3.4100000000408 (1600)
Posted by kaori 03/25/2009 @ 22:15

Tags : freeport-mcmoran, copper, mining, business

News headlines
Freeport-McMoRan, Jim Click Ford announce donations - Arizona Daily Star
Freeport-McMoRan Copper & Gold, an international mining company headquartered in Phoenix, has offered to match every dollar donated to the Red Cross by Dec. 31, up to $125000, to help Arizonans after disasters such as floods or home fires....
FreeportMcMoRan Copper & Gold Inc. Reports Operating Results (10-Q) -
Freeport-McMoRan is engaged in mineral exploration and development mining and milling of copper gold and silver in Indonesia and the smelting and refining of copper concentrates in Spain and Indonesia. They are the world's lowest-cost copper producer...
Freeport-McMoRan CEO sees pay fall from $74M to $33M -
With a big helping of stock awards, Freeport-McMoRan CEO Richard Adkerson tallied up $33.4 million in total compensation in 2008, according to the proxy statement filed by the Phoenix mining company with the US Securities and Exchange Commission....
Freeport McMoran Copper and Gold (FCX) PriceWatch Alert With ... - Market Intelligence Center
Freeport McMoran Copper and Gold (NYSE: FCX) closed yesterday at $51.85. So far the stock has hit a 52-week low of $15.70 and 52-week high of $127.24. Freeport McMoran stock has been showing support around 50.26 and resistance in the 53.78 range....
Freeport McMoran (FCX) NewsBite - FCX Gets Help From Higher Gold - Market Intelligence Center
Freeport McMoran (NYSE: FCX) opened at $46.10. So far today, the stock has hit a low of $45.94 and a high of $47.14. FCX is now trading at $47.56, up $3.08 (6.92%). Over the last 52 weeks the stock has ranged from a low of $15.70 to a high of $127.24....
Relational Investors Raises Stake in Genzyme (GENZ), Shows New ... - (subscription)
The firm raised their stakes in Genzyme (Nasdaq: GENZ) pretty significantly, and showed new stakes in Occidental Petroleum (NYSE: OXY) and Freeport-mcmoran (NYSE: FCX). Home Depot (NYSE: HD) remains their largest position at nearly $900 million....
Every Shareholder Should Read This Now -
He owns shares of AT&T, Freeport-McMoRan, Philip Morris International, and Transocean. Green Mountain Coffee Roasters is a Motley Fool Rule Breakers selection. Quality Systems is a Motley Fool Stock Advisor pick. The Fool'sdisclosure policyis 15 years...
Freeport-McMoRan reports 61% drop in profits - Inside Tucson Business
Freeport-McMoRan Copper & Gold Inc. reported its first quarter sales fell 54 percent, which it directly attributed to the price drop in metals. The company reported revenue of $2.6 billion, down from $5.67 billion in the first quarter of 2008....
Freeport McMoran (FCX) NewsBite - FCX Downgraded By BMO Capital ... - Market Intelligence Center
Freeport McMoran (FCX) was downgraded today by analysts at BMO Capital Markets and the stock is now at $39.28, down $1.17 (-2.89%) on volume of 9530364 shares traded. The brokerage reduced FCX to Underperform from Market Perform....
Freeport McMoran Copper and Gold (FCX) PriceWatch Alert For 5/14 ... - Market Intelligence Center
Freeport McMoran Copper and Gold (NYSE: FCX) closed yesterday at $46.01. So far the stock has hit a 52-week low of $15.70 and 52-week high of $127.24. The proprietary Key Risk Ranking for FCX has declined from a 2 KEY Considerable Relative Risk to a 1...


Freeport Sulphur No.6 entering Freeport, Texas harbor, 1923

Freeport-McMoRan Copper & Gold Inc., (FMCG, NYSE: FCX) often called simply Freeport, is the world's lowest-cost copper producer and one of the world's largest producers of gold. It was formerly based in New Orleans, Louisiana but recently moved its headquarters to Phoenix, Arizona, after acquiring copper producer Phelps Dodge in 2007. In addition to Phelps Dodge, its subsidiaries include PT Freeport Indonesia, PT Irja Eastern Minerals and Atlantic Copper, S.A. Freeport is the largest publicly traded copper and molybdenum producer in the world.

Best known for its Grasberg mine in Papua province, Indonesia, the company is the largest taxpayer to the Indonesian government. It mines and mills ores containing copper, gold, molybdenum and silver for the world market. Richard C. Adkerson is President and Chief Executive Officer of Freeport-McMoRan Copper & Gold and James R. Moffett is the company's Chairman.

McMoRan Exploration Company is a separately traded firm with some shared management with Freeport-McMoRan Copper & Gold Inc. . Richard C. Adkerson and James R. Moffett are co-chairmen of McMoRan Exploration. McMoRan Exploration, an oil and gas exploration and production firm based in New Orleans, Louisiana, was created in 1998 by the merger of McMoRan Oil & Gas and Freeport-McMoRan Sulphur. McMoRan Exploration recently acquired the famed Blackbeard offshore prospect in the Gulf of Mexico, that Exxon Mobil Corp. abandoned in 2006 after drilling a 30,000-foot (9,100 m) dry hole. McMoRan Exploration's well is currently (7/21/08) below 32,550 feet (9,920 m), the deepest penetration of the earth ever recorded.

The company was founded as the Freeport Sulphur Company in 1912, and the company founded Freeport, Texas that same year, near its new sulphur mines, then the largest in the world . Freeport pioneered mining sulphur by the Frasch Process at mines along the US Gulf Coast. Freeport Sulphur began to diversify in 1931, purchasing manganese deposits in Oriente Province, Cuba. The company produced nickel during WW2, and potash in the 1950s. In 1955, Freeport invested $119 million in constructing a nickel -cobalt mine at Moa Bay, Cuba and a refinery at Port Nickel, Louisiana. On March 11, 1957 the US government announced a contract buying Freeport production of nickel and cobalt from Cuba until June 30, 1965 as strategic commodities. In July 1957 the House Committee referred charges to the Justice Department against Freeport for investigation of a government trying to reduce the multi-milion dollar contract. In 1960 the Castro government nationalized the Cuban facility.

In 1956, the company formed Freeport Oil Company, and sold a Louisiana oil discovery for $100 million in 1958. In 1961, the company entered the kaolin business, and in 1964 formed Freeport of Australia to pursue mining opportunities there and in the surrounding Pacific Ocean region. In 1960, a team of Freeport geologists confirmed the Dutch discovery of the rich Ertsberg copper and gold discovery, located in extremely rugged, remote country in the Jayawijaya Mountains, in then-Netherlands New Guinea. In 1966, Freeport founded Freeport Indonesia, Inc. and negotiated a contract with the Indonesian government, which had taken over the former Dutch colony in 1963, to develop the Ertsberg deposit. In their feasibilty study, Freeport geologists estimated that the orebody totaled 33 million tons averaging 2.5% copper. The Ertsberg was the largest above-ground copper deposit ever discovered.

Construction of an open pit mine began in May 1970, and in mid-1973 the new Ertsberg mine was declared fully operational. Officials at Bechtel, the primary contractor on the project,called mine development at Ertsberg "the most difficult engineering project they had ever undertaken." The many challenges included building a 101 kilometer long access road (a project that required boring kilometer long tunnels through two mountains) and constructing the world's longest single span aerial tramway. Aerial tramways were needed to move people, supplies, and ore because a 2,000-foot (610 m) cliff separates the Ertsberg mine (at 12,000 feet (3,700 m) elevation) from the mill (at 10,000 feet). Getting copper concentrate from that mill to the shipping port required installation of a 109-kilometer long slurry pipeline - then the world's longest.

Mine construction and startup cost about US$200 million. The development of the Ertsberg District was an engineering marvel, but the mine's early financial performance was disappointing. Depressed copper prices and high operating costs kept the operation marginal during the 1970s.

In 1971 the company changed its name to Freeport Minerals Company (FMC) to reflect its role as a diversified mineral producer. FMC formed Freeport Gold Company in 1981 to operate a rich new gold discovery at Jerrit Canyon, Nevada.

McMoRan Oil & Gas was formed in 1967 by three partners, including James R. (Jim Bob) Moffett, the present CEO of FMCG. During the 1970s, the company acquired a reputation as an aggressive petroleum explorer with cost-efficient drilling programs. It formed drilling partnerships with several companies, including Freeport. In 1981 Freeport Minerals merged with McMoRan Oil & Gas to form Freeport-McMoRan Inc.

In 1982 Freeport Gold Company was the world's largest gold producer, producing 196,000 ounces of gold in its first full year of operation.

By 1989 Freeport-McMoRan had two world-class mines to develop: the new discovery at Grasberg, Indonesia, with the world's largest gold ore reserve, and one of the world's largest copper reserves; and the Main Pass sulfur-oil-gas deposit offshore from Louisiana, with estimated reserves totalling 67 million tonnes of sulfur, 39 million barrels (6,200,000 m3) of oil, and seven billion cubic feet of natural gas. These were rich deposits, but would be very expensive to develop. Freeport sold about $1.5 billion in assets to finance the development of these two projects.

By 1991, Freeport-McMoRan Inc. was basically a holding company for its two principal assets, Freeport-McMoRan Copper & Gold (FMCG) and Freeport-McMoRan Resource Partners, which ran the sulphur and fertilizer business. Freeport's focus was to raise enough cash to finance the development of the huge finds at Grasberg and Main Pass. Both of these assets got better the more they were studied: Main Pass was the second largest recoverable sulphur reserve then known, and Grasberg's ore reserves -- and profit potential -- were truly enormous.

In 1994 Freeport-McMoRan spun off its entire interest in Freeport-McMoRan Copper & Gold, which became an independent company, fully focussed on the Indonesian operation. In 1997 Freeport-McMoRan Inc., the former parent company, was itself acquired by IMC Global, a large fertilizer producer.

In 1997 the company exposed the Bre-X Gold Scandal. Brought in by the Indonesian government, Freeport was not able to correlate Bre-X's fraudulent claims to finding the largest gold mine ever discovered; Bre-X subsequently went bankrupt.

The Grasberg mine, FMCG'S crown jewel, soon became a source of violent trouble and terrible publicity , which continues today. It is also the world's most profitable mine.

In 2003 Freeport admitted it had been paying the local Indonesian military and police to keep the native landowners away from the lands it develops under the current Indonesian government contract; Freeport argues that this is necessary to provide security to its employees, both local and foreign.

In 2005, the New York Times reported that company records showed the total amount paid between 1998 and 2004 amounted to nearly US$20 million, distributed among both officers and units, with one individual receiving up to US$150,000. The company response was that there was "no alternative to our reliance on the Indonesian military and police in this regard", and that the support provided was not for individuals, but rather for infrastructure, food, housing, fuel, travel, vehicle repairs and allowances to cover incidental and administrative costs.

In contending that the money went to the government and not to individual officers, "the statements amount to a knowingly misleading representation by Freeport," the comptroller of the New York City Pension Funds said. While in Indonesia, Juwono Sudarsono, the civilian defense minister, said that it is illegal under Indonesian law for foreign companies to pay soldiers.

The New York City comptroller has charged that Freeport-McMoRan knowingly made "false or misleading" statements about payments to the Indonesian military and might have filed false proxy statements in violation of the Securities Exchange Act. He has also stated that he believed the company might have violated the Foreign Corrupt Practices Act, which forbids U.S. companies to bribe foreign officials. The Securities and Exchange Commission and the Justice Department are currently investigating these claims.

Freeport-McMoRan's close ties with the authoritarian Indonesian militia along with the military's heavy-handed tactics in dealing with natives has attracted the attention of many human rights advocates and organizations. However, by the late 1990s, after over twenty five years operating in Papua without recognising the land rights of the traditional peoples it finally announced recognition and established agreements with various Papuan tribes.

Denise Leith has written a comprehensive history of Freeport's influence, impact, and role in Indonesia . The book has received generally favorable reviews as a fair and balanced treatment of the issue.

Claims of severe environmental damages caused by the company's engagements in the Grasberg mine in Indonesia has led The Government Pension Fund of Norway, the world's second largest pension fund, to exclude Freeport-McMoRan from its investment portfolia, after a recommendation from the fund's ethical council.

The company was founded by Langbourne Williams Snr. as Freeport Texas in 1912 in the sulphur mining industry, in 1929 Langbourne Williams Jnr. collaborated with Payne Whitney to regain control of the company. In 1935 the Board of Directors included chairman John Hay Whitney, Kidder, Peabody & Co., Eugene L. Norton, Langbourne M. Williams Jr. (president), Monro B. Lanier, Chauncey Stillman, Godfrey Stillman Rockefeller, David M. Goodrich. The company change name to Freeport Sulphur in December 1936. Other directors have included Augustus Long, Robert A. Lovett, Charles Wight from 1947, Benno Schmidt 1954-1997, Jean Mauzé, Robert W. Bruce III, Robert C. Hills, Paul W. Douglas 1981-1983 after serving on Freeport Minerals 1975-1981, Henry Kissinger 1988-1995, George Putnam, and J. Taylor Wharton.

To the top

Copper mining in Arizona

New Cornelia mine and the town of Ajo

Copper mining in Arizona, a state of the United States, has been a major industry since the 1800s. In 2007 Arizona was the leading copper-producing state in the US, producing 750 thousand tonnes of copper, worth a record $5.54 billion. Arizona'a copper production was 60% of the total for the United States. Copper mining also produces gold and silver as byproducts. Byproduct molybdenum from copper mining makes Arizona the nation's second-largest producer of that metal.

Although copper mineralization was found by the earliest Spanish explorers of Arizona, the territory was remote, and copper could not be profitably mined and shipped. Early Spanish, Mexican, and American prospectors searched for gold and silver (see Silver mining in Arizona), and ignored copper. It was not until the completion of the Southern Pacific Railroad in 1876 that copper became broadly economic to mine and ship to market.

All copper mining was done by underground methods until the early 20th century. After the Bingham Canyon mine in Utah successfully mined a large low-grade copper deposit from a large open pit, the same technique was applied to Arizona’s porphyry copper deposits. Arizona's first open pit copper mine opened at Ajo in 1917.

Native Americans used copper minerals of the Verde district at modern-day Jerome as pigment to decorate skin and textiles. The first European to visit the area is thought to be Spanish explorer Antonio de Espejo, who found silver at a location in central Arizona in 1583. No mining resulted, and Juan de Oñate led another expedition searching for Espejo’s silver location in 1598; many claims were staked, but the expeditioners returned to Santa Fe without mining any silver, and the deposits remained unexploited.

The United Verde mine exhausted the rich oxidized ores in 1884, and the mine closed. William A. Clark of Montana visited the district in 1888, bought it, and reopened the mine. The smelter at Clarkdale was built in 1915.

Spaniards mined on a small scale at Ajo as early as 1750. After the Gadsden Purchase brought the southern Arizona into the United States in 1853, Americans reopened the mine in 1855, and shipped high-grade ore to Swansea in Wales. However, the remote desert location made mining generally uneconomic without onsite treatment. The area was mostly idle until the New Cornelia mine opened in 1917 as the first large open-pit mine in Arizona. Mining continued in the district until 1983. The district produced 6.304 billion pounds of copper.

Prospectors from Silver City, New Mexico discovered copper mineralization at Morenci, also known as the Greenlee district in 1872. Mining began the following year, and Miners extracted and smelted high-grade copper ore until a railroad reached the district in 1884 and a concentrator made mining and processing of low-grade ore economical.

The Morenci mine, owned jointly by Freeport-McMoran and Sumimoto, is the largest copper producer in the state, and regularly contributes about half of Arizona's copper production.

An army scout noted copper mineralization in the Warren district at present-day Bisbee in 1877. Production began in 1880 after a rich discovery of copper oxide on the Copper Queen claim. The success of the Copper Queen mine convinced Phelps Dodge to buy the adjacent Atlantic claim in 1881. Phelps Dodge later bought control of the Copper Queen and adjacent claims.

Although Phelps Dodge was the largest mining company in Bisbee, it was not the only one. The Calumet and Arizona company formed in 1901, and operated the large and profitable mine of the same name adjacent to the Copper Queen. By 1907, the C&A was the fourth-most productive copper mine in Arizona, and ran its own smelter in Douglas, Arizona.

Phelps Dodge started mining the Lavender open pit in the early 1950s. The Lavender pit closed in 1974.

The Copper Queen mine, Bisbee's first working mine, was also its last. Mining stopped in 1975, although the Copper Queen still offers tours.

The Warren district is credited with having produced 7.92 billion pounds (3.59 million mt) of copper. In addition, the district recovered 324 million pounds (147 thousand mt) of lead, 355 million pounds (161 thousand mt) of zinc, 28 million pounds (13 thousand mt) of manganese, 2.79 million ounces (86.8 mt) of gold and 102 million ounces (3177 mt) of silver.

Silver mining started at Globe in 1874. The silver mines shut down in 1877, but the following year copper mining took over.

The White Mesa copper-mining district is in the western part of the Navajo reservation, 112 miles northeast of Flagstaff, in Coconino County. The copper deposits consist of malachite and chrysocolla as grain coatings in the Jurassic Navajo Sandstone. They were first mined on a small scale by Mormon settlers in the 1800s, then briefly in 1917, and again 1939-1941. The district produced about 550,000 pounds of copper and a small amount of silver.

As of 2006, there were 11 producing copper mines in Arizona.

Six of the mines are owned and operated by Freeport-McMoRan, three by ASARCO, and one each by BHP Billiton and Mercator Minerals.

In addition, BHP Billiton's Pinto Valley mine in Pinal County restarted copper-molybdenum concentration in late 2007; this portion of its operations had been shut down in 1998.

Freeport-McMoRan has opened its new Safford Mine, eight miles north of the town of Safford in Graham County. The Safford mine, in a large porphyry copper deposit, will be the largest new copper mine put on production in Arizona in more than 30 years.

Other potential new copper mines are the Carlota project (owned by Quadra) in Pinal County and expected to start in 2008, and the Rosemont project (owned by Augusta Resources) in Pima County. Mining of the Resolution copper deposit in Pinal County, potentially the largest copper mine in Arizona, is stalled pending a proposed land swap with the federal government.

To the top

Climax mine

The Climax mine straddles the continental divide at Fremont Pass

The Climax mine, near Climax, Colorado, United States, was a major molybdenum mine in Lake and Summit counties, Colorado. In its heyday, the Climax mine was the largest molybdenum mine in the world, and for many years it supplied three-fourths of the world's supply of the metal. The mine is currently inactive.

The prospector Charles Senter discovered and claimed the outcropping of molybdenite (molybdenum sulfide) veins in 1879, during the Leadville, Colorado, Silver Boom, but he had no idea what the mineral he found was. Senter quickly determined that the rock contained no gold or silver, but he kept the claims anyway. The following year he settled down to live with his Ute Indian wife in a cabin a few miles north, and he made a living working a nearby gold placer. Each year he faithfully did the assessment work required to keep his lode claims, convinced that his mystery mineral must be worth something.

Although Senter finally found a chemist who identified the gray mineral as containing molybdenum in 1895, at the time there was virtually no market for the metal. When steelmakers found the usefulness of molybdenum as an alloy in producing very hard steel, the first ore shipments from the deposit began in 1915, and the Climax mine began full production in 1918. But the demand for molybdenum fell drastically at the end of World War I, and the Climax mine shut down in 1919. Molybdenum later found use in the metal alloys for the turbines of jet engines.

The Climax Molybdenum Company re-opened the mine in 1924, and it operated the mine nearly continuously until the 1980s. The mine has been shut down since 1995, awaiting higher molybdenum prices. The mine's current owner, the Phelps Dodge Corporation, continues to work on environmental cleanup of past operations while holding the mine ready in the event of market changes.

In December 2007, Phelps Dodge's parent company, Freeport-McMoRan Copper & Gold Inc., reported that it planned to reopen the Climax mine and that production should start in 2010. An initial $500-million project involves the restart of open-pit mining and construction of state-of-the-art milling facilities. The company stated that the Climax mine has "... the largest, highest-grade and lowest-cost molybdenum ore body in the world.". The remaining ore reserves are estimated to contain about 500 million pounds of molybdenum, contained in ore at an average molybdenum percentage of 0.165%. Production is expected to be about 30 million pounds per year, starting in 2010.

However, Freeport-McMoRan announced in November 2008 that it had halted plans to reopen the Climax mine, due to lower molybdenum prices.

The ore deposit is a porphyry type, similar to many large copper deposits, where many intersecting small veins of molybdenite form a stockwork in an altered quartz monzonite porphyry. Like other porphyry-type ore deposits, the ore is low-grade, much less than one percent molybdenum, but the ore bodies are very large. Beside molybdenum, the mine has also produced tin (from cassiterite), tungsten (from hübnerite), and pyrite as by-products.

The Climax deposit is one of a number of large molybdenum deposits in central Colorado and northern New Mexico. Other molybdenum deposits in the region include the Questa mine in New Mexico, and the Henderson and Urad mines near Empire, Colorado.

Mining was principally by "sub-level induced panel caving", a method that removed ore by undercutting the base of a panel in the ore deposit, causing the rock above to break and drop down in a controlled manner. The method allowed economical extraction of the large low-grade ore deposit.

The ore was crushed on-site, and the molybdenite was separated from the waste material by froth flotation. The large quantities of waste, called tailings, were placed behind tailings dams in the adjacent drainage to the north. The Climax tailing impoundment now covers several square miles.

The Climax mine is located at 39°21′57″N 106°11′09″W / 39.36583°N 106.18583°W / 39.36583; -106.18583 (39.365890,-106.185780)at an elevation of about 11,360 feet (3465 meters). It is located on Fremont Pass along the Continental Divide.

To the top


Bre-X Minerals Ltd., a member of the Bre-X group of companies, was a junior Canadian mining company, based in Calgary, that was once reported to be sitting on an enormous gold deposit at Busang, Indonesia (on Borneo). Bre-X bought the Busang site in March 1993 and in October 1995 announced significant amounts of gold had been discovered, sending its stock price soaring. Originally a penny stock, its stock price reached a peak at CAD $286.50 on the Toronto Stock Exchange (TSX), with a total capitalization of over CAD $6 billion.

Busang's gold resource was estimated by Bre-X's independent consulting company, Kilborn Engineering, (a division of SNC-Lavalin of Montreal) to be approximately 70 million ounces. Reports of resource estimates of up to 200 million ounces were never made by Bre-X though the property was described as having this potential. Bre-X's gold resource at Busang was a massive fraud. Encouraging gold values were intersected in many drill-holes and the project received a positive technical assessment by Kilborn. Crushed core samples had been falsified by salting with gold that has a wide variety of characteristics that had been subjected to mineralogical examination by Bre-X's consultants. The salting of crushed core samples with placer or supergene gold constitutes the most elaborate fraud in the history of mining. In 1997, Bre-X collapsed and its shares became worthless in one of the biggest stock scandals in Canadian history, and the biggest mining scandal of all time.

David Walsh founded Bre-X Minerals Ltd. in 1989 as a subsidiary of Bresea Resources Ltd. The company did not make a significant profit before 1993, when Walsh followed the advice of geologist John Felderhof and bought a property in the middle of a jungle near Busang River in Borneo, Indonesia. Project manager, Filipino geologist Michael de Guzman's first estimate of the site was approximately 2 million ounces.

The estimate of the site's worth increased over time; in 1995 it was 30 million ounces (850 t); in 1996, 60 million (1,700 t); finally, in 1997, 70 million ounces. The stock price of Bre-X rose to $280 per share by 1997 (split adjusted) and at its peak it had a market capitalization equal to US$4.4 billion.

Some other mineral companies, including Placer Dome organized failed takeovers, but the Indonesian government of president Suharto also got involved. Stating that a small company like Bre-X could not exploit the site by itself, the Indonesians suggested that Bre-X share the site with the large Canadian mining firm Barrick Gold, in association with Suharto's daughter Siti Rukmana. Bre-X hired Suharto's son Sigit Hardjojudanto to handle their side of the affair. Bob Hasan, another Suharto acquaintance, negotiated a deal whereby Bre-X would have a 45% share, Freeport-McMoRan Copper & Gold would run the mine and Hasan would get a cut as well. Bre-X would have the land rights for 30 years. The deal was announced February 17, 1997 and Freeport-McMoRan began their initial due diligence evaluation of the site.

Several months before Bre-X's boss salter vanished on March 17, 1997, Jan W Merks carried out an interlaboratory test program for Barrick Gold. The test program revealed that Busang's 2.9 m crushed core samples contained significantly more gold than corresponding 0.1 m library core samples.

The fraud began to unravel rapidly on March 19, 1997 when Filipino Bre-X geologist Michael de Guzman died falling from a helicopter in Indonesia. His body was found four days later in the jungle, mostly eaten by animals and identified from molars and a thumbprint. On May 12, 2005, however, the National Post published a front-page story asking if de Guzman might still be alive; one of his multiple wives claimed to have received a Brazilian money order from him, dated February 2006.

On March 26 the American firm Freeport-McMoRan, a prospective partner in developing Busang, announced that its own due-diligence core samples showed "insignificant amounts of gold". A frenzied sell-off of shares ensued and Suharto postponed signing the mining deal. Bre-X demanded more reviews and commissioned a review of the test drilling. Results were not favorable to them and on April 1 Bre-X refused to comment. David Walsh blamed the whole affair on web "ghost writers" who had spread rumors on the Internet and damaged the company's reputation. Canadian gold analyst Egizio Bianchini considered the rumors "preposterous". A third-party independent company, Strathcona Minerals, was brought in to make its own analysis. They published their results on May 4: the Busang ore samples had been salted with gold dust. The lab's tests showed that gold in one hole had been shaved off gold jewelry though it has never been proved at what stage this gold had been added to those samples. This gold also occurs in quantities that do not support the actual original assays. Trading in Bre-X was soon suspended on the TSX and the Nasdaq, and the company filed for bankruptcy protection.

By May, Bre-X faced a number of lawsuits and angry investors who had lost billions. Among the major losers were three Canadian public sector organizations: The Ontario Municipal Employees Retirement Board (loss of $45 million), the Quebec Public Sector Pension fund ($70 million), and the Ontario Teachers Pension Plan ($100 million). There was fallout in the Canadian financial sector also; the fraud proved a major embarrassment for Peter Munk, the head of Barrick Gold, as well as for the then head of the Toronto Stock Exchange (resulting in his ousting by 1999), and began a tumultuous realignment of the Canadian stock exchanges whose effects are still being felt.

Walsh moved to the Bahamas and died there of an apparent stroke in 1998, still protesting his innocence. Two masked gunmen broke into his home in Nassau, tying him up, and threatened to shoot him unless he turned over all his money. The incident ended peacefully, but three weeks later, on June 4, 1998, David died of a brain aneurysm.

Felderhof, Bre-X's Vice-President, Exploration had a residence in the Cayman Islands.

In 1999 the Royal Canadian Mounted Police (RCMP) announced it was ending its investigation without laying criminal charges against anyone. Critics charged that the RCMP was underfunded and understaffed to handle complex criminal fraud cases, and also charged that Canadian laws in this area were inadequate. However, despite the dropping of criminal charges, civil class action suits against Bre-X directors, advising financial firms and Kilborn continued.

Bre-X finally went bankrupt in 2002 although some of its subsidiaries like Bro-X continued until 2003.

In May 1999, the Ontario Securities Commission charged him with insider trading. Curiously, no other member of Bre-X's board of directors, or others associated with the Busang project, were charged by the OSC. The OSC admitted that there is no evidence that Felderhof was either involved in the fraud or was aware of the fraud. The trial was suspended in April 2001 when the OSC tried to have presiding judge Justice Peter Hryn removed for alleged bias against the prosecution. This was denied by an independent judge, and on December 10, 2003 the appeal was also denied by a panel of judges.

The trial resumed in 2005. Felderhof attended a number of the Court hearings — but did not testify — as the six-year case made its way through the system. The basis of the OSC action as well as the civil class-action suits is the alleged existence of numerous and obvious "red flags", as detailed by Strathcona, that should have been recognized.

Begun in 2001, the trial of John Felderhof was concluded on Tuesday July 31, 2007, with a not guilty verdict of illegal insider trading. A class-action lawsuit is still pending. Days after the verdict, the OSC also decided not to appeal the decision, a landmark victory for Felderhof and his lawyer, Toronto based Joseph Groia.

To the top

Source : Wikipedia