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News > Companies
No gold at Bre-X site
May 5, 1997: 7:58 a.m. ET

Strathcona study says there is no significant gold to be found at Busang
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NEW YORK (CNNfn) -- Bre-X Minerals Ltd. suffered another crushing blow Sunday when an independent audit found its claim that the Busang gold discovery -- touted as the find of the century -- was based on falsified data.
     Strathcona Mineral Services Ltd. said it had found evidence of tampering with Bre-X core samples taken from the Busang site on the Indonesian island of Borneo.
     "The magnitude of the tampering with core samples that we believe has occurred and resulting falsification of assay values at Busang, is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent in the history of mining anywhere in the world," the report said.
     The Strathcona report is the latest dive in the roller coaster ride Bre-X has taken since it first began explorations deep in the Indonesian jungle.
     Bre-X initially said the site contained 30 million ounces of gold but raised the figure several times, eventually claiming Busang held about 71 million ounces.
     Stock in the mining company climbed with each successive exaggeration, eventually reaching C$201 per share.
     But the beginning of the end came with the death of Michael de Guzman -- Bre-X's chief geologist at Busang. De Guzman fell out of a helicopter en route to a meeting with executives from Freeport-McMoRan, one of Bre-X's partners in the project. His death was ruled a suicide.
     Two days after his death, on March 21, an Indonesia newspaper reported that findings by Freeport McMoRan Copper and Gold Inc, a 15-percent stake holder in the site, did not match Bre-X's more positive reports.
     Investors quickly bailed out of holding Bre-X shares and the company lost $583 million of its market capitalization before the stock started a modest recovery.
     The Toronto Stock Exchange halted trading, but allowed it to resume several days later. The stock plunged 80 percent and crashed the exchange's computerized trading system.
     The Toronto Exchange is reportedly more prepared for this latest eventuality. It said it has taken special precautions, including placing special restricted trading rules and allowing brokers to accept only orders for same-day execution.
     Bre-X Chairman David Walsh said he was "devastated" by the report and vowed the investigation into Busang would continue.
     The Busang fiasco has already had a ripple effect across the mining industry, causing smaller firms to have difficulty raising funds for explorations. It will also taint any future claims of sizable gold deposits.
     Indonesia is also likely to tighten mining regulations and be more wary of smaller mining companies looking to make their names with a large find, industry officials said.Back to top

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