Bre-X bombshell: No gold
The latest Bre-X news and analysis
Independent audit concludes Busang product of a massive campaign of tampering and fraud
"without precedent in the history of mining"
By PAUL BAGNELL
Mining Reporter The Financial Post
The nightmare scenario of Bre-X Minerals Ltd. and thousands of its investors has come true: Busang is a fraud.
An independent investigation by Strathcona Mineral Services Ltd., released by Bre-X late last night, concluded Busang
holds no mineable gold and has been the product of a massive campaign of deceit and fakery.
"The magnitude of the tampering with core samples that we believe has occurred and resulting falsification of assay
values at Busang is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent
in the history of mining anywhere in the world," wrote Strathcona president Graham Farquharson in his report to Bre-X
president David Walsh.
"We very much regret having to express the firm opinion that an economic gold deposit has not been identified in the
Southeast zone of the Busang property, and is unlikely to be."
Walsh, in a brief statement, said Bre-X is "devastated" at the news. "We share the shock and dismay of our
shareholders and others that the gold we thought we had at Busang now appears not to be there."
Bre-X has hired legal, accounting and investigative personnel to continue investigating the scandal, Walsh said.
"We are determined to gain a full understanding for the shareholders, for Bre-X's business partners and for others, of
how the earlier data came to exist."
The furor over Busang began on March 26, when Freeport-McMoRan Copper & Gold Inc. said it had found only
"insignificant" traces of gold in seven holes it drilled as part of a due diligence review.
Freeport became the prospective operator and a 15% owner of Busang earlier in the year, when it beat out other
international miners for control.
Strathcona was immediately hired by Bre-X to get to the bottom of the confusion.
As the world waited for the Strathcona report, speculation mounted that Busang might indeed be an historic fraud.
Particulary damning, in the eyes of geological and mining experts were the findings of a July 1996 report to Bre-X by an
Australian mineral consulting firm.
The company, Normet Pty, reported finding gold particles that were "rounded with beaded edges," a characteristic that
strongly suggests gold that has come from a water body, not from bedrock.
Also, Normet was able to recover almost all of the gold in Bre-X's rock samples through a method known as gravity
concentration, in which crushed ore is shaken violently.
Experts said only about 40% or 50% of gold embedded in rock would shake loose in gravity concentration. The
unusually high recovery rate was another signal that Bre-X's gold did not belong with its rock samples.
More recently, The Northern Miner weekly newspaper reported that Normet also found Bre-X's samples contained the
minerals rutile, leucoxene and magnetite -- all found more commonly in streams than in bedrock.
The Strathcona report demolishes what had been the main argument against the possibility of tampering -- that a fraud
would require too many people and too much work to have survived this long.
Two experts said Sunday night that the fraud could have involved as few as one to three people.
A likely scenario is that small spoonfuls of granulated gold were dumped into sample bags containing broken rock
samples, said a senior executive of a Canadian gold mining company.
This could have been done in a tent or a shack out of view of other personnel at the Busang site, and under the guise of
sample labelling or some other routine procedure, the executive said.
Subsequent crushing and pulverizing of the rock samples would serve to blend the gold into the rocks, he said.
In Jakarta today, observers were speculating this could have been done as Bre-X's samples were being shipped by
boat from Busang to an Indonesian assay laboratory miles away.
The Toronto Stock Exchange said late Sunday it will halt trading in Bre-X shares today, though it was not clear how
long the halt would last.
When Walsh emerged from Bre-X's Calgary headquarters at about midnight EDT, he rushed to his car after telling
reporters he had nothing to add to his statements in the company's press release.
"It's a very sad day. It puts a stain on Calgary, and Alberta and the mining industry," said a Bre-X shareholder who
went to the head office after hearing the news. "I'd like to see the color of his [Walsh's] eyes," said the shareholder, who
asked not to be identified.
- with files from Sydney Sharpe and Scott Haggett in Calgary and Peter Morton in Jakarta.
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