Pot of Gold Everybody's
looking for that pot of gold at the end of the rainbow.
The irresistible gleam of those precious golden nuggets is blinding. Just ask the greedy investors
who poured billions of dollars into Bre-X Minerals Ltd. in the 90s in the hopes of getting
a piece of the literal gold mine the company discovered deep in the jungles of Indonesia.
With that unmistakable golden allure on their minds,
these investors failed to do their homework on Bre-X and the gold
they supposedly struck. Little did they know, the gold mine was a giant hoax.
What exactly happened to Michael de Guzman, the mastermind who vanished into thin air?
Bre-X Before we
tackle the lingering questions surrounding de Guzman's mysterious death in 1997, let's jump
back to the beginning of this crazy story. Bre-X Minerals Ltd. was initially founded by a Canadian
named David Walsh in the late 1980s. Walsh started the Calgary-based mining company in the hopes of
breaking into the diamond expedition game. This proved more difficult than Walsh anticipated,
and he was forced to file for personal bankruptcy in 1991 after several failed Bre-X expeditions.
He shifted the focus of his business from diamonds to gold.
To do that, he partnered with famed geologist John Felderhof, who had previously made a name
for himself by heading up an expedition in Papua New Guinea uncovering the region's largest known
gold mine. Felderhof brought the necessary mining experience to legitimize Bre-X's new operations.
Walsh set his sights on the jungles of Indonesia in Bre-X's search for gold,
and Felderhof officially became the General Manager of the company's Indonesian expedition.
The team was coming together, but there was one major player yet to be recruited. His name was
Michael de Guzman, a Filipino geologist who had been a longtime friend and colleague of Felderhof.
With the combined expertise of the two geologists he brought on board, Walsh had everything he
needed—well—everything except the gold. Felderhof and de Guzman eyed an area of the Indonesian
jungle that sat close to the Busang River in Kalimantan, a province on the island of Borneo.
Their interest in this area seemed more than a little curious given the fact that the site they
were looking at had been deemed worthless by not one, not two, but twelve other mining companies.
Even so, Felderhof and de Guzman insisted that they believed the site would yield golden results
for Bre-X. With their expert advice in tow, Walsh and company set up shop on the so-called
"worthless" land in 1993. De Guzman was named the site's project manager,
and their gold mining efforts finally began.
De Guzman Background This wasn't the first time Felderhof and de
Guzman had worked together on a mining expedition, and it wasn't the first time they mined in Busang,
either. The pair had previously collaborated on a Busang exploration just a few years before being
hired by Walsh, which is why they pointed Walsh and Bre-X in that direction in the first place.
De Guzman had struggled to break into the geology field for many years before his association
with Bre-X Minerals. A high school basketball star in the Philippines, his hoop dreams were
unfortunately shattered, along with his knee, before he could ever make it as an athlete.
Nevertheless, DeGuzman didn't let the devastating incident take away his enthusiasm for life.
De Guzman sought a career as a geologist following the demise of his playing days.
Although he was not going to be the basketball star he once hoped to be, he chased after fame
and fortune all the same. His geological exploits brought him all across Southeast
Asia to various mining outposts where he sought that ever-elusive gold like so many before him.
Much of his career was filled with failed expeditions, many of which came alongside
his good buddy John Felderhof. Together, they climbed volcanoes,
walked along earthquake fault lines, and descended into the Earth, searching for the golden treasure
that would make their hard work worth it. Though Felderhof had tasted success before,
de Guzman was still hunting his first victory. One way or another, he was going to make it happen.
That hunger for his first discovery is what made him so eager to join Bre-X's
expedition in Indonesia. It presented the perfect opportunity for him to test a theory
he'd been cooking up for years.
Busang, Volcanos, and Gold That theory was called Volcanic Pool Theory,
and it's why Felderhof and de Guzman were so optimistic that they'd find gold in Busang.
We won't bore you with the scientific details of de Guzman's theory. In the simplest terms,
the Volcanic Pool Theory states that when a volcano collapses into itself,
the combination of pressure and high temperatures makes gold.
His life's work as a geologist led to the creation of this theory,
and the Bre-X job was de Guzman's last chance at redeeming his otherwise
mediocre career. The theory seemed to check out in the eyes of Felderhof and Walsh,
and they used it to select the site on which Bre-X would conduct its mining operations. Because
Busang is positioned close to several volcanoes, it was the perfect spot for de Guzman to test out
the Volcanic Pool Theory and finally find the gold he had spent his life searching for.
Felderhof and de Guzman were going against the grain with their Bre-X expedition in Busang,
and much of their operations were rather unorthodox. They were mining in a place
that a dozen previous explorations had already concluded to be empty,
and their process for analyzing core samples from the Busang site was different from
standard practices that had been followed for years. It looked like they had no clue what
they were doing to the outside world, and for two years, it seemed like they didn't.
They failed to discover any gold on the Busang
land, and time was officially running out on de Guzman and his Volcanic Pool Theory.
Even Felderhof had reached the breaking point, and he advised Bre-X to shut down
operations on the property in 1995. De Guzman's window of opportunity was all but closed.
Jackpot Just as the Bre-X expedition was nearing its end,
they finally struck gold. Literally. In 1995, de Guzman reported to Walsh that they'd found
gold on the very land they'd been examining for two years. De Guzman's initial estimate predicted
2 million ounces of gold on the property. As the Bre-X crew continued to survey the
scope of their discovery, that estimate grew to 30 million ounces. For the next two years,
they continued to find more and more gold scattered across the Busang site,
and the final estimate they gave in 1997 totaled 71 million ounces of gold.
That's a lot of buried treasure, and it must have been buried pretty deep for it to go completely
unnoticed, only to be found at the very last moment before the operation was to be shut down.
It almost seems a little too good to be true, huh?
Investors certainly didn't think so. As Bre-X's gold findings soared, so too did their stock.
News of their historic discovery spread worldwide, and the Canadian
mining company saw immediate gains in the market.
Prospective investors did everything they could to get a piece of the growing Bre-X pie.
They bent over backward to invest in a business endorsed by trusted financial advisors like J.P.
Morgan and Lehman Brothers, who called Bre-X's expedition "the gold discovery of the century."
Their stock price experienced astronomical growth, ballooning from 30 cents a share
to a whopping $170 a share. Everyone that bought into Bre-X had that golden twinkle in their eye.
They were intoxicated by the boulders of gold unearthed in Indonesia,
making any red flag regarding the whole operation completely irrelevant.
Golden Greed Investors
weren't the only ones desperate to get in on the action, either.
The Indonesian government stepped in after catching wind of Bre-X's remarkable discovery.
President Suharto had no clue that his country was home to a gold mine of such massive size,
but he would make sure that they saw their fair share of the profits. The gold did sit
within their borders, after all. They entered negotiations with Bre-X, and the resulting deal
divvied up ownership of the land between Bre-X, the Indonesian government, and a larger American
mining company called Freeport-McMoRan, which was tasked with aiding Bre-X's mining efforts.
Bre-X still owned 45% of the land, which was the largest percentage between the three partners,
but this new deal opened up the opportunity for an outside party to come in and inspect the land
themselves. Once that happened, things started to unravel quickly for de Guzman and company.
After testing their portion of the Busang land, Freeport-McMoRan realized that there wasn't
even an ounce of gold on the property. They were obviously suspicious of their findings, and they
immediately scheduled a meeting with de Guzman to clear things up. That meeting never happened.
De Guzman hopped on board a helicopter that was supposed to take him to his fateful meeting
with Freeport-McMoRan. Before it ever arrived, however, he jumped out, plummeting to his death.
What led to such a dramatic turn of events?
Salt of the Earth Well, as it turns out,
the entire Bre-X gold discovery had been a scam masterminded by de Guzman himself. The
twelve previous mining expeditions were correct in their findings. There was no
gold reserve hidden in the jungles of Busang. De Guzman had planted all
of the gold that was found and reported by Bre-X through a process known as "salting."
De Guzman had gotten his hands on a large amount of gold jewelry, some of which he
pawned off local villagers. He then shaved little bits of gold from the pieces of jewelry,
scattering them all over the land that was subsequently sampled and tested by Bre-X.
This is called "salting" and ultimately accounted for all of the gold found on the Busang property.
When the expedition was mere weeks from being shut down in 1995,
de Guzman had nowhere else to turn. He knew that failure to uncover even an
ounce of gold would be an indictment on him and his unproven Volcanic Pool
Theory. In an act of desperation, he decided his best option was to create a fake gold mine.
For a while, it worked. He had surrounded himself with a crew
of inexperienced workers that did not have the knowledge or expertise to second-guess
the questionable practices and procedures de Guzman used during the expedition. Many
of the geologists on staff were recent college graduates out in the field for the first time.
De Guzman took advantage of their ignorance and operated his scam unchecked by those around him.
De Guzman did face some questions from curious investors who were unsure of his unorthodox
tactics. He was able to quell their fears by emphasizing his own geological expertise, backed
up by Felderhof, who ensured worried investors de Guzman knew exactly what he was doing.
Felderhof's word was enough for investors that cared more about gold than due diligence.
Of course, nobody had a clue that DeGuzman was basically sneaking out
in the middle of the night and planting gold on the property.
De Guzman Theories Once Bre-X entered
their partnership with the Indonesian government, the jig
was up. De Guzman knew his crimes would be discovered in short order,
and everything he had worked for would vanish all at once. His failure proved too burdensome,
and he took the plunge off that helicopter, crashing down into the jungle below—allegedly.
That's the official story, anyway. But did de Guzman fake his own death?
Is it possible that he's still alive to this day? Many believe that to be true
and that conspiracy is not entirely without evidence.
Workers on the Bre-X site have said that they saw de Guzman pack up duffel bags filled with
hundreds of thousands or perhaps even millions of dollars in cash
on the day that he supposedly died. That's an interesting thing to do if you're
planning on jumping out of a helicopter. But what if you're planning on faking your death
and disappearing to South America? Some believe that was de Guzman's plan all along. That much
cash would have helped him start over in a new country and never work a day again in his life.
It's not just crazy conspiracy theorists with tin-foil hats that think de Guzman is still alive,
either. The doctor that performed his autopsy has gone on record saying he doesn't think
the body he examined was de Guzman's. By the time the body was found in the Busang jungle,
it had decomposed beyond recognition. On top of that, a body had gone missing from a nearby morgue
not long before de Guzman's apparent suicide. Could this be the body they ultimately found?
Who knows? But de Guzman's wife poured gasoline on the conspiracy's fire when she came out and said
that she received a mysterious payment of $25,000 from someone in Brazil after her husband's death.
Perhaps it's likely that de Guzman committed suicide just in the manner the history books
say. But maybe he didn't. Maybe he's alive right now, living a lavish life somewhere in
South America with the millions he scammed off eager Bre-X investors,
having attained the fame and fortune he always dreamed of.
Clearing the Mine Whatever you believe about de Guzman's
current whereabouts, he was entirely out of the picture after his apparent suicide. The rest of
the Bre-X crew was left to pick up after his mess. Although no link was ever officially drawn between
de Guzman's scam and his Bre-X companions, Felderhof and Walsh, there was plenty of
suspicion surrounding the pair of surviving Bre-X executives after the Busang fraud was exposed.
Once Freeport-McMoRan discovered the lack of gold on the property, Felderhof and Walsh
sold $25 million of Bre-X stock immediately. Not exactly something you do when everything's going
smoothly. The Securities and Exchange Commission found their sudden move to cash in more than a
little suspicious given the fact that it occurred right before de Guzman's death and the uncovering
of his scam. Still, nothing could be proven, and the two got away scot-free of any charges.
They didn't exactly ride peacefully into the sunset, though. Walsh moved to Nassau after the
dust finally settled on the whole incident and ended up being accosted by two masked
gunmen who broke into his house and demanded he hand over all of his money.
While he didn't meet his end that night, he died just a few weeks later of a brain aneurysm.
Felderhof had his fair share of troubles too. He was charged with insider trading
by the Ontario Securities Commission in 1999. He ended up receiving a verdict of not guilty,
but that was after a long and arduous trial that didn't conclude until 2007.
He lived out the remainder of his life in the Philippines before passing away in 2019.
The whole charade led to several systemic changes in Canada. Professional geology became more
heavily regulated due to the Bre-X scam, and the Securities Commission put new legislation in place
that required mining companies to accurately disclose their findings to potential investors
and implemented the "involvement of a qualified" third party to keep miners in check.
None of these changes helped the investors who
dumped more than $6 billion into Bre-X recoup any of their losses.
Lose-Lose Everybody involved in
this whole situation came out a loser. The investors lost their money. Walsh lost his
reputation and then his life shortly after. Felderhof never regained his professional
footing and was in and out of courtrooms for years. Then there's de Guzman. Supposedly,
he too lost everything, or that's what they say. But maybe, just maybe, Michael de Guzman
is the only winner in the entire Bre-X scandal. Perhaps he's sitting on a beach in South America,
living the life he always dreamed of, all thanks to the gold mine that never existed.
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