The Great Scandal: How the Indonesian President and the World Were Deceived

A claim of discovering a giant gold reserve in Kalimantan once shocked the world and triggered euphoria among investors. Several prominent Indonesian figures, up to the President of the Republic of Indonesia at the time, took an interest in the project, which was claimed to hold 53 million tonnes of gold. However, the promise of wealth proved to be a fabrication, triggering one of the largest mining scandals to rock the global financial markets. According to an investigative report by Tempo (30 November 1998), a group of researchers from a Canadian mining company named Bre-X initially claimed to have found a mountain of gold in East Kalimantan. Bre-X was described as a small, penny-stock company. As detailed by Bondan Winarno in the investigative report ‘Bre-X: Sebongkah Emas di Kaki Pelangi’ (1997:50), in 1993 the company’s geologists undertook a 12-day journey in East Kalimantan. They traversed uncharted tropical forests to find an area, which geologist John Felderhof believed was rich in gold, called Busang. After exploring and confirming the area’s potential, the company issued an open letter to investors. The essence of the letter explained the future prospects of Busang, suggesting that if developed seriously, investors could become immensely wealthy. In Indonesia, many had already become rich from gold mining, with the Freeport-McMoRan project in Papua serving as one example. The news immediately caused a sensation, especially when the company announced that the Busang land contained a gold mountain of 53 tonnes. Consequently, in Canada, Bre-X’s shares skyrocketed, reaching an all-time high. BBC International recorded that the company’s value, initially very small, instantly changed to Rp7 trillion. In Indonesia, state officials and businesspeople were immediately captivated, including individuals close to President Soeharto, such as businessman Bob Hasan and Soeharto’s son, Sigit Harjojudanto. Through their respective companies, the two gradually took control of the mining area in Busang. By 1997, Bob Hasan had acquired 50% of the shares in PT Askatindo Karya Mineral and PT Amsya Lina, which controlled the Busang I and Busang II mining sites. Sigit was even persuaded by Bre-X with an offer of US$1 million per month for his company, PT Panutan Daya, to become a consultant in Busang. Initially, everything went smoothly. The involvement in a gold project amidst the economic uncertainty of the 1990s became a glimmer of hope. However, it was not easy for Bre-X to do business in Indonesia. President Soeharto required foreign companies to share ownership and cooperate with the government. In the Busang case, Soeharto appointed PT Freeport-McMoRan as the mining company representing the government. It was from this point that the facts about the Busang gold began to unravel. As a reputable company, Freeport implemented strict procedures, namely field verification. They were required to take samples to prove in a laboratory that the soil indeed contained gold. A Freeport team was dispatched to the site. Unexpectedly, on 19 March 1997, the same day Freeport conducted its verification, news broke that the Bre-X boss had vanished. The boss was Michael de Guzman, Bre-X’s Director of Exploration. Guzman reportedly died by suicide, jumping from the passenger seat of a helicopter on a flight from Samarinda to Busang. A suicide note was also found. On the ground, a search and rescue team found a body believed to be Guzman. The body was taken to the Philippines for burial. However, Bondan Winarno’s journalistic instincts told him otherwise. He was convinced the body was not Guzman’s. After conducting an investigation all the way to Canada, this conviction was confirmed. The physical characteristics of the body and Guzman were different. The conclusion was that he was still alive and had been deliberately hidden. This event turned out to be connected to the Busang gold mountain case. At the same time, Freeport released its verification results: the Busang soil contained no gold. Various independent researchers also reported similar findings. There was no gold in the Busang rock samples from 1995 to 1997. The news immediately caused an uproar in Indonesia, as it meant President Soeharto had been deceived. Bre-X’s stock subsequently plummeted, and investors were furious. The scandal took a long time to subside but was never fully resolved, leaving unanswered questions, especially regarding Guzman’s disappearance. According to a BBC International report, Guzman has not been seen since the incident, and his family does not know his whereabouts to this day. However, the family believes he is still alive and is thought to have gone into exile in South America.