By Jack Caldwell

By now you must have read the news that Southwestern Resources is suing its ex-CEO for fraud, breach of fiduciary duty, and insider trading after realizing that he altered assay results from the Boka Gold project in China.

John Patterson resigned as CEO of Southwestern Resources after getting a $264,000 severance payment. Now he is in hospital suffering from depression. A lawyer speaks on his behalf. No doubt he has money to pay the lawyer, for he personally owns nearly a million shares and another seven million shares through Global Gold Corp. I bet he was not depressed when the shares were worth $20 a piece. I can understand why he is depressed now that the shares have fallen to $1.60. Still he is worth eight million so it is worth suing him.

I suspect a lot of other people are also feeling depressed about this case. Obviously the folk who paid $20 for a share that is now worth $1.60 are feeling depressed. But they are investors and the up and down is part of the game, so we cannot feel too sorry for them.

The folk I empathize with are the geologists and engineers who have been unfortunate or silly enough to have put their names to official documents telling these unfortunate investors that the Boka Gold project would make them rich. Here is a quick run-down of some of these professionals, who are now feeling most depressed.

The Company had somebody by the name of L.D.S. Winter of Sudbury, Ontario prepare a series of NI43-101 reports between 2003 and 2006. Mr. Winter tells us in one of these reports that he is an “independent consulting geologist,” with a degree in mining engineering from University of Toronto (1957) and a Master of Applied Science from McGill. In his 2005 report, he notes this:

“I visited the Property between January 10, 2003 and January 14, 2003 inclusive for 5 days, on September 10, 2003 and November 15, 2003.”

I find no record that he visited the site after late 2003. In March 2007 he prepared an NI 43-101 report for Southwestern Resources on the Liam Gold-Silver Project in Peru.

Here are extracts from his successive reports on the Boka Project:

March 5, 2003: In summary, it is considered that the Boka gold mineralization was produced by a very large mineralizing system and that the Boka area, based on the evidence to date, has the potential to host a very large, world-class gold deposit or deposits. The Southwestern / Team 209 Joint Venture has approved a six-month (Phase 1) program and budget to continue the evaluation of the Project. If the results of the Phase 1 program are positive then a significant diamond drilling program will be required to continue the evaluation of the Boka 11 - Boka 1 Mineralized Horizon as well as outside areas such as Boka 7 and Boka 8. The current six-month (Phase 1) program and budget as approved by the Joint Venture is for 5000 m of drilling with a total budget of $US800,000.

January 9, 2004: The Cooperative Company is continuing with their drill program to define the Mineralized Horizon along strike with four holes in progress. In the writer’s August 1, 2003 report an exploration program with a budget of CDN $6,803,830 was recommended. This program is currently being carried out. Due to the positive results being obtained from the drilling program, the scope of the overall program has expanded to include more drilling as well as engineering and environmental studies. To take into account these items an additional program with a budget of US $3,806,500 has been recommended.

February 11, 2005: The Company requested Hatch Engineering to prepare a Scoping Assessment Report on the Boka Gold Project. A Draft Report was received in December 2004, however, after a review of the report the Company expanded the parameters of the study to include underground mining. It is planned to release the results of the Report in the near future.

September 20, 2005: The Company received a report dated June 30, 2005 (the “Hatch Report”) entitled "Southwestern Resources Corp. – Preliminary Assessment, Boka Deposit Yunnan Province, P.R.C.". The report was prepared by C.L.B. Grant, P.Eng. and Paul A.J. Hosford, P.Eng., employees of Hatch Limited ("Hatch"), each of whom is an independent qualified person as defined by NI 43-101. The Hatch Report was prepared for the purpose of assessing a potential resource based upon a small number (67) drill holes within the Boka 1 North, Boka 1 South and Boka 7 zones of Project. The Hatch Report calculated resource estimates within those three zones as described in the Hatch Report. The Company views these resource calculations as being preliminary in nature and is conducting further exploration to develop a larger base for the calculation of resources for the Project.

In December 2006, the Company issued a news release entitled Southwestern Resources’ Boka 1 resource rise 215%. Here is a small piece from this report:

The Boka 1 mineral resource estimate was prepared by Danny Kentwell, MAusIMM, and Louis Bucci, MAusIMM, of SRK Consulting, an independent international engineering consulting company. Assay and geological data used in compiling this resource estimate have been verified by Mr. Bucci by direct observation of drilling, sampling, sample preparation, logging and laboratory visits. Assay and geological data used in compiling this resource have been verified by Mr. Kentwell by analysis of assay, QA/QC (quality assurance/quality control) checks, duplicates, standards, and repeats and database/statistical validation.

In early 2007, the Company released their 2006 Annual Report. It is replete with name-dropping, glossy pictures of the property, technical-looking cross sections, and doughy prose like this:

Southwestern’s flagship property is the Boka Gold Project in China, which is widely acknowledged to be one of the most important and significant gold discoveries in China.

Gold is hosted in veins and breccias and in places can be very high grade, for example in Tunnels XG-13 and XG-15 at the B1N deposits, channel samples of two metres returned grades of over 600 grams per tonne gold. High-grade gold has also been intersected in deep holes more than 400 metres down dip from outcropping gold mineralization. Visible gold is commonly seen in core within high-grade zones.

In December 2006, we released an updated resource calculation for the Boka 1 deposit, prepared by SRK Consulting. The report identified measured and indicated resources at Boka 1 totalling 3.1 million ounces of gold, consisting of 31.2 million tonnes grading 3.05 grams per tonne, with an additional 0.8 million ounces of gold in the inferred category consisting of 8.9 million tonnes grading 2.66 grams per tonne. This new calculation confirms the world-class nature of Boka and gives us confidence to advance it toward completion of the pre-feasibility study. An additional inferred resource at Boka 7, as calculated in June 2005, contains 1.3 million ounces of gold, consisting of 14.5 million tonnes grading 2.75 grams per tonne.

Several advances were made in the prefeasibility study on Boka in 2006 under the guidance of Ausenco, a world-renowned engineering firm specializing in mine development within the Asia Pacific region. Ausenco has extensive experience in China and oversaw the commissioning of the Jinfeng Mine. The presence of Ausenco as lead consultants has many advantages due to their favourable working relationships with Chinese government groups, which is essential for the advancement of the project to the mining stage.

Several stages within the pre-feasibility have been completed, including geotechnical work, tailings site appraisal, environmental baseline studies, seismic studies, geological modeling, mineral resource calculation, geochemical studies and preliminary metallurgy. We expect other aspects of the pre-feasibility - including mine plan, plant design, infrastructure, financial analysis, waste rock disposal, social issues, and water management studies – will be completed by mid-2007. Following completion of the pre-feasibility study, we expect to initiate a feasibility study at Boka during 2007.

The fraud appears to have been pretty thorough. Snowden is now riffling through the Company’s computers:

Southwestern Resources Corp.'s investigation into tainted drilling results from a gold project in China has been widened to include a forensic audit of computers at the junior miner's Canadian headquarters, suggesting data manipulation could be a key element of the escalating scandal. In addition to a thorough database review of drill samples from the Boka project, which had been touted as a major gold discovery, officials from consulting firm Snowden Group are also scanning computers and the information technology systems at Southwestern's office in Vancouver. "It's a forensic. It's going through the computers, so if there was an adjustment to the data, they can tell which computer did it," David Black, Southwestern's chairman, said in an interview.