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OSC queries Bre-X's exploration rights Add to ...

Bre-X Minerals Ltd. first created uncertainty over its legal right to extract gold from the Busang site in Indonesia in 1993, when it started testing beyond the boundaries of the area where it initially had permission to explore, the lawyer prosecuting former Bre-X geologist John Felderhof said yesterday.

Mr. Felderhof has been charged by the Ontario Securities Commission with illegal insider trading and issuing false press releases.

OSC lawyer Jay Naster showed Judge Peter Hryn a series of faxes that, he said, demonstrate the Bre-X geological team had taken samples outside the area covered by its "contract of work" - the Indonesian document setting out where it could explore.

While it was not unusual to explore over the boundaries of a licensed area, Mr. Naster said, this activity was the genesis of a lengthy dispute over the rights to the property.

Mr. Felderhof, who ran Bre-X's Indonesian operations, took action to get the right to expand the exploration area, Mr. Naster said. But at the same time he tried to squeeze out one of Bre-X's early joint ventures partners, Jusuf Merukh.

Mr. Merukh went on to complain to the Indonesian government about being excluded from the section of property where vast quantities of gold were supposedly located. That dispute cast doubt on Bre-X's ownership of any gold it found on the site, Mr. Naster said.

The OSC alleges that Mr. Felderhof illegally sold $84-million of Bre-X shares in 1996 while he had information about the ownership dispute that had not yet been revealed to the public or shareholders.

Mr. Naster said earlier in his opening address to the judge that "from the perspective of an investor, the only thing more important than the amount of gold [at Busang]would be if [Bre-X was]legally entitled to explore for gold."

The trial was originally scheduled to be completed by Christmas, but will likely go months longer.

Bresea motion filed

Bresea Resources Ltd.'s court-appointed receiver has filed a motion in a Alberta court that could extricate the company from legal actions in connection with Bre-X Minerals Ltd.'s Busang gold fraud.

PricewaterhouseCoopers filed the motion in the Alberta Court of Queen's Bench yesterday for approval of a settlement with Bre-X and the lawyers for class-action suits in which Bresea is named.

In the settlement, Bresea would pay Bre-X $10-million and create a pool of shares representing 20 per cent of its equity to be used to satisfy claims against the company. Bre-X would return eight million Bresea shares it currently holds.

 

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