Читать книгу The Bushman’s Lair - Paul McKendrick - Страница 14

“I did not know that mankind were suffering for want of gold. I have seen a little of it. I know that it is very malleable, but not so malleable as wit. A grain of gold will gild a great surface, but not so much as a grain of wisdom.”

Henry Thoreau, “Life Without Principle”

Transparency International, a corruption-fighting non-governmental organization, launched its first International Corruption Index in 1995, around the same time the Bre-X management team was declaring they had made one of the world’s pre-eminent gold discoveries. The inaugural index ranked Indonesia the most corrupt of forty-one countries surveyed. It also conferred the title of most corrupt leader in modern history upon Suharto, the president of Indonesia from 1967 to 1998. His tyrannical rule left hundreds of thousands dead, and he is alleged to have embezzled between US$15 billion and US$35 billion from the state.

Few sectors of the economy were left untapped by the Suharto family. When it came to natural resources, a common approach was for a related party—often one of Suharto’s six children—to act as a conduit around any bureaucratic hurdles. In exchange, the related party usually ended up with a meaningful stake in the business or lucrative contracts for providing services to the venture. When Jakarta’s water system was privatized, Suharto’s son Sigit ended up with a 20 per cent stake in the winning bidder. The state oil company, Pertamina, had roughly 170 contracts with omnipresent Suharto family businesses providing everything from cafeteria food to security. When the company was audited in 1999, over US$6 billion was estimated to have been lost due to corruption and other inefficiencies.

As no foreigners were allowed mining permits in Indonesia without Suharto’s authorization, the Bre-X management team knew they were not going to lay claim to billions of dollars’ worth of Indonesian gold without Suharto’s family taking a cut. That was also apparent to Peter Munk, the Hungarian-born Canadian businessman who had founded Barrick Gold in 1983 and grown it into one of the world’s largest mining companies. In 1993 he had been rebuffed in an attempt to acquire Bre-X, but he was not going to let it get away a second time. So while the Bre-X management was busy pumping the share price up and selling off their shares, Munk was arduously pursuing any angle he could find to take control of the Busang prospect.

One of Munk’s tactics was to woo the eldest of Suharto’s children, a daughter known as Tutut, who was regarded as having the most economic and political clout of Suharto’s offspring. She was persuaded to help expedite Barrick’s position in exchange for one of her companies being granted the right to build some of the mine’s infrastructure. (A Barrick employee later described partnering with the Suharto family as follows: “You can never control your destiny once you’re in bed with the Suharto children. They demand money, and then they want more. They say give me this and give me that, and it never ends. You can never budget anything, never control anything. You’re on the ropes the whole time.”)

Munk also used some of his illustrious connections to apply pressure on the Indonesian government. Brian Mulroney and George H.W. Bush, both looking for new pursuits after holding the highest offices of their respective countries, were part of the Barrick offensive and sat on an international advisory board created to guide the company through “geopolitical tangles.” Both wrote letters to the Indonesian government suggesting the company should be given the opportunity to develop the Busang site.

An American investigative firm was also hired by Barrick to unearth weaknesses in Bre-X’s position, and they came back with several exploitable instances of Bre-X operating outside the Indonesian government’s rules, including the lack of proper title to the property. When the Bre-X team tried to renew their exploration permit, it was cancelled owing to some vague “administrative problems.” Although the news shaved roughly half a billion from Bre-X’s market capitalization, it was relatively minor damage for the company at the time and only indicated the market believed they would find a solution.

Walsh was indeed desperate for a way to break through the impasse. He had long been irked by the arrogance and underhandedness of Barrick’s approach—including Munk’s peculiar practice of referring to him as “darling”—and he sought to counter with his own strategic alliance. In October Bre-X announced it had become aligned with a private Indonesian company controlled by the second eldest of Suharto’s children, Sigit. It was a startling move to most people familiar with the country’s inner workings, as Sigit was known more for being a serial gambler than for business or political acumen.

The arrangement did little to counter Barrick’s finagling, and Bre-X was blindsided a month later when the Indonesian government gave the company “guidance” to form a partnership with Barrick, in which Barrick was to get a 75 per cent interest and Bre-X the remaining 25 per cent. For brokering the deal, “the Indonesian government would appreciate it if the parties could consider a 10 per cent participation given to the Indonesian government.” Barrick and Bre-X would have to agree on a purchase price.

At the time, many of Indonesia’s civil servants who had overseen the development of a fair and transparent regulatory system for mining were struggling with the growing publicity surrounding their government’s machinations. One technocrat, who was on the verge of tears while speaking with journalist Brian Hutchinson, commented that “three decades of solid mining law had been undermined in a matter of weeks, thanks to a handful of local politicians and some shortsighted Canadian businessmen.” The deal with Barrick wasn’t a given, however, as other powerbrokers and courtiers had begun putting pressure on the Indonesian government to consider an auction process for the Busang property.

Sigit, the Suharto offspring whom Bre-X had gambled on, was also becoming concerned that his sister’s arrangement with Barrick was going to rob him of a lucrative deal, and he turned to his father’s long-time crony, Mohamad “Bob” Hasan, to intervene. Hasan and Suharto met when Suharto was a junior army officer and Hasan supplied provisions to the army. Hasan is rumored to have assisted Suharto with a smuggling operation, and he helped him cultivate relationships with senior officers in Jakarta, which proved valuable when Suharto’s forces overthrew the government in the 1960s. Suharto rewarded Hasan with valuable concessions, which he parlayed into holdings in other industries. The two had a weekly tee time at which they discussed their joint interests, often in the company of dignitaries and celebrities. After a round with Sylvester Stallone, Hasan boasted: “I told Rambo, ‘I’m the king of the jungle.’”

He also took on the role of mediator among Suharto’s children following the death of Suharto’s wife in 1996, earning him the moniker “Uncle Bob.” He had just recently settled a dispute between two of them, known as Tommy and Bambang, over ownership of an auto manufacturer that produced the Timor “national car,” a vehicle that nobody in the country liked but consumers still bought because of its special exemptions from duties, luxury taxes and tariffs on imported spare parts.

When Hasan took a closer look at Busang, his self-interest was piqued. Over a round of golf, he convinced Suharto to allow him to broker a deal. A company he controlled quietly acquired a 50 per cent interest in Bre-X’s minority Indonesian partner in the main zone, a valuable position given that the partner held the mining authorization, which was only available to Indonesian companies. Sigit was given a 10 per cent interest in the Hasan-controlled company, presumably for bringing the opportunity to Uncle Bob’s attention. Tutut, who was working on behalf of Barrick, was excluded.

By this point, Barrick was not the only company pursuing Bre-X. However, none of the others vying for control of the Busang property had the relationship with Hasan that James “Jim Bob” Moffett had as chairman of Freeport-McMoRan Copper & Gold, a company based in the US that operated the Grasberg gold mine in Indonesia. Moffett had been assiduously courting Suharto and his cronies for years, paying for vacations and college educations for some of their children and bringing them in on deals. A Hasan-controlled company had even acquired a minority stake in Freeport thanks to Freeport backstopping a loan and lending Hasan funds to cover the interest.

While the tangled process of determining an equitable ownership structure of Busang was underway, negative publicity suddenly emerged about Freeport’s competitors. Munk’s past business failures were publicized (mingled with anti-Semitic references to his Jewish faith), and the financial position and environmental record of others was questioned. Freeport was spared similar attention, even though insurance held by the company had recently been revoked because of environmental concerns at the Grasberg Mine.

With the playing field sufficiently tilted, Hasan settled the ownership of Busang in February 1997, and Freeport was awarded—or burdened, depending on perspective—with an ownership stake. Bre-X would retain a 45 per cent interest, the Indonesian government would receive 10 per cent and Freeport would get 15 per cent while financing 25 per cent of the mine’s cost. The remaining 30 per cent would go to two companies now controlled by the éminence grise himself, Uncle Bob.

Although blindsided, Walsh tried to reassure the market that it was a fair deal.

Felderhof argued that they were in the government’s sights because they had discovered “too much gold, so it therefore becomes a question of national interest.” On a call with research analysts Felderhof said that being reduced to a 45 per cent stake wasn’t a big deal: “We are dealing with a very unusual deposit here, and it’s one of a kind in the world. Once we finish the drilling program we are currently doing . . . my estimate is 95 million ounces. Mike de Guzman, my project manager, he estimates 100 million ounces. If you would ask me what is the total potential, I would feel very comfortable with 200 million ounces. So far as I am concerned, there’s lots of blue sky there.”

Now that Freeport was a reluctant partner in Busang, they set about trying to confirm that gold had indeed been found there. Based on their extensive experience in Indonesia, much of it around their Grasberg mine, they were understandably skeptical. They had been turning over rocks in the area for half a century and had amassed total gold reserves of 52 million ounces. They were, therefore, having difficulty reconciling that with Bre-X’s estimate of a 200-million-ounce deposit discovered over such a short time span, a claim that hadn’t been independently verified. Their doubts were reinforced when their geologists reached the site to begin testing.

Bre-X had claimed that, based on their drilling results, the gold deposit was present right to the surface. If so, Freeport’s geologists expected to find signs of panning by the local Dayak people, but suspiciously, none were encountered. Freeport’s geologists took samples from exposed features while preparing to drill their initial test holes, and they quickly determined there were no signs of gold at the surface. (The Bre-X geologists would later be questioned about the absence of gold in outcrop samples, and their explanations included that it had leached, evaporated or “gone somewhere.”) Results from seven test holes showed no more gold than what is typically found in seawater. In contrast, assay results from drilling samples stored at a Bre-X warehouse in Samarinda contained more gold, albeit uncommonly large grains with a high content of silver in the centre—the kind of gold typically found in the Dayaks’ alluvial washings, not the igneous gold they would encounter in bedrock.

Moffett decided he should convey the concerning findings to Walsh. Members of the Prospectors & Developers Association of Canada (PDAC) had assembled in Toronto for their annual convention, regarded as the “premier international event” of the mineral industry. The Bre-X senior management, including all the senior geologists from Indonesia, were there to watch Felderhof receive the Prospector of the Year award. Eventually Moffet was able to get Walsh on the phone: “David, we’ve got a problem.” Walsh replied that he was a financial person and Felderhof was the one to speak with. Felderhof countered that Freeport had surely made a mistake, but they would send someone to the site to help rectify the problem. After some discussion it was decided that de Guzman would meet with Freeport to sort it out.

“We waited and waited and waited,” Moffett said, “and he never arrived.”