Hi Wayne,
Another example of a misleading and overly negative spin being put on an otherwise routine story.
What a suprise.....it's a Southam publication again.
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Trouble at the top, Bre-X chief admits
<Picture: David Walsh: Missing a level of scrutiny>
David Walsh: Missing a level of scrutiny
Southam Newspapers CALGARY - Bre-X Minerals Ltd. president David Walsh admits there may be something not quite right at the highest levels of his company. Actually, he's part of the problem.
Full Story
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For those of you who have just read this it is the lead into the actual full story that is printed below. People have to go to another section to get to the full story once they have read this above caption. Notice how a negative sense of suspicion is planted before you even get a chance to read the full story. After you read the story think about how you felt when you read the lead in and how you feel now that you read the whole story. Not quite the same is it ! Quite an example of how the press can manipulate things.
Be careful what you read !
Peter
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FULL STORY
Monday 14 April 1997
Trouble at the top, Bre-X chief admits
<Picture: Alt Caption>
David Walsh: Missing a level of scrutiny
Southam Newspapers CALGARY - Bre-X Minerals Ltd. president David Walsh admits there may be something not quite right at the highest levels of his company.
Actually, he's part of the problem.
Four of the six members of Bre-X's board of directors - whose mandate includes providing checks and balances on the powers of management - are senior officials with the Calgary-based company at the centre of the international mining and stock controversy.
And although, technically, there's nothing wrong with that, it flies in the face of guidelines established by the Toronto Stock Exchange - and Bre-X is a member of the TSE's elite 300 composite index of companies.
A board without a majority of so-called unrelated directors lacks a disinterested monitor of the company's activities, said Bill Mackenzie of Fairvest Securities Corp. of Toronto.
"You're missing a level of scrutiny, a stewardship on behalf of the shareholders," Mackenzie said.
"We're reviewing the company as it was, as it is, and what it will be like in the future and adding additional outside directors is one of the topics on our list," Walsh said in a recent special interview with the Herald.
Walsh and other Bre-X officials are facing law suits from several shareholder groups who say they put personal interests ahead of the good of all investors by selling shares while they kept silent about damaging information.
Bre-X board members on staff are Walsh and vice-presidents John Felderhof, Roly Francisco and Steve McAnulty. Unrelated directors are Hugh Lyons of Calgary and Paul Kavanagh of Toronto.
Two-thirds of the companies on the 300 index have boards that comply with the guidelines, said a TSE official.
Directors have been under scrutiny in recent years but generally because of their exposure to liability for back wages for employees if the company folds. Those laws prompted the board of Canadian Airlines International to resign en masse last fall when the airline was in financial difficulty.
As well the former boards of both Peoples Jewellers Ltd. and bankrupt Royal Trustco Ltd. have been hit with lawsuits from shareholders.
John Bart of the Canadian Shareholders Association said boards that are viewed as independent adds a level of credibility in a time of crisis.
"There is less likelihood there will be a conflict of interest, whether its real of just perceived, if you have outside directors," Bart said.
Walsh acknowledged Bre-X has a credibility problem these days.
The company meteoric rise from a penny stock on the Alberta Stock Exchange on the promise of between 71 million and 200 million ounces of gold at its Busang deposit in Indonesia was matched by dramatic slide back down.
Bre-X had a shareholder value of more than $6 billion in September but its market capitalization is now only $550 million. When Bre-X moved to the TSE last spring, the exchange opened the doors wide open and Bay Street money was there to welcome the Alberta company.
After its new partner Freeport-McMoRan Copper and Gold Inc. said it found insignificant gold at Busang, Bre-X's shares dropped $13 to $2.50 in minutes.
Walsh has been steadfast in his stand Bre-X's exhaustive testing at Busang will be proved to be accurate and Freeport's seven-hole program wrong but it has done little to rally the company's share price.
Nobody is saying Freeport is more credible because its board is dominated by people unrelated to the company - including a judge, a university professor and Henry Kissinger, the former U.S. secretary of state - but Bre-X suffers in comparison to its large and long-established partner.
"You look at the board situation and its just another thing to throw on the negative credibility pile," said Mackenzie.
However, Charles Blakey of the Alberta Securities Commission says Bre-X's board is typical of many Canadian junior mining companies and it fulfils the role of providing expertise in areas such as finance and geology.
J. Richard Finlay, chairman of the Toronto-based Centre for Corporate and Public Governance, said companies using other people's money to conduct business need to assure investors that in a crisis their best interests are first and foremost.
Finlay doesn't accept the argument Bre-X's management has been pre-occupied with its rapid growth it needs time to adjust.
"They're playing in the big leagues and they want to be a big-league player and with that comes certain obligations," he said.
Finlay added Bre-X shareholders would be better served if Walsh didn't hold the positions of president, chief executive officer and chairman of the board, which also goes against TSE guidelines.
Mackenzie said he advised clients last year to vote against a plan put forward by Bre-X that put a shareholders' rights plan in place and set aside 15 million options to purchase shares for the senior manager.
The moves appeared less designed to ensure shareholders got full value in a takeover attempt than to ensure "the guys in charge got to stay in charge," he said.
Dermot Travis of the Montreal-based shareholders' rights group Public Interest Research Associates said the finger of blame can't merely be pointed at Bre-X.
He notes people face bankruptcy because of failed Bre-X investments largely because they have assume there is less risk involved with investing in a TSE-listed company than a company on a junior exchange like Alberta. He said there's an even greater sense of security when the company is in the TSE 300.
"The system is supposed to have brakes so investors have some form of protection," said Travis, who is organizing Bre-X shareholders and looking at possible lawsuits.
"The systems failed on a variety of fronts . . . some lessons need to be learned." |
