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

To: william smith who wrote (27903)	5/31/1998 1:38:00 AM
From: Walter	Respond to of 28369

Saturday, May 30, 1998 Bre-X 'rights' non-existent New filings in class action suit indicate company misled investors Bre-X's Busang site full of red flags: expert By SANDRA RUBIN The Financial Post The Indonesian government told Bre-X Minerals Ltd. in late 1996 the company had no legal rights to any part of the Busang gold strike and anything it might be allowed to keep was "a gift," according to the minutes of a private meeting in Jakarta. The company never disclosed the stunning statement to regulators or North American investors who had poured money into the stock. In fact, key executives up to and including chairman David Walsh reassured shareholders everything was fine. Bre-X shares were flying high on the Toronto Stock Exchange and Nasdaq at the time, despite rumblings of trouble over the company's ownership of Busang. The shares moved on to the bellwether TSE 300 index just 12 days later. "The meeting records make it impossible for these defendants to claim they were themselves the victims of a fraud," said Houston lawyer Paul Yetter, who filed them in a Texas-based class action yesterday. "These documents show beyond a shadow of a doubt that Bre-X, its advisers and potential partners were not being completely truthful with investors, many of whom put their life savings into this company with tragic results." The first meeting came Dec. 4 as Umar Said, Indonesia's secretary general of mines, was pushing a partnership deal with giant Barrick Gold Corp. Bre-X was asking for 60 to 90 days to sell the plan -- which would vastly dilute its stake in Busang -- to its shareholders. An impatient Said told Bre-X in no uncertain terms it didn't have any say in the matter, according to the minutes of the private session between Bre-X, Barrick and the Indonesian government. "From [the] government's point of view it does not appear Bre-X has anything to sell," he told exploration chief John Felderhof, chief financial officer Rolando Francisco and Doug McIntosh, one of Bre-X's bankers from J.P. Morgan & Co. Inc. "[The] government does not recognize any legal interest of Bre-X in pending applications for Busang 2 and 3, and questions whether Bre-X is properly involved in Busang 1. Due to improprieties with article 29 of COW [Contract of Work] [the] government, not Bre-X, owns resources and chooses contractors. "If shareholders do not approve they would lose everything." Bre-X shares gained $1.30 that day to close at $20. Eight days later, amid mounting speculation it was losing its grip on Busang, Bre-X put out a press release saying Said had apologized on behalf of his government for comments casting doubts on the company's rights to mine Busang. "Significant progress is being made on all fronts towards the development of the Busang project," Walsh said in the Dec. 12 release. "Shareholders must be as pleased as we are with the recent developments." But in another private meeting between Bre-X, Barrick and the government the next day, Said pointedly denied he had apologized -- and asked Bre-X for a correction. "Umar Said said that he did not apologize yesterday," the minutes show as the first item discussed. "He only said 'sorry for the confusion,' and requested that we correct the press release." No correction was issued. A sharp exchange between Said and Francisco a few minutes later suggests things between the company and the Indonesian government were not nearly as rosy as investors were being led to believe. A clearly annoyed Said took the Bre-X director to task for too many "irregularities" in the Calgary company's paperwork. He cited a document he said listed David Walsh "as an Indonesian citizen holding a Canadian passport." Francisco said he couldn't explain what had happened because he hadn't seen the document in question. "You did not see, that is why there are irregularities!" Said snapped back. "That is why we can reject your application, although it has already passed the parliament." Later, at that same meeting, Said again got angry as Francisco asked for time to present the proposed deal with Barrick to his fellow Bre-X directors. "You have the wrong perception -- as if you are the owner [of Busang]," Said said. "There will be a new company." He told Francisco "you can explain to your shareholders that they have nothing to choose from, 25% is already a generous gift!" Three days later, on Dec. 16, Bre-X joined the TSE 300 index, obliging institutional managers to purchase the stock for index funds. "It certainly reflects the increased stature of Bre-X as a gold company," Walsh said in a statement. The shares closed at $20.10 that day. Four months later they were worthless, costing the funds, collectively, millions of dollars. The documents are included in about 500 pages of exhibits attached to an affidavit by Bre-X bankruptcy trustee Ross Nelson on file in the Bahamas. They were used to back up a request to freeze the Walshes' assets pending the outcome of several court cases. The freeze was granted, but is being appealed. BREAKING NEWS MARKET WATCH BIZ TICKERS MUTUAL FUNDS MONEY RATES BIZ SEARCH Livent investors stunned Bre-X 'rights' non-existent CanWest suit tackles WIC deal Insurers irked by Ottawa CANOE home \| We welcome your feedback. Copyright c 1998, Canoe Limited Partnership. All rights reserved. Please click here for full copyright terms and restrictions.

To: william smith who wrote (27903)	5/31/1998 1:45:00 AM
From: Walter	Read Replies (1) \| Respond to of 28369

Saturday, May 30, 1998 Bre-X's Busang site full of red flags: expert Bre-X 'rights' non-existent By SANDRA RUBIN The Financial Post Analysts and consultants from Bay Street and Wall Street who toured Bre-X Minerals Ltd.'s Indonesian gold strike should have seen at least 20 warning signs that something was wrong, said one of Canada's most prominent mining experts. Graham Farquharson, president of Strathcona Mineral Services Ltd., told Bre-X chairman David Walsh in a letter that his staff noticed several things that didn't add up "during the first few days of our visit to Busang" in March 1997. "Some of the red flags are more significant and more obvious than others. Some of them, on their own, might not create any doubt or questions to the casual observer but, collectively, they all point in the same direction." The letter was dated Oct. 20, 1997 -- after the salting scam had been exposed. Farquharson said it was requested following a meeting with one of Bre-X's Calgary lawyers and company controller Bryan Coates. He said the warning signs were not that hard to read. "All of the red flags require the observer to have some experience in the mining industry and more particularly in gold. However, the observer need not be a highly specialized scientist, as the red flags do not involve any sophisticated technology." Strathcona was called in to Busang after Freeport-McMoRan Copper & Gold Inc. dropped a bomb by saying it had found "insignificant amounts of gold" in its preliminary tests of Busang -- reported to be one of the world's richest deposits. Farquharson said in the seven-page document that he confined himself to red flags that "could have been identified at some stage by the many others that preceded us to visit and report on in Busang." Analysts, many of them geologists and metallurgical engineers, visited the Indonesian site and wrote reseach reports on the company's operations following their trips. Specialists for investment banks J.P. Morgan & Co. Inc. and SNC-Lavalin Inc.'s Kilborn engineering group were also on the site. Farquharson said one thing that stood out was the absence of surface signs of a major deposit. Strathcona geologists noticed Bre-X staff didn't wait for the results of one drill hole before deciding where to drill next. The Strathcona people were also concerned that it appeared Bre-X geologists never went to the drill sites. "It became apparent that the Busang geologists were not really interested in watching what came out of the hole, as the core was stored for many weeks after drilling prior to going through the sampling process, etc.," Farquharson said. He said it was also curious there was no visible gold in the huge body of core samples, even though the nuggets were supposed to be coarse and easy to see. "One would have thought that in over 60,000 metres of drill cores some evidence of visible gold would have been reported in the drill logs, but when we asked the question we were told there were no reports of visible gold." He pointed out the absence of nuggets conflicted with a description in a technical paper by Bre-X's top geologists -- John Felderhof, Michael de Guzman, Cesar Puspos and Jonathan Nassey. He said Strathcona was astonished to learn Bre-X routinely opened sealed bags of core samples after they arrived at a warehouse in Samarinda, saying they were doing it to "check for bag breakage." "It is, of course, standard practice in the industry that once a sample bag has been closed it should never be opened again until in the assay laboratory." Farquharson said another red flag was the question of whether it was conceivable one deposit could contain as much as 8% of the world's gold resources. "This is, of course, a red flag that is easy to point out in hindsight, but with all the experienced observers that had been to Busang, perhaps someone should have asked: is that really possible?" "Why would nature be so generous as to endow Busang with such a large proportion of the world's gold resources?" BREAKING NEWS MARKET WATCH BIZ TICKERS MUTUAL FUNDS MONEY RATES BIZ SEARCH Livent investors stunned Bre-X 'rights' non-existent CanWest suit tackles WIC deal Insurers irked by Ottawa CANOE home \| We welcome your feedback. Copyright c 1998, Canoe Limited Partnership. All rights reserved. Please click here for full copyright terms and restrictions.