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. Last Updated: 07/27/2016

Century's Richest Gold Find a Fake

TORONTO -- The Busang gold discovery in Indonesia -- touted by Canada's Bre-X Minerals Ltd. as the richest find of the century -- was falsified on a scale "without precedent in the history of mining" according to a new report.

In a stunning report to Bre-X, consultant Strathcona Mineral Services Ltd. said it found evidence of tampering with Bre-X core samples taken from the Busang site, deep in the jungles 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," said the report.

Strathcona said it did not find an economic gold deposit in the southeast zone of the Busang property, the area claimed by Bre-X to contain about 71 million ounces of gold. The report, released Sunday, said it was unlikely there was any gold there worth mining.

The Toronto Stock Exchange said it would halt trading in Bre-X shares Monday "in light of the extremely negative report from Strathcona."

Bre-X's stock had closed up 19 cents (14 cents) at $3.23 Canadian ($2.34) on the Toronto Stock Exchange on Friday.

Bre-X chairman David Walsh, the maverick mining executive who gambled his last $10,000 on finding Busang, said the company was "devastated" by Strathcona's findings. "We share the shock and dismay of our shareholders and others that the gold we thought we had at Busang now appears not to be there," said Walsh's statement Sunday.

As the fallout from Sunday's announcement reverberated through the world mining community, Walsh had little to say to reporters as he sped away from Bre-X's Calgary headquarters where shareholders and reporters had gathered. "I think our press release says it all for now," he said.

The report spells the end of Bre-X, said gold analyst John Ing of Maison Placements Canada in Toronto. "Bre-X has got nothing, that's what it means," Ing said. "They've got nothing but lawsuits on their hands."

A penny-stock exploration firm before it discovered Busang in 1993, Bre-X quickly became the darling of the Toronto Stock Exchange amid glowing reports of Busang's potential. But rumors began swirling around Bre-X and its Busang deposit after the March 19 apparent suicide of Bre-X's top geologist in Indonesia.

Michael de Guzman allegedly jumped to his death from a helicopter while en route to a meeting with officials at Freeport-McMoRan Copper & Gold Inc., one of Bre-X's partners in the Busang project.

A week later on March 26, New Orleans-based Freeport-McMoRan said that its preliminary tests found "insignificant" amounts of gold.

The reports of a huge gold find came from samples submitted by Bre-X's head of exploration John Felderhof and his team of geologists, including de Guzman. The last estimate of 71 million ounces of gold was calculated by assay firm Kilborn SNC Lavalin, a unit of Montreal-based SNC Lavalin Inc. Kilborn has already said it was not responsible for sampling.

After the Freeport-McMoRan report Bre-X immediately hired Strathcona, a respected Canadian mining consulting firm, to review its Busang project.

The announcements sparked panic selling of Bre-X shares, wiping almost $3 billion Canadian ($2.1 billion U.S.) from the company's market value when the stock plummeted to C$2.50 from around C$15.

Disgruntled shareholders have already launched at least eight class action lawsuits.

A Freeport spokesman said Sunday the company had no immediate comment but would soon release a statement. "Our response is we're aware Bre-X has released a news release," spokesman Garland Robinette said.

Freeport said last month it would "elect to participate in the Busang project only if development is, in [Freeport's] opinion, economically feasible."