Junior gold company Red Pine Exploration Inc. RPX-X is vowing to work to regain the trust of investors after accusing its former chief executive officer of tampering with its gold assay data over the course of a decade.
Toronto-based Red Pine first raised questions about its assay figures on May 1, saying it found inconsistencies in some of its drilling results at its Wawa gold project in Ontario. The company’s stock immediately lost 60 per cent of its value.
Last Friday, the company alleged that Quentin Yarie manipulated hundreds of gold assay results going back to 2014 that overestimated the size of its resource by up to 12 per cent. Mr. Yarie stepped down as chief executive officer in February, and had been with Red Pine since 2015.
Mr. Yarie did not respond to a request for comment.
On Wednesday, the company provided more information about the alleged tampering, revealing that Mr. Yarie manipulated 382 assay results between 2019 and earlier this year by increasing the grade of gold at select drill holes.
Michael Michaud, the incoming chief executive officer of Red Pine, said in an interview that the total number of manipulations of assay data stretching back to 2014 carried out by Mr. Yarie now stands at 544.
Paul Martin, the chairman of Red Pine, said in a conference call on Wednesday that he and his team were “devastated” to learn of the tampering scheme, and acknowledged it has caused the company “significant reputational harm.”
Red Pine only became aware of the alleged tampering by accident when a geologist noticed an anomaly in the company’s drilling results, which was first reported to Mr. Martin on April 29.
Red Pine said the lab that carried out the assays sent its results directly to Mr. Yarie. Some of those numbers were changed and then uploaded to the company’s database.
The alleged manipulation was carried out “in a sophisticated, selective and isolated manner,” Mr. Martin said in the call on Wednesday.
Before the company reported the alleged tampering, it told investors it was sitting on a resource of approximately 700,000 ounces of “inferred and indicated” gold, a category that means the deposit had not yet been proven to be economic.
Red Pine has reported the alleged assay results tampering to the Ontario Securities Commission.
The alleged tampering at Red Pine resembles an earlier case of assay data manipulation involving another junior Canadian mining company that saw a provincial securities regulator take action.
In 2009, John Paterson, former chief executive of Southwestern Resources Corp., admitted to fraud and illegal insider trading after manipulating the company’s gold assay data. Mr. Paterson took valid assay results from the company’s gold project in China and changed them in the company’s database to make the results look materially better. He sold shares in the company that were inflated in value by his manipulated assay results.
The B.C. Securities Commission banned Mr. Paterson for life from acting as a company officer or director.
Mr. Michaud, who officially takes over as chief executive officer in July, said that when he learned of the tampering, he wondered about whether he should still join the company. When Mr. Michaud’s appointment was announced in April, the alleged tampering had not been brought to light.
Mr. Martin told The Globe and Mail last week that Mr. Yarie’s departure from the company had nothing to do with the alleged tampering, and that he was terminated because of his long-term underperformance in the role.
Mr. Michaud said that before the tampering scandal broke, Red Pine “had a fairly decent reputation,” and that as senior vice-president of exploration at his current employer, Wesdome Gold Mines Ltd., he was even looking at it as a possible acquisition target.
The most notorious case of manipulation of actual assays in the Canadian junior mining sector revolved around Calgary-based Bre-X Minerals Ltd. In the late 1990s, the gold exploration company salted its assays at its Indonesian gold project to make it appear as if its purported gold find was a bonanza. Bre-X was later revealed as a hoax and investors lost about $6-billion as a result.
Niall McGee