F-6: Misleading Gold Report

Statement of the Case: Geoscientist A wrote a report on a gold prospect for a junior resource

company active on the Vancouver Stock Exchange (VSE). The report was intended to be a

factual history of the numerous test results at a specific site, including drill locations, summaries

of drill logs, and assay results. Geoscientist A used accurate numerical data in the report, but

added a few subjective adjectives. One example, among several similar statements in the report,

was this: “Assays on samples recovered from drill holes 6–14 revealed a very respectable 0.01

ounces of gold per tonne average, with some samples as rich as 0.03 ounces per tonne.”

After the report became public, the company’s share price rose sharply on the VSE. However, no

gold mine was constructed on the site, and the share price eventually dropped to a very low

value. Many shareholders, who had purchased shares at high values, now found the shares

almost worthless.

[Assay:the testing of a metal or ore to determine its ingredients and quality:

• "submission of plate for assay"]

Question: Were these statements by Geoscientist A professionally acceptable?

Outcome: The shareholders complained to the VSE and to the provincial Association that the

report written by Geoscientist A was misleading and demanded some disciplinary action, on the

basis that Geoscientist A’s use of the subjective adjectives constituted a personal opinion that

gave an inflated impression of the value of the property.

Authors’ Comments: Geoscientist A should not have used such subjective expressions as “very

respectable” or “rich” to describe the significance of the numerical data. Although Geoscientist

A summarized the data accurately, adding these subjective modifiers might have altered the

interpretation of the data by others. Such comments likely would not satisfy the requirements in

National Instrument 43-101, which came into effect on February 1, 2001. Geologists must follow

this document when disclosing information on mineral projects in Canada. The document

specifies the format for making oral statements or written disclosure of scientific or technical

information to the public concerning mineral projects. (See Chapter 2 of the text for a full

explanation.)

Whether deliberately or inadvertently, Geoscientist A did not follow accepted practice and

neglected the duty to the public, as required by the Code of Ethics. The Association would likely

feel obliged to take some action on such a complaint, but the complaint might easily be resolved

before reaching the disciplinary hearing stage, depending on the geoscientist’s explanation and

previous record.