The Windfall That Fell

When a rich lode of copper was discovered at Timmins in Ontario last April, the news set off a wild rush of speculation in Canadian mining stocks. As prospectors staked out some 8,000 claims in the Timmins area, penny stocks became dollar stocks on the Toronto Exchange, and paper fortunes piled up almost overnight. Though most of the glory and the proven reserves belong to the lode's Yank discoverer, Texas Gulf Sulphur, Canadians were particularly pleased when one of their own companies seemed on the verge of its own strike. It was only a small company with a long-shot name--Windfall Oils & Mines Ltd.--but it began moving quickly on faith, hope and rumor.

In the past month, the price of Windfall's stock soared from 56-c- a share to $5.70. Then the bubble burst, damaging thousands of investors, badly depressing the penny stock market and involving one of Canada's most unusual women. Last week two official investigations of the Windfall affair were launched.

Early in July, Windfall announced that it had started drilling in the Timmins area about 31 miles from the Texas Gulf Sulphur site. Without so much as a hint of what, if anything, had been found, investors bought up more than 6,000,000 shares of Windfall in the week of this announcement. Rumors of a rich lode raced through Bay Street, Toronto's Wall Street. The company remained noncommittal and, despite frequent urgings from the Toronto Exchange, did not report its drilling results.

Surprise in Store. Many Canadian investors placed considerable trust in the prime mover of Windfall: Viola MacMillan, 61, a shrewd, hard-driving prospector since 1923 and the dark-haired darling of Canada's mining men. Miners had elected Viola president of the Prospectors and Developers Association 21 times, and serenaded her each time with a lively rendition of Let Me Call You Sweetheart. She and her husband George, the president of Windfall, were called "the mining Mac-Millans." They also kept stockholders in the dark. To one questioner, Viola replied cryptically: "A lot of people are going to be surprised."

They sure were. Last fortnight the MacMillans finally got around to announcing the result of the drillings: "No commercial assays were obtained." The next day, sell orders flooded the Toronto Exchange, driving the price of Windfall stock as low as 80-c- before it closed at $1.04. Last week, as the price settled at a limp 78-c-, both the Ontario Securities Commission and the provincial government began investigations of Windfall's dealings. A BLACK DAY FOR CANADIAN MINING, headlined the respected Northern Miner.

Penny Crash. Windfall had delayed the announcement until it got 35 core samples prepared for assay. But many miners felt that experts like the MacMillans could have seen the core's value, or lack of it, much earlier. Other companies controlled by the MacMillans held 900,000 shares in Windfall--and Canadian law, unlike that in the U.S., does not force company officers to disclose what they have bought or sold. The Toronto Stock Exchange took a close look at Consolidated Golden Arrow Mines Ltd., one of Viola Mac-Millan's companies. At the exchange's request, Viola disclosed that at the beginning of June, Golden Arrow had owned 120,000 shares of Windfall, then bought an additional 38,000 shares for $30,778. All of these 158,000 shares, she said, had been sold during the runup--for a total of $345,907.

The fall of Windfall brought other penny stocks crashing down with it. Many run-of-the-mine speculators took a hard dive last week, and even experienced investors took a stiff beating. Many companies in the Timmins area were able to put money in their treasuries before the Windfall affair, intend to go on drilling on the theory that one failure is not decisive. But the Windfall case could discourage the speculative buying that Canada needs to find mines, and it will probably produce legislation to introduce stricter regulation of the securities business, including full disclosure of insiders' dealings.

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