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Bre-X Gold fever

It had all the elements of a great novel: a dramatic rags to riches story, a mysterious suicide (or was it murder?) and a scandalous international fraud. But the Bre-X saga wasn't fiction — much to the chagrin of the many who lost money in 1997. Thousands of investors were duped by the small Calgary-based mining company that falsely claimed to have struck gold in Indonesia.

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"Gold fever" is sweeping the nation. And it's all thanks to Bre-X, a small Calgary-based mining company that recently discovered gold deposits in Indonesia. Shares in Bre-X began to soar after the world caught on to the significance of the company's findings, and people who invested early are striking it rich. In this 1996 report from CBC's The National, Kelly Crowe talks to residents of St. Paul, Alta. - a small town that is home to a high number of "Bre-X millionaires."

It seems that St. Paul's wealth all began with a hot tip from an astute local banker who didn't mind spreading the word about this potentially lucrative stock. One woman interviewed admits she knows about five new millionaires in town. Other residents express regret that they didn't invest early on; one man even laments the fact that he used his money to buy a vehicle instead, calling it his "Bre-X truck." 
• St. Paul is a remote town of approximately 5,000 people in northeastern Alberta. A St. Paul credit union employee had done some investment research early on and wasn't afraid to spread the word about Bre-X's potential. Thanks to him, about one in every fifty residents of St. Paul owned Bre-X shares during the height of the gold frenzy. Canadian newspapers, magazines and TV programs focused a lot of attention on the high proportion of Bre-X millionaires in St. Paul during 1996.

• The "X" in Bre-X stands for "exploration." The "Bre" is derived from Bresea Resources Ltd., Bre-X's sister company, which had existed since 1984. The name Bresea was an amalgamation of Brett and Sean, the names of founder David Walsh's sons.

• Bre-X Minerals Ltd. was first incorporated and listed on the Alberta Stock Exchange in 1989. Shares of this junior mining stock opened at 30 cents a share and fluctuated between 10 and 30 cents for the next four years.

• Bre-X started out as a small exploration company run by former investment broker David Walsh out of his basement, with his wife Jeannette doing secretary duty. Financially, the company suffered for the first few years - Walsh opened his 1991 letter to Bre-X shareholders with, "Yes, we are still in business." By 1992, Walsh had declared personal bankruptcy, owing almost $60,000 to 15 different credit card companies.

• In 1993, Walsh contacted an old acquaintance, Dutch-born geologist John Felderhof, inquiring about land for possible exploration in Indonesia. At Felderhof's recommendation, Bre-X acquired the rights to part of Busang (in Kalimantan, Indonesia) for $80,100 US in May 1993.

• Felderhof soon joined the Bre-X team. He was responsible for the geological side of things, while Walsh took care of the business of stock promotion.

• The Busang exploration lands span approximately 850,000 acres (344,000 ha). Bre-X held the rights to 475,000 acres (190,000 ha) of that land. The region is a dense, elevated jungle.
• In 1994 it appeared that Felderhof, fellow geologist Mike de Guzman and the Bre-X team were starting to uncover gold deposits in Busang. Walsh vigorously worked on getting the word out, and investors began to take notice. By the end of 1994 Bre-X stock had risen to $2.84 a share.

• On Nov. 24, 1994, a Dow Jones story reported, "Bre-X Minerals Ltd. says recent drilling at its properties in Indonesia will soon lead to gold reserves of more than 2 million ounces." While two million ounces is considered impressive in gold mine terms, estimates grew to as high as 200 million ounces during the Bre-X heyday. If the latter estimates had been true, it would have been the largest single gold discovery in history.

• In 1995, well-respected stock advisors, analysts and financial journalists all started to jump on the Bre-X bandwagon. By October 1995 the stock jumped to $39.50 per share.

• Bre-X fever reached its peak in 1996. Bre-X was listed on the Toronto Stock Exchange (Canada's most prestigious stock market) on April 23, 1996, opening at a whopping $184 per share. By the end of the month it was up to $200. It hit its peak in September 1996 at $280.

• Bre-X was listed on the NASDAQ (the largest American stock exchange) in August 1996.

• In December 1996 Bre-X stock qualified for inclusion on the prestigious TSE 300 index - an index of 300 select stocks from the TSE chosen to represent the general behaviour of the market. Normally a stock had to be on the TSE for a year before qualifying, but because of Bre-X's incredible market strength, it was included on the index after only eight months.
Medium: Television
Program: The National
Broadcast Date: March 11, 1996
Guest(s): Rick Moore, David Walsh
Host: Peter Mansbridge
Reporter: Kelly Crowe
Duration: 2:10

Last updated: May 23, 2013

Page consulted on September 10, 2014

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