Busang rumors fly as Freeport gets review extension

Busang rumors fly as Freeport gets review extension

TORONTO (Reuter): The Busang rumor mill continued to churn on Wednesday as a jittery market weighed Freeport-McMoRan Copper & Gold Inc's move to extend its review of the controversial gold project.

Calgary-based Bre-X Minerals Ltd said on Wednesday that Freeport was granted an extension for its due diligence review of the Busang project until June 30.

New Orleans-based Freeport, a partner in the Busang find, requested the extension "to allow for consideration of the findings of the Strathcona audit," Bre-X said.

Rumors have swirled around Busang since the century's biggest gold find was cast into doubt on March 26 when partner Freeport- McMoRan said its preliminary due diligence tests found "insignificant" amounts of gold.

Panic selling of Bre-X shares lopped almost C$3 billion ($2.1 billion) or 80 percent from the company's stock market value last month.

Toronto-based Strathcona Mineral Services Ltd is expected to deliver a key report on Busang to Bre-X on Thursday or Friday.

Bre-X has said it will issue a press release on the report before North American financial markets open on Monday.

Freeport spokeswoman Kristin Lemkau said on Wednesday the request for the extension was made within the past week.

"The original agreement with Bre-X signed on Feb. 26 said that FCX's due diligence expire on April 30. This is really just to announce that we had pushed that date to June 30 to allow time for completion of the independent audit by Strathcona," Lemkau said in a telephone interview.

Strathcona has said its final report to Bre-X would be delivered about six weeks after the interim report. Strathcona has said the principal conclusions in the interim report are not expected to differ from the final report.

Lemkau declined to comment when asked if Freeport planned any further drilling at Busang over the next two months.

Bre-X shares led heavy traders on the Toronto Stock Exchange on Wednesday, closing down C32 (US23) cents at C$3.48 ($2.52) on 9.7 million shares.

Some investors on an Internet chat page speculated on Wednesday that Freeport's extension was favorable to Bre-X. But mining analysts cautioned against reading too much into the announcement.

"I don't think we should read into the request, although obviously investors are," said John Ing, president of Maison Placements Canada Inc.

"Everybody is reading a lot into the rumors. But really they are just rumors right now," another Canadian mining analyst said.

An Indonesian newspaper, citing unnamed sources, reported earlier this week that leaked results of Strathcona's drill tests showed "cheerful" grades of gold.

But in a report in the Calgary Sun newspaper on Wednesday, Strathcona President Graham Farquharson said it was unlikely that his company's findings had been leaked.

"I still haven't seen the results myself -- the assays are still under way. So I have to doubt the claim," Farquharson said in the Sun report.

"To the best of my knowledge there've been no leaks," Farquharson said.

Strathcona said last week it would maintain tight security over the assaying of its core samples at laboratories in Canada, Indonesia and Australia.

Only one or two persons in management at each laboratory would have access to the final assays and the results would not be reported until all the lab work was finished.