Today's Financial Post and the Headline looks pretty good, article itself is more neutral and critical...
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Friday, April 4, 1997
Busang has gold: report
Kilborn confirms earlier Bre-X assays, but carefully avoids estimates of
discovery's size. Report suggests ore samples not tampered with
Canadian investors sue Bre-X, SNC-Lavalin for $3.1B
TSE beats retreat again
OSC releases trading histories of Bre-X senior executives
By PAUL BAGNELL and BARBARA SHECTER
The Financial Post
Bre-X Minerals Ltd. went too far too fast in publicizing
estimates of the size of its Busang gold find in Indonesia, critics
said yesterday after the release of a much-awaited report on
gold assays at the site.
The report, by Kilborn SNC Lavalin, confirms the gold content
assigned to ore from Busang in an assay performed for Bre-X
by an Indonesian laboratory. But it makes no estimate of the
overall size of the discovery.
One thing the Kilborn report does do, however, is deal a
serious blow to the theory that Busang ore samples may have
been tampered with, the experts said.
"It tends to suggest that there wasn't any [tampering]," said a
retired mining executive.
Another expert, Dr. George Duncan, president of Accuassay Laboratories, in Kirkland Lake, Ont.,
said a re-examination of untested samples at two laboratories used by Kilborn -- if those "rejects"
have been kept -- could resolve the tampering question once and for all.
A close look at the gold contained in the rejects should reveal if the gold belongs naturally to the
rock or has been added, Duncan said.
Kilborn selected at random 475 ore samples from a larger pool of previously assayed Busang
samples. The samples chosen by Kilborn were assayed, by fire and cyanide leaching, at two
separate laboratories. Kilborn found the three sets of data to be consistent.
The report can't explain, however, shocking announcements last week from Freeport-McMoRan
Copper & Gold Inc. and Strathcona Mineral Services Ltd. that have thrown the size of the Busang
find into serious doubt, the experts said.
Also yesterday, speculation mounted that Bre-X will come under heavy pressure to relinquish an
even greater portion of Busang if the discovery turns out to be much smaller than the 71 million
ounces it had estimated.
As rumors continued to swirl, heavy trading in Bre-X shares caused the Toronto Stock Exchange's
trading system to crash again yesterday. On the Montreal Exchange, Bre-X shares (BXM/ME)
closed yesterday at $3.65, up 50›, on volume of 2.9 million shares.
Having once held 90% of Busang, Bre-X has already handed over 45% of the property, receiving
nothing in compensation, as Indonesian interests joined the project.
"There's no assurance [Bre-X] has anything, except a lot of lawsuits," said Victor Lazarovici, an
analyst at Smith Barney in New York.
Lazarovici and other Wall Street observers said the Indonesian government will likely try to keep
Freeport, with a long track record in Indonesia, on the project.
Freeport could demand a larger slice of Busang in exchange for not walking away, they said.
Experts contacted by The Financial Post yesterday had mixed views of the Kilborn study, but all
said it is now clear Bre-X should have been more cautious in its estimates of how much gold lies
under the Busang jungle.
All three said the Kilborn report shows Bre-X should have undertaken a bulk sampling program to
get a better handle on ore grades at Busang.
That's because the gold at Busang is coarsely distributed, and thus the grade of gold ore is difficult
to pin down strictly by drilling.
Bulk sampling is essentially a small, open-pit mining operation in which tonnes of rock is sampled,
instead of the pounds examined in a drilling program.
"That idea has some merit," Duncan said.
"I find it unbelievable that analysts and the company would be running out and announcing these
huge resource numbers when grade has always been in question," said a geologist with 20 years of
experience.
"The real program should have been moving to bulk sampling. It's a normal operating procedure for
an engineer to recommend."
The Kilborn report advises "larger samples and complete treatment," but it is unclear if this is a
reference to bulk sampling.
The retired mining executive, who spent most of his career with a major international miner, said the
Busang debacle underscores the difference between "resources" and "reserves."
Reserves are the results of more thorough drilling and are thus a more reliable measure of mineral
wealth.
Bre-X has announced ever-increasing estimates of resources at Busang: from 30 million ounces in
October 1995 to 71 million ounces this February.
Instead, the retired executive said, Bre-X should have concentrated on achieving reserve estimates
at more confined areas.
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