Integrity is the cornerstone of healthy development in a market economy. Under market economic conditions, many economic activities are plagued by an imbalance between self-interest and integrity. Similar problems also exist in the capital market for geological exploration. A lack of integrity has become a serious and pressing reality.

　　Liu Yikang, a senior advisor to the China Mining Association, pointed out at the 2017 China Prospector Annual Conference that in recent years, there has been a growing trend of fraudulent practices in domestic mineral exploration and falsification of geological data. If we were to say that no one—neither the parties involved nor any relevant stakeholders—is responsible for the falsification of geological data, it would simply mean that oversight of such fraud has been lacking and that the rules governing the exploration market have gone awry. In such an environment, investors have lost confidence in the exploration market—how then can we talk about building a robust capital market for exploration?

　　Therefore, to strengthen the development of the capital market for mineral exploration, it is essential to establish a comprehensive integrity system, ensure the authenticity and reliability of geological data, and scientifically promote the growth of the geological exploration capital market.

　　The lack of integrity undermines the development of capital markets. In the mineral exploration industry—a high-risk sector—integrity is particularly crucial. But why does this lack of integrity arise? From a subjective perspective, the profit-seeking principle serves as a powerful internal driving force that prompts market participants to violate the principle of integrity. From an objective standpoint, information asymmetry in transactions also creates conditions conducive to the breakdown of integrity. In today’s modern market economy, the scope of markets has expanded dramatically, and the space for economic activity is unprecedented. The vast majority of transactions involve parties who have never met before—and often even cross national borders—providing ample room for counterfeit goods, substandard products, deception, and fraud.

　　Liu Yikang gave an example: A forger in Inner Mongolia fabricated detailed exploration reports for six iron mines out of thin air. Among those involved, some helped draft the detailed exploration reports, others conducted reviews based on their qualifications, still others registered the resource reserves, and yet others issued mining permits—all proceeding smoothly without any hitches. When CCTV reporters interviewed relevant personnel, government officials claimed they bore no responsibility; geological experts asserted they were not responsible; and even the review agencies completely shirked all accountability. After investors entered the mining areas, they found they simply couldn't extract any ore at all—left utterly devastated and with no recourse but to accept their bad luck.

　　Experts believe that the shift of business operators from dishonesty to integrity is not driven by a sudden awakening of conscience, but rather by the relentless pressure imposed by an increasingly robust market competition mechanism—pressure that compels enterprises to act this way if they are to survive, thrive, and remain profitable. For market participants to secure their own interests in market economic transactions, they must first acknowledge and respect the interests of their counterparts.

　　“When Canadian Southwest Gold Corporation was conducting gold exploration in Boka, Dongchuan, Yunnan Province, its president, Patterson, in an effort to boost the company’s stock price, introduced some falsified laboratory data, inflating the estimated gold reserves from 20 tons to 150 tons. In July 2007, the fraud involving Boka’s geological data was exposed, and Patterson was sentenced to six years in prison. He also had to use his entire family fortune to cover legal settlement costs totaling 15.5 million Canadian dollars. Patterson’s fate should serve as a stark warning to all those involved in exploration fraud,” Liu Yikang said by way of example.

　　Meanwhile, domestically, the tolerance toward falsification in exploration activities has led to a rampant epidemic of such fraud. Falsification in mineral exploration has triggered numerous economic disputes and criminal offenses. Since there are no specific legal provisions imposing penalties for exploration fraud, the Supreme People's Procuratorate has issued a special judicial interpretation, sentencing offenders by analogy to the crime of forging official documents. Compared with other forms of economic fraud, however, the penalties imposed remain disproportionately lenient. Forging official documents issued by companies or public institutions carries a maximum sentence of three years; yet for economic fraud involving an amount of 200,000 yuan, the baseline sentence is already ten years. Moreover, the "Regulations on the Administration of Geological Data" are notably weak and ineffective—when it comes to the practice of fabricating reports, the only measures prescribed are “ordering rectification within a specified time limit and imposing a fine of 100,000 yuan,” without even mentioning tougher sanctions such as revoking mining rights or canceling exploration qualifications. Liu Yikang pointed out that geological reports often suffer from poor quality and ambiguous professional terminology, which adversely affect the development of the exploration capital market. In short, unless we can effectively curb exploration fraud through legal and institutional means, it will be impossible to build a robust exploration capital market.

　　At this stage, the marketization of China’s mining industry has reached a certain level. At the 2017 China Prospecting Professionals Annual Conference, Chen Yuan, Chief Consultant and Exploration Business Manager (Geology) at Beijing Sloco Resource Technology Co., Ltd., presented an overview of the development of marketization in geological exploration.

　　With the acceleration of the market-oriented reform in geological exploration, in recent years, the Chinese government has stepped up efforts to build a credit system, issuing a series of policies, measures, and opinions at the national level. In March 2007, the "Several Opinions of the General Office of the State Council on Building a Social Credit System" were promulgated; in April 2007, the "Regulations of the People's Republic of China on Government Information Disclosure" were issued; in January 2013, the State Council promulgated the "Regulations on the Administration of the Credit Reporting Industry"; in June 2014, the State Council released the "Outline for the Construction of a Social Credit System (2014-2020)"; in September 2015, the National Standardization Administration Committee issued standards such as "Enterprise Integrity Management System GB/T31950-2015" and "Enterprise Credit Evaluation Indicators GB/T23794-2015"; in May 2016, the "Guiding Opinions of the State Council on Establishing and Improving the Joint Incentive System for Trustworthiness and the Joint Punishment System for Distrustworthiness, and Accelerating the Development of Social Integrity" were promulgated; and in January 2017, the State Council issued the "Opinions on Deepening the Reform of the Professional Title System."

　　The “Several Opinions of the General Office of the State Council on Building a Social Credit System” clearly states that the Party Central Committee and the State Council attach great importance to the construction of the social credit system. It sets forth the direction and objectives for building this system, with a particular focus on improving credit records related to lending, tax compliance, contract performance, and product quality, thereby accelerating the development of the social credit system.

　　Building a social credit system is an objective necessity for perfecting China’s socialist market economic system and represents a fundamental solution for rectifying and standardizing the order of the market economy. Accelerating the construction of a social credit system is of great practical significance for combating dishonest behavior, preventing and resolving financial risks, promoting financial stability and development, safeguarding the normal socio-economic order, protecting the rights and interests of the public, and enabling the government to better fulfill its functions of economic regulation, market supervision, social governance, and public service provision.

　　The land and resources system has also introduced several measures to build a credit system: In November 2008, the Ministry of Land and Resources issued a notice on the promulgation of the "Implementation Plan for Building a Credit System in the Land Market and Mining Rights Market." In April 2009, the Ministry of Land and Resources issued a notice on the promulgation of the "Interim Provisions on the Disclosure of Government Information upon Request." In November 2012, the Department of Land and Resources of Liaoning Province issued the "Detailed Implementation Rules for the Management of Enterprise Credit Information in the Field of Land and Resources in Liaoning Province," requiring that business entities and practitioners with low credit ratings and frequent misconduct be subject to enhanced supervision. Based on different circumstances, specific restrictions will be imposed, and enterprises and individuals at different credit levels will be managed in a differentiated manner. In August 2014, the Department of Land and Resources of Zhejiang Province issued the "Work Plan for Building a Geological and Mineral Credit System in Zhejiang Province" and the "Interim Measures for the Credit Supervision and Management of Mining Right Holders in Zhejiang Province." In March 2015, the "Credit Rating Standards for Mining Right Holders in Zhejiang Province" were released, and in March 2017, the list of credit ratings for mineral resource exploration, development, and utilization entities across the province for the year 2016 was published. In September 2015, the Ministry of Land and Resources issued the "Measures for the Public Disclosure of Exploration and Mining Information by Mining Right Holders (Trial)." In December 2016, the "Implementation Measures for the Public Disclosure of Exploration and Mining Information by Mining Right Holders in Hubei Province" were released. The Chinese government has recognized the urgency of building a credit system. The current central government has emphasized advancing reforms aimed at streamlining administration and delegating power, combining deregulation with regulation, optimizing services, and simplifying approval procedures.

　　The construction of corporate and individual credit systems has also achieved a certain scale: From April 2009 to September 2012, the China Mining Association released draft amendments to the “Administrative Measures for Credit Rating Evaluation in China’s Geological Exploration Industry,” as well as the “Proposal on Establishing a Registered Geological Practicing Qualification System.” It subsequently drafted and completed the “Interim Provisions on the Registered Geologist System,” the “Implementation Measures for the Registered Geologist Qualification Examination,” the “Measures for the Assessment and Recognition of Registered Geologists,” and the准入 qualification system for professional and technical personnel in geological exploration. In April 2017, the China Mining Association again released the “Administrative Measures for the Assessment of Practice Levels of Geological Exploration Units” (draft for comments), the “Classification and Grading Standards for the Assessment of Practice Levels of Geological Exploration Units” (draft for comments), and the “Administrative Measures for Professional Geologists” (discussion draft). “Overall, China’s integrity system for enterprises and individuals in the field of mineral exploration and development is still at the discussion stage, with some local governments directly intervening in enterprise credit management,” judged Chen Yuan.

　　Gao Bing, deputy director of the Exploration Economics Research Office at the Institute of Industrial Economics, China Academy of Land and Resources Economics, believes that China should actively learn from and draw on advanced international practices, accelerate the establishment of a professional geological engineer system, and at the same time strengthen cooperation with foreign geological engineering associations.

　　“Geological exploration is highly risky and highly specialized, and its outcomes are hidden reserves of resources. Geologists essentially act as translators, converting specialized ‘geological information’ into ‘capital language’ that investors can easily understand—while ensuring the authenticity and clarity of the geological information disclosed. Therefore, establishing a geologist certification system is particularly important in China,” said Gao Bing.

　　China is a major country in geological exploration. From 2001 to 2016, China’s cumulative investment in exploration reached 990 billion yuan. The mineral exploration rights can support capital investments amounting to trillions of yuan; however, most of these rights currently find themselves in an awkward situation—possessing the right but lacking the funds—making it difficult to convert resources into actual capital. On the one hand, most exploration blocks still have considerable potential, yet their current level of exploration is low, resulting in relatively low valuations under the existing assessment methods. It is hoped that by increasing investment, these blocks can achieve substantial value appreciation and thereby attract social investment. On the other hand, due to difficulties in raising sufficient funding, most blocks can only maintain their exploration rights at the minimum required level of investment, effectively turning them into stranded capital, said Gao Bing.

　　Abroad, the professional geologist system in some countries has already reached a relatively mature stage. According to the bylaws of the American Association of Professional Geologists, candidates must have at least eight years of professional experience in geological practice following the completion of a bachelor’s degree, as well as a long-standing record of adherence to professional ethical standards. The Canadian Association of Professional Geoscientists stipulates that professional geologists must hold a bachelor’s degree in Earth sciences, possess practical experience in geoscience, demonstrate good character, and be proficient in applying their specialized skills in their field of work. The Association of Professional Geologists of Ontario, Canada, requires that professional geologists possess knowledge of Earth sciences, be able to understand and apply Earth science principles, safeguard public health, life, and property safety, and protect the natural environment.

　　Some other countries and regions have implemented a “qualified person system.” The U.S. Bureau of Land Management stipulates that qualified persons must hold a recognized academic degree, professional certification, and extensive knowledge and experience in their respective fields, and possess the ability to design, analyze, and evaluate the work they undertake. Canada’s National Instrument 43-101 for mining projects defines a qualified person as a professional geologist or professional engineer with at least five years of practical work experience in related fields such as mineral exploration, mineral development, mine construction, and mineral resource project evaluation, and who enjoys a good reputation within the relevant professional geology association to which they belong.

　　Gao Bing stated that, against the backdrop of an accelerating trend toward the internationalization of the mining industry and the ongoing reform of public institutions into categorized entities, establishing a risk exploration capital market that complies with international standards and building a seamless platform for connecting mining rights, exploration technologies, and social capital are of great significance for promoting the reform and development of geological exploration units. In this process, a group of professionally qualified geologists with international backgrounds—professional geologists—will play a crucial role.

　　The Belt and Road Initiative advocates win-win cooperation in resource development. This not only calls for geological exploration institutions to “go global,” but also to “attract investment from abroad.” It requires them not only to adapt to the rules of the global exploration market, but also to actively participate in shaping these rules. Professionally qualified geologists with internationally recognized credentials form the foundation for China’s participation in international discourse and influence.

　　He believes that for our country to achieve the goal of transitioning from a geologically large nation to a geologically strong nation, we need to be supported by professional talents such as certified professional geologists.

　　“The state should establish a well-organized institutional framework, and some practices adopted by Western countries could serve as useful references. For example, in the United States, professional geological organizations include the Federation of State Geological Surveys, the Society of Professional Geologists, and the American Association of Petroleum Geologists; in Canada, there’s the Canadian Association of Professional Earth Scientists and the Association of Professional Engineers and Professional Earth Scientists of British Columbia; in the European Union, we have the European Federation of Geologists, the Spanish Association of Geologists, the London Geological Society, and the Irish Association of Geologists; in South Africa, there’s the South African Institute of Mining and Metallurgical Engineers; and in Australia, there’s the Australasian Institute of Mining and Metallurgy, among others.”

　　In terms of establishing relevant regulations, the United States has enacted the Model Act for Registered Professional Geologists; Canada’s legal system consists of national professional association regulations and local professional association regulations; the European Union comprises regional group organization regulations, professional association regulations of individual member states, and local professional/association regulations; South Africa is composed of national professional/association regulations and local professional/association regulations; and Australia is composed of national professional/association regulations and local professional/association regulations.

　　Gao Bing proposed that professional geologists must obtain qualification certification, have a clearly defined practice seal, clearly defined rights and obligations, and adhere to ethical standards. The government should establish comprehensive supervision and management measures.

　　The planning should accommodate the fact that government-led economic geological exploration activities are carried out by geological survey teams holding exploration qualifications and enjoying monopoly rights. These geological survey teams are responsible for ensuring the quality of the raw data. In practice, trenching, drilling, and underground tunnel construction are contracted out to construction companies with appropriate qualifications; sample processing, laboratory analysis, and ore-dressing tests are handled by qualified laboratories. In this process, once quality issues arise, there is uncertainty regarding the assignment of responsibility.

　　Chen Yuan said that in the management of the land and resources sector, emphasis is placed on geological exploration units, while oversight of mining and metallurgical design institutes and mineral rights holders/mining industry operators remains relatively weak. As a result, the exploration reports submitted to the government to some extent contain inaccurate resource estimates/reserve data—indeed, in certain cases, these reports are entirely fabricated. Once mineral rights are traded on the market, such problems will inevitably come to light to a certain degree. Under the current operational framework in the exploration and development sector, effectively curbing dishonest behavior and the provision of false information requires perfecting the regulatory mechanisms to prevent the negative consequences of upstream misconduct from being passed down to downstream actors.

　　“It is necessary to formulate a clear plan for building an integrity system for exploration and development that is compatible with the current government-led market economy. We must streamline the Ministry of Natural Resources’ comprehensive management mechanism covering the entire process—from exploration and design to development—and coordinate the regulatory mechanisms and institutional frameworks under market-oriented conditions, addressing any conflicts between these new mechanisms and existing ones. Furthermore, we should integrate the listing rules of China’s securities trading market with the government’s credit system being developed for the mining sector. We need to eliminate administrative notices or regulations that lack legal validity, are conceptually vague, or contain contradictions. At the legal level, we should revise and improve effective punitive measures for illegal and dishonest behavior; at the non-legal level, we should amend and enhance the legal efficacy of key technical standards.” — suggested Chen Yuan (China Mining News).