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Dow Jones Business News -- March 25, 1997
Some See Bre-X Shares As Cheap As Busang Affair Continues
By MARK HEINZL
Dow Jones News Services
TORONTO -- Bre-X Minerals Ltd.'s (BXMNF) share price has failed to rebound from its recent plunge, even though some analysts say the stock is now a bargain and some investors are slowly regaining confidence in the company's Busang gold discovery in Indonesia.
While the stock continues to trade furiously, it has regained only a tiny bit of the ground lost last week, when the suicide of Bre-X chief geologist Michael de Guzman and an Indonesian newspaper report shattered investor confidence.
Bre-X shares fell 2.25 to 15.20 on the Toronto Stock Exchange on Friday, after a report in Indonesia alleged that the appointed mine developer at Busang, Freeport McMoRan Copper & Gold Inc. (FCX), is questioning Bre-X's estimates of the size and quality of the Busang gold deposit.
Freeport, a New Orleans mining company, has said only that its due diligence at Busang continues, and that it won't comment until it's complete.
On the Toronto Stock Exchange, Bre-X is trading Tuesday at 15.40, down 0.30, on volume of more than 2 million shares.
Bre-X is ''a very, very cheap stock,'' Rick Cohen, a mining analyst with Goepel Shields & Partners Inc. in Vancouver, said Monday, in light of the 71 million ounces of gold reserves that Bre-X has reported at Busang. But, ''it's hard to know what to believe anymore,'' Cohen said, referring to a flood of Busang rumors on the Internet, and the report in Harian Ekonomi Neraca.
''There's been a lot of erroneous press reports coming out of Indonesia'' about Bre-X and Busang over the last few months, Cohen added.
Bre-X chairman David Walsh said on Monday that the company's board ''has absolute confidence in the integrity and accuracy of assay results'' from Busang as reported by Bre-X. Also, Bre-X vice-chairman and geologist John Felderhof told Dow Jones in Indonesia on the weekend that he's ''110% confident the gold is there.''
Talk is now turning to who is buying Bre-X Minerals Ltd. (BXMNF) shares. More than 19 million of Bre-X's 219.2 million shares outstanding have changed hands since Friday. Analysts said mainly institutional investors are so far behind the buying, but they also noted that Bre-X shares are at an alluring level for mining companies such as Freeport McMoRan Copper & Gold Inc. (FCX) that might want to acquire Bre-X.
A Freeport spokesman Monday declined to say whether the company has purchased any Bre-X shares.
The Busang story has become a ''soap opera'' and there's little chance the gold discovery is any less valuable than Bre-X has been saying, said Victor Flores, a gold-fund manager with United Services Advisors Inc. in San Antonio, Texas. The deposit has been ''drilled like swiss cheese'' and ''too many smart people have looked at this thing'' for the
reported reserves to be wrong, he said, and called Bre-X shares ''a steal.'' Flores said he's considering adding more Bre-X shares to his fund.
Still, Lehman Brothers Inc. analyst Daniel McConvey, a close follower of the Busang affair, Monday downgraded his rating on Bre-X to ''neutral'' from ''hold.'' He wasn't available to comment.
Indonesian President Suharto has given the country's mines minister the authority to approve a required Contract of Work for Bre-X and several other mining companies, according to a Dow Jones report from Indonesia. But Bre-X won't make any announcement about a COW until it's ''official,'' said one person familiar with the situation.
Bre-X Minerals Ltd. (BXMNF) officials slammed the Indonesian newspaper report that doubted Busang's reported reserves.
''Credence is being given to tabloid journalism,'' said Bre-X spokesman Steve McAnulty.
`'We stand by our results,'' he said, adding that ''anybody who doesn't should stand up and be counted,'' rather than making anonymous comments about Busang. ''The truth will win out,'' he said. ''It's hard to believe that there weren't other agendas,'' he said referring to the report, but declined to elaborate.
''With all the gossip and innuendo going on people have lost sight that Bre-X has 45% of a very very significant asset,'' Bre-X chief executive David Walsh told Dow Jones.
On the issue of a possible acquisition of Bre-X, Walsh said he has ownership control of Bre-X and that ''there's no for sale sign in the front yard,'' and that it's ''not even in the thinking process.'' |
