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1997: The Bre-X bubble bursts

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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In 1996, Bre-X, a small Calgary-based mining company, announced that it had discovered gold deposits in Indonesia. Shares in the company began to soar, creating millionaires out of early investors. But when mining officials report their findings on March 26, 1997, shareholders are stunned to learn that there may in fact be no gold. This revelation has halted trading of Bre-X shares on the Toronto Stock Exchange. And as CBC's The National reports, Bre-X officials aren't talking to the media yet.

This shocker comes on the heels of the long struggle over ownership, and the news that Bre-X's chief geologist Mike de Guzman committed suicide last week by jumping from a helicopter. Investor confidence in the company has been crippled. Shareholder Ivan Dorin expresses his disbelief and disillusionment. "I think it's all over; I think my shares are worthless," he says.

• Bre-X started out as a small exploration company run, out of his basement, by former investment broker David Walsh, with his wife Jeannette doing secretary duty.

• 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.

• On March 27, the day after news broke that there might not be any gold, trading of Bre-X resumed on the TSE and shareholders began dumping their stock in a "wholesale panic." The share price crashed to $2.50 per share. A week earlier it had been $17.45 per share.

• Although the news didn't break until March 26, 1997, there were indications that something might be wrong in Busang prior to this date. After Freeport-McMoRan began its due diligence process, the American company's geologists had some serious questions for Bre-X about the gold findings. Freeport had scheduled a meeting in mid-March to go over core sample results with Bre-X geologist Mike de Guzman.

• Mike de Guzman died after falling from a helicopter on March 19, 1997. This happened just before the scheduled meeting with Freeport-McMoRan. A suicide note was found. The note said he could not bear to live as a carrier of hepatitis B anymore. This admission struck some people as an odd reason to give, since de Guzman had an entirely treatable form of hepatitis, and he had previously weathered 14 bouts of malaria without much complaint.

• There was some speculation that this was not a suicide, but murder. There were even rumours that de Guzman faked his own death.

• Mike de Guzman's brother Simplicio strongly believed it was murder. Simplicio did not feel his brother could commit suicide. He also found suspicious elements in the suicide note - one reference to Mike's wife Teresa was incorrectly spelled with an "h", and his beloved mother wasn't mentioned in the note. "He certainly would have included our mother," said Simplicio

• Interestingly, it was later revealed that de Guzman -- known in geological circles as a real ladies' man -- actually had four wives who didn't know about each other; three in Indonesia and one in the Philippines.

• As of 2006, the exact circumstances surrounding de Guzman's death remain a mystery.

• Seventeen years after class-action lawsuits were filed, the Bre-X case was considered closed, although unresolved, when an Ontario judge dismissed it on Apr. 23, 2014.

Medium: Television
Program: The National
Broadcast Date: March 26, 1997
Guest: Greg Chorney, Ivan Dorin, Anthony Hayes, Gordon Sick
Host: Peter Mansbridge
Reporter: Kelly Crowe
Duration: 2:43

Last updated: November 3, 2014

Page consulted on November 3, 2014

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