The Bre-X Minerals Gold Salting Scandal
The Story
A small Canadian mining company, Bre-X, claimed to have discovered the world's largest gold deposit in the jungles of Indonesia. Their stock soared from pennies to over $280 per share, creating a $6 billion company. The 'gold' was actually added to the core samples through a process called 'salting' - where gold dust or shavings are added to make samples appear rich. The fraud collapsed when due diligence for a potential buyout revealed the truth.
🚩 Red Flags
- Impossibly large and rich discovery by an unknown company
- Restricted access to the core sampling site
- Geologist reports that contradicted company claims
- Independent verification constantly delayed or denied
- Insiders selling shares while promoting the stock
⚖️ The Fallout
Bre-X collapsed overnight, wiping out billions in investor wealth. Chief geologist Michael de Guzman fell from a helicopter (officially suicide) before the fraud was fully exposed. Despite massive investigations, no one was successfully prosecuted for the fraud.
📚 Lessons Learned
One of the largest mining scams in history. Reinforced the critical need for independent verification of resource claims. Showed how stock market hype can completely detach from reality.
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