AN announcement that the supposed discovery of the world's largest gold deposit was a hoax has shocked Indonesia's mining industry and seen two of its share holders pull out of the project.
Bre-X Minerals, a Calgary based company operating in Busang in East Kalimantan (Borneo), has dominated headlines in the mining world for the past three months with its claim to have found a deposit of 200 million ounces of gold.
But the Busang gold discovery - described as the richest find of the century - was falsified on a scale "without precedent in the history of mining" according to a consultancy report at the weekend.
Last March the company's chief geologist at the site, Mr Michael de Guzman, fell out of a helicopter. Indonesian officials said they thought his death was a suicide.
Two days later Bre-X shares plummeted on the Toronto Stock Exchange following an Indonesian newspaper report that tests on the Busang site by the New Orleans based mining giant, Freeport McMoRan, did not match Bre-X's findings. The report said the deposits were "insignificant". A Freeport subsidiary was contemplating taking a 15 per cent stake in Bre-X, whose C$5 shares had risen to C$192.50 within minutes of being listed on the Toronto Stock Exchange in April 1996.
The Toronto exchange yesterday halted trading in Bre-X shares. In the weekend report to Bre-X, consultant Strathcona Mineral Services Ltd said it found evidence of tampering with Bre-X core samples taken from the Busang site, in the jungles of East Kalimantan.
The initial reports of a huge gold find came from samples submitted by Bre-X's head of exploration, Mr John Felderhof and his team, including Mr de Guzman.
The Indonesian Mines and Energy Minister, Mr Ida Bagus Sujana, said yesterday if Bre-X statements that the find was a hoax were true, "the government will immediately take actions, whether it be sanctions or other actions". In February last year his ministry said Bre-X had found deposit of around 40 million ounces. Bre-X's previous estimate had been 30 million ounces.
Freeport McMoRan Copper and Gold Inc. said yesterday it was pulling out of the project as did PT Nusamba, the main Indonesian partner.
Nusamba, run by a timber tycoon, Mr Mohammad "Bob" Hasan, is majority owned by foundations controlled by President Suharto. It controls 30 per cent of the Busang project. The Indonesian government holds 10 per cent. Freeport runs the world's largest mining operation in Irian Jaya, or West Papua as separatist rebels call the territory.