John Felderhof (second from left) is shown in this 1996 file photo taken at Bre-X Minerals' Busang project site in Kalimantan, Indonesia. Felderhof is shown with (left - right) Jerry Alo, project metallurgist; Michael De Guzman, exploration manager; Cesar Puspos, geologist.The Canadian Press
Former Bre-X Minerals Ltd. geologist John Felderhof, a central figure in Canada’s largest stock market fraud, died on the weekend.
Mr. Felderhof was vice-president of exploration at Bre-X when the tiny mining company reported finding a massive gold deposit in the jungles of Busang, Indonesia, in the 1990s, and went on a stock market tear. Independent geologists exposed the claim as bogus, and Mr. Felderhof was charged with spreading false information and insider trading, but was acquitted in 2007. He died in the Philippines this past weekend at age 79 of natural causes, said his lawyer, Joe Groia.
“In many ways, John’s was a remarkable story,” Mr. Groia said. “He enjoyed enormous success before Bre-X. Most geologists think they are lucky to have one discovery. John found two major deposits.”
In the early stages of his career, Mr. Felderhof found copper and gold deposits that became producing mines, but he is best known for his central role at Bre-X. At its peak in 1996, the exploration play had a market value of $6-billion and Mr. Felderhof claimed the property in Indonesia contained more than 200 million ounces of gold with a value of $70-billion, which would have made it the world’s largest gold mine. In 1997, a potential buyer for the mine investigated Bre-X’s site and found no significant gold. Consultants discovered Bre-X geologists faked drilling results by salting rock samples with gold from jewelry and flakes panned from nearby rivers. Mr. Felderhof was the only Bre-X executive to stand trial.
“Notwithstanding his acquittal, John’s career is an example of what happens to those accused of white-collar crimes," Mr. Groia said. “He never got his reputation back and his life was destroyed by the publicity around Bre-X.”
The question of who engineered the Bre-X fraud may never be answered. In 2013, Mr. Felderhof said in an interview with the Northern Miner newspaper that he had a theory on which Bre-X executives were responsible, but never named names. Former Bre-X president David Walsh, who died in 1998 at age 52, also said he had no knowledge of who was behind the scheme. Court documents showed Mr. Felderhof and his then-wife Ingrid made $75-million selling Bre-X shares between 1994 and 1996. The court records also show the geologist lost the money he made from Bre-X during his divorce from Ingrid, who was his second wife, and in subsequent legal proceedings.
Mr. Felderhof was born in Holland, the fifth of 12 children, and his family moved to Nova Scotia in 1954. He graduated with a geology degree from Dalhousie University in 1962, and spent the early part of his career in Africa and Indonesia. He played a significant role in developing major Indonesian projects, including the Ok Tedi and Mount Muro mines.
Bre-X annual meeting. John B. Felderhof, David Walsh and Paul Kavanagh. Photo byEdward Regan / The Globe and Mail March 14, 1996.Edward Regan/The Globe and Mail
Mr. Felderhof met Mr. Walsh, a Calgary-based mining stock promoter, in 1983 in Indonesia. The pair teamed up under the Bre-X banner in 1993 to explore a site in Indonesia. In 1995, a team led by Mr. Felderhof that included geologists Michael de Guzman, a long-time colleague of Mr. Felderhof, and Cesar Puspos, began reporting significant amounts of gold. Mr. Felderhof and Mr. Walsh were honoured as the “Mining Men of the Year” by Northern Miner in 1996, and early in 1997, the Prospectors & Developers Association of Canada (PDAC) named Mr. Felderhof its “prospector of the year.”
The Bre-X fraud came to light in the spring of 1997, shortly after Mr. de Guzman allegedly died falling from a helicopter. The company subsequently filed for bankruptcy.
“His life after 1997 was kind of crap," said Mohan Srivastava, a Toronto-based geostatistician who worked as a technical expert for Mr. Felderhof’s lawyers during the executive’s legal battle and considered the geologist a friend.
Mr. Srivastava said he believes Mr. Felderhof was not aware of the fraud. “He had to give back his PDAC award, which is the crowning achievement of an exploration geologist’s life. He won it and then weeks later the scandal broke.
“He lived the life that had that kind of Shakespearean tragic arc,” Mr. Srivastava said. “He gets to the top...and then he has to just eat crow the rest of his life. His wife left him, he ran out of money, and lived in the Philippines. The last 22 years of his life were lived in humble circumstances.”
Mr. Srivastava said Mr. Feldherof was extremely bitter about his Bre-X experience and felt other members of the company’s inner circle betrayed him.
Graham Farquharson, co-founder of Strathcona Mineral Services Ltd. in Toronto, ran a probe that investigated Bre-X’s claims about its holdings in Indonesia. In an interview, he described Mr. Felderhof as "a very unusual individual. Ups and down and big swings in temperament.”
Mr. Farquharson believes Bre-X geologists Mr. de Guzman and Mr. Puspos, who Mr. Felderhof hired, were directly involved in tampering with rock samples. Mr. Puspos, who lives in the Philippines, has denied any knowledge of the fraud. He was not available for comment on Monday.
“I was certainly convinced that as an experienced geologist, John had to be aware that something was not right because there were so many red flags," he added.
Mr. Felderhof never worked in mining after the Bre-X scandal, and moved to the Philippines in 2004. He leaves his third wife, Maria, four children, seven stepchildren and 12 grandchildren.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.
Andrew Willis
Niall McGee