Bre-X Seeks Refuge In Bankruptcy Gold Scam Leaves Company Broke, Struggling To Survive

Bre-X Minerals filed for bankruptcy protection Thursday after its stock was destroyed by revelations that the tiny Canadian mining company’s touted gold strike in Indonesia was a hoax.

The company said it was granted protection by an Alberta court in order to deal with the various claims that have been lodged against it.

Bre-X also announced it fired its senior vice president for exploration, geologist John Felderhof, who was deeply involved in promoting the Indonesian site. Felderhof has denied he was involved in any fraud.

In addition, Bre-X said it voluntarily removed its shares Thursday from trading on the Nasdaq Stock Market. The U.S. exchange had suspended trading on Bre-X shares until at least Tuesday while it considered whether to continue listing the stock.

A day earlier, Bre-X was dumped by the Toronto Stock Exchange following a plunge Tuesday in which Bre-X shares once worth more than $200 closed at about 6 cents.

The company’s market value at Tuesday’s close was about $14 million, compared with its peak value of $4.5 billion last year.

The decision to seek court protection came after two independent directors announced their resignation from Bre-X’s board on Wednesday. Bre-X said in a statement it wanted to show shareholders and creditors that the company’s assets will remain intact despite the intensifying crisis.

Some investors already had filed class-action suits against Bre-X after first word in late March that the Busang site on the island of Borneo might not contain much gold.

That same month, Bre-X’s chief geologist, Michael de Guzman, plunged to his death from a helicopter. His death is one of the biggest mysteries facing investigators, as Bre-X claimed de Guzman committed suicide but his family in the Philippines believes he may have been murdered.

The small, Calgary-based exploration company was a rising star for more than two years as it repeatedly increased claims about the huge gold find.

But on Sunday, the company released a stunning report from an independent consulting firm declaring that thousands of rock samples had been doctored with gold from elsewhere. The report did not specify who was to blame for the tampering.

The ranks of potential litigators swelled after the news.