View source for Bre-X

{{Short description|Canadian mining company (1989–2003)}}
{{For|the American company|Brex}}
{{Infobox company
| name = Bre-X
| logo = 
| type = 
| industry = [[Mining]]
| fate = 
| predecessor = <!-- or: | predecessors = -->
| successor = <!-- or: | successors = -->
| founded = 1989
| founder = <!-- or: | founders = -->
| defunct = 2003
| hq_location_city = 
| hq_location_country = [[Canada]]
| area_served = <!-- or: | areas_served = -->
| key_people = 
| products = Minerals, metals, gold
| owner = <!-- or: | owners = -->
| num_employees = 
| num_employees_year = <!-- Year of num_employees data (if known) -->
| parent = 
| website = <!-- {{URL|example.com}} -->
}}

'''Bre-X''' was a group of companies in [[Canada]]. '''Bre-X Minerals Ltd.''', a major part of Bre-X based in [[Calgary]], was involved in a major [[gold mine|gold mining]] scandal when it reported it was sitting on an enormous [[gold]] deposit at Busang, [[East Kalimantan]], [[Indonesia]]. Bre-X bought the Busang site in March 1993 and in October 1995 announced significant amounts of gold had been discovered, sending its stock price soaring. Originally a [[penny stock]], its stock price reached a peak at [[Canadian dollar|CAD]]$286.50 (split adjusted) in May 1996 on the [[Toronto Stock Exchange]] (TSE), with a total capitalization of over CAD $6 billion. Bre-X Minerals collapsed in 1997 after the gold samples were found to be fraudulent.<ref>{{cite web|title=Long-awaited Bre-X court decision due Tuesday |work=National Post and Calgary Herald |url=https://nationalpost.com/news/story.html?id=d5d283b0-d10d-4e23-8c91-3fd20bf1831e&k=24530 }}{{dead link|date=October 2025|bot=medic}}{{cbignore|bot=medic}}</ref><ref>{{cite news|last1=Grundhauser|first1=Eric|title=The $6 Billion Gold Mine That Wasn't There|url=http://www.slate.com/blogs/atlas_obscura/2015/08/21/the_bre_x_gold_mining_scandal_turned_part_of_the_borneo_jungle_into_a_6.html|access-date=September 21, 2015|work=Slate|date=August 21, 2015}}</ref>

Busang's gold resource was estimated by Bre-X's independent consulting company, Kilborn Engineering (a division of [[SNC-Lavalin]] of Montreal), to be approximately {{convert|71,000,000|ozt|ST t|lk=in}}. Reports of resource estimates of up to {{convert|200,000,000|ozt|ST t|lk=in}} were never made by Bre-X though the property was described as having this potential by John Felderhof, Bre-X's vice-president for Exploration, in an interview with Richard Behar of ''[[Fortune (magazine)|''Fortune'' magazine]].<ref name="Gibson2007">{{cite book|author=Kevin Gibson|title=Ethics and Business: An Introduction|url=https://books.google.com/books?id=qQfuI6VR0rwC&pg=PA77|date=19 July 2007|publisher=Cambridge University Press|isbn=978-0-521-86379-7|pages=76–}}</ref>

Bre-X's gold resource at Busang was a massive [[fraud]].<ref>{{cite web|url=http://www.cbc.ca/news/canada/calgary/bre-x-court-battles-come-to-an-end-1.1320776|title=Bre-X court battles come to an end|work=CBC News|date=May 30, 2013}}</ref>  Encouraging gold values were intersected in many drill-holes and the project received a positive technical assessment by Kilborn. Crushed core samples that had been subjected to mineralogical examination by Bre-X's consultants turned out to have been falsified by [[salting (confidence trick)|salting]] with gold.<ref>{{Cite web|url=https://moneyweek.com/502188/great-frauds-in-history-the-bre-x-gold-mining-scandal/|title=Great frauds in history: the Bre-X gold-mining scandal|date=2019-02-20|website=MoneyWeek|language=en-GB|access-date=2019-07-04}}</ref> In fact, in an old report found in Bre-X files, a mineralogist had reported that some gold particles in Busang samples had the darker yellow skin compared to the interior and some had delicate morphologies composed of [[electrum]]. The yellow rims result from selective leaching of silver from the surface of gold particle during river transport or during supergene (in-situ) processes. Electrum is inconsistent with an alluvial origin. The mineralogy gave no indication that it was alluvial gold and was consistent with the assumed origin of the samples. None of the mineralogists who studied the gold grains gave any indication that the gold was not consistent with a hard rock origin. The salting of crushed core samples with gold constitutes the most elaborate fraud in the history of mining. In 1997, Bre-X collapsed and its shares became worthless in one of the biggest stock scandals in Canadian history, and the biggest mining scandal of all time.<ref>{{cite book|author=Manuel Bustillo Revuelta|title=Mineral Resources: From Exploration to Sustainability Assessment|url=https://books.google.com/books?id=Q3syDwAAQBAJ&pg=PA22|date=23 August 2017|publisher=Springer|isbn=978-3-319-58760-8|pages=22–}}</ref>

==History==
[[File:Bresea Logo.jpg|right|thumb|Bresea logo.]]
[[David Walsh (mining)|David Walsh]] founded Bre-X Minerals Ltd. in 1989 as a subsidiary of Bresea Resources Ltd. The company did not make a significant profit before 1993, when Walsh followed the advice of geologist John Felderhof and bought a property in the middle of a jungle near the Busang River in [[Kalimantan]], [[Indonesia]]. The first estimate of the site by its project manager ([[Filipinos|Filipino]] [[geologist]] Michael de Guzman) was approximately 2 million troy ounces.<ref name="MinkesMinkes2008">{{cite book|author1=John Minkes|author2=Leonard Minkes|title=Corporate and White Collar Crime|url=https://books.google.com/books?id=Pe3UXyhDMY0C&pg=PA45|date=24 June 2008|publisher=SAGE Publications|isbn=978-1-4462-4188-2|pages=45–}}</ref>

The estimate of the site's worth increased over time; in 1995 it was 30 million ounces (850 metric tons); in 1996, 60 million (1,700 metric tons); finally, in 1997, 70 million ounces. The stock was originally listed on the [[Alberta Stock Exchange]] in 1989, and subsequently in 1996 on the [[Toronto Stock Exchange]] and [[NASDAQ]].<ref>[https://www.washingtonpost.com/wp-srv/inatl/longterm/canada/stories/brex051897.htm A Lode of Lies: How Bre-X Fooled Everyone ''Washington Post'' May 18, 1997]</ref>  The [[stock price]] of Bre-X rose to [[Canadian Dollar|CA$]]280 per share by 1997 (split adjusted) and at its peak it had a [[market capitalization]] equal to [[US$]]4.4 billion, equivalent to US${{formatnum:{{Inflation|US|4.4|1997|r=1}}}} billion in {{Inflation-year|US}}.<ref>{{cite book|title=The Economist|url=https://books.google.com/books?id=kejtAAAAMAAJ|year=2007|publisher=Economist Newspaper Ltd.}}</ref>

Some other mineral companies, including [[Placer Dome]], organized failed [[takeover]]s, but the Indonesian government of President [[Suharto]] also got involved. Stating that a small company like Bre-X could not exploit the site by itself, the Indonesians initially suggested that Bre-X share the site with the large Canadian mining firm [[Barrick Gold]], in association with Suharto's daughter [[Siti Hardiyanti Rukmana]].<!-- Living person - delete if no reference found soon. --><ref>{{cite web|title=1996-12-16, Dow Jones International News as cited in R. v. Felderhof, 2007 ONCJ 345 (CanLII)|url=https://www.canlii.org/en/on/oncj/doc/2007/2007oncj345/2007oncj345.html|archive-url=https://web.archive.org/web/20230308070637/https://www.canlii.org/en/on/oncj/doc/2007/2007oncj345/2007oncj345.html|url-status=dead|archive-date=March 8, 2023|date=July 31, 2007}}</ref>  Bre-X hired Suharto's son Sigit Hardjojudanto to handle their side of the affair. [[Bob Hasan]], another Suharto acquaintance, negotiated a deal whereby Bre-X would have a 45% share, [[Freeport-McMoRan|Freeport-McMoRan Copper & Gold]] would run the mine, and Hasan would get a cut as well. Bre-X would have the land rights for 30 years. The deal was announced February 17, 1997 and Freeport-McMoRan began their initial [[due diligence]] evaluation of the site.

==Fraud exposed==
The fraud began to unravel rapidly beginning on March 19, 1997, when Bre-X geologist [[Death of Michael de Guzman|Michael de Guzman reportedly died of suicide]] by jumping from a [[helicopter]] in Indonesia.<ref>{{cite web|url=https://www.theglobeandmail.com/report-on-business/rob-magazine/30-years-suicide-and-the-gold-find-of-the-century/article19291769/|title=Remembering Bre-X: Suicide and the gold 'find of the century'|author=Goold, Douglas|date=June 24, 2014|work=[[The Globe and Mail]]}}</ref><ref>{{cite web|url=https://www.theglobeandmail.com/report-on-business/the-rise-and-fall-of-bre-x/article1085866/|title=The rise and fall of Bre-X|author=Waldie, Paul|date=April 3, 2009|work=The Globe and Mail }}</ref> A body was found four days later in the jungle, missing the hands and feet, "surgically removed".<ref name=businessdaily>{{cite news|title=The World's Biggest Mining Scam|url=https://www.bbc.co.uk/programmes/p04rcz0g|work=Business Daily|agency=BBC|date=Feb 7, 2017}}</ref> In addition, the body was reportedly mostly eaten by animals.<ref name="Slate1">{{cite web|last1=Grundhauser|first1=Eric|title=The $6 Billion Gold Mine That Wasn't There|url=http://www.slate.com/blogs/atlas_obscura/2015/08/21/the_bre_x_gold_mining_scandal_turned_part_of_the_borneo_jungle_into_a_6.html|website=Slate|date=21 August 2015 |access-date=28 January 2017}}</ref> According to journalist [[John McBeth]], a body had gone missing from the morgue of the town from which the helicopter flew. The remains of "de Guzman" were found only 400 metres from a logging road. No one saw the body except another Filipino geologist who claimed it was de Guzman. One of the five women who considered themselves to be his wife was receiving monetary payments from somebody long after the supposed death of de Guzman.<ref name=businessdaily/>

A week later, on March 26, 1997, the American firm [[Freeport-McMoRan]], a prospective partner in developing Busang, announced that its own due-diligence core samples, led by Australian geologist Colin Jones, showed "insignificant amounts of gold".<ref>{{cite web|title=A Lode of Lies: How Bre-X Fooled Everyone|author=Schneider, Howard|date=May 18, 1997|page=H01|work=Washington Post Foreign Service|url=https://www.washingtonpost.com/wp-srv/inatl/longterm/canada/stories/brex051897.htm}}</ref> A frenzied sell-off of shares ensued and Suharto postponed signing the mining deal. Bre-X demanded more reviews and commissioned a review of the test drilling. Results were not favorable to them, and on April 1, 1997, Bre-X refused to comment. Canadian gold analyst Egizio Bianchini, of BMO Nesbitt Burns, considered the rumors "preposterous".<ref>{{cite web|author=Kirby, Jason|title=Really bad investment advice – Why do analysts so often get things so wrong?|url=http://www.macleans.ca/economy/business/really-bad-advice/|date=September 13, 2011|work=Macleans.ca}}</ref> An independent company, Strathcona Minerals, was brought in to make its own analysis. They published their results on May 4, 1997: the Busang ore samples had been salted with [[gold|gold dust]].<ref>{{cite web|title=No gold at Bre-X site|date=May 5, 1997|url=https://money.cnn.com/1997/05/05/companies/brex/|work=CNNMoney}}</ref> The lab's tests showed that gold in one hole had been shaved off gold jewellery though it has never been proved at what stage it had been added to those samples. This gold also occurred in quantities that did not support the original assays. Trading in Bre-X was soon suspended on the [[Toronto Stock Exchange|TSE]] and [[NASDAQ]], and the company filed for [[bankruptcy]] protection.<ref>{{cite web|url=https://www.nytimes.com/1997/05/09/business/bre-x-files-for-bankruptcy.html|title=Bre-X Files For Bankruptcy|date=May 9, 1997|work=[[The New York Times]]}}</ref>

==Aftermath==
By May, Bre-X faced a number of lawsuits and angry investors who had lost billions. Among the major losers were three Canadian public sector organizations: The [[Ontario Municipal Employees Retirement Board]] (loss of $45 million), the [[Caisse de dépôt et placement du Québec]], the Quebec Public Sector Pension fund ($70 million), and the [[Ontario Teachers' Pension Plan]] ($100 million). There was fallout in the Canadian financial sector also; the fraud proved a major embarrassment for [[Peter Munk]], the head of Barrick Gold, as well as for the then-head of the [[Toronto Stock Exchange]] (resulting in his ousting by 1999), and began a tumultuous realignment of the Canadian stock exchanges.

Bre-X declared bankruptcy on November 5, 1997 although some of its subsidiaries continued until 2003.

Walsh moved to the [[Bahamas]] in 1998, still professing his innocence. Two masked gunmen broke into his home in Nassau, tying him up, and threatened to shoot him unless he turned over all his money. The incident ended peacefully but three weeks later, on June 4, 1998, Walsh died of a brain aneurysm.<ref>{{cite web|title=Collected Woes|date=November 24, 2006|author=Waldie, Paul|url=http://www.globeadvisor.com/servlet/ArticleNews/story/gam/20061124/RO12COLLECTED|work=GlobeAdvisor}}</ref><ref>{{cite web|url=http://www.calgarysun.com/2017/01/26/behind-gold-the-real-life-story-of-bre-x-proves-life-is-stranger-than-fiction|title=Calgary Sun|website=Calgary Sun|access-date=2017-02-11|archive-url=https://web.archive.org/web/20170211160006/http://www.calgarysun.com/2017/01/26/behind-gold-the-real-life-story-of-bre-x-proves-life-is-stranger-than-fiction|archive-date=2017-02-11|url-status=dead}}</ref>

In 1999 the [[Royal Canadian Mounted Police]] (RCMP) announced it was ending its investigation without laying criminal charges against anyone.<ref>{{cite web|url=http://www.canoe.com/MoneyBreXSaga/home.html|archive-url=https://web.archive.org/web/19970419052409/http://www.canoe.com/MoneyBreXSaga/home.html|url-status=dead|archive-date=April 19, 1997|title=The Bre-X Saga - CANOE Money|website=www.canoe.ca}}</ref> Critics charged that the RCMP was underfunded and understaffed to handle complex criminal fraud cases, and also charged that Canadian laws in this area were inadequate. However, despite the dropping of criminal charges, civil [[class action]] suits against Bre-X directors, advising financial firms and Kilborn continued.

In May 1999, the [[Ontario Securities Commission]] charged Felderhof with [[insider trading]]. No other member of Bre-X's board of directors or others associated with the Busang project were charged by the OSC. The OSC admitted that there was no evidence that Felderhof was either involved in the fraud or was aware of the fraud. The trial was suspended in April 2001 when the OSC tried to have presiding judge Justice [[Peter Hryn]] removed for alleged bias against the prosecution. This was denied by an independent judge, and on December 10, 2003, the appeal was also denied by a panel of judges.<ref name="DanielsonWhyte1997">{{cite book|author1=Vivian Danielson|author2=James Whyte|title=Bre-X: gold today, gone tomorrow : anatomy of the Busang swindle|url=https://books.google.com/books?id=3JO0AAAAIAAJ|year=1997|publisher=Northern Miner|isbn=9781552570036 }}</ref>

The trial resumed in 2005. Felderhof attended a number of the Court hearings as the six-year case made its way through the system. The basis of the OSC action as well as the civil class-action suits was the alleged existence of numerous and obvious "red flags", as detailed by Strathcona Minerals, which should have been recognized.

Begun in 2001, the trial of Felderhof was concluded on July 31, 2007, with a not-guilty verdict of insider trading. Days after the verdict, the OSC also decided not to appeal the decision, a victory for Felderhof and his lawyer, Toronto-based [[Joseph Groia]]. A class-action lawsuit was discontinued by court order in early 2014; $3.5 million (CAN) damages were donated to charity and the [[University of Ottawa]] since funds were deemed too low to be meaningfully distributed among the large number of plaintiffs.<ref>{{cite web|title=After 17 years, Bre-X case finally closes|author=Gray, Jeff|work=The Globe and Mail|date=April 23, 2014|url=https://www.theglobeandmail.com/report-on-business/industry-news/the-law-page/the-bre-x-case-finally-closes/article18124172/}}</ref>

Felderhof died on October 28, 2019, in Manila, Philippines, at the age of 79.

The Bre-X mining fraud convinced Canadians to regulate professional geology in Canada.<ref>{{cite book|last=Andrews|first=Gordon|title=Canadian Professional Engineering and Geoscience: Practice and Ethics|publisher=Nelson|year=2009|page=53|isbn=978-0-17-644134-0}}</ref> The Securities regulation [[National Instrument 43-101]] was created in the wake of the Bre-X fraud to protect investors from unsubstantiated mineral project disclosures.<ref name="Bickford2013">{{cite book|author=Marion E. Bickford|title=The Impact of the Geological Sciences on Society|url=https://books.google.com/books?id=YWK1AAAAQBAJ&pg=PA16|date=24 September 2013|publisher=Geological Society of America|isbn=978-0-8137-2501-7|pages=16–}}</ref>

==Books and articles==
* ''The Bre-X Fraud'' by Douglas Goold and Andrew Willis, [[McClelland and Stewart]] (1997)<ref name="Salinger2005">{{cite book|author=Lawrence M. Salinger|title=Encyclopedia of White-Collar & Corporate Crime|url=https://books.google.com/books?id=0f7yTNb_V3QC&pg=PA109|year=2005|publisher=SAGE|isbn=978-0-7619-3004-4|pages=109–}}</ref>
* ''Fool's Gold: The Making of a Global Market Fraud'' by Brian Hutchinson (pub. by Alfred A. Knopf, 1998)<ref name="Hutchinson1999">{{cite book|author=Brian Hutchinson|title=Fools' Gold: The Making of a Global Market Fraud|url=https://archive.org/details/foolsgoldmakingo0000hutc|url-access=registration|date=1 May 1999|publisher=Knopf Canada|isbn=978-0-676-97192-7}}</ref>
* ''Bre-X: sebungkah emas di kaki pelangi'' by [[Bondan Winarno]]. {{ISBN|9789799523808}} (1997)
* ''Bre-X: Gold Today, Gone Tomorrow'' by James Whyte and Vivian Danielson<ref name="DanielsonWhyte1997"/>
* ''Indonesian Gold'' by Kerry B. Collison &mdash; a fictionalised account<ref name="Collison2002">{{cite book|author=Kerry B. Collison|title=Indonesian Gold|url=https://books.google.com/books?id=_qZlAAAAMAAJ|date=1 January 2002|publisher=Sid Harta|isbn=978-0-9578709-3-2}}</ref>
* ''New Perspectives on Busang'' by Phillip Hellman, Parts 1 & 2, ''[[The Northern Miner (Canada)|The Northern Miner]]'', May 2002
* ''Friction'' by Anna Tsing (2005, Princeton University Press)
* ''Fever: The Dark Mystery of the Bre-X Gold Rush'' by Jennifer Wells
* ''Bre-X, The Inside Story'' by Diane Francis (pub by Key Porter Books, 1997)
* ''Reporter. Forty Years Covering Asia'' by John McBeth, Talisman Publishing, Singapore, 2011. {{ISBN|9789810873646}}

==Film==
The film ''[[Gold (2016 film)|Gold]]'', a dramatization inspired by the Bre-X story, was released world-wide on January 27, 2017.<ref name="Global1">{{cite web|last1=Gilligan|first1=Melissa|title=Bre-X investment scandal hits the big screen in 'Gold' starring Matthew McConaughey|url=http://globalnews.ca/news/3210000/bre-x-investment-scandal-hits-the-big-screen-in-gold-starring-matthew-mcconaughey/|website=Global News|access-date=30 January 2017}}</ref><ref>{{cite web|url=https://deadline.com/2016/07/gold-movie-release-date-matthew-mcconaughey-edgar-ramirez-1201790227/|title=Matthew McConaughey Movie ''Gold'' Stakes Out Christmas Day Release|website=[[Deadline Hollywood]]|first=Patrick|last=Hipes|date=July 21, 2016|access-date=July 21, 2016}}</ref><ref>{{cite web|url=https://deadline.com/2016/11/matthew-mcconaughey-gold-january-27-date-shift-stephen-gaghan-awards-season-1201858215/|title=Matthew McConaughey-Starrer ''Gold'' Keeps Awards Window But Moves Wide Release To January 27|website=Deadline Hollywood|first=Mike Jr.|last=Fleming|date=November 21, 2016|access-date=November 21, 2016}}</ref> While many of the details of the film are fictionalized, the story and characters are inspired by the Bre-X events and people.<ref name="FP1">{{cite web|last1=Freeman|first1=Sunny|title=''Gold'': The movie about the Bre-X mining scandal that 'isn't about Bre-X'|url=http://business.financialpost.com/news/mining/gold-the-movie-about-the-bre-x-mining-scandal-that-isnt-about-bre-x|website=The Financial Post|access-date=30 January 2017}}</ref><ref name="CBC1">{{cite web|last1=Glasner|first1=Eli|title='They couldn't believe it was true:' Bre-X's Hollywood makeover|url=http://www.cbc.ca/news/entertainment/gold-hollywood-brex-1.3953566|website=CBC|access-date=30 January 2017}}</ref>

==Notes and references==
{{reflist}}

==External links==
* [https://web.archive.org/web/20181102064657/http://bre-xminerals.com/ Official website post scandal & Film Use]
*{{cite web|url=http://www.bre-x.com/ |title=Bre-X corporate website |access-date=2016-11-07 |url-status=dead |archive-url=https://web.archive.org/web/19961219040318/http://www.bre-x.com/ |archive-date=1996-12-19 }} 
* [http://www.cbc.ca/archives/categories/economy-business/business/stranger-than-fiction-the-bre-x-gold-scandal/gold-fever.html CBC Digital Archives - Stranger than Fiction: The Bre-X Gold Scandal]
* [https://web.archive.org/web/20060907074019/http://www.osc.gov.on.ca/About/NewsReleases/2006/nr_20060209_osc-felderhof.jsp Ontario Securities Commission News Release February 9, 2006]
* [https://money.cnn.com/magazines/fortune/fortune_archive/1997/06/09/227519/index.htm Reprint of Jungle Fever, Richard Behar's on-the-ground reportage of the Bre-X scandal, first published in Fortune Magazine]
* [https://web.archive.org/web/20121102230805/http://www.canada.com/nationalpost/news/story.html?id=4fc6577c-a591-4271-8c38-259ee710e160&k=43240 September 17, 2007: Bre-X geologist says mine might contain gold]
* [https://www.cbc.ca/listen/cbc-podcasts/1428-the-six-billion-dollar-gold-scam The Six Billion Dollar Gold Scam] CBC/BBC podcast

{{DEFAULTSORT:Bre-X}}
[[Category:Defunct mining companies of Canada]]
[[Category:Fraud in Canada]]
[[Category:Canadian gold rushes]]
[[Category:Corporate scandals]]
[[Category:OMERS companies]]
[[Category:Non-renewable resource companies disestablished in 2003]]
[[Category:1997 in economic history]]
[[Category:Non-renewable resource companies established in 1989]]
[[Category:Canadian companies disestablished in 2003]]
[[Category:1989 establishments in Alberta]]
[[Category:2003 disestablishments in Alberta]]
[[Category:Companies that have filed for bankruptcy in Canada]]
[[Category:Scandals in Canada]]