In May 1997, the editorial staff of The Northern Miner broke one of its own rules and bought an equity position in Bre-X Minerals.
Journalists normally aren’t allowed to buy shares in companies they cover, but this paper spent $60 at the time to secure share certificates that could be framed. This, so that the newsroom never forget the Busang scandal and Graham Farquharson’s role in unearthing a sham that changed the way mining companies report to the public.
Farquharson passed away on May 2 in Toronto at the age of 81. He was the head of Strathcona Mineral Services, a consulting firm that audited the Busang property in Indonesia, a project that Calgary-based Bre-X Minerals claimed contained one of the world’s largest gold deposits.
The announcement by Bre-X in 1995 sent the company’s shares soaring, from a mere penny stock to a peak of $286.50 in May 1996 on the Toronto Stock Exchange.
Strathcona’s audit however, revealed that the results were tampered with and that the only gold at Busang was the gold that Bre-X used to salt its samples. While the scandal tarnished Canada’s mining sector, it highlighted Farquharson’s credentials.
But the Timmins-born mining engineer’s credibility was well-known even before the Bre-X scandal, explains James Whyte, co-author of the book “Bre-X: Gold Today, Gone Tomorrow,” and former editor-in-chief of The Northern Miner.
The rising gold price and a relatively new flow-through share tax structure combined to bring a lot of money into the junior mining industry in the late 1980s, which led to companies being formed to take advantage of the investor interest. Too much money chased too many weak properties, Whyte said, which paved the way for the demise of many mining projects.
“Strathcona had a record of successful mine-building by that time and was brought into many projects to see if they could be turned around,” Whyte says. “It always fell to Strathcona to tell investors the bad news. That gave Graham and Strathcona immense credibility because he didn’t shrink from telling it straight.”
And when Bre-X needed to conduct an audit of its Indonesian project in 1997 after doubts were raised about the actual amount of gold in the property, it chose Strathcona, because the company knew no one would doubt the firm’s integrity.
Upon assessing the initial evidence, Farquharson faxed Bre-X and said that the project didn’t contain any gold, which led to his team receiving a scrappy welcome when it reached Busang.
“I know other consultants would have waited, they would say, we have to do this or that… Graham if he saw something and he knew he was right, he told it,” says Reinhard von Guttenberg, a geologist who worked with Strathcona back then.
Whyte, during an interview with Farquharson on Bre-X, remembers how the Strathcona head “very quietly said ‘we put a stop to that.’ Gentle manner, but strong where it counted,” Whyte recalls.
Arctic pioneer
Away from the scandal, Farquharson’s Strathcona is also credited with planning Canada’s first mine in the Arctic. He was hired by Mineral Resources International of Calgary to assess the Nanisivik lead-zinc deposit on Baffin Island.
Despite bone-chilling temperatures, long, dark winters, permafrost extending more than 600 metres into the earth’s crust and thick sea ice preventing ship access for all but two months, Farquharson – then only 33 years old – told the owners that he thought the deposit could be developed.
After being rebuffed by major mining companies, financial support was secured from Germany, the Netherlands and the Canadian government. Nanisivik began commercial production in 1976, and under Strathcona’s management, operated successfully as one of the world’s lowest-cost zinc mines for more than 22 years.
“People were skeptical (about the mine) but it was very successful,” says Graham Clow, who worked with Farquharson for a decade and is currently strategy director at SLR Consulting.
Farquharson’s push to build a small mining town in the area was a key reason behind the project’s success. “He grew up in a mining town and he insisted on that… I think that led to a long-term success… you had a real sense of family community,” Clow says.
Henrik Thalenhorst, another geologist who worked for Strathcona for several years, recalls how he almost spent Christmas at the mine because of a snowstorm that delayed plane access. “The most impressive memory is the moon circling above us 24 hours a day and absolutely no daylight, pitch dark 24 hours a day,” he says.
Clow describes Farquharson as an honest, straight shooter who worked all the time. “You would find him on his desk on weekends… and even on Christmas at times,” he says.
“He wasn’t right all the time (about projects), but everybody knew that he would tell it as he saw it,” he adds.
Thalenhorst, echoes a similar sentiment. “He served as a beacon for the industry in two ways, one is how to do proper technical work and the other one is how to be honest,” he says.
While Farquharson’s work at Nanisivik mine and in unveiling the Bre-X scandal, has dominated headlines, Reinhard believes his biggest contribution to the industry was how he consistently maintained Strathcona’s high quality.
He recalls how a company in the 1980s, when the ‘flow-through mania’ was at its peak, had combined little gold intersections up into one “orebody” in a project and wanted Strathcona to report on it. “Graham said no… he always told the truth and it didn’t matter for him if the clients didn’t like it,” says Reinhard.
Both Reinhard and Thalenhorst, believe it was Farquharson’s “tough” childhood that made him resolute. The Strathcona founder got his first job at 12 and paid his father $20 a month for room and boarding, according to Reinhard. He was also in a cast for three years because of Perthes disease (a hip disorder) as a child.
“He was in a cast for three years as a ten or twelve-year-old… that either destroys you as a person or that makes you strong. In Graham’s case it made him strong, durable and he expected similar toughness of other people. He did not suffer weakness very easily,” Thalenhorst says.
Early years
Farquharson spent his early years in the mining towns of Val-d’Or and Malartic, in Quebec, and Bathurst, N.B., before attending the University of New Brunswick. In 1960, his mining career began at a copper mine near Tilt Cove, Nfld.
After graduating as a mining engineer from the University of Alberta in 1964, he spent four years in Africa at Kilembe in Uganda and Tsumeb in Namibia. Following an MBA at Queen’s University, he joined Watts, Griffis and McOuat before becoming one of the founding members of the consulting firm Strathcona in 1974.
Aside from work, Farquharson was an accomplished runner and initiated the Nanisivik Midnight Sun Marathon. He was also interested in bird watching.
Reinhard recalls how he was walking around looking for birds while his team was drilling at Bre-X’s Busang, since the town was known for its wildlife. “He knew the outcome of this project, so he was not terribly concerned about what we were doing,” laughs Reinhard.
“Technically that was the easiest project I ever had. Zero!” Thalenhorst joked, referring to the amount of gold they found at Busang.
While Farquharson has been described as frugal since he didn’t spend more than what was necessary in projects, he heavily donated to educational institutions and supported university students considering a career in the mining industry.
Pierre Gratton, chairman of the Canadian Mining Hall of Fame, which inducted Farquharson in 2010, said that the mining engineer helped shape Canada’s “global leadership in mining.”
“He truly dedicated his life to our industry and in service of it – leading companies such as Strathcona Mineral Services and as a director of Franco-Nevada,” Gratton told The Northern Miner. “His presence will be greatly missed in our industry, but his accomplishments are immortalized in the Canadian Mining Hall of Fame.”
Whyte, who was always struck by Farquharson’s laid-back, quiet manner despite having “all the chops” to be very opinionated and aggressive, describes him as a person who most people in the mining business could “always trust.”
The editorial published in The Northern Miner after the Bre-X scandal in May 1997, echoed a similar sentiment. “The share certificates… will serve as a permanent reminder that if something seems too good to be true, it usually is… That it is not what they tell you, but what they don’t tell you that matters… And that when Graham Farquharson calls someone’s samples ‘invalid,’ he means exactly what he says.”
Farquharson was predeceased by his wife Anna-Liisa. He left behind his sister, Bonnie; nieces, Fiona (Mark), Susie (Andy) Caroline (Stefano); and numerous great-nieces and nephews.
Donations in his memory may be made to Canadian Mineral Industry Education Foundation or Princess Margaret Cancer Foundation.
Graham was a great man. Kind and generous and an amazing philanthropist. Great contributor to our hospital system
Packaged up and sent to me upon request all of his Consultants reports on a major project in Costa Rica. Generous above all
I am saddened at the past of Graham Farquharson. He was respected and held in high esteem by members of the Livingstone Presbyterian Church, where members of his family attended until the late nineties. Mr. Farquharson supported Livingstone Presbyterian Church financially, even as his health was deteriorating. We thank God for his life and know he is resting in His peace.