FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS...

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FINEX: October 27-28, 2010

Transcript of FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS...

Page 1: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

FINEX: October 27-28, 2010

Page 2: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

FINEX ‘10

Chris Hinde, Editorial Director, Mining Journal

MINING SCAMSThen and now, and how to spot them

Page 3: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

FINEX ‘10

Mining – Only industry with promoters

Scams – Deliberate fraud, not:

• Over-enthusiastic exploration geologists

• Illegal miners

Industry well suited, with promise of dramatic riches that are currently hidden

Page 4: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

Buyer Beware

Page 5: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

FINEX ‘10

August 1835 – West Tresavean situated just two miles from Tresavean

August 1885 – Limpets and barnacles on honest enterprise

August 1909 – Prospectus of a mining company … commercial traveller, real-estate man and third engaged in variety of pursuits

MJ Archive

Page 6: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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John Meech, BC University:

Mining disasters, environmental pollution, exploitation of non-renewable resources, greedy people stealing resources from First Nations communities, or moving to remote parts of the world and looting Third World countries of their resources.

Also about equity scams – people raising capital funds by telling half-truths and lies about moose-pastures and get-rich-quick deals."

Public Perception

Page 7: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

Monopoly Money

Page 8: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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Greed

Fear

Envy

Denial

Hope

Human Emotions Key

Page 9: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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• Exaggerated claims;

• Few negative results;

• Little corroborating data;

• Emphasis on nearby deposits;

• Confused ownership;

• No record of management success;

• Sudden share price changes; and

• New technology.

Telling the Difference

Page 10: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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• Frauds usually look for an ‘angle’ 

• Ripples from ‘Black Monday’ on October 1987, showed up immediately in scams

• Arizona took steps to educate the public about the dangers of investing in mining.

• Arizona Commission “want to stop the fools-gold rush before it reaches epidemic levels”.

• Investor alert issued in 1989 by the North American Securities Association.

Scams and the Economy

Page 11: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

Pump and Dump Scams

Page 12: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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• State has a long and glorious history of mining scams.

• Time-honoured method to bilk the public of millions of dollars is the ubiquitous mining swindle.

• Glamour attached to ‘discovery’ creates, in the imagination of some people, a relatively easy way to attain fantastic wealth.

Scam Central: Arizona

Page 13: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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Promoters ‘proof’ of an orebody falls into two categories:

1. Little, or only crude, evidence

2. More sophisticated approach

Arizona Republic Paper

Page 14: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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1. Bre-X and Busang

• Best example of salting, and biggest scam of all time.

• Borneo ‘discovery’ of 71Moz in mid-1990s, supported by Indonesian president

• Share price goes from pennies to over US$280 per share in four years

• Freeport checks, and shareholder value wiped out, almost overnight

Four Case Studies

Page 15: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

Bre-X Share Price

Page 16: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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2. Spenazuma Gold Mining

• Getting investors in right frame of mind; Doc Flowers.

• Richest and largest continuous vein of ore ever discovered in the world

• Deposit found by son of Aztec Emperor Montezuma

• Stock sold to easterners, who knew nothing of mines and mining

Four Case Studies

Page 17: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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3. Scottsdale Galleria

• Mining fraud promoters can always find greedy investors to believe their tales

• Claim in 1991 that gold was buried under shopping mall in Scottsdale, Arizona

• Police called when 300 people arrived with spades

Four Case Studies

Page 18: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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4. IPM and Black Rock

• International Precious Metals announced “sensational” gold and PGM grades

• TSE asked consultant to investigate; no mineralisation found; shares plunged

• Company delisted but relisted on NASDAQ, and promoted itself on internet

• Scheme unravelled, shares fell from US$14 to US$2; filed for Chapter 11

Four Case Studies

Page 19: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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Title Sampling and Assaying

Commodity Mining Method

Infrastructure Recovery Process

Permitting and Reports Profit Distribution

Sequence

Factors to Consider

Page 20: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

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MJ Rule:

Greater the amount of gold on the promoter …

the less gold there is likely to be in the deposit

Factors to Consider

Page 21: FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS Then and now, and how to spot them.

Thank You