Friday, March 28, 1997

Busang loses its lustre

Andreas Harsono
The Nations, March 28, 1997

Stock prices in the Canadian mining firm that found a much publicized gold deposit in Indonesia slumped after the chief prospector killed himself and reports surfaced doubting the size of find.

The Hongkong-based Far Eastern Economic Review once called Filipino geologist Michael De Guzman a “golden boy” after his spectacular discovery of a "huge gold deposit" in Busang in the Kalimantan rain forest.

De Guzman’s boss David Walsh, the chief executive officer of Calgary based Bre-X Minerals Ltd, recalled him as having a near genius level IQ while colleague geologist John Felderhof praised him as brilliant and a true professional.

De Guzman had his own judgment and decided to end his life. And rather than taking sleeping pills or something less painful, he chose to jump from a helicopter which was flying to the Busang site, around 300 kilometers northwest of Samarinda, the capital of East Kalimantan, last Wednesday morning.

“It was a great shock,” uttered Felderhof, who immediately flew back to Indonesia from a visit to Canada, saying the he was deeply distraught over the loss of his colleague. He said he was unsure of the exact reasons for de Guzman’s death.

Two witnesses inside the helicopter said they just felt a gush of wind by their heads. They turned around and de Guzman was gone from the helicopter.

Police said the pilot and the engineer of the helicopter had seen de Guzman writing a letter and putting it in a bag along with his Rolex watch and a gold plated bracelet just before being plunged from the helicopter. 

The note also said how de Guzman’s wife, who lives in the Philippines, should divide his belongings between his two daughters and other relatives, adding that he had given up to life because of disease.

The tragic death is not the only bad news for Bre-X executives like Felderhof.

The following day an Indonesian newspaper, the Jakarta based Harian Ekonomi Neraca, broke the news that Freeport McMoran Copper and Gold Inc were beginning to doubt that Bre-X had found as much gold as it said did at Busang.

The Indonesian Government last month recruited New Orleans-based Freeport to develop the mine, giving it a 15-percent ownership stake and shrinking BreX’s holding 45 percent. The Indonesian government and an investment firm controlled by Indonesian President Suharto took the rest in a 30/10 split. 

The Neraca daily quoted a Freeport official as saying that the finding in less than 10 million ounces which sharp contrast to Bre X’s claim last year of at least 70.95 million ounces of gold.

The Bre-X claim means that the Busang deposit worth is around US$230 billion (Bt 5,750 billion) at today’s prices.

It is possible the deposit is not as large as had been reported. But it is also possible that the deposits are not worth mining at all, the anonymous official told the paper.

In this modern era of information technology, that statement needed just minutes before reaching the whole world and hundred of millions of dollars in market value disappeared as soon as stock exchanges throughout Canada opened on Friday.

A synopsis of the story was flashed to North America by Bridge News, and international financial wire service. The Jakarta bureau of the Agence France Presse as well as other news agencies also quoted the report and spread it worldwide.

In a market primed on the idea that Busang is one of the great gold discoveries of history, this was incendiary stuff. Mining analysts had earlier compared the Busang find to the legendary Klondike or Witwatersrand gold mines in south Africa a century ago.

The Busang deposits even pitted various powerful figures like former Canadian premier Brian Mulroney, former US president George Bush against each other and locked Indonesian President Suharto as well as his children in a high-profile business struggle to control the future structure of Busang.

Within five minutes of opening Bre-X was down 90 cents on the Toronto stock exchange trading and exchange officials called time out at the company request to ensure the investors would be able to trade on equal information, said a market manager. Despite a trading halt of more than 3.5 hours to let the market hear the company’s reassurances, Bre-X slid to $10-70 its lowest point since April 1996 and closed at $11.40, down $1.70, on the Toronto Stock Exchange.

At its lowest point, its value had fallen about $600 million since the world learned of de Guzman’s my serious fall. Also hammered were Bre-X’s parent companies, and Bresea Resources Ltd and Minorca Resources Ltd, which have small indirect stakes in the Kalimantan discovery.

“Absolute insanity. Just Insanity,” Toronto mining promoter Stan Hawkins, a Bre-X shareholder and former Bresea director, told the Globe and Mail newspaper. Hawkins said he had heard all sorts of different rumors that de Guzman was murdered and his assays were all wrong and that was why he jumped of the helicopter. “Certainly, there’s no question about the assay. They’re golden, no pun intended,” he said. 

While stockholders were still selling their shares, dozens of rescuers and colleagues combed the Kalimantan thick rain forest, trying to find de Guzman’s body. World’s apart, both Canadian and Indonesian newspapers, put the rescue effort and the stock hysteria on their front pages.

Rescuers finally found what they suspected to be de Guzman’s body on Sunday, face down in a swamp, 150 meters to be west of Menamang, a village north of Muara Kaman, dozens of kilometers from Busang.

Observers could not help but speculate that de Guzman had taken such a tragic step after finding out that the result of his exploration work, which had been begun in 1986, was falling apart.

“How could a geologist whose picture is printed on glossy magazines would wide stand such humiliation?” asked one observer, adding that de Guzman income has risen dramatically since the find. He was estimated to be worth up $4.8 million. 

BN Wahyu, head of Indonesian Mining Association, complained about the secrecy surrounding the Busang find, saying that he could not get a map of the site from Bre-x until March even though the association had lobbied the mining ministry in Jakarta for a fair deal for the company. 

Both Felderhof and Walsh angrily denied the report. Freeport Spokesman in Jakarta also denied the report, saying that the American company is still drilling and cross examining the deposit in Kalimantan. Without explicitly referring to the Neraca newspaper, Walsh said in a statement that he had considered taking legal action against certain parties and publications due to the erosion of share value which resulted from these reports.

In an apparent bid to calm down investors, Walsh said, “When the first ounce of gold is poured at Busang, I’m sure the naysayers will complain about the color.” 

Felderhof, who is the chief Bre-X geologist, also said that he is going to have a meeting with Freeport executives to discuss their continuing preliminary work on the deposit, adding that he is expecting to be present when Busang’s long delayed contract of work is issued by the Indonesian government within two weeks. 

Bre-X attributes its estimates to consultants from Kilborn SNC Lavalin Inc, a Toronto-based engineering firm, which was standing behind its figure.

Paul Semple, a vice president at Kilborn SNC Lavalin, said the firm had no reason to believe that there were any reasons to amend it. "If there is other information out there, we just haven’t seen it,” he said.

Norman Keevil, chief executive of Vancouver-based Teck Corp, which failed to negotiate its way into the Busang project, said Kilborn’s people are reputable engineers who would not likely be wrong about such a bonanza. 

If Freeport has begun drilling on the site, Keevil said, "It couldn’t have been much more than three weeks ago, so I don’t know how much data they could even have out of it yet.”

Mohamad Cholid, the deputy editor of Neraca, said that his newspaper got the leaked information from two different sources.

The fist was an official at the Ministry of Mines and Energy, “I was told that President Suharto himself has also been briefed about the Freeport finding.”
Cholid explained that his newspaper had headlined the report after carefully checking and rechecking the sensitive data in a usual and standard journalistic manner.

“In a modern time like this,” quipped Cholid, public companies are always vulnerable to reports like this. “The public doesn’t know for sure who is correct, our sources or Bre-X geologist? They want to play is safely. Now they will be just having to wait and see.” 

Thursday, March 27, 1997

Man Who Found Huge Deposit Left a Suicide Note

Andreas Harsono
American Reporter Correspondent
Jakarta, Indonesia

by Andreas Harsono
American Reporter Correspondent

VANCOUVER -- Bre-X Minerals Ltd. chairman David G. Walsh is a
chain-smoking, beer-drinking penny-stock promoter whose cooperation with
Dutch-born geologists John Felderhof and Filipino Michael de Guzman led to
the discovery of the Busang gold find in the jungle of Kalimantan, the
largest of 17,000 islands in the Indoinesian archipelago.
Admirers hailed Walsh as "a true capitalist hero" who had helped
thousands of ordinary Canadians to make their dream coming true: becoming
millionaires with his stocks.
Critics alleged Walsh is a dangerous adventurer who was once a
bankrupt financier and never paid back all the money that he took from a
financial institution in the early 1990's.
On the eve of the Bre-X stock's tumble, he gave an interview to
the Canadian Broadcasting Corp. radio service from his headquarters in
Calgary. He talked mostly about de Guzman's sudden death
Below is a transcript of the interview, which was aired
NARRATOR: The news of Busang co-discoverer Michael de Guzman's
presumed death] came as a great surprise. We just were with Mike de
Guzman last week at the Toronto Prospectors and Developers annual
convention, where he was in good spirits and anticipating getting back to
the Busang site.
Walsh said that on his way back to Indonesia, de Guzman, who had
14 bouts of malaria in his lifetime, got a checkup at a hospital in
Singapore. He said the hospital faxed his hotel before he was to go to
Busang, telling him he had hepatitis B, which is non-curable in his
case, and would have been a very painful, lingering end to his young life.
So we have recovered a five-page note he has left to his family
and ourselves, more to [co-discoverer] John Felderhof actually, saying
that he's had enough physical pain over the years and he was ending it.
We're taking it as a suicide note. I've got a copy of it and it is his
Q: He must have been in terrible pain, then.
A: He's been in pain on and off over the years, but I guess,
faced with this confirmation of this hepatitis B, he made up his own mind.
Q: And that's in keeping with the police theory in Indonesia that
he threw himself from the helicopter.
A: Yes, we understand that the pilot first noticed something was
wrong when a gush of wind went by his head. And he turned around, and Mike
was gone from the rear left side of the helicopter.
Q: Tell me about the man.
A: He was 41 years old, a remarkably bright fellow, extremely well
thought of, and indeed an unbelievable geologist. And he had his own
theories. He liked working with Bre-X. We do give our geologists the
freedom of developing their theories.
Q: Do you recall what went through your mind when you heard about
de Guzman's discovery in Busang?
A: It was certainly an unbelievable feeling when I was told about
the results from the first hole they drilled, a kilometer from the central
zone, which was line 24.
Q: Some people would have been skeptical about those results. Was
it your faith in de Guzman that gave you that feeling, or were you acting
on instinct?
A: No, it was just my faith in the technical team headed by John
Felderhof, who has worked with Michael for a number of years in Indonesia.
They worked very, very well as a team.
Q: He chose a very dramatic way to end it. It that in keeping with
his personality? Was he a dramatic kind of guy?
A: No, I don't think so. No, he was a very warm, friendly [guy
who had a good sense of humor, but took his work very, very seriously. He
was a perfectionist.

Wednesday, March 05, 1997

The Sensitive Question of Transitional Justice in Indonesia

Transitional Justice in East Asia and its Impact on Human Rights
Human Rights Dialogue
Series 1, Number 8 03/05/1997

Andreas Harsono

When in 1987 South Korean President Chun Doo Hwan handed over power to his confidant, Roh Tae Woo, Indonesian President Suharto reportedly told his vice president and close aide Sudharmono that the Korean power transition could be a model for Indonesia. Ten years later, and after having ruled the world's fourth most populated country since 1965, the aging Suharto is now facing serious decisions about whether (and how) to hold on to power or simply retire.

Suharto has almost certainly changed his mind about the Korean model of succession. He watched as Roh, in a bid to strengthen his power base and calm the opposition in South Korea, tried to distance himself from the human rights abuses that took place under Chun and prove that he was not merely under the thumb of his predecessor. Later he watched as Roh lost power to Kim Young Sam whose government set about prosecuting Chun and Roh and sentencing both to lengthy prison sentences. This was definitely not the model Suharto had in mind.

Even the tightly controlled Indonesian press headlined the trial and printed pictures of the handcuffed former Korean presidents on their front pages. These images had ominous implications for Suharto: perhaps one day he, too, would face such a trial if he ever steps down from power.

Indonesia's government, intellectual, and military elite believe that any justice brought about in the coming transition will be tied to the democratization process itself. Political players in Indonesia's democratization can be divided into three camps: the nationalist movement, whose main figure and founder was the charismatic former president Sukarno; the politically-involved military leaders, who have Suharto as their figurehead; and the political Muslims, who are heavily divided among different religious sects, some of which have demonstrated political ambition. Will the next leader represent the Muslims, whose influence has significantly increased since the establishment of the influential Association of Indonesian Muslim Intellectuals under technology-czar B. J. Habibie? Or will the next leader represent the young military officers currently gathered around Suharto's powerful son-in-law, Major General Prabowo Subianto? Or will the nationalists return to power under opposition leader Megawati Sukarnoputri, Sukarno s daughter? Predicting who will succeed Suharto and what form of justice they would seek, if any, remains a complicated and difficult issue. For that matter, the whole concept of transitional justice is extremely new to Indonesia.

In private, the different political groups are discussing who will rule post-Suharto Indonesia and what kind of legal reprisals the next government might take against its predecessor. Some of the transitional justice scenarios whispered about consider action against Suharto and his family members, whose business empire has grown tremendously under their patriarch s influence. Charges of human rights abuses and corruption could result in trials, isolation, or seizure of their property. But some leading pro-democracy and opposition figures are rumored to have told their inner circles that they are ready to offer generous pardons to Suharto and his supporters. The implications of pardons could be nothing, or it could seal Indonesia's fate as an explosive divided nation—a sort of Asian Yugoslavia—which would have disastrous consequences for human rights.

Establishing the criteria by which transitional justice is implemented is highly complex. The reality, as one observer said, is that "the winners will dictate with their own values. The truth is exercised by those in power." Some of the more problematic questions are as much related to the change in power as to the complexities inherent in transitional justice. Justice under transition can be arbitrary: Who will be deemed a friend or an enemy of the new regime? Who can be trusted and who cannot? Who can be held directly accountable for the abuses committed under Suharto s rule and who was just following orders? What charges can be leveled against the past regime? Can laws be applied retroactively? And there is the difficult dilemma of judgment: If a judgment is made on moral grounds, those who are in political favor but are guilty of wrongdoing may still be punished; but if a judgment is made on political grounds, those who are innocent may end up being punished. The latter occurred in Indonesia when Suharto came to power and has taken place in other countries, such as China and Burma.

In prosecuting Sukarno and his followers in the late 1960s, Suharto created his own form of justice. During the massacre of some 500,000 alleged communists in 1965-66, the army-backed Suharto administration also jailed thousands of people deemed to be enemies of the state. Those who were regularly active within the banned Indonesian Communist Party—which was blamed for a failed coup attempt and the killing of several army generals in 1965—were categorized as "Group A" and subject to execution or life imprisonment. Many of those still imprisoned today claim that they are being unfairly punished because they acted on political orders. Those who were less involved but not above suspicion were categorized as "Group B" or "Group C," and jailed or exiled on Buru Island, mostly from 1966 to 1979. Those who were released in the 1970s lost political and other rights, including the right to travel. Today, their children and relatives are not allowed to join the ranks of the civil service or military, or work as educators. Ironically, Indonesia's most famous novelist, Pramoedya Ananta Toer, who wrote about Indonesia's liberation from the Dutch, is among these "second-class citizens," as one Indonesian columnist described them.

In a number of cases of massive human rights violations the need for justice is clear. It is widely accepted in Indonesia that the involvement of government and military officials in the mass murder of innocents requires some form of justice. Indonesia under Suharto has suffered many such incidents, including the 1984 Tanjung Priok massacre in Jakarta, where dozens of Muslim protesters were gunned down, and the 1991 Dili massacre, when more than 200 East Timorese were brutally killed.

However, when it comes to the massacres of the 1960s, according to polls conducted by the Jakarta-based Institute for the Studies on Free Flow of Information, most average citizens, many of whom lost relatives to these vicious mass murders, view retribution for them as an obstruction to justice and reconciliation in Indonesia. In fact some intellectuals believe that the retroactive application of justice must not be allowed to go back as far as the massacres of 1965–66. Why? Many argue that all groups were involved in the fighting and violence of the 1960s; whereas the more recent massacres in Timor and Jakarta were a case of government soldiers attacking citizens.

"If Suharto does step down, he wants firm guarantees that his successors will not turn on him in the way that is happening now in South Korea," said Juwono Sudarsono, vice governor of Indonesia s National Defense Institute, in a recent interview. The big question is whether Suharto could step down in such a manner. Perhaps, observers say, he would rather wait it out and die in office.

Andreas Harsono is the Jakarta correspondent for the Bangkok-based newspaper Nation.

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