This is fantastic and gripping story about the biggest mining scandal in history. It is told through the testimony of eyewitnesses linked by an intelligent and clear narrator. Aspects of the story are so bizarre that you might think it fiction, but it is all true. Presented in nine half hour episodes, you can listen to the podcast on the BBC HERE or on Apple HERE.
In 1997, the mining world was rocked by the dramatic exposure of a $6 billion gold salting scandal. From 1994, a crew of corrupt Filipino geologists, working in a remote jungle location in eastern Borneo for a small Canadian mining company called Bre-X, had undertaken industrial-scale salting of a gold prospect called Busang. This was at such a scale, and continued over such a time, as to convince hardheaded global mining companies as well as Mum and Dad Canadian investors that Bre-X had discovered the largest gold mine in the world. Some analysts, working from Bre-X stock exchange reports, estimated well over 200 t of economically recoverable gold. The resulting 3-year frenzy of greed caused the penny stock Bre-X soar to over $285, valuing the company at over $6 billion. It also exposed corruption at the highest level in Indonesia and lack of oversight by regulators in Canada. When qualified external assessors finally got access to the remote location the fraudsters knew the game was up. Bre-X Chief Geologist Michael De Guzman, on his way back to site to face the music, fell (or did he jump, or was he pushed, or was he even there?) from a helicopter. His body (or at any rate, someone’s body) was recovered on the jungle floor four days later, partially eaten by pigs. The corpse was identified by one of his colleagues from the Busang site before he, and the remaining Filipino members of the crew, flew back to the anonymity of Manila.
Apart from De Guzman, no one was ever named, and no one convicted of crime either in Indonesia or Canada. The Bre-X stock price collapsed overnight, and the company quickly went into receivership. David Walsh, the President and Chief Executive of Bre-X, and his Vice-President of Exploration John Felderhof, retreated to their respective villas on the Cayman Islands.
The whole story revolves around the actions of De Guzman. Bizarrely, although the podcast describes in gruesome detail what De Guzman’s (supposed) corpse (what was left of it) looked like, none of the interviewees describe the living man in any detail, and none give his background or evaluate his character. He remains a shadowy figure. What the witnesses give is a cardboard villain, a toothless, bespectacled, gold-bedecked conman drinking and whoring his way through the fleshpots of Jakarta, Samarinda and Toronto. But De Guzman must have had some impressive qualities to fool so many for so long.
I listened to the podcast in one marathon session and thought it brilliant. The depth of research by the team of journalists working for the BBC and CBC, and their ability, after a 25-year gap, to ferret out and interview key witnesses, was impressive. I have no doubt that this podcast will become the definitive account of the Bre-X scandal. New revelations are unlikely, but who knows? There is still time for an aged de Guzman to reappear from the shadows and tell his side of the tale.
There are numerous unresolved questions, but three major ones stand out:
1. The involvement of Indonesian President Suharto’s family and close associates in the bidding war to gain control of the promised riches of the Busang mine and the actions they may have taken when the extent of the fraud first became apparent.
2. The true involvement of the pilot, the only person in the helicopter besides De Guzman at the time of the incident. He was/is an Indonesian Army Airforce officer and provided the only account of the incident, then was made unavailable for further comment by Government authorities. And what was in the large “box” that witnesses saw being loaded into his Squirrel helicopter at Samarinda airport in Kalimantan immediately prior to the fatal flight? And what credence should we give to the unconfirmed report that a corpse from the Samarinda morgue mysteriously went missing at around that time?
3. The extent to which David Walsh and John Felderhof were involved in the fraud. Walsh, the President of Bre-X, was an entrepreneur with little previous mining background who would have relied on his Vice President of Exploration, Dutch Canadian geologist Felderhof, for all technical advice. At the height of the Bre-X boom both Walsh and Felderhof made tens of millions of dollars selling Bre-X stock. After the scandal broke, Felderhof was charged with insider trading by the Toronto Stock Exchange. He pleaded that he was just another innocent, albeit naive, dupe of the fraudsters and, after more than ten years in litigation, was acquitted of the charge. Both Walsh and Felderhof are now dead.
As a geologist, I did much work in Indonesia throughout the 1990’s and have a personal view on many of these matters (see HERE). In my opinion, Felderhof (whom I met and worked with in the field) was a good geologist who, at a critical juncture, allowed desire for fame and riches to overwhelm his professional judgement.
Contract Filipino geologists were much favored for field work throughout SE Asia at that time. All those I worked with were honest, dependable and great companions in the field. They could blend with the local population, were acclimatized to tropical conditions, technically competent and hardworking. But from the point of view of Western mining companies they were, above all, cheap. They were in fact being exploited, and they knew it.
With hindsight, I think it foolish of Bre-X to have offered their site crew extra remuneration in the way of stock options. This was meant to buy loyalty, but once the low-paid field geologists realised that adding $10 worth of locally purchased alluvial gold to a single drill sample could add $100,000 to their potential net worth, the temptation to do just that must have been great. By succumbing, they unwittingly stepped onto an ever faster moving treadmill that could only result in dramatic consequences for all when it finally stopped. It was a classic Ponzi scheme.