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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