Southwestern Resources Corp. is suing its former CEO, and revealed Monday that its Boka project in China contains "significantly less" gold than it had previously stated.

The Vancouver-based miner had announced July 19 that there were errors in the assay results it previously reported for the project because of "deficiencies in its control procedures." The company's stock price lost more than half its value overnight.

Southwestern Resources 3-month trading

Now, it says a preliminary analysis done with the help of an independent mining consultant has shown that the "mineral resource at its Boka Project is significantly less than previously reported."

But, it adds, "there are still indications of gold mineralization in drillholes and historical mine workings."

The company said its review of the project has found no evidence of tampering with the samples sent for assay.

Instead, Southwestern said it believes "manual and deliberate changes were made to its prior database to increase the grade of samples within mineralized sections."

The company has hired a consulting company to prepare a new resource estimate for the Boka project, and that should take eight weeks.

Until then, Southwestern Resources said it can provide "no assurances" about the size of the Boka deposit or its economic viability.

The company also announced it has launched a legal action against former CEO John Paterson in the Supreme Court of British Columbia.

It is seeking unspecified damages, alleging fraud, breach of fiduciary, statutory and contractual duties, and insider trading, it said.

The allegations have not been proven. Paterson resigned from Southwestern on June 19.

Southwestern also said it is pursuing similar claims in China against the former general manager of the Boka Project, John Zhang. He was fired last month.

Investors have also filed a lawsuit against Southwestern and Paterson, alleging they issued many misleading news releases. The first release — from late 2002 — talked of "bonanza gold grades."

Southwestern Resources stock closed at $1.70 on the TSX, down 34 cents on the day.