After a drill data tampering scandal in May, Red Pine Exploration said it’s scrubbed its assay library clean and is ready to move on with new CEO to steer its Wawa Gold Project.
The Toronto junior miner endured a harrowing two months when it retracted years of reported drill results, dating back to Red Pine’s acquisition of the project in 2014.
The company points the finger of blame at former CEO Quentin Yarie for having selectively altered results coming back from the assay lab, recording them as higher grade than they actually were, and then filing them into the company’s drill database.
“That is a very broad-brushed approach, said Paul Martin, Red Pine’s board chair and interim CEO, of the action they took, “because we didn’t know the magnitude.”
Red Pine took swift measures in the weeks afterwards to investigate the damage to repair the project’s reputation, finally reporting in late June that WSP Global has independently verified all of the assays collected from 2014 to the present day.
The database can now be relied upon, Red Pine asserts, for an upcoming update on a new gold resource estimate for the Wawa project, due out later this month.
Red Pine is exploring for gold on a 7,000-hectare property two kilometres south of Wawa. The area once hosted several past-producing gold mines going back to the late 1800s.
For a project that's attracted investors like Alamos Gold, Martin said he can’t explain why Yarie would doctor the results.
“I have not spoken to him and I have no plans to speak with him.”
Red Pine reported the incident to the Ontario Securities Commission (OSC), the provincial Crown agency that regulates capital markets, to decide if and when they wish to prosecute. Whether the OSC will formally launch an investigation remains unclear, though it remains an active file, according to Martin.
The tight-lipped regulator replied through a spokesperson that OSC's policy is not to comment on the “existence, status or nature” of investigations or situations to ensure fairness and prevent market manipulation through the complaints process.
Potential legal action against Yarie remains on the table, confirms Martin, but a decision hasn't been made.
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In its internal investigation, Red Pine claims that valid and accurate results from its assay lab, Activation Labs (Act Labs), had been emailed only to Yarie, who manipulated 532 assays out of 98,000 in the database between 2014 and 2022. That amounted to about 10 per cent of the resource — “not a horrible outcome,” said Martin.
Every company defines its own protocol on handling assay results from the lab, Martin said, with Yarie being their only point of contact during his tenure as CEO.
“That was the one mandated here. Of course, in hindsight, we now know why.”
Red Pine’s new protocol is for certificates from the assay lab to be sent to at least two members of the senior management team.
While the damage appears to have been limited, wrong or misleading assay results are a nightmare for junior mining companies. It can totally destroy a company’s credibility on the market. Assay results are used to calculate a mineral resource estimate used in technical studies to develop a mine.
Bigger assay manipulation scandals, like Bre-X, create deposits that don’t exist, said Martin. This one was done “around the fringes” of real and tangible assay results, making it very difficult to identify.
Martin said they found subtle instances of tampering across the board.
“There was one where it was a 100-gram (per tonne) assay and (Yarie allegedly) made it 300.
“Both of them would be the exact same in a resource estimate because you would cap those grades. So, does that make sense?
“There were other instances where he was much more aggressive, but it was never where he would do 10 or 20 of them. It was always three or four.
“There was a style of how this was done, which made it more difficult to understand.”
Many companies and investors in Red Pine, including Alamos and Franco Nevada, had done their due diligence and didn’t find any issues.
“This was orchestrated very sophisticatedly,” said Martin, when asked about the lessons learned. “It was not haphazard in how it happened.”
“Frauds are very difficult to identify. There’s so many people that have looked at this project. I’m not passing the buck — it is our responsibility — but this has occurred over 10 years."
It took a sharp-eyed Red Pine employee to spot the discrepancies in late April. Red Pine made it public on May 1.
By then, Yarie was long gone. A Red Pine news release from last February reported Yarie had "stepped down" and resigned his board seat.
But Yarie was actually ushered out the door, said Martin, for reasons unrelated to tampering. Martin insists the assay manipulation was not known at the time.
Red Pine’s stock was deemed to be underperforming, compared to its junior mining peers. An evaluation was made that it was “time for a change in leadership,” said Martin. Yarie had “lost the confidence of the market” and from an investor standpoint, they didn’t see the situation improving any time soon.
He was terminated without cause and paid a contractual severance.
"Had we known there were manipulated assays, he would be terminated for cause and he would’ve gotten no money.”
Moreover, Martin said the Wawa project had advanced to the point where “more sophisticated and experienced leadership” was needed. New CEO Michael Michaud “has that in spades” over his predecessor, he said.
Martin said Michaud is viewed as a “credible individual” and the board is looking forward to “seeing where he can take this project over the coming couple of years.”
Though Red Pine’s stock remains at 8 cents a share, after a precipitous drop in May, Martin said the feedback from the investment community has been positive of the company's action and the choice in CEO.
Michaud, Wesdome’s former senior vice-president of exploration, arrives this month to take over. He’ll lay out his vision for how a potential underground mine, possibly with a starter pit, will come together.
A drilling program was temporarily suspended this spring when the scandal broke. It’ll be Michaud’s call on when it will resume.
Martin admits the reputational damage to the project and its prospectivity will be tough to overcome. He’s hoping this summer’s new mineral resource estimate “will be a line in the sand between prior management and the go-forward management.”
