Since 1915, the Northern Miner weekly newspaper has chronicled Canada’s globally significant mining sector.
The following year, it was discovered that the Bre-X core samples had been salted (falsified) and the company’s stratospheric share prices became worthless. Bre-X is infamously known as the most elaborate and biggest mining scandal of all time. To this day, no one has ever been held accountable.
David Walsh died in 1998 of an apparent stroke claiming his innocence until the end. John Felderhof was cleared of illegal insider trading in July, 2007.
The Busang gold deposit in Kalimantan, Indonesia, is known around the world as one of the most important gold discoveries of the century. A few years ago however, it was a small prospect being explored in a remote region by a little-known junior from Calgary, Alta., Bre-X minerals (BXM-T).
The Busang story came to the mining forefront earlier this year when the company’s Southeast zone discovery was described as having the potential of “30 million ounces plus, plus, plus”. This find, however, was not the result of overnight success. Rather, the discovery was the culmination of years of hard work and teamwork between two Canadian – David Walsh, an entrepreneur and financier, and John Felderhof, a geologist and mine-finder.
While Busang became the mining story of 1996, it is a tale that may not have materialized without the single-minded dedication of the Walsh-Felderhof partnership. On a shoe-string budget and with little encouragement or interest from majors, the men were exploring in Indonesia long before it was fashionable.
The industry was skeptical of the venture, at least in the early days, and the region’s geological puzzle was as difficult to put together as the funds for exploration.
The discoveries made at Busang by Bre-X Minerals are world-class and, for this reason, The Northern Miner has selected David Walsh, 51, and John Felderhof, 56, as its “Mining Men of the Year” for 1996.
Born in Montreal, Walsh began his career working for trust companies before joining Midland Securities in 1976. Walsh had moved to Calgary by the early 1980s, and he soon decided to strike out on his own. He incorporated his first public company, Bresea Resources (BSR-M), in the summer of 1984, followed by Bre-X in July 1989.
Felderhof, who was born in the Netherlands, grew up in Nova Scotia. He graduated from Dalhousie University in 1962 with a degree in economic and structural geology. His 32-year career in the mining industry has taken him to South Africa, Australia and Southeast Asia.
Felderhof was a co-discoverer of the Ok Tedi copper deposit in Papua New Fuineas. That discovery was the first of many he made in Southeast Asia, most of which are gold deposits. The list includes Mt. Muro in Kalimantan, currently in production, and the advanced stage Muyup and Mirah gold deposits, also in Kalimantan.
The paths of Walsh and Felderhof crossed for the first time in 1983 when Walsh visited Indonesia to look at some mineral opportunities. While nothing came of that visit, he was impressed with Felderhof’s track record and grasp of the country’s mineral potential. In 1993, Walsh acted on Felderhof’s recommendation to pick up some ground in Kalimantan. By this time, Bre-X had made an agreement to acquire 80% of Busang’s Central zone discovery, as well as other ground in Indonesia. The Central zone had previously been drilled by other groups, and was considered at that time to have limited potential. Bre-X disagreed, however, and expanded the zone through ongoing drilling.
A breakthrough occurred at Busang in May 1995, when Felderhof and his exploration team discovered the massive Southeast zone. Year of geological detective work and a keen understanding of the region set the stage for his discovery, but it also involve teamwork. Credit for the identification of the Southeast zone also blongs to Michael de Guzman, a long-time colleague of Felderhof, and Cesar Puspos, Bre-X’s senior geologist.
The company’s share price, which had languished as a penny stock for years, now soared into the stratosphere. The issue was on the “most active” lists for much of 1996.
Just weeks ago, Bre-X released an updated resource calculation for Busang, as calculated by Kilborn SNC Lavalin. Resources in all categories now stand at 779.7 million tonnes averaging 2.28 grams gold per tonne, or 57.33 million contained ounces.
Of this total, the smaller Central Zone contains measured and indicated resources of 32 million tonnes averaging 2.38 grams (2.46 million contained ounces), plus an inferred resource of 3.18 million tonnes averaging 2.56 grams (300,000 contained ounces). To date 10 holes have been drilled at Busang’s Central zone.
Most of the deposit’s total resources are found within Southeast Zone 1 South. Situated between section lines 44 and 69, 92 holes have been dilled thus far. That area hosts measured and indicated resources of 259 million tonnes averaging 2.2 grams gold (18.37 million contained ounces), plus an inferred resource of 369 million tonnes averaging 2.16 grams (25.7 million contained ounces).
Busang’s overall resource includes the Southeast Zone 1 North, which lies between section lines 4 and 39, where 45 holes have been drilled. That area hosts a measured and indicated resource of 23.9 million tonnes averaging 2.85 grams (2.2 million contained ounces), plus an inferred resource of 90.8 million tonnes averaging 2.84 grams (8.3 million contained ounces).
Holes drilled since the revised calculation will be incorporated in another resource update, which Kilborn expects to release early next year. Bre-X anticipates that resources will top 60 million oz. The zone remains open in all directions and he property still has excellent potential for the expansion of reserves.
An intermediate feasibility study indicates that Busang will produce an average of 1.9 million oz. per year, from an annual mill throughput of 29 million tonnes. Cash production costs have been calculated at US$96 per oz., which would make Busang one of the lowest-cost gold mines in the world. Capital costs are estimated at $930 million.
The resources and exploration potential of Busang have not gone unnoticed by major mining companies, some which had lined up in recent months to negotiate with the junior. The regular business of selecting a partner, however was interrupted when , in November, the Indonesian government directed Bre-X to strike a deal with Barrick Gold (ABX-T) on a 75-25 basis in favor of Barrick. The government is also seeking a 10% interest in the project.
At pres time, Bre-X and Barrick had submitted to the government a proposal to develop Busang. The companies are currently awaiting a response.