Bre-X of canada forges alliance with Sigit's firm<\/p>\n
JAKARTA (JP): Bre-X Minerals Ltd, a Canadian company
\ncontrolling the world's largest single gold deposit in Indonesia,
\nhas forged a strategic alliance with PT Panutan Duta, a company
\nowned by President Soeharto's son sigit Harjojudanto.<\/p>\n
The Business Times reported yesterday that the deal will grant
\nPanutan a stake potentially worth C$580 million (US$609 million).<\/p>\n
The Singapore-based newspaper quoted a statement issued by the
\nToronto-listed Bre-X as saying that Panutan, which is 60 percent
\nowned by Sigit, will receive a 10 percent "carried interest" in
\neach of its mining deposits in East Kalimantan, called Busang I
\nand Busang II.<\/p>\n
Further, under the terms of a memorandum signed by the two
\ncompanies, Bre-X will advance a loan to Panutan to buy out the
\ncarried interests of its two current Indonesian partners -- PT
\nAskatindo, which has a 10 percent interest in Busang I, and PT
\nKrueng, which has a similar interest in the Busang II zone.<\/p>\n
In addition, Bre-X has hired Panutan as a consultant for 40
\nmonths "to assist in administrative, technical and other support
\nmatters" within Indonesia -- for which Panutan will receive a
\nconsultation fee of US$1 million a month.<\/p>\n
Panutan's 10 percent "carried interest" entitles it to receive
\na proportionate share of the project's distributable cash flow
\nafter it commences production. However, as Bre-X is a listed
\ncompany -- it has a market capitalization of some C$5.8 billion
\non the Toronto Stock Exchange -- Panutan can either float its
\nBusang interest or sell it to a third party, analysts said.<\/p>\n
The fact that Sigit -- whose other business interests include
\npetrochemicals, telecommunications and trading -- will benefit
\nwithout putting any money into the venture is bound to
\ncontroversy.<\/p>\n
Analysts added that another point of contention is the 60:40
\njoint venture that Bre-X and Panutan have established to provide
\n"support services" for the mine. As the development costs are
\nestimated at C$2 billion, anyone providing support services
\nstands to benefit considerably.<\/p>\n
The deal ends weeks of uncertainty about the mining company's
\nfuture. Bre-X shares fell sharply this month over a dispute with
\nlocal partner PT Krueng. The company explained to the Indonesian
\ngovernment that Bre-X had unfairly left it out of the Busang II
\nphase of the project.<\/p>\n
Bre-X shares went into a free-fall on rumors that the dispute
\nwould result in the government not issuing a final contract of
\nwork. On Oct. 4 alone, Bre-X shares lost C$510 million in value.<\/p>\n
The mining company had earlier seen its share price soar from
\nC$4.5 to C$250 even before it extracted a single ounce of gold. A
\n10-for-one stock split later sent it down to around C$25.<\/p>\n
Bre-X officials have welcomed the alliance with Sigit. Bre-X
\npresident and chief executive David Walsh said: "We are delighted
\nto have formed an alliance with a strong Indonesian partner. This
\nis another major step in the progress towards the expeditious
\ndevelopment of our Busang gold project in Indonesia."<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/bre-x-of-canada-forges-alliance-with-sigits-firm-1447893297",
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"sponsor": "Okusi Associates",
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