By PAUL BAGNELL
Mining Reporter The Financial Post
Chaos again surrounded Bre-X Minerals Ltd. yesterday as speculation continued to swirl over the extent of its Indonesian gold find.
Bre-X shares traded for a total of 22 minutes on the Toronto Stock Exchange before the frenzy once again caused the exchange's computer system to crash.
After the stock (BXM/TSE) climbed $1.35 to $3.85 on heavy volume of 7.8 million shares, TSE officials halted trading in Bre-X for the rest of the day. Trading in the stock is expected to resume this morning.
Bre-X shares did trade for the full day on the Montreal Exchange, where the stock (BXM/ME) closed at $3.50, up 81›, on volume of 9.3 million shares.
In other developments yesterday:
Bre-X did not release a study by PT Kilborn Pakar Rekayasa, the company retained to estimate the size of the Busang gold discovery. On Monday, Bre-X told the TSE it would release the Kilborn report before the start of trading yesterday.
The company has suggested the Kilborn report may shed light on why Freeport McMoRan Copper & Gold Inc. has not been able to match Bre-X's gold findings at Busang. An unnamed source at the Toronto Stock Exchange said exchange officials are working with the Ontario Securities Commission to investigate the Bre-X debacle. The investigation will be looking for unusual trading patterns that might
indicate persons or institutions acted on information that had not yet been made public, the source said, and authorities will also try to determine when Bre-X began comparing its Busang test results with those of other companies.
Three more lawsuits have been filed against Bre-X in the U.S., bringing the total to five. The actions seek class action status and accuse Bre-X of misrepresenting the Busang find to investors.
Several experts said yesterday there is no insurmountable legal barrier stopping Canadian shareholders from joining one of the U.S. actions.
Bre-X shares also traded for the full day on the Alberta and Nasdaq stock exchanges. On both exchanges, Bre-X stock gained value, as investors seemed to bet that Thursday's huge selloff had left the shares undervalued at $2.50.
On Nasdaq, the shares (BXMNF/NASDAQ) climbed 3/4 to US$2 1/2 on volume of almost 12 million shares. On the Alberta Stock Exchange, Bre-X shares (BXM/ASE) closed at $3.55, up 80›, on volume of 6.2 million shares.
Calls for regulatory reform grew louder, as more experts said the Bre-X disaster would never have happened if regulators imposed tighter controls on the mining industry.
Bre-X and Canadian financial markets have been in turmoil since March 26, when the company divulged news that its earlier estimates of Busang's gold content may have been "overstated."
A consultant told Bre-X it found evidence of "invalid samples and assaying of those samples," and a "strong possibility" of exaggerated resource estimates.
Worse, Freeport told Bre-X it has found only "insignificant" amounts of gold in the early stages of a due diligence review of the property.
Freeport is a U.S. resource giant that won the right to be the operating partner of a mine at Busang in February, but has said it will walk away from the project if Busang does not prove economic.
On Monday, Bre-X released a detailed account of its decision to use a cyanide leaching assay process to estimate the amount of gold in Busang ore samples.
The company said it would follow that information with a report from PT Kilborn on that company's role in calculating estimates at Busang.
But the report wasn't made public yesterday, although Bre-X said it had received the document from Kilborn. In a news release, Bre-X said the report "is an extensive document which requires a more thorough review by Bre-X's technical team than initially anticipated."
Bre-X said it would correlate the data in the Kilborn report with that generated by Strathcona Minerals Services Ltd., the Toronto engineering firm that has so far been unable to verify Bre-X's results.
Before Strathcona's involvement, Busang was estimated to contain 71 million ounces of gold. That would make it one of the world's greatest gold discoveries. But now investors are wondering if Busang contains any gold at all.
Many investors have been devastated by the Bre-X mess.
Eyeing the potential for huge damages, five U.S. law firms have filed actions against Bre-X on behalf of individual shareholders. In each case, the lawsuits seek to be certified as a class action against the company.
W.A. Bogart, a specialist in legal procedure at the University of Windsor, said Canadian shareholders have been included in U.S. class actions in the past.
-- with files from the Financial Times
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