Mindoro: a cautionary tale for investors

Editor’s Note: Mindoro was a private company and should not be confused with Edmonton-based Mindoro Resources (MIO-A), a legitimate junior company exploring in southeast Asia.

In 1993, rumors began circulating in the Vancouver mining community that a private company had discovered a deposit of 26 million tons grading 0.4 oz.

gold per ton, or roughly 11 million contained ounces, in southwestern Oregon.

It seemed too good to be true, and indeed it was (T.N.M., June 14/93). Last week, the British Columbia Securities Commission (BCSC) handed out the maximum penalty to Mindoro, the private company that claimed to have discovered this huge resource, and to Ronald Markham, a director of the company. Described by the BCSC as “the ultimate con man,” Markham was found to have been the “mastermind” behind the illegal distribution of Mindoro shares.

Markham was also found to have fraudulently appropriated funds from Mindoro’s treasury to buy such luxuries as a $22,000 woman’s Piaget watch, a waterfront property, and a Cadillac and Rolls Royce for subsequent wives.

The commission imposed on him a lifetime trading ban, a permanent prohibition from being a corporate director or officer, and the maximum penalty of $100,000. A permanent cease-trade order and a $100,000 penalty were also imposed against Mindoro.

Mindoro director John Berry, a chiropractor who had persuaded some of his clients to buy Mindoro shares, was slapped with the same prohibitions as Markham for 10 years and ordered to pay $35,000. Two mutual fund salesmen who participated in the illegal distribution of Mindoro shares were also handed penalties and prohibitions.

The news was small consolation to the investors who sank millions of dollars into Mindoro, with the promise that a hefty return would be realized once the company was publicly listed or bought out by a major.

What the investors did not know was that the drill results were phony and “cooked” by a group of alchemists posing as assayers. As it turned out, Mindoro had its own lab, where various “proprietary” techniques were used to come up with fabulous results, even on samples taken miles from the property and from rocks unlikely to carry gold. Several reputable companies investigated Mindoro’s claims and took samples, only to find nil or trace values when certified labs were used. One company went so far as to state that someone at the Mindoro lab had introduced gold into its samples during the test procedure.

Investors did not know then (or now) that Mindoro was following in the footsteps of two previous companies that claimed to have “found gold deposits” in southwestern Oregon. The first took place in the early 1980s, when Oregon prospector Thomas Webb located claims in the area and vended them to Goldwinn Resources. (According to BCSC documents, Webb was a major shareholder of Mindoro, with at least 4.5 million shares.)

Goldwinn carried out a sampling program in mid-1983, and reported a probable reserve of 26 million tons of 0.1 oz. gold. Drilling returned positive results, but skepticism soon surfaced about the assaying techniques (T.N.M., Oct 13/83). Traditional fire assaying did not return much gold or confirm assays done by a U.S. lab using a “proprietary” leach compound.

Goldwinn then retained John Sickafoose (of Arizona-based OCM), who refined the technique by “pre-treating” the rock in a solution to make it respond to fire assays. Sickafoose’s tests returned consistently higher grades than previously obtained, according to reports at that time. Despite this “breakthrough,” Goldwinn’s ongoing efforts came to naught and the company went on to pursue other ventures until it was eventually de-listed.

Pacific Concord

The Oregon project was revived in 1984 when Webb, acting in concert with geologist J. Paul Sawyer (described in BCSC documents as “Mindoro’s geologist, co-founder, director and major investor”), began an effort to sell the claims to a British company. The transaction was complex and convoluted, involving a series of offshore private companies and trusts.

But, when the dust settled, Pacific Concord Resources (then listed on the VSE) had acquired an offshore company, which, in turn, owned an Oregon corporation (Oregon Gold) that held the claims. Pacific Concord or affiliates also bought an 8% net smelter return royalty, retained by the vendors for a reported price of about US$1 million.

By late 1986, investors had poured more than $16 million into Pacific Concord. Much of it came from the British insurance firm of Legal & General Assurance and CTS Trust (Mining).

Pacific Concord retained (and eventually acquired outright) Sawyer Consultants to oversee its mineral projects. A key objective was to continue a program to confirm the presence of gold, silver, platinum and “other refractory elements” on the Oregon claims.

To get the ball rolling, a “carbonaceous-type gold and silver research agreement” was reached by Concord Gold, Sawyer Consultants and OCM.

Sickafoose was put back to work and OCM carried out more than 900 experiments, using a variety of assaying techniques. The few reported results were erratic and generally low, though some improvement was later credited to thiourea leaching.

An interim report concluded that although gold was present, an interfering element (later identified as “black material”) had resulted in non-reproducible assays. It was then recommended that an effort be made “to find out what this black material is” and to design processes either to “eliminate it or neutralize it” during the analyses of the samples.

Research snag

Sawyer Consultants suspected the interfering elements might be platinum group elements and requested that OCM test this theory. At this point, the research hit a snag. Saying its agreement was for gold and silver only, OCM refused to carry out analyses for platinum group elements, saying it would conflict with a similar research contract under way for another client.

Sawyer Consultants then recommended that the research agreement be renegotiated to allow the study of the platinum group elements. So, in May of 1986, Pacific Concord announced it was subscribing for 60% of Concord Research of Phoenix (AZ) for US$2 million and a commitment of a further $2.4 million. The other 40% was held by a Phoenix-based group of financiers and metallurgists.

Later that year, Pacific Concord announced it had acquired 60% ownership of yet another metallurgical research company, Pacific Concord Research, which was based outside Vancouver. It had full assaying capability and was charged with developing “gold extraction processes,” and with the design and construction of a pilot plant for the Oregon gold project. The Arizona facility previously responsible for this work was then directed to focus on the development of the platinum group metallurgy.

A shroud of secrecy was draped over the “proprietary metallurgical research and development,” and those involved were bound by secrecy agreements. No results were ever publicly reported, though one former employee says he spent two years fire-assaying samples from the Oregon property and never found any gold the entire time.

Pacific Concord, whose shares peaked at $8 in 1987, began a downturn as directors came and went during the next few years. It began divesting itself of all mineral assets, including the Oregon claims, saying it saw “no merit” in developing them further. The company changed its name to Pacific Engineered Metals, and shareholders were told that Concord Research’s efforts would now be focused on a fuel cell catalyst (“plat-cell”) and a product exhibiting “high energy magnetic fields under controlled environments.” Management conceded it had not provided much information in the past about the business of Concord Research because of confidentiality agreements and the need to protect “proprietary assets.” But it promised that more news would be forthcoming “as information is generated” and “when our board deems it to be in the best interest of the company and its shareholders.” But, by 1989, Legal & General Assurance had pulled the plug on any further financings, and Pacific Concord, no longer able to provide funds, lost its control position in Concord Research. The “plat-cell” and the thing exhibiting “high-energy magnetic fields” died on the vine. So too did Pacific Engineered Materials, which was eventually de-listed for failure to file.

But the Oregon property was to rise again for the third time. During an interview in 1993, Markham told The Northern Miner that he had met Webb and Sawyer in England in the late 1980s and became interested in the Oregon property after being convinced that the previous owner “didn’t know what it was doing.”

Sawyer became Mindoro’s consulting geologist, and Sickafoose and OCM were again put to work analyzing samples. A while later, another consulting geologist took over and Mindoro set up its own lab in Idaho.

The promotion began to unravel when a consultant reported to a group of investors that the likelihood of the Oregon property containing minable ore from which gold can be at a profit was “zero.” Investors began to realize they had been bamboozled, and the media started looking into Markham’s past, only to find that British newspapers had dubbed him “Runaway Ron” after he fled the country when police wanted to question him about millions of dollars he had solicited for a private company which purportedly had a gold mine in Saudi Arabia.

True to form, Markham disappeared again when Mindoro and a subsequent promotion called La Paloma Resources collapsed. He did not appear at the BCSC hearing, but reports have surfaced that he is busy promoting his latest venture, International Gold of Reno, Nev., which is said to be “exploring a gold deposit” in Idaho.