FINEX: October 27-28, 2010

1. FINEX: October 27-28, 2010

2. FINEX ‘10 MINING SCAMS Then and now, and how to spot them Chris Hinde, Editorial Director, Mining Journal

3. FINEX ‘10 Mining – Only industry with promoters Scams – Deliberate fraud, not: • Over-enthusiastic exploration geologists • Illegal miners Industry well suited, with promise of dramatic riches that are currently hidden

4. Buyer Beware

5. FINEX ‘10 MJ Archive August 1835 – West Tresavean situated just two miles from Tresavean August 1885 – Limpets and barnacles on honest enterprise August 1909 – Prospectus of a mining company … commercial traveller, real-estate man and third engaged in variety of pursuits

6. FINEX ‘10 Public Perception John Meech, BC University: Mining disasters, environmental pollution, exploitation of non-renewable resources, greedy people stealing resources from First Nations communities, or moving to remote parts of the world and looting Third World countries of their resources. Also about equity scams – people raising capital funds by telling half-truths and lies about moose-pastures and get-rich-quick deals."

7. Monopoly Money

8. FINEX ‘10 Human Emotions Key Greed Fear Envy Denial Hope

9. FINEX ‘10 Telling the Difference • Exaggerated claims; • Few negative results; • Little corroborating data; • Emphasis on nearby deposits; • Confused ownership; • No record of management success; • Sudden share price changes; and • New technology.

10. FINEX ‘10 Scams and the Economy • Frauds usually look for an ‘angle’  • Ripples from ‘Black Monday’ on October 1987, showed up immediately in scams • Arizona took steps to educate the public about the dangers of investing in mining. • Arizona Commission “want to stop the fools-gold rush before it reaches epidemic levels”. • Investor alert issued in 1989 by the North American Securities Association.

11. Pump and Dump Scams

12. FINEX ‘10 Scam Central: Arizona • State has a long and glorious history of mining scams. • Time-honoured method to bilk the public of millions of dollars is the ubiquitous mining swindle. • Glamour attached to ‘discovery’ creates, in the imagination of some people, a relatively easy way to attain fantastic wealth.

13. FINEX ‘10 Arizona Republic Paper Promoters ‘proof’ of an orebody falls into two categories: 1. Little, or only crude, evidence 2. More sophisticated approach

14. FINEX ‘10 Four Case Studies • Bre-X and Busang • Best example of salting, and biggest scam of all time. • Borneo ‘discovery’ of 71Moz in mid-1990s, supported by Indonesian president • Share price goes from pennies to over US$280 per share in four years • Freeport checks, and shareholder value wiped out, almost overnight

15. Bre-X Share Price

16. FINEX ‘10 Four Case Studies 2. Spenazuma Gold Mining • Getting investors in right frame of mind; Doc Flowers. • Richest and largest continuous vein of ore ever discovered in the world • Deposit found by son of Aztec Emperor Montezuma • Stock sold to easterners, who knew nothing of mines and mining

17. FINEX ‘10 Four Case Studies 3. Scottsdale Galleria • Mining fraud promoters can always find greedy investors to believe their tales • Claim in 1991 that gold was buried under shopping mall in Scottsdale, Arizona • Police called when 300 people arrived with spades

18. FINEX ‘10 Four Case Studies 4. IPM and Black Rock • International Precious Metals announced “sensational” gold and PGM grades • TSE asked consultant to investigate; no mineralisation found; shares plunged • Company delisted but relisted on NASDAQ, and promoted itself on internet • Scheme unravelled, shares fell from US$14 to US$2; filed for Chapter 11

19. FINEX ‘10 Factors to Consider Title Sampling and Assaying Commodity Mining Method Infrastructure Recovery Process Permitting and Reports Profit Distribution Sequence

20. FINEX ‘10 Factors to Consider MJ Rule: Greater the amount of gold on the promoter … the less gold there is likely to be in the deposit

21. Thank You