Bre-X stock falls
TORONTO (CP) -- Shares of Bre-X Minerals hit rock
bottom today before the Toronto stock market was forced to
pull the plug because of a trading crush.
It was the first time trading in Bre-X stock had reopened
since news broke the exploration company had the world's
biggest mining hoax on its hands -- not a world-class gold
deposit.
The price of the shares opened at six cents -- down from
$3.23.
Canada's largest stock exchange was able to keep trading
going for about an hour before trading of Bre-X shares was
halted "due to systems problems."
A staggering 35.4 million shares -- about half the TSE's
normal overall daily trading volume -- changed hands in that
hour.
Six cents a share puts the firm's market valuation at $14
million. Bre-X was once valued at $6 billion.
"It's a meltdown," said Norm Duncan, a trader at C.M.
Oliver and Co. "You remember Three Mile Island? This is
worse."
The fallout from the explosive revelation that Bre-X's huge
gold find is fiction is widespread: an RCMP review; a knock
for Canada's mining sector; disaster for Bre-X shareholders,
and plenty of debate about what stock regulators and
investment dealers have to do to better protect investors in
future.
In developments Monday
-- RCMP confirmed commercial crimes officers in Alberta
are reviewing the Strathcona report and will then decide
"what direction to take."
-- Indonesia "will take strong measures" against those
responsible for the hoax, Mining Minister Ida Bagus Sudjana
said without elaborating in Jakarta.
-- Freeport McMoRan Copper and Gold, the New
Orleans-based Bre-X partner that first raised serious doubts
about the find, said it is withdrawing from the project. An
Indonesian partner is also pulling out.
-- Junior mining companies, especially those exploring for
gold in Indonesia, took a another hit. Some stocks lost more
than a third of their value.
-- The Caisse de depot et placement du Quebec, one of
Canada's largest pension funds, said stock exchanges should
consider demanding independent valuations on mining
companies.
Bre-X, a little Calgary exploration outfit, had turned itself
into a stock market superstar with a string of glowing
exploration results in the last couple of years.
The independent audit of Bre-X's property now suggests a
tampering job "without precedent in the history of mining
anywhere in the world."
"Obviously it's a black eye for the Canadian industry," said
Doug Leishman, a mining analyst for Yorkton Securities in
Vancouver.
"But good things sometimes happen because of bad things
and hopefully there will be some strengthening of (mining)
reporting standards," said Leishman.
Securities regulators are setting up a task force to study
whether new mining regulations and standards are required.
Some experts suggest Canada should adopt tighter rules
similar to an Australian code laying out the qualifications and
responsibilities of professionals who estimate the size of ore
deposits.
Bre-X has hired independent investigators to find out who
did what at Busang. One of the investigators is Rod Stamler,
a former high-ranking RCMP officer who has become
internationally known for his ability to crack international
commercial crimes.
That independent probe as well as any police investigation
are expected to focus on Bre-X's chief geologist, Michael de
Guzman, who plunged to his death from a helicopter in an
apparent suicide in March.
De Guzman had been on his way to meet Freeport officials
who weren't finding gold. A note he left behind along with his
prized Rolex watch and a wad of cash claimed he had
hepatitis B and was dying.
James (Jim Bob) Moffett, Freeport chief executive officer,
said the company suspected tampering soon after it began
work at Busang in March, and believed it likely occurred at a
warehouse in the remote river town of Samarinda.
"It appeared that the samples that went through Samarinda
had gold," Moffett said. "The ones that didn't had no gold."
He also said de Guzman knew before his death that Freeport
suspected there was no gold at the Busang site.
De Guzman's family insists the Filipino geologist didn't
commit suicide.
"The family stands by Michael's findings," Jojo de Guzman,
his younger brother, said in Manila on Monday. "One day, he
will be vindicated in the same way that we will find out the
truth about his death."
Bre-X hasn't offered any theories on who's responsible for
the bust.
"Investigators will get to the bottom of it," company president
David Walsh said as he was swarmed by reporters outside
Bre-X's headquarters.
Walsh -- a 51-year-old mining promoter who along with
other senior Bre-X officials reaped $77 million in profits by
selling shares last year -- refused to answer questions.
Across the street, someone at a ski shop poked a bit of fun
at the debacle with a sign calling for people to: Speculate on
Skis. Invest Now.
Many investors have found nothing to laugh about.
The ordeal has been like "a cold blast of winter air," said an
Edmonton shareholder who didn't want to say how much
money he'd lost.
"It causes you to re-evaluate a wide range of things --
(including) how important money is in your life," he said.
Hundreds of small Canadian investors had jumped on the
Bre-X bandwagon as the onetime penny stock soared.
Bre-X results eventually pegged the deposit at an incredible
71 million ounces.
Freeport's announcement that it had found little gold sparked
a panic selloff of Bre-X shares. They lost more than 80 per
cent of their value -- about $3 billion -- in just minutes.
A number of investors saw their living savings wiped out.
What many shareholders and experts are asking is how the
salting of samples was able to go on for so long. No one ever
independently verified Bre-X's spectacular claims, yet few in
mining, the media or investment community questioned the
company had a world-class deposit.
One who still isn't questioning, in spite of the Strathcona
report, is geologist John Felderhof, Bre-X vice-president. He
maintains there is gold, lots of it.
"I personally still believe that there are significant amounts of
gold at Busang," he said. |
