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S P E C U L AT I O N S L eon ard M e lma n Over regulation harming mineral explorers F or the past 25 years or more one of the greatest concerns of metals advocates, both prospectors and miners, has been the gradually increasing intrusion of government into the area of exploration and development. It is my personal belief that the rate of growth of such laws, rules, regulations and impositions has been accelerating in recent years. It is also worth noting two other important points. First, many regulations tend to increase the costs and complexities of the entire process of advancing a mineral discovery through to eventual production and, second, it is not just mining that is affected, but the pattern of over-regulation across many spectrums of society in general tends to increase, not just prices, but also the time span of moving any enterprise forward. In preparation for this column, during the past several weeks, I have been collecting articles regarding this trend toward what I regard as excessive regulation. The enormous variety of laws either recommended or actually enacted is truly mind-boggling. Some of the recent measures in America and Canada are listed below. First, let's look at the US where we note huge increases in regulations relating to shipments of crude oil by rail; the unending jolts and complications arising from the 2,000+ page Obamacare law; proposed laws regarding private banks being allowed to store metals; Michigan state's microbrewers demanding easing of regulations; the FDA is proposing new imported food safety regulations and many American doctors now steering entirely clear of Medicare patients due to oppressive regulations. There are so many more examples that it is virtually impossible to list them, but the Wall Street Journal recently carried two articles entitled Red Tape Record Breakers and Government Gone Wild. Noted econo24 www.resourceworld.com mist, Niall Ferguson, recently authored a piece noting that historically, America was truly the land of the free while France was the land of intrusive socialist government. However, after examining recent trends relating to regulation in America, Ferguson concluded, "...at some point between 1833 and 2013, France must have conquered the United States." Regrettably, I must note that the situation is no better in Canada and perhaps even worse. In just the past two months I have noted the following laws either proposed or already enacted: • Increasing the complexity of RCMP accountability follow-up • A new act entitled "Safe Drinking Water for First Nations Act," adding complexity to existing water purity regulations • An act ceding new territories to fall under national parks regulations In addition, I can also list several other stories of note including the fact that too many medical tests – some unnecessary – are required by law, driving up the cost of the entire system; new bodies of regulations which impair the shipment of wine products between provinces are in effect and a flood of new laws because of the rail tragedy of the Lac Megantic have just been enacted. If anyone believes that this pattern of intense regulation is limited to Canada and the US, they should think twice as I also noted an article out of China relating to anger caused by their complex "onechild" laws and legal complexity is so overwhelming in nations such as Egypt and India that articles abound about people driven to virtual – and actual – suicide. Our main interest, of course, is in relation to metals prospecting, exploration and development and to say there is no shortage of regulations impeding mining operations would be a substantial understatement. For example, Canada is now enacting new mining transparency regulations which public companies will be forced to obey, bringing Canada into line with laws already passed in the US and Europe. Countless environmental regulations affecting mining are already in effect. Kinross Gold recently pulled out of a major project in Ecuador because of outrageous tax laws. Barrick Gold recently took a huge write-down on its Chile-Argentina PascuaLama Project citing environmental laws and government interference. Canada just announced that tougher new regulations for mining companies operating in foreign lands are in the process of being written, following consultation with the provinces, territories, First Nations groups, the mining industry and various interested civil groups. It has also become apparent that Canadian laws relating to share registration on various exchanges and the oppressive costs involved in obeying such rules are becoming onerous burdens for many exploration and mining companies, both junior and senior. The situation has become so perilous for small miners that a new organization – the Venture Company Association – has been formed with the rallying cry of, "Zealous over-regulation by a multitude of governing organizations is rapidly bringing venture funding to a halt." It is that serious. n This material is taken from sources believed to be reliable and is provided for information only. Any investment decision should be made only after prior consultation with investment professionals. Leonard Melman is a financial and political writer who focuses on issues relating to the resource sector. Mr. Melman lives in Nanoose Bay, British Columbia, Canada and can be reached at lmelman@ shaw.ca SEPTEMBER 2013