WALSH INTERVIEW ==CALGARY HERALD, 6 and 7 APRIL 1997
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views of such a third party. This article has not been reviewed by Bre-X Minerals
Ltd. to ensure the accuracy of the content there of and neither Bre-X Minerals
Ltd. nor any of its directors, officers or employees assumes any responsibility for
the information set forth herein.
April 6, 1997
The David Walsh Reflections
Bre-X boss looks at turbulent times
Mike de Guzman died when he fell from a helicopter in
Borneo. How did it affect you? Are you convinced it was a
suicide and are you convinced it was because Mike was
suffering hepatitis?
I knew him well. I knew his abilities more than I knew him
personally. He was an integral part of the company I have seen the
five-page note he left and to my mind it's his handwriting. It's on
record that he's had malaria and numerous times. And from his note
he was diagnosed with hepatitis B and he basically said he'd had
enough pain in his back and his stomach and that was basically the
essence of his note. We don't have an official copy of the autopsy
yet or official hospital records. We're relying on the note that he
left, as I said, in his handwriting.
When you first heard Mike had died, was your reaction an
emotional one?
It was emotional because I'd just seen him six days earlier, spent
some time with him over the period of the prospectors' convention
in Toronto. It was a great shock.
The next big shock was the Freeport-McMoRan release? What
was your reaction?
First of all it wasn't Freeport's fault. It was a regulatory issue.
Rumors started that the preliminary results were not comparable to
Bre-X results and it had been their intention to complete their due
diligence in full without disclosing, because you could have a
(drilling) hole miss, as we've had, but because of the rumor that
started, our shares started to decline. That prompted a call from the
regulatory bodies, which prompted the preliminary release of the
assay data that Freeport had, which as they've said in any
correspondence, is preliminary and there's more work to be done.
Who pushed for it to be released?
It was the Ontario Security Commission on the Toronto Stock
Exchange. I think it was an overreaction . . . just based on the way
we've drilled for the last three years. We don't issue hole by hole
results and have wild gyrations in the market. Freeport completed a
seven-hole program. We have no further results from that program
than what's been announced from them.
You've been quoted as saying you are 100 per cent certain the
gold is there and (senior Bre-X geologist) John Felderhof is
saying he's 110 percent certain. Is there a chance there's less
gold than you thought?
No, I don't think that will be the case. I think that all the numbers
that we've reported have been accurately announced. I'm convinced
our numbers will hold up.
Have you talked to Jim Bob (Moffett, the chief executive of
Freeport) since these preliminary results were released?
I've talked to him off and on. There's not much to talk about until
the final analysis and as I said I haven't received an update on their
work since what's been announced. And I don't think I want to . . .
because it would end up piece meal again. I'd have some
information that wasn't generally in the public domain. I'm satisfied
just to wait until the end of the month and get the whole picture at
once.
How did you first learn about Freeport's tests? Did Jim Bob
call you? Was he cordial? Was he upset?
He was cordial, but said that it was very preliminary they hadn't
completed their seven holes . . . in very preliminary stages . .. but
stated that we all could have a problem.
What went through your mind at that point?
I wasn't that concerned. I phoned John Felderhof. John wasn't that
concerned because it was too preliminary and neither was Mike de
Guzman. It could have been any number of factors, the drilling, the
lab, God knows what.
How many days previous to Mike's death was this?
I think three or four days.
The Ontario Securities Commission then compelled Freeport
to release those results, what, about a week after you found
out. Do you remember roughly the time frame?
March 27, March 26 . . .
There were rumors coming out of Jakarta at that point?
That was picked up by a publication over there. Then it was picked
up by one of the ghost writers on the Internet on the chat page or
whatever. And that's what prompted the stock to drop a couple of
dollars, which prompted the call from the regulatory bodies, which
prompted us to get the material that Freeport had to that particular
date.
Do you think this Internet scenario with the stocks could have
happened 10 years or 15 years ago. Are you a victim in essence
of Internet journalism?
I think what possibly we're seeing here is a test of globalization, of
the integrity of markets with Internet being the wildcard. People can
say anything and people can believe the written word without
looking into the motivation behind that statement. I think apart from
us being under scrutiny, I think the whole global marketplace is
under scrutiny and the Internet itself. It's a fantastic new technology
but if it's used in the wrong manner or for someone's own personal
gain or reasons, I don't know how they're going to be able to police
it, quite frankly.
What about mainstream media?
They're pretty quick to judge without the facts. What really annoys
me is reporters who have 'Mining Reporter' under their name who
don't do their own due diligence and write from rumors and tips and
unmarked envelopes dropped on their desk.
Do you think Bre-X will be vindicated? Are you convinced of
that?
Yes I am. But we've got 25, 35 days to go, of uncertainty.
Can the next 25 be anything like the last 14? Or do you think
you've been through the wringer at this point?
I don't think there's much more to say on the subject until we get
the results. I don't think I'll be doing any more interviews after
today What's the point? It's coming down to is the gold there or is
the gold not there. That's basically it. The gold's there or it's not
there. We at Bre-X are convinced it's there.
What's it like to be in a worldwide media spotlight?
You fellows all have your jobs to do, but I didn't realize there were
so many reporters out there. We got CNN, 60 minutes, Asian
News, the Jakarta Press, trying to get access, you know, fax,
phone, e-mail . . .
What's this been like for you personally? What personal
anguish have you gone through?
We're devastated by these accusations, that this cloud has been put
over us, when in my mind we have probably the most professional
and knowledgeable technical team in the world. John Felderhof and
Mike de Guzman are experts on
this Maar-diatreme (geological) system at Busang that no one in
North America even heard of before Bre-X got involved in the
summer of '93. Not only did they
never hear of the system, most people didn't even know where
Indonesia was. Now everyone's an expert.
Do you feel some concern for those people who have lost
money on Bre-X, Bro-X, for let's say, the last few weeks.
Terribly concerned, personally. It's tragic. I know so many of our
shareholders personally who got themselves into financial
difficulties, some more so than others. I feel very badly about
what's going on here. (But) I would say 99 per cent of faxes or
e-mail that come in are very supportive of us and just cannot
believe the accusation against us. And generally speaking they're
equally convinced we'll be vindicated.
Can you comment on some of the class action lawsuits that
have been launched?
I can't comment on any litigation against us. We haven't personally
been served with anything that's been reported in the media
regarding the class action suits.
How much time are you having to devote to the affair?
Our total and undivided attention.
So it's Bre-X and bed.
Yah. That's about it. B and B.
You're probably working ridiculous hours?
Yah, because of the nature of the accusations.
How long a day do you put in?
I'd say it would be an easy 12 hours.
So months ago, everybody in Calgary envied you . . . Here
were these guys sitting on top of the world with this large gold
deposit. You must have been 100 miles high. The emotional
roller coaster must be incredible, something most of us can't
relate to?
It has been a tremendous roller coaster, even before this latest
go-round.We were spending an awful lot of time negotiating a joint
venture partner. No one's really had any fun out of this yet at all.
No one's taken any big vacation or is driving around in a $200,000
car or Gucci shoes. No one's had time. Since I got to Indonesia it's
been nothing but work for the last four years and it's four years this
month.
April 7, 1997
Part Two
The David Walsh Reflections
Bre-X boss speaks from the eye of a storm
So the question is who's buying the shares?
That's the question that came up on the Internet.
Is your feeling that it's millions of individual investors?
Well it's sort of dismissed because it's 100 million shares and you've
had a bloodbath in the market and it's got to be some big money
smart money or....
Have you stopped in the last week to figure out how much
you've lost?
I haven't to the dollar, but its obviously substantial. I sold 300,000
shares of Bre-X sometime last fall which certain people are
displeased with. That represented less than a 10th of one percent of
the volume of shares that traded in Bre-X last year. I don't have the
figure - I'm getting it Monday - just to illustrate how minute; it's like
a penny on a dollar.
Some critics have said that Bre-X management is in over its
head, that this has gotten too big for you. How do you respond
to that?
I don't believe I'm in over my head. I have two philosophies in life,
OPM and OPB - Other People's Money and Other People's Brains.
There's an awful lot of talent out there that can be drawn on . . . an
awful lot of brain power. I think the first good management decision
I made was getting (geologist) John Felderhof and his team. I would
say the next step I made to keep the shareholders informed was to
get (Bre-X vice-president) Steve McAnulty. I think that as we
realized that this was going to be a large operation . . . our plan is
to, as we move forward . . . I know exactly where we're going.
Do you know if any other mining companies have gone
through what Bre-X has, this kind of ordeal?
I don't think on the scale of this, I don't know what to call it?
(Laughing)
Trial by fire? Or cyanide leach?
Yeah, trial by fire or cyanide leach (laughing). . . That's good.
What motivates you now?
I think right now I'm motivated by clearing our reputations that
have been damaged and to show the world that this has been a
straight-up operation from the beginning and that the gold is there
and this whole catastrophe was unnecessary and unwarranted.
Were you stunned? It seems to be stunning the way, as soon as
Freeport said they made a preliminary test and it doesn't look
like there's significant gold there; it just seemed like everybody
was ready to believe them 100 per cent and you nothing. Was
that stunning for you . . . ?
I was somewhat surprised. I was surprised but only for a moment
because of the well-oiled disinformation campaign that's been going
on for a year that left everyone on the edge of their chair, so this
was sort of like one of the legs fell off the chair. That's . . . the
straw that broke the camel's back, so to speak. I guess the
nervousness had been instilled out there by this very
well-orchestrated disinformation campaign.
Does what's happened in the last two to three weeks with your
shares, change the situation financially with (mining partners)
Freeport, or would Bre-X still up with the same financial gains
. . . at the end of the day?
We fully expect that the binding agreement will be honored when it
is proved that the gold is there. Freeport and more particularly Jim
Bob Moffett is an honorable man, and (Indonesian tycoon) Bob
Hasan . . . who I've met on numerous occasions in January . . . his
greatest wish is that this facility be brought into production. I see no
reason why he would change. . . he is a businessman and if he puts
his name to an agreement, his reputation is that he honors his
agreements.
So you don't see any difficulty either - and I know you have
dealt with this - but, just to reiterate, you don't see any
difficulty after the smoke clears dealing with the Indonesians?
No, I think once it's proved by the third parties that the gold is
there, our relationship will end up with a better relationship. When
they realize that we are good miners and we haven't misled anyone
and you know we were one of the first to go in there in '93 apart
from the giant companies.We attracted a couple of hundred other
companies into the country. We personally employ approximately
500 people in Indonesia.
Have you ever thought, at any point in the last little while, that
you should have been more conservative in your estimates?
Well, it's a bit of a catch 22. If we had curtailed our drilling and not
been as optimistic or forecast results . . . our guesstimates have
always come in backed up by the drilling. The catch-22 is there is
no secret in the world and what I tried to do was to keep our stock
share price . . . I tried to keep our share price equal to the value of
the deposit. If we hadn't done that and lagged behind, we were a
target for a takeover and at a very cheap price, which wouldn't
have done any good for our shareholders. So we continued with the
drilling, came out with the results, made the forecasts of what we
thought, which always came in, and we kept the stock price pricey
enough that it didn't warrant us becoming a target for a major
(takeover). That left us, we thought, in control of being able to
negotiate a joint venture.
Could that kind of thing be happening now? You mentioned
earlier somebody buying the shares could be a mining
company buying a good percentage . . .
That's the conclusion I've reached and I haven't been in touch with
any of the companies mentioned or any senior companies in the last
couple of weeks.... I don't know.
Who has benefited from this so far, this fiasco? You are better
off than you were in 1988.
OK. When the stock was $25, $28 . . . I could have, we all could
have, exercised options and (laughing) so, the reward from the
success has been nominal to what it could have been at the higher
prices or will be again. So, I mean it's very unreasonable to assume
that this is an in-house conspiracy for the "chickens--t" money we
made in the big picture. . . like I said, I sold less than a 10th of one
per cent of the volume last year. You know, I maintain 97 per cent
of my investments in Indonesia.
Have you sold in the last month?
No.
So you're a millionaire, but you could have been a billionaire?
I guess, yeah.
What about the fire at Busang?
There are rumors (that) data had been destroyed - more particularly
sampling data - and the timing suspect and the finger pointing at us.
The truth of the matter is there was an overload with buildings and
facilities because of the growth of the deposit. There was a building
built next to another building for the sake of expediency; they
overloaded a transformer from a generator that burst, or something
happened. The buildings are all wood. It started the fire, destroyed
a few buildings. The facts are it destroyed about $200,000 worth of
new computers that had just been shipped on site. It destroyed
some data, drill data, sampling data, some geological maps but the
key thing here is we keep duplicates off site in a safe spot.
Where do you go from here?
We're going to be vindicated and we're going to maintain our 45 per
cent with one of the greatest operators (Freeport-McMoRan).
There were three things we needed in an operator: financial clout,
technical clout and experience in the country. We came up with the
financial clout and the technical experience in various companies,
but Freeport had all three. Frankly I was under the impression they
were too preoccupied . . . so we didn't even approach them. So it
came as a surprise Jim Bob(Moffett) was interested in Busang. We
were very pleased. They had 30 years in the country."
Looking back, what would you have done differently?
I guess if a mistake was made, it is that I was naive enough to think
that a deposit of this size would be allowed to be developed without
interference from big business. We should have been wiser in that
regard and more on our guard.
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