Friday, December 6, 2013

How to fix junior mining: finally a discussion might have begun

Kipper the Keenmeister and his buddy The Clive™ have finally lobbed the grenade that might perhaps start a discussion on how to resuscitate the smoking ruin that once was junior mining. Here's two articles that suggest perhaps we might get the ball rolling:

Mineweb - gold CEOs blast M&A deal making, resource standards. Bosses from B2, Primero and Hecla on deal making and the problems with 43-101. I'm definitely going to listen to the audio for this, not just cos I'm a Clive™ fanboy. Here He™ is:
It may not come as a surprise, but Johnson had some fiery opinions to make, laying into management teams he sees as recalcitrant when it comes to deal making. Not signing confidentialiy agreements. Or if they did, not handing over data after B2Gold had promised a two-year standstill.

"There's a couple groups in the industry that aren't, in my mind, doing what they should be as public companies," Johnson said. He continued on to say, "A lot of institutions are asking me who won't sign what."

He didn't elaborate on the answer.

It's led B2Gold, Johnson said, to alter their confidentiality agreements. B2Gold still agrees to a standstill, he said, but if after 90 days a company isn't forthcoming with promised data on assets then the provision falls.
And here they are talking about the joke of NI 43-101:
Conway: I can tell you 43-101 is a piece of garbage. It's not worth anything.

Johnson: It's a joke.

Conway: It's a joke. It's not protecting you guys in any way, shape or form.

Johnson: Absolutely.

Johnson: What we typically see where it falls apart is the block model. We just say, give us your usually fails right there. The extrapolation that they're using for their reserves and resources is probably completely out of whack relative to the geostatistical information or data that is there.
I think the part the OSC/BCSC/SEC need to take away from this is the "it's not protecting you guys in any way". That's what the regulators should pay attention to, since the point of NI 43-101 was to protect investors from scams, since after all it was instituted on the back of the Bre-X disaster, which itself destroyed the capital markets for a couple years.

And finally, with the entire junior mining industry lying in a smoking ruin as capital continues to flee the entire industry, sending the $HUI to its 2008 low and beyond, a lesson learned that cannot be unlearned and will take portfolios decades to recover from, and capital remembering the old adage "fool me twice", finally people are starting to speak up about what went so disastrously wrong:

Mineweb - truth-telling in resource estimates. A P.Geo. writes in with his/her comments. Kipper also wants more P.Geos to write in, cos I guess he realizes what a good story this is.

But check out this quote from the P.Geo.:
We need some mechanism to encourage consultants to aspire to deliver the “truth” (i.e. an orebody in which reserves match eventual production) rather than an estimate that pleases their client – whoever it is. Once that problem is dealt with, the technical flaws I discuss below will likely become a lot less common.
Um, buddy?

I work in engineering. I work with people who have P.Eng., and am myself working towards getting licensed. Guess what? When the client wants something that goes against our code of ethics, our job is to reply "no". When the client wants a lie, we are bound to tell the truth. That's what it means to have the ring and the stamp.

Maybe the P.Geo. societies should look into the idea of a code of ethics. Because with a code of ethics, your "profession" (look up the meaning) can indeed aspire to deliver the truth.

No "profession" gives the client a worthless report. Your "profession" should aspire to do this, at a minimum:

1. at all times provide the truth;
2. at all times make known the level of confidence in data, including the sensitivity to differences in interpretation;
3. at all times work to protect the capital of your client's shareholders;
4. at all times ensure the spotless ethical conduct of all your members, including censure or ejection of P.Geos who demonstrate incompetence or unethical behaviour;
5. through all this, contribute to the proper functioning of capital markets in order to assure the survival of your industry.

Plus the standard boring crap like ensuring obedience of the law, maximizing safety of workers, and protecting the environment.

That is what it means to have a "profession".

Your two-track system is nice, but the problem is that it's a big kludge that wouldn't be needed if only the P.Geos had ethics to begin with.

I brought this up a year ago, but I guess nobody read what I had to say.

Well, look what happened to your industry since then.

If there really is no framework that ensures the above, then the P.Geo. designation as it stands is a joke. Fix that.


  1. I wonder if the VCMA will get on board better 43-101 reporting? For some reason I don't think it is in their best interest.

  2. The professional associations in Canada have the same code of ethics for geologists and engineers. When you take your ethics exam you will be sitting with a bunch of aspiring P. Geo.s.

    The problem is not a matter of geologist or engineering professions. After all, look at the number of PEA's, PFS's and even DFS's that have used extremely optimistic economic and mining assumptions.
    Some practitioners and consulting groups already have a form of the two track approach. It's called a peer review. Whether it is effective or not is another question.

    1. Well, if the P.Geos have a code of ethics, they're not following it. Full stop.

  3. There isn't enough understanding of risk assessment among mining people. There's an interesting presentation here that discusses some of the issues.