bre-x stock chart

Bre-X Gold, the NI 43-101 and Why Canada is One of the World’s Most Investor-Safe Mining Jurisdictions

The National Instrument 43-101 was created after the Bre-X Gold scandal to protect investors from unsubstantiated mineral project disclosures. Like my dad would say, “a day late and a dollar short” for all the Bre-X Gold investors, but a very important milestone in Canadian mining history, and one that would go on to re-establish Canada’s reputation as one of the world’s most pre-eminent and investor-safe mining jurisdictions. In the top three, I would claim. But not back then. Those were dark times.

According to Wikipedia:

Bre-X was a group of companies in Canada. Bre-X Minerals Ltd., a major part of Bre-X based in Calgary, was involved in a major gold mining scandal when it reported it was sitting on an enormous gold deposit at Busang, Indonesia (in Borneo). Bre-X bought the Busang site in March 1993, and in October 1995, announced significant amounts of gold had been discovered, sending its stock price soaring. Originally a penny stock, its stock price reached a peak at CAD$286.50 (split-adjusted) in May 1996, on the Toronto Stock Exchange (TSE), with a total capitalization of over CAD $6 billion. Bre-X Minerals collapsed in 1997 after the gold samples were found to be a fraud.[1][2]

It goes on to state:

The purpose of National Instrument 43-101 is to ensure that misleading, erroneous or fraudulent information relating to mineral properties is not published and promoted to investors on the stock exchanges overseen by the Canadian Securities Authority.

The NI 43-101 was created after the Bre-X scandal to protect investors from unsubstantiated mineral project disclosures.

The gold reserves at (Bre-X’s) Busang were alleged to be 200 million ounces (6,200 t), or up to 8% of the entire world’s gold reserves at that time. However, it was a massive fraud and there was no gold. The core samples had been faked by salting them with outside gold. An independent lab later claimed that the faking had been poorly done, including the use of shavings from gold jewelry. In 1997, Bre-X collapsed, and its shares became worthless in one of the biggest stock scandals in Canadian history.”[2]

The promulgation of a codified reporting scheme makes it more difficult for fraud to occur and reassures investors that the projects have been assessed in a scientific and professional manner. However, even properly and professionally investigated mineral deposits are not necessarily economic, nor does the presence of a NI 43-101-, JORC- or SAMREC and SAMVAL-compliant CPR or QPR necessarily mean that it is a good investment.

Similarly, the publication of a complex technical report with all the inherent jargon, technical wording and abstract geological, metallurgical, and economic information may not actually significantly advantage an investor who is not able to fully or properly understand the content or importance of this information. In this way, the NI 43-101 may not serve the interests of those it is designed to protect—the retail investors who may easily misinterpret such information. Because of this, many investors hire independent geology consultants to review the reports for them.

Eight percent of the entire world’s gold reserves at the time were in one mine in one part of the planet! Must have been a gold asteroid that hit the planet many years ago and spattered the whole globe, with the biggest chunk left in Borneo! Who knows? Yet, people flocked to purchase Bre-X gold shares at the time, obviously with no solid proof of the grade of mineral asset other than what was provided to them by the company’s management. It sounds too good to be true, doesn’t it? How good was it? I’m glad you asked.

History has shown that it was indeed too good to be true. Please don’t think I am being hard on the Bre-X gold investors and singling them out for their investment selection, as I am not. I have more than enough examples of investments I have made in private and publicly traded companies. We all do and don’t let anyone ever tell you differently. The ones that do are the ones you want to run from, and very fast at that, because they are probably trying to sell you some stock-picking service they claim will get you hundred baggers, stocks that increase one hundredfold (100X) in value, one hundred percent of the time. If it sounds too good to be true…

private placement profits

Leave a Comment

Your email address will not be published.