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Gold mine scandal tales only scratch the surface

By Marj Charlier
Special to The Denver Post

Gold Today, Gone Tomorrow

By Vivian Danielson and James Whyte
The Northern Miner, Toronto, $28.95

By Diane Francis
Key Porter Books, Toronto, $24.95

By Douglas Goold and Andrew Willis
McClelland & Stewart, Toronto, $27.99

May 3 - Three days before I escorted a dozen Wall Street and Bay Street Tmining analysts to view my company's new gold mine in Alaska, Michael de Guzman fell (was pushed? jumped?) from a helicopter on his way to the Bre-X gold mine on the Indonesian island of Borneo.

This really fried my shorts. Instead of rushing back to their desks to write about the wonderful (and real) gold mine I had shown them, every single analyst hurried back to unravel the Bre-X fraud (and in many cases, to cover their butts in the coming scandal).

And so, I became one of those who followed the Bre-X story - gold bugs, mining executives, geologists, mystery enthusiasts - eagerly anticipating the books that would solve the mysteries of the huge Busang gold deposit that sprang out of the humid Indonesian jungle, spread like kudzu to an unbelievable 200 million ounces, and then rotted back into nonexistence and infamy in a matter of months. The three books that resulted, all written by Canadian authors, detail the unfolding of the scandal that sent a 30-cent mining stock soaring past $286 a share and then crashing back to 9 cents, focusing most heavily on the world closest to them - the financial jungle here in North America. When Calgary-based Bre-X's unsubstantiated estimates of 1 million ounces of gold went unchallenged, the company's management saw no reason to stop there. Eventually, Bre-X credited Busang with 200 million ounces - the largest deposit in the world. The lack of critical review by brokerage houses, bankers and industry peers, these books suggest, allowed the deposit to grow to its absurd proportions and turned what might have been a $5 million stock scam into a $3 billion deadly scandal.

Unfortunately, none of these books takes full advantage of the wild and woolly tale of murdersuicide, investor greed, international political scandal and brokerage firm negligence. None of them does a good job of weaving together the two stories of the misdeeds in the Indonesian jungle and the stock promotion and hype in Canada.

Goold and Willis come the closest to writing a page-turner on Bre-X, but even they don't pick up a narrative rhythm until midpoint. And their too-frequent digressions, such as a lengthy speculation about Indonesia's political future, distract from the story.

But Goold and Willis, and Danielson and Whyte in particular, sketch intriguing portraits of the three men central to the scandal. Michael de Guzman, the Philippine geologist with a scarred childhood and limping gait, emerges as amoral and conniving. His four wives and mysterious disappearance are the toogood-to-be-true elements that made the story stranger than fiction. John Felderhof is portrayed as the rough chief geologist who traded on his jungle-tough image but actually preferred his luxury Cayman Island homes. And David Walsh, Bre-X's guileless founder and chairman, was clearly in over his head from the start. Of the three books, Danielson's and Whyte's comes the closest to answering the big riddles of the Bre-X story: What really happened in Indonesia? How was the deposit salted? How did the company keep the world from discovering the hoax for so long? And who was responsible for the initiation and perpetuation of the Bre-X scandal? Their text is exhaustively detailed, which probably makes it the best read for litigation-minded investors and industry-watchers who want the whole story. But it is weakened by self-absorbed stories of how the Northern Miner, a mining publication where the authors work, discovered the scandal.

Francis utterly fails in creating a book that either holds a narrative or creates a factual record. Her endlessly dull quotes show a lack of understanding of what makes people, or what they say, interesting. The true story of what happened at Bre-X may never be known, now that de Guzman is dead, his cronies are protected by the Philippine government and Felderhof is securely ensconced behind the tropical walls of his Cayman Islands home. With truth as an unreachable goal, then, it's possible that the book that could tell this story best would be a novel that abandons all pretense of faithfully recording the truth and takes full advantage of the amazing, even if true, elements of this fantastic tale.

Marj Charlier, director of investor relations at Cyprus Amax, covered the mining industry for the Wall Street Journal for 12 years.


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