200 million oz of gold, hailed by Lehman Bros. as the “discovery of the century” unearthed in the jungles of Borneo by a Calgary minerals company founded by a chain-smoking financial failure sinking in debt.

If a story sounds too good to be true, it must be the story of Bre-X. The Bre-X tale is one that seems like it’s come straight from the pages of an over-the-top Hollywood script, a script that any producer worth their weight in, well, gold, would probably toss aside and label as completely unbelievable.

But here we are, with the major motion picture Gold coming to a theatre near you and a follicly challenged Matthew McConaughey starring in the big screen interpretation of the events that make up the Bre-X stock market scandal.

The Bre-X headquarters in Calgary, Alberta, Canada. Photo: Dean Bicknell/Calgary Herald

Bre-X started off almost worthless-to everybody

It all started back in 1989, when Bre-X Minerals, Ltd. was founded by Canadian David Walsh, a washed-up stock broker who by all accounts looked like death warmed over on the best of days (not to be confused with the Irish journalist of the same name who rained on cyclist Lance Armstrong’s parade by going public with the athlete’s doping scandal and in physical appearance is far more lively).

He was an overweight, chain-smoking ball of stress, always on the cusp of being broke. He had one thing going for him, though, and that was the ability to talk a good game-something that would come in extremely handy soon.

It was a tepid start for Bre-X, with failed mining expeditions in Quebec and the Northwest Territories and the company continuing to walk the unglamorous line between bankruptcy and being an almost worthless penny stock until 1993. That’s when Walsh called upon a former acquaintance who would eventually become Bre-X’s chief geologist and vice president, fellow Canadian John Felderhof.

Walsh had spent the year leading up to reconnecting with Felderhof in the throes of declaring personal bankruptcy but was still able to artfully convince some friends to invest $138,000 with Bre-X so that it could purchase the mining rights to a chunk of jungle near the Busang River in Borneo on Felderhof’s recommendation.

This area fell under Indonesia rule and had been on the mining radar for some time when Bre-X stumbled onto it, but only because a dozen established mining companies had already surveyed the area and declared that it wasn’t a viable site for further exploration.

The players: Left: John Felderhof and Michael de Guzman on site in Borneo. Right: Bre-X president David Walsh and Felderhof point at papers saying how fantastic Bre-X is.

If at first you don’t succeed, cheat

But Felderhof had an ace in the hole that the other companies did not, and that ace was Filipino geologist Michael de Guzman. De Guzman had been giving Felderhof core samples taken from Busang that initially showed no signs of substantial amounts of gold, but suddenly that changed and samples started showing large deposits of gold-to the tune of an estimated 136,000 pounds (16,329 kilograms).

However, the gold those samples contained was not from the Borneo jungle, but shaved off the wedding ring on de Guzman’s finger. Those shavings were then used for the ‘salting’ of de Guzman’s crushed core samples to give the false reads. In order to keep up his ruse and since his wedding ring only lasted so long, over the next 2.5 years he would buy a further $61,000 worth of gold panned by locals which he would use to salt samples as they were collected.

Even though a dozen other companies found no substantial evidence of gold along the Busang River, de Guzman and Bre-X convinced a lot of people otherwise.

Bre-X goes from a penny stock to a Wall Street favourite

After initial reports surfaced of Bre-X’s findings, the company’s stock, which had been trading at pennies, began climbing, eventually hitting $280 per share and putting Bre-X’s market value around the $6 billion mark.

All of this was tied into the estimated value of gold at the Busang site as reported by de Guzman using his salted samples, and from the initial 136,000 pound figure it continued jumping at a staggering pace, topping out at over 200 million troy ounces or 6,000 tons-potentially the largest gold find in history.

All of this despite the misgivings of independent geologists who had been hired by investors to inspect the site and study de Guzman’s findings being suspicious of the shape of the gold samples they were provided with. Their tests even showed that the gold flake they were examing was more what you’d expect to see in panned river gold and not what you’d find in anything mined from the ground.

While de Guzman carried on tampering with samples and a small town began to rise from the mud along the Busang River in anticipation of mining starting in earnest, Wall Street was telling anyone with a dollar to spare to invest what they had in Bre-X.

While more investors hopped onboard, Walsh and Felderhof began dumping their Bre-X stock. From April through September in 1996 Walsh and his wife sold off a combined $26.1 million, and Felderhof $26.5 million.

The Bre-X story in a handy infographic. The company’s stock went from zero to hero with the backing of some major financial powerhouses. Image: visualcapitalist.com

The noose begins to tighten

Against its better judgement, Bre-X was dragged into a three-way partnership brokered by (which is just a polite way of saying demanded by) Indonesia’s President Suharto after Suharto suspended Bre-X’s mining operation by temporarily revoking their mining rights to the Busang River site.

The deal would give his country a 40% cut of whatever gold was found, Bre-X 45%, plus also allow another more established mining company, Freeport McMoRan, in as a 15% partner. With that looming overhead, a suspicious fire at the Busgang site in early 1997 destroyed many of Bre-X’s samples and records.

On March 19, 1997, Michael de Guzman committed suicide by jumping from a helicopter 800 feet (243 metres) in the air to the jungle below. Or that’s the official story at least. His body remained in the jungle for four days before it was found, and had already been partially shredded and snacked upon by wild boars.

If nothing else, the boars were quite selective about what they ate-Guzman’s face, hands and feet were missing. A DNA test was never done, no dental records were available and the body was cremated without much investigation.

Considering de Guzman had cashed out millions in Bre-X stock and the lack of hard evidence some think he might still be alive, or that he might have been murdered. And then, like de Guzman (or his deceased stunt double) plummeting from a chopper, the bottom fell out for Bre-X.

It would be funny if people hadn’t lost everything they had by investing in Bre-X. Photo: CBC

The gig is officially up

Freeport McMoRan took samples from the same areas de Guzman had, and found what could barely be called a trace amount of gold. Word of this caused Bre-X stock to crash, and many of its investors-including the Ontario Teachers Pension Plan that had to swallow a $100 million loss, not to mention others who lost their homes and savings-were out billions of dollars.

The sample tampering was made public, and a very angry Wall Street began screaming for the heads of Walsh and Felderhof, both of whom proclaimed their innocence. Walsh hightailed it to the Bahamas where he died of a brain aneurysm in June of 1998, and Felderhof took up residence in the Cayman Islands. He was charged with insider trading, but acquitted in 1997. It still remains a mystery as to who knew (or didn’t know) exactly what, but now that Hollywood has its hands in the telling of this tale one thing is certain:

Matthew McConaughey, bad hair and all, is also hunting for gold. Oscar gold. Please tell us no one loses their life savings in that story, right?

Jay Moon

Jay Moon is a writer who has turned the wanderlust that found him backpacking around Canada and the U.S. as a young lad into a writing lust that has him embracing the opportunity to cover topics about anything (and everything) he can get his now middle-aged eyes, ears, and hands on.

View all stories

Jay Moon

Jay Moon is a writer who has turned the wanderlust that found him backpacking around Canada and the U.S. as a young lad into a writing lust that has him embracing the opportunity to cover topics about anything (and everything) he can get his now middle-aged eyes, ears, and hands on.