Saturday, July 25, 1998
Bre-X's Walsh accused SNC
By SANDRA RUBIN
The Financial Post
Two weeks before he died, the chairman of Bre-X Minerals Ltd. pointed a
finger at SNC-Lavalin Inc., claiming it had been hired to carry out an
independent analysis of Busang, and its failure to report anything suspicious
after "months of on-site inspections" gave him a false sense of security in the doomed project.
David Walsh's assertion is a blow for the Montreal-based engineering giant, which has insisted its
Kilborn subsidiary was hired only to do computer modelling and provide estimates of the size of the
Busang find.
But Walsh said in his final statement, sworn May 20 and filed in the Bahamas supreme court, that
the work by SNC-Kilborn and Normet Pty. Ltd. went beyond that.
"[They] were contracted to provide independent analysis of the Busang properties," he said in the
affidavit, obtained by The Financial Post. "Following months of on-site inspections from a review of
samples and assay information, neither of these institutions reported any irregularities in the
procedures at the site or even any suspicion of irregularities.
"As a non-geologist, I was comforted by the receipt in January 1996 and November 1996 of
substantial feasibility studies from these firms which confirmed the results and methodologies being
pursued by Bre-X."
The due diligence team from Freeport-McMoran Copper & Gold Inc., which uncovered the fraud,
said its people knew almost within minutes of setting foot on the remote jungle camp that something
was very wrong.
SNC official Suzanne Lalande conceded the firm had engineers on site, on and off, from 1995 until
the scheme was uncovered, but denied there had been inspections.
"It was not in our mandate to make site inspections," she said. "We were there ... because it was
part of our work to be there, but there was no mandate. The site inspection was not carried out
because we were not supposed to do so."
Lalande said SNC was to conduct studies and computer models of geological samples - and did
that professionally. But Walsh said the firm had a more significant role than that, claims Houston
lawyer Paul Yetter.
"The picture Mr. Walsh paints of SNC Lavalin is entirely different from the one being presented by
the company itself - that of a low-level computer operator whose job it was to take and compile
information," said Yetter, who is leading a Texas-based class-action suit. "What Mr. Walsh is saying
is crystal clear: Kilborn was supposed to verify that there was gold there."
The engineering firm has been hit with huge lawsuits in Canada and the U.S.
Harvey Strosberg, who is leading an Ontario-based class action, said Walsh's statement is in sharp
contrast with what SNC has been saying. "If it's true, it's totally inconsistent with what SNC-Lavalin
has said and it could be a critical statement for investors."
SNC shares (snc/tse) have taken a hit because of the firm's involvement in the nototious gold fraud.
The stock was trading around $19 when the hoax was exposed in March 1997. It closed Friday up
10› at $10.90 - just slightly off its 52-week low of $10.65.
"They've been hurt by Bre-X but I think the market has reacted too much," said Martin Dufresne, of
Desjardins Securities. "The stock has dropped more than the value of the Kilborn subsidiary, which
was acquired in 1996 for $39 million. Investors have overreacted to the impact of the Bre-X
problem on SNC."
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