To all: Today's Financial Post... Nothing new, nothing too negative, just nothing positive either...
Thursday, April 24, 1997
Busang drill results spark Bre-X trading
frenzy
By SANDRA RUBIN
The Financial Post
Shares of Bre-X Minerals Ltd. soared yesterday as eager investors stampeded to buy in amid
renewed hope there is gold at Busang.
Stock in the tiny Calgary-based company (BXM/tse) opened at $2.60, rocketed to $5.75 by
mid-afternoon, then flamed in a fast selloff to close at $3.62, up $1.22.
The majority of buyers were retail investors, with block trades accounting for only 2.7 million of 17
million shares traded.
"There's an awful lot of rumors flying around and very little of substance," said Matt Sutcliffe, head
of mining at brokerage Williams de Broe in London.
"People should be waiting for the audit. The audit's going to be all-important."
The buying frenzy was fuelled by Bre-X's release late Tuesday of drill results that appear to back
its claims of a massive gold strike at the Indonesian deposit.
The company said 16 of 22 holes drilled at Busang's southeast zone yielded grades of between
1.05 and 6.67 grams per tonne.
Experts cautioned that those results are based on drilling and tests done before all the controversy
erupted in late March when Bre-X partner Freeport-McMoRan Copper & Gold Inc. said the rich
Busang find might be a bust.
Observers also warned that if core samples were "salted," as many analysts suspect, the results
would be meaningless.
"Let's say, at worst, this is a tampering scandal," said Keith McCandlish, an investigative geologist
with Associated Mining Consultants Ltd. in Calgary. "Then this adds nothing new because these
were drilled and into the lab for assaying prior to Michael de Guzman's suicide March 19, and the
subsequent statement by Freeport showing a possible problem with the gold."
But investors were buoyed by a report in an Indonesian business paper that PT Nusantara Ampera
Bakti (Nusamba), a company controlled by President Suharto, may up its stake in Busang to 25%
by buying another 5% from two local partners.
The front page story was widely interpreted by Bre-X supporters as a vote of confidence in
Busang by Suharto and business tycoon Mohamad "Bob" Hasan.
The newspaper, Harian Ekonomi Neraca, is rumored to be closely linked to Hasan and was the
first to report last month that Freeport found "insignificant" amounts of gold in its preliminary testing.
There was fevered speculation in Jakarta yesterday that the latest scoop was yet another calculated
leak, and an announcement is pending.
But Indonesian Mining Minister Ida Bagus Sujana has said Nusamba made its application for the
deal on March 10 - two weeks before Freeport's stunning announcement threw open the door to
the possibility of foul play. And the deal is contingent on Busang living up to its billing as a major
gold deposit.
The results of an independent audit by Toronto-based Strathcona Mineral Services Ltd., expected
early next month, should clear up the mystery.
But there were signs yesterday that things are finally starting to shake loose.
Bre-X confirmed it has released Barrick Gold Corp. and Placer Dome Inc. from confidentiality
agreements preventing them from discussing what they found in tests and due diligence of Bre-X.
The move came after discussions with securities regulators.
Barrick, which started due diligence on Busang before being elbowed out of the project by
Freeport in February, refused to discuss whether it's been approached by regulators looking for
relevant material.
"What I can say is we're more than pleased to co-operate with any regulator or investigative
authority looking into this matter," said spokesman Vince Borg.
Ontario Securities Commission chairman Jack Geller said investigators are pressing for anything
they can get their hands on in their quest to uncover whether Bre-X properly disclosed information
to the public.
"We certainly have been in constant discussions with Bre-X about the disclosure, and everything
that can be looked at is being looked at," he said.
The OSC has hired Toronto-based investigative geologists Watts Griffis & McOuat Ltd. to help in
its inquiry.
Meanwhile, rumors rocked markets on both sides of the border that Freeport's chief executive
James Moffett had resigned.
"I've had about 25 calls from people asking me about that - it's definitely not true," said Freeport
spokeswoman Kristin Lemkau.
She refused to comment on reports that Moffett had slipped into Indonesia last week and held two
secret meetings with Suharto on Busang's future.
The Dow Jones report, which could not be confirmed, said the meetings focused on the
"appropriate steps" to be taken by the Indonesian government and Freeport after the Strathcona
results set out the true value of Busang.
But sources in Jakarta suggested that investors should not read too much into the meetings because
Moffett is a frequent visitor to the country and meets with the president about twice a year.
Also yesterday, Philippines investigators said they've positively identified the body of Bre-X
geologist Michael de Guzman, who reportedly killed himself in a leap from a helicopter March 19
after being summoned by Freeport to explain some results.
- with files from S.N. Vasuki in Jakarta
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