Why it pays to double check

SCANDALOUSLY unprofessional data reporting and outright fraud have brought us the JORC and NI 43-101 rules in recent decades but miners are reminded not to let their guard down.

Staff Reporter

Delegates at the Mines and Money Hong Kong conference were warned of the dangers of failing to practice adequate due diligence ¬– even with strictly enforced reporting regulations ostensibly safeguarding the integrity of the industry.

Roma Group principal geologist Steven Hodgson spelled out the consequences in stark terms for miners cooking the books or allowing accidental mishaps through insufficient due diligence.

“It’ll destroy your reputation,” he said.

“Nobody will want to work with you if you get caught doing this sort of thing and even if you’re not directly involved, mud sticks.

“So it’s quite hard to bring your reputation back on line.

“You will lose a lot of money, you could lose your project, you could end up in jail.

“Even if everything does work out, you could lose a lot of time in legal issues.”

Hodgson’s presentation followed the formation of JORC in the wake of the Poseidon bubble of the 1960s, in which misreported exploration data led to Poseidon being delisted and rules demanding a clarification of the relationship between the competent person and the company.

NI 43-101 was traced back to the Bre-X scandal of the 1990s, which represented a blatant “pump and dump” scam including salted resource samples, the collapse of Bre-X Minerals and the suspicious death of the project geologist who fell from a helicopter.

Hodgson used the scandal to illustrate the importance of identifying red flags in market disclosures.

In the Bre-X case, it included the fact that gold particles in the false report were coarse grained while all the other mines of the region were fine grained and that all samples were prepared and processed by company employees in the jungle before submission to laboratories.

In cases highlighted after the establishment of JORC and NI 43 101, Hodgson noted that the establishment of stricter industry standards did not eliminate the need to identify similar red flags of incompetence or fraud.

One example noted that an inflated gold resource could be due to a failure to exclude resources from pegmatite veins while another exposed assay results that predated the drilling itself.

Failure to sample the ore zone, disregard of true thickness in sampling, poor record keeping and incomplete or inconsistent data sets were also flagged as possible reporting problems.

Hodgson concluded by commenting that avoiding legal trouble in exploration information disclosure largely boiled down to using common sense.

“If the geology doesn’t match the surrounding deposits, if the resource is growing way beyond what you’d expect, look into it.

“You work hard to get a good deal, so you need to think about what you’re doing.”