cross-posted from: https://sh.itjust.works/post/59506794
Bre-X was a group of companies in Canada. Bre-X Minerals Ltd., a major part of Bre-X based in Calgary, was involved in a major gold mining scandal when it reported it was sitting on an enormous gold deposit at Busang, East Kalimantan, Indonesia. Bre-X bought the Busang site in March 1993 and in October 1995 announced significant amounts of gold had been discovered, sending its stock price soaring. Originally a penny stock, its stock price reached a peak at CAD$286.50 (split adjusted) in May 1996 on the Toronto Stock Exchange (TSE), with a total capitalization of over CAD $6 billion. Bre-X Minerals collapsed in 1997 after the gold samples were found to be fraudulent.
Some other mineral companies, including Placer Dome, organized failed takeovers, but the Indonesian government of President Suharto also got involved. Stating that a small company like Bre-X could not exploit the site by itself, the Indonesians initially suggested that Bre-X share the site with the large Canadian mining firm Barrick Gold, in association with Suharto's daughter Siti Hardiyanti Rukmana. Bre-X hired Suharto's son Sigit Hardjojudanto to handle their side of the affair. Bob Hasan, another Suharto acquaintance, negotiated a deal whereby Bre-X would have a 45% share, Freeport-McMoRan Copper & Gold would run the mine, and Hasan would get a cut as well. Bre-X would have the land rights for 30 years. The deal was announced February 17, 1997 and Freeport-McMoRan began their initial due diligence evaluation of the site.
The fraud began to unravel rapidly beginning on March 19, 1997, when Bre-X geologist Michael de Guzman reportedly died of suicide by jumping from a helicopter in Indonesia. A body was found four days later in the jungle, missing the hands and feet, "surgically removed". In addition, the body was reportedly mostly eaten by animals. According to journalist John McBeth, a body had gone missing from the morgue of the town from which the helicopter flew. The remains of "de Guzman" were found only 400 metres from a logging road. No one saw the body except another Filipino geologist who claimed it was de Guzman. One of the five women who considered themselves to be his wife was receiving monetary payments from somebody long after the supposed death of de Guzman.
A week later, on March 26, 1997, the American firm Freeport-McMoRan, a prospective partner in developing Busang, announced that its own due-diligence core samples, led by Australian geologist Colin Jones, showed "insignificant amounts of gold". A frenzied sell-off of shares ensued and Suharto postponed signing the mining deal. Bre-X demanded more reviews and commissioned a review of the test drilling. Results were not favorable to them, and on April 1, 1997, Bre-X refused to comment. An independent company, Strathcona Minerals, was brought in to make its own analysis. They published their results on May 4, 1997: the Busang ore samples had been salted with gold dust. The lab's tests showed that gold in one hole had been shaved off gold jewellery though it has never been proved at what stage it had been added to those samples. This gold also occurred in quantities that did not support the original assays. Trading in Bre-X was soon suspended on the TSE and NASDAQ, and the company filed for bankruptcy protection.
By May, Bre-X faced a number of lawsuits and angry investors who had lost billions. Among the major losers were three Canadian public sector organizations: The Ontario Municipal Employees Retirement Board (loss of $45 million), the Caisse de dépôt et placement du Québec, the Quebec Public Sector Pension fund ($70 million), and the Ontario Teachers' Pension Plan ($100 million). There was fallout in the Canadian financial sector also; the fraud proved a major embarrassment for Peter Munk, the head of Barrick Gold, as well as for the then-head of the Toronto Stock Exchange (resulting in his ousting by 1999), and began a tumultuous realignment of the Canadian stock exchanges.
Walsh moved to the Bahamas in 1998, still professing his innocence. Two masked gunmen broke into his home in Nassau, tying him up, and threatened to shoot him unless he turned over all his money. The incident ended peacefully but three weeks later, on June 4, 1998, Walsh died of a brain aneurysm.
