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Gold Garbage: Scams New and Old

By Ralph E. Pray, D Sc., Met Eng




Here's what actually happened, described in the case file documents: Based on a precious metal assay certificate signed by a registered Arizona assayer, the sellers,

"in consideration of the payment of the sum of ($53,243,002), (fifty three million two hundred forty three thousand(s) and two United States Dollars) receipt of payment acknowledged, do hereby sell and transfer to BioChem World Wide Chemicals AS, Company reg. no. 971060700 established under the laws of the country of Norway with registered offices at 5604 Oystese, Buyer, of Gold concentrate(s), 37,389 (thirty seven thousand(s) three hundred and eighty nine lbs., and or 185,386 (one hundred eighty five thousand(s) three hundred eighty six (oz) troy ounces stored in welded shut steel containers continuously stored at Total NM Warehouse, 600 North Street, Lordsburg, New Mexico 88043, etc, etc. "

This document was signed and notarized in Maricopa County, Arizona, and was publicly distributed in 2001. Guess what! The New Mexico warehouse floor concrete may have a higher gold assay than the concentrates sitting above it valued at fifty-three million. The faxes between Oslo, Norway and the U.S., sent to accounting firms, investigative agencies, and the seller's office in Scottsdale, Arizona, would paper the walls of a three bedroom house. The Oslo people asked for ethical technical help, but only after the fox had already left the henhouse.

Before anyone with an itchy finger pulls the hammer back there is one consideration -- the sellers gave the buyers a huge discount, a precious metal discount for contained platinum etc. Not many of those around. Against that smoke and mirrors asset the overseas owners have to cough up the monthly warehouse fee on storing fifty-three million plus in a lonely unguarded building. In an unusual power play, the sellers got on the buyer's board of directors and called the shots on the who, what and when of confirming assays.

People have worked their way up from silly little lies over many years to scams like these. Behind almost every mining scam is a professional person gone haywire, in this case an assayer. All sorts of associates get dragged into the circle. Another scam, the multi-billion dollar Bre-X disaster, with something like 42,000 salted samples, began with a spoonful of copper-gold shavings in one drill core sample. It worked. Based on the true assays of the salted samples Canadian stock promoters innocently kited the shares. Geologists at the drill site saw a way to enhance job security. Plenty of placer gold was available from the local Indonesians. This gold was carefully weighed and secretly mixed into each of the diamond drill samples crushed at the remote site. The independent assay results were checked and rechecked. Fine. Two of the geologists got a recorded thirty million cash each from the sale of their Bre-X stock. A major mining company came in to check three years of drilling by putting in their own core holes next to a few market stimulators. Nothing -- in hole after hole.

One of the original salting geologists, by now quite famous because of his "discovery," was so afraid to face the music at the last minute he bailed out of a chopper bareback from a thousand feet. He didn't get to spend his thirty million.

Closer to home, the recent and current fakery in Southern Nevada's Eldorado Valley is a textbook case of a "Disneyland Mine in the Desert." The players, many of them professional people, a few of whom are well known, are stubborn illusionists who stumble repeatedly over the shortest word in the mining lexicon: ore. To them ore is any rock on their claims. Their stable of half-assayers generates the mineral Promotorite out of alluvial cobble through a series of lab tricks and double-talk. Such fake assays are old stuff. What's new in the Eldorado Valley case is a string of PhD. experts testifying in Federal Court that their lab magicians are believable. Maybe these outside consultants get all backwards thinking a half-assayer is better than no assayer.

Back to the 53 million-dollar concentrate sellers. Just before the Norway scam the Arizona Alchemists had a crack at buyers in London who didn't fall for the deluge of documents. This doesn't mean the Brits are always sharp in these matters. Not too long ago a Sir William was ready to invest millions in a process to take the gold out of the iron ore tailings at Eagle Mountain, near Desert Center in Riverside County, California. Kaiser Steel had left behind a mountain of processed tailings. The promoters, who had a lease from Kaiser's surviving company, admitted the iron content was low, "but Kaiser never went after the two ounce per ton gold." Sure there's gold in the rock, but it assays way to the right of the decimal point. After satisfying the client, I laid the facts before the Riverside County D.A. That D.A. hates mine liars.

The latest attempt known here to move the New Mexico warehouse "Suckerite" was with a rich Saudi gold buyer, who, by coincidence, came through my lab just two weeks before I left on a consulting job for a Saudi company in Jedda. I exposed the fraud immediately. The Saudi then canceled his three hundred million dollar escrow previously set up to facilitate the transfer of gold from New Mexico and Arizona to the Saudi bank. Relieved at not losing his three hundred million, the escrow fee of fifty thousand dollars paid by the Saudi was, to him, "good luck money." From everything I saw in Arabia, the Arizona guys may be lucky they didn't unload one of their warehouses on the rich Arab.

Samples of these fabulous gold materials are not easy to come by. I recall when the Arizona scammers flashed a colored photo of large metal ingots stacked on a pallet held aloft by a forklift. "Those look like copper ingots," I said. "No, no. They're pure gold," the scammer explained. "That bullion comes directly from our volcanic cinder gold mines at Show Low, Arizona." Keeping a straight face, I looked again. "The ingots sure have a copper color." "Well, maybe so. But our scientist says that some gold looks just like copper." Of course it was copper. Their "scientist" cons everybody on both ends of the assay furnace. He could have played a part next to Robert Redford in "The Sting" with his hands tied together.

Sometimes it appears to me, after 56 active years in the business, some of it while personally fire assaying over 47,000 rock samples for John Q. Public, there are now more big-wheel mine liars in the U.S. than there are true mine prospectors. I wonder if this is because it's almost impossible for the little guy to dig an honest hole in the ground anymore.
Dr. Ralph Pray, Mining & Metallurgy


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