TORONTO (CP) -- Southwestern Resources Corp. [TSX:SWG] shares took another fall of nearly 8% Friday, a day after the junior gold miner's stock lost half its value when it withdrew all previously announced results for the Boka gold project in China.
The Vancouver-based company, which also fired the project's general manager, lost 23 cents or 7.9% to C$2.67 in trading of more than one million shares.
On Thursday, company fell more than 80% at one point, then closed down 54% after the company withdrew the Boka results.
The company said ''the integrity of certain drill core samples was compromised'' and it has dismissed John Zhang, the project's Yunnan-based general manager.
Southwestern said Thursday it uncovered ''deficiencies in its control procedures for its Boka project and believes this resulted in errors in reported assay results.''
The review was done by a special committee of directors set up July 4 after the resignation of former CEO John Paterson and a delay in the Boka pre-feasibility study.
Paul van Eeden, a Toronto-area mining expert, said he had doubts about the economics of the mine as early as January 2003, when he visited the Boka deposit.
He recommended to readers of his newsletter than they sell the stock, since he didn't think the deposit would work as either an open-pit mine or an underground operation.
There was too much overburden on the deposit, located on the side of a mountain, to create an open pit, plus there were two villages on the top of the mountain which would have to be moved.
''You'd have to move the top of the mountain,'' Van Eeden said.
Van Eeden also didn't think the grade of the gold - which he did see - was high enough to make an underground operation profitable, given the nature of the geology.
However, Van Eeden said investors should not jump to conclusions about the company's announcement about its drill samples.
''I would suggest we not read too much into that until we have more information,'' Van Eeden said. ''This may be serious, and it may be nothing.''
Van Eeden said despite his view that the deposit would not be profitable to mine, he is confident there is gold there.
During his visit, local miners were asked to go into the mine and remove rock and returned with gold samples.
''We all could see it,'' Van Eeden said.
Van Eeden said he is wondering why the pre-feasibility study was delayed, although he added delays are not unusual.
''The question is why?'' Van Eeden said.
Paterson, a co-founder of the company, left abruptly on June 19, citing personal reasons. The previous day the company, which owns 90% of the Boka site, had said additional metallurgical test work was needed to complete the pre-feasibility study, with Paterson blaming delays in delivering samples to a laboratory in Perth, Australia.
Southwestern also dismissed Zhang and ''is continuing its detailed review of the Boka project in an expedited manner, including additional field work and drilling new holes.''
The company reported in May that 91,000 metres had been drilled in 249 holes and definition of the deposit was still open, with results including a sample of 15 grams of gold per tonne over 30.4 metres and 52.7 grams per tonne over six metres.
(c) The Canadian Press 2007
