Bre-X

David Walsh founded Bre-X Minerals Ltd. in 1989 as a subsidiary of Bresea Resources Ltd. The name Bresea was derived from the first names of Walsh's two sons: Brett and Sean. Bre-X stock was listed on the Alberta Stock Exchange in 1989. The company always lost money. In March 1993, on the advice of geologist John Felderhof, the company bought a property in the jungle near the Busang River in Kalimantan, Indonesia. Felderholf had co-discovered the Ok Tedi Mine in Papua New Guinea in the late 1960s; it was later declared to be an environmental disaster.

In May 1993, Felderhof was hired as general manager in charge of Bre-X's Indonesian exploration and, in October 1994, he was appointed vice-president of exploration.

Early tests showed no gold at the site. However, in December 1993, days before the license was set to expire, de Guzman told Walsh that he knew the precise spot they needed to drill at Busang I; the location had come to him in a dream.

In May 1995, Bre-X began drilling at Busang II, with positive results.

The first estimate was approximately 2,000,000 troy ounces (69 short tons; 62 t) of gold at the site. In 1995, it was increased to 30,000,000 troy ounces (1,000 short tons; 930 t); in 1996, it was 60,000,000 troy ounces (2,100 short tons; 1,900 t); finally, in 1997, it was 70,000,000 troy ounces (2,400 short tons; 2,200 t), as estimated by Kilborn Engineering, a division of SNC-Lavalin of Montreal. Felderhof said that the mine even had the potential for 200,000,000 troy ounces (6,900 short tons; 6,200 t), although the company itself never confirmed those estimates. If Bre-X‘s gold claims had been real, the company would have had roughly 8% of the world's gold supply.

In 1996, the company moved its headquarters from the Walsh family home in Varsity, Calgary to Kensington, Calgary.

In April 1996, the company was listed on the Toronto Stock Exchange and opened for trading at $187.50/share. In August 1996, it was listed on the Montreal Exchange and the NASDAQ. The share price of Bre-X rose to CA$280 per share in 1997 (split adjusted) and at its peak it had a market capitalization of CAD$6 billion.

Stating that a small company like Bre-X could not exploit the site by itself, Indonesian President Suharto initially suggested that Bre-X share the site with Barrick Mining, in association with Suharto's daughter Siti Hardiyanti Rukmana.

Fraud exposed

After Freeport confirmed that its testing showed "an insignificant amount of gold" at the mine, Bre-X demanded more reviews and commissioned a review of the test drilling. On April 1, 1997, Bre-X made a futile attempt to allay investor concerns. However, despite the evidence, several stock analysts still insisted that the company really did own the world’s biggest gold deposit.

An independent company, Strathcona Minerals, was hired to make its own analysis; on May 4, 1997, the firm reported that the crushed core samples that had been subjected to mineralogical examination by Bre-X's consultants were falsified by salting with gold dust. The lab's tests showed that gold in one hole had been shaved off gold jewellery though it has never been proved at what stage it had been added to those samples. This gold also occurred in quantities that did not support the original assays. De Guzman used realistic ratios of gold to rock to not cause alarm. Over 2.5 years, he purchased an estimated $61,000 worth of panned gold from locals to salt the mine.

On May 7, shares plunged to 6 cents each; volume set a record on the Toronto Stock Exchange. People bought shares in hopes that the stock certificates would become collectables.

On May 9, 1997, Bre-X Minerals Ltd., as well as sister companies Bresea and Bro-X, filed for bankruptcy protection. The Walsh family owned 19% of the company and Deloitte owned 12%.