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The Visual Story Of The Biggest Fraud In Gold Mining History
Courtesy of Visual Capitalist
This infographic documents the rise and fall of Bre-X.
From initial private offerings at 30 cents a share, Bre-X stock climbed to more than $250 on the open market. Near the peak of Bre-X share prices, major banks and media were on board:
The Peak
- It was touted by media and banks as the “richest gold deposit ever”
- In December 1996, Lehman Brothers Inc. strongly recommended a buy on “the gold discovery of the century.”
- Major mining companies such as Barrick Gold, Placer Dome, and Freeport-McMoRan Copper & Gold, among other top producers, fought an epic battle to get a piece of Bre-X’s Busang deposit.
- Indonesia’s Suharto regime managed to grab 40% of the deposit for Indonesian interests.
- Fidelity Investments, Invesco Funds Group, and other mutual-fund companies piled into the stock.
- J.P. Morgan bankers talked up Busang in a conference call in which Bre-X’s top geologist predicted the deposit might contain a staggering 200 million oz of gold, worth over $240 billion in 2014 prices. Morgan declined to comment.
- Egizio Bianchini, stock broker and one of Canada’s top gold analysts, said “What most people are now realizing is that Bre-X has made one of the great gold discoveries of our generation.”
The Timeline:
1989: David Walsh founded Bre-X Minerals Ltd. in 1989 as a subsidiary of Bresea Resources Ltd.
1993: Walsh followed the advice of geologist John Felderhof and bought a property in the middle of a jungle near the Busang River in Borneo, Indonesia.
1994: Initial drill results were encouraging, and the drill program was ramped up.
1994: However, it was the project manager, Michael de Guzman, who was filing gold from his wedding ring and mixing the flakes in with the crushed core samples.
De Guzman used realistic ratios of gold to rock to not set off alarm bells, and to keep project going forward.
Over the next 2.5 years, de Guzman would buy $61k of panned gold from locals to use in salting.
Independent auditors that were sent in by large institutional investors found that the panned gold had rounded edges, but de Guzman explained it was because of “volcanic pool” theory.
De Guzman, Felderhoff and Walsh sell off a small portion of their options for $100 million
1996: Bre-X hits a snag with the Indonesian government, who claimed that Bre-X was not playing by the “rules” of the country. Bre-X’s exploration permits are revoked.
1997: January fire at Busang destroys many of the sample records.
1997: After many major miners express interest in Bre-X, eventually a joint venture is reached that gives Indonesia 40% share, Bre-X 45%, and Freeport McMoRan a 15% share of interests.
1997: Freeport begins due diligence on deposit and starts to twin holes that were already drilled.
1997: Freeport reports “minor amounts of gold” in some holes, but not much else.
1997: On his way to meet the Freeport due diligence team, de Guzman mysteriously falls to his death 600 ft from a helicopter. Police rule it a suicide.
1997: Shares of Bre-X crash.
1997: Report confirms that there is no gold at Busang, and samples were tampered with.
Courtesy of: Visual Capitalist
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From really really rich to really really dead all in 8 years. That sucks.
Note that the real damage to shareholders was done by a lawless government pulling the rug out from under them.
He Government did change the law in response to this.
Not saying this changed behavior...just saying..."it's against the law."
The geologist is still alive but the founder didn't make it either.
This "Greenspan Put" really is one for the ages. This is a lot of debt for some "faux prosperity."
If folks want to know what an outright default looks like just go to Brazil or Russia.
So far the Mexican Peso has held up.
That was probably the biggest bailout in history.
Of course no one knows about that.
Wasn't George Bush the elder involved in this somehow?
I seem to remember that he was on the board of Barrick at the time.
How convenient: the one who salted the samples with gold, Guzman, jumps out of a helicopter.
Where have the claims against Guzman originated from and on what are they based?
Bre-X.....yeah.....I remember something about that.
Helicopter ride? No thanks.
Thank goodness we now have nailguns.
..........and the best use of a nailgun in a feature film goes to:
http://en.wikipedia.org/wiki/The_Girl_Who_Kicked_the_Hornets%27_Nest_%28...
Is that a chart of the height of Guzman's body during the helicopter ride and subsequent fall/dead liar's bounce?
I wonder who was the beneficiary of the key-man insurance on Guzman?
Hopefully one day we'll read "Bernanke mysteriously falls to his death 600 ft from a helicopter."
The article will confirm his parachute container was filled with freshly printed Dollars instead of a parachute.
Good idead Pheo, let's first tar and feather him with $100 bills so he looks like the Geico money guy on the way down.
I prefer "mysteriously pushed". LOL.
2015: March fire at Federal Reserve data center destroys many of the Fed's records, including those covering period 2008 - 2011. Back-up computer files, paper files and data tapes at remote storage location also severely damaged by freak gas explosion. Yellin promises thorough investigation of incidents.
Sept 10, 2001 Rumsfeld announces $2.3 trill can't be accounted for.
Next day sticks in mind for some reason.
Records kept in the Pentagon & Bulding 7
Coincidence, obviously.
Pull it!
Ahhh, Lucky Larry Silverstein. One would think the insurance companies who paid him might have found this interview curious.
Lucky Larry Silverstein EXPOSED - YouTube
knew a guy in Vancouver who at the peak was carrying $4M in Bre-X stock, his buy in was $150K. Held on too long to squeeze another fucking nickle out of it and poof! lost it all. He was very sad. Still makes me laugh everytime I think about it. At the time he thought he was the smartest guy on the planet.oops.
Copper Mine in Atlas Shrugged comes to Mind
Francisco d'Anconia actually had copper to mine but his intent was to burn the 1% sheeple and he sure did. BRE-X was an epic fraud by 1 man who ended up killing himself.
I like the Atlas Shrugged version better
This guy was good...............
Shame he lost his cool..............
Shame he didn't skeedattle with his part of that $100 million before the helicopter ride.
Time to pull out my gold fillings and start salting some holes.
No need to do that. Just print some Gold Certificates and list them on the COMEX. Paper Gold is so much better than that nasty metal that comes out of dirt that people will gladly lose money in the process of digging it up.
Too bad Dick Fauld didn't jump out of a helicopter too. Or John Corzine
But he got the next best thing: "Someone was in the corner, pumping iron and he walked over and he knocked him out cold."
http://gawker.com/5059737/lehman-bros-ceo-totally-got-knocked-out
I think this is what just happened to "Dingy Harry" Reid a couple of weeks ago in the gym.
These guys either need to stay out of the gym or better yet, commit seppuku (Hari-Kari); but then, they have no honor.
It's a bit like all these funny pieces of paper they sell t the COMEX isn't it.
That is an old school story Tyler but it did happen. They used that Bre-X scam to beat the shit out of gold prices for a entire decade. That episode is why I won't invest in gold mining stocks and especially juniors. Just buy the physical gold if you can. For as much as I love PM's, miners are not my cup of tea.
Shares can be pretty good. Bought midcaps and producing juniors in 1998-1999. Sold most in 2006 because I needed the funds for another project. I still have some shares and I would be overjoyed if they do half as well in the years ahead as they did back then.
When gold makes it's big move (we ain't seen nothing yet) the shares will have their place in the sun. Just do your DD and don't worry about being the first one onboard. Spread things around a bit just in case you pick a "Bre X".
Don't sell specie to pay for shares. Sell just about anything else if you must.
The old BRE-X helicopter ride!
I heard he pulled the 'ole 007 trick. "Mission Codename" [golden parachute]
As soon as the report came in that someone had "fallen" out of a helicopter I knew something was wrong.
More like suicideD.
The better junior digger investment newsletters advised their clients that the data was inconsistent, and too good to be true, and to stay out of it. I was in junior diggers at the time, and obliged, happily owning no shares when the roof fell in. Same newsletter did have me in Arizona Star when went up 50x. I take no credit for any of that, but was happy to pay them their newsletter fee.....paid for itself many times over. Anyhow, not everybody was fooled.
Fell out of helicopter
9 shots with a nail gun
Fell out of 33rd floor window
Mercedes exploded
Drowned in hot tub................
Amazingly he still made it to work on time......he's a trooper.
Friend of mine was an analyst at Loewen Odatjie Mcutcheon. Went long most of the way up then shorted at the top.
Then cashed out and bought a $3M house.
Supposedly the heap PM analyst at BMO who was a raging bull on the stock had a core sample on display in his office that was salted.
Thats some funny shit.
The $3M house was probably the most expensive house in Toronto in '96. Bridle Path nonetheless.
What does the future hold for the Pebble Project?
It's on the rocks.
not going to happen
salmon kissers shut em down
sadly I knew bre-x, but only played with a small number of shares near the end when it had shit it's load..never made a dime but it should have warned me what was to come never just assume things are isolated from worldcom (tooka big hit) to enron, to mf global and madoff..buy tulips you can't lose.
I thought Worldcom was a steal at $8 - they had announced that they needed to update some previous years statements - not go into receivership.
I learned my lesson though. Tried to convince my Grandmother in 2001 to buy gold with a $1,000 inheritance she received. Instead she bought a GIC with a 4% yield.
Yeah, the media knows all. If they're pushing one side of things, you should be going the other. Uncanny how terrible they are in a correction.
http://www.idiottax.net/2014/11/stock-market-corrections-investment.html
DON'T WORRY WE'RE GOING TO MINE ASTEROIDS FOR ALL THE GOLD IN THE UNIVERSE. ELON MUSK AND GOLDMAN SACHS WILL GET OUT GOLDEN ASTEROIDS. JUST FORK UP THE 5 BILLION.
now if BRE-X would have been listed on the NYSE, with a respectable market cap, post 2008, Guzman could have borrowed money through the conduit of QE various to buy shares of his own company, and raise the share price to $250, now that would be a story. oh yes and if he had met his fate through a pneumatic nail gun.
They shoulda sold a crapload of shares and used the proceeds to buy Goldman Sachs. That would have been a story for the ages.
my favorite was the international gold bullion exchange in ft. lauderdale. they set up a boiler room that cold called people to sell them gold then played the arbitrage on the delivery date to buy the gold cheaper. eventually they got into selling storage along with the purchase of gold. in the end, as gold dropped from 800+ they got caught with gold painted wooden blocks in their safe as the only collateral left for redemption. 1980ish.
Ya I wonder about that mega offshore oil discovery in Brazil, so huge it will buy healthcare for every Brazilian.
BTW did they get the 100mill back from the Jew's estate?
BDO, BDO.
How to destroy the 1% "GREED"
I have a very good story about Brex and the folks involved and every word is true since It happened to me.
In 2005 June I was at the CAP energy conference in Calgary looking at energy companies for investment in my funds I managed. While there a contact from a Toronto brokerage firm called me to go see a jr gold exploration company based in Calgary that had a promising property in Indonesia Bre-x
So I called and made appointment for the next day to meet the "management" and was given the address to the office.
The next day I get in a cab and drive to the office which seems odd since I am headed to a poor residential location in Calgary. I arrive at a house that's a bungalow with faded paint and a torn screen on a front door and I knock. I am met by David Walsh CEO of Bre-x in track pants holding a glass of scotch at 11am. I proceed into the house and meet his wife and head geologist John Felderhoff. I spend an hour looking at maps drill locations and the very earliest shallow drill results.
I bought 275,000 shares in the next 3 days at sub 4.00 for my funds.
It was impossible to tell at this stage but clearly these people did not see what was going on in the remote jungle in Borneo ..
That said the rise in the stock was incredible
Many people forget that in 1996 Felderhoff and Walsh won miners of the year and I always thought the photo of Walsh in a suit was amusing
By 2005 bre-x did not exist.
LOL, yeah, I think wobbleybob was the one drinking the scotch, hence his screen name.
Back when Bre-X was rolling along, Barron's did a hit piece, suggesting the samples were salted. I bought some puts. Helicopter accident, revelations of fraud, stock crashed and trading halted. Couldn't close the (modest) put position. Something about a trading halt for fraud being different than other trading halts. At least that was what we Muppets were told. Learned something useful.
I remember the Bre-X scandal well.
After it all came crashing down in the mid 90's, some of the novelty shops and Pakistani/Indian owned convenience stores located along Yonge St. in Downtown Toronto had huge banners hanging over their store signs declaring "Bre-X share certificates for sale, $10 each"
Wish I bought one of them for a joke.
It's an interesting story, but why tell it now? The timeline ends eighteen years ago. Does it have any bearing on anything happening today?
It was the beginning of a bear market in gold miners that probably bottomed in November.
The securities industry uses equity swaps as a way of fixing gold mining share prices against U.S. treasury bond prices, especially junior miners. Gold mining exploration companies are now considered ground zero for fraud. Doesn't matter if the assets are there, since they struggle to raise capital and go broke, or get bought out very cheaply by bigger companies.