|Gold mine claim lures investors - and investigators|
American Metal Market > March 9, 1987
Gold Mine Claim Lures Investors--and Investigators
It is no secret that the gold rush under way in the mining industry today is not analagous to the gold rushes of past decades. Rather, those firms faced with prices, and consequently profits, for base metals in the doldrums, have turned to the lustrous metal to brighten their corporate bottom lines. The facts are quite obvious.
The average world cost to mine gold these days is about $200 a troy ounce. International gold prices have been hovering around the $400-pertroy-ounce mark. Not a bad profit for one's investment.
But the word has leaked out to the general public and now everyone wants into the act, including those who believe you can make fortunes on fool's gold.
The Gannett Westchester (N.Y.) newspapers and the Denver Post recently published an article we thought would tickle the funny bone of any historical buff in the metals business.
We are printing the full text of the story here so that you can decide if this is a good mining investment.
The opportunity to buy shares in a company with rights to the legendary King Solomon's Mines, from which the Biblical king was said to have received huge offerings daily, may sound too good to believe.
But when Saudi Arabian billionaire Adnan Khashoggi, once reported to be the richest man in the world, becomes chairman of the Denver-based firm making the claims, investors--and investigators --are not too far behind.
News of the rich mines, which Khashoggi, a figure in the U.S.-Iran arms deal, says were discovered in the West African country of Mali on property owned by Denver-based Mali-American Mines Ltd., also caught the attention of Vancouver Stock Exchange officials.
The exchange, which halted trading in shares of a Canadian mining company involved in the deal, is looking into whether the mines actually exist.
Vault Explorations Ltd., a small British Columbia gold exploration company, began trading on the Vancouver exchange Nov. 20 and rumors began to circulate that the firm would become a partner with the Khashoggi-associated American company that owned the so-called "King Solomon's Mines.'
Although Vault had done nothing more than announce it had drilled a few exploratory wells near Kamloops, British Columbia, the company's stock soared from 25 cents to 48 cents (U.S.) in its first seven days of trading, with 450,000 shares changing hands.
On Jan. 5 the price was up to $1.39. The next day Vault rose from $2.08 to $2.50 a share in 18 minutes of hectic trading, bringing the stock to 10 times its opening value. Because of the price jump, Vancouver exchange officials ordered a temporary trading halt pending additional information on Vault's rumored partnership with Mali-American.
On Jan. 7, the day after trading was halted, the stock exchange made public a news release issued by Vault and Khashoggi, representing Mali American. The release said that Mali, of which Khashoggi is chairman, had found an enormous reserve of "gold, diamonds and other precious metals' in Mali and that 95 million shares in the venture holding "the legendary King Solomon's Mines' would be sold through Vault.
Khashoggi also said in the release that the Mali reserves will bring prosperity to Mali and help stabilize world finances.
In an accompanying news release, Vault president Maurice Hamellin explained that Mali-American would gain control of Vault through a complex stock swap "equal to the amount of recoverable gold and diamond reserves' in the Mali mines. The agreement stipulated that Hamellin sell his majority interest of 750,000 shares in Vault to Mali-American for 2 cents a share, or $15,000.
Unsatisfied with the information coming from Vault, the Vancouver exchange sent the case on Jan. 12 to the British Columbia Superintendent of Brokers, Michael Ross.
Ross says all he has received from Vault so far is a geological report that he describes as full of "uncertainty, fluff and fuzz.'
The stock exchange's investigation into Vault follows an ongoing investigation into two other Khashoggi-associated Canadian companies, Tangent Oil & Gas Ltd. and Skyhigh Resources Ltd.
Two of Skyhigh's directors, Donald Fraser and Walter Ernie Miller, have been implicated in Khashoggi's Iran arms financing.
Between November 1985 and January 1986 Vertex Finances S.A. and Euro Commercial Finances B.V., the two Cayman Island-based companies controlled by Fraser and Miller, loaned Khashoggi $30 million. Part of that money allegedly was used by Khashoggi to help provide financing for one of the arms sales.
Khashoggi is reported to be assetrich and cash-poor, with more than $150 million in debts and a growing list of lawsuits.
But Paul Esquivel, a mining analyst with Davidson Partners of Toronto, says that when people hear that Khashoggi is involved with a company "everybody from dentists to board directors wants in. They're convinced the stock will go up.'
In reality, Esquivel says, promoters play up an alleged Khashoggi involvement, and trading in the stock exchange becomes "like a pyramid game where the little guy gets burned.'
Esquivel says promotional claims about stocks usually have some basis in fact, and because it isn't illegal to say you have found what may be King Solomon's mines a lot of people are going to invest on the hope it may turn out to be true.
"You can make a lot of money from nothing,' he said. "It's done all the time.'
COPYRIGHT 1987 Reed Business Information
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