Thursday, March 27, 1997

Busang Gold Find Has a Dramatic Twist

Andreas Harsono
American Reporter Correspondent
Jakarta, Indonesia

Andreas Harsono
American Reporter Correspondent

VANCOUVER -- The Hong Kong-based Far Eastern Economic Review once
profiled the Filipino geologist; they called Michael De Guzman a "golden
boy" after his spectacular find of a huge, multibillion dollar gold
deposit in Busang, a village deep inside the Kalimantan rain forest.
De Guzman's boss David Walsh, the chief executive officer of the
Calgary-based Bre-X Minerals Ltd., recalled him as having a "near-genius
IQ," while colleague geologist John Felderhof praised him as a brilliant
and a true professional.
De Guzman had his own judgment about himself. He decided to end
his life. And rather than taking sleeping pill or something less painful,
he tragically chose to jump from a helicopter that was flying to the
Busang site, around 300 kilometers northwest of Samarinda, the capital of
East Kalimantan, on the morning of Wednesday March 19.
"It was a great shock," said Felderhof, who immediately flew back
to Indonesia from his visit to Canada, saying that he was deeply
distraught over the loss of his colleague. 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 that went by their heads. They turned around and de Guzman was gone
from the rear left side of the helicopter.
Police said that the pilot and the engineer of the helicopter,
which was hired by Bre-X, 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 he fell 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 had "giving up" on life because of
The tragic death is not the only blow to Bre-X executives like
The following day an Indonesian newspaper, the Jakarta-based
Harian Ekonomi Neraca, instead of headlining the dramatic suicide, broke
the news that Freeport-McMoran Copper & Gold Inc. is harboring doubts that
Bre-X found as much gold as it says it did at Busang. Freeport, reports
say, has not found gold in quantities that were described in Bre-X assays,
and records were destroyed in a fire jtoi make comparisons of essay
results even more difficult.
The Indonesian government last month recruited the New
Orleans-based Freeport to develop the mine, giving it a 15-percent
ownership stake and shrinking Bre-X's share to 45 percent. The Indonesian
government and an investment firm controlled by Indonesian President
Suharto respectively own the rest 30 and 10 percent.
The Neraca daily quoted the Freeport official as saying that the
find was less than 10 million ounces, which is in sharp contrast to
Bre-X's claim last year that it had found at least 70.95 million ounces
of gold.
The Bre-X claim would mean that the Busang deposit is worth around
US$230 billion at today's price.
"Possibly," one official says, "the deposits are not as large as
had been reported. In fact it is possible that the deposits are not worth
mining," the anonymous official said.
In this modern era of information technology, the statement just
need minutes before reaching the whole world. About $US3 billion of market
value vanished as soon as stock exchanges throughout Canada began to open
on Friday and the stock fell to just 20 percent of its opening quote,
then in the $200 range.
A brief report of the story was flashed to North America by Bridge
News, a St. Louis-based wire service formerly known as Knight-Ridder
Financial News. 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 where prices are keyed to the idea that Busang is one
of the great gold discoveries of history, this was incendiary. 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 managed to pit various powerful figures
like former Canadian premier Brian Mulroney, U.S. ex-president George
Bush, and Indonesian President Suharto as well as his children against
each other in a high profile business struggle to control the future
output of Busang.
A small Canadian town saw hundreds of its residents become
millionaires after their Bre-X shares rose more than 3,000 percent. Some
of them even moved to New Zealand to avoid paying Canadian taxes.
But the Neraca news report might not have traveled so far so fast
without the help of Internet chat groups in which computer junkies swap
market news and rumors.
Before dawn on Friday, someone posted the Bridge News report on
the Internet. Five minutes later the trading on the Toronto Stock Exchange
opened, Bre-X was down US$0.9. Exchange officials called time out at the
company's request "to ensure that investors trade on equal information,"
said a market manager.
Despite a trading halt of more than 3.5 hours to let the market
settle down and hear the company's reassurances, Bre-X slid to US$10.7 --
its lowest point since April 1996 -- and closed at US$11.4, down US$1.7,
on the Toronto Stock Exchange.
At its lowest price, it had fallen about US$600 million since the
world learned of de Guzman's mysteriousand final flight. Also hammered
were Bre-X's parent companies, Bresea Resources Ltd. and Minorca Resources
Ltd., which have small indirect stakes in the Kalimantan discovery.
"Absolute insanity. Just insanity" said Toronto mining promoter
Stan Hawkins, a Bre-X shareholder and former Bresea director who said he
had heard "all sorts of different rumors that de Guzman was murdered and
the assays are all wrong and that's why he jumped off the helicopter, or
whatever. Certainly there's no question about theassays: They're
golden, no pun intended."
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. A world apart, both Canadian and Indonesian
newspapers put the rescue effort and the stock hysteria on their front
Rescuers finally found de Guzman's body on Sunday, face down in a
swamp, 150 meters to the west of the estimated impact point in Manamang, a
village north of Muarakaman, dozens of kilometers from Busang.
Observers cannot seem to help but speculate that de Guzman had
made his tragic decision after finding out that the years of effort in his
exploration work, which had begun on a shoestring in 1986, was about to
reward him with a huge embarrassment.
"How could a geologist whose pictur was printed on glossy magazines
around the world withstand such a humiliation?" asked an observer, adding
that de Guzman's income ad risen dramatically since the find and made him
a multimillionaire with assets of $4.8 million.
B.N. Wahyu, head of the Indonesian Mining Association, complained
that the secrecy surrounding the Busang find meant he could not get a map
of the site from Bre-X until March, even though the association had
lobbied the mining ministry here for a fair deal for the company.
Both Felderhof and Walsh angrily denied the report. A Freeport
spokesman in Jakarta also denied the report, saying that the American is
still drilling and cross-examining the deposit in Kalimantan.
Without explicitly referring to the Neraca newspaper, Walsh said
in a statement that he is considering 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 te
first ounce of gold is poured at Busang, I'm sure the naysayers will
complain about the color."
Felderhof, who is the Bre-X chief 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 Workpermit is issued by
the Indonesian government two weeks from now.
Bre-X says it attributes its figure to consultants from Kilborn
SNC-Lavalin Inc., a Toronto-based engineering firm, and Kilborn stands
behind it.
Paul Semple, a vice-president in Vancouver, said the firm had "no
reason to believe that there is any reason to retract that. 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 in an effort 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.
"We've seen the reports and the Kilborn study. It's hard to believe
that there is anything materially different than what we have seen. This
[newspaper story] is probably just speculation, but I'm as curious as you
"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 first
came from an official of Freeport and the second came from a source at the
Ministry of Mine and Energy.
"I was told that President Suharto himself has also gotten reports
about the Freeport finding," Cholid said, explaining that his newspaper
headlined the report after "carefully checking and rechecking" the
sensitive data in a normal editing procedure.
"I times like these," quipped the senior journalist. "Public
companies are always vulnerable to reports like this one. The public
doesn't know for sure which one is correct -- our sources or Bre-X
geologists. They want to play it safely. Now we have to just wait and

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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