FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS...
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Transcript of FINEX: October 27-28, 2010. FINEX ‘10 Chris Hinde, Editorial Director, Mining Journal MINING SCAMS...
FINEX: October 27-28, 2010
FINEX ‘10
Chris Hinde, Editorial Director, Mining Journal
MINING SCAMSThen 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
Buyer Beware
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
FINEX ‘10
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
Monopoly Money
FINEX ‘10
Greed
Fear
Envy
Denial
Hope
Human Emotions Key
FINEX ‘10
• 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
FINEX ‘10
• 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
Pump and Dump Scams
FINEX ‘10
• 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
FINEX ‘10
Promoters ‘proof’ of an orebody falls into two categories:
1. Little, or only crude, evidence
2. More sophisticated approach
Arizona Republic Paper
FINEX ‘10
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
Bre-X Share Price
FINEX ‘10
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
FINEX ‘10
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
FINEX ‘10
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
FINEX ‘10
Title Sampling and Assaying
Commodity Mining Method
Infrastructure Recovery Process
Permitting and Reports Profit Distribution
Sequence
Factors to Consider
FINEX ‘10
MJ Rule:
Greater the amount of gold on the promoter …
the less gold there is likely to be in the deposit
Factors to Consider
Thank You