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Gold Mining Swindles

I've spent half a century writing for radio and print (mostly print). I hope to still be tapping the keys as I take my last breath.

"I tell ya Jethro, we're rich."

"I tell ya Jethro, we're rich."

Gold Mining Scams

Everybody should heed Mark Twain’s advice, which has been constructed in various ways but boils down to: “A gold mine is a hole in the ground surrounded by liars.”

Others have warned against smooth-talking salesmen who promise fabulous wealth from a mine where they’re picking up nuggets the size of apples. However, despite all the counsel from wise people, there are still folks out there who park their doubts and lose their shirts.

Salting the Mine

A favourite of scammers in gold rush days was salting the mine. One scheme involved loading a shotgun with gold dust and firing it into a strategic section of an old mine. The mark would then be led on an inspection of the mine and carefully guided toward the prepared section. Money would change hands, and the soon-to-be unhappy investor would discover there was little gold in them thar hills.

In a variant, swindlers might stake a claim to a tract of barren land and announce they had found silver. Authorities would send out a land surveyor to verify the claim. When the surveyor decided on which part of the claim to dig to confirm the find, a dead snake would be lobbed into view; a rattler was the preferred choice.

Before the surveyor had a chance to notice the serpent wasn’t moving, it would get both barrels of a shotgun. With the ground now nicely salted, the con-men would say, “That was close. But, it’s safe to dig now.”

The surveyor would then confirm the presence of silver. The claim could be carved up and sold to unsuspecting treasure seekers.

Gold rush scam

Gold rush scam

Bre-X Scandal

The salting-the-mine swindle was resurrected in the 1990s on a massive scale. A company called Bre-X, which was based in Calgary, Alberta, announced in 1995 that it had found significant gold deposits at a place called Busang in Indonesia.

The project manager, Filipino geologist Michael de Guzman, said there were more than two million troy ounces of the bright shiny metal on the site; an estimate that kept rising until it reached 2,000 tonnes.

The ore samples were examined by experts and declared legitimate. Stockbrokers were advising clients to get in on this elephant gold find. The value of Bre-X shares went from pennies a piece to almost $300 each. Investors who got in early were very happy. At the peak, the company had a market capitalization of more than $6 billion.

The deal was looking so good that some big players started to elbow their way in, including Indonesia’s President Suharto (who never passed up the chance to get a piece of the action) and the American mining giant Freeport-McMoRan.

Real or fake?

Real or fake?

But, the good times didn’t last. On March 19, 1997, de Guzman “fell” from a helicopter into the Indonesian jungle. By the time his body was found, forest critters had enjoyed several lunches and dinners, and all that was left to identify de Guzman was a molar and thumbprint.

A few days later, Freeport-McMoRan announced the gold-loaded ore samples they checked were found to contain “insignificant” amounts of the precious metal, and the jig was up.

Bre-X went bankrupt, but nobody directly involved with the company suffered any consequences, although its founder, David Walsh, died of a brain aneurysm at his luxurious home in the Bahamas at the age of 52.

Michael de Guzman’s Escape

In 2005, The National Post ran a story saying that one of de Guzman’s many wives got a money order from Brazil dated after his apparent death. The money supposedly came from the $100 million de Guzman made when he sold his Bre-X shares at near their peak.

The television series Masterminds, in a 2004 episode entitled “Fool’s Gold,” points to Michael de Guzman as the person who engineered the entire swindle.

It’s hard to believe that the man who put together this incredibly clever scam did not also have an exit strategy that would allow him to escape with the proceeds.

There was plenty of collateral damage. The head of the Toronto Stock Exchange was forced out for allowing what turned out to be a very dodgy company to be listed. Some major investors got taken to the cleaners; the Ontario Teacher’s Pension Fund lost $100 million, and the Quebec Public Sector Pension Fund dropped $70 million. Thousands of small investors lost all or part of their life savings, and some committed suicide.

A fool and his money are soon parted.

A fool and his money are soon parted.

The Taranganba Scam

Off to another time and place but a similar parade of wiser-but-poorer speculators. In 1886, gold, lots of it, was discovered at the Mount Morgan Mine in Queensland, Australia. Gold fever spread through the colony and around the world.

Robert Ross owned land about 80 km away at Taranganba. He reasoned that if there was gold at Mount Morgan, people might believe there was gold on his property. And believe they did when Ross put the story about that he’d discovered deposits that rivalled those of Mount Morgan.

The money rolled in; an estimated quarter of a billion dollars in today’s value. But there was not a single ounce of gold anywhere to be found at Taranganba. Ross and his fellow con artists did very well, and not one of them felt the sharp sting of the law.

Although there was justice of a kind; Ross frittered most of his fortune away, probably through gambling, and died of a stroke within a couple of years.

Bonus Factoids

  • Gold’s value is tied to its scarcity. Gold has been discovered on every continent, and the average human body contains 0.2 milligrams of it. However, it is only the 73rd most abundant element on the planet. Platinum, osmium, rhodium, and iridium are less common and, therefore, more valuable ounce for ounce.
  • All the gold ever mined would fit into three Olympic-sized swimming pools.
  • According to the U.S. Geological Survey, more gold can be recovered from a ton of old computers than can be refined from 17 tons of gold ore.
  • A gram of gold, about the size of a grain of rice, can be flattened out into a film that will cover an area of one square metre.


This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.

© 2016 Rupert Taylor