EDITORIAL — 1997 a walk on the wild side — Scams and skulduggery

Last year came in like a stampeding bull and went out like a lazy bear ready to hibernate. During the months in between, investors watched in horror as an assortment of scam artists unleashed a bag of tricks never before seen in the mining industry.

The year 1997 will be remembered as a year of scams and skulduggery — deception orchestrated on such a grand scale, or carried out so brazenly, that it completely overwhelmed the accomplishments of those who toiled honestly and diligently to explore and develop mineral properties in North America and abroad.

Although new mines were brought into production and exploration projects were advanced last year, those achievements were overshadowed by the misdeeds of scoundrels who conjured up fantasy gold deposits far more appealing than anything nature could deliver.

Who will ever forget John Felderhof’s outlandish comment that he could “do 30 million ounces” with his “eyes closed” at the Busang project in Kalimantan, or Michael de Guzman’s admonishment that scientists had better “throw away their textbooks” in order to understand the wonders and marvels of Bre-X Minerals’ jungle property?

Or the gall of Bre-X buffoon David Walsh, who blithely told investors that Freeport McMoRan Copper & Gold did not have the assaying expertise to find the gold in drill cores that his rinky-dink junior from Calgary never failed to find? Or his words of advice to investors to “hang on” until responsibility for the “biggest blunder in mining history” was laid at the feet of Freeport’s supposedly incompetent head honcho, Jim-Bob Moffett? And who could forget those 1,000-ft.-plus drill intersections from Delgratia Mining’s Josh property in Nevada, or the company’s 5-million-oz. calculation made in haste on the back of an envelope? It is not often we hear executives telling mining analysts that they should buy shares of their company (Delgratia) if they “want to get rich”; with the alternative choice being to stay on the sidelines and “stay poor.” And it is not often that we see an “audit” performed that purports to investigate assay results suspected of being phony, yet which places an obvious suspect on the audit team after swearing him to “secrecy.” Oh, and by the way, the audit finds that Delgratia’s top brass are innocent and the “victims of data falsification.” The gall of it all was something to behold.

This time last year, markets were hot and euphoria was in the air. The threshold of expectations had been raised to new levels by the remarkable progress at the Busang property in Kalimantan. The monster deposit made everyone else’s gold project look puny and anemic, and the fast pace of discovery made everyone else look painstakingly slow.

This year, mining companies face bear markets, low metal prices and investor indifference. The economic crisis in Southeast Asia adds yet another dark cloud to this gloomy scenario. Some mining companies in existence today will be gone tomorrow.

But all is not doom and gloom. Silver is enjoying a bit of a revival and the Western industrial economies are showing signs of strength. Investors are taking renewed interest in the markets, which are seeing some action resulting from a recent spate of mergers and acquisitions. Overall, there is a flight to quality that is benefiting juniors with good management and properties. Expectations are more realistic and a 1-million-oz. gold deposit is entirely respectable again.

And the worst of the scam artists have left the building.