Gold (12 page)

In his weeks at Blue Star, Livermore had come to understand the formation more intimately. In the model he developed, upward-migrating hydrothermal fluids, loaded with gold, had “ponded” beneath a particular structure of the thrust, concentrating large amounts of fine-grained gold. Using his new knowledge, Livermore started mapping in an area now called the Lynn window, near the Blue Star mine. He sampled the rock and the assay “kicked”—showed gold. In September Livermore staked seventeen 20-acre claims, buying the posts and driving them in himself. Newmont hired a bulldozer, and in October started trenching through the rock near a peak in the Tuscarora range. One of the trenches intersected eighty feet of rock grading .2 ounces of gold per ton. In November a heavy snowfall ended the exploring season, but they were back in April with a drill. The third hole intersected an eighty-five-foot-thick band of ore. “It was that same submicroscopic gold I had first seen at the Standard mine,” Livermore said, “uniformly disseminated, no major metallurgical problems—it was just a beautiful ore body.
My God, it was a beautiful ore body.”

Livermore made the strike on a height called Popovich Hill, named for a prospector who had kept a cabin there. Popovich had lived on the mountaintop for years. All around him lay the Tuscaroras. I suppose he tramped through every inch of them. In John Huston's classic gold hunt movie,
The Treasure of the Sierra Madre
, the old prospector says: “I know what gold does to men's souls.”
Popovich left no trace except his name and an abandoned cabin.
We don't know a thing about him except where he slept his hopes away, on top of the biggest goldfield in America—invisible. In two years of tearing up the peak where Popovich had lived, Newmont outlined a reserve of 12 million tons.

An ocean of new gold lay ready to be tapped, and yet . . . there was no gold rush. Livermore had identified a previously unknown category of commercial gold deposit on a trend that struck for forty miles. It was five miles wide and sometimes hundreds of feet thick. Yet only one other significant discovery was made in the 1960s—at Cortez, in a valley south of Carlin. Livermore was dispatched to Canada. Other than a single Newmont mine that opened in 1965, a goldfield that now has mines strung along it like Christmas lights sat there largely unexploited. The reason was simple. The gold price was too low.

He was the greatest gold miner of the modern age—a silvery, immaculate, dashing, and indefatigable tycoon.

N
O ONE FOUND MORE MINES
in Nevada because they were not there to find. The gold price hadn't put the ore in place. Ore is a human construct, not a natural one. Nature makes metal. Ore is made by math. The definition of ore is rock that can be mined at a profit. Ore comes into existence only when the value of a mineral exceeds the cost of getting it out of the rock. When Livermore made his discovery the price of gold was $35 an ounce. To get that $35, Newmont had to build a mill, strip away the overburden, blast and dig up the rock, truck it to the mill, smash it into a powder, feed it through a complex of special tanks in which the particles of gold attached themselves to carbon, collect the mess at the end, burn off the dross, and pour it into bars. All this consumed capital, energy, and wages. There was only one place for Newmont to recover
those expenses—from the $35, ounce by ounce. In 1965, when the Carlin mine got going, enormous deposits of gold-bearing rock lay all through the hills, but they did not qualify as ore because they were not rich enough to support mines. The Nixon Shock changed that.

When the gold convertibility of the dollar ended in 1971, the true price of gold—what private buyers would pay—had been rising. Now that rise gained speed.
Three years later the gold price passed $180. Large swaths of north-central Nevada turned into ore. A second phase of mine development swept the Carlin Trend. Then the party really got going.

In the last half of the 1970s a series of crises—the Islamic revolution in Iran, the rising oil price, an American recession—caused some investors to buy bullion as a hedge against jittery currencies. The gold price rose. Then in a single year, from 1979 to 1980, it shot into the stratosphere, blasting from $222 an ounce to $825. The scale and explosiveness of this increase was unprecedented. A firestorm of hype and speculation crackled around it. Gold captured a new place in the public imagination. It became what analysts call a “sentiment indicator”—the measure of emotions such as fear, greed, or panic. Gold fever seized the market and common sense went home.
“Nobody in his right mind will sell at these levels,” a New York dealer told the Associated Press in December 1979, when the price passed $500. “They're afraid they'll never be able to buy it back.”

But they could have. In two years the gold price fell to $290. Then it recovered, and by the 1990s had settled into a range between $300 and $400 an ounce. As an investment, gold would never be the same again. A new scheme for rating gold mine stocks (in which the upside of possible price rises was incorporated into the structure of valuing the stocks) became the industry standard. In less than ten years the stock market value of North American gold miners
increased 150 times, from $200 million to almost $30 billion, as millions of ounces of gold poured out of north-central Nevada. The fortunes of the two biggest gold mining companies in the world were founded on the Carlin Trend, one of them by a man who had learned, through bitter experience, to fear the gyrations of commodity prices, and who found a way to flatten them. He was the greatest gold miner of the modern age, a silvery, immaculate, dashing, and indefatigable tycoon with the menacing aplomb of a Florentine prince.

P
ETER
M
UNK WAS BORN IN
1927, heir to a Hungarian business fortune.
In 1944, when the German wartime occupying force started rounding up Hungary's Jews for shipment to the death camps, the sixteen-year-old Munk and his family were among those rich enough to buy their way out on the Kasztner train, a transport arranged by Rezso Kasztner, a Jewish lawyer, in exchange for the payment of a bribe in cash, gold, and diamonds to the death camp planner Adolf Eichmann. Munk reached safety in Switzerland, and later emigrated to Canada.

Escaping a degrading death in one of history's monstrous passages must mark a person. Munk does not like to talk about it, or anyway, not to me. An account of the events already exists in Anna Porter's
Kasztner's Train.
Porter, born in Hungary herself, is a Toronto publisher, and friend of Munk's. She described sitting with Munk in his house, in a room darkened by heavy drapes, with Persian carpets on the floor and, on the wall, a picture of Munk's grandfather's house in a wealthy Budapest quarter, with the old man standing in the garden. “I've been sorting some boxes,” Munk told her. “I don't think about the past much, but we have to pack some of these old things.”

Munk's parents divorced when he was six. At first he lived with his mother. Later, when his father remarried, he shifted back to his Munk grandfather's house. When the German army entered Budapest in March of 1944, Munk's routine had him traveling back and forth across the Danube on visits to his mother, Katharina. This trip soon became more difficult. Within days the Nazis published edicts requiring Jews to wear yellow armbands displaying the Star of David, and forbidding them to use public transit. Munk kept up the visits anyway. He had fair skin and blue eyes, and did not look obviously Jewish. He stuffed the yellow armband in his pocket and hopped the tram across the river, risking his life.

The deportations started, and in early June of 1944 Munk's paternal grandfather, Gabriel, bought fourteen tickets on the Kasztner train, paying for them, Munk recalled, with a suitcase stuffed with gold and cash. From the young man's point of view, the family escape plan had one chilling drawback: it did not include his mother.

Gabriel felt no responsibility to include Katharina, since she had left the family. Munk told Anna Porter that for the first time in his life, he stood up to his grandfather, declaring that he would remain behind in Budapest with his mother. Katharina broke the deadlock herself, insisting to her son that he accompany his father's family. To his mother's wishes, Munk's father added that Katharina would only be temporarily detained. “My father assured me that if we left enough money for food and bribes, my mother would be fine,” he said. “But I think he knew she would be deported.”

In a haunting scene in Porter's book, Munk recalls escorting Katharina to the detention center in a former rabbinical seminary. She wore a cream-colored summer suit and Italian shoes. He carried her elegant leather suitcase. She had her money in a small purse. They talked about what they would do together when the war was
over. They said good-bye at the gate. The next day, about to leave on the Kasztner train, Munk called his mother at the detention center. Amazingly, they put him through. Katharina said she was fine, and that her maid had brought fresh laundry. Munk boarded the train for Switzerland. A few days later the Germans put Katharina in a boxcar bound for Auschwitz.

Katharina survived, but she emerged from Auschwitz painfully altered. She returned to Hungary. As Porter told me when I called to talk to her about this part of Munk's story, he “wanted desperately to be with her, after discovering that she had survived, and
what
she had survived. He adored his mother.”

Katharina insisted that Munk go to Canada to complete his education. Later he brought her there, although she never liked the country and did not speak English. “He took very good care of her,” said Porter. “That was the strongest relationship in his life.”

When I met Munk, he was eighty-four years old, a graceful, tough-looking, slender man with a hawkish face. Short white hair curled tightly on his head. He moved with an athletic step. We met in his fifth-floor corner suite at Claridge's Hotel in London. An unseasonably warm spring day bathed the balcony in sunshine. Sheer curtains billowed inward. A spray of white flowers blazed on the orange marble mantel. Munk ordered a pot of coffee and three bottles of San Pellegrino. He sat down and polished off a coffee, then sprang up to take a phone call at the desk, conducting his end of the conversation in monosyllables. I did not know it at the time, but as we met, Munk's company, Barrick Gold Corporation, the world's biggest gold miner, was in the midst of a secret bidding war with the Chinese goliath Minmetals Resources. One month later Barrick would stun the business world with the news that it had paid $7.6 billion to snatch an Australian copper miner from Minmetals'
jaws. It was the biggest acquisition in Barrick's history, and the first time it had bought a nongold asset. Munk drove Barrick to the top in gold mining by a single-minded focus on one metal and one place. His strategy turned a $14 million gold mine into a $50 billion company. That's the happy landing. The flight itself was not so smooth.

M
UNK GRADUATED IN
1952
FROM
the University of Toronto with a degree in electrical engineering.
Six years later he and business partner David Gilmour founded Clairtone Sound Corporation Limited. The company's mission was to produce high-quality record players, and encase them in the best design. In those days, home audio equipment came in boxlike cabinets. Clairtone introduced slick, modular components that captured the spirit of the 1960s.

The company aimed at the top end of the market. Munk hired Frank Sinatra as a Clairtone pitchman, and managed to get product placement for his futuristic Project G stereo in the iconic 1967 movie
The Graduate.
He rose to business stardom, jetting around at the age of thirty addressing business groups who saw him as a visionary.
A 1967 commercial posted on YouTube shows Munk and his partner rolling across the Brooklyn Bridge into Manhattan in a gleaming 1936 Pierce-Arrow convertible. In the backseat is their latest product, a Clairtone color TV.
The Clairtone company was falling apart around them when the ad was shot, but Munk was as cool and sleek as the Danish modern cabinets that enclosed his products, and that attracted customers like Hugh Hefner.

Later, overwhelmed by manufacturing problems and a move into color television not supported by demand, Clairtone collapsed. In a piece on the company and her father, Nina Munk, a
Vanity Fair
contributing
editor, quoted a lawyer for the Nova Scotia government, which lost millions of dollars in a partnership with Clairtone:
“Munk was too good a salesman for his own good. He could sell anything to anyone—including himself.”

In the wake of the debacle, Munk left Canada for London. In 1970 he and Gilmour founded the Southern Pacific Hotel Corporation, with Munk as chairman. Within three years it was the largest chain of luxury hotels in the Pacific. The restoration of his business reputation seemed complete until, in 1973, Israel's defeat of Arab forces in the two-and-a-half-week Yom Kippur War led Arab oil producers to embargo supplies to some countries, and to raise the price of oil. The cost of travel increased and the global economy slowed. Munk's enterprise withered, and his attempts to save it led to a humiliating meeting in London with the Earl of Inchcape, chairman of the British shipping giant P&O.

“Desperate for capital, and exhausted from a 40-hour flight from Fiji,” said a profile in Toronto's
Globe and Mail
, “Mr. Munk had come to beg Lord Inchcape's board to reinstate an offer for shares that his South Pacific company had earlier rejected. The imperious Lord Inchcape would not be moved. ‘What offer are you talking about, Mr. Munk? There is no offer on the table. You will go bankrupt and then we will talk to the receiver and will pick up your assets and you will face the wrath of your shareholders, which you well deserve, because you were pigheaded.' With that, Mr. Munk was shown the door.”