BULL STREET - The art of the Con

Bre-X Upended

Indonesia is a country that has been blessed with natural resources and its oil industry is the envy of its neighbors.  The local mining industry is also world class and there are not too many days that go by when we have not heard of another “elephant find” discovered in one of the many thousands of islands, which comprise the country.  It is the largest producer of the Robusta coffee beans, which make instant coffee, it is the second leading producer of cocoa and palm oil and one of the world’s largest producers of rubber.  It is one of the largest exporters of oil and has vast amounts of copper and alumina.  It was not a major surprise then, when a small Canadian mining company announced that they had discovered gold in Borneo, one of the islands that make up the archipelago of Indonesia.

As the weeks went on, the find increased in size regularly until it eventually became by far the richest find since creation.   Bre-X, of Calgary, Alberta, a junior company which only had a secondary listing on the Toronto Stock Exchange, announced that the find exceeded 200 million ounces of gold, ($120 billion) the stock soared on the Canadian Stock Markets, starting at pennies and raising to stratospheric heights.

The stock started life at 12 cents per share and before it was over the price had risen to over $281.  Fidelity Investments, one of the largest financial money managers in the world sunk substantial money into the stock, as did a number of Canada’s largest pension funds.  It’s geologist, John Felderhoff, won prospector of the year award and he and an associate shared the distinction of being mining men of the year.  The market capitalization at the high on Bre-x was $6 billion and class action suits have been filed against everyone within serving distance to the tune of $3 billion. 

A team of highly trained geologists evaluated the gold samples and announced that they were legitimate sent the stock even higher, and the frenzy assumed unstoppable proportions.  More importantly, Freeport McMoran, a highly regarded expert in the field announced a joint venture with Bre-X and  they were advancing substantial funding for the mining venture as well. 

At this point, the strangest of things occurred, the world-renowned chief geologist for Bre-X, Mike De Guzman, seemingly became disoriented aboard his helicopter and stepped off the plane into the ocean, thousands of feet below.  Although this caused some consternation, pundits disregarded the aerial circus by remarking that “Mike always was tripping over himself.”  While this satisfied many, an investigation was begun and Forensic Investigative Associates was hired to look into the claims that had been made.  They found that the gold had been salted and that De Guzman had committed suicide.  They named one Cesar Pupos as De Guzman’s accomplice.

Others have far more esoteric theories on Guzman’s demise and a have placed a broader conspiracy spin on the overall Bre-x hoax.  There are some that are convinced that sometime before Guzman’s wild stories of gold all over the landscape first emerged, he was kidnapped by an Indonesian group and informed that he had to find lots of gold on the property or they would resort to serious dismemberment of his torso.  These conspiracy buffs were led by a respected author in the Philippines, who just happens to have a book coming out in which she accuses Indonesian factions of helping to plot the scheme, which resulted in the largest mining scandal in history. 

In the early West, when someone wanted to sell his mining claim and move along, he would often take gold and fill his shells with it, put the shells into his shotgun.  From there it was a simple task of taking aim at his mine site and pulling the trigger.  Gold particles became imbedded deeply into the rock and when a sample was taken it appeared as though the claim was awash with the precious metal.  Mr. Guzman used modern technology to salt his claim and the saga of what has become known as the “bungle in the jungle,” a fiasco in which a global record six billion dollars was stolen from investors in the greatest scheme in dollar terms in history.  On November 5, 1997, the Court of Queen’s Bench, Alberta put Bre-X Minerals Ltd. into bankruptcy



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