Gold news shocks tiny town
St. Paul, Alberta investors own Bre-X shares, feel impact of mine revelation
Bre-X rocks Canada
March 27, 1997: 6:26 p.m. ET
CALGARY, Alberta (Reuter) - The stunning revelation that Bre-X Minerals Ltd.'s Indonesian gold deposit may not be as rich as touted sent shock waves all the way back to the company's roots in
small-town western Canada. Perhaps no one was more stunned by Bre-X's
admission on Wednesday that the Busang project's gold reserves may have been overstated than the residents of St. Paul, Alberta, a sleepy farming town of 5,000 residents 124 miles (200 km) northeast of
Edmonton, Alberta.
St. Paul became famous as the prairie home to about 100 shopkeepers, electricians and farmers who bought stock in Calgary, Alberta-based Bre-X more than two years ago. They paid pennies a share on the advice of a local broker and became instant millionaires as the stock soared to C$250 ($181) before a 10-to-1 stock split.
The broker, Guy Drouin of RBC Dominion Securities, declined to comment Thursday.
The St. Paul investors who still held Bre-X stock watched in horror on Thursday as their paper fortunes stood to wither faster than they grew. Bre-X stock was down C$13 at C$2.50 ($1.81) in late trading Thursday after being halted all day Wednesday. After the split the stock had risen as high as C$28 ($20.30).
"The people are as surprised and shocked here as anywhere in the world, except that maybe because they are rural people, they are more used to business being done up front," said Olli Megley, general
manager of the St. Paul Journal newspaper who bought Bre-X stock at C20 cents (14 cents) a share.
Megley said for many townsfolk, the Bre-X investment was their first stock market foray. Those who had not balanced the stock with other
investments could find themselves in serious financial trouble, she said.
Bre-X rocked the world's mining and investment industries on Wednesday by admitting test samples from its Busang gold property on the island of Borneo may have been overstated. The property was billed as the biggest gold find of the century.
Bre-X's Busang partner, New Orleans-based Freeport McMoRan Copper & Gold Inc., said analysis of its own drilling results so far indicated
"insignificant amounts of gold."
The news came after a week of intrigue for Bre-X that included its chief geologist's falling to his death in the Indonesian jungle from a helicopter in an apparent suicide and reports in an Indonesian
newspaper that Freeport had doubts about the size and viability of Busang.
"It's the word 'insignificant' that really concerns me now," said Bob Porozni, a St. Paul pharmacist who was one of the town's first Bre-X shareholders. "I don't know who's at fault here, but it's a difficult
situation."
The major concern, he said, was the uncertainty stemming from a lack of reliable information.Porozni, who runs two Valu Drug Mart stores in
St. Paul, said he was trying to be philosophical about Bre-X and the risks that accompany stock market investments.
"I'm prepared to take the ups with the downs. I don't want to lose money, of course, but I'm not going to be forced to sell pencils on the street," he said. "I am concerned about some people -- maybe
they borrowed money to buy the stock."
Megley said any downside from the Bre-X saga would likely have little effect on the economy of St.Paul, whose previous claim to fame was a landing pad for UFOs built as a civic landmark.
She said the town was prospering from a boom in agriculture and the oil and gas industry.
V.K
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