Sunday May 4 5:06 PM EDT
Mining world awaits Busang gold report
By Darren Schuettler
TORONTO, May 4 (Reuter) - As mining officials the world over await test results that may solve
the puzzle of an Indonesian gold deposit, reports Sunday suggested the news may be bad for
Canada's Bre-X Minerals Ltd. and its controversial Busang find.
Calgary-based Bre-X is expected to release the long-awaited study by consultant Strathcona
Mineral Services Ltd. before North American markets open on Monday.
But Bre-X officials on Sunday declined to comment on a report that the company will urge more
tests to determine just how much gold is at Busang.
"Bre-X will argue that what's now needed is a large bulk sample from the Busang site for further
testing," the Toronto Star newspaper quoted an unnamed Bre-X insider as saying.
"Any mining company in our position would want further testing," the source was quoted as saying.
A bulk sample would involve more extensive drilling, sampling and assaying of the site. Strathcona's
report is based on samples from six holes drilled at Busang.
Some observers said talk of a bulk sample suggested the Strathcona report was negative for Bre-X,
which has estimated Busang contains 71 million ounces of gold, potentially the richest site in the
world.
"If the rumor is (Bre-X) needs a bulk sample, then that's because the small amount of sampling that
has been done is disappointing," George Duncan, president of mining consultant Acurrassay
Laboratories, said by telephone Sunday.
Duncan said Strathcona President Graham Farquharson is well regarded within the mining
community and has a reputation for being conservative in his findings.
"Somebody once said he is a mine buster," Duncan said.
Bre-X hired Strathcona to review the project in March after doubts emerged over what has been
called the gold find of the century.
Busang partner Freeport-McMoRan Copper and Gold Inc. said on March 26 that its preliminary
tests found "insignificant" amounts of gold.
That same day, Strathcona told Bre-X the gold at Busang may have been overstated due to invalid
procedures.
The announcements sparked panic selling of Bre-X shares, wiping almost C$3 billion ($2.1 billion
U.S.) from the company's market value when the stock plummeted to C$2.50 ($1.80) from around
C$15 ($11).
Other analysts predicted the final word on Busang will only come after further drilling.
"This deposit is going to have to be drilled off," John Ing, president of Maison Placements Canada,
said Sunday.
"My guess is that there is gold there, but what really made this deposit was the size and the higher
grade. Presumably, the higher grade is not there," he said.
With billions of dollars in limbo, nervous shareholders have traded rumors for weeks on Internet chat
sites.
Bre-X's stock closed up 19 cents (14 cents) at C$3.23 ($2.34) on the Toronto Stock Exchange
Friday.
The TSE has set special trading rules for Bre-X shares on Monday to handle the huge volumes
expected when the Strathcona report is released. Frantic trading after Freeport's announcement in
March overwhelmed the TSE's computer trading system.
The Strathcona report will be closely watched by some shareholders who have launched
class-action lawsuits against Bre-X and some of its key officials.
The suits charge that Bre-X executives gave inflated projections about the size of Busang's gold
deposits so they could pump up the stock and sell it off for big profits.
The Ontario Securities Commission, Canada's top securities regulator, is currently probing Bre-X
for possible violations of insider trading and disclosure laws.
Foreign investors are also monitoring the outcome of the Bre-X affair, which has tarnished Canada's
reputation within the world mining community. Other major mining countries, particularly Australia,
have criticized Canada for its lax regulation of smaller mining companies. |
