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Gold/Mining/Energy : BRE-X, Indonesia, Ashanti Goldfields, Strong Companies. -- Ignore unavailable to you. Want to Upgrade?

To: alan holman who wrote (27768)	2/26/1998 1:41:00 PM
From: alan holman	Read Replies (2) \| Respond to of 28369

Thursday, February 26, 1998 Felderhof defends procedures at Bre-X By SANDRA RUBIN The Financial Post Guarding bags of untested Bre-X Minerals Ltd. core samples would have been no guarantee against tampering and leaving them lying around open is normal practice for a junior company drilling at a remote site, John Felderhof says. He makes the remarks in a court filing that marks his latest attempt to have himself excluded from a huge class action lawsuit filed in Texas following the stock's collapse. The Dutch-born geologist, the company's exploration chief, was responding to charges he should have been alerted to signs of tampering by several "red flags" - including improperly sealed sample bags. Gold was added to the worthless rock before it was sent to the lab, giving the impression of a massive strike. Felderhof said a sealed bag guarantees nothing. "Common sensically, a sealed bag can be salted with a hypodermic needle, so allegedly improper sealing is obviously no red flag," he says. "The allegation that sample bags containing heavy rocks should have been better safeguarded - perhaps maintained in a locked steel vault with an armored guard 24 hours a day - only demonstrates the gap between plaintiffs' ivory tower theories and real industry standards and practices when a junior exploration company is conducting a drilling program in the remote areas of Indonesia." Calgary-based Bre-X was far from a junior in the months before its disintegration amid allegations of stock fraud. It had a market capitalization of $6 billion and a listing on the Toronto Stock Exchange 300 index. Felderhof also rejects suggestions there was anything unusual in not having independent drilling to back up reserve estimates that pegged the Indonesian find as perhaps the greatest of the century. "Plaintiffs cite nothing to suggest that the omission to allow independent drilling and sampling by outsiders, at the risk of losing confidentiality, was a required or customary practice by any geological society, regulatory agency or stock exchange." One geologist, who spoke on condition of anonymity, said it's "dead wrong" to say it's not customary to have an independent resource estimate based on outside drilling. "I really feel his answer there is going down the street of the strict level of legal thinking. Anyone into what they think is a major mine would do everything they could to give the public and shareholders all the assurances they need about the ore body. It's sort of like doing an audit." But he said Felderhof is right when he says it's not uncommon for bags of untested core samples to sit around unprotected in a remote site. "It's not to say we're all sloppy, but in most projects, you tend to think everybody working on it with you is honest, so you let things slip a bit. It's common for people not to go entirely by the book." But Calgary geologist Keith McCandlish of Associated Mining Consultants said in his view Bre-X's security measures fell "far short" of the industry norm. "In my experience, on any project I've ever run, there's been a locked sample-storage facility to which few people have had access. It seems they didn't even have minimum security in place." Felderhof also denied in the 21-page document, filed in court in Texarkana, Tex., that he had run the show at the Busang site. He said he was not the chief geologist nor was he charged with day to day responsibilities at Busang. That was the domain of Michael de Guzman, who died in a fall from a helicopter about a week before the salting scandal hit North American markets. BREAKING NEWS MARKET WATCH BIZ TICKERS MUTUAL FUNDS MONEY RATES BIZ SEARCH Air Canada announces new route Safety-Kleen vote stalled by ongoing Philip woes Avenor spurns $2B offer from Abitibi Stocks back on record pace