Geology Fraud: The infamous case of Bre-X and the origin of JORC standard

Mineral exploration /mining are full of outrageous examples of fraud. Ethics in this is as important as in all canons of metaphysics in life. Bre-X mining scandal is the biggest in prospecting history. Bre-X a group of companies of Canada brought the property rights in Busang river of Indonesia for gold in 1993 and by 1995 declared that a huge bonanza of gold is discovered.

• by Pramod Kumar, former Addl Director, AMD

Mineral exploration /mining are full of outrageous examples of fraud. Ethics in this is as important as in all canons of metaphysics in life. Bre-X mining scandal is the biggest in prospecting history. Bre-X a group of companies of Canada brought the property rights in Busang river of Indonesia for gold in 1993 n by 1995 declared that a huge bonanza of gold is discovered. The stock price of the co. skyrocketed, reached a peak on Toronto stock exchange. The company geologist Michael de Guzman falsified the assay data. An independent company Kilburn estimated the resources but the Bre-X refused to accept it. A third independent co, after due-diligence published its report saying that there is insignificant gold and that the drill core samples have been salted with gold dust!!! (based on some difference found between hard rock origin and alluvial origin of gold). By 1997 the trading of the company was stopped on stock market and it collapsed. The company geologist – Guzman committed suicide by jumping off from the helicopter. A film… GOLD in 2016 was made by Stephen Ghagan based on this theme. Prospecting geologists, while evaluating reserve /resources should do so very dispassionately, without personal bias or external pressure. In statistics it is said that “there is NO error if we KNOW the error”… but it only means limitation of the procedure, calculation, margin n estimate of error, sampling and analytical bias all being incidental to the methodology…. and Certainly No willful fraud. Ethics is yet another tool in exploration.

This case led to creation of Joint Ore Reserve Committee (JORC) code for public reporting of mineral results and enshrined the concept of personal responsibility of geologist signing off on reports and news releases. The concept was subsequently adopted by all major mining jurisdictions as a part of their law. The current codes of JORC, NI-43-101, VALMIN, CRIRSCO etc are all derived from this concept.