Indonesia vows to probe
Busang fraud
By PETER MORTON
The Financial Post
JAKARTA -- A deeply annoyed and embarrassed
Indonesian government yesterday promised a major probe
into what appears to be unprecedented world-scale
deception over Bre-X Minerals Ltd.'s claim to have found the
world's largest gold find.
"Lawbreakers should be punished," said Ida Bagus Sudjana,
the country's minister of mines and energy.
Bre-X's major Indonesian partner, Nusamba Group,
immediately announced it was tearing up its deal with the
company after a Canadian assay report confirmed what the
40%-Indonesian partners already suspected -- there was
never any gold in Busang.
Toronto-based Strathcona Mineral Services Ltd. rocked the
mining world late Sunday when it said its audit found
wide-scale tampering with samples and falsification of assay
data.
At a rare news conference yesterday in Jakarta, Nusamba
owner Bob Hasan, a close friend of Indonesian President
Suharto, said the government will likely call for its own
investigation once North American securities investigators
have completed their probe.
"I think they should be punished," Hasan said, referring to
those who are found to have "salted" 10,000 core samples
with as little as one kilogram of gold.
Bre-X said that its samples showed as much as 71 million
ounces of gold was to be found beneath the remote jungle on
the island of Kalimantan north of Jakarta.
But Hasan insisted neither the Indonesian government nor
Indonesian investors lost any money in the venture. One year
ago, Bre-X shares were trading at more than $200.
"It's business," the multimillionaire pulp magnate said.
"Sometimes you make money, sometimes you don't."
Hasan said Indonesia had largely written off the Bre-X find
in March after New Orleans-based Freeport-McMoRan
Copper & Gold Inc. found "insignificant" gold in the samples
it took near the ones upon which Bre-X made its claims.
Hasan said the government will also demand tough new
regulations that, at the minimum, call for independent assays
to be done and tighter security when samples are moved.
"The government will be more strict in the future," he said.
Despite the major embarrassment, Hasan also insisted
Indonesia will continue to attract foreign investment, except
from small mining companies.
"The smaller companies will find it difficult to raise money
abroad," he said.
The Canadian embassy in Jakarta was also inundated with
calls from Indonesian and international news outlets after
Bre-X's assay findings were found to be fraudulent.
"We're surprised and shocked," said Ren‚ Cremenose, the
embassy's first secretary. "But it is too soon to say what the
reaction will be."
Strathcona said it found almost no gold in samples it drilled
near those Bre-X claimed to contain staggering amounts of
gold traces.
Instead, the original samples were salted, resulting "in
falsification and misrepresentation of many thousands of
samples."
Geologists said here yesterday as little as one kilogram of
gold was all that was needed to salt the 10,000 samples
Bre-X claimed contain unusually high concentrations of gold.
Suspicion immediately fell on Michael de Guzman, the
geologist who mysteriously died after falling out of a
helicopter, and three other Filipino geologists hired by Bre-X.
All three are reported to have left Indonesia.
Even an Australian company trying to sue Bre-X for a share
of the Busang stakes on Kalimantan was stunned by the
Strathcona assessment.
"This is a deep shock to all of us," said Warren Beckwith,
chairman of Golden Valley Mines NL.
He called for the Indonesian government immediately to
force Bre-X out of the Busang properties and allow other
mining companies to assess whether there is any commercial
gold beneath the vast and remote jungle.
"We might be fighting over banana leaves," he said. "Still, we
think Bre-X seriously misconducted itself and should be
disqualified as manager."
Golden Valley, through its Indonesian company, PT Krueng
Gasui, has launched a Calgary lawsuit against Bre-X, claiming
it was cheated out of a piece of Busang. |
