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The BCSC alleges that junior mining company First Mexican, its then-CEO and an external consultant broke securities laws by knowingly publishing a shoddy estimate of resources on a minerals property.LAURA LEYSHON

The British Columbia Securities Commission (BCSC) alleges that junior mining company First Mexican Gold Corp., its then-chief executive officer and an external consultant broke securities laws by knowingly publishing a shoddy estimate of resources on a minerals property.

The allegations centre around the conduct of the Vancouver-based, TSX Venture-listed gold and silver exploration company from 2014 to 2017. This past July, First Mexican changed its name to QcX Gold Corp.

According to a BCSC news release, in 2014 First Mexican hired an external mining engineer who came up with a rough estimate on how much gold and silver might be on the ground at its Sonora property in Mexico. The engineer made it clear that the resource estimate wasn’t solid enough to be published in a technical report that investors would typically rely upon to make buy and sell decisions.

First Mexican’s chief executive officer at the time, James Voisin, assured the engineer the estimate would not end up "anywhere near to a public document,” said the BCSC.

After that, First Mexican hired John Archibald, a Victoria geoscientist, to prepare a formal technical report on the Sonora property. The BCSC alleges that Mr. Archibald wasn’t sufficiently qualified to author the report, and that would be a violation of securities laws. He also published the same unreliable resource estimate that the mining engineer had used and printed it without her knowledge in a publicly-available report released in December, 2014.

According to the regulator, a month later, the original mining engineer told First Mexican her resource calculation was in fact overestimated by as much as 83 per cent, because of incorrect information provided to her by Mr. Voisin. First Mexican then waited more than two years, until November, 2016, to disclose to investors that its published resource estimate was flawed but it stopped short of specifying the details. A year later, the company disclosed a lower resource estimate.

The regulator also stated that Mr. Voisin engaged in illegal insider trading in First Mexican shares on 121 separate occasions from early 2016 to late 2017, while knowing the publicly available information on Sonora was unreliable and/or blatantly wrong. His proceeds from the share sales were slightly more than $162,000. Mr. Voisin resigned from the company in October of last year.

None of the allegations have been proven in court.

The Globe reached out to Mr. Voisin and Mr. Archibald for comment for this story on LinkedIn, but neither responded.

In an e-mail to The Globe, QcX Gold’s current CEO, Albert Contardi, who joined the company last year, called the regulatory action against QcX an “unfortunate event.”

“I have no knowledge of their activities, or the company before my involvement in late 2019,” he added.

Shares in QcX Gold fell by 8.5 per cent on Tuesday to close at 16 cents apiece on the Venture Exchange.

The Canadian rules governing how technical reports are drafted for mining companies, and who can write them, date back to the early 2000s and are now among the strictest in the world. The regulations came into effect after the Bre-X Minerals Ltd. fraud of the late 1990s, which saw investors lose $6-billion. Calgary-based Bre-X blew up after it was revealed that its purported gigantic gold mine in Indonesia was a hoax.

To ward against future frauds, Canadian regulators designated that technical reports must be prepared by an independent “qualified” individual, such as an engineer with at least five years of experience in mineral project assessment, who also has the appropriate expertise for a particular project. Mr. Archibald was unqualified to prepare a report on First Mexican because he had no experience calculating or estimating mineral resources, said the BCSC.

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