Shares in Bre-X were suspended on the Toronto Stock Exchange yesterday for the third time this week. They have fallen sharply amid serious doubts about earlier claims by the company that it had made the world's biggest gold find deep in the Borneo jungle.
The shares have plunged from C$15 (pounds 6.50) to C$3.20, though they edged up last night to C$3.43 before dealings stopped. Last year the company sported a stock market value of about pounds 2.7bn. It is now worth nearer pounds 300m.
Paul Yetter, a partner at Baker & Botts, said a writ had been issued in Texas last Friday on behalf of all Bre-X shareholders except "insiders" such as directors.
"We were hired to protect the interests of outside shareholders when it was first suggested by the Indonesian government that Bre-X make a joint venture of its Busang gold project with Barrick Gold, the biggest Canadian producer," Mr Yetter said. "We have been conducting investigations into the company for four months. Those are continuing."
Mr Yetter's action is directed against executives and officials of the company but also targets Kilborn Pakar Rekjayasa, the company's engineering auditors. Mr Yetter admits action against other Bre-X advisers - they include bankers JP Morgan and auditors KPMG Peat Marwick - "is a possibility".
Baker & Botts are not alone in seeking legal redress against the company, according to Mr Yetter: "There are about three other lawsuits against the company and at least another couple are imminent."
The Bre-X saga began four years ago when Canadian financier David Walsh was persuaded to buy into the Busang concession on the advice of Dutch geologist John Felderhof.
Money was raised from European investors for a drilling programme and it was claimed last year the concession might contain as much as 200 million ounces of gold.
These potential riches drew in the Indonesian government and Barrick Resources, headed by Peter Munk, who persuaded Mr Walsh to concede Barrick a share of the claim in a joint venture. Outside shareholders were upset by the deal. Even more upsetting was last week's revelation by Mr Walsh that the potential gold resources might have been overstated.
The statement came a few days after Bre-X's chief geologist, Michael de Guzman, fell 800 feet from a helicopter to his death near the gold site. Local police claimed de Guzman had committed suicide. Meanwhile there are strong rumours that the US Securities and Exchange Commission has begun an investigation into the affairs of the company. The shares are quoted on the American Nasdaq exchange as well as in Toronto, Calgary and Montreal exchanges. The SEC refused to confirm or deny the suggestion. In Canada , the Ontario Securities Commission has begun an investigation.
One New York stockbroker, Andrew Racz, director of research at Bishop Rosen, is calling for the US government to investigate the Bre-X affair:"Closer regulation is clearly now needed for mining exploration companies particularly as we have a genuinely global market through the Internet which allows insider trading in offshore accounts outside any government regulation."