A suicide? So say de Guzman’s bosses at Bre-X Minerals, a high-flying Canadian mineral-exploration company. They say the Filipino geologist jumped 800 feet to his death because he was terminally ill. De Guzman had suffered through several bouts of malaria, according to Bre-X, and recently was diagnosed with hepatitis B, a potentially fatal disease. De Guzman should have been on top of the world: he’d helped to discover a huge-and now hugely controversial–Indonesian gold field known as Busang. Bre-X touted the find as a modern El Dorado, worth at least $25 billion. But two days after de Guzman’s death, rumors began circulating that Busang’s riches had been overstated.
Last week Freeport-McMoran, the U.S. mining company that paid $400 million for fights to develop Busang, made a startling announcement. After drilling several preliminary test holes, it reported “insignificant amounts of gold.” The news stunned the mining and financial industries. Trading in Bre-X’s stock was suspended on Wednesday; when it resumed the next afternoon, shares plunged from about $9 to just over $1 on the Nasdaq exchange.
Attention has now turned to the two men who founded Bre-X and got rich on Busang’s presumed spoils. One is John Felderhof, a gruff Dutch geologist who hired de Guzman and received the lion’s share of credit for discovering the Indonesian field. The other is CEO David Walsh.
Four years ago Walsh was a small-time stock promoter with big-time money problems. He’d formed several mineral-exploration companies in his native Canada, but nothing had panned out. At 47 he was working from a basement office in his Calgary home and fending off creditors; he and his wife reportedly declared bankruptcy in 1993. But his fortunes changed dramatically when he hooked up with Felderhof, who persuaded Walsh to buy Busang’s expiring mineral claims for a paltry $80,000.
Now come the questions. Did Walsh and Felderhof make a huge but honest mistake-or was Busang an overzealous attempt to drive up Bre-X stock? There is no proof of deception, but, says one gold analyst, “my suspicions are high.” Walsh is “not solid,” adds the analyst, “not a levelheaded businessman.” It’s also not clear how much de Guzman may have known about the true size of Busang’s reserves. Just two days before the bombshell Freeport report, Felderhof had stood indignantly behind Busang: “I’m 110 percent confident that the gold is there.”
Neither Walsh nor Felderhof, who both still hold large blocks of Bre-X stock, is talking now. Walsh has moved from Calgary to the Bahamas. Bre-X investors, including Fidelity mutual funds, have not fared as well. “A lot of innocent people have been ruined,” says Tom Ajamie, a Houston lawyer representing a shareholder group. He’s been trying for months to talk to Walsh about Busang. No one at Bre-X returned his calls. Last month a Canadian mining association named Felderhof its “prospector of the year.” Perhaps there’s still time to retract the award.
