Bre-X

No Deal

But Barrick could not negotiate a deal acceptable to all parties. With Suharto's close confidant Mohamad “Bob” Hasan stepping in with the deal, the American firm Freeport-McMoRan Copper & Gold was eventually selected as Bre-X's partner in the Busang project. Freeport first undertook its own due-diligence drilling and reported that its analyses of seven core samples “indicate insignificant amounts of gold.” That news came one week after the announced death of Bre-X's chief geologist Michael de Guzman, who reportedly fell to his death from a helicopter while traveling to Busang to meet with Freeport's due diligence team to discuss Freeport's assay results. Forensic Investigative Associates conducted an independent investigation into the scam and concluded that the company had “improved” the samples from the time they were collected until they were turned over to a down-river lab for analysis. Forensic Associates believed Walsh (and the other Canadian employees) did not know about the samples. The next day, the $6 billion (Canadian) Bre-X stock lost almost all of its value.

An independent company, Strathcona Mineral Consultants, was commissioned to conduct an independent study of the situation. After their study, Strathcona concluded that “an economic gold deposit has not been identified in the South East Zone of the Busang property, and is unlikely to be.”

Prior to the disclosure of the truth, Walsh and Felderhof sold large amounts of their personal stock in Bre-X, reaping millions of dollars for their own benefit and at the expense of Bre-X investors, who lost about $3 billion when the scam was revealed in the spring of 1997. This incident caused a massive shattering of investor confidence and tarnished the reputation of the securities industry.

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