Bre-X: The Inside Story

Duncan McDowall is a professor of history at Carleton University and the
author of Quick to the Frontier: Canada’s Royal Bank.

The Calgary-based junior mining company Bre–X created two spectacular
“rushes” in 1997: one of investors chasing profits in gold and
another of journalists chasing a story. Financial Post editor Diane
Francis and her team of researchers were quick to the chase, eager to be
first across the Christmas book market finish line. In most respects,
their “inside story” succeeds. It is fast-paced and superb on the
peripheral details of gold exploration and the financial chicanery that
supports it. The chummy, boozy world of mining exploration and promotion
is vividly brought to life, as is the rumor-filled atmosphere of junior
mining companies. Similarly, we sense the fog of Indonesian corruption
and nepotism that settled around the Busang project. Despite the
book’s hurried production, it contains a remarkable wealth of
detail—including a chilling account of the last days of rogue
geologist Michael de Guzman before his suicide. We are even shown his
suicide note. Given these strengths, Francis’s telling of the sorry
tale is probably a more instructive one than that of its chief rival,
Goold and Willis’s The Bre–X Fraud (1997). If there is a liability
to such speedy journalism, it is that the writing is often choppy, full
of short, unstyled paragraphs. Nor is there any discussion of
sources—a crucial disclosure for journalists intent on telling the
“inside story.”

Francis convincingly argues that Canadian junior mining companies are
congenitally prone to fraud, but in this case it took the ground-level
connivance of de Guzman to allow Bre–X to become a fraud of monumental
proportion. In passing, there are other revealing analytical insights.
The public’s credulity, for instance, was fanned by the enthusiasms of
Bre–X’s own promotional Web site, which in a seemingly disinterested
way pumped out unproved estimates of Busang’s potential. In an age of
globalization, Francis warns, the potential of further market
manipulation is growing and largely beyond the ability of regulators to
check. “Bre–X is a preview of the future,” she concludes, “and
it is frightening.”