Former Bre-X geologist has died
By Peter Kennedy
John Felderhof, a key player in the Bre-X Minerals gold mining scandal has died. He was living in the Philippines and died of natural causes, according to published reports
His passing will once again remind mining investors of how a small-time Calgary stock promoter named David Walsh became involved with a mining project in Indonesia that was supposed to be one of the world’s largest gold projects, but actually turned out to be a salting scam.
The saga featured Mike de Guzman, the Indonesian geologist who committed suicide by jumping out of a helicopter, and Felderhof, the former Bre-X vice-chairman and chief geologist who was supposedly in charge of the Busang project.
As all who were there can recall, the excitement at the 1996 Prospectors and Developers Association of Canada convention in Toronto was palpable when Bre-X announced that it was supposedly sitting on 200 million ounces of gold in Indonesia.
Many investors were eager to buy into the story after missing out on a huge nickel discovery in Labrador a couple of years before Bre-X came to light. At its height, Bre-X had a market cap of $6 billion.
When Mike de Guzman jumped to his death from a helicopter in March 1997, he took his secrets with him to the grave. But New Zealand geologist Gary O’Connor recently said he has a theory as to what may have prompted De Guzman and his associates to salt core samples from the Busang project in Indonesia with gold. “They started to salt it to get numbers that would allow them to raise money for drilling,” he said. He believes they just kept going.
O’Connor said he encountered de Guzman while he was working for Freeport-McMoRan Inc. [FCX-NYSE], a U.S. company that helped to uncover the scam. Prior to working for Bre-X, O’Connor said de Guzman was a respectable geologist who set up mine tours in the Philippines.
More than 20 years later, O’Connor is CEO of Moneta Porcupine Mines Inc. [ME-TSX, MPUCF-OTC, MOP-XETRA], which holds a portfolio that includes five gold projects in the Golden Highway and Porcupine camps near Timmins Ontario.
Felderhof was the only person to face legal charges in the gold scandal. But in July, 2007, he was acquitted of all of the insider trading and other securities charges that he faced.
An Ontario court ruled that Felderhof reasonably believed there was a big gold find at Bre-X and the so called “red flags” that might have led him to question the reliability of the gold estimates weren’t as obvious as the Ontario Securities Commission had alleged.
The judge also said the tampering of thousands of Bre-X core samples had been so sophisticated, the ruse would have been difficult to uncover.
Felderhof sold $84 million worth of Bre-X stock in 1996, just before the Busang gold find was revealed to have been a fraud.