BRE-X REPORT MAY SHED LIGHT
ON BUSANG SAGA, ANALYSTS
TORONTO (Reuter) - Canadian gold prospector Bre-X Minerals Ltd. released a report
Wednesday which analysts said may shed light on the mystery swirling around the Busang gold
discovery in Indonesia.
The report outlined Bre-X's sampling and assay procedures at Busang which has been
embroiled in controversy since doubts about the project surfaced last month.
"These are the pieces of information that the market needs in order to logically rule out certain
scenarios," John Kaiser, editor of a mining industry newsletter, said in a telephone interview
Wednesday.
"One of the big complaints about Bre-X is that it has not been forthcoming about what the
procedures actually were so people can rule out all these crazy theories about what could have
happened," Kaiser said.
Bre-X has been under pressure since tests by its partner Freeport-McMoRan Copper & Gold
Inc. on the Busang gold property indicated the deposit may contain "insignificant" amounts of
gold. Freeport also noted "visual differences" between its gold samples and Bre-X's samples.
The stunning announcement prompted panic selling of Bre-X shares last month, lopping nearly
C$3 billion ($2.2 billion) from the company's stock market value.
Bre-X sank to a new low of C$1.76 ($1.26) on the Toronto Stock Exchange Wednesday, but
recovered to finish the day down C2 cents (1.4 cents) at C$2.27 ($1.63).
Wednesday's report was faxed to analysts and posted on the company's web site. In a
step-by-step explanation, Bre-X outlined how the core samples were collected and assayed.
Kaiser noted that most of the crushing of the core samples occurred off the Busang site. The
report said the samples were transported to a lab at Balikpapan, Indonesia where crushing took
place.
"It seems to suggest that crushing of any consequence did not happen on the site. So it would
seem to rule out the possibility that the project crew tampered with it," Kaiser said.
Bre-X has said an independent audit of the Busang project would confirm its estimate of 71
million ounces of gold, potentially the richest in the world.
Strathcona Mineral Services Ltd., the Toronto-based mining consultant hired by Bre-X, is not
expected to deliver its report on Busang until late April or early May.
While investors anxiously await Strathcona's findings, increasing attention is being paid to the
personal trades of Bre-X's maverick chief executive David Walsh and other company officials.
Walsh, his wife and Bre-X's head of exploration, John Felderhof, earned about C$77 million
($55 million) from the sale of the company's shares in 1996, according to recent documents
released by securities regulators.
Walsh and his wife, Jeannette, earned about C$35 million ($25 million) in 1996, while
Felderhof netted about C$42 million ($30 million) from stock sales last year.
At least seven class action lawsuits have been filed in the United States and Canada against the
besieged company.
The suits -- filed in cities ranging from San Francisco to Windsor, Ontario -- charge that Bre-X
executives gave inflated projections about the size of gold deposits at Busang and then profited
by selling shares in the company.
Canada's top securities regulator will release insider-trading documents Friday that show
whether top Bre-X officials sold shares just before the embattled gold prospector's stock
collapsed last month.
Under Ontario securities laws, corporate executives are required to report any insider trading
for each month by the 10th day of the following month.
Bre-X officials have until the end of the business day Thursday to issue insider trading reports
for March to the Ontario Securities Commission.
An OSC spokesperson said Wednesday any reports from Bre-X officials would be made
available Friday.
Reports for January and February have indicated no insider trading by Bre-X executives so far
this year.
The OSC is currently probing Bre-X for possible violations of insider trading and disclosure
laws under Ontario's Securities Act.
Some trades by Walsh and others in 1996 were controversial because they occurred shortly
after Bre-X learned that its preliminary license had been canceled by the Indonesian government,
a development the company did not reveal publicly until last October.
Walsh has said he did not consider the canceled license material information because Bre-X's
underlying claim to Busang was still in good standing.
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