"You know, I almost died That last year, dear." This is Murray Pezim talking,
and judging by recent telephone calls, that is how he starts conversations these days. That the Vancouver mining promoter has not yet passed to the great claimsstaking rush in the sky is evidenced by the party he is throwing on June 15 and 16 in Las Vegas—craps shooters, blonds, and crocodile-skin shoe fanciers welcome—and by the fact that he is sitting on 150,000 shares of Cartaway Resources Corp., which is a story in itself.
Cartaway, listed on the Alberta Stock Exchange, is an
or “penny dreadful,” depending on one’s stock position. In 1993, the company’s shares traded at a
a low of two cents. In the third quarter of that year it hit 30. Cents. In its heyday, Cartaway leased 3,000 90-gallon
garbage containers to the City of Kamloops, B.C. The future seemed, well, limited. A corporate epiphany arrived in the person of Michael Stuart, not just a broker with First Marathon Securities Inc. in Calgary, but the firm’s top guy in that city. In a subsequent head-snapping
prospectus in November, 1995, Cartaway announced that its board of directors, led by Stuart, who had become Cartaway’s president, secretary and promoter, had decid-
WHAT GOES UP
ed to refocus the business efforts away from garbage containers and towards exploration opportunities in Labrador and Greenland.
Thus was born a classic mining promotion, the likes of which Canadian investors have been buying into for, oh, a half-century or so. It was classic in the sense that it tagged on to an existing find, in this case the Voisey’s Bay nickel discovery in Labrador. Classic in the way that a corporate “shell”—the garbage company— greased access to a stock exchange and the investing public. And classic in the way that the promotion’s principals, including Stuart, got Cartaway’s “cheap stock,” getting in as low as 12 V2 cents.
It was the brain wave of Stuart, and fellow First Marathon brokers in Vancouver, to pool exploration prospects, pick-
ing up claims from the likes of Vancouver promoter Jimmy John. Management was hired—John Ivany, banned along with Pezim from trading on the Vancouver Stock Exchange for all of 1991, took over the presidency—drill rigs were leased, and the punters who scored on Voisey’s piled in. Institutional investors bought stock, pushing it up, then started locking in their profits. In mid-May, Cartaway hit $26. Then it
cratered. The ASE shut down, beaten by the sheer volume of orders.
That the ASE is a wildly speculative exchange does not excuse the Cartaway debacle. Cartaway’s first offence was releasing visual estimates of ore on its Cirque Property in Labrador. Based on an eyeball appraisal, the company was touting “massive sulphides,” and then the presence of five per cent to 10 per cent chalcopyrite, which, to the initiated, usually indicates a minable copper grade. Trouble was, subsequent assays proved the visual estimate to be about as close to the truth as Jupiter is to Mars. Ivany’s defence is that “everybody makes mistakes.” If that is all it was, the Cartaway collapse still begs an examination of the standards of reporting on mineral exploration. Certainly more stringent standards would
have made life easier for at least one
Toronto broker, who spent 2 1/2 days a week keeping investors out of the highly speculative Cartaway. This same broker found himself on vaca-
tion with an investor who had made $25 million on Calgary’s Bre-X Minerals. The junior mining market has been running wild. Investors, he says, have been throwing money at the wall. Last week, the junior market started to implode. Helping the market blow-off were reality checks on confused assay results from the likes of Timbuktu Gold Corp. and Naxos Resources Ltd., the latter a Jimmy John company that has been touting a fabulous platinum find in California.
The larger issue is the aforementioned Mr. Stuart. First Marathon, run by Lawrence Bloomberg out of Toronto, is conducting what it politely calls a “review” of the Cartaway caper. The optics on this one are very bad indeed. It certainly does not fit with the refined Bloombergian veneer to have his breakaway republic in Calgary acting like two-bit mine promoters. And given the design of the deal, it is hard to see Cartaway as much more than a getrich-quick scheme for brokers, a view reinforced by Stuart’s selling of some of his own stock before the crash. Some might wonder where First Marathon’s compliance department, the internal watch-
dog, is in the story. First Marathon talks of shades of grey, as it tries to assess the seriousness of Stuart’s actions. Others have no difficulty seeing the story in black and white. □
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.