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Gold/Mining/Energy : Bre-X, What happens after Strathcona results?

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To: Robert Dirks who wrote (19)5/4/1997 9:44:00 PM
From: Robert Dirks   of 31
 
IT'S ALL OVER, KAISER WAS RIGHT !!!! RELEASE ATTACHED

Strathcona Minerals Services Limited
12th Floor, 20 Toronto Street, Toronto, Ontario, Canada M5C 2B8

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Summary

The Busang property in the Province of Kalimantan in Indonesia has been under exploration by Bre-X Minerals Ltd. (Bre-X) with core drilling results since mid-1995 on the Southeast Zone of the property giving rise to expectations that the Busang property could host one of the largest single gold deposits ever discovered. In February 1997, Freeport McMoRan Copper & Gold Inc. (Freeport) commenced a due diligence program prior to becoming a participant in the further development of the Busang property. The Freeport program included core drilling and in mid March, Freeport advised Bre-X that gold values comparable to those from the Bre-X drilling were not being realized.

As a consequence, Strathcona Mineral Services Limited (Strathcona) was engaged by Bre-X to carry out a technical audit of the work done by both Bre-X and Freeport. As part of that technical audit, we have completed a closely supervised six-hole core drilling program with 1470 metres drilled. Because of the intense interest in the Busang property and the consequences for many parties arising from any conclusions reached in our audit, we have made the decision to select an initial 350 metres of core for assaying that would allow us to issue an interim report on our findings, rather than wait for several more weeks before all core has been assayed and all investigations completed.

The 350 metres of core and the resulting 175 samples were selected so as to provide the best chance of confirming the presence of gold as indicated by the Bre-X core samples. The sample treatment procedures and assaying were carried out at laboratories in Australia, Indonesia and Canada, with all results received just prior to our issuing this interim report. The assay results have been quite conclusive, and along with work done by Freeport, results from recent drill core samples submitted by Bre-X, and other investigations and observations we have made, we are able to express without reservation the following opinions and conclusions concerning the main area of interest on the Busang property, the Southeast Zone I South, and to which we anticipate no changes in our final report when all the drill core from our audit program will have been assayed.

1. Only trace amounts of gold have been found in the samples assayed, and there were no samples that gave gold values of economic interest.

2. As a consequence, we believe there to be virtually no possibility of an economic gold deposit in the Southeast Zone I South of the Busang property.

3. The assaying of the samples from the Busang property submitted by Bre-X to Indo Assay Laboratories in Balikpapan, Indonesia has been of a good standard,
and the gold values reported have reflected the gold in the samples delivered to the laboratory.

4. The due diligence program conducted by Freeport has been very thorough and of a high professional standard in all respects.

5. The gold recovered in samples submitted by Bre-X has originated from a source other than the Southeast Zone of the Busang property and has resulted in falsification and misrepresentation of many thousands of samples with consequent and subsequent erroneous estimates of gold resources.

We therefore make the following recommendations to the Board of Directors and management of Bre-X Minerals:

1. Those authorized and qualified to carry out investigations into the fraudulent activities that we believe to have occurred should be contacted immediately and requested to pursue the matters that we are bringing to the attention of Bre-X and any other parties concerned. We are ready to assist in whatever manner we can in carrying out these investigations.

2. All core and samples that have not yet been assayed and all documentation pertaining to the Busang property should be placed under tight security until the investigations recommended are completed.

3. All exploration work on the Southeast Zone at the Busang property should cease immediately.

Unless we receive further instructions to the contrary, we shall continue with the completion of our audit program although we do not feel it necessary that assaying of the remaining core samples be carried out at all three laboratories.

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