Busang gold find a hoax: Report

Busang gold find a hoax: Report

TORONTO (Reuter): The Busang gold discovery in Indonesia --
touted by Canada's Bre-X Minerals Ltd. as the richest find of the
century -- was falsified on a scale "without precedent in the
history of mining" according to a report released on Sunday.

In a stunning report to Bre-X, consultant Strathcona Mineral
Services Ltd. said it found evidence of tampering with Bre-X core
samples taken from the Busang site, located deep in the jungles
of Borneo.

"The magnitude of the tampering with core samples that we
believe has occurred and resulting falsification of assay values
at Busang, is of a scale and over a period of time and with a
precision that, to our knowledge, is without precedent in the
history of mining anywhere in the world," the report said.

Strathcona said it did not find an economic gold deposit in
the southeast zone of the Busang property, the area claimed by
Bre-X to contain about 71 million ounces of gold. The report said
an economic deposit was unlikely.

In Jakarta, Indonesia's Minister of Mines and Energy I.B.
Sudjana told newsmen the government would take action if the
Indonesian laws had been violated over the Busang gold property.

Sudjana added, however, he had not yet seen the report issued
by Strathcona Mineral Resources Ltd.

The Toronto Stock Exchange said on Sunday that it would halt
trading in Bre-X shares on Monday "in light of the extremely
negative report from Strathcona."

Bre-X's stock closed up 19 cents (US$.0.14) at C$3.23 ($2.34)
on the Toronto Stock Exchange on Friday.

Bre-X chairman David Walsh, the maverick mining executive who
gambled his last C$10,000 ($7,200) on finding Busang, said the
company was "devastated" by Strathcona's findings.

"We share the shock and dismay of our shareholders and others
that the gold we thought we had at Busang now appears not to be
there," Walsh said in a statement on Sunday.

As the fallout from Sunday's announcement reverberated through
the world mining community, Walsh had little to say to reporters
as he sped away from Bre-X's Calgary headquarters where
shareholders and reporters had gathered.

"I think our press release says it all for now," he said.
The report spells the end of Bre-X, said gold analyst John Ing of
Maison Placements Canada in Toronto.

"Bre-X has got nothing, that's what it means," Ing said in a
telephone interview. "They've got nothing but lawsuits on their
hands," he said.

With billions of dollars in limbo, nervous shareholders have
traded rumors for weeks on Internet chat sites while they waited
for the Strathcona report.

Some Bre-X shareholders who stood by the company during the
recent turmoil now lay the blame at Walsh's feet.

"He should be prosecuted to full extent of the law," Chris
Laughren, a construction worker, told Reuters on Sunday as he
waited outside Bre-X's headquarters.

Laughren said he has lost C$7,500 ($5,400) on Bre-X stock, or
"three months work down the drain."

Walsh said in a statement on Sunday he would do all he could
to protect Bre-X's remaining assets "for the benefit of the
shareholders."

A penny-stock exploration firm before it discovered Busang in
1993, Bre-X quickly became the darling of the Toronto Stock
Exchange amid glowing reports of Busang's potential.
But rumours began swirling around Bre-X and its Busang deposit
after the March 19 apparent suicide of Bre-X's top geologist in
Indonesia.

Michael de Guzman allegedly jumped to his death from a
helicopter while en route to a meeting with officials at
Freeport-McMoRan Copper & Gold Inc, one of Bre-X's partners in
the Busang project.

A week later on March 26, New Orleans-based Freeport-McMoRan
said that its preliminary tests found "insignificant" amounts of
gold.

The reports of a huge gold find came from samples submitted by
Bre-X's head of exploration John Felderhof and his team of
geologists, including de Guzman. The last estimate of 71 million
ounces of gold was calculated by assay firm Kilborn SNC Lavalin,
a unit of Montreal-based SNC Lavalin Inc. Kilborn has already
said it was not responsible for sampling.

After the Freeport-McMoRan report Bre-X immediately hired
Strathcona, a well-respected Canadian mining consulting firm, to
review its Busang project.

The announcements sparked panic selling of Bre-X shares,
wiping almost C$3 billion ($2.1 billion U.S.) from the company's
market value when the stock plummeted to C$2.50 ($1.80) from
around C$15 ($11).

A Freeport spokesman said on Sunday the company had no
immediate comment, but would release a statement before North
American financial markets opened on Monday.

"Our response is we're aware Bre-X has released a news
release," spokesman Garland Robinette said.

Freeport said last month it would "elect to participate in the
Busang project only if development is, in (Freeport's) opinion,
economically feasible."

Disgruntled shareholders have already launched at least eight
class action lawsuits.

The Ontario Securities Commission, Canada's top securities
regulator, is investigating Bre-X for possible violations of
insider trading and disclosure laws.

Increasing attention is being paid to personal trades by
Walsh, his wife and other company officials in 1996, which netted
them about C$77 million ($55 million).

Editorial -- Page 4

Full report -- Page 10