The Bre-X Gold Scandal

First there is a gold mountain, then there is no mountain

By Andrew Alden, About.com Guide
See More About:
O old
O 1rauds
O minin
O indonesia eoloy

A bar o1 old bullion excites 1ever dreams o1 wealth.
U.S. Federal Reserve Bank image
Sponsored Links
%op Lithium StockWe think this miner is the best way to play boomin lithium
demand.www.wealthdaily.com/lithium-report
Geoloical ConsultantsMinin and exploration consultants. A1rica 1ocussed
specialists.www.rockstock.co.za
GeoloyFind business articles 1rom leadin publications and journalswww.allbusiness.com
Geology Ads
O Gold
O Scandal
O Gold Minin Stock
O Gold Scrap Gold
O Geoloy
Sponsored Links
yVista Corporationyperspectral data collection and imae analysiswww.hyvista.com
Gold MineAlle lie1erbaren Bcher schnell, sicher & porto1rei bei
buecher.de!www.buecher.de/GoldMine
Start with the biest deposit o1 old ever reported, in the headwaters o1 the Busan River in the
steamin junle o1 Borneo. %he Canadian company Bre-X Minerals Ltd. didn't know about that
when it bouht rihts to the site in 1993. But a1ter Bre-X hired a hih-livin eoloist to map the
ore body, the deposit, alon with the 1ever dreams that accompany old, rew to monster size
by March 1997 that eoloist was talkin about a 200-million-ounce resource. You do the math
at, say US$500 per ounce.
Bre-X prepared 1or bi times ahead by buildin a old-plated Web site, where you could
enerate your own Bre-X stock chart to 1ollow its meteoric rise. It also had a chart showin the
equally meteoric rise o1 the estimated old resource: toether, those two paes could in1ect
anyone with old 1ever. (%he site's ruins are preserved on the Internet Archive.)
The Sharks Arrive
Bier mineral companies took notice. Some made takeover o11ers. So did the Indonesian
overnment, in the person o1 president Suharto and his power1ul 1amily. Bre-X owned more o1
this lode than seemed prudent 1or such a small, inexperienced 1orein 1irm. Suharto suested
that Bre-X share its 1ortunate surplus with the people o1 Indonesia and with Barrick, a 1irm tied
to Suharto's ambitious dauhter Siti Rukmana. (Barrick's advisors, amon them Geore . W.
Bush and ex-prime minister o1 Canada Brian Mulroney, also 1avored this scheme.) Bre-X
responded by enlistin Suharto's son Siit ardjojudanto on its side. An impasse loomed.
%o end the contretemps, 1amily 1riend Mohamad "Bob" asan stepped in to o11er all sides a deal.
%he American 1irm Freeport-McMoRan Copper & Gold (led by another old Suharto 1riend)
would run the mine, Indonesian interests would share the wealth, Bre-X would keep 45 percent
o1 the ownership, and asan 1or his pains would accept a share possibly worth, oh, a billion or
so. Asked what he was payin 1or this stake, asan said, "%here is no payment, no nothin. It is
a very clean deal." (You may hear a voice sayin "Foret it, Jake. It's Indonesia-town.")
Trouble Arises
%he deal was announced on 17 February 1997. Freeport went to Borneo to start its own due-
dilience drillin. Suharto was ready to sin a contract a1ter this step, lockin in Bre-X's land
rihts 1or 30 years and startin the 1lood o1 old.
But just 1our weeks later, Bre-X's eoloist at Busan, Michael de Guzman, exited his helicopter
(250 meters in the air at the time), an evident suicide. On March 26 Freeport reported that its
due-dilience cores, drilled only a meter and a hal1 1rom Bre-X's, showed "insini1icant amounts
o1 old." %he next day Bre-X stock lost almost all o1 its value.
Freeport brouht more rock samples to its American headquarters under armed uard. Bre-X
commissioned a review o1 Freeport's drillin the review recommended more drillin. Another
review 1ocusin on the chemical assays caused Bre-X to clam up completely on 1 April, and
Suharto's sinature was postponed.
Bre-X blamed the Web. CEO David Walsh told a 1awnin algary Herald reporter that the
meltdown bean when scurrilous local rumors in Indonesia were "picked up by one o1 the host
writers on the Internet on the chat pae or whatever."
Further reviews took the rest o1 April. Meanwhile, disquietin details bean to arise. Industry
journalists soon 1ound evidence that the Busan ore samples had been "salted" with old dust.
Salting of the Earth
On Friday 11 April, 4rthern Miner maazine put a "news 1lash" on its Web site layin out three
lines o1 evidence that Bre-X had been duped.
O First, contrary to company statements, Busan core samples had been prepared 1or assay
in the junle, not in the testin lab. Videotape made by a visitor to the 1ield site showed
the humble machines common in assay labshammer mills, crushers, and sample
splitters. Well-labeled sample bas clearly had 1inely crushed ore in them. Security was
lax enouh that samples could easily have been spiked with old.
O Second, the local inhabitants had beun pannin 1or old in the Busan River, but in two
years they never 1ound any. Yet Bre-X claimed that old was visible, a sin o1 unusually
rich ore. And de Guzman's technical report, con1usinly, called the old submicroscopic,
which is typical o1 hard-rock old ore.
O %hird, the assayer that tested the samples said the old was predominantly in visible-sized
rains. Also, the rains showed sins consistent with bein typical river-panned old
dust, such as rounded outlines and rims depleted in silver. %he assayer doded the 64-
billion-dollar question, sayin that there were indeed ways 1or hard-rock old rains to
acquire rounded edesbut that arument was a 1i lea1.
The Curtain Falls
Meanwhile a storm o1 securities lawsuits arose around Bre-X, which viorously protested the
whole un1ortunate series o1 misunderstandins. But it was too late. %he collapse o1 Bre-X cast a
cloud over the old minin industry that lasted into the next century.
David Walsh decamped to the Bahamas, where he died o1 an aneurysm in 1998. Bre-X's chie1
eoloist, John Felderho1, eventually went on trial in Canada but was acquitted o1 securities
1raud in July 2007. Apparently in sellin part o1 his stock holdins 1or $84 million in the months
be1ore the scandal hit he had not been criminal, just too stupid to catch the 1raud.