Saturday, March 28, 1998
Barrick knew Busang claims false, lawsuit
says
Suit filed late Thursday adds giant gold company to list of Bre-X defendants
By SANDRA RUBIN
The Financial Post
St. GeneviŠve, KWG blame Bre-X
High noon for Bre-X
Giant Barrick Gold Corp. played a role in the Bre-X Minerals Ltd. fraud by
failing to reveal troubling tests of Busang core samples five months before the
scandal exploded on North American markets, says a massive class action
lawsuit.
Lawyers behind the Texas-based suit amended it late Thursday to add Barrick to the list of
high-profile Canadian and U.S. defendants they say played a role in the multibillion-dollar fraud. A
judge in Texarkana, Tex., will be hearing motions on the suit Monday.
The amended complaint says Barrick "had unique access to adverse information" about Busang
after getting core samples in October 1996.
The company was doing due diligence at the time on a possible joint venture with Bre-X being
brokered by the Indonesian government.
"Barrick was given access to 135 waste core samples from Busang which had not been used for
any testing," says the filing.
"Of the 135 samples tested,
130 contained no gold.
"Based on its testing of
core samples, Barrick knew
that Bre-X's claims about
Busang were false."
The lawsuit slams Barrick,
one of the world's biggest
gold producers, for failing to
warn investors there could
be a problem and continuing
to make statements it
expected to be a partner in
the Busang find.
"With that information in their hands, making those statements that misled investors is at the heart of
their responsibility," said Houston lawyer Paul Yetter, who is leading the Texas action.
"Barrick may well have hoped that there was more gold than their own tests showed. But what they
couldn't do is make statements at that point knowing what they did, having that critical secret
information.
"They could not make statements to the investing public without fully divulging what they knew,
without those statements being wholly truthful."
The class action maintains Barrick kept quiet because it hoped some of the cachet of an alliance
with the promising junior, which most people believed was sitting on the find of the century, would
rub off.
"Barrick intended to profit from its relationship with Bre-X and believed that its business and the
market price of its stock would benefit as a result," says the suit.
Barrick was battling a stubbornly flat stock price, disappointing third-quarter results and the
collapse of a gold project in Peru. It was under intense pressure to come up with new projects, the
suit says.
"Barrick was desperate to obtain an interest in Bre-X and its widely heralded discovery at Busang
in order to achieve its publicly stated goals of increasing its reserves and becoming the predominant
gold producer in the world."
Barrick spokesman Vince Borg declined to comment on the allegations. "We have nothing to say."
But executive vice-president Patrick Garver confirms in a Dec. 15, 1996, letter to one of Bre-X's
lawyers there were problems with the tests.
"We understand that Bre-X has agreed to provide Barrick full access to the property and otherwise
work with us so that we can promptly confirm Bre-X's view that the results that were recently
obtained from Barrick's independent assays are anomalous," Garver wrote.
The letter was filed late Thursday to support the amended suit. In it, Garver also confirms J.P.
Morgan & Co. investment banker Doug McIntosh knew of the negative test results.
"I understand that you and Doug McIntosh will be contacting [Barrick vice-chairman] Bob Smith to
follow up on this."
J.P. Morgan was Bre-X's investment adviser. It has already been named in the suit. Spokeswoman
Laura Maggos said there would be no comment.
The suit says Barrick also told Lehman Brothers Inc. analyst Daniel McConvey about the negative
tests.
"Barrick provided McConvey and Lehman with access to its test results, and was indifferent to false
positive statements about Barrick's test results and the size of the Busang deposit."
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