Felderhof still insists Bre-X site has gold
Courts must decide how much gold there is at Busang, his lawyer says
By
SANDRA RUBIN
The Financial Post
The courts will have to determine exactly how much gold there is at Busang before forging ahead with investor lawsuits against Bre-X Minerals Ltd., the lawyer for former exploration chief John Felderhof said yesterday at the start of certification hearings.
Certification is a key legal step for investors hoping to recover some of the billions of dollars lost in the notorious gold fraud.
It's only after the case is certified as a class-action suit that their lawyers can start poring over company documents and questioning insiders and brokerage house analysts about their role in promoting the exploration firm's stock.
Shares of Bre-X shot from pennies to a pre-split equivalent of $286 on the company's assertion it was sitting on perhaps the biggest gold find the world has ever seen. The stock was rendered worthless after it was discovered someone had been adding outside gold to core samples to give the appearance of a massive strike.
Mr. Felderhof, the Dutch-born geologist who peddled the Indonesian find to Bre-X and was responsible for overseeing all the drilling operations, continues to maintain it contains gold.
"The approach Mr. Felderhof is urging on you in this proceeding is to determine core factual issues," Joseph Groia, his lawyer, told the court. "How much gold is there at Busang? Is the gold at Busang fundamentally viable?
"For example, in June, 1995, Bre-X announced results of 2.3 million ounces of gold. If it were to be determined at the end of the day that there were 2.3 million ounces of gold at Busang, it's my representation that as of June 1995, halfway through the class period, there had been no misrepresentations -- and that would eliminate a number of the plaintiffs."
Harvey Strosberg, who is leading the class-action suit, argued that the company and its insiders knew there was no mineable gold but conspired to pretend there was to drive up the share price.
"They engaged in a stock promotion to raise funds by salting core samples to give the impression of one of the biggest gold finds in the world," Mr. Strosberg argued.
He said the bedrock of the plan was four years of press releases, dating back to 1993, each suggesting the find was bigger than had been thought.
"All of these were totally false and they were misleading because there was no gold in mineable qualities in Busang," he said. "Some of these defendants have received substantial amounts of money, tens of millions of dollars -- $50-million in one case -- by trading in these shares.
"In the absence of a class action, there's no chance of behavior modification as a result of this fraud."
Lawrence Thacker, representing the late Bre-X chairman David Walsh, and his wife Jeanette, as well as vice-president Stephan McAnulty, said the suit should not be certified because investors' stories differ greatly. He said, for example, not everyone who bought Bre-X relied onthe press releases in question.
Some of those who lost money also made investment decisions on advice received from their brokers, said Mr. Thacker.
The certification hearings are expected to last all week.
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