MINERAL ECONOMICS SOCIETY

Report to CIM Council: Activities During 1997-1998
MES had a busy and successful year running its various events and activities, while realizing exciting results on educational support programs made possible by MES initiative and funding. MES is in excellent financial shape with adequate funding to fulfill all existing obligations on the funding front. The generous support of the many corporate and institutional sponsors of our seminars and symposia has allowed us to instigate programs at two major Canadian universities that bring industry experience into the university classroom. We at MES take pride in having had a part in launching these popular and successful programs.

MES Executive Committee: 1997/98 Fiscal Year

Chairman Rob Halupka
Royal Bank of Canada
Tel: 416-974-3718
Fax: 416-974-0680

Vice-Chairman
Keith Spence
Alliance Pacific Resources
Tel: 416-362-0007
Fax: 416-362-0008

Secretary
Jane Spooner
Micon International
Tel: 416-362-5135
Fax: 416-362-5763

Treasurer
Joyce Bish
Midland Walwyn Capital
Tel: 416-369-2081
Fax: 416-369-4002

The Executive Committee was ably assisted by members of the sub-committees, who brought ideas and plans to life and made it all happen.

MES Sub-Committees: 1997/98 Fiscal Year

Education Committee

Ted Yates
Cominco Ltd.
Tel: 416-869-1850
Fax: 416-862-8553

Andy Abraham
Micon International
Tel: 416-362-5135
Fax: 416-362-5763

Ore Reserve Committee

John Postle
Roscoe Postle Associates
Tel: 416-947-0907
Fax: 416-947-0395

Bernie Haystead
CIBC
Tel: 416-956-6984
Fax: 416-956-8347

Discussion Group
Jay Turner
Nesbitt Burns
Tel: 416-359-5187
Fax: 416-359-5356

David Boynton
Canaccord Capital
Tel: 416-869-3304
Fax: 416-869-3876

Standing Committee on Reserve Definition
With the benefit of hind sight, it is fortunate that this initiative was already well advanced by the time the Bre-X bomb exploded last year. CIM was well positioned to provide input and help the regulators develop a measured response to the questions raised by the investment community. The following report was provided by John Postle and Bernie Haystead, co-chairs of the committee.

Several events occurred over the year that are of interest to CIM members. Although there have been very few written comments in response to the Ad Hoc Committee Report of September 1996, a number of issues have been addressed by the members of the committee.

The OSC/TSE established a task force to investigate the needs and requirements for mining industry standards. In response to a request from the OSC/TSE task force, John Postle forwarded a copy of the September 1996 Ad Hoc Committee report; he also provided a copy of the OCS/TSE letter to CIM National Office requesting CIM comment to the task force. In the midst of these deliberations, the OSC was in the process of revising National Policy 2A which includes guidelines for the reporting of resources/reserves. This revision is being prepared for circulation to the public for comment.

The rewrite of National Policy 2A is being based on the September 1996 Ad Hoc Committee report. Bernie Haystead and John Postle have discussed two concerns raised by members of the Standing Committee on Reserve Definitions with John Drury who is leading the initiative. The two issues are the grammar problems raised by Marcel Vallee and the industrial minerals contracting issue raised by Dan Hora, a member of the Industrial Minerals Division. The rewrite of National Policy 2A will be quite extensive, and Bernie and John felt that these issues should be brought to Mr. Drury's attention even though there is not full consensus on these issues.

Minutes of the October 18, 1997 CMMI meeting on resource/reserve definitions in Denver were circulated together with the draft International Reserve Definitions. The draft definitions were published in the February 1998 CIM Bulletin; CIM members were asked to provide feedback comments.

Discussion Group
In the 1997/98, MES organized a series of "Discussion Group" meetings in keeping with our tradition of inviting speakers to give topical presentations to the Toronto mining community on a monthly basis in an informal setting. The program runs on a strictly break-even basis, with venue costs being covered by corporate sponsors and from the modest proceeds of "soda" sales. A summary of meetings held over the course of the fiscal year is as follows:

1. Innovative Technology for the Cost Effective Treatment of Acid Mine Drainage
   Speaker: Dr. Gene Shelp, President & CEO, ENPAR Technologies Inc.
   Sponsor: Micon International Limited
2. Red Flags Over Busang
   Speaker: Graham Farquharson, Strathcona Mineral Services
3. Technical Overview of Current Market Factors
   Speaker: Keith Edwards, Technical Analyst, Nesbitt Burns
   Sponsor: Roscoe Postle Associates
4. New Instrumented Support for Mining: The Smart Cable
   Speaker: Dr. Will Bawden, Chair of the Lassonde Program, University of Toronto
   Sponsor: Cominco Ltd.
5. Mining: Insuring Project Risks
   Speaker: David Jennings, Vice-President, AON Reed Stenhouse
   Sponsor: Cameco Gold

Vancouver Symposium
The Vancouver chapter of MES ran a very successful symposium on January 27, 1997 at the Hotel Vancouver in conjunction with the 1997 Cordilleran Roundup. The theme "Corporate Strategy in Mining: Finding, Developing and Operating Mines in the 1990's" clearly struck a chord, with a high turn-out and an enthusiastic audience. Craig Roberts of First Marathon Securities was Chairman of a dedicated and effective committee that brought the event to life. The symposium attracted a high-powered panel of speakers, as follows:

• Alex Balogh
  Deputy Chairman of Noranda and Chairman of Falconbridge
• Hugo Dummett
  Sr. VP & Group General Manager of BHP Minerals International
• David Lowell
  Chairman of Arequipa Resources
• David Thompson
  President & CEO of Cominco
• Milton Ward
  Chairman, President & CEO of Cyprus Amax Minerals
• John Willson
  President & CEO of Placer Dome

Corporate sponsorship and net proceeds from registration fees provided a solid funding base to meet MES Vancouver's commitment to sponsor an education program at the University of British Columbia.

Vancouver AGM At the highly successful Vancouver AGM of April 1997, MES organized a series of presentations addressing issues relating to mineral economics as our contribution to the Technical Program. Able coordination and assistance were provided by the Vancouver chapter of CIM (special thanks to Steve Hodgson of H.A. Simons LTD). Turn-out was excellent with the 50-chair meeting room filled to overflowing. There were presentations in the MES sessions, summarized as follows:

1. Operating Modelling: A Strategy for Identifying Anomalies in Underground Hard Rock Mine Operating Costs
   Leo Hwozdyk, Kilborn SNC Lavalin.
2. Commodity Price Analysis Using Graphic Inversion
   John Postle, Roscoe Postle Associates
3. Aspects of Comparative Cost Estimation for Nickel
   Shaun Browne, AME Mineral Economics
4. The Argument for a "Bare Bones" Case
   Larry Smith, Kilborn SNC-Lavalin
5. Financing Mining Projects: What Banks Want to Know
   Rob Halupka, Royal Bank of Canada
6. A New Millenium for Project Hedging
   John Garland (for Peter Payne), Royal Bank of Canada
7. Derivative Mine Valuation: Advancing Technology for Mineral Resources Evaluation
   Samuel Frimpong, University of Alberta
8. How Project Structure Determines Project Risk, Project Value and Discounting: The Case of Nonlinear Cash Flows
   David Laughton, University of Alberta

Education Committee
CIM Adjunct Professorship Program at the University of Toronto
This program was launched in January 1995 when representatives of the Toronto segment of the Mineral Economics Society and CIM Toronto Branch presented cheques totalling $10,000 to the Dean of Engineering at the University of Toronto. At this time a commitment was made to U of T to provide a total $100,000 commitment at $20,000 per year over five years for funding two adjunct professorships, one in mining engineering, the other in mineral exploration.

In his letter of January 28, 1998, Will Bawden, Lassonde Chair in Mining, thanked MES for our support and made the point that the $100,000 initiative was instrumental in the decision not to scrap the geological and mining engineering program. Adjunct professors to date have included Charles Pitcher, Derek Bullock, George Kent and Maureen Jensen. MES has provided $35,000 to date, with $15,000 left in our share of the commitment to U of T. The members of CIM wish to thank Ted Yates of Cominco Ltd. for providing effective leadership over the past five years as Chairman of the Education Committee of MES.

Mine Economics Education at UBC
1997 was a milestone year for the Vancouver chapter of MES. In October of 1997, MES Vancouver presented a cheque to the University of British Columbia for $8,000 as the first payment on a $40,000 commitment over five years at the rate of $8,000 per year. In his letter of February 13, 1998, Scott Dunbar of the Department of Mining and Mineral Process Engineering of UBC outlined the programs sponsored by MES, and described longer term goals. The funds were used to purchase mine modelling software used in a mine valuation course and to provide an honorarium for a geostatistics professional, Dr. George Verly, to give a ten lecture sequence of courses in ore reserve estimation.

CIM Centennial Project
In celebration of the 100th anniversary of CIM, MES has elected to sponsor a project in support of the Canadian Mining Hall of Fame. Agnico Eagles Mines Limited has donated four handsome bronze statuettes that depict a crouching underground miner. MES will pay for the manufacture and installation of handsome glass cabinets that will encase the statuettes and display the names of inductees to the Canadian Mining Hall of Fame. The total bill will be $5,865. The opening ceremony for the new facility at the University of Toronto is scheduled for May 22, 1998.

In the spirit of celebration of the CIM Centennial, MES contributed $5,000 to the Endowment Fund of CIM in April 1998. The Foundation's objective of supporting a strong educational program is in line with the goals of the Mineral Economics Society, and we hope our contribution will help the Foundation realize its objective.

Corporate Sponsors
In 1997 MES received generous support from a number of firms involved in the mining sector. Corporate contributions have bolstered MES's funding base in support of such key programs as the five year commitment to fund the Adjunct Professorship program at the University of Toronto. Such corporate support is vital to the success of programs, and we involved with MES wish to express our gratitude.

Tier 1 Sponsors
Boliden Limited
Cominco Ltd.
Falconbridge Limited
Gordon Capital Corporation
Rio Algom Limited
Royal Bank Financial Group

Tier 2 Sponsors
Argosy Mining Corp
Band-Ore Resources Ltd.
Barrick Gold Corporation
Micon International Limited
Nesbitt Burns
Noranda Inc.
River Gold Mines Ltd.
Roscoe Postle Associates Inc.
Rothschild Canada Inc.
Southern Era Resources Limited

MES Executive Committee: 1998/99 Fiscal Year
At the April 3, 1998 meeting of MES, nominations were presented and appointments confirmed for all positions of the Executive Committee and various sub-committees. The members of the new Executive Committee the oncoming year are as follows:

Chairman

Keith Spence
Alliance Pacific Resources
Tel: 416-362-0007
Fax: 416-362-0008

Vice-Chairman

Jane Spooner
Micon International
Tel: 416-362-5135
Fax: 416-362-5763

Treasurer

Joyce Bish
Midland Walwyn Capital
Tel: 416-369-2081
Fax: 416-369-4002

Secretary

Jacqueline Allison
TD Securities
Tel: 416-983-4058
Fax: 416-307-0512

MES Sub-Committees: 1998/99 Fiscal Year
Members of the sub-committees of MES for the oncoming year are as follows:

Education Committee

Andy Abraham
Micon International
Tel: 416-362-5135
Fax: 416-362-5763

Ore Reserve Committee

John Postle
Roscoe Postle Associates
Tel: 416-947-0907
Fax: 416-947-0395

Bernie Haystead
CIBC
Tel: 416-956-6984
Fax: 416-956-8347

Discussion Group

David Boynton
Canaccord Capital
Tel: 416-869-3304
Fax: 416-869-3876

Steve Braun
Nesbitt Burns
Tel: 416-359-5283
Fax: 416-359-6585

Paul Rollinson
Deutsche Morgan Grenfell
Tel: 416-682-8056
Fax: 416-682-8080