The Six Billion Dollar Gold Scam: 2. The believers

Summary

World of Secrets: The Six Billion Dollar Gold Scam – Episode 2: The Believers

Podcast: World of Secrets
Host: Suzanne Wilton
Release Date: March 3, 2025
Produced by: BBC Scotland Productions for BBC World Service and CBC

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Introduction

In the second episode of Season 7, titled "The Six Billion Dollar Gold Scam: The Believers," BBC's World of Secrets delves into one of the most infamous mining frauds in history—the Bre-X scandal. Host Suzanne Wilton navigates listeners through the fervor that gripped the small town of St. Paul, Alberta, transformed overnight by the allure of a massive gold discovery in Indonesia. This episode uncovers the human emotions, community dynamics, and individual decisions that fueled the Bre-X bubble, alongside emerging suspicions that eventually led to its dramatic unraveling.

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Setting the Scene: St. Paul’s UFO Lore and Gold Fever

The episode opens in the quirky town of St. Paul, Alberta, known for its UFO landing pad—a local legend stemming from unexplained cattle mutilations in 1967. Host Suzanne Wilton introduces Troy Seimers, a local resident, who explains the town's fascination with the unknown:

[00:40] Troy Seimers: "St. Paul has this kind of lore in the UFO world, and I mean to the point where even people have made pilgrimage."

This deep-seated belief in extraordinary phenomena set the stage for the town's reception of the Bre-X gold discovery. In the mid-1990s, when Bre-X announced a significant gold find in Indonesia, St. Paul became a hub for investors eager to capitalize on this potential fortune.

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The Bre-X Phenomenon in St. Paul

Bre-X, a modest Calgary-based mining company, declared a groundbreaking gold discovery in Busang, Indonesia, in 1995. This announcement sent shockwaves through St. Paul, igniting a gold rush that transformed the town's economic landscape. Suzanne Wilton explores why this small, remote community became the epicenter of Bre-X investments:

[06:38] Troy Seimers: "This small community in the middle of nowhere suddenly became the hub of activity for a mining company with a motherlode across the world in Indonesia. Like why St. Paul? Why was this town so specifically targeted?"

The answer lies in community connections and the rapid spread of investment enthusiasm. A local banker, leveraging personal relationships and word-of-mouth, fueled the investment craze:

[07:24] Troy Seimers: "Somebody in Bre X told this guy at the bank and this guy brought in a small cadre of like maybe three or four well-connected families and then they expanded to the next series of connected families."

Almost one in ten residents of St. Paul became Bre-X investors, with the stock's ascent from $0.20 to over $286 a share in less than a year. The town's collective investment turned ordinary residents into sudden millionaires:

[09:04] John Macbeth: "I didn't hear about it soon enough. If I would have, I wouldn't be standing here now."

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Personal Stories: Choices and Consequences

The episode features poignant personal accounts illustrating divergent paths taken by investors. Colin Perozny, a local brewery owner, shares his decision to cash out early:

[13:09] Colin Perozny: "We bought a vehicle instead. And now we call it the BRE X truck because it would have been worth about $300,000."

Conversely, Warren Irwin, a hedge fund manager, recounts his extensive investment:

[28:15] Warren Irwin: "I settled on investing $250,000 at $18 a share. All of my cash was plowed into Bre-X stock."

These narratives highlight the community's varied responses to the rapid stock escalation, ranging from cautious optimism to reckless investment, deeply impacting individuals' lives and the town's fabric.

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The Role of Media and Market Speculation

Bre-X's meteoric rise was amplified by aggressive publicity and speculative trading. Suzanne Wilton details how press releases, analyst reports, and burgeoning internet chat rooms fueled investor enthusiasm:

[18:10] Sam Greer: "You had fantastic drilling results. You had the media pumping it up."

The advent of the Internet introduced new dynamics, with Brett Walsh, David Walsh's son, managing chat rooms that were becoming breeding grounds for both legitimate discussions and rampant speculation:

[21:10] Sam Greer: "They were just kids in their Underoos in their parents' basement playing on the Internet. But there was a lot of wrong information going out there."

Institutional investors, bolstered by endorsements from respected analysts and major banks, further legitimized Bre-X, creating a frenzy unprecedented in the region:

[29:06] Warren Irwin: "There was a frenzy and a sense of greed that I have not seen since in the markets."

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Rising Suspicion and Initial Red Flags

As Bre-X's stock continued to soar, skepticism began to surface. Warren Irwin, deeply invested both financially and emotionally, sought firsthand verification of the gold deposits. His attempts to visit the Busang site revealed inconsistencies:

[39:16] Warren Irwin: "They were doing skeleton core, meaning every meter...that's not as good a way to keep backup."

Interactions with local analysts and conflicting information heightened Warren's concerns, prompting him to seek external opinions:

[40:49] Warren Irwin: "John Felderhoff is a crook."

However, his findings were met with resistance and disbelief. Major mining companies showed little interest in exposing Bre-X as a scam, often dismissing such claims as attempts to manipulate stock prices.

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Warren Irwin’s Investigative Journey

Determined to uncover the truth, Warren Irwin embarked on a personal investigation, traveling to Borneo to inspect the Bre-X site. His journey, fraught with challenges, underscored the lengths to which believers went to validate the golden mirage:

[33:18] Warren Irwin: "I jumped in a plane and there I am in the southern part of Borneo with zero permission to go on site."

Despite logistical hurdles, Warren gained limited access, observing practices that deviated from standard mining protocols, further fueling his suspicions.

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Conflicting Narratives and the Collapse Begins

Back in Canada, Warren's serendipitous encounter with geologist Dale Hendrick introduced him to dissenting voices. Dale revealed that previous Australian geologists had found no substantial gold, suggesting Bre-X's claims were fraudulent:

[40:14] Warren Irwin: "John Felderhoff is a crook. And he went on to say...he runs into John once and...he's telling me it is a scam."

These revelations deepened Warren's mistrust, but internal conflicts persisted as major companies maintained their stance, dismissing Bre-X's potential as a genuine threat.

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The Tipping Point: A Community in Disbelief

Despite growing evidence of deceit, many in St. Paul remained steadfast in their belief, clinging to press releases and optimistic projections. The community's collective denial began to fray as Bre-X's inflated valuations reached unsustainable heights:

[29:49] Warren Irwin: "It's throwing gasoline on a fire for sure."

The tension between unwavering faith and emerging doubts set the stage for the inevitable downfall, leaving the town of St. Paul in emotional turmoil.

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Conclusion and Anticipation for Unraveling

As the episode concludes, host Suzanne Wilton hints at the escalating conflicts and the eventual unraveling of the Bre-X scam. The narrative sets the stage for future episodes, promising deeper exploration into the actions taken by Bre-X to maintain their façade and the eventual consequences that would ripple through St. Paul and beyond.

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Notable Quotes

• Troy Seimers [03:56]: "There's gold fever on the streets of St. Paul. Everyone's talking about BRE X..."

• John Macbeth [09:10]: "If you'd listened to this local banker's hot tip, jumped on the stock in the early days and kept a hold of it, you were now rich."

• Colin Perozny [13:26]: "For our generation, everybody was getting in on it and what are we going to get and things like that. Everybody wanted to get rich."

• Warren Irwin [28:54]: "You just had $4 billion spread around Bay street in a big mining discovery and everybody had all this cash and they're all going, this was great, let's do it again."

• Warren Irwin [31:56]: "I had built up a very good contact base in Jakarta. Probably the best contact I had was John Macbeth."

• Sam Greer [39:16]: "They were doing skeleton core... that's not as good a way to keep backup."

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Closing Production Notes

The Six Billion Dollar Gold Scam is meticulously produced by BBC Scotland Productions, featuring sound design by Hannis Brown and Joel Cox, with executive editing by Heather Kane Darling at CBC. The episode employs a blend of interviews, personal narratives, and investigative reporting to weave a compelling story of ambition, deceit, and community impact.

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Stay tuned for the next episode of World of Secrets: The Six Billion Dollar Gold Scam, where the true extent of Bre-X’s machinations and the battle for control over the Busang gold mine will be unveiled.

Transcript

[Suzanne Wilton]

This BBC podcast is supported by ads outside the uk.

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[Suzanne Wilton]

This is the UFO landing pad that we're standing on. It's circular, it's got a map here of Canada, Canadian flags above us. What is the significance of the UFO component of this?

[Troy Seimers]

Okay, so there's speculation that at some point St. Paul actually had a visit.

[Suzanne Wilton]

Really?

[Troy Seimers]

Yeah. There's no definitive proof, but that's how.

[Suzanne Wilton]

Is this part of the town gossip?

[Troy Seimers]

Yeah, this is the lore of St. Paul is that we've had situations where like the unexpected explained has occurred.

[Suzanne Wilton]

Like what?

[Troy Seimers]

We actually had a citizen in our town who would go out to farms and investigate cattle mutilations, which was, you know, predominant theory amongst the UFO community.

[Suzanne Wilton]

Troy Seimers is showing me around his hometown of St. Paul. It's a small prairie town with a population of about 6,000. A few hours from Calgary. Back in 1967, cattle were found here with their organs neatly removed. Rumors spread that it was the work of aliens. People believed their town was being visited by extraterrestrials and they raised money to build a 2.4 meter concrete pedestal, a landing pad for the UFOs. Today, a row of flags to welcome any otherworldly visitors flapped loudly in the Alberta wind.

[Troy Seimers]

St. Paul has this. This kind of lore in the UFO world, and I mean to the point where even people have made pilgrimage.

[Suzanne Wilton]

St. Paul really sells itself as the town with the UFO landing pad. A picture of it is on their website. And if you search what is St. Paul known for? The UFO stuff comes up. But back in the mid-90s, the town that wanted to believe the truth was out there put its faith in something on earth. Gold.

[Colin Perozny]

There's gold fever on the streets of St. Paul. Everyone's talking about BRE X, a small Calgary mining company that struck gold half a world away. And even though the mines are in Indonesia, a lot of the wealth is right here in St. Paul. Do you know any new millionaires?

[Suzanne Wilton]

A few. Say about five.

[Troy Seimers]

This small community in the middle of nowhere suddenly became the hub of activity for a mining company with a motherlode across the world in Indonesia. Like why St. Paul? Why was this town so specifically targeted?

[Suzanne Wilton]

In the mid-90s, St. Paul believed so hard in jungle gold that these streets were thought to have the highest concentration Bre X investors anywhere in the world. Small business owners, retirees, moms and pops. With a little extra to invest, they went all in on Bre X. Some thought the Brex gold mine story sounded too good to be true. Fool's gold and these two camps, believers and nonbelievers, were on a collision course. I'm Suzanne Wilton and from the BBC World Service and CBC, this is the $6 billion gold scam. A story about the lengths people will go to in pursuit of getting rich and how greed can obscure the truth. This is episode two, the Believers. Highway 881 takes you right into St. Paul. The route passes by a tall red brick church and a clock tower. But the rest of the buildings are low and boxy. Overhead traffic lights and signs for fast food joints light up the main street. Decades on, emotions are still, still raw in this town. I've been warned people won't want to talk about BRE X and how the gold rush all went down. Here. It all started with a man from a local bank. Just an average guy who came across a hot stock and told his friends and neighbors.

[Troy Seimers]

To my understanding, it was the gentleman at the bank and he happened to know Mr. Walsh.

[Suzanne Wilton]

Mr. Walsh was David Walsh, the CEO of Bre X. I mean, I found.

[Troy Seimers]

It very ironic that something that dramatic came to St. Paul of all places.

[Suzanne Wilton]

So there must have been some sort of connection.

[Troy Seimers]

There must have been a tacit connection between the way Briax started from very small routes to suddenly getting the attention of a small community in the middle of nowhere. I don't mean that as a slight. We're two hours from Edmonton. We are not really that connected. And I mean back in 97 even less so, right? I mean we're not the age of the Internet and texting and video chats and all that lovely stuff. So back then to drive to the city you really had to have a purpose, you know what I mean?

[Suzanne Wilton]

So somebody knew somebody.

[Troy Seimers]

Somebody in Bre X told this guy at the bank and this guy brought in a small cadre of like maybe three or four well connected families and then they expanded to the next series of connected families. Then it just kind of spread and spread and it oozed. St. Paul didn't have a wealth of information about Bre X other than the fact that it was a mining company that had discovered an amazing thing. And you trusted a person who at that point, it's my understanding the gentleman at the bank wasn't actually a resident of St. Paul that long.

[Suzanne Wilton]

This town is still full of people with Briac stories. Colin Perozny runs a Brewery in St. Paul and I've been told he might have something to say. Hello? Good. Are you calling?

[Troy Seimers]

Yes, I am.

[Suzanne Wilton]

My name is Suzanne.

[Warren Irwin]

Hi Suzanne, nice to meet you.

[Suzanne Wilton]

I'm from Calgary and I was a journalist at the Calgary Herald for a long time and I worked on Bre X. Can we chat with you?

[Warren Irwin]

The place is a mess.

[John Macbeth]

I got back. I was in Chicago till midnight last night, so.

[Suzanne Wilton]

Oh really? Were you there on business?

[Warren Irwin]

No, just a little quick getaway before.

[Suzanne Wilton]

The rest of the world caught onto bre x. St. Paul was already in the grip of gold fever. They got into the game when the company's stock was just pennies. In 1993. The stock started out at 20 cents a share.

[Colin Perozny]

It's a rags to riches story that has caused a lot of excitement here in St. Paul. A hot tip from a local banker has made dozens of people rich, at least on paper and has left dozens more shaking their heads.

[John Macbeth]

I didn't hear about it soon enough. If I would have, I wouldn't be standing here now.

[Suzanne Wilton]

If you'd listened to this local banker's hot tip, jumped on the stock in the early days and kept a hold of it, you were now rich. But some people like Colin made a Different choice.

[John Macbeth]

We bought a vehicle instead. And now we call it the BRE X truck because it would have been worth about $300,000.

[Suzanne Wilton]

That's Colin talking to CBC News about the choice he made to buy a truck instead of BRE X stock.

[John Macbeth]

I was quite young. I was out of university only a couple years. I needed to buy a vehicle. So I came home and I talked to my wife and I said, look, there's this opportunity, you know, told her, tried to explain what it was. And of course she's a more logical thinker than me, and she says, absolutely not. We should be buying the truck instead. That same day that I bought the truck, if I would have put the exact same amount of money into BRE X stock, I believe it was going to be worth about $3 million. At its peak.

[Suzanne Wilton]

With a population of 4,800, one in 26 residents became a BREX investor. But despite the public frenzy, most people in this town kept their BRE X windfall a secret.

[John Macbeth]

Some of the winners, they used it as a springboard to either starting new businesses, retiring early. Yeah, it definitely had a unique impact on the town. Personally, I know of about maybe 15 or 20 people who invested. There seemed to be a lot of people who were talking about it, whether they actually invested or not. And, you know, you hear other stories of other people who invested. Never mentioned a word of it to anybody, but carried on with their normal lives.

[Suzanne Wilton]

Were there folks, like, excited like they'd won the lottery and talking about it?

[John Macbeth]

Oh, absolutely. And I don't know how much actual work got done throughout that period because people were constantly on their computers checking stock quotes. And I think at that time even you had to phone in to get a stock quote. So you were phoning in for stock quotes.

[Suzanne Wilton]

They would have been in close contact with stockbrokers, a hotline for inexperienced investors to advise them on their next move.

[John Macbeth]

Again, the newspapers. The, you know, people joked you used to take the equities part of the newspaper and use it for, you know, whether fire starter or for kitty litter or something like that. And now that was the most sought after part of the newspaper was the actual stock section.

[Suzanne Wilton]

How did word get around?

[John Macbeth]

Well, like you did say, it's a small town, so there's the coffee shop talk and, you know, talking with co workers and sitting at a hockey game or a hockey practice with you, watching your kids play. And there's chatter there too, so it didn't take long for it to spread like wildfire.

[Suzanne Wilton]

Did it seem strange that this small prairie town in rural Alberta would be so interested in a gold mine in the middle of Borneo?

[John Macbeth]

No, it's, you know, it's human nature to be greedy and want to get richer.

[Suzanne Wilton]

One banker with a few hot tips. You can see why so many people jumped on Briek's stock. I'd really like to find an investor who will speak to me. Well, this is really frustrating. I've come two hours drive from Edmonton all the way to St. Paul hoping to talk to some folks. I've tried three different people. None of them are willing to talk. It's 25 years later and people are still uncomfortable with talking about the rags to riches. I'm optimistic though. I'm going to try again tomorrow. There's another opportunity. You know, the old timers apparently still gather, so I'm hopeful that someone's still going to share their story.

[Colin Perozny]

This was just a small town, farmers, you know, regular Joes. People were excited in the community because people had got in on the ground floor. And I think someone in the.

[Suzanne Wilton]

I'm in a local eatery, a place where townsfolk once swapped trading tips and gains over coffee. I finally found a couple who invested and who'll talk. They don't want to use their last names because in towns like this they say loose lips sink ships.

[Colin Perozny]

For our generation, everybody was getting in on it and what are we going to get and things like that. Everybody wanted to get rich. Everybody was looking at making a quick buck. The working class person wanted to be have money to retire and blah blah, blah.

[Suzanne Wilton]

That's what I think we want to believe. We want to believe sometimes so much that we're blinded by the truth.

[Colin Perozny]

What did you learn? What did you learn as a child? If it's too good to be true, it's too good to be true.

[Suzanne Wilton]

Wow.

[Colin Perozny]

You gotta understand the cultures of small communities and where people are from. We're not big risk takers. We invest a little bit of money. We lost money. We didn't invest a lot. Were you 200 bucks?

[Suzanne Wilton]

Okay, so one of you won and one of you lost.

[Colin Perozny]

Yes. So when I up five bucks, I cashed out. So, you know, I could have made a lot more, but I didn't. I just cashed out for probably about the second month that everybody was going like this. I said, oh, I'm taking my money. Traders at the Alberta Stock Exchange say they've never seen anything like it. From a low of $1.90 to a high of $170 in just one year.

[Suzanne Wilton]

You didn't have to be rich to invest. St. Paul's Small Town Coffee groups pooled together to buy stock. As those early investments skyrocketed, Troy remembers people getting stoked up even when Bre.

[Troy Seimers]

X was just starting. If they all pitched in 100 bucks and, and got in at the bottom with their little group of, of pooling, right? 15 gentlemen, that's 15, 1500 bucks on a penny stock. Suddenly that 1500 bucks is, you know, probably $150,000, right? So these guys are sitting back and having coffee going wow, can you believe what just happened? Right? And the vibe is like that. And like I said, people's thoughts were like, this is unbelievable. We are like, I mean this is gonna be a gold mine. This is fantastic. I can't believe this is happening. You know, this little community suddenly went, yay. We finally hit the big time.

[Suzanne Wilton]

A jackpot, right?

[Troy Seimers]

Like, I mean suddenly everybody in town was gonna be rich.

[Suzanne Wilton]

The press descended on St. Paul to photograph the town's millionaires. And where better than the UFO landing pad? A photo exists of five grinning men standing there in a row. I had a copy and asked Troy to take a look at it.

[Troy Seimers]

It's hard to say who's really in the photo, but I have speculation. It's just certain key.

[Suzanne Wilton]

It's incredible looking at some of these original old articles. St. Paul, can you tell me about this one? Sam Greer is rifling through his collection of old articles and he's just come across the same photo. Like Troy, he can't in fact won't name the people in the shot.

[Sam Greer]

I better not too much. I think some of the guys are a little bit sensitive about it because I think all these guys made money on it. To be quite frank.

[Suzanne Wilton]

I'm meeting with Sam in my home city of Calgary, Canada. David Walsh, the CEO of Bre X hired him in 1994 to work in their Calgary office in liaise with investors. It was in the basement of the Walsh's family home. Jeannette, David Walsh's wife, ran the office and their son Brett also worked there. Back then it felt like a family business. When Sam joined the company, it was before any sniff of a gold rush. So they just picked your resume?

[Sam Greer]

They picked my resume and they, they interviewed me. I just got along with them right away. I really liked David and that's where things got started.

[Suzanne Wilton]

What did you like about David?

[Sam Greer]

Very personal guy, good sense of humor. It seemed like a pretty serious guy and it seemed like a pretty cool project they were working on. I mean, I'm looking for gold in Indonesia. Was pretty neat.

[Suzanne Wilton]

In those early days, David Walsh was going around Alberta promoting Briac's stock. One of his roadshows took him to Edmonton, the nearest city to St. Paul. It was this on the ground promotion that sparked a groundswell of interest. Then there were the press releases describing what was happening in Busang, Indonesia.

[Sam Greer]

The drilling results that came in to the Calgary office. There was a nice flow of news coming out.

[Suzanne Wilton]

So as news is coming out, analysts are getting excited. Words of mouth starts to spread. The press is excited and it just.

[Sam Greer]

Helps to fuel the everything fueled it. You had fantastic drilling results. You had the media pumping it up. You had brokerage analysts that really like it. You had a gold market that was getting strong. It was the perfect catalyst.

[Suzanne Wilton]

Sam spent much of his time speaking with shareholders on the edge of their seats, holding on for dear life as the drilling results kept getting better and better.

[Sam Greer]

Early 1995, about January, February 95 it started to gain lots of momentum and then it really took off kind of midway through 95.

[Suzanne Wilton]

In July 1995 a press release was issued stating the discovery of possibly the largest pure gold deposit ever found in Indonesia. Then in October the projection was upgraded. Mining analysts estimated the deposit contained more than 10 million ounces of gold. Brieck's stock doubled in a week. The next press release topped even that. It was being reported that the Busang project had the potential to become one of the world's greatest ore bodies. Shares continued to soar.

[Sam Greer]

People wanted to get updates on a regular basis. So our job was to make sure everyone got the press releases when they came out. And I will say the management made sure we stuck to the press releases.

[Suzanne Wilton]

David Walsh hung on every word coming out of the jungle and rolled out press release after press release. These were devoured by analysts who created financial reports for investors, bankers and journalists. By January 1996 the stock hit 155 a share, making Walsh a very rich man. His fortune was estimated at 250 million. Those who had held onto their penny stock were now very rich. Well, at least on paper anyway.

[Sam Greer]

And then 96 was a glorious year for the company. That's where it really, that's where they hit their height. That would have been in August. You know, in the Calgary office We all believed that it was going to be the world's biggest gold deposit and we just saw wealth created from it.

[Suzanne Wilton]

Brex pumped out information at full throttle. This was the very early days of the Internet with clunky dial up modems alongside those statements. Bre X.com featured an anonymous narrator whose job it seemed to be to supplement hard facts with tantalizing hints at future developments. Internet chatboards dedicated to stocks and shares were flooded with speculation about Briek's discoveries. Here you could find a number of regular contributors talking the company up. They went under pseudonyms such as Drumbear, Dick, Nada and Big Dude.

[Sam Greer]

They were just kids in their Underoos in their parents basement playing on the Internet. But there was a lot of wrong information going out there.

[Suzanne Wilton]

David Walsh's son Brett was in charge of moderating the BRE X chat rooms.

[Sam Greer]

He was a pretty straight laced kid, I remember. You know, he'd really just stick with the press release and say, well, this is what was reported and this is what you said. Two different things.

[Suzanne Wilton]

So how important were the chat boards at that time?

[Sam Greer]

And they were just starting to pick up like it was just, it was really the birth of all that stuff. People that had a short term position in a stock, they would put a false rumor out on the Internet and it can be not just BRE X but other companies and say, yep, this company just found the world's best deposit next to BRE X or somewhere else. And their stock would go up. Someone would realize someone just made that up and posted it.

[Suzanne Wilton]

This kind of rumor mongering was illegal for a company to officially share. But here in the information superhighway, there was no regulation except that enforced by the chat room moderator.

[Sam Greer]

The news media article started quoting these erroneous things on the Internet. It was so new and I don't think anyone knew how to regulate was just kind of the Wild West.

[Suzanne Wilton]

While Brett was struggling to moderate the chat rooms, his dad, David Walsh, was fending off negative news stories. The occasional analyst raising the question whether this could all be too good to be true. Carefully timed reports of tantalizing new information coming out of Busang were his secret weapon, drowning out the naysayers. During that time, journalist Richard Behar was interviewing Walsh for a Fortune magazine article. The BRE X CEO was obsessed with controlling the narrative. David Walsh and Richard Behar.

[Warren Irwin]

Yep, it's Richard Behar. Hi, how are you? How you doing?

[Sam Greer]

Good.

[Warren Irwin]

I'm just in the middle of putting out a very quick press release. Can I get back to you? Yeah, I do. I do need very much to talk to you. Do you know what kind of stuff's flying around?

[Sam Greer]

Yeah, I know.

[Warren Irwin]

That's why I'm just putting out a little release. Okay, I'll get back to you. Okay, thanks.

[Suzanne Wilton]

Whatever the question or the concern, the answer seemed to come from the BRE X publicity machine.

[Warren Irwin]

Richard, I hope you got David Walsh. I hope you got the answers on the two pages I sent back to you plus the press release. Some unanswered questions I have for you now. As per item 17, the date was 9-4-96 and barrack where you write the.

[Suzanne Wilton]

Barrick Bre X believers were everywhere. Many were unquestioning, just happy to ride the roller coaster up into the stratosphere. But there were some people who weren't satisfied. They needed to see the gold for themselves.

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[John Macbeth]

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[Suzanne Wilton]

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[Warren Irwin]

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[Suzanne Wilton]

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[John Macbeth]

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[Warren Irwin]

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[John Macbeth]

Ameca empathy is our best policy.

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[Warren Irwin]

I had a friend of mine, he was a trader with me at the time and he was on our equity desk and he said, Warren, you got to take a look at this really crazy gold stock a buddy of mine got in.

[Suzanne Wilton]

Warren Irwin is a hedge fund manager and a well known figure on Bay Street, Canada's banking and money Corridor in Toronto's downtown financial district. He's on business in Calgary and has agreed to meet me in the very average downtown hotel my producer is staying in. I doubt it's the kind of place a multi millionaire like Warren usually hangs out in.

[Warren Irwin]

I made my bosses a fair amount of money trading other stock. So we approached them, my partner and I, about possibly taking a position in BRE X. And they weren't super keen on the idea. So at the time I said, okay, well, if you guys aren't, can you let me trade it personally? So he said, knock your socks off.

[Suzanne Wilton]

Warren is clean cut with piercing blue eyes. He's freshly shaven, not a dark hair out of place. Because of his height, broad shoulders and air of wealth about him, he's an imposing figure in his signature dark navy suit. Exactly what you'd imagine a 90s hedge fund manager to look like. And he's been running money in Bay street for nearly 30 years. It was while Warren was a director of Special Investments at Deutsche Bank Canada that he first came across BRE X. He kept a careful eye on the stock price, but also the temperature on the ground. He was an active member of the BRE X Internet chat rooms.

[Warren Irwin]

This was pioneering. This is the first time there's ever really been a chat session of any significant stock. This was very, very new and it was very fascinating in that you're able to get so many opinions and so much information shared online.

[Suzanne Wilton]

It was so novel at the beginning. Warren believed in Briek's stock just like anyone else. He settled on investing 250,000 at 18 bucks a share. All of his cash was plowed into Briek's stock.

[Warren Irwin]

I felt pretty good because I felt I was going to make an absolute fortune on it. Because if, you know, and I was believing the numbers were true, I knew that this was going to be huge. And what's interesting, at the time, the greed machine was working, more so than I've seen since. This is right after Robert Friedland had found diamond fields and he just sold that to Inco for $4.3 billion.

[Suzanne Wilton]

Robert Friedland was a mining financier and his discovery of the biggest nickel deposit in history had the mining community on a high and Bay street sloshing with money.

[Warren Irwin]

You just had $4 billion spread around Bay street in a big mining discovery and everybody had all this cash and they're all going, this was great, let's do it again. But they don't realize big discoveries don't come around too often. But sure enough, Bre X had the story there, this is the next big thing. And a lot of people rolled the money right into BRE X. So there was a frenzy and a sense of greed that I have not seen since in the markets. The level of greed back then was just unbelievable. And the front page of the Globe and Mail and the Financial Post were all about Bre X. Brie X this, BRE X that. And the newspapers were jumping all over this and pumping it, too. So pretty incredible times.

[Suzanne Wilton]

What role did that play, do you think, in the excitement and.

[Warren Irwin]

Oh, it's throwing gasoline on a fire for sure. Yeah. Between the press getting involved to legitimize it, and with a lot of investors who just made a pile of money. With Robert Friedland, there was money, there was greed, and there was a sense of legitimacy. And the numbers being spouted were just huge.

[Suzanne Wilton]

So to what extent did the actions of the analysts in hyping the stock contribute to this?

[Warren Irwin]

Well, the key thing about the analysts, especially from these big banks, when you have big, legitimate banks with respected analysts writing about this, that I believe, gave a significant amount of investors a high degree of comfort. And that's why, in part, the institutional investors also got involved in this.

[Suzanne Wilton]

After its meteoric rise in the early months of 1996, Brex hit the big league. In April, as it graduated from the Alberta Stock Exchange onto the Toronto Stock Exchange, the company's price jumped to a new record of $184. And by May, there were 20 million Bre X shares at $286 a share, a very high price. Big Canadian banks and major companies rarely reached this high. If, like Warren, you'd bought shares at 18 bucks a share, you were now very, very rich.

[Warren Irwin]

Then, before you know it, as you're well aware today, that there were a number of institutions started jumping in, like big, big Capital started throwing money at this name. And before you knew it, it had a $5.6 billion market cap and pretty exciting time.

[Suzanne Wilton]

Market cap means market capitalization. It's essentially a valuation of the company's worth.

[Warren Irwin]

At the peak for me, I had $5.6 million personally in it. I borrowed a million dollars, thinking it was prudent. And I was 30, early 30s, 31, I think it was 30. And there I was sitting there rocking and rolling.

[Suzanne Wilton]

Yeah, Warren was a diligent investor. He was on the phone night and day talking to anyone he could in Indonesia who had Brex Intel. He racked up $1,500 phone bills each month.

[Warren Irwin]

And I'd built up a Very good contact base in Jakarta. Probably the best contact I had was John Macbeth. He worked for the Far Eastern Economic Review at the time. He is probably one of the most seasoned and experienced, experienced and respected journalists in Southeast Asia. And we struck up a relationship and it worked out basically that he would share with me some of the gossip he was picking up in Indonesia and I'd share with him all the latest gossip.

[Suzanne Wilton]

In Toronto in August 1996, Warren heard about a tour of the Busang property for analysts from the big banks. This was his chance to see the site for himself. Warren. With so much invested in Bre X, Warren wanted in, but there were a limited number of places.

[Warren Irwin]

So I tried to get on one of their first property tours. And I was told repeatedly from their Calgary office that there was no room on the trip. So it was a really tough trip to get on. And I said, you know, I'm just going to fly to Jakarta and it's going to be way tougher for them to say no to me if I'm sitting in front of the office manager in the office in Jakarta.

[Suzanne Wilton]

The office manager in Jakarta was a guy named Greg McDonald.

[Warren Irwin]

I took him out for dinner and he assured me, warren, we got three helicopters going in, they're all full. And I said, don't worry about that. I'll get my way there, no problem. I'd already figured out the river system. I figured I could get a high speed riverboat and get some guy to take me up the Mohawkam river up to one of the ports, either Laura Durie or whatever. And then what I would do, I'm an experienced motorcycle racer and I would buy a motorcycle from one of the locals. And I find in Southeast Asia you throw around enough money, things could happen.

[Suzanne Wilton]

Warren wasn't used to being told no. Then Greg gave him a sliver of hope. He told Warren he should go to Balikpappen in southern Borneo where the two main guys, John Felderhoff and Michael de Guzman, were giving a presentation.

[Warren Irwin]

So I jumped in a plane and there I am in the southern part of Borneo with zero permission to go on site. But I had this backup plan of throwing a bunch of cash at some local people to get me to where I need to go. So I'm there that night. Oh, hi, John. Hi. Hi, Mike. Any chance of me getting a helicopter tomorrow morning? Sorry, Warren, they're all full. I said, okay, great. Well, we went out, I saw the presentation. Then we went out drinking that night. But we also went out playing pool with the head of the Indo Assay labs there.

[Suzanne Wilton]

His pool partner was John Irvin. This guy was the next best thing to grilling Mike Tagusman and John Felderhoff directly. The assay lab Ervin ran was where the core samples of rock drilled from Busang were taken to be analyzed. Assaying is the process of determining the amount of gold present in a mineral deposit. Warren knew John Irvin would have the most up to date information on the amount of gold coming out of the site.

[Warren Irwin]

And you know, this is tropical heat and we're drinking beers and he's sweating profusely and we're shooting pool or playing pool. And he looked a little nervous. And I said to him, I said, just for fun, I said, john, there's, there's gold there, isn't there? And he nearly jumped out of his skin. I was going, this is a little odd.

[Suzanne Wilton]

John Irvin's reaction to Warren's question could very well have been just one of surprise. After all, everyone knew there was a lot of gold in Busang.

[Warren Irwin]

So the next morning, wake up bright and early. Got me bags packed. Hey, John. Hey Mike. Any room in the helicopter, Warren? As luck would have it, there's one spot on one of the Hueys going. So I, I got jammed in as a 6 foot 6 guy. Jammed in the last seat on the, on this and I was sitting on the side of this, this Huey going into the site. And we're flying over, you know, flying over jungles that have been cut down by the logging companies. And you're seeing the red mud in the rivers as the, the soil doesn't hold the moisture anymore. So we landed at Busang and I, I got a, got a bunk to stay in a one of the rooms with one of the mining analysts.

[Suzanne Wilton]

I'm, I go back to, to that time as well when I traveled up there and I reflect on your saying, oh, it's, you know, I'll just get in there. It's not easy, Warren. It's not easy to get there. So it's, it's incredible that you had this fortitude to be able to just go, why were you so intent on.

[Warren Irwin]

Going though $5.6 million of my own money? Trust me, when you have that much money and you're what, 31, you're doing anything you can to make sure you know what's going on. So I had 5.6 million reasons to get off my butt and go to the middle of some godforsaken jungle.

[Suzanne Wilton]

At Busang, Warren and the other bankers were flown by helicopter around the Property to visit various drill locations.

[Warren Irwin]

One thing that was important for me as I'd look at who was running the drills, they were run by Australians. They looked like they were. They were buying in. Obviously they believed that they wouldn't be there. But the issue of course then was the gold was you couldn't see it with the naked eye in the core. Right. So there's no way even an Australian driller would have known whether they're drilling, you know, nothing or something. So I looked around and the locals were building their. Building houses all around the property, looking for work. And they'd build their little shack. So I go, okay, the locals are bought in. Okay, that's a good sign.

[Suzanne Wilton]

Talking a very remote location in the middle of the jungle. This is indigenous people, you know, who with traditional ways. Tell me what your experience was there.

[Warren Irwin]

I imagine they were a local diet and. But they were working away building houses and they were believers.

[Suzanne Wilton]

Can you describe the village? What was it like?

[Warren Irwin]

Oh, just a bunch of shacks. They were just putting up shanty, little shanty towns being built around the, around the front gates because they wanted to be there first. Any jobs, any work?

[Suzanne Wilton]

When Warren finally got in front of Mike de Guzman and John Felderhoff, he watched them very carefully.

[Warren Irwin]

I remember one of the mining guys asked Mike about whether he could get some sandpacord to take back. And I remember looking at what Mike did. Mike turned away from him, had a whispered conversation with Felderhoff, and then they went back, got some core, came back, gave us a bunch of core. I was going, that was a little sketchy. Why would they have to have a private conversation just to give us some stupid core?

[Suzanne Wilton]

And there were other things that got Warren's spidey senses tingling. When you drill a core, you end up with a big piece of rock. You normally split this in two. So you can send one half to the assay lab and the other half is backup. This means if you later need to double check your results, you can split the backup in half and ship that to the lab. It's called twinning and it's a standard procedure in mining exploration. But Felderhoff and de Guzman were doing something different.

[Warren Irwin]

They were doing skeleton core, meaning every meter. They'd keep a little two or three inch piece. So that's not as good a way to. To keep backup. So I'd asked Felderhoff because they'd been doing that. Well, of course I asked him, why are you doing this now versus the traditional way of splitting core? And he said, well, because gold is so nuggety. We want to make sure we get as big a sample as possible. So I said, john, when are you going to twin the holes? It's John Felderhoff. And he says, we'll be twinning the holes this fall. When that fall came and went and there was no sign of twinning holes, that didn't make me feel super great.

[Suzanne Wilton]

Warren left Busang with some concerns, but on balance, he still had confidence in his $5.6 million investment. But soon after getting home and completely by chance, he bumped into a seasoned exploration mining geologist named Dale Hendrick.

[Warren Irwin]

I ran into him the elevator in my condo building and I was reading the front page of the Financial Post and. And it said, brie X, you know, millions created, blah, blah, blah. I'm reading this and I go, yeah, yeah, what do you think of this? And he goes, oh, yeah. He says, a lot going on in the mining business. Yeah, yeah. I just said. I said, I just came back from here. And he said, really? You and I need to talk. And his old timer sat down with me. We live in the same condo building, as luck would have it. And he started explaining to me that John Felderhoff is a crook.

[Suzanne Wilton]

Dale Hendrick seemed credible. He'd spoken to Australian geologists who'd explored the property before Bre X. He told Warren that those guys were convinced there was absolutely no gold to be found at Busang. They had tested it all.

[Warren Irwin]

And I said, well, why don't the Australians tell the world that this is a scam? Oh, no, they're not going to do that because they're making way too much money on this. There are so many people in the mining business that knew there was a scam right from the beginning that kept their mouths shut. And I said to Dale, I said, well, Dale, if the Australians aren't going to say anything, I said, are you saying. He goes, yeah, I'm telling the majors who I know that this is a scam. And they're. They're thinking, I have three heads.

[Suzanne Wilton]

But could Warren trust Dale? At this point, the major mining companies such as Barrick Gold, Placer Dome and Freeport McMorran were all eyeing up Busang. Bre X, even then, was still a junior mining company. It's the junior mining companies that do the exploration. And then the major mining companies come in and take the gold out of the ground. While a handful of people like Warren were raising red flags, others dismissed scam rumors as dirty tricks. If the majors could drive the Brex share price down, they wouldn't have to pay so much to buy their way in.

[Warren Irwin]

And I was concerned that Dale was actually working for one of the majors. And you have guys employed by the big mining companies running around telling people it's a scam to keep the price a little bit lower than would otherwise be. And there's me little 31 year old Warren or 32 year old Warren trying to think, thinking this is a scam or this could be a scam. And then I have an old, an old timer sitting there telling me it is a scam. John Pelderhoff is terrible human being. And he went on to say a funny line. He goes, he ran into John once and this is why Dale was never ever allowed to go on site. Because he said to John once, he goes, john, haven't you taken this scam far enough? Isn't enough enough? And you know, Felderhoff kind of like shrugged his shoulder and left.

[Suzanne Wilton]

Ever the diligent investor, Warren continued to rack up his phone bill by getting intel directly from Jakarta. And mainly from journalist John Macbeth.

[J]

He called me every night.

[Suzanne Wilton]

I met with John in Jakarta.

[J]

As Warren Irwin said, everyone got a bit carried away with it. You know, we were talking 200 million ounces of gold here. And this is amazing.

[Suzanne Wilton]

There's one call John took which stands out. It was in the middle of the night, December 1996, the phone rang. It was Warren.

[J]

His opening line was, what if I told you there was there was no gold there? Everything was going on, the share price was going up and I would just suddenly stop me in my tracks. And I said, what do you mean? And he said, I've had the mass out every which way and there's no gold there. And I remember saying to him, well, what do you make of that? And he said, I don't know. And then we got into conversation about what was going on and we kind of forgot about it.

[Suzanne Wilton]

Things were moving really fast. And not long after Macbeth had spoken to Warren, he met with John Felderhoff at the Bat's bar in the Shangri La hotel.

[J]

I talked to Felderhoff quite often. He wasn't always trustful of me, I don't think. But he got to know me a lot better as time went on and he loosened up quite a bit. But he was obviously a man under great pressure. I remember interviewing him and probably February, January, February of 97, he was chain smoking, he was drinking endless bottles of beer. He was really under the gun. Well, that was well about a month out from when de Guzman allegedly jumped from the helicopter. And that was when the Suharto family had become fully engaged. I knew that they were under pressure. I mean, they were under pressure to. To sell.

[Suzanne Wilton]

As gold fever took over, De Guzman and Felterhoff tightened access to the exploration site. They were trying to keep a lid on the monster they'd awoken. But as much as they may have wanted to keep the world out, Bree X's incredible rise had brought them to the attention of powerful people. People who were willing to do whatever it would take to force their way into Busang. Next time on the $6 billion gold scam. Breeks battle to keep their hands on.

[Sam Greer]

The Gould BRE X stood up to large corporate companies that had connections, and we fought back.

[Warren Irwin]

So we played pretty hard.

[Sam Greer]

Everything is surprising, I guess, in the BRE X story.

[Suzanne Wilton]

And there are rumors of dirty tricks.

[Warren Irwin]

One of the things that I think upset the BRE X people was that Barrack had enlisted private detectives.

[Suzanne Wilton]

And the story of the breech's discovery gets wilder and wilder.

[Troy Seimers]

People were hunting people and looking for people and have you seen him?

[Suzanne Wilton]

The $6 billion gold scam is produced by BBC Scotland Productions for the BBC World Service and and CBC. I'm Suzanne Wilton. Our lead producer is Kate Bissell. Producers Anna Miles, Mark Rickards Story consultant Jack Kibble White music and sound design by Hannis Brown. Additional sound design and audio mix by Joel Cox. Executive editor Heather Kane Darling at cbc, Veronica Simmons and Willow Smith are senior producers. Chris Oak is executive producer, Cecil Fernandez is executive producer, and Arif Noorani is the director at the BBC World Service. Anne Dixie is senior podcast producer. And John Manell is the podcast commissioning editor. Thanks for listening.

[Sam Greer]

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