Bre-X salted its drill samples with $61,000 of gold dust — and fooled the world

Bre-X Minerals was a small Calgary exploration company that in 1993 bought a jungle site at Busang, in East Kalimantan, Indonesia. Its chief geologist reported increasingly extraordinary gold finds — estimates grew from 2 million troy ounces to 70 million, potentially 8% of the world's known supply. By May 1996 the stock had reached C$286.50 and the company's market capitalisation exceeded C$6 billion.

The samples were fake. Over roughly two and a half years, approximately US$61,000 worth of alluvial gold — some of it shaved from jewellery — had been added to the drill core before it was assayed. The fraud was exposed only when Freeport-McMoRan, brought in as a mining partner, ran its own due diligence in March 1997 and found insignificant gold. An independent review by Strathcona Minerals confirmed in May that the samples had been falsified. On 7 May 1997 Bre-X shares traded at six cents. The company filed for bankruptcy two days later.

The geologist at the centre of the fraud died on 19 March 1997, reportedly falling from a helicopter en route to meet Freeport's team. The circumstances were never resolved. No criminal charges were brought: the RCMP closed its investigation in 1999, and an Ontario Securities Commission prosecution of a vice-president ended in acquittal in 2007. An estimated 40,000 investors lost their holdings; Ontario Teachers' Pension Plan alone lost C$100 million.