Hi John, here is an interesting article, suggesting Bre-X may never have happened if it were not for Voisey Bay.
Sunday, Nov 15th
Voisey's Bay hustle set the stage for
Bre-X scandal: author
By MICHELLE MACAFEE
ST. JOHN'S, Nfld. (CP) - The Bre-X fiasco, which has
left furious
shareholders seeking millions in lawsuits, likely would
not have
happened if Diamond Fields Resources had not risen
from
relative obscurity to control the massive nickel find at
Voisey's
Bay, Nfld., suggests the author of a new book.
Inco's initial $500-million investment in Voisey's Bay in
the spring
of 1995 left others kicking themselves for doubting the
storybook
tale of down-and-out promoter Robert Friedland's
discovery of
nickel while searching for diamonds in unexplored
territory,
Jacquie McNish writes in The Big Score.
When Calgary-based Bre-X Minerals, a penny-stock
company
founded in 1988, began trumpeting its Indonesian gold
find in the
fall of 1995, investors abandoned all caution and sent
share
prices skyrocketing.
The speculative boom that followed Diamond Fields
ended by the
spring of 1997, when Bre-X collapsed amid declarations
the
Busang find in Indonesia was a fraud.
"The Voisey's Bay story is an epic story of greed with
more twists
and turns than the Labrador coast," said McNish, a
Toronto-based business feature writer at the Globe and
Mail.
"The setting is the greatest speculative boom since the
California
gold rush - an extraordinary time when billions of
dollars (were)
backing the flimsiest of projects."
Friedland's success as head of Diamond Fields was so
implausible that it sent everyone, including the brightest
analysts
on Bay Street, cheering on other potential rags-to-riches
stories.
McNish's book traces the Voisey's Bay hustle from
August 1985,
when a geologist for the Newfoundland government
chipped off
some samples at the rich northern Labrador site, to April
3, 1996,
when Inco and Diamond Fields signed their $4.3-billion
takeover
agreement.
The deal remains the largest single mining property
acquisition in
history.
Inco chairman Michael Sopko knew at the time the real
work had
yet to begin. But McNish said everything that could have
gone
wrong has in the 2½ years since the takeover.
Nickel prices have plummeted to record lows, demand
has
declined and Inco has found itself vulnerable to a hostile
takeover.
In Newfoundland, the company has hit roadblocks with
native
groups who lay claim to Voisey's Bay and its
surrounding land.
Inco has also had problems with Premier Brian Tobin,
who insists
that the company keep its promise, made in better times,
to build
a smelter and refinery in the province.
Inco has said it will miss its original target of opening
the mine by
the end of next year.
But the weight of the issues still to be resolved could
keep the ore
underground for many more years, said McNish.
Rumours of a possible partnership with Falconbridge
Ltd. may
serve both the shaky market and Inco's bottom line, said
McNish.
But unlike Tobin, she expressed doubts about the need
for Inco to
take an immediate writedown on the project, a move that
would
increase its losses.
The company's payment to Diamond Fields in shares
rather than
cash gave it more room to manoeuvre and saved it huge
interest
payments on its debt, but at the same time "horribly
diluted its
stock value," said McNish.
A writedown would also be a huge blow to Inco
management and
force the company to speculate on the value of its
investment
once nickel markets come back to life.
"The real test will be time," said McNish.
"I do believe this will prove to be a great acquisition. It
may take
20 years to be able to say that, but it's a fantastic ore
body."
---
The Big Score: Robert Friedland, Inco, and the Voisey's
Bay
Hustle. Jacquie McNish. Doubleday. $35.95.
© The Canadian Press, 1998
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