Magazine article Multinational Monitor

The Ugly Canadian: Robert Friedland and the Poisoning of the Americas

Magazine article Multinational Monitor

The Ugly Canadian: Robert Friedland and the Poisoning of the Americas

Article excerpt

The Vancouver Stock Exchange (VSE) has long enjoyed a reputation as the "Wild West" of mining funds. Despite attempts to refurbish its tarnished image, a January 1994 report by James Matkin of the Vancouver Stock Exchange & Securities Regulation Commission found the VSE a hotbed of "shams, swindles and market manipulations." Scores of junior companies and entrepreneurs regarded as too high-risk, or flatly unacceptable in New York and London have flocked to the VSE. Of these, none has been more welcomed in the Canadian markets than gold mine financier Robert M. Friedland, a Canadian whose Venezuelan Goldfields (Vengold) in 1993 made the biggest float in VSE history -- $31 million.

However, no one's track record casts more doubt on the integrity of Canadian money markets than that of Friedland, a man who admits he was attracted to the VSE because "it is one of the freest and most underregulated venture capital markets in the world."

Friedland's grounded rocket

A 43-year-old Chicago native (he became a Canadian citizen in the late 1980s), Friedland first emerged from relative obscurity in 1985, with a VSE shell company called Galactic Resources. Notwithstanding the hubristic title, for a while the sky indeed seemed the limit: "Galactic's stock performed like a rocket," comments John Wood, editor of the Vancouver-based financial news service, Stockwatch. Friedland had soon formed joint ventures with the world's biggest mining corporation, RTZ, at Ridgeway, South Carolina, and opened up the Ivanhoe gold joint venture on Nevada's Carlin Belt.

Along the way, he sold off Galactic's 30 percent share in the Philippine Far South East Gold project to CRA (RTZ's Australian associate), having persuaded the World Bank's International Finance Corporation (IFC) to package the deal. And though in 1987 he failed -- along with T. Boone Pickens, the notorious Texas corporate raider -- to gain control of Newmont Mining, a year later he convinced Homestake Mining (second only to Newmont in the U.S. gold stakes) to buy shares in Galactic.

Friedland's golden apple was undoubtedly the Summitville mine in Colorado. Its $222 million costs were bankrolled mainly by European (especially Swiss and British) investors, although the Bank of America also came through with $30 million, after the world's biggest civil engineering company, Bechtel, agreed to take on design and engineering of the mine. By the decade's end, Friedland had become a darling among North America's smart-monied sets. Rick Young and Dan Noyes of the New York Times observed, "Industry executives filled conference rooms to hear him speak on innovative ways to finance mining operations."

But the bitter reality was that Friedland had savagely cut corners, as well as costs, to bring Summitville on-stream in almost record time. "People were willing to go along with his assumptions," declares John Dobra, a Washington Gold Institute consultant. "The problem was, his assumptions were usually wrong."

Friedland's major, catastrophically false assumption was that the recently developed heap-leach system (virtually the cheapest and fastest way to extract gold from ore) would work on a vast scale (spread over 50 acres) and halfway up an icebound mountain. In heap-leach mining, ore is crushed and stacked on huge liners. Cyanide is then dumped on the heap and the liners are supposed to collect the cyanide, gold and other metals which leach out. Within days of Summitville's opening in 1986, the cyanide solution used to dissolve gold from the 127-foot high ore heap began leaking through its stretched and rupturing liner.

Kenneth Gooding, mining editor of the London Financial Times, describes what happened over the next three years: "More water flowed into the heap than flowed out or evaporated. ... Acid water began to flow from the waste pile." Cyanide started to leak into a nearby creek, and from there into the ground water. When the company tried to pump the leaking water back into the heap, this simply "raised the [water] level at an alarming rate. …

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