Hunt Contracting Co Pty Ltd v Roebuck Resources NL

3 0 2 927

JUDGMENT No. ........ ........ ..I ,

C A T C H W O R D S

TRADE PRACTICES - misleading or deceptive conduct - sale of alluvial gold mine - estimates as to volume of resources and grades of gold - whether estimates misleading or deceptive - whether estimates provided negligently.

Trade Practices Act 1974

Parkdale Custom Built Furniture Ptv Ltd v. Puxu Ptv Ltd (1982) 149 CLR 191

HUNT CONTRACTING CO PTY LTD v. ROEBUCK RESOURCES NL PETER

DONALD ALLCHURCH and SAMUEL WARNE

No. WAG 67 of 1992

FRENCH J.

PERTH

24 April 1995

IN THE FEDERAL COURT )

OF AUSTRALIA	)
WESTERN AUSTRALIA	)
DISTRICT REGISTRY

GENERAL DMSION	No. WAG 67 of 1992
B E T W E E N :	HUNT CONTRACTING CO PTY
LTD

Applicant

and

ROEBUCK RESOURCES NL

First Respondent

PETER DONALD ALLCHURCH

Second Respondent

and

SAMUEL WARNE

Third Respondent

MINUTE OF 0 R D m

JUDGE MAKING ORDFJ&:

FRENCH

DATE OF ORDER:	24 April 1995
WHERe MADE	PERTH

THE COURT ORDERS THAT:

1. The application is dismissed.

2. There is judgment for the first respondent on the cross-claim in the sum of $149,500 inclusive of interest.

3. The applicant is to pay the respondents' costs of the application and the cross-claim.

NOTE: Settlement and entry of Orders is dealt with in Order 36 of the

Federal Court Rules.

INDEX

Page

Introduction

The Pleaded Case

Geology of Mary River Area

Gold Mining in the Kimberley Gold Field and the

Mary River Area

Samuel Warne

Peter Allchurch

Warne is Engaged by Roebuck

Technical Report No. 95 - February 1988

Roebuck - Warne Joint Venture Agreement

- July 1988

The Joint Venture's Mining Operations

- November 1988-June 1990

Technical Reports 117 and 119

- September/October 1989

Technical Report 123 - December 1989

The Joint Venture Mary River Mining Operation Continues

Mary River

Gold Mine Tenement and Equipment Valuations

- February 1990

The Information Memorandum - March 1990

The Code for Reporting of Identified Mineral Resources

and Ore Reserves

The Decision to Sell - March 1990

William Wreford and Hunt Contracting Co Pty Ltd

Peter Thorpe Makes an Offer - April 1990

Wreford Contacts Allchurch - May 1990

Allchurch Writes to Wreford - 17 May 1990

Wreford Visits the Site - 24, 25 and 26 May 1990

Conversations During the Site Visit - 25 May 1990

Wreford Makes an Offer - 25 May

Wreford Tries to Raise Finance

The Contract of Sale - 28 June 1990

Wreford Seeks Advice

Settlement - 21 August 1990

Upgrading the Plant - September to November 1990

Wreford and his Finances - October/November 1990

Wreford Seeks an Indulgence from Roebuck

- 4 November 1990

Variation of the Sale Agreement - 13 December 1990

Wreford's Red Diary

A Prospector Introduced - November 1990

The Bores Work - 20 November 1990

Edwards and Warne Come to Site - January 1991

Financial Difficulties Continue

Wreford Calls on the Thorpes - March 1991

Wreford Writes to Esanda - June 1991

Wreford Engages a Geologist - July 1991

Wreford Communicates with AUchurch - July 1991

Esanda Refinances - 2 September 1991

Acquisition of Additional Truck - September 1991

Further Communication with AUchurch

wreford Leaves the Site - 29 September 1991

The Herlihey and Lee Preliminary Reports

- 27 November 1991

Letters and Notices of Demand

The Onley Memorandum

Expert Visitations

Auction - 5 February 1992

Expert Evidence on Resource Representations

Reconciliations Between Estimates and Productions

Valuation of the Project at time of Sale

Conclusions About the Impugned Conduct

Conclusion

IN THE FEDERAL COURT

)

OF AUSTRALIA

WESTERN AUSTRALIA

DISTRICT REGISTRY

GENERAL DMSION

1	No. WAG 67 of 1992

B E T W E E N :

HUNT CONTRACTING CO PTY LTD

Applicant

and

ROEBUCK RESOURCES NL

First Respondent

PETER DONALD ALLCHURCH

Second Respondent

and

SAMUEL WARNE

Third Respondent

CORAM: FRENCH

24 April 1995

REASONS FOR JUDGMENT

Introduction

On 28 June 1990, Hunt Contracting Co. entered into an agreement with

Roebuck Resources NL to purchase an alluvial gold mining operation located at May River in the Kimberley region in Western Australia. The purchase price was

$450,000.

Prior to entering into the contract the principal of Hunt Contracting,

William Brindley Wreford, had been provided with documentation relating to the

operation by Peter Allchurch, the Managing Director of Roebuck. The information

provided contained statements about the quantities of alluvial materials and

anticipated gold grades throughout the system of waterways and associated banks and

alluvial deposits within the tenements the subject of the sale.

Following settlement of the sale, Hunt Contracting commenced processing tailings and mining for alluvial gold on the tenements. It was unable to recover sufficient gold from the resources to meet its costs. In March 1990 it employed additional persons and subsequently entered into what amounted to a joint venture arrangement with them. Nevertheless the operation failed, and ultimately a receiver was appointed over the assets which had been sold. Plant and equipment were auctioned on behalf of the receiver in February 1992.

Hunt Contracting alleges that the information and associated statements made to Wreford prior to entering into the contract of sale were misleading or deceptive and alternatively negligent and that it has suffered loss and damage as a result. These allegations are denied and Roebuck counterclaims for the outstanding balance of the purchase price, being the sum of $100,000 and interest.

The case occupied about six weeks of hearing. The evidence was

complex and detailed. In the end, however, its resolution turns upon the proper characterisation of the statements made and materials provided to Wreford prior to his entry into the contract of sale.

The Pleaded Case

Prior to the matters which have given rise to these proceedings, Hunt

Contracting camed on business as an earthmoving contractor in Western Australia

(SIC 1). William Brindley Wreford, was at all material times director of the company

(SIC 2). Roebuck Resources NL camed on business as a prospecting and mining company (s/c 3). It was. prior to May 1990, the registered proprietor of a number of mining tenements comprising mining leases and prospecting licences in the Mary River area of the Kimberley region. Peter Allchurch was the Managing Director of

Roebuck and at all material times acted on its behalf. Samuel Warne was a joint

venturer with Roebuck in an alluvial gold mining operation conducted on the

tenements. AU these allegations are admitted in substance.

Hunt Contracting says that at a meeting held in Roebuck's office and

later continued in a nearby restaurant, Allchurch told Wreford that the tenements and

plant were for sale and suggested that he purchase them (SIC 7). In order to induce the purchase, he is said to have made oral representations to Wreford and handed to

him at the time written representations contained in a document. The oral

representations alleged are as follows:

(0	could be economically recovered;
That the tenements contained a very large quantity of alluvial gold which
Ci)	bearing ore with an average grade of between 0.4 and 0.5 grams per loose
That the tenements contained not less than 1,000,000 cubic metres of gold
cubic metre;
(iii)	That alluvial gold mining operations on the tenements conducted by an
owner/operator would be very profitable.

The document given to Wreford was entitled "Mary River Gold Mine Tenement and Equipment Valuations". In that document it is said to have been represented that the tenements contained the following gold resources:

"Present measured

resources:

384,000 loose m3 at 0.4 to 0.5 g/M3 recovered.	Value
at present gold price ($480.00) $2,370,675 gross

Inferred resources:

1,000,000 M3 value $6.17 million

Potential resources:

3,000,000 M3

gross value $15 million

Total gross resource value:

$23.47 millionw

(SIC 8 and 9)

The respondents say that Allchurch told Wreford in a telephone conversation between 7 and 11 May 1990 that the Mary River goldmining operation was for sale as a going concern. A meeting was arranged at Roebuck's offices on 16 May 1990. At the meeting, which was brief, Allchurch descnied the operation in

general terms and promised to send Wreford an "information package" by

post (D8).

The respondents deny the alleged representations and say that Allchurch told Wreford that the operation was making a loss as the price of gold had fallen

significantly since its commencement. Allchurch also told Wreford that Roebuck had experienced serious difficulties in conducting the Mary River goldmining operation. These included the remoteness of the location, the difEiculty of obtaining good quality

on site management and the difficulty of maintaining a sufficient level of production from the gold recovery plant due to "teething problems", poor management and

insufficient water.

It is said that Allchurch told Wreford that the rate at which the

gold recovery plant processed alluvial ore was critical to the level of profit of the

Mary River goldmining operation, that alluvial goldmining was a highly technical

operation and that Wreford should take advice before committing Hunt Contracting to purchasing the operation which they might not have the skill or expertise to conduct (D9).

It is further contended by the respondents that Wreford told Allchurch

at the meeting that it was his considered view that the gold price would rise as a consequence of world economic conditions which would make the operation more profitable and that if Hunt Contracting were to purchase the operation he would

manage it on site thereby achieving a greater level of efficiency than achieved by

Roebuck (D10).

Hunt Contracting says that in order to induce it to purchase the tenements, plant and equipment, Allchurch wrote to Wreford on 17 May 1990 making the following written representations:

with good management, after slight modifications the

"(9	existing plant and equipment was capable of treating
l,000m3 of gold bearing ore per day,

(U)

the coarse tailings heap situated on the tenements comprised behveen 60,000 and 100,000m3 of material bearing gold at a grade of between 0.2 and 0.35 glm) and accordingly represented a substantial and easily accessible gold resource;"

The letter enclosed certain documents being:

(i) The valuations document given to Wreford at the

initial meeting;

(U)	A document dated March 1990 prepared for Roebuck
and entitled *'Mary* River Gold Project Information
Memorandum";

(iii) A document dated December 1989 entitled "Maxy River Joint Venture Alluvial Gold Resource Estimates & Sampling Results for Mary River, Thompson Creek, Car Body Creek, Susan-Peter Creek Area - Technical Report No. l23 by S.B. Warne" prepared by Warne.

This allegation is in substance admitted (D11).

.. ... . -

In the statement of claim, Hunt Contracting refers to particular sections

of the Information Memorandum said to contain representations about volumes and

grades of gold bearing material in the Mary River tenements. Other representations

in the report TR 123 are also quoted.

The respondents say that each of the documents contains statements of

fact, predictions, estimates and statements of opinion, that each of the statements of

fact was accurate and that each of the predictions, estimates and statements of

opinion was made on the basis of Roebuck's exploration, prospecting and mining and was based on reasonable grounds and that the documents as a whole conveyed a fair and reasonable picture of the Mary River goldmining operation (D12). They say they

will refer to the documents and each of them at trial for their true meaning, full effect

and for the representations made thereby (D13). In the defence, it is complained that Hunt Contracting has failed to plead the representations to be drawn from the extracted passages. In relation to the extracted passages at paras. 8(b), 9(a), 10 and

11 of the statement of claim the respondents assert that each of the statements is an

extract from the larger document which must be considered in its entirety. Each of the statements was a prediction, estimate or statement of opinion, each was based on reasonable grounds and the reasonable grounds were in each case Roebuck's mining results, plant records, sampling results, measurements and other information or data obtained while prospecting, exploring or mining in the Mary River area, Roebuck's observations and experience of its geological features and its knowledge of mine economic factors at the operation. Any assertions of fact were accurate and if any of the extracted passages is found to convey an approximation the relevant statement was in content and contexts and approximation, was a tentative statement and in accordance with the practice of the resources industry indicative of volume and grade of material only. It is asserted that the impression created was not misleading nor was any fact conveyed by the statement false.

Hunt Contracting says Wreford inspected the operation on or about 30 and 31 May 1990 and that in the course of the inspection further oral representations were made. These were as follows:

oral representations by Wame in the presence and

(a)

with acquiescence of the second respondent:

(i)	the material in the vicinity of Thompson Creek bore gold at

a grade of 0.5 grams per loose

cubic metre;

(ii) the material in the wash areas on the banks of the Mary River bore gold at a grade of 0.4 to 0.5 grams per loose cubic metre;

(iii) the material in the old channel areas comprised not less than 500,000 cubic metres bearing gold at a grade of 0.4 to 0.5 grams per loose cubic metre.

In addition, it was said that both Allchurch and Warne represented orally that:

the tenements contained not less than 1,000,000 cubic

"(i)

metres of material bearing gold at a grade of between

0.4 and 0.5 grams per loose cubic metre;

(ii)

the tenements could be mined profitably."

(SIC 12

and 13)

.. .

By way of response to that allegation it is said that between 24 and 26 May, Allchurch and Warne showed Wreford and a business adviser of his by the name of Freemantle the operation conducted on the tenements. They saw certain of the streams and other areas considered by Roebuck to contain gold bearing alluvials, Roebuck's gold recovery plant, its camp, the Thompson Creek dam site, the equipment, the tailings, and the mining operation (D16). In the course of the site inspection Allchurch and Warne say they stated to Wreford that:

"0)	Roebuck had prepared a new site near Thompson Creek to which it proposed to move its gold recovery plant;

(ii) the gold recovery plant had been losing fine gold to tailings and as a consequence might need modification to increase recovery;

(iii) the jig tailings heap adjacent to the plant had not been drilled or sampled by the First Respondent save for one sample taken by the Third Respondent in the cone underneath the jig tailings pipe;

(iv) samples had been taken of alluvials at certain identified sites or places on the tenements and that those samples had been tested to estimate grades;

(v) that an alluvial gold mining operation was an operation requiring skill and expertise which Wreford might not possess, and that Hunt Contracting should obtain expen advice before committing itself to purchase;" (D17)

The representations pleaded are denied, although it is admitted that during the course of the site inspection the respondents made statements of fact and gave estimates and statements of opinion and predictions to Wreford and Freemantle which were accurate in so far as they were statements of fact. Alternatively they were, from their content and context, approximations, tentative statements, indicative of volume and grade of material only and neither misleading nor false. In so far as they were

predictions, estimates or statements of opinion they were based on reasonable

grounds, portrayed a fair picture of the Mary River ,goldmining operation and

generally were not misleading or likely to mislead to deceive (D18).

Hunt Contracting says, that acting in reliance upon the various

representations and induced by them, it offered, on or about 31 May 1990, to acquire the operation from Roebuck for a price of $625,000 which offer was accepted. The respondents admit that Hunt Contracting offered to acquire the operation on or about 25 May 1990 from Roebuck for a price of $625,000, but otherwise deny reliance and inducement. They say that Hunt Contracting made its offer based on Wreford's expectations as to an increase in the price of gold, his perception that he could manage the operation more efficiently than Roebuck and thereby make a profit from

10.

it and his assessment of the quantity and quality of gold in the jig tailings heap which he attended and, in the event, later endeavoured to process to recover gold. Further,

they say he did so notwithstanding repeated statements by Allchurch that he should obtain advice on the purchase and on the conduct of an alluvial goldmining operation which might be outside his experience and competence (D19). Hunt Contracting and Roebuck agreed to vary the price for the operation on or about 6 June 1990 to the

sum of $450,000 due to Hunt Contracting's difficulties in obtaining finance to complete the purchase. Settlement was effected on 21 August 1990 and, at all

material times thereafter until about February 1992, Hunt mined the tenements.

The

.-.

respondents deny that Hunt mined the alluvials between August 1990 and January 1991 and deny that the reason for the reduction in the agreed price was solely Hunt's

financial difficulties, but otherwise admit the assertions about the variation of price

and settlement of the purchase. In addition, Roebuck says that on or about 28 June 1990 it made an agreement in writing with Hunt Contracting for the sale of the

operation for the sum of $450,000 and that on or about 13 December 1990 they entered into a further agreement in writing varying the terms of the original agreement (D20). Hunt has paid the sum of $350,000 pursuant to the terms of the agreement as varied, but a sum of $100,000 remains due and owing. The respondents plead that by the express terms of the agreement, Hunt confirmed it had made its

own inquiries as to the property the subject of the purchase, that it had not relied on any representations made by Roebuck, that it would not bring any action or proceedings against Roebuck should any representation turn out to be false or

misleading and that the agreement was the entire agreement between Hunt and Roebuck and there were no oral statements, representations, undertakings or

11.

agreements between the parties save as therein contained (D21).

Hunt alleges that the various representations pleaded were false in various respects which are set out at some length in the pleading and need not be traversed here in detail. The falsifying facts relied upon relate to the quantities of alluvial gold which could be recovered economically, the volume estimates and grades and the profitability of alluvial goldmining operations on the tenements (SIC 17, 18, 19A-19L.) In addition it is said that representations made in the letter of 17 May 1990 were false in that the plant and equipment situated on the tenements was

.....

. .

...

incapable of treating the represented quantity 1,000 cubic metres of gold bearing ore

per day, nor did the tenements contain sufficient quantities of ore bearing gold, the

value of which exceeding the cost of its recovexy and treatment to supply that volume of ore. And the grade of gold contained in the coarse tailings heap was said to be less than 0.2 grams per cubic metre (SIC 20). The representations as to grades were said to constitute representations as to future matters and Hunt Contracting relies upon s.51A of the Trade Practices Act 1974 and s.9 of the Fair Tradine Act (SIC 21). In the alternative, to the extent that the various representations as to grades and quantities constituted expressions of opinion or estimates there was said to be an

implied representation that there were reasonable grounds for forming the opinion or

making the estimate which was, in each case, false in that there were no such reasonable grounds (SIC 22). Hunt Contracting thereby asserts that the respondents have, in trade or commerce, engaged in misleading and deceptive conduct contrary t'o

the Trade Practices Act 1974 and the Fair Tradine Act respectively (SIC 23). The various falsifying pleas are denied by the respondents who allege that the mining of

12.

the operation was not efficient and failed to win substantial quantities of available alluvials, that Hunt Contracting's testing procedures as to the recovery rate of gold were muddled, incompetent and did not yield accurate or true results. They say also that in using the gold recovery plant to treat the jig tailings heap, Hunt Contracting extensively modified it in accordance with its own design and advice and that it failed to move the plant to a prepared site at Thompson Creek thereby increasing the cost of haulage without corresponding gain. Further, it is said generally that Hunt Contracting and its contractors the Thorpes, conducted the operation incompetently

so that hard rock and alluvials likely to bear higher gold quantities were not,extracted

-.*.. .-

and so that the haulage distance between the alluvial~ extracted and the gold recovery plant was greater than necessary. (D22). In relation to the various statements said to be representations as to future matters, the respondents deny that that is their proper

characterisation, assert that s.51A of the Trade Practices Act has no application and subsequent events to be false (D24).

that each of the statements relied upon was made upon reasonable grounds (D23).

In the alternative, Hunt Contracting raises a plea of breach of a duty of care saying that the respondents were each under a duty to it to take all reasonable care to ensure the accuracy of their representations. The course of action in negligence is then pleaded. The respondents deny that they owed such a duty of care and assert that in any event Hunt Contracting did not rely on their skill, experience and expertise in offering to purchase the Mary River goldmining operation and that Allchurch had expressly told Wreford that he should obtain advice from a suitably

qualified expert before making a decision whether or not to purchase the operation

and that the respondents believed he would take and rely upon that advice (D27).

Hunt Contracting asserts in support of its negligence claim that the various representations made to it were contrary to the requirements of the Australasian Code for Reporting of Identified Mineral Resources or Ore Reserves. This is because various terms used in the representations are said not to have been in accordance with the requirements of the Code (sJc25). The respondents say that the Code is of no, or alternatively, difficult application to the reporting of reserves or

resources comprising alluvial gravels, that in any event its requirements were complied with and that Hunt Contracting placed no reliance upon the Code terminology. Moreover they say the representations were not "resource reports" within the meaning

of the Code. Hunt Contracting asserts that it has suffered loss and damage,

particularised as follows:

(a)	amount paid for the tenements $100,000
@)	loss on plant and equipment acquired for the project and later sold at a loss

$170,000

(C)	operating losses incurred attempting to mine the tenements $1,126,0%
(d)	amount which the plaintiff would have been able to earn through the
exertions of its directors, MY and Mrs Wreford, had they not been engaged in
their attempt to mine the tenements $112,500 *(SIC* 26)

The respondents deny the loss or damage and say, in any event, that it was caused or

contributed to by Hunt Contracting's own negligence. Roebuck seeks to set off the sum of $100,000 and interest due to it under the terms of the agreement as varied (D32). It cross-claims in the sum of $100,000, damages for lost opportunity to invest

that sum and interest.

Geolow of the Marv River Area

The Mary River is about 32 kilometres south west of Fitzroy Crossing.

It is a tributary of the Fitzroy River.

It begins on the watershed between the Ord

River Drainage Basin to the north and the Fitzroy River Drainage Basin to the south. The river flows south and east. Another water course, known as Poverty Creek, slows north from the watershed into the Ord River Drainage Basin from a point near the source of the Mary River. Joining the Mary River south of its source, are the East

- .

Mary River, Little Gold Creek, Thompson Creek, which itself is itself joined by Car Body Creek, Swan-Peter Creek and Six Mile Creek. These streams are listed in their southward progression.

Because the Mary River area forms part of a watershed between two major drainage basins it has been subject to erosion. It is characterised by alluvial deposits of a distinctive brick red colour along the banks of the major water courses, including the Mary River, Thompson Creek, Car Body Creek, Susan-Peter Creek and Six Mile Creek. There are lesser deposits along Sandy Creek and Poverty Creek.

These deposits are known as High Red Alluvial deposits (HRA's). Their colour is to be contrasted with the greys and pale browns which characterise the active stream

alluvium and associated bench alluvium (Plates 2 and 14 in Exhibit 130). The bases of the HRA's occur between 2 and 8 metres above active stream channels. The HRA's contain lateritic ironstone debris and resistate white quartz pebbles, the latter suggesting prolonged chemical weathering before erosion and deposition in the HRA.

15.

The HRA's are less than 1.8 million years old. Their evolution probably began with

periods of uplift and erosion resulting in the deposition of basal gravel. Lesser uplift

in source areas led to silt deposition with gravel bars. Further uplift produced middle

gravel layers overtopped by more silt as uplift was reduced. The whole area was

uplifted again in recent times (from a geological perspective). This caused streams to flow cutting through the unconsolidated HRA's and into bedrock. Extensive coarse

pebble fields on and adjacent to the HRA's are due to recent erosion.

Gold	in the Kimberlev Gold Field and the Maw.River Area

: .

, . .

The Mary River falls within the Kimberley Gold Field. Gold was

initially found in the region at Old Halls Creek in 1882 and not long after that at Mary River. A report by the W.A. Government Geologist, Edward Hardman, published in 1885, descnied the Mary River and surraunds as part of a large area of country which he believed would be auriferous to a payable degree. Referring specifically to alluvial golds, Hardman reported that he prospected gravels over many miles of country and rarely failed to obtain good colours of gold. He found gold to be distributed over about 140 miles along the Elvire, Panton and Ord Rivers as well as

on the Mary and Margaret Rivers. Of the latter he said, "indications were very good and the appearance of the country most favourable" - Hardman, R e ~ o r t on the Geoloev of the Kimberlev District - Western Australia (1885) Perth Government

Printer pp.34.

The Kimberley Goldfield was proclaimed on 19 May 1886. Initially,

however, the goldfield did not live up to its promise - Battye, Histow of Western

16.

Australia UWA Press (1978) pp.367-368. By 1920 the M q River was known as the source of some of the largest deposits of alluvial gold anywhere in the district. However, even then, it had not established a reputation as a notable gold producer - Gibb Maitland, The Gold De~osits of Western Australia, The Mining Handbook,

Geol Survey Memoir No. 1 (1919) reprinted by Hesperian Press (1979) pp.4-5. Alluvial and hard rock mining were carried out continuously within the field for quite a number of years, but mining later became sporadic. The earliest alluvial gold mining was directed to the recovery of larger nuggets from the basal levels of active channel sediments and high level red alluvials (HRA). Mining was carried out by pick

. .

and shovel and gold recovery by screening, separation using rockers or by hand jigging and panning. Dry blowing was practiced in the dry seasons. In some cases shafts were sunk through HRA to bedrock where basal gravels and bedrock crevices were mined for nuggets. Stamp batteries erected on Mary River and Thompson Creek were used to crush hard rock veins in the bedrock to extract their gold contents.

The advent of portable metal detectors in the 1970's led to an increase

in alluvial gold prospecting and mining, particularly where basal levels of the HRA's

were exposed. Bulldozers were used to open successively deeper levels of fresh alluvials so that these could be prospected using detectors. After a significant rise in the gold price between 1978 and 1980 several small scale mechanised wet gold recovery plants were operated on the Mary River, Thompson Creek, Six Mile Creek and Poverty Creek. A larger plant was operated for a number of years a few kilometres north of the Mary River water shed - R e ~ o r t bv Minval Associates Ptv Ltd

Exhibit 257 Appendix 5.

17.

Samuel Warne

In September 1980, Samuel Warne, a Geologist, pegged a dredging claim over 60 hectares of the Mary River. Warne had a varied career which included considerable practical experience as a working geologist. He had completed 8 out of 9 units for a science degree at Adelaide University, including three geology units. He

worked as a geologist between 1955 and 1959 in South Australia, Western Australia and Tasmania. Between 1959 and 1968 he was a secondary school science and geography teacher in South Australia. During that time he provided advice to

contractors and prospectors for non-metallic deposits in the Murray Basin in South

. .

Australia. He worked as a geologist again for various companies from 1968, focussing on searches for copper-zinc deposits. In the late 1970's he worked for Kennecott Exploration in charge of its Perth office. He was involved there in the search for

copper-zinc-silver deposits in the Kimberley Region. He was transferred to Adelaide to undertake exploration for copperlgold deposits on the Stuart Shelf. From 1981 until the present time, Warne has carried on practice as a consulting geologist working in Northern Australia and the Kimberley region in particular. He has had a number

of jobs over the years involving alluvial gold deposits. His work included exploration

and evaluation of gold and other mineral prospects in the East Kimberley region.

Warne's first contact with the Mary River area was in 1980. He became

interested in it because of a report he had read about the Reform Mine which was on

the edge of the Mary River. He had worked in the area taking scheelite samples for Union Oil and had noticed that gravel samples he examined carried gold grain. In September 1980, he pegged his dredging claim. In December 1980, he arranged for

18.

Kath Delaney, also a geologist, to prepare for him a map of the portion of the Upper Mary River covered by the dredging claim. The mapping process used 25 metre survey intervals over a distance of 2.8 kilometres from a start point about 100 metres below the water shed that marked the commencement of the River (X 137; T 1184, T1475). The Upper Mary River is noticeably narrower than its lower reaches as shown on a map, sections of which were drawn by Warne on separate sheets between 28 July and 10 August 1988 (X 138, T1502).

In 1980, Warne had observed signs of earlier prospecting activity in the

Mary River. In particular, there was evidence that prospectors had not confined

themselves to the river bed but looked for old channels across the banks which had been covered by silt deposits to depths of between half a metre and a metre. The

evidence was in the form of old pits and trenches. There was a belief among some prospectors at the time that the trenches contained only coarse gold. Warne believed

that gold was also present in fine grain form which was nevertheless of value (T

2295).

After the mapping was completed, Warne entered into arrangements with other prospectors to mine the dredging claim for gold on a small scale using a D2 caterpillar bulldozer. The bulldozer was used to pick up creek bed material, to detect nuggets in the creek and to push bench materials into the creek with a view to

detecting old channels. In 1985 the dredging claim was converted to a prospecting

licence under the new Mining Act. Warne had found that the D2 bulldozers were not

powerful enough to move material from the larger benches within a reasonable time.

19.

An attempt to put together a joint venture with other prospectors failed, and bulldozing was continued. For a short time a dry blower was used, until the end of

the wet season in 1986. A very large bench was bulldozed at that time. Yields of the order of half a gram per cubic metre were recovered using the first dry blower. When a larger dry blower was used, a check of its tailings with a small dryblower yielded an added 0.3 grams per cubic metre. This was an indication of the

inefficiency of the dryblowing methods and the amount of gold that had escaped into

the tailings. Warne decided that there was no point in continuing with dryblowing and that if useful quantities of gold were to be retrieved an alluvial plant would have to be

.. .

. . . .

used. From 1980 to 198617 when the bulldozing and dryblowing came to an end, he

was on site for about 2.5% of his working time (T 1478).

One particular area mined by Warne was covered by a prospecting

licence and later by Mining Lease 801199. Bulldozing on this tenement was carried

out in conjunction with a Mr Peter Leech and, save for two or three small alluvial areas, was confined to the high red gravel sheets. Shortly prior to July 1988, Warne's son, Dan, acquired M801248 running along the Upper Mary River. He also acquired M801212 from Peter Leech. That tenement was known as Blue Peter. Warne and his son were aware from the outset that there were limited resources available on these tenements. The immediate potential was further down the Mary River and up Dam Creek and other smaller areas in M80/199 (T1491).

In June 1986, Warne met Peter Donald Allchurch, also a geologist and

began to do work for Roebuck Resources NL, a company of which Allchurch was a

20.

director, along with Roger Duncan MacLiver, Roderick John McClure and Peter

George Onley.

Peter Allchurch

Peter Allchwch has a Bachelor of Science degree with a major in

geology from Adelaide University.

From 1963 to 1967 he was employed by the South

Australian Geological Survey and then for two years as a project geologist with the

American Smelting and Refining Company Australia Pty Ltd based in Adelaide.

From 1969 to 1980 he was successively senior geologist, chief geologist, and

-.-.. ..

exploration manager for Australian Selection Pty Ltd based in Kalgoorlie and Perth. He was involved in exploration for nickel and copper sulphite deposits, then diamonds and gold in Western Australia. He designed and managed exploration programs for copper, zinc, lead, tin-tungsten, gold, diamonds and coal in various parts of Australia. From 1980 to 1985 Allchurch was Technical Director of Samantha Exploration NL, Managing Director of Samson Exploration NL and a director of Cape Range Oil NL. Samantha Exploration and Samson Exploration explored for gold in Western

Australian and Queensland.

In 1986, following the takeover of Samantha Exploration, Samson Oil and Cape Range Oil, Allchurch restructured and relisted a public company which he named Roebuck Resources NL. The purpose of the company was the discovery of valuable minerals and petroleum deposits. Allchurch was the Managing Director of the company and also the Managing Director of Amity Oil NL.

21.

Warne is Eneaeed bv Roebuck

In 1986, Allchurch was looking for a person experienced in hardrock

exploration in the Kimberley area. Wame's name came up and he contacted him. They met at Halls Creek in June 1986. From the outset, Wame tried to interest

Allchurch in acquiring his tenements on the Upper M q

River.

Roebuck had been engaged in hardrock exploration at Slinky Hills

which is about 80 kilometres north of Halls Creek. In the course of the hardrock

exploration it became apparent that there was some alluvial potential. Allchurch had

..-*..

. ...

never had any prior direct experience with alluvial gold although he had seen many alluvial deposits and evaluated some. He had never been involved in mining for alluvial gold. He was concerned that there should be a proper investigation of the potential. Initially, Wame was engaged to assess the alluvial gold prospect in the

Slinky Hills area. He carried out that assessment using a backhoe for sampling and

an 8 tonne trailer mounted bulk sample testing plant which were provided by Roebuck. The plant could process about 80 kilograms of alluvium per hour. It had been purchased by Roebuck from Universal Mining Fabrications. At the same time,

Roebuck purchased a smaller sampling plant called a wheelbarrow jig. Recoverable grades in the Slinky Hills area proved to be generally less than one half of a gram per cubic metre. Warne completed the assessment in August 1987. Subsequently, he also did some work for Roebuck at Mount Dockerell where the grades were better.

However, Roebuck did not proceed with mining in that area as its interest was

overtaken by its involvement with M q

River.

22.

Warne continued with assessing the tenements he held at the Mary River area for his own purposes and hired equipment from Roebuck in that regard. While testing he gave some of his results to Allchurch. Allchurch asked him to prepare a report setting out the results of his exploration work and sampling. The

report which Warne prepared dated February 1988 was designated "Technical Report

No. 95".

The report was entitled "Roebuck Resources NL. The Mary River

,...,. ,..-

Alluvial~ Geology and Reserves Kimberley Region Western Australia". It began with a general description of the geology of the Upper Mary River area. It set out estimates of the volume of alluvial materials in the Mary River system by reference to three mining leases, ML801248, W01212 and W0/199. Those estimates can be summarised as follows:

Sol24

99,216 cubic metres comprising 81,916

cubic metres of creek allwials and

17,300 cubic metres from the pediment

zone as shown

in Table 1 to Report rounded

to 82,000 and 18,000 cubic metres respectively

in the tm of the Report.

ML80/212

ML80/199

69,470

cubic metres.

The volumes were in bench cubic metres, i.e., in situ volumes of material. Estimates for untested areas the subject of newly pegged prospecting leases were set out in

Appendix 1.

In summary they were as follows:

23.

PL80/144

- Upper Mary River

5,200 cubic metres

PIA01883 - Narrow Creek carrying

rich gold in potholes

2,400 cubic metres

PIA01906

- probably low grade

subject to some early working	21,000 cubic metres
PIA01893	37,000 cubic metres
PIA01943 - pediment areas
extensive carrying gold (untested)
North north east creeks carrying
nuggets	4,500 cubic metres

PIA01882

- total stream gravels

197,000 cubic metres

large alluvial zone at junction

with Hope Fall Creek and unassessed

bench material - minimum	20,000 cubic metres
high level of flood gravels -
assuming nominal width 100 metres
and depth of 0.5 metres indicated
volume	225,000 cubic metres.

Some explanatory comment was offered in the body of the report.

ML.801248 was the subject of the 1980 mapping which Warne had undertaken with

Kath Delaney. Initial estimates had indicated a volume in excess of 120,000 cubic metres of material. However, following bulldozing it had become apparent that rock bars buried beneath some benches reduced the assumed volumes. To some extent

this was set off by old channels and bank areas carrying significant gold values and additional volumes. Estimates for ML801248 attached to the report broke up the river sections into Main Creek, Old Channel, Side Creek and Bench areas. Warne said in the report in relation to Mining Lease 801248:

"The attached estimates are based on a realistic assessment of the situation as it exists now on creek gravels section by section, side alluvium bench by bench and some credit for adjacent pediment This

results in a tested reserve of 82,000 cubic metres for creek and bench

deposit and 18,000

for pediment zones.

These volumes do not include valley side slopes known to cany gold and bulldozed for nuggets, and only nominal areas of pediment (where testing has been carried out) considered."

Plant capable of processing fine silts would be needed if the pediment and HRA zones were to be mined (T1599). The fine silts also overlaid coarse gravel deposits. 18,000 cubic metres for pediment zones were included in the assessment because Warne thought that ultimately plant could be found to treat that material.

.. .

Mining Leases 801212 and 801199 had not been mapped. The volume

estimates for the part of the Mary River covered by Mining Lease 801212 totalled

57,320 cubic metres. Warne's estimates were based on field traverses and

observations made during sampling. The main channel was found to be over 3 metres deep in places during sampling. Most of the northern bank composed of bench

alluvials, flood gravels and pediment washed from the adjacent mining lease, ML80/199, was dif£icult to assess. The total stream width and depth of the bench material was unknown but greater than the presumed average values indicated in tables attached to the report. Low nominal figures were used for upper gravels. Their depth varied according to the underlying topography or whether they masked a former overflow channel. In one area tested by backhoe, gravels were a few

centimetres deep overlying a former 2.5 metre deep side creek channel carrying

nugget gold.

25.

In relation to Mining Lease ML.801199, the estimated volume was 12,150

cubic metres.

Values given for pediment gravels only covered the immediate known

areas of nuggetlcoarse gold bearing material below former workings. Warne expected that mineralised colluvium and pediment would prove more extensive than that estimated. An untested nugget bearing creek in the north of the tenement was not included in estimates nor was nugget bearing pediment gravel. The total indicated

volume for the newly pegged areas was 287,000 cubic metres plus 200,000 cubic metres of gravel. In making the volume estimates in TR95, Warne worked on the assumption that a portion of the bedrock would be brought to account. Mining

...

, ,.

bedrock to a depth of about 20 centimetres was normal practice and did not require

specific mention. Samples already taken had included bedrock. There was evidence from Allchurch that the 20 centimetre figure was nominal but in some places mining

might go up to a metre into the bedrock (T1190). It was desirable to mine some of the bedrock because nuggets tended to be caught in the cracks and crevices of the weathered layer near the surface (T1482).

The grade determinations were made by bulk sample testing for various

sites using the UMF mobile washing plant.

The plant worked by directing

concentrate over a sluice and panning for the gold.

Volumes treated were

determined by recording the number of loader buckets, each with a volume of 0.4

cubic metres, assuming an average volume of 0.45 cubic metres to cover any heaping of the bucket. The samples were taken from sites using a backhoe loader bucket:' This restricted sampling to previously bulldozed areas and creek gravels but, according

to Warne, adequately tested the variety of sample situations. There was no selective

26.

sampling of the material, all silt, rock and boulders were incorporated into bulk samples at all sample sites. According to Warne, creek gravels consistently returned grades in excess of 0.8 grams per cubic metre with a few lesser values at 0.5 to 0.7

grams per cubic metre.	The gold comprised small nuggets, finelcoarse gold and very
finelfloor gold.

The bench materials returned similar grades to creek gravels. Sample

sites in the creeks usually incorporated some bench material and associated silts.

Warne observed that as many benches had not been bulldozed they could be. expected

--...

to yield excellent grades. Experience had shown that old channel and bench deposits were richer in gold than present creek gravels. As to pediment, in the tested areas values ranged between 0.5 and 2 grams per cubic metre. The recovered gold was mainly in the form of small thin wafer like pieces with the remainder being extremely fine floor gold caught on the lower section of the jig concentrate sluice. Warne felt that a quantity of very fine gold had probably been lost during the washing. He commented that further attention to retrieving fine gold would be important as large areas of pediment were potentially economic. There was a problem with pediment material in the time taken to feed it through the plant. Satisfactory recovery only occurred at the slowest possible fixed rate which was less than 3 cubic metres per hour, about half the rate for creek and bench material. He concluded:

"From results obtained, an average grade of 0.7 cubic metres for all material is considered reasonable and takes into account some dilution by side valley material, of probable lower grade, and silts overlying bench deposits during full scale mining on M80W and

M801212."

27.

An appendix to the report offered additional comments about volume estimates and gold grades in untested areas covered by various prospecting licences. It was said in

the body of the report that:

"Collectively for tested deposit areas, it is calculated approximately

170,000 cubic metres of economic grade material is available."

Warne said in cross-examination that by "economic" grade he meant that a reasonable

miner could mine the material at a profit.

-..

. . .

The grades reported in TR95 were bullion grades, that is, they

quantified the incidence of umefined gold in the materials tested. There was no

facility on site to obtain a more accurate figure. The grades were grams per loose

cubic metre of material. The volume estimates in the active stream bed were obtained by measuring the width of the water course at various points and the length between those points. The depth of the active bed was measured where backhoe cuts

had been taken. Bench volumes were calculated by measuring their width and length

with a tape. Depth was measured where there was exposure due to bulldozer cuts and backhoe sample sites and where there were natural exposures on the side of the creek (T1481). The creek, being generally flat bottomed, an assumption was made for the purpose of calculating volumes that the creek bed cross section was a

rectangular prism. (T1506)

Warne considered that the maximum recoverable bullion grade would

be 0.7 grams per loose cubic metre. His opinion was based upon the results of bulk

28.

sampling. The bullion grade equated to a fine gold grade calculated at 0.63 grams per loose cubic metre. The report, TR95, was in part based upon the 1980 Delaney map of the area covered by ML801248. That map had not been prepared on any assumption about grades. It was prepared for the purpose of identifying a resource for a possible mining operation. Warne had no specific figure in mind as a grade below which mining would be uneconomic (T1586). The question whether an

economic mining operation was possible was not a matter for him alone (T1586). He

had assumed that the greatest quantities of alluvial gold would be recovered from the

Upper Mary River because of its proximity to the gold source. He recognised that

..-*.. ....

there was gold content in quartz gravels. He did not initially realise the importance of

the high red alluvials or their extent.

Roebuck - Warne Joint Venture Aereement - July 1988

Warne presented TR95 to Allchurch in February 1988. Allchurch had

inspected the section of the Upper Mary River which had been mapped in 1980. He formed the opinion that Warne's volume estimates were accurate (T1188). Allchurch

and his fellow directors decided that the Mary River area was "potentially mineable". They began looking for plant and doing feasibility studies. They formed the view that the stock market would be in recession for some years following the 1987 crash. Involvement in the mining operation would be a way to generate a reasonable ongoing cash flow. The price of gold at the time was $A610 per ounce.

In February 1988, Peter Onley, a director of Roebuck, who is a

consultant geologist, visited the Mary River to make an assessment of the tenements

29.

with a view to Roebuck deciding whether it wanted to be involved in mining the area.

Warne showed him around and explained his approach to sampling. Onley was

satisfied with that approach. He read TR95 and was also satisfied with that. His site visit occupied two or three days. Onley drew up a feasibility study for a joint venture. He assumed a UMF plant with a nominal capacity of 30 loose cubic metres per hour.

For the purpose of the exercise an actual throughput of 28 loose cubic metres per hour was postulated. The recovered grade was assumed to be 0.7 grams per loose

cubic metre in the first year and 0.5 in the second. Gold prices were posited as $19

per gram in year one and $17 per gram in year two.

In fact the price of gold fell

. .

more sharply than that, so that by 1988 when the joint venture commenced mining on

Mary River it was down to about $15.50 per gram.

Onley prepared a notice of intent to mine alluvial gold in the Mary

River in March 1988. That document was lodged with the Department of Mines. A Synopsis at the beginning of the notice asserted that the "Mary River Joint Venture

Partners" had delineated an alluvial gold resource in the upper reaches of the Mary

River. It said:

"Reserves of 160,000 cubic metres at a grade of 0.7 grams of gold per cubic metre have been proven near the head waters of the Mary River with a further UX),000 cubic metres inferred over 3.5 kilomew downstream."

Reference was made to a proposal to use a wet gravity separation plant capable of

treating 30 cubic metres of material per hour. Mining would proceed by the removal of gravel from the water courses and adjacent terraces using bulldozers and loaders

30.

but not explosives. The statement about the reserves was based upon figures given to Onley by Allchurch. He also referred to Warne's document TR95. Onley was unable

to say whether the figure of 160,000 cubic metres was based upon the 170,000 cubic metres mentioned in TR95. The estimated grade of 0.7 grams per cubic metre was derived from that document.

On 28 July 1988 the Mary River Joint Venture Agreement was executed

between Roebuck on the one hand, and Samuel Brian Warne and his son, Daniel

Victor Warne, on the other. At the time, the Wames were or were entitled to be

... .

registered holders of the following tenements:

ML80R48	Samuel Brian Warne
ML80R12	Daniel Victor Warne
ML801199	Samuel Brian Warne
PW/813	Samuel Brian Warne
PL80/882	Daniel Victor Warne
PL80/893	Daniel Victor Warne
PL801943	Daniel Victor Wame and Ian Andrew Nasb

The Roebuck tenements were:

Initially the respective interests of Roebuck and the Warnes were zero

and one hundred per cent. Upon completion of construction and commissioning of

plant the interests would be Roebuck, 60%, and the Warnes, 40%. The tenements

31.

held by each of the parties became property of the joint venture held by the parties as tenants in common in the proportion of their respective interests. On the same day, a management agreement was made under which Roebuck was appointed as manager of the project. Daniel Victor Warne was appointed as a consultant to the joint venture to assist in its day to day operations.

In the Annual Report of Roebuck for the year ended 30 June 1988,

was said, inter alia:

, . ..

"Mapping and sampling of alluvial sediment in the May River and adjacent terraces indicated potential for a commercially minable deposit. Systematic tating of the alluvials has proceeded by backhoe, trenching and mapping to determine allwial volumes and small scale sampling and assaying followed by "bulk" sampling and treatment of the samples in a mobile ten tonne per hour gold recovey plant to determine grades."

The Joint Venture's

Minine brations - November 1988-June 1990

In order that the joint venture could begin mining it had to acquire and

commission plant to separate gold bullion from excavated material. Several designs were prepared but it was necessary to find plant able to run on a limited water supply. Mr S.A. Sickerdick of Pylon Mining was consulted in this respect. As it turned out he was himself operating a plant at Telalpa in South Australia on a limited water supply. Following a site visit, Sickerdick constructed a plant and erected it at

Mary River. A letter he wrote to Allchurch of 29 October 1988 confirmed the

erection of the plant which was then fully operational. According to Sickerdick's letter measured plant runs indicated that ore was being processed at 70 loose cubic

metres per hour. This capacity had been determined by using loader bucket

capacities.

The throughput, it was said, could easily be increased to 80 loose cubic

metres per hour (X185).

The joint venture mined the Upper Mary River between November

1988 and November 1989. Sam Warne himself was on site during that period on the

following dates:

1988

4-31 Oct

1-6 NOV

1-12 Dec

a..

. . .

1989

11-17 April

22-30 April

1-26 May

13-31 July

19-31 August

1-17 September

28-31 October

1-29 November

Sometimes he was involved in the mining operation itself, but he was also using the

area as a base for other activities.

The mining operation involved the use of bulldozers, an excavator or

loader, trucks and the ore recovery plant. A bulldozer would scrape up alluvial

deposits from the creek beds and banks. They would be placed by the loader into a

truck for transport to the oil recovery plant. There, the gold content would be mecharlically separated from the gravel and dirt. The separated gold was sent away for refining. It was the practice of the joint venture to mine the full width of the available channels. If there were any gravel showing at the side of a channel, that

would be taken.	Sometime such gravel was to be found under silt deposits at bends
in the creek.

There were limits to the usefulness of the bulldozer. It could not get

into indentations in the creek banks or fissures in the bedrock. An excavator was acquired in July 1989. Warne spent considerable time instructing the excavator operator to identify bedrock and to excavate it to the proper depth. Cracks in weathered bedrock in the creek beds were repositories of nuggets. It was Warne's practice to excavate the rock to a depth of about 20 centimetres. He directed the

excavation operation, sometimes for hours on end. In some cases he would identify for the operator the locations of old stream channels which might contain alluvial

gold. He also tried to ensure that the operator did not excavate or load silt which

tended to clog up the ore treatment jigs and yield a lower grade of gold.

The gold recovery plant designed by Sickerdick was used by the joint

venture at Mary River from November 1988 until June 1990. It was designed to

process 60 loose cubic metres of material per hour. In practice it operated at an

average of 65 cubic metres pre hour. Sometimes it was run at above 80 cubic metres per hour on loose gravels. The joint venture members were less concerned about the grades obtained through the machine than achieving a daily production weight of gold.

The grade could have been increased by reducing the rate at which material was processed but the total amount of gold recovered at the end of each day would have

been less (T1501).

34.

As the operation moved down stream below the M a y Dam, the

recovered material had a higher sand content than in earlier stages. A large amount of fine material attributed to the flooding of the jigs resulting in loss of gold from time to time. There was also difficulty in the treatment of material from the high red alluvial deposits. That material tendered to be very silty and when it was processed it yielded reduced recovery. The high red alluvials were mined during wet periods when the creeks were in flood or the material in them was too wet to process (T1500 and TR244 X-130).

.... .. . .

Practical aspects of the joint venture operation can be seen in internal correspondence emanating from Allchurch. A handwritten memorandum prepared in December 1988 dealt with the first 51 days of operation from 1 November to 21 December. For twenty eight of those days the plant had not been operational for various reasons which were listed in the memorandum. There were a number of suggestions made in relation to the acquisition of spare parts, the sale of an existing loader, the acquisition of a new one for plant feed, and the purchase of an excavator

to improve the mining system. Under the heading "Management", the memorandum

said:

"1.	The manager's first responsibility is to supervise
mining - carting operations so that plant does not
wait for ore. Ultimately the project will depend on the mfnine.
2.	It is important that we maintain as large a stockpile
as practicable to allow us to keep the plant going for as long as possible."

35.

There was an estimate of monthly operating costs and the amount of gold production needed to break even. There was a reference in that memorandum to a recovery rate of 0.5 grams per cubic metre in fine gold. AUchurch observed:

"Clearly with reasonable through put we should pay back and make

money."

At that time, joint venture income from gold sales was $41,036.28.

The amount of

gold in stock was $7,200

in nuggets and site stock in volume was estimated at $15,300

In a handwritten memorandum to Dan Warne misdated 5 January 1988

(for 5 January 1989) AUchurch emphasised the need to increase the production rate

to the maximum in daylight hours and to add a partial or full night shift as soon as possible. He was loath to spend more money on equipment until it could be

demonstrated that the plant could be run regularly for 8 hours or more a day for ten

days or so. He said:

"I am confident that the project can work well but we cannot continue

to operate at a real loss." (X194)

On 19 January 1989, AUchurch again wrote to Dan Warne. He was pleased to hear

that the operation was settling down and things were going well. He commented that increasing the ore throughput would make more money for the joint venture than marginally increasing recovery by say 10%. He urged increased throughput wherever

possible.

He also advised Warne to keep a close eye on the mining as that was the

36.

key to the operation. It was apparent from his letter that Allchurch was monitoring

the costs associated with the operation. He talked about cutting telephone costs and

monitoring the use of fuel to the various items of plant and vehicles (X195).

The next written communication from Allchurch was a memorandum of

14 June 1989 to Warne and Onley in which he again referred to the need to increase

production to improve returns on the operation. The recovered grade, as he pointed

out, was down on reserve estimates but consistent at a little over 0.4 grams per cubic

metre. Because it was unlikely that the grade could be improved the throughput

....,.

should be increased. The only way to improve the grade would be to adjust the plant. Returns had been good in February, but "barely adequate" in May. Allchurch suggested that at the then current gold price of $15.75 per gram, the joint venture needed to average in excess of 16,000 cubic metres per month and should aim for 18,000 cubic metres per month of ore processed. Cross examined on this memorandum, he said that the "reserve estimates" referred to figures derived in discussion with Warne and Onley. They had already realised that the grades were

lower than those contained in TR95 (T1358). They were now expecting grades of about 0.5 grams per cubic metre. This is consistent with the handwritten report which Allchurch prepared in December 1988 on the first fifty one days of operation. He referred in that memorandum to a recovered grade of 0.5 grams per cubic metre of fine gold. In cross-examination he said that 0.5 grams per cubic metre was "the sort

of figure" recovered in the early stages of mining the Upper Mary River after the

treatment of stockpiled material.

37.

For the purpose of these proceedings, Allchurch prepared a document entitled "Mary River Gold Operation Volume and Grade Reconciliations" (X-146). For the period November 1988 to November 1989, as was pointed out in the document, Roebuck mined and processed 124,951 loose cubic metres, recovering a

total of 46,972 grams of fine gold at an average recovered grade of 0.4 grams per loose cubic metre. Daily production records indicated that the volume mined from

blocks which were the subject of resource estimates in TR95 was 117,058 loose cubic

metres to the end of November 1989. The estimated resource in TR95 for those

blocks was 127,200 loose cubic metres. A table which formed part of the

- .

reconciliation showed a comparison of the estimated resource volume according to TR95, the volume mined and the unmined quantity. These figures were expressed in bench cubic metres. Bench cubic metres are measures of volume of material in situ.

The ratio of the bench volume to loose volume is 1 to 1.2. That is to say, a bench cubic metre when excavated occupies on average 1.2 cubic metres as loose material. A reconciliation table covering volumes mined for the period November 1988 to

November 1989 was as follows (X-146):

Allchurch commented in the report that the mined volume was 8% less than the

reserve prediction.

A further 10,534 loose cubic metres were mined from TR95

blocks between December 1989 and the sale of the operation.

The discrepancy in

grades may be explained by the fact that Warne's bulk sampling was processed

through a UMF mobile washing plant. The joint venture used the Sickerdick plant. The Warne figure was a bullion grade of 0.7 grams per loose cubic metre which was equivalent to 0.63 grams per loose cubic metre fine gold grade. When taking into account a loss tailings of 0.18 grams per loose cubic metre, there was a good grade reconciliation. Robert Hancock, a mining engineer with Minval Associates, who was called as a witness for Roebuck made this point in cross-examination (T233.5).

On 29 June 1989, McLiver sent a fax to Dan Warne noting that their

June outgoings could exceed income by approximately $19,000.

3 7.

total of 46,972 grams of fine gold at an average recovered grade of 0.4 grams per loose cubic metre. Daily production records indicated that the volume mined from

blocks which were the subject of resource estimates in TR95 was 117,058 loose cubic metres to the end of November 1989. The estimated resource in TR95 for those blocks was 127,200 loose cubic metres. A table which formed part of the

Location

R~SODICC

R e S O m

Unmined

Estimate

Block Mined

Resources

BCM

B m

ML248

Creek & Bench

81,900

76,000

6,000

formerly

Pediment

l 7 W

17,300

PI334

ML212

Creek & Bench

27,520

26,000

upper (red)	23,500	0	23,500
gravels

Allchurch commented in the report that the mined volume was 8% less than the reserve prediction. A further 10,534 loose cubic metres were mined from TR95 blocks between December 1989 and the sale of the operation. The discrepancy in

grades may be explained by the fact that Wame's bulk sampling was processed through a UMF mobile washing plant. The joint venture used the Sickerdick plant. The Wame figure was a bullion grade of 0.7 grams per loose cubic metre which was equivalent to 0.63 grams per loose cubic metre fine gold grade. When taking into account a loss tailings of 0.18 grams per loose cubic metre, there was a good grade reconciliation. Robert Hancock, a mining engineer with Minval Associates, who was called as a witness for Roebuck made this point in cross-examination (T2335).

On 29 June 1989, McLiver sent a fax to Dan Wame noting that their

June outgoings could exceed income by approximately $19,000.

In the company's Annual Report to 30 June 1989 which was apparently completed in October of that year, the following comments were made about the Mary River Gold Project:

"In November 1988 a 50 loose cubic metres (85 tomes) per hour jig- based gold recovery plant was completed and commissioned. Full production began in January 1989 and the plant has consistently achieved throughput rates of more than 65 loose cubic metres (110 tomes) per hour. The mine has operated on a single shift basis throughout the year, with some delays due to wet season rains and mechanical downtime.

To the 30th June 1989,88,8% loose cubic metres (151,123 tonnes) of ore had been treated for a recovery of 35.404 kilogrammes (1,138.4 ounces) of fine gold and 1.368 kilopmmes (44 ounces) of silver, for

an average recovered grade of 0.4 pmmes of gold per loose cubic

metre.

The mine operated profitably to the 30th June, but a 26 percent fall in the price of gold between the s m of construction and the first gold sales significantly reduced expected profit levels.

Roebuck sole funded the development, but has an 80 percent revenue interest until loans to our joint venture partner are repaid Thereafker, Roebuck has a 60 percent interest

Reconnaissance sampling of extensive alluvials within the Joint Venture tenements during the year, has indicated the presence of substantial resources of alluvials with grades in the range of 0.3 to 0.6

pmmes per loose cubic metres.

Systematic detailed sampling is

required to bring these resources to the proven category." (X7).

In cross-examination, Warne was asked what would constitute the "systematic detailed sampling". It was said to be a reference to bulk sampling. He had discussed the question with Allchurch. They had agreed that backhoe sampling was unwarranted and that it would be sufficient to do bulk sampling using the production plant. This was the approach that had been used up to that stage at Mary River. It was subsequently applied to Thompson Creek. Bulk sampling through the production plant was economic and also resulted in production of gold.

40.

As at November 1989, the joint venture was not performing to

AUchurch's satisfaction. In a handwritten fax of 15 November 1989 to Sam and Dan Warne he observed that the results for October were very poor. The operating loss

had increased by $23,000

to $37,000 since 1 July.

Costs were generally good but

production very low. This was the main problem. Gold sales and operating costs for

the months of May to October inclusive indicated that sales exceeded costs in May,

June and September. Allchurch went on to say:

"Now that we have the water production sorted out we must strive to

....

increase throughput of grade ore to

at least 450 m3 per day."

The letter went on:

"We do have a few things going for us now. The gold price is rising

and looks like continuing to rise (now S391), and the Aussie dollar is

weakening at last (feu 1 cent today) A$ gold 504.00."

Allchurch suggested that if a stockpile could be built the plant could be run for 8 hours with one worker and Dan Warne as supervisor on Sundays with the rest of the

crew off. He suggested that the plant should be started early in the morning to maximise hours. Cross-examined about this letter, Allchurch agreed that as at November 1989 he had a concern about the financial viability of the project.

Nevertheless a dam had been constructed at Mary River and this was the source of

the reference to the water problem having been "sorted out".

41.

Technical Rewrts 117 and 119 - Seutember/October 1989

Warne was asked by Roebuck to prepare further technical reports.

Technical Report 117 in two volumes was entitled "Evaluation of Exploration Drilling

August-September 1989". This report was directed to the evaluation of hard rock

mining prospects in the area. Warne denied that it was inspired by disappointment

with results which had been obtained from alluvial mining.

A further technical report, 119, dated October 1989, was entitled

"Progress Report on Mining and Exploration of Mary River Joint- Venture

Tenements" (X209). Quarterly production figures were set out indicating average

gold grades of 0.46, 0.47 and 0.33 grams per loose cubic metre for the periods ending 31 December 1988, 31 March 1989 and 30 June 1989 respectively. Production had

been restricted in the last quarter of 1988 because of time spent in bulk sampling and

plant tuning. The wet season had arrived early, in mid-November. The operation

was shut down from 22 December 1988 to 14 January 1989. The exhaustion of surface water stored in dams during June restricted plant operation to 80% of capacity on reversion to the bore supply. The lower average grade for the second quarter of production in 1989 was due to testing and the partial working of lower

grade deposits.

The sources of the ore treated for the period covered by the period

were as follows:

M801248 Maly River Channel

and Benches

70,996 loose cubic metres

M801193 East Mary Channel

and Benches

3,7W

loose cubic metres

M80/212

Mary River Channel

and Benches, Old Channel including

high level low grade

flood gravels

1,500 loose cubic metres

M801199

Specimen Creek

Alluvium:

520 loose cubic metres

Bills Patch

Eluvium

1,980 loose cubic metres

Warne accepted that although he could establish the source of a lot of the ore from the mine manager's records, some ore waited on the pad a day or two to be treated. .. . , The records did not distinguish bench and channel material. Warne could work out in the course of operations what the bench and channel grades were but a stranger coming to the records would be unable to make that distinction (T1605). In relation to M801248 it was not to be taken from the absence of any reference to reserves in that tenement that it had been mined out. There was no requirement to discuss the reserves. The report was to be presented to the Mines Department to summarise

production and exploration of the lease. Warne agreed in cross-examination that

although he had predicted in TR95 an average grade of 0.7 grams per loose cubic

metre of bullion gold which converted to about 0.62 grams per loose cubic metre of

fine gold, the actual yield at around 0.4 was below his original expectation (T1603).

The report also contained an exploration section in two parts, A and B.

Part A referred to Alluvial and Eluvial reserves. Part B concerned Hard Rock

Mineralisation and is not relevant for present purposes. Under Part A, Warne dealt

with areas within the various tenements. In summary the report contained the

- 5

following comments:

M801212 and P8011036 - Blue Peter. Cave W a t e r

0)	Hole and Red Flat

M80B12 yielded 0.45 grams per loose cubic metre.

25,000 bench cubic metres of creek and bench

deposits remained.

P.80/1036 Old Channel passes through canying boulder beds of former channels. Bulk testing of relevant grade of 0.1 per loose cubic metre for upper most flood gravels, 0.2 to 0.3 grams per loose cubic metres for deeper mixed deposits and 0.4 to 0.5 grams per loose cubic metres for former boundary channel sections.

The total values of deposits in this valley area was

, .

...

not known but was of the order of 500,000 loose

cubic metres.

(ii) P80j893: P80rn. P80/883. M80n99 - Dam Creek

and S~ecimen

Creek

Remaining estimated reserve

plus 10,000 loose

cubic metres metre at Dam Creek, 0.35 grams per loose cubic metre for Spencers Creek.

(iii) P80/882 - Lower Marv River Section to Junction of Thomuson Creek

Measured and visual estimates of gravel deposits in

this seaion indicated

Creek gravels 49,250 bench cubic metres

Bench deposits 33,900 bench cubic metres

Mensive deposits of high level flood graveis were not included in these estimates. They were thought to contain low grade fine gold. An estimated 77,000 bench cubic metres occurred immediately adjacent to the Mary River channel downstream as far as Little Gold Creek junction. High level gravels were far more extensive further downstream. Small scale samples of Hopeful Creek Junction yielded grades of 0.4 to 0.5 grams per loose cubic metre.

(iv)

P80fl049 - Little Gold Creek minimal.

(V)	P80/887, P80111W. P8011057 - Thomuson and Car Bodv Creek Reserves had not been assessed but were said to be

in excess of 150,000 bench cubic metres. Panning

had indicated significant gold grades.

(vi) Panning indicated *a general gold content" with the best potential in the lower section. Reserves and grades had not been assessed for these creeks.

Roebuck accepted that the dilution of ore by waste material was greater than anticipated and that the ore recovery plant was not operating as effectively as the test plant. Although the recovered grades were less than the test grades, the decision had been taken to increase the throughput in favour of gold production over higher

grades.

During September 1989 Warne had some discussions with Monty

Gordon, representing a local Aboriginal community, the Gunyan Community. He

drafted for Gordon a letter to the joint venture which Gordon signed asking for retention of roads, bores and dams when the operation had been completed. The letter, dated 8 September 1989 was intended to satisfy the Department of Mines that

the infrastructure should not be demolished (X-210, T1649). Warne sent a fax on the same day to Roebuck's Perth office. It referred to discussions with Gordon and said, inter alia:

"Concept of tourist gold theme with operating plant@) has obviously

not entered his head" (X211)

He emphatically denied however that he had then concluded that the project might close because of its unprofitable nature (T1652). I agree that this is too long a bow

to draw based upon the content of the fax.

Technical Rewrt 123 - December 1989

The joint venture partners decided that they would need to shift the ore

processing plant to Thompson River where a dam had been already part constructed.

Allchurch wanted the area to be sampled so that he could present details to his

Board, rather than merely accept Warne's word that it was appropriate to proceed

with mining on the Thompson River. According to Warne, what was required was

justification in the form of a summary report on the volumes available from the new

. . .

plant site on the Thompson Creek. It was that which caused him to prepare TR123.

The method of sampling ore adopted by Warne for the purpose of

preparing TR123 was descnied in the report in the following terms:

"1.	SAMPLE COLLECTION Samples were collected from streambed gravels by hand digging from surface. Effort was made to obtain a representative sample from surface to
bedrock or hole bottom. In many cases, dry, free
running upper gravels kept caving into the sample pit and such samples were biased toward upper gravel content. Past experience has indicated best gold values occur irregularly on the stream bed in natural traps which are unlikely to be sampled; as a result values indicated by this sampling method are lower
than bulk mining values, but act as a reliable guide
when compared to results from previously mined sections.
Gravels from the sample hole were placed in a 3.5 millimetre mesh screen which fitted precisely over a 20 litre plastic bucket so that no spillage occurred. 3.5 millimetre material was weighed and all oversize placed into a second bucket and also weighed.
In Thompson Creek oversize boulders commonly half the size of the bucket occurred and were not included

in oversize weights."

The 20 kilogram alluvial sift samples were treated in a Russell Jig, also known as a wheelbarrow jig. This had a manually fed hopper holding approximately 30 kilograms of sample. The jig concentrate was emptied by a tap at the base of the hutch. After each sample the hopper and jig mesh were thoroughly washed. Concentrates were emptied into a panning dish and transferred to a larger pan at the bottom of a washing tub full of clean water. Material in the large pan was repanned and the resultant concentrate added to the first. Gold grains were then collected and recorded. .The Russell Jig was effective in removing gold from the samples. No gold was found remaining on the sluice matting or from panning sluice tails.

tenements as a result of the exploration expenditure. An average multiplier for all 23 tenements was selected while recognising that they included mining leases and prospecting licences as well as applications for other such titles and for an exploration

licence. To achieve the $189,000 estimated valuation communicated to Wreford in

the letter of 17 May, a prospectivity enhancement multiplier of only 1.2 would be required. This was said to be an unrealistically low figure on the face of the technical evidence. On this basis, the value of the tenements and information was $387,585 rounded up to $388,000. Adding to this the lower auction value of the plant and

equipment being $325000,

there was a total value of $710,000 for the project.

165.

The Joint Venture terms method was applicable in this case because of the existence of a joint venture between Roebuck and the Warnes. The variation of the joint venture arrangements involved the surrender of the 40% share of the Mary River project by the Warnes to Roebuck on the basis that their accrued liability to 8 Febmary 1990 was forgiven. That liability was $200,236. On the face of that arms length buy out, the project had a 100% value of $500,590. The fact that the warnes were offered further involvement, namely future employment for Dan Warne and a 10% contniuting interest for Sam Warne, rendered the valuation a minimum though

realistic figure for the project around the general time when Hunt was contemplating

-..

.. -.

its purchase. On this basis, the total preferred value estimated in August 1990 for the

Mary River project was $500,590 rounded to $501,000.

The third method of valuation is known as the Discounted Cash

Flowmet Present Value financial simulation modelling method.

The valuation using

this method depended upon an after tax valuation of the tenements as at August 1990

using a simulated cashflow model and discounting for risk through adjustments to input parameters rather than by selection of the discount rate. Assumptions made in

the model were based upon specific data provided by Allchurch to Minval in the course of Minval's review of Roebuck's cost data and parameters used by it in previous financial studies of similar properties. The model showed considerable

volatility being very sensitive to variations in the gold price and operating costs. The

assumptions used were:

1. Only the measured and indicated resources remaining at date of sale were

mined, being a volume of 400,000 bank cubic metres less the 42991 bank

cubic metres mined by Roebuck from December 1989 to August 1990 at a

grade of 0.5 grams per loose cubic metre.

2. A capital cost of $510,000, comprised the $450,000 finally agreed as purchase

price plus $60,000 being the estimated cost of moving the treatment plant to a

new site on Thompson Creek and of upgrading its efficiency.

3. The annual production rate was based upon the assumption of one 12 hour

shift worked each day, six days per week for 46 weeks per year with 70% plant availability and throughput of 60 loose cubic metres per hour. Mine life was

thus 3.08 years.

Roebuck's production records indicated a long term historical

average production figure of 627 loose cubic metres per hour. The 60 loose cubic metres per hour throughput rate in this calculation was rounded down to that figure.

4. Operating costs were based on the $612,000 annualised cost estimated by the Bovard and Walsh report and the Bovard letter for an operation running one shin per day (6 people). On a consemtive annual throughput of 139,000 loose cubic metres operating costs were $4.40 per loose cubic metre.

...

. .

5. Depreciation was uniformly distsibuted over the mine life of 3 years, the amount available being $270,000.

6. Gold price was $484 per ounce as applying at August 1990.

7. Tax at the rate of 39% was been applied

8. Dismunt of 10% per annum real was appropriate for a project at this stage of operation.

Sensitivities were m

against the preferred case in order to obtain a Low and

High value.

The value in August 1990 dollars estimated on the basis of DCF/NPV financial simulation modelling using a 10% real rate of return ranges from $39,000 to $1,358,000 with a preferred value of $489,000. This methodology included Hunt's acquisition cost of $450,000 in its calculation and did not require separate addition of the value of plant.

In my opinion, the careful and comprehensive approach taken by

Minval Associates to the valuation of the project is generally supportive of a value in

the range which they assert. Having regard to that, the Hyman's report and Bovard's report to Esanda, I could not conclude that the sum of $450,000 which was the sale price paid by Hunt Contracting represented a payment in excess of the true market

value of the project.

Conclusions About the Irn~uened

Conduct

The question whether a communication between parties is misleading or

deceptive or likely to mislead or deceive is to be considered by reference to the

communication taken as a whole and in the context in which it is made - Parkdale Custom Built Furniture Ptv itd v. Puxu Ptv Ltd (1982) 149 CLR 191 at 199. That does not mean to say that conduct is misleading or deceptive only if it would mislead

or deceive a well informed person armed with an appropriate level of scepticism. Conduct which is capable of misleading gulliile people may, for that reason, be misleading or deceptive. In the context however of a major commercial transaction involving the sale of an obviously high risk business, statements about the business will not necessarily be misleading where they offer a positive prognosis upon bases which are disclosed subject to self evident limitations, express disclaimers and injunctions to the purchaser to seek independent advice - E.R. Sauiib & Sons Ptv Ltd v.

Corporation Ptv Ltd (1985) 6 IPR 489 at 497 and see generally the discussion in Heydon, Victims Level of Care in Misleadine and Dece~tive Conduct (1995) 2 Competition and Consumer Law Journal 230. Where the statement is in a form or uses language which, on the face of it, supposes a level of interpretive skill, the fact that it is susceptible of mis-interpretation by an uninformed person, or a person who takes no steps to inform himself or obtain advice, does not thereby render it

168.

misleading or deceptive or likely to be misleading or deceptive. It is, of course, dangerous to generalise in this respect. The sale of a retail business induced by

projections of future earnings may be a different thing from the sale of an alluvial mining operation. The complex technical questions which attend inferences about the distriiution of deposits in the latter are of a different order from the question where

the projected earnings are properly based on the recent commercial history of a retail outlet. In each case, the conduct complained of must be characterised in its own context. Before turning to that characterisation in the present case there are a few general findings of fact some of which are already explicit or implicit in these reasons which should be set out.

1. Samuel Warne is a geologist and alluvial gold miner experienced in the assessment of alluvial gold deposits with particular experience in the east Kimberleys and the Mary Wver area

2 Warne's ability to evaluate volume and grades of alluvial gold bearing deposits was qualified by the inherent uncertainty of such estimates. That uncertainty derives from the complexity of the geological history underlying the distribution of alluvial auriferous materials.

The uncertainty in making such estimates is well known to geologists generally

and readily ~scertainable

by enquiry of geologists.

The uncertainty of making such estimates in the Mary River area would be reasonably apparent to a person of average intelligence who inspected the area and gave consideration to the question.

The documents provided to Wreford, TR123, the information Memorandum, the tenement and equipment valuation and the letter of 17 May, self evidently required the interpretation of a person with relevant expertise to advise the uninformed reader of their full implications and signifimce. The language used, particularly the various references to resources as measured, infened, indicated and potential, on the face of it begged questions which required interpretive assistance to answer. The document cannot be characterised on the basis that it may be used and acted upon in the way that a sales brochure for a home or car may be read and acted upon.

When read by an informed person or the kind of person who might provide advice, the documents revealed the limitations of the estimates contained in them. This appears from the evidence of Bovard, Orridge and the Minval experts, Lawrence and Hancock, as well as from the documents themselves.

Turning to the more specific aspects of the case for misleading and

deceptive conduct and in particular the conversations relied upon, the following findings emerge from the evidence. These are not exhaustive of the findings which

have already been made.

In a telephone conversation following their initial discussion on 4 May,

Allchurch told Wreford of the fact that the Mary River project was for sale. He told

him there were adequate resources and a functioning plant. There had been

difficultieiwith the plant management and water supplies. The mine was making a

cash profit, but an accounting loss. Resources within trucking distance of the plant were exhausted. Retreatment of tailings had not been considered. Resource estimates had been done by Warne and so far as Allchurch was concerned, they were very good. There was nothing in these statements which was misleading or deceptive. The represented "adequacy" of the resources left open the question "adequate for what?" but conveyed no misleading impression. Moreover it must have been apparent even to the lay listener at that stage that what Allchurch was descniing was an operation which would require careful management to make a reasonable profit.

At a meeting in Allchurch's office on 16 May, he told Wreford that the resources set out in the Information Memorandum were 400,000 cubic metres at 0.3 to 0.5 grams per cubic metre and that it was very likely that there was more than rr million cubic metres of resource at Mary River. He did not say that the tenement contained a large quantity of gold which could be economically recovered. On the

170.

face of it what he stated about the resource was a matter of opinion. It was

necessarily inference from evidence. And having regard to the findings already made about Warne's experience, his methods and the validation of his specific estimates in TR95 which were matters known to Allchurch, it was an opinion based upon reasonable grounds. Allchurch made it clear by implication that money was not simply there for the taking. He did not tell Wreford that he would make a lot of money. He suggested more than once that Wreford should take advice. In particular he recommended that he talk to Sickerdick.

What Allchurch said to Wreford on these two occasions should be considered in the light of the material which he subsequently provided to him. Independently of that material however, his expression of opinion based on reasonable grounds and qualified by the expressed necessity for some independent advice for Wreford, was not capable of characterisation as misleading or deceptive even if the estimates referred to were not ultimately vindicated.

The letter of 17 May 1990 is to be read in conjunction with the materials contained with it particularly the valuation document, TR123 and the Information Memorandum. Hunt Contracting relies upon statements made in the letter that with good management, after slight modification, the existing plant and

equipment was capable of treating 1,000 cubic metres a day. It also relies upon the reference to a tailings heap comprising 60,000 to 1000,000 cubic metres of material bearing gold at a grade of 0.2 to 0.35 grams per cubic metre and representing a

substantial and easily accessible gold resource. These statements are statements of

171.

opinion. The plant was, at that time, operating at an average throughput of 60 loose cubic metres per hour. Production rates of up to 80 loose cubic metres per hour had been achieved. On a two shift operation, it was reasonable to suppose that the plant,

properly managed, could achieve 1,000 cubic metres per day. In any event, the figure

of 1,000 cubic metres appeared from the letter as an upper limit of what was

achievable.

Returns were "good" with daily throughput exceeding 600 cubic metres.

The statement as to tailings was a statement of opinion.

The

definiteness of the pleaded representation bears little resemblance to the tentativeness

-. ..

. -

of the passage from which it was derived:

"We have not significantly tested the coarse tailings heap, but Sam Warne believes it will grade between 0.2 and 0.35 per cubic metre. We have not measured the heap, but it would be between 60,000 to 100,000 cubic metres and as such represents a substantial and easily accessible gold resource."

It is evident that both the volume and grades are suppositions, unsupported by

sampling or measurement. It is a statement of what Warne and Allchurch believed and little more than that. Such evidence as there was supported a grade within the range referred to. Hunt Contracting recovered .l8 grams per loose cubic metres from its tailings treatment operation and there was almost certainly some loss of tailings.

The Minval Report (X-257) supported a volume estimate based on Roebuck's production of between 80,240 lcm and 99,350 lcm. It supported a grade of 0.21 grams

per loose cubic metre. It could not be said that the tailings were not accessible nor

that the resource was not "substantial", albeit the latter is a word of ambulato~y

content. The letter of 17 May 1990 was not misleading or deceptive.

172.

Statements made in the tenement valuation document are also pleaded

as misleading or deceptive. They relate to the existence of resources variously described in the document as "present measured resources, inferred resources and

potential resources". They also relate to the values attributed to these resources in

the document. I do not accept the contention that the valuation document was to be seen as superseding the Information Memorandum and TR1213. It was, in appearance and content, a summary to be read and understood in conjunction with the other documents. It was also to be read in conjunction with the suggestions contained in the letter that Wreford come to the site to satisfy himself as to resource disposition and that he be free to check sample ore zones himself or by his

consultants.

I accept the submission of counsel for Roebuck that the "present

measured resource" referred to the valuation document was the same as that

identified as 400,000 bcm "measured and indicated" in the Information Memorandum.

This was stated to be based upon detailed mapping and traversing as to 250,000 bcm

and estimates as to 150,000 bcm in unmapped smaller tributary creeks alluvial and eluvial deposits. The grades were "indicated" by "preliminary sampling" in each case. The statement was evidently one of opinion based on reasonable grounds namely, Warne's estimates in TR123.

The statements of inferred and potential resources were statements

which might be called a provisional opinion. The equivalent figures in TR123 were designated as unassessed resources. The designation "unassessed" in this respect gives

173.

content to the designation "inferred" and leaves it with the status of a tentative view. There is no misleading statement here and a fortiori no misleading statement in

relation to the volumes of "potential resources". The values of the resources are simply arithmetical products of the volumes and the current price of gold. They add nothing to the status of the opinions expressed nor to their content. Nor does the total gross resource figure of $23.47 million which is simply the sum of the three preceding figures.

In relation to the report, TR123, and the Information Memorandum, I

have already made findings sufficient to indicate the global character of those

documents, the nature of the readers to whom they were addressed and the extent to

which they embody statements of opinion, the limitations of which are apparent from the documents themselves in the eyes of those to whom they are addressed. There was a degree of debate about the Australasian Code. The question whether or not it was complied with in the Information Memorandum is, in my opinion, academic for present purposes. Wreford knew nothing of it so it could not affect his understanding

of the Information Memorandum. And the informed person to whom the Information Memorandum was addressed or ultimately to be addressed, would not be

misled as to the true nature of and bases for the various estimates as set out.

The Information Memorandum made clear that it was expected that purchasers to

whom it was provided would carry out their own independent assessments. It was in that respect addressed to persons who were themselves capable of such assessment or who had access to persons who could provide it.

174.

It was apparent from the Information Memorandum that during the

time of the Roebuck-Warne joint venture, the operation of the Mary River project had been marginally viable making a loss after depreciation. It left open the

possibility of improvement to a level of profitability. The debate as to the

methodology, nomenclature and the rights and wrongs of the conclusions offered by the Information Memorandum generally raise issues similar to those raised in relation to TR123 save for the matter of the application of the Code. As earlier indicated, I

accept that there were reasonable grounds for the opinions expressed subject to the

inherent uncertainties of alluvial estimations.

.- .

Reliance is placed by Hunt Contracting upon statements made by

Allchurch and Warne during a site inspection before the first offer was made.

Wreford accepted the general proposition that what he was told on the day of the sale was no more than a "visualisation" of the material with which he had already been provided. It went no further, in his view, than anything he had been told or

understood from the Information Memorandum and the associated material. The particular representations relied upon were statements said to have been made by

Warne that:

(0	The material in the vicinity of Thompson Creek bore gold at a grade of 0.5 grams per loose cubic metre.
(ii)	The material in the wash areas on the banks of the May River bore gold at a
grade of 0.4 to 0.5 grams per loose cubic metre.
(iii)	The material in the old channel areas comprised not less than 500,000 cubic metres bearing gold at a grade of 0.4 to 0.5 grams per loose cubic metre.

Further, it is said that Warne and AUchurch represented that:

(0	bearing gold at a grade of between 0.4 and 0.5 grams per loose cubic metre.
The tenements contained not less than 1 million cubic metres of material
(ii)	The tenements could be mined profitably.

As to that, I have already indicated that I do not accept that the representations

attributed to Warne were made by him. This aspect has already been discussed in the

review of the evidence of the site visit. I accept that AUchurch and Warne expressed

the opinion that the tenements contained not less than 1 million cubic metres of

* -

material but that the quoted grade was more probably between 0.3 to 0.5 grams. This was, and was on the face of it, an expression of opinion and the word "measured" was not used in relation to it.

I accept also that AUchurch said that the tenements could be mined

profitably. That was a statement of opinion and in my view it has not been falsified.

Moreover there were reasonable grounds to support it having regard to the possibility

of increased plant throughput and the use of a double shift.

In my opinion the allegations of misleading or deceptive representations

made on the site visit have not been established.

CONCLUSION

I am not satisfied that the applicant has made out any misleading or

deceptive conduct on the part of the respondents. There being no such conduct and,

176.

in my opinion, no duty of care which has been breached in this case, there is no cause

of action against the respondents. I should add that in my opinion what the applicant agreed to pay for the project was not more than its real value. The financial fate of the applicant seems to have been sealed roughly from the day at which it began operating. The plant modifications and associated non-productive time, the imposition of significant cost burdens, the reduction in plant throughput, the failure to

shift the plant to the new site, the frequent absence of Wreford from the site and the absence of tight and well organised control of the operation by Wreford, conspired to ensure the failure of the venture.

The outcome of this case is no doubt unfortunate in terms of its

financial consequences for Wreford and those of his family members who have

supported him. In the end, however, the responsibility for that outcome cannot be sheeted home to the vendor of the business. It follows that the vendor is entitled to the unpaid balance of the purchase price, namely $100,000 plus interest payable under the sale agreement. Interest accrues at 11% per annum commencing two months after settlement under the agreement. Settlement was on 21 August 1990. Allowing interest at the contract rate, the amount of interest to date is $49,500. There will therefore be judgment on the cross-claim for $149.500.

I certify that this and the preceding

One hundred and seventy five (175) pages are

a true copy of the Reasons for Judgment of his Honour Justice French.

Associate:

Date: 2 4 #p

/44<

Counsel for the Applicant: Mr N.P. Hasluck QC and MS	J. Pinnington
Solicitors for the Applicant: Lawton Gillon

Counsel for the Respondent: Mr J. Larkins QC and Mr D. Stone

Solicitors for the Respondent: Williams & Hughes

Date of Judgment: 24 April 1995

[1995] FCA 302

24 Apr 1995