The Toronto Stock Exchange clamped down Friday on trading of Bre-X Minerals Ltd. as anxious investors placed their final bets on one of the most compelling mysteries of recent times.
As first reported in The Financial Post, the TSE is now restricting Bre-X trades to avoid chaos when an independent assessment of Busang's gold reserves hits the streets.
The audit by Strathcona Mineral Services Ltd. is expected to settle whether the Indonesian site is the greatest gold find of the century or one of the greatest gold frauds of all time.
Billions of dollars hang in the balance. Angry investors, who lost $3 billion in March when the stock collapsed to $2.50 from $15.50, are watching closely. Class action lawsuits are being drawn up with Bre-X, its directors and even Bay Street brokerages on the firing line.
Canada's reputation as the premiere market for junior miners is also riding on the outcome.
Bre-X chief executive David Walsh insisted again last week that the strike deep beneath the Borneo jungle contains 71 million ounces of gold. Jim Bob Moffett, the tough-talking Texan who runs Feeport-McMoRan Copper & Gold Inc., insisted equally strongly that his company has found "insignificant" amounts of gold in testing and retesting of core samples.
The Ontario Securities Commission is investigating Walsh and others to see whether they made millions trading on insider information. Talk of possible salting has refused to die.
Bre-X stock (bxm/tse) closed up 19› at $3.23 in trading of 9.25 million shares Friday as investors staked their final positions.
With the clock ticking down, the TSE announced that brokers will now be allowed to accept only "day orders," with no special terms.
"In addition, orders entered by TSE brokers that are well outside the quoted market may be cancelled," the TSE said in a statement. The exchange said it acted "in anticipation of what could be an unprecedented number of orders" following the release of the Strathcona report.
Nia Sarinastiti, a spokeswoman for the Indonesian partners, has said the results will go first to Bre-X and its financial adviser J.P. Morgan. They will then be given to Bre-X's partners in Busang and the Indonesian government. Bre-X "expects" to make the report public before North American markets open on Monday morning.
But there has been widespread speculation it could be leaked over the weekend. The Indonesian government has said repeatedly it is not prepared to sit on the report.
With Indonesians headed to the polls on May 29, several ministers are scheduled to hold election rallies Sunday in Jakarta. It's possible they could release details of the Strathcona report in a bid to score political points with voters.
In another move apparently aimed at voters, Indonesia's director general of mining, Adjat Sudradjat, said Friday that the government has asked Newmont Mining Corp. to reduce its equity stake in a local gold mining venture to 49% from 80%, a signal it could be taking a more nationalistic line in response to domestic criticism over its handling of the Bre-X affair.
Busang's ownership could also be up for grabs, especially if the deposit contains some gold but is much smaller than its billing -- a scenario that many people think is likely.
"This fiasco only intensifies the whole ownership question," said John Ing, president of Maison Placements Canada. "We haven't heard the last of it, that's for sure."
And investors who are counting on the Strathcona report suggesting there is a smaller gold deposit at Busang could be disappointed.
Many experts feel the rugged and remote location would make it so expensive to mine the gold it would be worth only $50 an ounce. That would value a deposit of 20 million ounces at $1 billion.
"That would make Bre-X worth a little over $4 a share," said Dunnery Best, senior vice-president of Midland Walwyn Capital Inc. "It's already trading at the $3.50 level, so it's basically discounting 10 million to 20 million ounces right now."
-- with Files from S.N. Vasuki in Jakarta |
