I was at one of the nicer restaurants in downtown Toronto, just beginning a get-to-know-you lunch with an executive of a large Canadian mining company. We talked about metals markets, the company’s growth strategy and his recent move from one company to another. With white linen napkins on our laps, we began eating.
Then a waiter approached the table. He had a telephone in his hand, and said there was a call for me. It was my editor, back at the Financial Post newsroom, about four blocks away on King Street West. “It’s a fraud,” he said. “Total fraud. You need to run – not walk – back here right now.”
And run I did, leaving my somewhat flustered guest to finish his grilled salmon alone. The Bre-X story had just exploded. Not that it hadn’t already been a wild ride up to that point.
Bre-X Minerals was a Calgary-based junior gold company with a deposit in Indonesia that had become an obsession among Canadian stock market investors. Drill results indicated the deposit was rich, big and getting bigger. Each time Bre-X issued new results, the stock would lunge upward again.
Bre-X’s Busang deposit, investors believed, was going to be the most lucrative gold mine in history, and it was already making people rich. Take David Walsh and John Felderhof, for instance. Walsh, the CEO, and Felderhof, the top geologist, had decided to reward themselves for their hard work on behalf of shareholders by cashing in stock options and each buy a sprawling home in the Cayman Islands.
The biggest gold mining companies in Canada – Barrick Gold and Placer Dome – battled each other for the right to own the deposit, only to be bested by a company based in the U.S. deep south. Busang was big and getting bigger.
Then Michael de Guzman fell out of a helicopter.
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