This from the FT. Boys at Stockhouse asking when market will change. Post Bre-X market won't change until some junior brings a big one on honestly and succesfully (Hopefully this means CMR and Binco/Maskwa/Refinery)
Looks like OSC is finally trying to do its job. If the markets could believe there was some oversight, that would probably help.
Canada weighs in on gold scandals
By Dan Westell
Published: August 15 2000 22:23GMT | Last Updated: August 15 2000 22:32GMT
A reputation for manipulating samples to make them appear better than they are is a regrettable aspect of the Canadian mining business, following junior companies wherever they look for gold around the world.
Known as salting, the practice of introducing gold from other sources into samples has produced huge scandals, notably the Bre-X Minerals fraud.
Good assay results will drive a volatile junior mining stock from pennies to dollars. The brains behind the salting schemes - often local labourers or geologists - ride that rise, take their profits, and are never identified. When the salting is discovered, the stock collapses.
Salting scandals are very difficult to prosecute. The physical act often takes place in isolated locations or in countries where policing is haphazard or corrupt. Stock trading, where the money is made, is international, electronic and can involve front companies or trusts located in jurisdictions that are as hard to penetrate as the thickest jungle.
The Ontario Securities Commission, however, has launched prosecutions against two company insiders who it claims benefited from situations where salting drove a junior company's stock price.
In neither case have the insiders been accused of being party to the salting. The OSC alleges that the two men both knew about developments that had not been communicated to other shareholders, but nonetheless continued to sell shares from their personal holdings.
John Felderhof, once the vice-chairman of Bre-X , will stand trial in the autumn for selling C$83.9m (US$56.5m) of the company's stock while aware of undisclosed information about the company's rights to its property and its publicly released resource calculations.
When the results from the Busang prospect in Indonesia were found to have been faked in March 1997, Bre-X's market value fell C$6bn.
Last month, the OSC won a court decision in what is seen as a test run for the Bre-X case. Glen Harper, the president of Golden Rule Resources, was found guilty on two counts of insider trading after a 13-day trial.
He sold shares worth C$4m in early 1997 when the company was reporting stun ning results from its Stenpad property in Ghana, driving the stock from the C$2 range to C$13.80. Later assessments revealed there was no significant gold at Stenpad, and the Golden Rule share price collapsed.
The OSC's case against Mr Harper was based on his inconsistent behaviour when dealing with assay results. When they were good, he published them. Bad numbers, particularly a set in early January 1997 and a second set in mid March, were deemed not credible and not published.
"It is not reasonable that good news results are material and bad news results are not material," judge Patrick Sheppard wrote. "Instead of providing complete information, Harper disclosed only selected information that supported the stated Golden Rule proposition that Stenpad potentially hosted a multi-million-ounce gold deposit."
The positive results attracted the attention of several major mining companies, but only Teck, the Vancouver-based international mining company, took a close look. It sent geologist Ron Burk to Stenpad in March 1997 to take samples.
"I was quite surprised at how low the numbers were," Mr Burk said in court.
There was a tense meeting at the Golden Tulip hotel in Accra where Mr Harper rejected the assays. Dr Mark Nebel, Golden Rule's geologist, suggested the samples for Teck had had the opposite of salting done to them. Dr Nebel suspected the samples were so rich that the locals were stealing the contents of the two kilogram sample bags, and refilling them with dirt from the road.
Graham Farquharson, a mining engineer and president of Strathcona Mineral Services, was OSC's expert witness. He is best known for blowing the whistle on the Bre-X scandal.
After being retained to look at the company's results, he reached the conclusion something was wrong and made "the C$6bn phone call" that triggered its collapse.
Judge Sheppard accepted all the OSC witnesses' evidence and rejected Mr Harper's explanation. As for Dr Nebel: "The court found his credibility wanting."
A grim Mr Harper left the courtroom without comment. An appeal is possible, his lawyer said. Sentencing, which could include a jail term, is set for September. |
