Bre-X and Barrick agree to 10% govt stake in mine
JAKARTA (JP): Canada's Bre-X Minerals Ltd. and Barrick Gold have finally agreed to provide a 10 percent stake in the disputed Busang II gold mine to the Indonesian government, according to a senior official at the Ministry of Mines and Energy.
Umar Said, the ministry's secretary-general, said yesterday the agreement resulted from tough negotiating between the two companies.
He did not say how the companies would split the 10 percent stake.
In the negotiations, which were extended after passing the ministry's Dec. 4 deadline, Bre-X and Barrick agreed to the government's proposal for their respective 25 percent and 75 percent stakes in the Busang II gold mine.
Sources said earlier the ministry had had to extend the Dec. 4 deadline after the two companies had failed to agree on how to split the government's 10 percent stake. Bre-X did not agree that the government's stake should be taken equally from the two firms' shares, sources said.
The government threatened it would revoke the Busang II concession, now held by Asketindo, Bre-X's local partner, if the two companies did not heed the government's proposal.
Busang II, which Bre-X claims holds one of the world's largest deposits with an estimated 57.33 million ounces of gold, was discovered by PT Asketindo and Bre-X.
The source said that after the discovery the government granted Bre-X and Asketindo a temporary mining contract, which would qualify them for a final contract of work to develop the gold mine.
Control
He said if the Busang II concession had been revoked Asketindo and Bre-X -- which in October signed up President Soeharto's eldest son Sigit Hardjojudanto -- would no longer have had the right to develop the gold mine. This would have paved the way for other firms to control it.
The government has urged Bre-X to join forces with one of the world's biggest gold miners, Barrick Gold Corp, which had reportedly teamed up with Sigit's sister Hardiyanti Rukmana to win the deal.
An economic advisory group, Econit, warned over the weekend that the government should be careful about the disputed gold mine.
Econit said the government should not repeat the same mistake it made in awarding the Grasberg concessions in Irian Jaya to PT Freeport Indonesia.
Econit said the mining contracts given to Freeport benefited the company more than the government and local people. The royalties paid by Freeport to the government are much lower than those paid by mining companies in other Southeast Asian countries.
The government's stake in Freeport is less than 10 percent.
Umar said yesterday the government's 10 percent stake in Busang would be big enough.
The government would not seek a bigger stake from Bre-X and Barrick or ask them to negotiate a new deal, he said. (hen)