bre – x gold scandle

8/13/2019 BRE X GOLD SCANDLE

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BRE

X GOLD SCANDLE

Presented To: Presented By:

Dr. Namrata Sandhu Saryu Garg

Tarun Chawla


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Company OverviewBre-X as a group of companies in Canada.

David Walsh founded Bre-X Minerals Ltd. in 1989 based in

Calgary.

The company was unsuccessful at finding any significant

deposits and its stock, listed on the Alberta Stock Exchange,

averaged a price of 27 cents between 1989 and 1992.


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Bre-X bought the Busang site in March 1993and in October

1995 announced significant amounts of gold had been discovered.

After starting drilling, Felderhof claimed that they had found up

to 2 moz of gold.

As the drilling continued, they need more capital to fund

exploration and initiated its first private placement, with Loewen

Ondaatje McCutcheon, Ltd., for C$4.5 million in March 1994.

As it began to explore the new site, the estimates of recoverable

gold rose to 6-8 moz by November 1994.

By March 1995, the stock price had increased to C$2.05.


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Cont

In May 1995, Bre-X initiated its second private placement: this

time Nesbitt Burns, Scotia McLeod, and McLean McCarthy Ltd.joined Loewen in the placement of C$7.5 million.

The stock shot up to C$14.87 that day when the company

announced that it had found a large gold deposit that raised their

estimate of recoverable gold to 30 moz.On February 20, 1996, Bre-X announced its third private

placement by Nesbitt, ScotiaMcLeod, Levesque Beaubien

Geoffrion, and First Marathon Securities.

After the company raised its estimate of recoverable gold to 42.6moz, Bre-X stock rose C$13.875 to C$153 per share.


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Cont

By May 1996, Bre-X had a market capitalization of over C$4billion and late may they completed a 10 for 1 stock split, deemed

necessary because the capitalization of the firm had peaked at $6.2

billion.

The estimate of the site's worth increased over time:-

In 1995 - 30 million ounces

1996 - 60 million ounces1997 - 70 million ounces

.


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Frauds exposed

The Fraud began to unravel rapidly on March 19, 1997 whenMichael de Guzman died by falling from a helicopter in Indonesia.

A week later the American firm Freeport- McMoRan announced thatits own due-diligence led by Australian geologist Colin Jones, showed

"insignificant amounts of gold

After that Bre-X demanded a review of the test drilling but resultswere not favorable to them.

David Walsh blamed the whole affair on web "ghost writers" whohad spread rumors on the Internet and damaged the company'sreputation.


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Cont

Strathcona Minerals a third-party independent company publishedtheir results the Busang ore samples had been salted with gold dust.

The lab's tests showed that gold in one hole had been shaved offgold jewelry though it has never been proved at what stage this goldhad been added to those samples.

Its shares became worthless and it was one of the biggest stockscandals in Canadian history, and the biggest mining scandal of alltime.

David Walsh died in 1998 from an apparent brain aneurysm, leavingonly Felderhof to face charges.


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Causes

NO inspectors at the side

Mining methods were not meeting the evaluation standards.


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Major Losers

The Ontario Municipal Employees Retirement Board (loss

of $45 million),

The Quebec Public Sector Pension fund ($70 million),

The Ontario Teachers Pension Plan ($100 million).


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In 1999, the Ontario Securities Commission accused Felderhof

of four counts each of insider trading and misleading investors

for selling C$84 billion worth of Bre-X stock in 1996 and not

disclosing correct information about the gold deposit to

investors.

Other charges brought against Felderhof have not been

pursued. In 1999, the Royal Canadian Mounted Police decided

not to charge Felderhof due to lack of evidence.


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Felderhof's trial began in October 2000 but was delayed by

years of legal battles. He has not appeared at the trial since

March 2005, and he never took the stand to defend himself

against the allegations. Closing arguments wrapped up nearly a

year ago in August 2006.


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July 31, 2007

The Bre-X Scandal Ends: Chief Geologist Found Not Guilty

The sample falsifying scam that rocked the mining world 10

years ago - came to a close today.


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Effect of Bre-X Stock Price


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Bre-X Income Statement (in C$000s)


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Thank you

bre – x gold scandle

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