Barrick boss shocked to hear Bre-X had no gold: Report

Barrick Gold Corp chairman Peter Munk testified Wednesday (Canadian time) that he was shocked to learn in early 1997 that there was no gold at Bre-X Minerals Ltd.'s highly touted Busang site in Indonesia -- a discovery that became Canada's biggest mining scandal, Globeandmail.com of Canada reported.

"It never occurred to me that a fraud of this magnitude could happen in a country as developed as Canada," the 78-year-old chairman told the insider trading trial of former Bre-X geologist John Felderhof.

Munk told Ontario Court that he reacted with "disbelief" when he learned during a visit to Switzerland that preliminary drilling results by Bre-X's U.S. partner, Freeport-McMoRan Copper & Gold Inc., showed insignificant traces of gold.

The executive was subpoenaed by the defence to testify in the trial of Felderhof because Toronto-based Barrick had been in secret talks in 1996 to negotiate a joint venture to develop the Busang gold site, but later lost out to Freeport-McMoRan.

Felderhof has been charged by the Ontario Securities Commission with illegal insider trading of Bre-X shares and issuing misleading press releases about the gold content of Busang, which was promoted in 1996 as the world's largest gold deposit.

He is accused of selling $84-million of Bre-X shares while possessing undisclosed information about the problems with Bre-X's ownership of Busang.

Under questioning by defence lawyer Joseph Groia, Munk said the first batch of core samples that Barrick got from Busang in December of that year indicated "disappointing results," and "was the first time we had concern whether there was gold or not."

But Munk said Felderhof insisted there was a "mistake" in the shipment of samples, and Barrick received a second batch that did indicate the amount of gold claimed by Bre-X.

Munk said he and other Barrick officials did not visit the Busang site because they were never given permission by Bre-X to do so.

Court was told that Barrick's strategy with respect to Bre-X was to solicit the support of the Indonesian government to promote Barrick as the preferred partner and operator.

In Barrick's quest for control of the Busang project, Munk said it hired Hany Salaam, a Jordanian, and his associate, Walid Kurdi, to help deal with the Indonesian government bureaucracy because the stakes were high.

The men were promised interests of 8 per cent and 5 per cent, respectively, in Barrick's potential stake in Busang, he said.

Munk said Barrick also developed a relationship with Indonesia's Citra Lamtoro Gund Group because it was controlled by Siti Hardiyanti Rukmana, popularly known as Tutut, who was the daughter of then Indonesian president Suharto.

Earlier, Munk testified that he personally became involved in Barrick's pursuit of a stake in Busang as it became apparent that such a deposit could make the company the world's largest gold producer. "We were quite excited by Bre-X."

Barrick came close to negotiating a stake in Bre-X during 1994 and 1995, but no deal was ever made, Munk added. (*)