Bre-X Minerals Ltd.
What Was Bre-X Minerals Ltd.?
Bre-X Minerals Ltd., frequently alluded to just as Bre-X, was a Canadian gold mining company that scandalously defrauded investors by distorting gold examples and misquoting its accessible gold reserves.
From a pinnacle valuation of more than $6 billion Canadian dollars (CAD), Bre-X's shares collapsed and the company before long petitioned for bankruptcy. Among the numerous survivors of the Bre-X scandal were Canadian [pension funds](/pensionplan, for example, the Ontario Teachers Pension Plan and the Quebec Public Sector Pension Fund, which confronted combined losses of more than $150 million CAD.
Understanding Bre-X Minerals Ltd.
Bre-X was founded in 1988 by David Walsh, a Canadian businessman with a foundation in the finance and energy sectors. In 1993, at the command of Walsh's business partner John Felderhof, the company started gold exploration close to the Busang River in Indonesia, with geologist Michael de Guzman employed as the exploration manager.
Through a series of communications, the company proceeded to report several large vertical updates to the estimated gold items in their Indonesian site. These evaluations moved from 2 million ounces to a pinnacle of 70 million ounces in 1997. Appropriately, market participants responded by bidding up the market value of Bre-X's shares.
The scam disentangled quickly in March 1997, after de Guzman purportedly tumbled to his death from a helicopter over the Indonesian wilderness, soon after potential Busang project partner, Freeport-McMoran (FCX), said that its due diligence had revealed just insignificant measures of gold at the property. Bre-X plunged on the news and was delisted from major stock exchanges in May 1997. Simultaneously, it cleared out billions of dollars for its hapless investors, which included major Canadian pension plans and other institutional investors.
The Rise of Bre-X
Today, Bre-X has the questionable qualification of having executed the largest case of mining-related fraud in recent history. Yet at its pinnacle, the company was a sweetheart of the Canadian investment community. This was reflected in the substantial rise in the company's share price prior to its collapse, when it developed from under $1.00 CAD per share up to a pinnacle of almost $290 per share in May 1996.
The Aftermath of the Bre-X Minerals Ltd. Scandal
The Bre-X fraud was executed by the simple act of defiling core tests with gold dust taken from gold jewelry and other mining sites. With the exceptionally suspicious death of Michael de Guzman in 1997, as well as the subsequent death by natural reasons for David Walsh himself, John Felderhof stayed the main enduring character from the Bre-X debacle. While charges of unlawful insider trading were brought against Felderhof in 1999, he was vindicated of these charges in 2007.
One effect of the Bre-X scandal was to reinforce securities regulation in Canada. National Instrument (NI) 43-101 executed Standards for Disclosure for Mineral Projects after Bre-X imploded to work on the transparency of mining projects. Since many companies in Canada are taken part in mining operations, laying out a regulatory authority over the industry's geographical practices was considered goal.
- The collapse of Bre-X aided hasten changes to Canadian mining industry regulations.
- Bre-X Minerals was a major Canadian mining company that executed perhaps of the largest financial fraud in the industry's history.
- The idea of the fraud included deliberately defiling core tests with gold derived from different sources.