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The Toronto office of Warren Irwin, hedge fund manager and CEO of Rosseau Asset Management, is decked out with memorabilia from Bre-X Minerals Ltd., the largest and most famous gold mining fraud in history.
Irwin made a fortune as a young money manager trading Bre-X stock. He had heard about the Indonesia-focused exploration company in 1995, and had some experience in the country and with gold miners.
Irwin encouraged Deutsche Bank, his employer at the time, to take a position in Bre-X at roughly $13 per share. The bank declined, so Irwin acquired a substantial position for his personal account at approximately $18 a share. Within months, Bre-X was hailed as the largest gold find in history. Shares in the company soared beyond $270.
As luck would have it, a cash call from Irwin’s homebuilder forced him to sell half his position at those high prices. He still had a sizeable stake in the company, and decided to visit the site in Indonesia to learn more.
Bre-X informed Irwin there was no room on the summer site visit but he flew to Jakarta anyway, and by chance a seat on the helicopter became available when an analyst lost his passport and did not make the trip. Irwin had a long list of questions for John Felderhof and Michael de Guzman, two key Bre-X executives. Felderhof told Irwin Bre-X would be twinning some of the best drill holes — to provide additional confidence to the market in September. Irwin left satisfied the company was legitimate and was looking forward to seeing the holes twinned in the fall.
Back in Toronto, Irwin saw a man reading a newspaper article about Bre-X in his condo elevator, and Irwin told him he’d just returned from site.
The man introduced himself as Dale Hendrick, an exploration geologist, and former Chief Geologist for one of Canada’s great gold mines, the Kerr Addison Mine. Hendrick told Irwin he doubted the discovery’s legitimacy and said he was prevented from attending the site by the company.
The men agreed to lunch, where Hendrick debriefed Irwin on his trip. Convinced Bre-X was a fraud, Hendrick even suggested a crime of this scale would end up with people dead just like the salt job at another gold exploration company, New Cinch.
For the rest of this article, click here: http://ceo.ca/2015/10/28/rosseaus-warren-irwin-shorted-bre-x-now-he-s-going-long-nexgen/