The Biggest Gold Mining Scandal in History

The Spotlight

4 minutes read

Aug 6, 2021

gold film roll twisted on itself

This is the incredible story of one of the biggest gold scandals in history which started in Canada and ended in the depths of the Borneo jungle.

With summer well under way, we’ve decided to tell you an incredible story that will make for the perfect beach read.

A story that sounds so much like a movie that Hollywood actually made it into one, full of international scams, lies, billions of dollars, fake suicide (?), and of course at the center of it all: GOLD.

The players

Bre-X, a tiny mining company founded in 1988 by David Walsh was quietly doing business in the American Northwest and trading on the Calgary stock market at only 30 cents a share.

But in 1993, Bre-X dreams of international expansion and acquires its first international plot of land in the jungle of Borneo, Indonesia, and puts an unknown Filipino prospector named Michael de Guzman in charge of the project.

In 1994 Guzman came back from the mine with his first rock samples bearing good news.

The jackpot

Guzman’s sample results went beyond their wildest dreams as they revealed roughly 3 oz of gold per ton of rock, which would mean that sitting in the deposit were somewhere between 3 and 6 million ounces of gold.

Instantly Bre-X share value jumped from $0.30 to $1.74, and when the initial estimate was revised to 12 million ounces of gold, shares leaped even further to reach $53 apiece.

The industry and international press caught wind of it and quickly named Bre-X’s deposit “the richest deposit in the world”.

The new gold kings

While Bre-X’s shares kept rising with each new and higher estimate, eager investors started bumping elbows at the door, everyone from institutional investors to international banks wanted in on the action.

In 1996, with new projections reaching 200 million ounces, shares had skyrocketed to $300, putting the little mining company at a 6 billion Canadian dollar valuation.

The mining starts

With projections still rising, and Bre-X already planning the mining phase, the Indonesian government decided to get their fair share of the deal and negotiated a 40% share in the project.

While its multi-billion market cap was now averaging that of the main players in the industry, Bre-X was still a relatively small mining company for such a gigantic project. So to help them in the mining process, they agreed with the Indonesian government to make a deal with a larger, and more experienced, mining company that would handle the mining process for a 5% share in the project.

The mystery samples

But, in March 1997, as this new mining partner was getting in place and working on extracting its own samples to complete that of De Guzman’s, something seemed off.

Their samples were coming up dry.

The new rock samples from the future Busang mine were barely showing any gold.

And after initial mining had started, the advertised “richest deposit in the world” was still yet to appear.

Puzzled by these new findings, the company quickly asked De Guzman to jump in a helicopter to come explain his research methods and these newfound discrepancies.

The helicopter

At 10:13 on March 19, 1997, an Alouette helicopter bound for the Busang mining site took off from the Balikpapan airport with only two people officially on board: the pilot and De Guzman.

But upon arrival, the pilot was alone in the chopper.

According to the man, only 15 minutes into the flight, he turned around to see the door of the cabin open and De Guzman’s seat empty.

Four days later, a body was found in the jungle. Rodents and animals had already taken their toll, but the body was finally identified from his jeans and fingerprints: it was Michael De Guzman.

A note apparently handwritten by De Guzman was then found in the chopper, where he explained that he couldn’t bear to live anymore “while sick from hepatitis B”, and his death was quickly ruled a suicide.

The secret revealed

Theories still abound: is De Guzman really dead? Was it really a suicide? Where could he be today?

But what his alleged death finally revealed was a much larger scandal: the Busang mine gold deposit had, in fact, never existed.

It turned out that when his samples started coming up empty, Mike De Guzman had used a process called “salting” to spike the samples. Duping the lab that in charge of the tests along with everyone involved in the project.

And where did he find the gold he used to spike his samples? De Guzman simply filed it off his own wedding ring.

Once the news broke, Bre-X’s great mining project collapsed instantly, along with its share price, which in May 1997, was down from its $300 high to a mere few cents, costing investors billions of dollars in losses.

A scandalous event that still resonates today in Canadian investor’s minds, and one that single-handedly ushered in new geological standards to protect investors from fraud.

The bottom line

While we will never be sure what really happened to De Guzman, one thing is certain: there is no way he will be able to put his hands on the fine gold bars stored in our high-end vaults thanks to our free and secure storage solution. 😎


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