Author: WillP -- Date:1999-02-27 11:39:52
Subject: Bre-X vs. Wsp-X
There are reams of books out there on the Bre-X saga...some good and some
not. I'm not going to offer an opinion on Bre-X as there is litigation galore before
the courts, however let's have a look at 'salting' of a diamond mine in general, as
opposed to gold.
John Kaiser presented a good write-up of the "chain of custody" in taking
Winspear's bulk sample. If anyone is unduly concerned about the possibility of
salting at Snap Lake, or any other mini-bulk sample...read it.
#1. The salting process in general works best if it were undertaken by a small
number of employees, rather than a concerted effort by a company as a whole.
#2. Any illegal activity must present a high rate of return to the perpetrator. A
fence will buy stolen goods at 10% of the value...what return would a salter be
looking for? Ten fold? A hundred fold? Bre-X was described as a $5 million
scam that got hyped to $6 billion. It supposedly cost $30,000 to plant all of the
gold. Using the $5 million figure...that's about a 150 fold profit. A proper Snap
Lake salt would cost $100,000 Canadian, so the hoped for profit would be
roughly $15 million...or the sale of 4 million shares at $4. This would have to be
accomplished before the bulk sample results were released...and the shares
would have to have been acquired for next to nothing...a daunting task.
#3. Salting of an orebody works best if the 'ore' is barren. To properly salt a
kimberlite body, one should have a barren kimberlite. An orebody with anything
larger than microdiamonds would make detection too easy. The Snap Lake
kimberlite was already known not to be barren, and any self respecting geologist
(or even me) could roughly interpret the prospects of finding larger stones from
CF results in 1997 as being excellent. Further...the 1998 CF results from the
NW peninsula revealed some larger stones...up to 0.8 carats in size (with a
probable maximum dimension in excess of 7 mm). Presumably the probability of
detection would be relatively easy for an expert.
#4. The mere act of plopping three incredibly high quality gemstones into two
different bags would be the act of a rank amateur. It would run the real risk of
totally skewing the diamond size population, and of course attract undue
attention to the salted stones themselves. Far better, to have only 2 of the top six
stones being valuable gems. Surely, no salter worth his 'salt' would be so foolish
to chuck away $50,000 in three fine gems without adding twice to four times the
weight of large poor quality stones. Having done that...one would then have to
re-populate the remaining weight classes appropriately. Having done that...one
runs the risk of having two different types of stones in all weight classes, unless
the ore is otherwise barren.
#5. To do so...one would have to have a really good idea of what the population
of the unsalted kimberlite was. They would therefore have to be privy to all of
the data from the 1996-97 boulder and drill results. This narrows down your list
of salters considerably.
#6. A good scam works best when there is a sole owner. Having a JV partner,
especially one that must be rather protective of it's reputation heading into a
$250 million debt financing deal, is not conducive to a good salt job. Having one
that has just had a number of successes finding real diamond mines...is even
worse. All those extra experienced geologists poring over the cores, data, etc,
would be an invitation to early discovery. Bre-X fell apart with the arrival of a
somewhat doubting JV partner.
#7. A diamond salt is unsustainable. A 6000 tonne bulk sample would cost at a
minimum $1,500,000. The work involved to evenly distribute the diamonds
through this sample would be enormous. Just think about it. I would argue it is
unsustainable at the 200 tonne mini-bulk level as well. :-)
#8. What would be the purpose in just putting in just 3 high quality gems? The
probability of detection becomes ridiculously high, and the probability of the
value added by them being discounted is just as high. Right now...those three
stones aren't contributing a great deal to the share price.
These are some of the things I think of when someone makes the flip offhand
comment about salting a mini bulk sample.
Regards,
WillP |
