Mining frauds

I'm just thinking today, through a wayward stream of associations, of a couple of recent awe-inspiring mining frauds, both with a Canada connection.

Bre-X was the most spectacular mining swindle in history, bursting upon the world as it did during the 1990s bubble, and possessing before the furor died down the added drama of a fatal fall from a helicopter.

At one point, indeed, Bre-X was claiming the rights to 8% of the world's gold at a site in Busang, Indonesia. How much would you pay to own a share in a company with 8% of the planet's gold? That was the question they had investors asking themselves. And it was the wrong question. There was no gold at the site at all.

The moral of the story: ask the right questions!

Another story comes to mind today. CMKM Diamonds. As it happens, CMKM isn't a Canadian company, just as Bre-X was never an Indonesian company. CMKM is a US company, that over a four year period (2003-07) sold $200 million in stock to the public in the expectation that their capital would help exploit diamond wealth of Saskatchewan, Canada.

By the spring of 2007, CMKM was a penny stock company with, in essence, no assets and $558 in the cash drawer.

CMKM still exists, but it exists chiefly for the purpose of pursuing a lawsuit against its former insiders in the hope of acquiring some assets to distribute to those too trusting shareholders.

As to that fall from a helicopter I mentioned above. In May 1997, Michael de Guzman, a field geologist with Bre-X and someone who would have to have been in the thick of any salting of the rock cores, jumped to his death from a helicopter. Or maybe he fell. Or maybe he was pushed.

Or maybe he didn't die after all. A body was recovered, but never positively identified. In June 2005, one of his widows [there are four widows in all!] told reporters that he is still alive and living in Brazil, and had sent her a money order for $25,000.

The moral? who the heck knows!