Editorial Getting information

In the mining business, there are numerous examples of stock market activity preceding the general disclosure of information explaining the activity. The laws of libel make us reluctant to point out any suspect company, but in the past month alone we’ve watched the value of a number of listed securities increase markedly prior to information being released.

Some of that activity, perhaps most of it, is simply the result of healthy speculation. Those who read this publication are well aware of promising situations where drilling has commenced and favorable results might be reasonably expected. It is certainly no crime to anticipate those results. In fact, much of the appeal of Canada’s vibrant mining industry is an exuberant, highly liquid market where that kind of market “player” can follow his instincts without swamping the entire market.

And the very senior companies might argue that results from a single drill hole or even an entire grassroots exploration property cannot properly be considered a material fact. A material fact, according to Ontario’s Securities Act, is any fact that “significantly affects, or would reasonably be expected to have a significant effect on, the market price or value” of the company’s stock. Can a single drill hole affect the price of a blue-chip company?

That makes it difficult to judge. Even when it becomes apparent that there has been a transgression of the rules, just who might be at fault? Results from a single drill hole, for example, might have been considered merely internal information by a large company at the time it was noted by a project geologist. Only later could it be judged to have been a material fact. It is unrealistic to expect every drill hole to be reported immediately to a securities commission, but if one of those holes is sufficient to move the market, can the company be held responsible? The fact is, it’s a judgment call, and no one’s judgment is infallible.

In the meantime, diamond drill crews on site can tell just by looking whether the core on a hot prospect is likely to run. They, and others who might have dealings with the exploration company involved, can get on the telephone and place an order with a broker well before the chain of command can determine if a news release is required, how it should be worded, then ensure it is correctly disseminated.

There’s no air-tight way to contain information if it’s information that someone wants. There are always leaks. The more pressure there is, the more likely there will be a leak.

Under current rules, if there is some exciting news developing, a company’s officers and directors must make efforts to contain the information as it goes through the proper channels. The result of trying to bottle up information, however, is that a select few can benefit while the public at large must wait.

It would be better to lift restrictions on the dissemination of information. Put the onus on public companies to justify what information should not be made public. The basic financial statements, prospectuses and listing statements would still be held on file, but all other information would be fair game for investors, brokers and the news media. If they had the right to the information, they’d be able to ferret it out.

The stock market is an efficient place when left to its own devices. If the market for information was similarly left to operate more freely, with regulatory bodies acting merely as adjudicators, the result would be a faster and fairer dissemination of news.

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