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