Resource World Magazine

70 www.resourceworld.com J U N E / J U L Y 2 0 1 9 Epilogue by David Duval I n the early 1960s, the Kidd Creek base metals discovery near Timmins, Ontario sent equity markets into a tizzy, creating windfall gains for specula- tors around the world. As a teenager, I can vividly recall the sound of fixed wing aircraft and helicop- ters flying overhead towards the discovery location about 20 miles northeast of town. The discovery was in fact a long-estab- lished airborne EM anomaly that was a convenient outlier that explorers used to calibrate their geophysical instruments. People around the world were actually randomly dialing the local area code to get information on the discovery. Details of the find was arguably one of the worst kept secrets in Canadian min - ing history which in retrospect is actually not saying a lot. My uncle, an assayer at the Hollinger gold mine, which must have been doing some test work for Texas Gulf, had the assay results for the discovery hole written down on a piece of paper and was well positioned in the marketplace. These drill results were subsequently published in The Northern Miner and the stock of Texas Gulf went ballistic. For his part, he made a windfall of around $200,000 (a lot of money in those days) which he subsequently lost on Viola MacMillan's Windfall Oils and Mines, a proximity play which failed to meet inves - tor expectations and later sent its leader briefly to jail for wash trading. That event was basically the driv- ing force behind the Ontario Securities Commission booting junior explorers off the Toronto Stock Exchange and sending them to the upstart Vancouver Exchange which was more loosely regulated and receptive to speculative issues. Mining promoters, including the enigmatic Murray Pezim, migrated to Vancouver and the rest, as they say, is history. For all the malfeasance that went on in subsequent years, including the industry-altering Bre-X fraud (which in fact was an Alberta-Toronto and not a Vancouver listing), the rate of discoveries was quite remarkable and included Hemlo near Marathon, Ontario, Voisey's Bay in Labrador, the Ekati and Diavik diamond discoveries in the NWT and Eskay Creek in BC. However, the tendency for regulators to kill the goose that laid the golden egg reared its ugly head following the Bre-X fraud and the overregulation that followed increased the administrative and compli - ance cost of running a public company, meaning less money was going into the ground. In actual fact, there's been no real market-moving, Canada-based, grass roots mineral discovery of any significance since that period. These days, mineral explorers are hav - ing a difficult time raising money to cover their listing and administrative costs let alone funds for exploration. Why exactly this is happening is open to debate. But from my perspective there seems to be a shift in investor sentiment away from natural resource equities that is largely age demographic based. Everyone has a cell phone, email, text messaging, twitter and Instagram account, and technology- based equities – including marijuana stocks – that are more aligned with their contemporary investment interest, how - ever speculative these stocks might be. One mid-30s investor I know made a major first-time investment in a marijuana stock and doubled his money in a few months, something I haven't managed to do in a decade of investing in gold stocks. Four high-performing technology stocks – also known as FANGs: Facebook, Amazon, Netflix and Google (now Alphabet, Inc.), account for much of the historic gains on the S&P index – a phenomenon that in my view has age-demographic underpin - nings. Rather than invest heavily in their own businesses, they are buying back their stock in the marketplace, creating a price floor and a ready market for the exercise of stock options by corporate executives and insiders. Juniors simply don't have this option. Just look at auto manufacturer Tesla which is well off its 52-week high but has a market capitalization that is equal to Ford Motor Company which sold close to six mil - lion vehicles last year versus an estimated 350,000 all-electric vehicles for Tesla. These examples strike me as an his- toric investment mania that decades ago was not uncommon in the minerals sector when new discoveries precipitated staking rushes and area plays that drew thousands of investors into the market place, not only in Canada but internationally as well. Major discoveries in Canada fueled market booms in other jurisdictions, including parts of Australia. In my opinion, what's needed in Canada is a relaxation in the regulatory climate that will make it attractive again to invest in junior explorers which by definition tends to be a high risk-high reward busi - ness. This could include some innovative adjunct to the flow-through program. Freeing up capital for exploration would help precipitate discoveries that would draw investors out of tech back into the resource marketplace. n A look at the past might hold the keys to the future

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