Everything We Have in Our Database Is Wrong - Pierre-Jean Lafleur | Mining Mindset

The regulations have increased on the part of government, so therefore there is a greater need for independent consultants - experts, engineers, geologists, and people with other professions working together to evaluate projects, do feasibility studies, and so on. Because it's now the law in most parts of the world, at least in Canada and Australia.

There is more work for consultants since about 25 years, because of the regulations and the obligations on mining companies to provide reports that are done by independent experts. This is to ensure that there's no conflicts of interest and to ultimately reduce frauds and wrongdoing.

The mining industry has a reputation - and still has some bad reputation - about frauds and wrongdoing. The reason is mainly because mining activity is remote. I was working in the industry in the 80s and the 70s. The industry regulated itself in the sense there was a free market at work. The big companies who were interested in discoveries and projects realized by smaller companies - bigger companies with more money would offer to buy projects or take them over.

They would have their own in-house experts who would go out and check the project, check the numbers for the estimation and the evaluation. So you had geologists to start with, then mining engineers, then metallurgists, and so on. At the end, they would make a report. The largest companies in the market would have their own internal group of experts doing the consulting that is now done by independent consultants.

What happened is the richest companies with the best projects and the most money would invest in that, and they would standardize the reporting. Because a mining company could not have a mine in Canada and a mine in Africa where a ton in Africa is different than a ton in Canada, with different currencies and so forth. When they report to shareholders or to the stock market, they would have a standard format for technical information.

The big companies had good experts who would detect wrongdoing or fraud and measure the real value of projects. But the smaller companies would attract frauds and criminals.

One example that really triggered governments to jump in was Bre-X in 1996, which claimed they had found a gold mine in Indonesia. The stock market value of that company was $6 billion, and there was a struggle between large companies like Barrick to buy Bre-X because it was such a big gold mine.

In the course of evaluations by the big companies, they discovered it was a fraud. All of a sudden, the value of Bre-X went to zero. There were traces of gold, and there were small gold miners in the rivers around the area, but on that property itself there was no gold mine.

I know because I worked on the database. I was living in Mexico at the time, and people were calling me from Canada and everywhere else wanting to know if they should buy the stock. Even though I didn't see the samples, I could see that the distribution of gold values was not typical at all. It was actually typical of fraud.

Technology now means there is less fraud probably, because the bar is much higher.

We have regulations that are more complex, more defined. Everybody has to follow them, otherwise you're not complying and they will force you to redo your work. So companies hire consultants and train their own people to work properly following the law and the rules of NI 43-101, JORC, and so forth.

That makes life more complicated, takes more time. Every time you publish a report with an update on a resource because you did a few drill holes, you also have to put in all the other sections about methodology, environment, topography, and then the sections on environment and social benefits are now becoming bigger and bigger. They're suggesting technical reports should be no more than 100 pages because investors are not going to read them - and they won't understand them if they do. But it's almost impossible to keep it short. There's a contradiction there.

In terms of technology, we have many software packages that do very powerful things, but sometimes they work differently, and that's a challenge. A lot of companies focus on the cost of the software, the price of the license. But I've been saying all along since the first day I worked with mining industry software on a computer - the cost of the software is nothing.

You could pay $1 million for the software license and it doesn't matter. What's going to be more expensive is paying the person who uses the software. If you hire a geologist or mining engineer, even a young one with computer skills, you're going to pay them maybe $100,000 or more per year, and that will happen for 10 years. That's $1 million. Why do you complain about the price of the software? The software costs nothing. Buy it and move on.

What matters is the user. You're spending money for the user, then you're spending millions of dollars for drilling, trucks, mining equipment, and the plant. And you complain about the software that will give you all the reports and information you need to manage all of this? Buy the software you need and use it.

The challenge in technology now is that there are too many choices and people sometimes don't know how to operate all of them. It's just that there's so much available that it's overwhelming.

Artificial intelligence - we think it's going to solve a lot of problems. It's going to be useful to solve some kinds of problems sometimes, but it's not going to be perfect. We're going to get mistakes, and we're going to have to make improvements. Sometimes we can improve, sometimes we just have to live with the shortcomings.

The thing about blockchain is it's basically a tool for the police - to trace people, to know where things come from, and to monitor them. There are certain applications where it's useful, like diamonds. But it's a whole lot of work for all the other people who don't really need it.

I have a prejudice against blockchain and the digital monitoring of everything.

I have worked a lot with computers, databases, and models, and the only thing I can guarantee you is they are all false. Everything we have in our database is wrong.

Look at the database with drill holes and samples. You have thousands and thousands of samples, very often coming from the same drill hole. They're all together - one sample followed by another. You can never find two samples that are identical. They're all different.

So what are they telling us? Each sample is saying the next sample is wrong. That sample says this sample is wrong. "I know the truth - I am right, you're wrong." Every sample contradicts the others. So they're all false, because if you drill another hole right next to this one, you will have a series of different samples again.

The truth is not in the samples. The truth is in the reality, which is in the ground. The truth comes out when you mine it and put it through the plant - not through the computer, through the plant. That's when the truth comes out.

And even that truth - when you sell concentrate of copper or tons of iron or diamonds - that's not even the reality. The reality is something else. Natural resources - the price we pay for these materials is somebody's idea. We make a deal, but when the material gets to the destination and is used, it may turn out to have contamination that was not on the bill.

So the reality is something outside of our brain and our ideas. Humans depend on mineral resources. We produce them, we make deals, but everything in our databases and computer models - they're a good approximation at best. They're not the truth. The truth is outside and independent from us.

We always try to improve that. For example, at McGill University in Montreal, Roussos Dimitrakopoulos is working a lot with uncertainty, variance, conditional simulation models, and others to evaluate projects more accurately.

Artificial intelligence can help us because it's all operational research. When I was at school in the 1970s, I studied operational research. I took a course online from Harvard University on artificial intelligence recently, and it's exactly the same thing I was learning in 1976. Machine learning, operational research, artificial intelligence - it's all in the same world.

Now artificial intelligence benefits from computers today that are much more powerful. If you apply a million rules and solve problems a million times in one second as opposed to one time in 1976, it seems spectacular. But I personally consider that artificial intelligence is not artificial and not intelligent. It's not artificial because it's a new generation of programming designed by humans. And it's not intelligent because it cannot go beyond our intelligence and our consciousness. It's designed by humans, so it's limited by what we can give the program.

The biggest impact I think will be a regeneration of interest for underground mining. Underground mining is very old - even the Egyptians used to dig tunnels to make tombs for the pharaohs before they built pyramids.

In underground mining, we don't mine waste. We try to focus on grade material and tend to focus on high grade because costs are higher. We want to mine material that will produce less volume but more income. All that needs to be optimized.

For the danger that underground and open pit mining represent, we can have automation applied all across the board. In Canada, we have uranium mines that are so rich you cannot put a living person in the mine. We have uranium mines that were automated from start to end many decades ago. These technologies can now be generalized and used more extensively.

In Canada, it's becoming more and more difficult to hire people to work in mines because they are very far from large cities. People don't want to live there, don't want to bring their children there.

Until you get it out of the ground, you don't know for sure what you have. Once you find something, you need to report it if you want to be financed. If you go public, you need to follow certain rules so that people who lend you money or buy your shares are not going to lose everything.

The stock market is a private enterprise - an exchange where people trade shares. It requires technical experts to evaluate projects. To understand each other, everybody has to use the same language, the same technical terms, the same rules.

In Canada, the Canadian Institute of Mining and Metallurgy set up committees - groups of experts defining the rules. How many drill holes, how many samples, how to take samples, how to calculate the resource, the volume, the tonnage, and how much metal there is.

The stock market supervises the application of those rules through its own committee of technical experts. For the whole thing to work, the government comes in and makes a law. Lawyers write the law, but it cannot be the same as technical rules defined by CIM. The law applies to everybody and everything. CIM looks at specific problems - diamond industry, coal industry - to define the specifics.

The reason NI 43-101 is more popular is simple. The US has SEC rules, and they're very strict. You cannot have inferred resources in the report. There are very strict restrictions. Investors in mining didn't find that justified and found the rules in Canada more suitable. In other words, Canada allows for a little bit more room for speculation. Investors who look at the mining market - a little bit like buying a lottery ticket - were more comfortable with that.

Australia is very similar to Canada. London and New York stock markets are typically for large, very large companies with strict rules. The large companies with income from large mines are comfortable in New York and London. Smaller companies, junior mining - that goes to Canada and Australia.

When NI 43-101 was instituted, I was told that 60 to 70% of the mining capital came from the Canadian stock market. Canada was making a significant contribution to financing junior mining companies. So NI 43-101 became very important. If your money for a project in Africa, Peru, Chile, or Argentina is coming from the Canadian stock market, you have to obey the stock market rules in Canada - and that's NI 43-101.

This generates a lot of work for Canadian consultants. Geologists, mining engineers, and metallurgists in Canada are getting a lot of work for expertise on investment and mining all over the world. The capital comes from outside of Canada, into Canada, then goes out to mining projects. The expertise is located in Canada for the stock market exchange and consulting work.

JORC is usually very close to NI 43-101, but not quite. For example, NI 43-101 requires that if a mining company drills a project and there's a material change - they didn't have resources and now they do, or resources doubled, or work allows them to make a feasibility study - the stock market says you have to prove it with a technical report that must be published and made available to the public. JORC did not require that. Companies in Australia did not have the obligation to always publish a technical report.

There are other differences. In a JORC report, you can add inferred resources with indicated. In NI 43-101, you cannot present inferred resources with indicated - they have to be separate.

NI 43-101 tends to be ahead of JORC when it comes to improvements. When environment becomes important, there's a chapter explaining the impact. Then it becomes more explicit about what you must explain - carbon footprint, social economic consequences, and so forth.

There are always efforts to make the different regulations similar. CRIRSCO and other initiatives by the United Nations work to bring the regulations together.

The PEA requires that you complete your resource estimate. The description of geology is always there. When you get past the resource, you start to have information about mining.

A PEA level is a comparative study. You say you have this project and these resources - that's a known fact. If you compare it to a similar project, they have this kind of mining method, this kind of mining equipment. You take technical information from another similar project and say - if we apply those parameters to our project, this is what it would look like.

You don't complete a detailed study. You borrow technical information for mining and processing from other similar projects to estimate the value. That's a PEA in a nutshell.

There will be improvements and changes. Things will get more complicated. More rules, more refinements, more improvement will require more investment. And only larger companies will be able to do it.

Larger companies will have more ease to apply the rules, and for smaller companies it will become more and more difficult. The solution that small companies use right now is they have a shell in the stock market, investors, and most of the work is done by consulting.

Regulations will have the effect of reducing the number of small companies relative to large companies. There will be more capital invested in larger companies and relatively less in smaller ones. But the absolute number of small companies could increase - it's just the way money is going to be distributed.

Some companies have good projects, good management, good finance. They continue to grow from small to medium to large projects. But the economy goes into cycles, and when the economy goes down, their product may not be in demand and the price falls. They get squeezed.

The companies that survive are the ones who see it coming and decide to take their best asset and sell it. That's heartbreaking. You can see a company with an efficient team, good work habits, corporate culture, synergy between engineers, geologists, and managers.

One company I worked with had over 10 mines - copper, gold. When they went through a cycle, they took their best gold mine with very good output, high grade - and dumped it on the market. Because when the economy gets bad and investors run away from mining, the only way to get cash flow to survive is to sell your best asset.

It's like a mother with eight children in bad economy who can't feed them. You take your oldest son and tell him to go work in the mining field and send cash. It's heartbreaking, but that's the only way to survive during crisis.

All the gold, iron, aluminum, nickel, lithium, oil - everything we've used since the beginning of humanity - where is it today? It's right here on Earth. When we're finished with it, we don't ship it to Mars. It stays in the environment.

We dig these materials from the biosphere, and they stay in the biosphere. All oil and coal that we burn goes into the atmosphere, then into seawater, then gets taken by biomass, transformed into algae and fish. The carbon cycle goes right around into the biosphere.

Every once in a while somebody says the municipal waste dumps of large cities are the mining of the future. It's just more expensive. It may be more expensive to extract lithium from a cell phone dump than to mine it. So until that happens, we'll continue to mine fresh raw material. When it becomes more expensive than mining the dumps, then we'll mine the dumps and recycle.

Natural resources are almost infinite. There's a predominant notion today that there are too many people for the resources we have on Earth. But it's the opposite. We have the resources that people can produce. Humanity is adaptable - we adapt by producing what we need.

Yes, the best mines with the highest grade and lowest cost are now gone. But we still find new projects with very high-grade material. They're just not in locations we thought about. We continue to make discoveries. There's still oil being discovered all around Africa right now, and this is true for all natural resources.

If we take seven or eight billion people and put them standing side by side with room for arms' lengths - we wouldn't fill Manhattan Island in New York. So to all the people who say we're too many - this is nonsense.