'Bre-X consortium should hasten Busang approval'

'Bre-X consortium should hasten Busang approval'

TORONTO (Reuter): A signed deal between Bre-X Minerals Ltd and Freeport-McMoRan Copper and Gold Inc should speed up approval for the development of the huge Busang gold mine in Indonesia, analysts said.

"This should expedite the issuance of the contracts of work," said gold analyst Chad Williams with Research Capital Corp in Montreal.

Bre-X and Freeport announced on Thursday afternoon that they had signed a binding agreement to develop Busang.

The details of the agreement were announced last week, but the agreement was not binding until Thursday.

A signed agreement should put to rest any market speculation that Freeport would back out of its deal with Bre-X at the last minute, analysts said.

The arrangement will give Bre-X 45 percent of the deposit, 15 percent for Freeport and 40 percent for Indonesian companies and the Indonesian government.

Bre-X has said it expects to receive its vital contracts of work from the Indonesian government by the end of March. The companies need the documents to proceed with development of the property.

Freeport said it had completed its due diligence at Busang.

Under the deal, Freeport-McMoran is to be the sole operator of the Busang II and Busang III properties.

In consideration for the transaction, Freeport-McMoran has agreed to provide 25 percent of the total estimated cost of delineating a proven reserve and constructing the initial Busang mine complex, up to $400 million.

In addition, it has agreed to arrange, on behalf of the Indonesian companies, a $1.2 billion project financing commitment from Chase Manhattan Corp. for the remaining estimated costs of the initial Busang mine complex.

"The interesting comment about that is that it didn't take very long at all, which is a testimony to the quality of work done by Bre-X," Williams said.

In a statement on Thursday, the companies said they hope to start a feasibility study during the second quarter of 1997, with plans to develop a mine and mill that will initially produce 100,000 to 150,000 metric tons of ore per day.

"This is going to be a very, very big mine," commented Williams. A mill at a typical underground Canadian gold mine produces at a rate of about 5,000 tons a day, he said.

In a conference call last week, Bre-X executives said they hope to produce four million ounces of gold a year by the year 2002. The mine should start producing in 2000 at a rate of two million ounces a year.