Offshore, again

After the collapse of the junior exploration market in the late 1990s, it is an unusual and refreshing experience to see more work being done by junior companies in the Pacific Rim. Perhaps this means there is a modest revival going on.

It appears as if Canadian companies are plunging headlong into Mongolia. The effect is reminiscent of the sudden rush to Indonesia in the mid-1990s, but we hope it will have a happier ending.

After all, the Indonesian rush was not one of junior exploration’s shining moments. There were ownership disputes, allegations of corruption, and logistical difficulties. And there was that nasty business with salted samples.

Worse, though, there was a pervasive atmosphere of hype surrounding the whole business. For a company to announce an Indonesian property deal in 1996 was a virtual guarantee that the share price would shoot up the moment trading resumed (much like the way, two years later, you could watch your cheap shares in a dot-com skyrocket as soon as public trading started).

We paid for that atmosphere over the next few years, in public mistrust and investor apathy.

That’s why the followers of Asian projects need to balance enthusiasm with caution. Mongolia, we are informed, has a pragmatic government, which is a good sign. And we are another few years past the old Soviet experiment, which had such a hold on that part of the world. It will be encouraging if Canadian juniors can make a success in the country.

Another development this week reminded us of another offshore gold rush by Canadian juniors. Turn the clock back a little farther — near the beginning of the decade — and the gold rush was in Bolivar state, Venezuela, in the Kilometre 88 district.

Ten years later, give or take, Corporacion Venezolana de Guayana (CVG) has announced a partnership with Crystallex International to develop the Las Cristinas property. Las Cristinas has been an abject lesson in all the things that can go wrong with foreign projects.

There were issues with garimpeiro (local artisanal) miners, who were already occupying the area and mining colluvial material themselves, sometimes with devastating effect on the natural landscape. Official expulsions were often violent and never pretty.

Land titles were not clear; some companies got exploration concessions from the Mines Ministry and others direct from CVG. Not all those titles held up — and more recently CVG, under what might be gently termed new management, has repudiated earlier deals, insisting that the other party had breached contract.

And the one project that has been commercially successful in the Bolivar state gold fields is a classic narrow-vein underground operation, Hecla Mining’s La Camorra, a sort of Geraldton-on-the-Cuyuni. Plans for bigger low-grade operations, such as Placer Dome’s original blueprint for Las Cristinas, have never moved past the construction stage.

Compared to the more “foreign” of foreign ventures, then, Australia, with a legal and political system that more closely resembles Canada’s than any other in the world, has to be seen as a haven of good sense and solidity. We find it surprising — in some ways — that Canadian companies have not taken on more projects there. But in another significant way, it is not such a surprise.

Australia, after all, is one of the few countries in the world with a vibrant junior exploration sector of its own. The level of technical expertise, from exploration through to production, matches any other country in the world. And Commonwealth and state governments generally know and appreciate mining. No matter the ease of doing business there, Canadian juniors would be playing against some of the world’s best.