When the President of Indonesia and the World Were Duped by the Golden Mountain
Jakarta, CNBC Indonesia — The tale of a fictitious gold mine in Kalimantan once ranked as one of the world’s biggest scandals. Not only global investors, but Indonesian elites up to the President of the Republic of Indonesia at the time were swept up in the euphoria that later proved to be full of fabrication.
Amid promises of instant wealth, many parties rushed into the mining project touted to hold a massive 53 million tonne gold reserve. Yet, behind these fantastical claims lay a fabrication that eventually unravelled, shaking global markets.
In a Tempo investigative report (30 November 1998), it began with a group of researchers from the Canadian mining company Bre-X claiming to have discovered a gold mountain in East Kalimantan. Bre-X was described as a minnow company, indicating it operated on a small scale.
As detailed by Bondan Winarno in the Bre-X investigative report: A Chunk of Gold at the Foot of the Rainbow (1997:50), in 1993 the company’s geologists embarked on a 12-day journey in East Kalimantan. They traversed remote tropical forests to locate an area that, according to geologist John Felderhof, was rich in gold, named Busang.
After exploring and confirming the area’s potential, the company issued an open letter to investors. The letter’s core message outlined the future prospects of Busang, suggesting that serious development could make investors immensely wealthy.
In Indonesia, many had already grown rich from gold mining. The Freeport-McMoRan project in Papua served as prime evidence.
The news immediately caused a stir. Especially when the company announced that the Busang land supposedly held a 53-tonne gold mountain. As a result, in Canada, Bre-X shares rocketed and reached their all-time high.
BBC International recorded the company’s value transforming from very small to Rp7 trillion overnight. In Indonesia, state officials and businessmen were immediately captivated. Figures close to President Suharto, such as businessman Bob Hasan and Suharto’s son Sigit Harjojudanto, were among them.
Through their respective companies, the two gradually took control of the Busang mining area. In 1997, Bob Hasan had acquired 50% of shares in PT Askatindo Karya Mineral and PT Amsya Lina, both of which controlled Busang I and Busang II mining.
Sigit was even persuaded by Bre-X to accept US$1 million per month for his company, PT Panutan Daya, to serve as a consultant in Busang. Initially, everything proceeded smoothly. Participation in the gold project amid the economic uncertainty of the 1990s offered a glimmer of hope.
However, doing business in Indonesia was not easy for Bre-X. President Suharto required foreign companies to share shares and partner with the government. In the Busang case, Suharto designated PT Freeport-McMoRan as the government’s mining representative. It was from here that the facts about the Busang gold began to emerge.
Everyone Got Pranked
As a renowned company, Freeport conducted strict procedures, namely field verification. They were required to take samples to prove in the laboratory that the soil indeed contained gold. Freeport’s team proceeded accordingly.
Unexpectedly, on 19 March 1997, the same day Freeport conducted the verification, news broke that Bre-X’s boss had disappeared. The boss was Michael de Guzman, Bre-X’s Exploration Director.
Guzman was reportedly dead by suicide, jumping from a helicopter passenger seat on a Samarinda-Busang flight. A suicide note was also found.
“The back seat with its sole passenger was empty, and the right door of the helicopter was open,” wrote Bondan Winarno (1997:117).
On the ground, the SAR team found a body believed to be Guzman’s. The body was taken to the Philippines for burial. However, journalist Bondan Winarno’s investigative instincts suggested otherwise. He was convinced the body was not Guzman’s.
After tracing leads to Canada, his suspicion proved correct. The physical characteristics of the body and Guzman differed. The conclusion: he was still alive and deliberately hidden.
It turned out this incident was 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 reported the same. No gold was present in Busang rocks from 1995-1997.
The news immediately rocked Indonesia. Because it had successfully duped President Suharto. Bre-X shares plummeted. Investors raged. They even held Bre-X boss David Walsh hostage to demand their money back.
It took a long time for the case to subside. Yet, it remains unresolved, leaving lingering questions, especially about Guzman’s disappearance.
Quoting BBC International again, after the incident, Guzman was never seen again. His family has no knowledge of his whereabouts to this day. However, the family believes he is still alive and is thought to have exiled himself in South America.