In a devastating report, independent consultants said that the supposed gold find at Busang, in the jungles of Indonesian Borneo, was so paltry as to be unworthy of mining. There was "virtually no possibility of an economic gold deposit".
Moreover, the report by Strathcona Mineral Services of Toronto suggested that the results of earlier test drillings, on which Bre-X based its estimates, had been falsified to give the impression of a giant find. It said that projections had been based on "falsified data" and that there had been "tampering with samples delivered to the labs".
Bre-X, based in Calgary, saw its stock value soar when it began to promote the Busang mine in 1993. It told investors the deposit contained 71 million ounces of gold. Such was the excitement that some experts speculated the total amount might touch 200 million oz.
Strathcona's conclusions will almost certainly doom Bre-X and expose it to a tidal wave of litigation from angry shareholders. Already, several groups of shareholders in Canada and the US have filed suit.
"You would think the company would probably cease to exist," commented Harry Bingham of Van Eck Institutional Advisors in New York.
In its audit, Strathcona concluded: "The magnitude of the tampering with core samples that we believe has occurred and resulting falsification of assay values at Busang is of a scale and over a period of time and with a precision that, to our knowledge, is without precedent in the history of mining anywhere in the world".
Trading in Bre-X shares was suspended on the Toronto Stock Exchange yesterday and on other exchanges including the New York Nasdaq. The release of the report also prompted the withdrawal from the project of two of Bre-X's putative partners, Musamba, of Indonesia, and Freeport-McMoran of New Orleans.
Freeport-McMoran first cast grave doubt on the importance of Busang when it revealed on 26 March that test drillings it had completed at the site were showing "insignificant" quantities of gold. The news panicked investors into a panic and Bre-X lost 80 per cent of its value in 30 minutes in Toronto before trading was suspended.
In the wake of the Freeport-McMoran findings, Bre-X invited Strathcona to investigate the truth about Busang. On the report's release, the chairman of Bre-X, David Walsh, issued a statement: "We share the shock and dismay of shareholders and others that the gold we thought we had appears not to be there".
Suspicions about the authenticity of the Busang find were reinforced in March when one of Bre-X's leading geologists at the site, Michael de Guzman, fell to his death from a helicopter in Borneo. He was on his way to Busang to answer questions about sampling from Freeport-McMoran officers.
It remains unclear whether the death was by suicide or whether there are grounds to suspect murder. An early official explanation was that Mr de Guzman had shortly before discovered that he was suffering from a terminal illness. But his family protested his innocence yesterday saying he "had never been involved with any kind of fraudulent acts".
The estimate of the mine's 71 million oz was made by a Montreal assay firm, Kilborn SNC Lavalin. But Kilborn has already insisted that it was not responsible for the sampling itself. The implication of Strathcona's references to "tampering" is that gold from other sources may have been added to the samples provided to Kilborn.
The 30-minute meltdown of Bre-X stock on 26 March saw the value of its shares plummet from C$15.50 to C$2.50, wiping some C$3bn from the firm's value. Litigation against the firm may focus on trades completed by Mr Walsh and his wife and other executives in 1996 which reportedly netted them about C$77m.
Bre-X has hired Price Waterhouse and a forensic investigations firm to determine how the mine's data was falsified.
1993: Bre-X Minerals starts gold exploration in Busang, a remote area of rain forest on the island of Borneo.
1995: Bre-X says Busang could contain more than 30 million ounces of gold.
1996 April : Bre-X shares rocket from C$5 to C$192.50 within minutes of listing on Toronto stock exchange. Shares later split 10 for one.
September: Bre-X starts search for major mining partner.
1997 Feb: New Orleans-based Freeport McMoran Gold and Copper sings deal to help develop Busang.
Feb: Head of exploration at Bre-X John Felderhoff says deposit could contain up to 200m ounces.
March 19: Bre-X chief geologist Michael de Guzman falls to his death out of helicopter en route to site.
March 21: Bre-X shares slump after Indonesian newspaper reports suggests Freeport's tests contradict Bre-X claims.
March 26: Bre-X hires mining consultants Strathcona Mineral Services to review project.
April 4: Ontario Securities Commission investigates possible insider trading.
April 23: Freeport McMoRan says testing has not found significant amounts of gold.
May 5: Strathcona Mineral Services says gold find "was falsified on a scale without precedent in mining history."