repeat:
The Boka tapdance.. of SWG in China -- Once a 21 dollar stock. The great gold play that caused a flurry of wannabe imitators.. has been brought low with the whiff of a scam ... Is this China's Bre-X?
We don't know how much of SWG's value was Boka, or how bad the Boka the compromise of the Boka deposit really is but assuming there is salvageable value in Boka, and there is good value in their other plays, then the company may be approaching bargain price levels soon.
All we need is more blood running in the streets.
We are still in "howbadizit" mode.
We just don't know. Little Johnny Zhang not answering all the tough questions begins to look like he is planning a short helicopter flight. Will his widow get postcards from Brazil? Will be he be seen exiting 7-11's in Peoria?
It will be quite a denouement if it turns out that there was minor salting of a few holes, or a misreporting of results due
to a mix-up.
But the way that Zhang is not answering... hmmm.. where was the chain of custody? The check sampling.. the independent consulting company...
What are these engineering companies good for? Hatch etc. what a bunch of stooges they are turning out it be! First Kilborn, now Hatch.. Even if nothing really bad is wrong, and we hope it isn't.. Hatch and other engineering firms will have to be held to new standards. It ain't a reportable assay unless you slept with the samples, had a camera on them 24-7 and the assay lab is manned by blind Mormons.
No more of this horseshit. We don't need it. Unless there is serious chain of custody for check samples, we should not invest at all. It should be up to the companies to provide some kind of oversight on this stuff. We need a ISO 20,000 on it.
Soon.
*********************************
Financial Post.. Boka, a bit more detailed. I see that they pillory Zhang a bit more, Paterson's role become a bit smellier, and the actual nature of the problem is in higher relief in this tome from the Post. It is one group of samples that is known to be bad, the Feb 21st's group, and others are merely suspect. However I might add, suspicions are pretty high if any samples are connected with Zhang in his 3 year tenure. The nature of the tampering may be in fact just fiddling with digits, but the fact that certain bags were in disarray points to an iceberg "somewhere over there in the darkness and the mist" ... we must sail closer and see if we can crash into it..
That the company did not have oversight of Zhang, and that he is not an approved CDN geologist, is a bad show. This is NOT
chain of custody. This is NOT secure. It is flummoxery of the 12th degree and no amount of willy wally waffling and slurred
techno garble can relieve the company of responsibility. They misstepped into the deep doo-doo from the get-go. Someone, clearly, on a project this size should have had a constant watch on integrity of the samples and the people. They did not
have that clear and constant watch.
I think there may gold at Boka. I think JZ hisself may have fiddled with assay sheets perhaps. And samples too? "decimals
shifted to the right" ... Is this a suspicion or broker talk? Is it true?
The Chinese have been known to shoot people for fraud. If Zhang is found guilty this is one area where I would not complain
about excessive punishment by foreign governments.
*************************************************
"What they have discovered is there is a series of assay results that came from drilling that look as if the decimal points were actually moved to the right when they were disclosed to the public," said Wendell Zerb, an analyst at Canaccord Adams.
The executives tried to interview the general manager of the project, a Chinese citizen named John Zhang who has worked for
Southwestern for more than three years. But so far, he has not co-operated.
"He's not forthcoming," said Mr. Black.
Southwestern's stock was halted in advance of the announcement. As soon as trading resumed, investors went into a selling
frenzy. The shares ended the day at $2.90, down more than 54%. The stock was down almost 30% this year before yesterday's
announcement.
"Historically, the Southwestern group is known in the industry as being absolutely top-notch individuals. So to me this is
quite a surprise," Mr. Zerb said.
He added that unlike Bre-X's Busang project, which was a new discovery, the Boka project has been picked over by thousands of local miners, and gold has been documented.
Southwestern is reviewing all of its samples from Boka to determine whether any results were manipulated other than the ones released on Feb. 21. The highlight of those results was a reported intersection of 15 grams per ton of gold over 30.4 metres.
*************************
There may be some more China problems to come, but I cannot believe that the whole country is awash in this sort of
corruption. It is interesting that the market was sabotaged by an Asian play once before, but the suspicion is that "the
usual suspects" were domestic in this instance. I don't think the market will be anywhere near as affected by this as it was
by Bre-X, even if it turns out to be a real scam and not just a bit of finagling.
The stories about Chinese miners going into tunnels and coming out with gold "that everyone could see" are quaint. This seems
to ring true, but is unverifiable in any technical way unless the company does a demonstration video, a thing which we note
is conspicuous by its absence -- and that sort of proof in any manner except as far as I could see, i.e. one lousy
photomicrograph, is distinctly miniscule. When something like this happens, every grandiose declaration by the company
supposedly designed to lend credence begins to have the distinct ring of a three dollar coin on a hollywood movie set. A loud and phony clatter.
The revelation of this little debacle, and I don't think it is a grand market shaker, is also a tad weak. There is no great
number of twinned holes, no pervasive and authoritative third party consultant's forensic investigation. Just some
allegations by the company itself without any presented evidence.
I am not sure where Zhang stepped into the picture. Back in August or perhaps June 2004 he seemed to appear in association
with a group that may well become notorious, Team 209, the JV partners and the people doing the small scale mining. Formerly
two other people leading the exploration group, noted in a March 2004 NR with Paterson, were Charlie Cheng from UBC and a
Xianda Wang from Salzburg University.
If Team 209 is implicated in a scam, and it is premature to say so, but hypothetically, and Zhang is part of it, the stories
about miners coming out of tunnels with gold could be a made-out-of-whole-cloth sort of thing.
A number of companies have had China problems. They vary from routine corruption about who is supposed to own the property,
to getting the property at all if it is too high grade, as normally the Chinese government reserves high grade precious metal properties to domestic entities only. Low grade is for foreigners. SWG's Boka was an exception.
I think this little foray into Bre-X integrity, if it matures into a real farce may shake China plays, dry up liquidity in
that country, and cause a flight to domestic quality and near term producers. Probably a godsend in the final analysis. I
can't tell you how many times I have heard brokers tell me that they could not look a real mine in Canada because they had
all these China plays that were so good on their plate. 3 or 4 in the last week alone, and in the last year, well let's say
quite a few market blowouts - pump and dump schemes were scuking up all the money. Many China plays may be just that, pumpsie dumpsie -- although I think many operators are legitimate, without doubt. The Chinese mining game is real enough. They have quite a few porphyry copper plays. But I don't see after 5 years many people over there starting mines. I don't see people anywhere starting anything like a mine in many places for that matter. I like the idea of that, and that is why our properties emphasize that possibility, from an ore-ecomonic and capex standpoint.
Between China deals gone bad, no high grade, problems with ownership, bad South American governments, confiscatory overseas tax regimes, just plain higher costs, it is high time investors and brokers learned to stay in jurisdictions that make sense and have good track records and money repatriation possibilities. No 10% dead money partnership with arbitrary governments and no 50% tax schemes or worse. No 3 person ownership of a claim or the best bribe wins. No 10,000 galamsay mining the property with ak47's. Let's keep it peaceful and mine with the devils we know instead of the devils we don't. Let's face facts, I know many domestic plays are pump and dump, but if one can't see the brokers plans for China plays from the get go, I think one needs glasses bad.
The trick going into a new country is to find a way to make money there and get it out. No one, not even Motorola has
demonstrated conclusively that they can do that well. I will admit that retailers have been making things in China since the
70's and probably making fair profit. But in the mining game it appears to be structured differently. I am not sure exactly
what the reason is, but countries are very jealous about their resources. The one exception seems to be Canada, who will let
a kid come in a buy any mine in the country for lollipop money.
Paterson's seems to be troubling in his role as explo manager. He had the position where he should have had oversight from
the beginning. Either he was in on the scam, or he should have had procedures in place to make it very much harder to do, and
he did not perform ..
It is early days in this play. The company must make a clean breast of it. I think the let it play out in the market for the
reason that they wanted to see what level they could maintain based on their other properties.. giving them the benefit of
the doubt.
****************************************** |
