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Gold samples 'doctored in worst mining scam ever'

Straits Times - May 6, 1997

Susan Sim, Jakarta – The fabled Busang gold mine, once described as the richest find this century with a reputed 71 million ounces of gold, is a scam "without precedent in the history of mining anywhere in the world", a report has concluded.

Not only was there "virtually no possibility of an economic gold deposit" at the site deep in the Kalimantan jungles, but samples submitted by mining company Bre-X Minerals had been doctored, an independent consultant hired by the company said.

As the mining industry here reacted with stunned dismay to the news, released in Canada late on Sunday night, the Indonesian government vowed to take legal action against Bre-X if it was proved to have acted fraudulently.

The interim report by Strathcona Mineral Services, dated May 3 and addressed to Bre-X president David Walsh, was brief but direct in its condemnation of what it described as "fraudulent activities" by unnamed parties. "The magnitude of the tampering with core samples that we believe has occurred and resulting falsification of assay values at Busang is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent in the history of mining anywhere in the world," it said.

It did not elaborate on who did the tampering or how it was done.

The report, coming after weeks of nervous anticipation that saw Bre-X shares plummet and climb with each rumour after a Bre-X partner said it had found "insignificant amounts of gold" in due diligence checks, brought the high-stakes saga to an ignominious end.

There was first the dramatic struggle for control of the mine as the company and its rivals roped in two of President Suharto's children, a former Canadian prime minister and a former American president for heavy behind-the-scenes lobbying, before a confidante of the Indonesian leader, Mr Bob Hasan, brokered a deal.

That deal cut Bre-X's share by half to 45 per cent, gave 15 per cent to American company Freeport McMoran Copper and Gold, 10 per cent to the Indonesian government and 30 per cent to a charitable foundation headed by Mr Suharto and managed by Mr Hasan, Nusamba and two other Indonesian companies.

Then, there was the mysterious death of Bre-X chief geologist Michael de Guzman, who apparently fell from a helicopter while on his way to meet Freeport executives to review his findings. And with that, came unstuck the tale of the tiny Canadian company that made instant millionaires of its shareholders, including Mr Walsh and his wife, as estimates of the Busang find rose, at one point reaching the stratospheric level of 200 million ounces before settling at 71 million ounces.

While Mr Walsh said he shared "the shock and dismay of our shareholders and others, that the gold we thought we had at Busang now appears not to be there", local partner Nusamba announced last night that it was withdrawing from the project.

And amid speculation that the government would now tighten mining regulations and subject small exploration companies to more stringent scrutiny to avoid a repeat of the scandal, sources said that top mines ministry official Kuntoro Mankusubroto was summoned to the state palace by State Secretary Moerdiono at noon yesterday.

Mr Kuntoro, who as secretary general oversaw the granting of contracts of work to foreign mining companies, was stripped of his powers briefly last year, because of reported differences with his minister over the ownership of the Busang mine.

He was replaced early last month when media speculation intensified that Bre-X geologists might have doctored samples by adding gold particles. See page 13.