Here is FP's story for Saturday. No unnamed sources this time.Saturday, April 19, 1997
Should Busang be taken with grain of salt?
Geologist says it would have been possible for gold samples to have been
systematically adulterated
By SANDRA RUBIN
The Financial Post
Anyone who says it would have been impossible for embattled Bre-X Minerals Ltd. to have
systematically "salted" its gold samples at its Busang find in Indonesia doesn't know what they're
talking about, an expert in gold-industry securities fraud said Friday.
Keith McCandlish also said investors are right to be troubled that Bre-X's U.S. partner
Freeport-McMoRan Copper & Gold Inc. failed to turn up gold in its preliminary tests.
McCandlish, an investigative geologist, said a salt job is quite possible even if Bre-X sent its core
samples out to be crushed.
He dismissed suggestions that extra gold added to big pieces of rock sample would have been
easily detected.
"While it is much much more difficult to salt whole core than it is to salt crushed material,
nonetheless it can be done -- and anyone who tells you otherwise is either blind or very silly," he said
in an interview from Calgary.
"It can be as simple as mixing some coarse gold with a little bit of sand. You put a little bit of it in the
plastic bag that holds your core.
"When that whole core gets to the lab, they're careful to dump everything out. Nobody notices a
little bit of sand in the bottom because there's going to be some loose material. The amount of
samples taken, and the grade that was reported, adds up to about $25,000 worth of gold."
McCandlish, manager of mining services at Associated Mining
Consultants Ltd., stressed that he's reserving judgment on what
actually happened.
Bre-X maintained its silence Friday when the stock (BXM/TSE)
rose 19› to $2.49.
"We have no comment on this," said spokesman Richard Wool.
"We prefer to wait for the report by Strathcona [Mineral Services
Ltd.]," an independent auditor.
McCandlish said it's "extremely surprising" Freeport failed to turn
up gold considering they used two kinds of testing: fire assays and
cyanide leach.
"You would have expected that one or the other of the methods
used by Freeport would have resulted in some indications of gold," he said.
"For absolutely nothing to show up in the Freeport cores, analyzed by two different methods that
are very, very different -- the fact that they reported negligible to insignificant amounts of gold -- is a
very, very grave concern."
He also said the tiny Calgary exploration firm is to some extent the author of its own misfortune
through a failure to disclose information to regulators, the Indonesian government and possibly its
own partners.
And there were questions raised from the work that Bre-X did make public.
"Quite frankly I've seen Bre-X's sample protocol and there are things missing in it," McCandlish
said. "There is no reference to calibrations for the atomic absorption. There's no reference to running
blanks, or standards and controls. There are some things missing that an experienced assayer or
geologist would include.
"So Bre-X released something --and right away there are flags in that."
He said Bre-X's estimate that Busang contains at least 70 million ounces of gold is hard to swallow
geologically, because all the other discoveries in the area contain 10 million ounces to 15 million
ounces.
"You would expect a deposit found in that area, in a similar geologic area with a similar style of
mineralization, should be roughly the same size."
Meanwhile, a respected Canadian gold analyst says the real mystery may be why it's taking so long
to clear the controversy up.
Rick Cohen, of Goepel Shields & Partners Inc. in Vancouver, said it should be evident by now why
Freeport failed to find gold in its preliminary testing.
Cohen said in a recent report that if the difference is due to problems with incorrect assay
procedures -- which Bre-X has fingered as the possible culprit -- someone will have been tipped to
it at this point.
"A competent assayer could have reviewed the processes used by both Bre-X and Freeport by
now," he wrote.
"We are guessing that all of the procedures have been reviewed by someone, but where is the
information?"
Cohen, who could not be reached Friday, also pointed to problems of disclosure.
"Why didn't Bre-X disclose what they believed was the grade of the samples they provided to
Freeport? If the Bre-X samples had any grade at all [according to their assayers], then this would
point to assaying procedures being the culprit, not salting.
"Either Bre-X's lab would be wrong or Freeport's lab would be wrong. These are simple questions
that do not require a 30-day investigation to answer."
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