Bre-X was a co-conspirator in the execution of a historical
gold mining scandal after it reported having discovered an enormous gold
deposit in the year 1995 that caused ripples in the stock market. Bre-X
Minerals crumbled after the gold samples were found to be a fake. The scam
involved a lot of stakeholders both from
the management of Bre-x and other entities (Yeager, 2019).
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In 1988 stockbroker David Walsh founded a mineral
Exploration company by the name Bre-X Minerals and in March 1993. Through the advice of Mr. Michael Guzman the geologist and exploration manager the company bought the Busang mineral site.
In March 1995 it reported having discovered a huge gold deposit.
The company caved-in
in 1997 after being involved in a mining scam and fraud. In March 1997 the case
untangled quickly after geologist Mr. Michael Guzman reportedly committed
suicide when he jumped off the helicopter. After this incident Bre-X took over the headlines and was delisted in May 1997.
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David Walsh was a businessman from in the field of oil, mining, and gas.
In 1999 he was charged with illegal insider trading and he was acquitted of these charges in 2007. Michael de Guzman was a Filipino geologist and headed exploration operations of Bre-X. He lied about the enormous discovery of gold deposits in Busang, Indonesia.
He was instead coating the core sample with gold from his gold
wedding ring and blending the flakes in with the mashed core samples. When this
fraud was exposed he committed suicide by jumping off a helicopter in March
1997, his body was found in the Indonesian jungle. Alberta
Stock Exchange exploded out of this gold scam resulting in Stakeholders around the world losing an estimated $3 billion.
Suspicious investors
sent an auditor who saw wounded edges of the panned gold. The geologist
explained this was as a result of volcanic theory. The auditor was convinced, and
stocks went up exponentially.
When three men sold off a portion of
their options for around $100 million that caught the attention of Mr.
Suharto the President of Indonesia that made him revoke Bre-X’s exploration
license.
In March 1993 Bre-X
Minerals brought the Busang site through the advice of the geologist Mr. Michael
Guzman the exploration manager, he found the enormous gold deposits in Busang,
Indonesia estimated that the Busang property contained a million ounces of gold
and during that time the company’s market capitalization exceeded C$ 6 million.
Thousands of duped investors lost a total of between $3 billion and $5 billion.
De Guzman wasn’t
getting enough attention from his employer. So he formulated a plan to get
rich. He convinced the world that he found gold in Borneo. He knew he needed
some backup to operate this story. That is when he gets the geologist John
Felderhof, Guzman convinced Felderhof that they needed an investor. He wanted an
investor who was risky and wasn’t going to be keen on asking questions. Therefore,
Felderhof recommended a Canadian businessman named David Walsh (Ruffell & Schneck, 2017).
Managers and directors of Bre-X colluded with Alberta Stock to execute fraud.
Geologists in the field should be investigated for fraud. Geologists had the technical knowledge to determine the sites that gold can be found.
It is unclear how the geologists did not report the scam.
They should be investigated
for any collusion with Bre-x to execute the scandal. The directors stopped buying
the company’s stock after the discovery of gold in Indonesia was a clear
indication that the intention was to get rich through the smartly executed scam.
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