Kalimantan's 53 Million Tonnes Gold Deposit Scam Exposed
Amid global economic uncertainty, gold remains one of the most stable investment instruments. Unsurprisingly, this precious metal has been coveted for generations.
One of the largest gold discoveries occurred in Kalimantan in 1993, with researchers claiming a 53 million tonne deposit. However, the pursuit of this find led to a scandal that ended in immense embarrassment.
Causing a Furore
The gold mountain narrative was first propagated by Canadian mining company Bre-X. Tempo (30 November 1998) described it as a small-scale operation. As detailed by Bondan Winarno in his 1997 investigative report Bre-X: A Piece of Gold at the Rainbow’s Foot (p.50), the company had spent 12 days traversing East Kalimantan’s remote jungles in 1993, searching for a region geologist John Felderhof believed was rich in gold – Busang.
After surveying and confirming the area’s potential, the company issued an open letter to investors outlining Busang’s promising future, suggesting serious development could make them wealthy. Indonesia has seen numerous wealthy individuals through gold mining, with Freeport’s Papua project being a prime example.
The news instantly caused a stir, especially after Bre-X announced Busang would have a 53 tonne gold mountain. Consequently, Bre-X’s shares soared, hitting a historic high. BBC International reported the company’s valuation jumped from negligible to Rp7 trillion.
In Indonesia, government officials and businessmen were immediately captivated, including close associates of President Soeharto such as businessman Bob Hasan and his son Sigit. Both were eager. Through their respective companies, they gradually took control of the Busang mining area.
By 1997, Bob Hasan had acquired 50% of PT Askatindo Karya Mineral and PT Amsya Lina, which controlled Busang I and II mines. Sigit was also lured with $1 million monthly to have his company, PT Panutan Daya, act as consultant for Busang.
Initially, everything went smoothly. The gold project offered hope amid the economic uncertainties of the 1990s. However, Bre-X faced challenges operating in Indonesia. President Soeharto mandated foreign companies share equity and collaborate with the government. For Busang, he appointed PT Freeport-McMoran as the government’s mining representative, leading to the exposure of Busang’s gold claims.
The Scam Unveiled
As a reputable firm, Freeport conducted strict field verification, taking samples to test for gold in labs. A Freeport team was dispatched.
Unexpectedly, on 19 March 1997—the same day Freeport began verification—news broke that Bre-X’s CEO had vanished. His name was Michael de Guzman, Bre-X’s Exploration Director.
Reports stated Guzman had committed suicide by jumping from a helicopter passenger seat en route from Samarinda to Busang. A suicide note was found.
“The rear seat with the sole passenger was empty, and the helicopter’s right door was open,” wrote Bondan Winarno (1997:117).
On the ground, SAR teams found a body believed to be Guzman, which was taken to the Philippines for burial. However, journalist Bondan Winarno’s investigative instincts suggested otherwise. He was convinced the body wasn’t Guzman’s.
After investigations in Canada, his suspicions were confirmed. Physical characteristics of the body differed from Guzman’s. It was concluded he was alive and had been hidden.
This incident was linked to the Busang gold case. Simultaneously, Freeport released verification results showing Busang’s land contained no gold.
Independent researchers corroborated this, confirming no gold in Busang’s rock formations between 1995 and 1997.
The news caused uproar in Indonesia, having duped President Soeharto. Bre-X shares plummeted, investors raged, and some even held Bre-X’s CEO David Walsh hostage to reclaim their money.
The case took years to subside but remains unresolved, with Guzman’s disappearance still a mystery.
According to BBC International, Guzman vanished without a trace after the incident. His family has had no knowledge of his whereabouts since.
However, his family believes he is still alive, reportedly living in exile in South America.