Prices fluctuate but recently, the price of an ounce of gold has hovered around $1,250. And while there are other precious metals that sell for a much higher price, gold is number one when it comes to brand cache. The discovery of gold in California sparked a nation’s westward expansion in earnest; American currency was backed by gold, in part, until 1971; Olympic champions receive gold medals; and the phrase “gold standard” is used to describe something best in class. Gold is special.
Gold is why, in 1993, a forgettable company named Bre-X bought a bunch of land in the Indonesia part of the island of Borneo. A geologist named John Felderhof, who had previously discovered gold and copper deposits in that general part of the world, believed there was gold be to found in this area as well. Many mining companies explored his claim; all of them passed until Bre-X entered the picture. A Canadian company trading on less than a cent a share on the penny markets, Bre-X was hardly a big player in the space, so maybe the gamble made sense regardless of the outcome. Regardless, two years later, they were glad they made the investment. The mining director, a man named Michael de Guzman, came back with his first report: he estimated that the mine contained at least two million troy ounces of gold. Samples he provided to independent labs supported his view.
Bre-X wasn’t a penny stock for much longer after that. The discovery shot the company’s stock price into the stratosphere, and by 1997, the company was worth billions of dollars — all because of this one gold mine. This caught the eye of the Indonesian government, which had concerns — could a small mining company truly exploit the huge amounts of gold in the area? So authorities stepped in, requiring that Bre-X bring in a partner (and, of course, ensuring that the government got a cut). That’s when Bre-X’s fortune began to make a major U-turn. In February of 1997, the partner mining company, named Freeport-McMoRan, came to the site to do its due diligence. And they didn’t find any gold.
Freeport-McMoRan asked de Guzman for an explanation, and de Guzman agreed to provide one. He never would. The Calgary Herald reported that “the 41-year-old geologist was wearing thin as he juggled four wives and families, none of whom knew about each other” and his problems went well beyond his home life (home lives?). And, again, per the Herald,de Guzman was “about to face tough questions about why a large independent mining company couldn’t find gold at a remote site that was supposedly among the world’s biggest deposits.” And while he boarded a helicopter to the site that March, he never arrived. He jumped from the helicopter (or fell out, no one is quite sure), falling to his apparent death. His body wasn’t recovered, at least not intact — it was mutilated nearly beyond recognition; it could only be identified by dental records.
The death was ruled a suicide, in part because de Guzman had a lot more to hide than his polygamy. Per Slate, the reason Freeport-McMoRan could find no gold in the mine s because de Guzman faked it:
As it would turn out, de Guzman had been “salting” his core samples with gold dust, first with shavings from his own wedding ring and later with $61,000 worth of locally panned gold. Of course other geologists, hired by some of the investors, had taken a look at de Guzman’s samples and raised suspicions due to the fact that the entire cores had been crushed up, leaving nothing to verify the samples against, and that the gold fragments themselves seemed to have an unnatural shape. But de Guzman managed to talk his way through all of their misgivings, and Bre-X continued to grow on rampant speculation.
Bre-X’s stock cratered shortly thereafter and its shareholders were out billions of dollars. The company’s founder fled to the Bahamas and only avoided prosecution because he also died shortly thereafter (although there was nothing suspicious about his death). Felderhof was later charged with insider trading but prosecutors couldn’t make the case stick; ultimately, no one affiliated with Bre-X went to prison.
From the Archives: South Korea’s Reverse Gold Rush: The get-out-of-date program on a national scale.