Walsh says gold hoax was a 'horrendous blow'

Walsh says gold hoax was a 'horrendous blow'

MONTREAL (AFP): Bre-X Minerals chief David Walsh said Friday that a police investigation into the Busang gold strike hoax in Indonesia was "moving rapidly."

In an interview with Canadian Press, Walsh also said he had hoped right up to the last minute that an independent audit conducted by Strathcona Minerals Ltd. of Toronto of the claim would produce a "positive report."

Strathcona's announcement last Sunday that the goldfield in Borneo was a bust came as a "horrendous blow," said Walsh, chief executive officer of Bre-X.

When Bre-X officials got the news, "we contacted the authorities and had already started an investigative process on our own," Walsh said.

Walsh has filed a formal complaint with the Royal Canadian Mounted Police alleging his company was the victim of a massive fraud.

On Thursday, Walsh announced that Bre-X and two related companies, Bresea Resources Ltd and Bro-X Minerals Ltd, had filed for protection from its creditors.

Walsh also said that Bre-X chief geologist and vice president John Felderhof, currently in the Cayman Islands, had been fired.

Felderhof was instrumental in the earlier claims that Busang was the world's biggest gold find.

Prices

Bre-X share prices tumbled from more than US$2 to just a few cents, pulling down the share prices of other Canadian mining companies. Firms doing business in Indonesia lost one-third of their value on Monday alone.

The company was de-listed Wednesday by the Toronto Stock Exchange while the Alberta and Montreal exchanges continued to suspend trading in Bre-X.

A day after Bre-X Minerals Ltd. filed for bankruptcy, its ousted chief of exploration said on Friday he was unaware of any fraud at the now worthless Busang gold project.

In a statement released through his lawyers in Toronto and Houston, Felderhof said he has reviewing the "startling new material" on Busang, but added more facts were needed.

"Again, let me state without reservation that I was not aware of any fraud at Busang, Loa Duri, or Bre-X," the 56-year-old Canadian geologist, now living in the Cayman Islands, said.

Felderhof, 56, was named Canada's Prospector of the Year in March for his work in finding the Busang gold deposit in Indonesia, once touted as the century's biggest gold discovery.

Bre-X's last official estimate for Busang was 71 million ounces of gold, while Felderhof had said it could hold up to 200 million ounces of gold.

But in a devastating report on Sunday, a consultant hired by Bre-X concluded that Busang was falsified on a scale "without precedent in the history of mining."

Bre-X's storage warehouse near the Borneo town of Samarinda, where core samples were kept for long periods, was the most likely spot for any tampering, the report said.

Felderhof said in his statement he was cooperating with authorities probing the biggest mining scandal in history.

"I can't disclose who he has been contacted by, but I can tell you he has been cooperating with the people that have been calling him," Joseph Groia, Felderhof's lawyer, said in a phone interview on Friday.

Felderhof also has retained the Houston law firm of Jenkens & Gilchrist. Felderhof and other Bre-X officials have been named in several class action lawsuits filed in the United States and Canada.