Читать книгу The Bushman’s Lair - Paul McKendrick - Страница 13

“Somewhere in the cell-structure of the brain, is located an organ which receives vibrations of thought ordinarily called ‘hunches.’ So far, science has not discovered where this organ of the sixth sense is located, but this is not important. The fact remains that human beings do receive accurate knowledge, through sources other than the physical senses. Such knowledge, generally, is received when the mind is under the influence of extraordinary stimulation. Any emergency which arouses the emotions, and causes the heart to beat more rapidly than normal may, and generally does, bring the sixth sense into action.”

Napoleon Hill, Think and Grow Rich

David Walsh was raised in the wealthy Westmount neighbourhood of Montreal and, like Bjornstrom, was a high school dropout. He followed his father and grandfather into stockbroking, a field in which a lack of a formal education was not an impediment at the time. At seventeen he was buying and selling stocks and bonds on behalf of wealthy individuals and pension funds. By the time he was twenty-three, he was the head of a three-person team and had charmed a secretary named Jeannette into marrying him. They had two sons shortly thereafter.

Walsh’s philosophy on amassing wealth was inspired by a self-improvement book called Think and Grow Rich, by Napoleon Hill, which was published during the Great Depression and has now sold over 100 million copies, according to the Napoleon Hill Foundation. After mastering all the other principles described in the book, the author claimed, readers might be able to access that portion of the subconscious mind that receives ideas and knowledge as a flash into the mind—the sixth sense. He goes on to describe it as a subject that “will be of great interest and benefit to the person whose aim is to accumulate vast wealth.” Walsh claimed to have read the book at least fifty times after it was passed along to him by his mother, who had received it from her mother.

Walsh’s first attempt at striking out on his own came after the company he was working for alleged he had failed to detect fraudulent transactions connected to one of the accounts he was supervising. He left the company and launched his own trust company, and when it quickly flopped, he joined a larger investment dealer, where his schmoozing abilities generated decent commissions on the sales desk. In 1982 he was asked to set up an institutional trading desk in Calgary, an enticing move since Calgary had been flourishing as a home for the companies benefiting from the same oil and gas boom that had drawn Lucette’s family west.

His timing couldn’t have been worse. The recession of the early 1980s was just beginning. Unemployment reached 12 per cent, and house prices plunged by more than 20 per cent. These strong headwinds imperiled Walsh’s new venture, and he abandoned it just a year later.

Increasingly desperate for a success, he spent the rest of the 1980s starting up unsuccessful oil, gas and mineral exploration companies—when he wasn’t sitting in Moose McGuire’s or the Three Greenhorns with other promoters, sucking back drinks and cigarettes. The Walsh family kept afloat on Jeannette’s income as a secretary and Walsh’s stock-flipping and lines of credit. He moved his office into the basement of the family home. Eventually the continual rolling of the dice caught up to him—he was overextended to fifteen credit card companies—and in 1992 he declared bankruptcy.

Undeterred, Walsh opted to roll the dice one more time. Bre-X Minerals Ltd., a mineral exploration company he had started up and named after his son, Brett, was still trading for pennies on the Alberta Stock Exchange, and Walsh somehow managed to raise some money to breathe new life into it. He then set off for Indonesia to look for the next big opportunity—an idea, he said, that came to him in a dream.

The only person he knew in Indonesia was a Dutch geologist named John Felderhof, an intrepid mineral prospector who relished mucking about in inhospitable jungles in search of the big prize. Raised in the Netherlands and then, from the age of fourteen, in Nova Scotia, Felderhof studied geology at Dalhousie University in Halifax and then left for Northern Rhodesia (now Zambia), where he worked in a copper mine, married a South African and began raising a family with her until safety concerns and international sanctions caused him to leave.

Felderhof’s next opportunity landed the family in Papua New Guinea, where he and another geologist hacked their way through the dense bush with machetes and stumbled upon communities untouched by modern civilization. On one occasion when Felderhof lost his sodden boots while hiking through a waist-deep swamp, he continued barefoot and afterwards had to remove eighteen leeches from his legs with a lit cigarette. The persistence of the two men culminated in the discovery of a massive copper and gold deposit, which would result in the construction of the Ok Tedi Mine nearly twenty years later. This gained Felderhof notoriety as a geologist, but it did not bring him the financial windfall he sought, as he didn’t own a stake in the project.

By 1970, too many rounds with malaria had tempered his enthusiasm for Papua New Guinea, and he tried to repeat his success, with a greater financial stake, throughout Africa, Australia and Asia. The lifestyle eventually became too much for his marriage, which ended in divorce after seventeen years. Several years later, he met an Australian woman named Ingrid who left her husband, married Felderhof and bought a house in Australia with him.

In 1980 Felderhof landed in Indonesia, renting motorbikes to travel from village to village seeking out locals who had found gold nuggets in stream beds. One area that kindled his interest was around Busang Creek on the island of Kalimantan, but he concluded it was too remote and expensive to explore. By the early 1990s he was broke and out of work and had developed a reputation for exaggeration and binge drinking. Meanwhile, Ingrid had moved in with his family in Nova Scotia to weather the storm.

It was under these circumstances that David Walsh reached out to him in 1993. The two men had much in common at that point; both were penniless, heavy-drinking, chain-smoking speculators determined to find something, even if it meant going through hell first. They met at the Sari Pan Pacific, a ritzy hotel in Jakarta. Walsh was accompanied by his son Sean—a recent high school graduate possibly brought along because his credit card wasn’t frozen—and a geologist who had worked with Walsh previously. Felderhof was accompanied by a few geologists, including a Filipino he had mentored named Michael de Guzman. Over dinner they reviewed a portfolio of properties Felderhof had compiled.

Walsh decided Busang was the most attractive property Felderhof had presented to him, partly because the report compiled by de Guzman generously estimated the resource there at 1.3 million ounces of mineable gold. Felderhof was brought on as Bre-X’s Indonesian manager, and he in turn hired de Guzman as his chief geologist. To raise money to develop the project, Walsh and Felderhof paraded their prospect through the offices of potential investors across Canada. Thanks to an improving market for junior mining companies in the early 1990s following the market crash of 1987, they were able to raise enough money to acquire the property and begin testing it, albeit on a shoestring budget.

Work began in 1993 in the central zone with the assembled team of geologists overseeing local workers. Bulldozers were used to carve rough roads through the jungle, followed by trucks towing thirty-foot drill rigs. Drilling commenced with the sacrifice of a chicken to placate the local tribe’s gods, and then diamond-studded bits were sunk up to 1,300 feet into the bedrock. Hollow pipe encapsulated core samples that, once extracted, were broken into shorter lengths with sledgehammers, washed, loaded into wooden crates and transported back to the base camp by truck. At the camp the samples were logged and partly crushed to prepare them for further transport downstream by boat to a laboratory for assaying.

The assay results for the first two holes were not encouraging, and Felderhof gave instructions to shut down the operation, but before that happened, a third hole was drilled that showed more promise. The operation continued. Results improved dramatically for holes four through nine, which showed an attractive range of eight to sixteen grams per tonne.

The company’s prospects now changed dramatically. They worked the phones and raised funds to acquire a 90 per cent interest in adjacent lands to the southeast, reserving the other 10 per cent for the required local ownership. They convinced the retiring head of exploration at Barrick Gold, Paul Kavanagh, to visit the property. He liked what he saw and was persuaded to join the Bre-X board of directors, providing instant credibility, and a $4.5 million equity raise was completed in 1994 at $1.50 per share.

When drilling expanded into the southeast zone, even more fruitful results were encountered. Some of the gold was found near the surface, making it easier to extract. The drilling gathered more pace throughout 1995, as step-out drilling locations were all encountering gold, further delineating the massive size of the deposit and causing the resource estimate to balloon. “A resource of 30 million ounces can be readily attained,” Felderhof announced in January 1996. That would make it the fourth-largest gold deposit discovered anywhere in the world.

By then many of the investment newsletter authors and equity research analysts had developed gold fever, and several visited the site, returning to write ever more enthusiastic reports with higher and higher price targets. One such report advised readers that “the foremost and primary rule of investing in the junior resource industry is to have confidence in the people behind the company,” and it suggested that such was the case with David Walsh, “one of the sharpest executive officers that we have ever encountered in this business. He is also one of the most honest and dependable.”

When the author of that report was interviewed by Fools’ Gold author Brian Hutchinson, he could no longer remember why he had given Walsh such glowing praise. He had never actually met the man—nor anyone else from Bre-X, for that matter—and had only spoken to Walsh on the phone. His actual assessment, which he withheld from his readers, was that Walsh was the “weak link” and that he had a drinking problem. Meanwhile, the report’s author had bought Bre-X at $1.20 and sold at $250.

In May 1996 the stock price reached $286.50 (on a pre-split basis), giving the company a sky-high valuation of over $6 billion. Felderhof sold $19 million in shares that month alone and purchased an ocean-front house and condominium in the Grand Caymans, a house in the US and a Lamborghini. He would sell $84 million in total over the span of about four months, according to the Ontario Securities Commission. Walsh, who had only just moved out of his basement office to half-completed Bre-X offices in a downtown Calgary building, had begun selling shares earlier than Felderhof and would divest $56 million of Bre-X shares in total, including those belonging to his wife. The couple opted for one property in the Bahamas, where they would soon take refuge.