Bre-X mining saga could have been scripted for film

Bre-X mining saga could have been scripted for film

TORONTO (AFP): David Walsh, president of the Bre-X mining
company, was hunkered down in his Calgary office on Friday,
trying to sort out what went wrong with a company that once had
taken the investment world by storm.

Walsh was the golden boy of Toronto's Bay Street -- the
Canadian equivalent of Wall Street -- when he announced he
controlled a massive gold find at Busang in Indonesia's East
Kalimantan province

Each analysis of the find was better than the previous one.
Company officials boasted it was the biggest gold find in the
world -- ever.

Last year, with his stock soaring, Walsh -- a former bankrupt
businessman -- engineered a 10-for-one stock split, making the
shares available to a wider range of investors at more than C$20
a share.

The company had a book value of more than C$6 billion (about
US$4.3 billion).

When the Toronto Stock Exchange was forced to close early
Thursday -- largely because of computer crashes associated with
the rush to dump Bre-X shares -- Bre-X shares were changing hands
at C$2.50 per share, giving the company a book value of less than
C$600 million.

Walsh, who normally spends the Easter holiday in the Bahamas,
was instead at his company's Calgary headquarters, insisting that
Bre-X was alive and that its assay tests would prove valid.

Those assay tests are at the center of the controversy and
have rekindled speculation that the apparent suicide last week of
Bre-X's chief geologist in Indonesia, Michael de Guzman, may not
have occurred because he was depressed over learning he was
terminally ill.

De Guzman vanished while returning home, by helicopter, from
Busang. Authorities in Indonesia said he apparently jumped out of
the helicopter and that he had left a suicide note explaining his
illness was the cause for his suicide.

Despite overwhelming evidence to the contrary, Walsh -- in a
brief interview outside his Calgary office -- insisted the assay
tests carried out by Bre-X are accurate.

"We've done over 100 miles (160 kilometers) of core and the
assays have been consistent all the way through," he said.

As to suggestions the tests may have been faked, he said:
"It's physically impossible in our mind that the core could have
been tampered with."

Walsh's statement flies in the face of findings by an
independent Canadian consultancy, hired by Bre-X, and separate
tests by Bre-X's American partners in Busang.

Strathcona Mineral Services Limited said "there appears to be
a strong possibility that the potential gold resources on the
Busang project in East Kalimantan have been overstated because of
invalid samples and assaying of those samples," according to Bre-
X.

In addition, Bre-X's U.S. partner, Louisiana-based Freeport-
McMoRan Copper and Gold, said its own drilling in the project
area had revealed "insignificant amounts of gold."

It was apparent that investors preferred to believe Strathcona
and Freeport.

Sloppy

Trading in Bre-X shares had been halted Wednesday following
the release of the Strathcona report. When trading re-opened
Thursday, an hour before the scheduled close of the Toronto Stock
Exchange (TSE), Bre-X dominated the action so much that the TSE
computers crashed twice and the exchange had to close early --
but not before eight million Bre-X shares had changed hands.

Mining analysts, who last week dismissed an Indonesian
newspaper report that the Busang gold find had been overstated,
now say that Bre-X was probably guilty of sloppy assay work.

Both Bre-X and its partner, Freeport, took their test samples
from drill holes roughly 1.5 meters deep (4.95 feet) -- and
parallel to each other.

Yet, while Bre-X found gold grades ranging from 1.3 to 4.4
grams (0.045 to 0.15 ounces) a ton, Freeport reported just 0.01
to 0.06 gram (0.00035 to 0.0021 ounce) per ton -- amounts that
would not justify mining.

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