New Mexico junior makes math gaffe, retracts high-grade REE assays

A little-known junior explorer based in Elephant Butte, New Mexico (population: 1,500), surprised investors twice last month, first by releasing spectacular rare-earth-element (REE) assays from its Warm Springs beryllium project in Sierra County, New Mexico, and then by taking them back.

David Tognoni’s BE Resources (BER-V) released the final four drill holes on July 22 from a 12-hole program started in February, including hole 3, which reportedly intersected 30 metres grading 19.58% total rare earth oxides (TREO) starting from a depth of 353 metres. Composed of 60% light REEs (cerium, europium, lanthanum, neodymium, praseodymium and samarium) and 40% heavy REEs (gadolinium, terbium, dysprosium, holmium, erbium, thulium, ytterbium, lutetium and yttrium), the drill holes potentially represented one of the highest-grade REE discoveries ever made.

A few days later, however, on July 25, the company had to retract the assays because of “mathematical errors that occurred in the process of totalling a large volume of the assay results of 15 individual rare earth elements into total rare earth oxides.” BE Resources said an independent consulting geologist had made the erroneous calculations which overstated most of the results by a factor of 10.

REE mineralization for hole 3, for example, was recalculated as containing 30 metres of 1.95% TREO instead of 19.58% TREO, with several other intersections similarly appearing to have had decimal points misplaced one spot to the right.

On July 27, the company released a second correction to fix “errors of a typographical nature found in the table of rare earth assay results set out in its news release of July 25, 2011, none of which are material or affect the TREO values.”

Self-regulatory securities watchdog Investment Industry Regulatory Organization of Canada has cancelled all 10,663 trades in BE that occurred on July 22. It said it was taking the measure “to protect market integrity and to ensure a fair and orderly market for trading in securities of BE Resources.”

After releasing the original results, shares in the company jumped 782% in one day to close up 66.5¢ to 75¢ on 49.32 million shares traded, including alternative trading platforms. On July 26, after BE issued the
initial correction and resumed trading, its shares were down 55¢ to 20¢ on heavy volume of 9.8 million shares.

Lying within the eastern edge of the Datil-Mogollon volcanic field of southern New Mexico, the West Springs project primarily hosts mafic to silicic extrusive units of Tertiary age and Quaternary basalts. 

Originally drilled in the 1960s as part of a U.S. Bureau of Mines project looking for economic beryllium mineralization, a private company named the Beryllium Group later leased the property in 2001. BE Resources’ president, Tognoni, was a part-owner of the Beryllium Group, which completed 14 drill holes there over two years. For reasons unexplained in BE Resources’ prospectus – though perhaps a combination of lacklustre assays and a down time for the junior exploration industry – the Beryllium Group was dissolved in 2002 and cancelled the lease.

By 2004, Tognoni had formed a new company, named Great Western Exploration, and signed another lease for the Warm Springs project. This time, the company completed one deep core hole and seven reverse-circulation holes in the outlying areas. It later spun off the property into BE Resources, which went public in late 2009.

Though public records show BE Resources as the only Canadian public mining company to have employed Tognoni in management or director roles, he holds an engineering degree from Arizona State University and has “completed post-graduate studies in geology, aeronautics and meteorology at the Arizona State University, ore reserve estimation at the Colorado School of Mines and mining engineering and finance at the University of Arizona,” according to BE’s latest management information circular. It lists his principal occupation since 1979 as that of an independent consultant to mineral and oil and gas projects worldwide.

BE Resources’ latest 12-hole drill program only managed to find anomalous amounts of heavy rare earths in the first eight holes, however the recently released holes were said to have been drilled on the periphery of a half-mile-diameter circular structure thought to mainly host beryllium, a hard, lightweight metal resistant to melting that the U.S. Department of Defense considers to be “strategic.” 

Despite the corrections, the best drill hole (No. 3) still intersected REE mineralization at various depths, including 189 metres, 353 metres, 386 metres, 398 metres and 482 metres.

Tognoni received $36,000 for a salary in 2010 at BE, as well as $226,000 in other compensation representing “the expense allowance paid to Mr. Tognoni to cover the cost of office space used by Mr. Tognoni and any associated overhead costs.”

According to BE’s prospectus, he holds a 24.3% interest in Great Western Exploration, which was issued 9.4 million shares as part of the transfer agreement for the Warm Springs project. In 2007, Tognoni also bought 1 million “founders’ shares” of BE Resources for $200, or 0.01 of a cent each. 

BE Resources has 50.04 million shares outstanding and a 52-week trading range of 5.5¢-$1.30. At presstime BE Resources was trading at 14.5¢