This is Stockwatch's entire report:
Market Summary - Daily Market Report
Thursday March 27 1997
Our review week starts with Thursday this week, because Friday will be a holiday. It was a very bad
Thursday. The laws of stock market gravity returned with a vengeance in the shape of a Bre-X
Minerals calamity. We will return to Bre-X in a minute, but first a look at the damage to western
markets. The VSE tumbled 56 points to 1130 on 45.6-million shares; the ASE tumbled 88 points to
2711 on 22.4-million. The combined volume of 68-million shares, (6.3-million more than last Friday),
saw the ASE's share of western trading recover to 33 percent, from 27 percent a week ago.
Turning to the past five days, the VSE, at 1130, is down 155 points, compared with down 60 points last
week; the ASE, at 2711, is down 205 points, compared with down 64 last week. The gap between the
two indices has shrunk to 1581 index points, 50 fewer than a week ago.
Yesterday's terse comment from Bre-X's mineral consultants -- "that there appears to be a strong
possibility that the potential gold resources on the Busang project in East Kalimantan, Indonesia, have
been overstated because of invalid samples and assaying of those samples" -- was confirmed today by
Freeport-McMoRan. "Insignificant amounts of gold" was Freeport's description, and the blood bath
was on. When trading resumed at 12:00 PM Bre-X plummeted to $2.50, forcing the TSE to close early
as a result of computer overload.
Another ominous Freeport comment was that it also noticed visual differences between the gold particles
in its cores and those drilled by Bre-X. Check holes drilled nearby would not usually show a difference
in the gold particles; such a suggestion implies the possibility of salted cores. Salting is arguably the
perfect crime: highly profitable with almost no likelihood of conviction. (Timbuktu Gold was a recent
short-lived but good example; New Cinch Uranium is another.) Unfortunately, finding someone
with firsthand salting experience, who will talk, is impossible; but finding someone who has been in the
vicinity is not.
Bill Timmins, a director of Bre-X from 1988 until his resignation in mid-1994 lets out an audible sigh
when he hears 'salting.' He was the geologist for a 1976 salting scandal on the VSE called Tapin
Copper, and it ruined his career. The RCMP found identical source-gold to that in bogus assays at
promoter Russ Aronec's apartment, and charged him with fraud. Mr Aronec, who had sold his Tapin
shares in 1976 through a current VSE governor, escaped to Costa Rica where he reportedly pulled
another bad stunt. He then moved to Panama and was murdered. Before leaving Vancouver Mr Aronec
offered his investors who had done well on Tapin a ground floor opportunity in his next deal. Then,
with their profits in hand the promoter made his escape. Mr Timmins provided the VSE with an affidavit
stating that he had transported the cores from Baker County Oregon to Vancouver, and that there was no
way anybody could have salted them while they were in his care. Shunned by clients, with his
Vancouver consulting career in ruins, Bill Timmins moved to Calgary. In 1988 he joined the board of
Bre-X, leaving in 1994 shortly before the spectacular results started coming, to get involved in a deal
with an old friend.
Of Indonesia he says, "No," I've never been there. Thank goodness, in my case." Yes, he owned a few
shares, and an option on 100,000, most of which he sold around $1. After he had left the board he
found 1,000 shares in an account that he sold at $5. Mr Timmins says Bre-X's David Walsh "is a
straight-up guy, so whatever is going on behind, and I don't really know what the hell is happening,
there is some other story." How, he asks, could you salt more than 200 holes over a period of two or
three years? He reckons it is an impossible feat. Rather than rushing to a salting conclusion, Mr
Timmins questions the difference in gold particles between Freeport and Bre-X's cores. He does not
understand, if Freeport saw gold particles, why their cores did not run. Of course, something else he
does not understand is why Bre-X ground up all its core instead of keeping half, which is normal. In
any event, he says that since he left Bre-X he has not been involved and does not really know any more
than anyone else. This he observes ruefully, "is probably better for me, because it took me a long time to
get over that Tapin fiasco, a lot of years. It stays with you."
A second viewpoint on salting is that of Adrian du Plessis. He earns a living doing securities research
for litigants, and several years ago his occupation took him to the 1979-1981 affairs of New Cinch
Uranium. He sees startling similarities between people's response to New Cinch and Bre-X.
He says New Cinch, for almost two years, from 1979-1981, reported on steady drilling progress that
defined a large gold-silver ore-body on property it held in New Mexico. But in early 1981, Willroy
Mines, a mining company that had taken an interest in New Cinch's "discovery", publicly disclosed that
its own testing had found no significant mineralization on New Cinch's property.
He calls New Cinch a timeless history lesson,
"Following Willroy's January 1981 public announcement that it had discovered no significant
mineralization in New Cinch's drill cores, the VSE directed New Cinch to have an independent
consultant examine El Paso Chem-tec labs and its assay procedures. An engineering consulting firm,
Davy McKee Corporation, was retained to conduct the review.
"Davy McKee determined that there was no correlation between the original assays... and the actual gold
content of the original drill core material." McKee found no "technical explanation" for this as, both,
atomic absorption and fire assay results reported by Chem-tec, beginning with Hole 1, were false.
President H. Vance White pointed out in a January news release: 'It would have been extraordinarily
difficult for anyone to tamper with the cores or samples over a period of two years and to produce a
consistency of results such as those which have been experienced.' At the time it was made, this
statement appeared to lend support to those believing that the New Cinch mineral discovery was
substantial as the company claimed it to be and that the assaying discrepancies would be resolved. From
a more objective distance, however, it pointed to the real nature of how the scheme of falsification had
been carried out -- systematically and patiently.
"On February 13 1981 Willroy filed a civil suit in Ontario seeking damages of $21.4 million against
New Cinch, its parent companies, its directors and officers, promoter Applegath, the Vancouver Stock
Exchange, the broker/underwriters and others.
"The book, Fleecing the Lamb, authored by Alison Griffiths and David Cruise comments upon this
period: 'Incredibly, a brisk trade was still being conducted in New Cinch shares, the demand ebbing and
flowing in relation to rumours about when the McKee study would be finished and what it would find.'
"Cruise and Griffiths have written that: "New Cinch shares continued to trade on the strength of
rumours until December 11, 1981 when the company formally announced that Chem-Tec's November
1980 assays had indeed been contaminated."
"New Cinch stock ground to a low of $0.20 in 1981 and company management alleged that they
themselves were victims -- and that Holes 29 and 31 were the product of mineral tampering (or salting)
by an unknown party or parties. But this explanation was inconsistent with the fact that all of the
company's drilling results -- and not just those obtained in late 1980 for Holes 29 and 31 -- had failed to
be duplicated by outside, legitimate, assayers. Sample materials from the earliest drill holes were
re-assayed and turned up negligible gold/silver content. (The evidence in the case pointed more to a
patiently executed, long-term, scheme of assay report falsification than it did to a, relatively recent,
drill-core salting job.)
"At this point," say the Fleecing the Lamb writers, 'the New Cinch story turns from a stock swindle to
something considerably more. On November 14, 1982, Michael Opp was found murdered in his
Phoenix, Arizona, apartment. It was a cool and professional execution: the killer had kicked in Opp's
door, shot him once in the head and disappeared into the night. A Phoenix resident, Hoyt Trujillo, was
subsequently charged and acquitted. The prosecutor maintained that the murders involved a dispute over
a small drug sale and a $25 television set. Opp's father found an eighteen-page letter, allegedly written
by his son, detailing his knowledge of the New Cinch affair. Michael Opp's letter, really a confession of
a failed life, describes his homosexual tendencies, his criminal record and various drug binges. In the
letter, young Opp claimed that he was an employee of Chem-Tec, the firm that had done the first assay,
and lived in the home of the firm's owner, Robert Simon. Opp further claimed that Simon had bought
Chem-Tec with money advanced by Applegath and Vance White. Michael Opp's parents said that their
son had expressed fear for his life: "He could be killed over the salting of the Orogrande assay. He knew
the assays were being salted by someone higher up."
You can see why Mr du Plessis calls New Cinch A Timeless History Lesson.
(c) Copyright 1997 Canjex Publishing Ltd. canada-stockwatch.com
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