thestar.com
Company not worried it lacked gold field title
`Administrative problem' dismissed by board of directors Document admission up next on agenda in inside-trading case
MADHAVI ACHARYA-TOM YEW
BUSINESS REPORTER
Directors of Bre-X Minerals Ltd. considered it little more than "an administrative problem" that the company did not have legal title to the mineral rights at the Busang property, an Ontario court has heard.
Likewise, in the fall of 1996, when the Indonesian government cancelled Bre-X's preliminary exploration permit, known as a SIPP, the board believed this was not material information because other types of work permits had been granted.
"At the same moment the SIPP was cancelled, our KPs were renewed," Stephen McAnulty, former director and vice-president of investor relations, testified under cross-examination yesterday. "We were operating under the auspices of the KP and the COW (contract of work). It was a non-issue in my mind."
The court has heard previously that Bre-X didn't have title to Busang until July 27, 1996, four months after the company's stock began trading on the Toronto Stock Exchange.
Witnesses have differed on whether Bre-X needed legal title to mine the property under Indonesian law.
John Felderhof, Bre-X's former chief geologist, has pleaded not guilty to eight criminal charges of insider trading and misleading investors. The Ontario Securities Commission alleges that Felderhof sold $84 million worth of Bre-X shares between April and October 1996 while having information that had not been disclosed to investors.
Busang, once thought to contain the biggest gold deposit in the world, was discovered to be a bust in the spring of 1997. The Alberta-based company, along with its stock, collapsed in the wake of the hoax.
McAnulty is likely to be the last witness for the securities commission in the long-running trial.
Next week, lawyers are slated to argue over the admission of a handful of documents that could prove crucial to the case.
Among them is a September 1993 fax in which Michael de Guzman, Bre-X's head geologist in Indonesia, who is now deceased, confirms to Felderhof that "impressive" samples taken by an assistant field geologist are all outside the area covered by Bre-X's contract of work.
Other inter-office memos track efforts by Rolando Francisco, Bre-X's former chief executive officer, to secure legal title to the Busang property. The securities commission says this information should have been released to investors. The defence wants the documents excluded from the case. Under cross-examination this week, McAnulty testified that he had never seen the documents before and couldn't explain their origins.
In his final day of testimony yesterday, McAnulty described a series of troubles that transpired at Bre-X, starting in 1995.
The court has heard that, in 1987, a joint venture known as PT-WAM held the contract of work for Busang's central zone. In turn, a company called WRPL owned 80 per cent of PT-WAM. Prior to 1993, WRPL transferred beneficial ownership of its PT-WAM stake to another company, called Montague Pacific. Bre-X bought Montague in 1995 and Montague bought WRPL in July 1996, officially giving Bre-X legal title at the property, the securities commission claims.
Bre-X directors felt their company had been "held up for ransom" when Warren Beckwith, a former chairman of Montague, demanded about $5 million for his company, McAnulty said.
Then, in the summer of 1996, powerful Indonesian businessman Jusuf Murukh complained to the mines department that he had a claim to Busang's southeast zone, thought to contain the bulk of the gold deposit. McAnulty testified yesterday that Bre-X's lawyers in Canada, Indonesia and Australia suggested Murukh's claim was frivolous.
That fall, the Indonesian government began its efforts to strong-arm Bre-X into a joint-venture agreement with mining giant Barrick Gold Corp.
Asked by defence lawyer Joe Groia why the mines department seemed to be pushing Barrick, McAnulty responded, "We believed there was some collusion, potential bribery, some people had been paid off."
While Barrick aligned itself with an Indonesian company that had ties to the daughter of Indonesia's president, Bre-X decided to enter into an arrangement with a firm connected to the president's son, McAnulty told the court.
"I guess you could say that alliance was our only way of going against forces that would have us fail." |
