The May 1997 collapse of Bre-X Minerals, a company that in a life of a few years claimed to have the largest gold property in the world, should have come as no surprise. In this examination of the fraud, Alberta-based writer Brian Hutchinson shows that there was little reason to believe the claim, and illustrates how the passions of the market and the fortunes of investors rode on waves of vanity and greed.

Hutchinson reaches into history to demonstrate that mining frauds are nothing new. In Canada, mining is carpeted with deception, Hutchinson observes, from the valueless rock samples brought back to England by Martin Frobisher, to the scams that happen with regularity on the Vancouver Stock Exchange.

The Bre-X saga began with the union of formerly luckless firm president David Walsh, freespending chief Bre-X geologist John Felderhof, and exploration manager Michael de Guzman. When they met, a sinister partnership was born. There is no evidence to show they actually planned the fraud, but fraud it was and the guys behind it were naturals, Hutchinson says.

Hutchinson makes a case that the partners had to know what they were doing and that the extensive denials of knowledge of the scam by Bre-X managers are self-serving. He shows how insiders sold stock as the market went gaga over a patch of inaccessible jungle that was being hustled as the richest mine in the world.

There should have been checks and due diligence along the way. But analysts repeated Bre-X claims without really examining the gold supposedly certified by respected laboratories. As the mining community learned, the gold Bre-X claimed was a few hundred dollars worth of grains scraped from nearby river bottoms and added to drill cores before they were assayed. A little quick work with a microscope would have shown the gold did not have the structure of the kind Bre-X was saying was abundant in rock formations.

Hutchinson tracks the activities of Indonesian government representatives working for President Suharto’s children. In the end, Bre-X was forced into a marriage of Suharto’s convenience with Freeport McMoRan Copper & Gold Inc., a large U.S. mining concern that found no commercial quantities of gold on the site.

Fool’s Gold is a serious analysis of mining fraud. Rich with insights and superb writing, it is a morality play in which nearly all the major players emerge with dirty hands. Business writing doesn’t get any better than this.