Abstract
M. Burnetta, Edmund Sidesb
a Principal Geologist, AMC Consultants (UK) Limited, MBurnett@amcconsultants.com
b Director and Principal Consultant, Orebody Risks Limited, UK, edmund.sides@orebodyrisks.com
Abstract
It is widely acknowledged that exploration and mining endeavours are associated with a high degree of risk, however they can also provide opportunities for significant financial benefits. Given the reward potential, especially where precious metals and minerals are involved, mining is also inextricably linked in the public mind with fraud and underhand business dealings; perhaps most clearly stated in the (in) famous quote, that “A (Gold) Mine Is a Hole in the Ground with a Liar at the Top” (Twain, incorrectly).
The development of modern Mineral Resource reporting codes was in response to the effects of fraudulent business practices on stock markets in Australia and Canada. In particular, insider trading and misleading information in the case of the Poseidon Nickel NL boom and bust saga; and good, old fashioned, salting, in the case of the Bre-X, Indonesian, Busang fraud.
Several factors influenced the development of the CRIRSCO family of reporting codes and standards, with one of the primary drivers being the need for a common terminology (agreed definitions) to allow investors to more easily compare the merits of different projects in different jurisdictions. It was implicit in the earlier iterations of the codes, that adherence to the principles of transparency, materiality, and competency, as exercised by the Competent Person / Qualified Person (CP/QP), would allow the investor to make a properly informed decision about investment in a particular endeavour, given that uncertainty and risk, as well as potential upside opportunities would have been clearly articulated.
Various factors, such as: the requirement for small and medium sized companies to raise capital; the pressure to deliver projects ahead of time and under budget; the cyclical nature of the mining industry; and the pressure on CEOs to deliver positive growth on a quarterly basis, have all contributed to a situation where the CRIRSCO codes have become increasingly detailed in their reporting requirements. This can be clearly seen if we analyse the frequency of the words risk(s) and uncertainty in the various CRIRSCO code updates.
Additionally, problems may arise when a CP/QP, who has a personal financial interest in a company is tempted to abuse the system for personal and financial gain. Such issues are difficult to avoid without regular independent checks or rigorous corporate governance procedures and proper scrutiny by company boards. An example of this is ‘digital salting’ – where the assay results used and reported by a company have been adjusted after receipt of the assays from a certified laboratory.
The authors conclude that the use of a CRIRSCO reporting standard when reporting Mineral Resources and Mineral Reserves can assist in reduction of project risk via the reporting of material issues in a manner that is transparent by persons or a team comprised of Competent Persons; however, like any legislation or regulation, a code cannot prevent fraud occurring.