Who's to protect mining investors?

The Bre-X fraud made it clear that mining investors ought to be protected! Mining investors in Canada may well be the first in the world to be so protected. The National Securities Regulator takes on this task once the Supreme Court approves it for all of Canada. Now let’s take a quick look at a scenario. A mining investor may have thought that a mineral resource in an annual report looked like a good bet. But what went wrong if its mined grade is significantly lower than predicted? Here’s a cute catch-22! Confidence limits for metal grades and contents of mineral resources need not be disclosed. Yet public opinion polls are reported with 95% confidence limits. Why does the mining industry not do likewise? I did so in 1997 for Barrick Gold. The mining industry ought to revisit what was once hailed as Matheron’s new science of geostatistics. It made landfall on this continent in 1970. It is simple to prove that geostatistics is an invalid variant of applied statistics. Surely, mining investors in Canada would want a National Securities Regulator to investigate the validity of geostatistics.

Our National Securities Regulator launched its Transition Office in June 2009. Mr Douglas M Hyndman was appointed the NSR Chair. The Supreme Court of Canada has not yet ruled on the constitutional validity of a national securities regulator. It seems to make sense at a glance but is fraught with practical pitfalls. Alberta and Quebec prefer provincial fiefdoms. Here’s what I find funny. David’s 1977 Geostatistical Ore Reserve Estimation was put on paper in La Belle Province. Alberta’s oil patch has taken to geostatistics with reckless abandon. That’s why I am pleased that NSR’s Chair is bringing 25 years of experience to this position.

Mining investors do remember the Bre-X fraud but too few grasp how geostatistics converted bogus grades and barren rock into a massive gold resource. I’m not one to search for moral integrity. Searching for scientific integrity is good enough for me. I am pleased that the BCSC Chair has been appointed to chair the NSR Transition Office. He does have what it takes to unravel a scientific fraud. I do so wish the Supreme Court of Canada to rule in favor of a National Securities Regulator.

I drew the attention to the BCSC Chair in my letter of March 24, 2006 to the fact that I had called on the Canadian Council of Professional Engineers and the Canadian Council of Professional Geoscientists to examine whether geostatistics is a scientific fraud or sound science. Neither CCPE nor CCPG took to the task. I also pointed out to have met in Vancouver, BC on January 22, 2006 with Ms Deborah McCombe, PGeo and Dr Greg Gossan, PGeo. At that time both were on staff with securities commissions in Ontario and in British Columbia.

I pointed out that Dr Isobel Clark derived in her 1979 Practical Geostatistics the variance of the distance-weighted average AKA kriged estimate. She was the first and only scholar who derived the distance-weighted average. I pointed out that the author didn’t test for spatial dependence within her sample space by applying Fisher’s F-test to the variance of the set and the first variance term of the ordered set. I made it clear that all distance-weighted averages converge on the arithmetic mean as the distance between Clark’s sample space and a selected position converges on infinity. That’s why testing for spatial dependence in sample spaces and sampling units is so critical in applied statistics. All I want to know is why professional engineers and professional scientists accept that spatial dependence between measured values may be assumed simply because Stanford’s Professor Dr Andre Journel has said so.

The Supreme Court of Canada is to decide whether or not a National Securities Regulator is in the best interest of Canadian investors. Meanwhile the Chair of NSR’s Transition Office in June 2009. He no longer has to rely on Dr Greg Gossan, his former Chief Mining Advisor.

Dr Gregory J Gossan
Formerly: BCSRC Chief Mining Advisor
Presently: Chief Geologist, AMEC

Mr Douglas M Hyndman, Chair, NSR Transition Office, ought to ask the Canadian Council of Professional Engineers and the Canadian Council of Professional Geoscientists whether or not a statistical fraud does violate any Code of Ethics.