Editorial: Hopes for retribution for Busang keep fading

What had most mining people talking during the week ended Aug. 4, the 31st trading week of 2007, was the acquittal on July 31 of former vice-president of exploration at Bre-X Minerals, John Felderhof, of four charges of insider trading and four of misleading disclosure in connection with the 1997 Busang salting fraud in East Kalimantan, Indonesia.

* The trial’s end stirred up some queasy feelings as the Canadian mining community realized that — notwithstanding a few minor, remaining legal battles — the greatest fraud in Canadian history will now likely go unpunished and many of the key details of who did what and when will remain a mystery to the general public.

As senior staff writer James Whyte writes in more detail in the adjacent commentary, the trial was notable for the stellar performance of defence lawyer Joe Groia, who masterfully shredded the credibility of the prosecution’s expert witness, the normally venerable Graham Farquharson of Strathcona Mineral Services, who had contended that there were “red flags” at Busang that should have been detected by Felderhof and others much earlier on.

Justice Peter Hryn ultimately ruled that Felderhof “took all reasonable care” to ensure the truth of the company’s disclosures and that the purported red flags were only visible with the benefit of hindsight, which in a roundabout way, speaks quite poorly of the competency of the parties involved in the project at the time.

* A giant of the Canadian junior mining scene took a final bow on Aug. 2, though he’ll likely stick around for a few encores yet. Vancouver’s hard-driving Peter Brown, 65, used the occasion of Canaccord Capital’s annual meeting and the tabling of record quarterly profits to hand over the CEO role to president Paul Reynolds, who had been president and CEO of Canaccord’s British unit. Brown will stay on as Canaccord chairman.

Brown and Ted Turton founded Canaccord’s precursor company in 1968 by buying a small Vancouver venture capital firm. After decades of relentless growth and helping literally thousands of companies get their start, Canaccord went public in 2004 and now has more 1,600 employees worldwide in 30 offices. It ranks as Canada’s largest non-bank investment dealer.

A member of the Order of British Columbia, Brown has been chairman of both the Vancouver Stock Exchange and the University of British Columbia’s board of governors, was vice-chairman of Expo ’86, and still serves on the boards of the Vancouver Olympic Committee and the Vancouver Convention Centre.

* There was some cause for optimism for foreign miners in Mongolia: after many months of discussions, Cameco subsidiary Centerra Gold came to a new agreement with the Mongolian government to moderately raise the taxes on the company’s operating Boroo gold mine — a deal that may serve as a template for future new mines in that country.

Under the new deal, effective Jan.1, 2007, Boroo will pay a generally applicable 25% corporate income tax rate until July 2013. Under the previous agreement, the rate had been 20% for the three years starting March 1, 2007, and 40% thereafter. Also, effective Aug. 3, 2007, the mineral royalty payable will be 5% rather than the old 2.5% rate.

Centerra is making headway on reaching a similar investment agreement for its advanced Gatsuurt gold project in Mongolia, which has been delayed by the near-crippling uncertainty over the country’s taxation and mining law.

* Vancouver’s Northern Dynasty Minerals landed a major partner for its huge but remote and politically contentious Pebble copper-gold-molybdenum project in southwestern Alaska. Reminiscent of Teck Cominco’s recent deal to buy into half of NovaGold Resources’ Galore Creek copper-gold project in B.C., Anglo American can acquire half of Pebble by making staged cash investments totalling US$1.43 billion.

The move marks a bit of a return for Anglo American to North America: While it is one of the world’s largest mining companies, Anglo American is only involved in three other major projects in North America: Cripple Creek & Victor (CC&V) in Colorado and Nevada, through its AngloGold Ashanti subsidiary; and the Snap Lake and Victor diamond mines in Canada, through De Beers.