Dear Ray,
Thank for your stimulating discussion, especially on the issue of the industry taking more responsibilty and lifting its game. In the particular area of ore reserve reporting, it is possible to say that the mining industry has shown great responsibility and has improved its performance – the development of the JORC code, and subsequent extension to more commodities, shows that the mining industry is very willing to impose high compliance standards on its own members. This indicates we can do it in other areas.
You raise the issue of vendor-rip-offs and I wonder if the Valmin Code has (or should have) addressed this problem effectively?
The proper use of exploration funds is very important. Maybe the codes of ethics of our professional societies are a way to stimulate performance, though not all exploration company directors are members of AusIMM or AIG.
I would be interested to read the University of Queensland study you mention. I am aware of Ashley Lavalle of Griffith Uni (Jour. Aust. Political Economy, 47, pp 27-49) writing on the overstatement of the impacts of Native Title on mineral exploratiion investment, and this paper includes some analysis of the problems of raising sharemarket capital, but he/she does not give the 28% figure for real use of exploration funds that you mention.
I agree with your comments on the big fund managers, on majors pulling out, and the tendancy to understate exploration risk.
I very much appreciate your positive suggestions on what the industry should do – a lot of people have dissenting views but do not offer constructive suggestions: Your ideas on changing the vendor considerations and tightening up the rules for new floats are good. The IPO grants scheme and NSX listing sound very interesting. And Ken Glasson will be beaming from heaven at your advocacy of better reporting standards. Ray, have you passed on your ideas to Ian Goddard, chair of the finance section of the Strategic Leaders Group or others?
With respect to last night’s meeting, the themes were: a) exploration expenditure has dropped, b) the government has recognised this and instigated the Action Agenda which concluded in July 2003, c) Federal cabinet may pay attention to the recomendations of this Action Agenda and d) each of us may be able to help by writing some letters.
The SLG report has now gone to government, and while it may not be the perfect document, it is the one that is on the table, and I feel that it is good and that it should be supported by geoscientists. There is potential for some of us to give support and, at the same time, include recommendations to make the adoption of the SLG recommendations more likely. Therefore your ideas are a positive contribution, and I encourage you to keep pushing them forward. I will pass them to AGC President David Denham by copy of this message.
Kind regards,
Mike Smith