RI to get 40 percent of Busang<\/p>\n
By Prapti Widinugraheni<\/p>\n
JAKARTA (JP): The battle for the right to develop East
\nKalimantan's huge Busang gold mine ended Sunday night with
\nIndonesia owning 40 percent of the joint venture, the United
\nStates' Freeport McMoran Copper and Gold 15 percent and Canada's
\nBre-X Minerals Ltd. 45 percent.<\/p>\n
The shareholding structure was agreed on in a memorandum of
\nunderstanding signed by the three parties just a few hours before
\nyesterday's government deadline and before President Soeharto
\nstarted his week-long visit to Cambodia, Laos and Myanmar.<\/p>\n
Politically well-connected businessman Mohamad \"Bob\" Hasan
\nrepresented the Indonesia government and Indonesian companies in
\nthe negotiations.<\/p>\n
Bob said the agreement was still subject to government
\napproval.<\/p>\n
Under the agreement the Indonesian government gets 10 percent
\nand Bre-X's Indonesian partners -- PT Askatindo Karya Mineral and
\nPT Amsya Lyna, and their partners -- 30 percent.<\/p>\n
\"This arrangement enables Bre-X to retain the largest direct
\nshare of Busang,\" Bre-X chairman David G.Walsh said.<\/p>\n
Bob, through PT Nusamba, which is controlled by three
\nfoundations chaired by President Soeharto, has a 51-percent stake
\nin Askatindo. The latter was Bre-X's local partner in the Busang
\nII gold area, while Amsya Lyna owns 10 percent of the Busang III
\ngold area.<\/p>\n
Bob said the composition of the gold mine's shareholders was
\nthe most beneficial to Indonesia.<\/p>\n
\"I personally asked for Freeport to be included in the deal as
\nthey have had a lot of experience in Indonesia and the means to
\ncut back on costs,\" Bob said.<\/p>\n
The government is scheduled to make an announcement on the
\nissue today.<\/p>\n
No government official was available for comment and Minister
\nof Mines and Energy I.B. Sudjana and his top officials were in
\nBandung yesterday.<\/p>\n
Bre-X said Freeport would be the mine's sole operator and
\nprovide about US$400 million, or 25 percent of the estimated cost
\nof building the mining complex.<\/p>\n
An American analyst here said the $400 million could be what
\nFreeport's 15 percent stake in the joint venture was worth.<\/p>\n
\"I think Bre-X shareholders would be quite happy with this
\ndeal,\" added the analyst who insisted on anonymity.<\/p>\n
Freeport will also provide up to $1.2 billion in extra funding
\nthrough syndicated loans to be arranged by major financial
\ninstitutions.<\/p>\n
\"This financial strength will allow for the joint venture to
\nproceed without any further dilution to shareholders,\" Walsh
\nsaid.<\/p>\n
Walsh noted that with Freeport's mining management team in
\nIndonesia, the joint venture could be operated as cheaply as
\npossible.<\/p>\n
\"Freeport has the infrastructure and a management in place
\nwhich understands the exploration, engineering and social
\nchallenges of operating in these remote islands,\" he said.<\/p>\n
Freeport, which is based in New Orleans, has had copper and
\ngold mining operations in Irian Jaya since 1973. It was the first
\nforeign investor in Indonesia under President Soeharto's
\nadministration.<\/p>\n
Bob said that with Freeport in the project, the group would
\nhave easier access to funding sources, particularly bank
\nsyndication loans which would be needed to develop the mine.<\/p>\n
He said the syndications would probably include Merrill Lynch
\nand Chase Manhattan banks.<\/p>\n
Bob said the participation of state enterprises, which have
\nexpressed interest in the project, would depend on the
\ngovernment's decision.<\/p>\n
\"But I think the government should concentrate on operations
\nthat will bring in lots of royalties and corporate taxes --
\nthings that carry no risk,\" he said.<\/p>\n
\"State firms can join once the mine has begun production. In
\nthe meantime, I think it's better that private companies bear the
\nrisk,\" Bob said.<\/p>\n
State-owned mining firms PT Aneka Tambang and PT Tambang Timah
\nclaimed earlier this month they had government approval to have a
\nstake in the project.<\/p>\n
Bre-X, which revised yesterday the amount of the gold deposits
\nit found in Busang last year to almost 71 million ounces, was
\nasked by the government last November to establish a joint
\nventure with Barrick.<\/p>\n
Each was backed by politically powerful local partners-- Bre-X
\nby the President's son Sigit Hardjojudanto and Barrick by Sigit's
\nsister, Siti Hardijanti Rukmana.<\/p>\n
Initially, it was proposed that Bre-X own 22.5 percent,
\nBarrick 67.5 percent and the Indonesian government 10 percent.<\/p>\n
Barrick announced yesterday its discussions with Bre-X and its
\nIndonesian partners did not result in an agreement.<\/p>\n
Barrick chairman Peter Munk said his company offered a very
\ngood economic deal for all parties but he admitted it is the
\nright of the government to decide what is the best interests of
\nthe Indonesian people.<\/p>\n
Freeport's entry into the project surprised some analysts but
\nothers said it was not unexpected.<\/p>\n
Last month Bob Hasan bought majority shares in Freeport's
\nlocal partner -- PT Indocopper Investama -- from PT Bakrie &
\nBrother. So through PT Nusamba Bob owns 9.6 percent of Freeport
\nIndonesia.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/ri-to-get-40-percent-of-busang-1447893297",
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