Barrick and Bre-X join forces

By Benget Simbolon

JAKARTA (JP): Bre-X Minerals Ltd. and Barrick Gold Corp. have finally agreed to form a joint venture to develop the huge Busang gold mine in East Kalimantan, claimed to hold one of the world's largest deposits.

But the two Canadian companies have not decided how to accommodate the government's request for a 10 percent stake in the mine.

"They told us yesterday they had already reached an agreement. Barrick will have a 75 percent stake in the gold mine, while Bre- X 25 percent," Umar Said, the Ministry of Mines and Energy's secretary-general, said yesterday.

"The deal is very positive. And the next step will be for them to make an agreement with us and set up a joint venture company to develop the Busang gold mine," he said.

Umar said the agreement was in accord with the government's wish that Bre-X enter a partnership with Barrick by Dec. 4 to develop what Bre-X claimed as the world's largest gold deposit.

He said if the two companies had failed to strike a deal by the deadline, the government would have taken "necessary steps" to expedite the mine's development.

Earlier in October -- soon after Bre-X had signed up Sigit Hardjojudanto, President Soeharto's eldest son, as its local partner -- most analysts predicted Bre-X would soon get the final contract of work for the Busang gold deposit.

Bre-X had discovered the deposit, estimating it had 57.33 million ounces of gold.

The battle for the Busang mine took a new course last month with the sudden entry of Barrick and its powerful local partner, Mrs. Siti Hardijanti Rukmana, Sigit's sister.

The government immediately told Bre-X it wanted Barrick to own 75 percent of Busang.

Another Canadian mining company, Placer Dome Inc., had earlier negotiated with Bre-X to buy a share in the Busang mine but the negotiations stopped when the Barrick-Siti alliance emerged.

Despite the deal, Placer Dome's Jakarta representative, Rob King, said yesterday his "company remains keen to acquire a substantial interest in the Busang mine".

"We are especially qualified to develop the property as we have constructed nine mines in the last 11 years, two of them in the same challenging tropical environment as Busang," King said.

Asked about the government's request for a 10 percent stake, Umar said the two companies were still undecided: "But I think they will fulfill it. We have such a stake in the Freeport copper and gold mine. Why not here (in Busang)."

Some analysts have predicted the government's 10 percent stake would be taken equally from Bre-X and Barrick.

Asked about would-be local partners for Bre-X and Barrick, Umar said, "I don't know. Please ask them."

An official who monitored the negotiations was concerned yesterday over the government's handling of the Busang mine.

"Foreigners now have the impression that if you are in Indonesia, don't talk about law. This is due to the government's inconsistency," the official said.

He said there was nothing wrong with the way Bre-X had bought the Busang concession from Montigue Corp., the previous investor, without the government's consent.

"But now the government says Bre-X's exploration concession in Busang is illegal. That is simply a pretext to fabricate a way for Barrick Gold Corp. to enter," he said.

Moreover the government should not have imposed a deadline for Bre-X and Barrick to reach an agreement, he said.

"Now as you see, it has extended the deadline at least twice. The last one was Dec. 4," he said, adding that the extensions had hurt the government's credibility.