Securities regulator confirms Bre-X probe
Securities regulator confirms Bre-X probe
TORONTO (Agencies): Canada's top securities regulator said on Thursday it is probing whether Bre-X Minerals Ltd, mired in controversy over its Busang gold find in Indonesia, breached insider trading and disclosure laws.
The Ontario Securities Commission said the Calgary-based gold prospector has been under investigation since the end of 1996. But it did not reveal details of the probe until today.
"The OSC can confirm that the investigation relates to whether there has been a breach of continuous disclosure requirements or insider trading provisions," the regulator said in a statement.
The OSC said it has not determined whether there is enough information to begin formal proceedings against Bre-X, but the investigation is focusing on whether there were breaches of Ontario's Securities Act.
The regulator's announcement was among several fresh twists in the Bre-X Minerals saga.
A group of Canadian Bre-X shareholders launched a class action lawsuit on Thursday, adding to the five court actions the company already faces in the United States.
Frantic trading in Bre-X shares handcuffed the Toronto Stock Exchange once again on Thursday -- the third time this week that the TSE has stopped Bre-X due to heavy order volumes and a creaky computer system.
A much-anticipated report on Bre-X's assay program at Busang confirmed the company's original findings on Thursday. But analysts said the highly technical report by Kilborn SNC Lavalin Inc also raised new questions about the controversial gold project.
Bre-X has been under seige since last week when its partner in Indonesia, Freeport-McMoRan Copper & Gold Inc. revealed that early drilling samples performed during its due diligence process on the Busang gold property in the rain forests of Borneo turned up only tiny amounts of gold.
Panic selling lopped nearly C$3 billion off the company's market value last Thursday and the stock has since played havoc with the TSE's old computer trading system.
Bre-X climbed C23 cents to C$3.34 on brisk turnover of 5.02 million shares before the Toronto exchange was forced to stop trading at 1243 EST/1743 GMT on Thursday.
The TSE again cited "systems problems caused by high levels of order flow in (the) company's stock."
The trading problems irritated investors and further embarrassed the exchange, which has been the butt of jokes recently on the U.S. financial news television channel CNBC.
Kilborn, a unit of engineering firm SNC-Lavalin Group Inc performed the original resource calculations on Busang showing it contained an estimated 70.95 million ounces of gold.
The firm confirmed its findings on Thursday, based on assay samples provided to it by Bre-X.
"The standard deviation and variance observed in the analysis of the database is consistent with previous test work done on Busang samples...," said the report, which was released by the Toronto Stock Exchange and the OSC.
Bre-X chief executive officer David Walsh promised on Monday the report would shed light on Bre-X's testing methods. But Bre-X told the TSE and OSC on Thursday that the report contained no new material information.
"Our view is investors should have as much information available to make their own decisions. We thought it should be out there," OSC chairman Jack Geller told Reuters.
Analysts said the Kilborn report does not resolve the controversy over Busang, but did provide a few details not known before.
The hammer mill process used by Bre-X "can produce a non- reliable sample in the preparation process," a mining analyst said. "If there is a problem here, it is in within the sample preparation. It is not in the assays, it's problem in the sample preparation."
Meanwhile, a group of Canadian investors has launched a class- action suit against troubled mining company Bre-X Minerals over the Busang gold debacle.
The claim, for unspecified damages, was filed Thursday by a Windsor, Ontario law firm, Gignac, Sutts.
It named geological firm Kilborn SNC Lavalin, a subsidiary of the Montreal-based conglomerate SNC Lavalin, as a co-defendant.
The suit is believed to be the first filed in Canada against Bre-X and the first to name Kilborn SNC Lavalin as a defendant. There have been five reported class action suits filed against Bre-X in the United States.
All the claims allege Bre-X executives deceived investors with bloated projections of the gold find in the Busang area of Borneo.
The Canadian claim filed Thursday also blames Kilborn SNC Lavalin geologists for having confirmed Bre-X's initial claims of a huge gold find.
Bre-X has hired an mining consultant, Strathcona Mineral Services Ltd, to conduct an independent drilling program and audit of the Busang site. Strathcona is expected to deliver its report by early May.
"What everyone is waiting for is the actual independent drilling by Strathcona," said John Ing, president of Maison Placements Canada Inc.