Junior mining company Red Pine Exploration Inc. RPX-X has accused its former chief executive of manipulating data on hundreds of its gold assays over the past decade, and says some of its resource estimates for its Ontario gold project are no longer valid.
The Toronto-based company first raised questions about its assays on May 1, saying it found inconsistencies in some of its drilling results pertaining to its Wawa gold project, and it was looking to work with an independent firm to determine the scope of the problem.
On Friday, Red Pine said the inconsistencies stemmed from the “unauthorized manipulation of certain assay results” by the company’s former CEO.
Red Pine did not identify its former CEO by name in its release, but board chair and interim CEO Paul Martin confirmed it was Quentin Yarie, who stepped down as CEO of Red Pine in February. He had been with the company since 2015. Mr. Yarie did not respond to requests for comment on Friday.
Red Pine cut a range of estimates for its resource at its Wawa project, and indicated further reductions are possible once more investigative work is conducted. The company previously said drilling results showed it was holding a resource of approximately 700,000 ounces of “inferred and indicated” gold, a category that means the deposit had not yet been proven to be economic.
Red Pine said the lab that carried out the assays sent its results directly to its former CEO. Some of that data were changed and then uploaded to the company’s database. Red Pine said more than 500 assays of drill results dating from 2015 until earlier this year were manipulated.
Shares in Red Pine fell by 26 per cent in trading on the TSX Venture Exchange on Friday. Since the company first reported issues with its assays, Red Pine’s value has fallen by more than 60 per cent.
Gold assays have been manipulated before by the junior mining sector, notably the Bre-X Minerals gold fraud of the late 1990s. Back then, the Calgary-based gold exploration company salted its assays at its Indonesian gold project to make it appear as if its purported gold find was a bonanza. Bre-X was later revealed as a hoax and investors lost about $6-billion as a result.
Mr. Martin said in an interview that the tampering at Red Pine differs markedly from Bre-X because the magnitude of the alleged tampering is much smaller. Mr. Martin estimated the reduction in the company’s resources is between 9 per cent and 12 per cent.
“This was selective manipulation on a low-level scale, but over a long period of time,” Mr. Martin said.
The tampering came to light, he said, after a geologist stumbled upon an anomaly in the company’s drilling results by accident. Mr. Martin said he was first notified about that matter on April 29.
When Mr. Yarie stepped down earlier this year, it was at the behest of the board, said Mr. Martin, due to the poor performance of the company under his tenure. At that point, the board did not know about any alleged tampering of the company’s assay data, Mr. Martin said.
The alleged data tampering at Red Pine appears to resemble an earlier case of assay data manipulation involving another junior Canadian mining company.
In 2009, John Paterson, former CEO of Southwestern Resources Corp., admitted to fraud and illegal insider trading, after manipulating the company’s gold assay data. Mr. Paterson took valid assay results from the company’s gold project in China and changed them in the company’s database to make the results look materially better. He sold shares in the company that were inflated in value as a result of his manipulated assay results. The British Columbia Securities Commission banned Mr. Paterson for life from acting as a company officer or director.
A search of insider trading records indicates that Mr. Yarie has never sold shares in Red Pine. According to data from Refinitiv, he holds a 0.44-per-cent stake in the company.
Despite its early stage of development, Red Pine recently attracted funding from Franco-Nevada Corp., the world’s biggest royalty and streaming company.
The junior miner said it is the process of reporting the alleged assay tampering to the Ontario Securities Commission and is weighing other legal options.
With a report from David Milstead
Niall McGee