Gold Rush

by Jim Richards

  ‘Boh mi bpan ha,’ (There is no problem) I started off in my best conciliatory Pasa Lao, trying to calm things down. While there wasn’t a problem for them, there sure as hell was for us. This was not effective, but they were at least now listening to me.

  I tried another line. My language worked quite well regarding mining and military matters, so I fabricated a story based upon these themes.

  ‘I work directly for the chief of the army on his personal gold-mining concessions in Lang Xiao. I have a meeting with him tomorrow morning and he will be very angry if I’m not there,’ I said imperiously.

  That was a reasonable start and, although a total lie, it was partly believable as the army chiefs did indeed run private gold-mining concessions. I appeared to get a bit of traction off the others while Bug Eye, sensing a loss of momentum, became even more agitated.

  ‘Bullshit, bullshit! We go to Samkhe. NOW, NOW, NOW!’ he screamed, trying to drag me to the car.

  He was so small he didn’t have a lot of impact, but the gun in my stomach was making my hair stand on end. Stay calm and think of something to break the impasse.

  At this moment my French girlfriend started to cry, which, although unintentional, came in handy, acting as a bit of a circuit breaker.

  ‘My friend here is a diplomat at the French embassy and she has full diplomatic immunity,’ I said, arms outstretched. ‘You cannot arrest her, or you will cause a diplomatic incident. It would be very, very serious.’

  The others thought about it.

  ‘Maybe we could pay a fine instead?’ I suggested brightly.

  ‘How much?’ one of them asked.

  Oh, how I loved that question.

  We started to talk numbers as I apologised profusely for the trouble we had caused by our unthinking ignorance.

  The steam was starting to diffuse. The other men clearly preferred the idea of money to Bug Eye getting out the torture gear and potentially causing a ton of trouble for them all.

  I negotiated with one of them as Bug Eye glared, still pointing his gun at me. I wasn’t in a great bargaining position, but I wasn’t looking for a great bargain; just avoiding getting my bollocks electrocuted and my girlfriend raped would do.

  We came to a settlement and instantly it was all smiles. I shook hands with the others, who seemed happy. As we parted it was Bug Eye who had the last word.

  ‘I’ll get you and your bitch,’ he said.

  We waited till they drove off and scurried back into her house to down some stiff drinks. I was glad I had heeded the advice of my old escape-and-evasion instructor from my army days: ‘Always, always, always: carry money.’

  CHAPTER 14

  THE BIG CON

  ‘A mine is a hole in the ground with a liar on top.’

  Mark Twain

  I flew back into Perth on my birthday. It was the first of January 1996; I was thirty-two years old and feeling the thrill of anticipation all immigrants must experience on arrival in their new country. This time I was not backpacking around looking for work. Now I had residency and the chance to build a new life in this place. This was where I would set up my home and someday, maybe, start a family.

  In the first week I bought a house with the cash I had earned in Laos. It was small and a wreck, but it was close to the centre of town. I spent enough time in the middle of nowhere; when I wasn’t working I wanted to be in the middle of a city.

  The house had been built in 1897, at the height of Western Australia’s gold boom, during the decade when the population of the colony had quadrupled, driven by the great gold rushes to Coolgardie, Kalgoorlie, the Murchison and elsewhere.

  During the first evening in my new house, I went around the corner to the local pub, the Northbridge Hotel, for dinner. In a glass case at the bar was a replica of the Golden Eagle nugget, which was about a metre long. The original at 1,135 ounces was the largest gold nugget ever found in Western Australia. A plaque stated the Golden Eagle nugget had been found by sixteen-year-old Jim Larcombe near Coolgardie in 1931, and the family had used the money to buy the Northbridge Hotel. I took this to be a good omen for my house purchase.

  I spent the next two months working on my new, old house, making it habitable. Never again (I hoped) would I get caught out as I had been after leaving Guyana; at least I would always have somewhere to live.

  Most importantly, I was debt-free. This meant I could take risks, and I knew that to succeed in getting my own mining show or floating a resource company on the stock market, I had to take some risks.

  I worked a couple of short-contract geology jobs in the goldfields, supervising drilling programs that lasted a few weeks apiece. This work enhanced my geological experience and added some more contacts.

  At the end of one of these jobs, I was enjoying the view over a cold beer in the Exchange Hotel in Kalgoorlie, the skimpy barmaid capital of Australia. These mining-town pubs were handy, as they were open virtually twenty-four hours a day to cater for the shift workers at the mines.

  I was catching up with an old geologist friend from my Meekatharra days. His name was Greg Smith, a Canadian who had worked all over Africa and Asia. Greg had previously set up an alluvial gold mining operation in the Philippines and had taken out a mortgage on his house in Sydney to pay for it. After he lost his house, his wife didn’t speak to him for five years. Despite some tough times, Greg explained that things had recently taken a turn for the better and he was now running an exploration company based in Indonesia.

  There had been a recent massive gold discovery in Indonesia by a Canadian company called BRE-X, and speculative money was flooding into the country.

  ‘Jim, you have got to come and work with us up in Indo. It’s incredible,’ Greg said. ‘The Canadians are going mad after BRE-X. It’s the biggest gold boom the world has ever seen, the new South Africa. Jakarta will be the mining capital of the world, and you can be a part of it.’

  His enthusiasm was contagious. My ambition to set up or float my own company in Australia still needed some initial capital, so I was tempted, especially as plenty of my cash had gone on renovating my house. He could see I was wavering so he mentioned the money – $600 per day – and that got me over the line.

  I headed up to Indonesia with Greg to take a look at the place. No harm in that …

  Greg and I arrived into the traffic chaos of Jakarta. We went to see Mike Bird, a chain-smoking Australian who ran several small exploration companies out of his office. We were working for one of them, East Indies Mining Corporation (EIMC), which sounded grand, but in terms of field staff it was just me with Greg part time.

  Mike briefed us. ‘Here you go, guys: maps, aerial photos and historic geological information, all sourced from various government agencies. Your target is epithermal gold and porphyry copper mineralisation. ‘Jim, you must be the luckiest geologist in Asia, mate,’ he added. ‘Your project area is right next to the beach resort of Pangandaran here in Java.’

  Epithermal gold and porphyry copper are types of mineralisation you find around the Pacific Rim of Fire, a particular zone of active volcanic terrain that includes much of Indonesia.

  This gig sounded more promising than some of the disease-ridden joints I had worked in previously. As we opened the office door to leave, Mike said, ‘Hang on, fellas, I’d like you to meet some friends of mine.’

  We walked straight through the door opposite, which was labelled ‘BRE-X Minerals’, and there we met Cesar Puspos, a Filipino geologist, and the BRE-X commercial manager, Greg MacDonald, a Canadian expat with whom I would become quite friendly.

  Mike Bird was disappointed that Mike de Guzman, the Filipino chief geologist, was not there to meet us; he was working in the field. The recent BRE-X discovery (which had kicked off the whole Indonesian gold rush) was a colossal deposit on the island of Kalimantan and the investor world was in a frenzy to get in on the action. The technical director of BRE-X was geologist John Felderhof, who Greg knew from his Canadian days.

  We also happe
ned to be working for John’s younger brother, Will, who was president of EIMC. Greg had gone to university with Will, so we had quite a few connections with BRE-X, which, given their good fortune, we all figured was great.

  We stayed in a five-star hotel in Jakarta, which I was not used to, and that night another expat geologist showed us around the Blok M red-light district, which he was used to. When we entered the notorious Oscar’s pub, a group of bar girls cheered him like a returning hero.

  Next morning at Gambir train station we met our Indonesian geologist, Zuffrein, a fifty-year-old former government employee who spoke good English. It was early days in my learning Bahasa Indonesia, the Indonesian language, so having Zuffrein helped speed things along.

  The train was modern and comfortable and we viewed the scenic and hilly volcanic terrain of West Java. The fertile black soils were intensively farmed even on the steepest of slopes.

  At Bandung, we hired a car and things got a bit nerve-racking as we drove down to the south coast. Our driver was appalling, the other drivers were even worse and the roads were atrocious. We passed a fatal accident along the route and by the time we arrived in Pangandaran, Greg and I were nervous wrecks. From that point on, I only used a driver I knew and trusted to drive me on this route.

  But Pangandaran was a dream destination: a popular beach resort, magnificent seafood, and lots of gorgeous foreign and local women. As a bonus, the mountains behind the town were prospective for gold and copper.

  We rented a large house to use as an office and accommodation, bought three motorbikes and leased a car. Zuffrein had found us three young Javanese geology graduates who spoke reasonable English, and also an accountant. One mineral exploration company, ready to go. All you needed was to keep adding money.

  We built up a list of target areas to visit, using the available data. There was no Google Earth (much loved by geologists these days) back in 1996; aerial photos were the most useful tools we had in looking for anomalous areas that could be prospective for minerals.

  We broke up into teams and scoured the hills looking at the targets, talking to the locals to see if they had any knowledge of nearby gold occurrences or unusual-looking rocks.

  There were roads and people everywhere. Java has a population of 130 million and is one of the most densely populated places on earth. This was handy for getting information, and labour was always available.

  After some weeks we had found several areas of interest. These places had large enough mineral alteration systems (ancient changes to the rocks due to the passage of hot ore-forming fluids) to potentially host a decent-sized gold orebody. We set about systematically exploring these areas, moving from place to place, trenching, drilling and sampling, assisted by about fifty local labourers.

  We had mixed success, and a few months after we had commenced our work, we received a visit from our company president, Will Felderhof. In tow were some important investors from Canada.

  Following a tour of the project, we sat down to a seafood feast of fresh lobster and prawns at one of the beachfront cafés. It was instructive to mix with people who had floated resource companies on the stock market, and I questioned these guys closely; they made it all sound so easy. The conversation that flowed during the meal also made it clear to me just how much money had been made on the Canadian stock market out of the BRE-X discovery.

  In three years, BRE-X stock had gone from being worth barely 10 cents a share to C$286 a share, which valued the company at about C$6 billion in today’s money. The Canadian punters were hungry for more. As the talk and alcohol flowed, I started to get an odd queasy feeling.

  Speculation is contagious. I was sitting with some people who had become very wealthy from BRE-X. Here I was, right in the middle of all this activity, doing the work, and I was still just a salary man, an outsider in a game of insiders.

  A strange mixture of greed, envy and entitlement moved through me. It was a poisonous combination, and my judgement was heading in the wrong direction. In my haze, I formulated a plan to get a piece of the action. As financial plans go, it wasn’t sophisticated, but neither was I. The strategy was to use my salary to buy some Indonesian exploration stocks.

  Will’s visit had gone well and the next morning we farewelled our guests. I then asked Greg about my new investment idea. He himself had already made a bundle out of another Indonesian-based company, so he must know how it was done.

  ‘Greg, do you have any tips as to what stock is going to run?’ I asked.

  ‘I don’t know, Jim. I’ve been selling for a while now, and the market looks a bit overheated. But there are plenty of stories out there if you want a punt.’

  I had been saving hard for quite some time. These funds were intended for me to peg some ground and start up my own company when I returned to Perth, and finish off my house. I now decided to finesse this plan by using the money in the interim to buy shares in a few different Indonesian resource companies. I could make some profit on these investments, and when I returned to Perth and needed the money for my own venture, I could sell.

  So that is what I did. I figured that BRE-X was too expensive, so I went for a whole group of other Indonesian-focused resource companies, six in all, spreading all of my savings around to make it safer.

  I spent a couple of days in Jakarta visiting the company office and I had dinner with a group of geologists, including Mike Bird, Greg Smith and Greg MacDonald from BRE-X. The dinner talk was of the gold boom. This one would last, a shift into a new mining era with Indonesia and BRE-X at the centre.

  The city bars were packed with expats, all on the treasure trail, all doing deals. There were no terrorist attacks in those days. This was party central, and these were heady times.

  Peter Munk, the head of major gold-mining company Barrick, and others, were camped out in Jakarta trying to track down John Felderhof to do a deal with BRE-X. By now the Busang deposit was up to 70 million ounces of gold (worth $84 billion today). It was the discovery of the century.

  I felt pretty good about all of this and over the next few weeks my investments crept up in value. Finally, I was making money out of money, instead of just earning it. I was a player. As I was being successful, I kept on buying more shares; why not?

  Three weeks later, I was listening to the BBC World Service news on my radio in Pangandaran. I sat up like a shot.

  The chief geologist of BRE-X, Mike de Guzman, had fallen out of a helicopter on his way to the Busang project in Kalimantan.

  This bizarre incident caused the BRE-X share price to crater, and all of the other Indonesian-based junior resource stocks also fell in sympathy. I felt the news wasn’t really material to the big picture so I hung on, and even bought a few more shares at the new bargain prices. I was confused and troubled by the de Guzman story, but couldn’t figure out why.

  Events started to worsen over the next couple of weeks, as rumours swirled around that the BRE-X discovery might have been an elaborate fraud. I struggled to comprehend the scale of this. A fraud this big would involve a whole team of geologists: one man could not construct it.

  In my experience, geologists were basically honest. I could understand one of them transgressing, but for a whole team and company to commit a fraud on this scale, over several years? It was unthinkable.

  I spoke with Mike Bird over the phone. He was convinced BRE-X’s discovery was real, and he was closer to it than almost anyone.

  The next piece of bad news came when the mining company Freeport, which had been conducting due diligence drilling on Busang, reported that its own check samples had found ‘insignificant amounts of gold’.

  A market crash followed, which swept away not only BRE-X but any resource company remotely associated with Indonesia. The Canadian market was decimated. People who had over-extended themselves or borrowed on margin – mums and dads, pensioners and widows – were left penniless overnight. It was a bloodbath. The whole gold industry was in freefall. Even the price of gold itself was going down.


  My personal savings were destroyed. I was the deserving victim of my own greed-inspired brain meltdown. So much for diversification!

  Equally worrying, I would probably lose my employment in the shakeout. More than any other industry, mining is boom and bust. Unthinkingly, I had benefited from the boom and now, deservedly, I was getting wiped out in the bust.

  In those mad, bad days as BRE-X unravelled, it was hard to know what to believe. The Indonesian exploration industry soured instantly as the flow of cash from the Canadian mothership dried up.

  I caught up with Greg MacDonald, the BRE-X commercial manager in Jakarta, for a beer. He looked frazzled and he explained to me what he had seen the day Mike de Guzman had died falling from the helicopter.

  ‘I went to get Mike from his hotel room, to catch the plane to Kalimantan. I hammered on his door for ages. When he finally answered he was dressed in his clothes from the night before, and he was soaking wet,’ Greg said. ‘I think he’d been trying to drown himself. It was later that day that he fell from the helicopter.’

  ‘What kind of a mental state was he in?’

  ‘He was disorientated and dishevelled, and he looked scared. He had to fly out and front the Freeport guys at Busang and explain to them where the gold was. I guess he realised the game was up.’

  I still had my wreck of a house, but I had lost every dollar I had so carefully saved up during my years of isolated toil – around $200,000 in today’s money. The nest egg I had gathered to renovate my house, buy a car and start up my own minerals business was gone. I was wiped out – again – and felt sick to my stomach about it.

  The only silver lining was watching the Indonesian elite going berserk over losing their own money to the scam. In this most corrupt of countries, they were the ones supposed to be making money out of this kind of caper.

  Cesar Puspos and another Filipino geologist who had been closely involved in preparing the rock samples had hightailed it back to the Philippines. Some other foreign geologists were arrested and shaken down by police as Indonesian joint-venture partners realised they were going to end up with nothing. Things were turning nasty and, smelling the trouble, expat mining types headed for the airport.