Dozens of mining firms may halt exploration in RI

Dozens of mining firms may halt exploration in RI

TORONTO (AP): Dozens of mining companies including Vancouver- based Placer Dome Inc. and Barrick Gold Corp. of Toronto will likely halt their mineral exploration programs in Indonesia until they get final approval, says an executive mining firm.

Graeme Currie of Canaccord in Vancouver said that the measure would be made after the Indonesian government decided last week not to grant any mining contracts to Bre-X until the size of its Busang gold deposit is clearly determined.

Currie said junior companies like his now face a "credibility chasm" in trying to attract investment.

"The one thing that's clearly going to come from this is a higher level of assessment and due diligence."

Placer Dome's spokesman Hugh Leggatt said Bre-X Minerals's troubles may have begun when it prematurely released information on the find before final assays were completed,.

"This is an unprecedented occurrence at this scale," said Leggatt over the weekend. "We've got this massive deposit and suddenly it's been put in doubt. It's very unusual for this level of doubt to be cast over a gold find."

Placer Dome, Canada's second-largest gold producer, escaped the project just in time. The company bowed out of the Busang project last month after Bre-X struck a deal with Freeport- McMoRan Copper and Gold.

"It's a very complex procedure which requires a lot of time and a lot of data," he said. "You need to do a lot of work - you can't just announce things because the market is hungry for more news."

Bre-X was surfing a wave of speculation and gold fever that analysts say was almost bound to come crashing down on the Calgary exploration firm.

The high-flying company suffered one of the most spectacular wipeouts in Canadian business history last week with the announcement that its Indonesian gold find may not be as rich as first thought.

Bre-X stock has plunged to a tenth of its former value, its mining rights have been thrown into doubt and preliminary testing by its corporate partners has raised questions as to whether there's any gold in the company's remote Busang claim.

The crash has left a lot of shareholders, market watchers and many in the mining industry wondering how it could have gone so wrong, so quickly.

Leggatt says there may turn out to be gold in the remote Indonesian jungle, just not as much as first believed. "It's hard to believe that it would go from 70 million to zero in one day."

Ron Meisels, president of P and C Holdings of Montreal, said there were signs that Bre-X stock was overpriced months before last week's collapse.

"This really was a dirigible full of hot air which suddenly had lightning strike it," he said.

Meisels said warning bells went off for him when the company began issuing more and more news releases touting the potential size of the Indonesian find.

"They ran the stock up," he said. "You have a stock going from 50 cents to 280 dollars, hitting the headlines on and on ... and you get everybody jumping on the Bre-X wagon.

"It was self-fulfilling and self-promoting."

When trading of the company's shares resumed Thursday, after a one-day suspension on the Toronto Stock Exchange and the U.S. Nasdaq market, they fell more than C$12 in a matter of minutes to close at C$2.50, or US$1.81, wiping out C$2.8 billion (US$2.03 billion) from the company's value in one day.

The biggest casualty from the fall of Bre-X could be other junior mining companies, who have already been hit as nervous investors shy away from all mining stocks.