Pogue: thanks for pointing out the excellent article. FP is doing an excellent job covering all the BS. In fact, I think many who posted here a year to a year and a half owe publications like FP, Globe, Stockwatch, and Northern Miner an apology because they were right all along. But hey nowadays, nobody likes to take responsibility, admit they were wrong, or apologize anymore. Nowadays you could be caught red-handed, it is still DENY, DENY, and DENY to the very end (death?). There is no doubt in my mind that the lawsuits will be successful. However, it will take a long long time and the lawyers will take a big chunk out of any recovery.
Saturday, June 20, 1998
Freeport knew Bre-X 'wrong' immediately
By SANDRA RUBIN
The Financial Post
Bre-X case challenge denied
The first geologists allowed by Bre-X Minerals Ltd. to carry out
independent tests on Busang knew something was fishy before seeing a
single drill result, says the man who led on-site due diligence work for
Freeport-McMoRan Copper & Gold Inc.
It's the first time Freeport has allowed anyone to speak out about what was going on at the
Indonesian property in the days before the lid was blown off the sensational gold fraud.
Colin Jones, who was Freeport's vice-president of exploration in Indonesia, says his team was
struck by serious discrepancies and concerns the moment they set foot in the jungle camp on March
1, 1997.
"There were all sorts of things we as geologists recognized," he said from Australia. "We knew there
were things wrong with the project pretty well immediately."
Geologists and mining engineers from a dozen investment banks and brokerages had trooped
through Busang as Bre-X stock soared on North American exchanges, but none reported signs of
trouble. Many are now being sued for billions by angry investors who lost their savings.
Jones said it's tough to imagine no one noticed anything. "It's mind-bogglingly amazing to me no one
had spotted any of this before."
He said the Freeport team was alerted by a series of clues, starting with senior Bre-X technical staff
who were in the dark about the most basic operations. They didn't know the assay results or even
where the drill holes were.
"They weren't interested," he said. "They didn't have to know that stuff - because they knew the
results were going to be good."
In a bombshell for SNC-Lavalin Inc., Freeport said the
Kilborn Engineering group used data that were so deeply
flawed its resource estimates were rendered "invalid."
"It was obvious the database supplied to Kilborn
contained some serious discrepancies, and was not
considered suitable for resource estimation work."
Several geologists said the problems should have turned
up in a routine database validation check.
"It's a one- or two-day test, and we do it systematically
because there's no point doing resource model verification
if your data is crap," said one geologist. "It shouldn't have
mattered whether Kilborn was supposed to do it as part
of the terms of their contract. They should have done it
anyway. It's common practice."
SNC has also been named in class actions suits.
Spokesman Robert Racine said Kilborn did carry out the
tests. "I don't know what data Freeport had in its hands,
but I can assure you we did the work professionally - of
course we did data validation checks."
Several members of the Freeport team wrote a paper, called Busang: Digging For the Truth, which
Jones presented at a conference in Perth, Australia, on Friday.
He said within 48 hours of arriving at Busang, he caught senior Bre-X staff lying. In a deposit like
Busang, there should have been telltale gold-bearing sediment in area streams. The company said it
hadn't looked for sediment, but Jones discovered there had been a stream-sediment sampling
program - and the results were "surprisingly negative."
"That was important, because I was being lied to. Anyone else who asked would have had to
accept their first answer, but I speak Indonesian and could talk to some of the young geologists,
who told me about the tests."
Ironically, Bre-X exploration chief John Felderhof and geologist Michael de Guzman weren't there
while Freeport combed the site.
They were in Toronto being feted by the Prospectors & Developers Association, "allowing
Freeport staff unrestricted access ... to carry out a rapid series of tests."
Jones, who now works for Resource Service Group in Perth, said the Freeport people were struck
by a report Bre-X commissioned from Normet Pty Ltd. that contained "possibly the best description
of an alluvial gold grain ever written."
On March 10, Freeport got its confirmation: the first test results showed no gold. Security was
stepped up dramatically. Core samples were flown by helicopter directly to labs, and even rejected
core was kept under lock and key. Transport, logging and sampling were all videotaped.
Core from two holes was flown on the Freeport corporate jet to an assay lab in New Orleans. It
too came up empty.
March 19, the due diligence team "finally put the last pieces of the puzzle into place" and realized it
was a massive fraud.
Before they could tell head office, they were informed de Guzman had fallen to his death from a
helicopter on his way to meet them at Busang.
Jones said the Freeport crew was immediately evacuated by helicopter. The company sent the
corporate jet to rush them back to Jakarta. They were registered in hotels under assumed names.
His paper is important because it proves problems at Busang were obvious even without drilling
new holes, said Paul Yetter, who is leading a Texas class action lawsuit.
"It's called Busang: Digging for the Truth?" he said. "Maybe it should be called Busang: The Truth
Without Digging." See BRE-X: page 6
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