Vancouver — An audit by Southwestern Resources (SWG-T, SWGGF-O) and an independent mining consultant on drill results from the Boka gold project appear to show that the data was deliberately tampered with.
The company says that changes to the database were made manually to increase the grade of samples within mineralized sections.
Review of tens of thousands of data entries from the project, in China’s Yunnan province, now has Southwestern Resources acknowledging resources will be significantly less than previously reported. However, the company says there are still indications of gold mineralization in the drill holes and historical workings.
There have been no indications that there was any tampering with the actual samples sent for assay.
A new resource estimate has been commissioned and is expected by the end of October.
Southwestern has launched legal action against its former CEO and qualified person, John Paterson, and certain affiliated companies, for fraud, breach of fiduciary, statutory and contractual duties and insider trading, seeking to recover all damages and losses.
Meanwhile, the company’s Chinese legal council has set its sights on former Boka project general manager John Zhang with similar claims.
Southwestern Resources has also seen a class-action lawsuit recently brought against it, and Paterson, rise to $320 million for allegedly misleading investors.
Exploration will continue on Boka, directed by the new technical report being prepared.
Shares of Southwestern Resources dropped 17% on the news, closing off 34 at $1.70 apiece. Based on its 45 million shares outstanding, it posts a $77-million market capitalization.
In its second-quarter report ending June 30, the company reported $28.6 million in cash and equivalents plus another $3.2 million in short-term investments.
In mid-June, Paterson resigned “effective immediately, citing personal reasons” (T.N.M., July 2-8/07). The move came a day after Southwestern announced its Boka prefeasibility study, expected this summer, would be delayed until the end of the year.
A subsequent review launched by Southwestern identified instances of compromised integrity of certain drill core samples. That led the company to retract all previous results from the project.
The 157-sq.-km Boka project is held through a sino-foreign joint venture between Southwestern and Team No. 209 of the Yunnan nuclear industry of Yunnan province. The JV company, Yunnan Gold Mountain Mining, is held 90% by Southwestern’s subsidiary and 10% by Team No. 209, which has a carried interest.
In addition to Boka, Southwestern is joint ventured with Newmont Mining (NMC-T, NEM-N) on the Yunnan porphyry copper project in China and the Liam gold- silver property in Peru. It also holds other mineral projects in Peru, a 17.8% interest in Superior Diamonds (SUP-V, SUPYF-O), and 49.7% of Zincore Metals (ZNC-T, ZCRMF-O).
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