Barrick says it is close to deal with Bre-X
By Benget Simbolon Tnb.
LOS ANGELES (JP): Barrick Gold Corp. indicated here yesterday it would conclude agreements with Bre-X Minerals Ltd. and Indonesian local partners before the Feb. 15 deadline and secure the contract to develop the Busang Gold mine in East Kalimantan.
"Barrick is currently working to conclude arrangements with Bre-X and Indonesian partners, Askatindo and Amsjalima, within the time frame," said the company's vice president for Communications, Vincent Borg.
Borg said his company was looking forward to sharing its mine development, operating expertise and financial resources in developing the Busang gold mine.
"We are committed to protecting the environment with the people of Indonesia. We're certain this will bring substantial economic, social and community benefits to all of the people of Indonesia," he said.
But Borg refused to elaborate on the latest negotiations between Barrick, Bre-X and its local partners in Jakarta.
"I don't know the latest development. They are there in Jakarta continuing their discussions. We'll know that right after the Feb. 15 deadline. But we'll apply our best mining system in Goldstrike to the Busang gold development'" he said.
The Indonesian government sent letters to the two Canadian companies -- Barrick and Bre-X -- saying that if they could not reach an agreement before Feb. 15 it would take over the project and find other investors to develop the huge mine.
Barrick is competing with another Canadian firm, Placer Dome, to become Bre-X's partner. Bre-X found the estimated 57 million ounces of gold in Busang.
But Placer Dome, with a debt equity ratio of 50 percent, was reportedly having financial problems, causing it to delay a mining operation in South America.
Barrick, which is the only gold mining company in North America with an "A" credit rating, has cash flow of over US$500 million a year and $1 billion revolving stand-by credit line. Its retained earnings last year were expected to remain at more than $900 million.
With total reserves of 43.3 million ounces (including other operations in North and South America), Barrick produces 3.2 million ounces of gold a year, mostly from its North American operations.
Financial strength
Borg said that with his company's financial strength the unconditional US$1.5 billion financial commitment needed for the Busang development could start immediately without question.
"We won't seek loans for developing the Busang gold mine. We have enough equity," he said, adding that globally Barrick spent about $110 million on exploration.
"Barrick has consistently demonstrated superior operating results due to its combination of high quality mining operations and above average management skills," Borg quoted a Merrill Lynch report as saying.
Borg was accompanied by Greg Fauquier, the head of Barrick's U.S. operations, to the company's Goldstrike gold mine in Elko, Nevada, where Borg was speaking from.
The Goldstrike property covers 7,000 acres and has about 2,000 workers or about 10 percent of Elko's 20,000 people. It has two gold mines: Betze-Post and Meikle mines.
Betze-Post has a proven and probable reserve of 29.9 million ounces and is the world's largest open pit mine. With an average grade of 0.203 ounces of gold a ton, Betze-Post produces about two million ounces a year.
Meikle gold mine, about 1.5 kilometers north of Betze-Post, has a proven and probable reserve of 6.6 million ounces of gold with an average grade of 0.68 ounces of gold a ton. On average it produces about 400,000 ounces a year.
Barrick, which saw its net profits up by about 40 percent to almost $1.3 billion and total assets up to $3.56 billion in 1995 is exploring 10 properties in Indonesia in a series of joint ventures with local companies. The joint ventures are at varying stages of exploration and development.
Four of the properties are in Irian Jaya, four are in Kalimantan, one is in East Nusa Tenggara, and one is in Sumatra.
Since setting up an exploration office in Jakarta in mid-1994, Barrick, which earned several prestigious awards for its environmental leadership and community development programs from the government and international bodies -- including the most coveted environmental one from the 1992 Rio summit on the environment -- has established a land position of 8.8 million hectares, the largest in Indonesia.
Its exploration spending rose from $1 million in 1994 to $5 million in 1995 to $8 million last year.