Bre-X Minerals says it can sell Busang stake

Bre-X Minerals says it can sell Busang stake

CALGARY (Reuter): Bre-X Minerals Ltd confirmed on Wednesday it has the right to sell its 45 percent holding in the rich Busang gold deposit in Indonesia without offering a right of first refusal to its Indonesian partners.

"Bre-X's 45 percent interest in Busang Indonesian Gold JV is held by wholly owned Dutch subsidiaries. Bre-X is free to sell its Dutch subsidiaries without a right of first refusal," Bre-X president and chief executive David Walsh said in a statement to shareholders.

"However, there is no plan for such a sale," he added.

Walsh said Bre-X remains committed to Bre-X's joint venture partners and the project.

"Based on the latest resource calculations, the Busang property contains at least 70.95 million ounces of gold -- making it the largest and richest gold mine in the world. At today's price of approximately US$350 an ounce, the Busang property has a gross economic value of $24.8 billion," Walsh said.

He added that production costs in Indonesia are estimated to be roughly $75 to $95 an ounce as compared with $200 an ounce as a world average.

"Based on Bre-X's 45 percent ownership, the company's currently estimated gross economic value in the property is $11.2 billion. While we are confident that this figure could be substantially higher, any such estimate is based on potential and remains speculative," Walsh said.

Walsh said the final joint venture agreement reached, which awarded 15 percent of the property to Freeport-McMoRan Copper & Gold, 45 percent to Bre-X and 40 percent to Indonesian interests, reflected the political, economic and social environment in Indonesia.

"In the months leading up to the final agreement, various third parties conducted negotiations with the Indonesian authorities, from which Bre-X was excluded, which introduced a percentage ownership mind-set that significantly reduced our ultimate negotiating leverage," Walsh said.

"Even though we discovered the gold fields of Busang, they are of such extraordinary richness that the final deal had to include a 40 percent share for Indonesians to be competitive with the offers put forth by other major mining entities and to satisfy domestic political requirements," he added.

Walsh said Freeport, chosen by Mohamad "Bob" Hasan, was an excellent choice for the large, experienced partner in Busang for which Bre-X had long acknowledged a need.

Walsh also addressed a newspaper report that he pulled profit from his Bre-X shares at a crucial time.

He said at one stage last year, a false news report said that Bre-X's ownership in Busang was at risk, because of the revocation of a SIPP (preliminary survey permit) on August 15, 1996. The stock fell to C$17.

"The report in question neglected to include the fact that Bre-X's ownership and exploration rights were fully protected by virtue of the outstanding KP's (mining authorizations) which supersede the legal status of the SIPPs," Walsh said.

"Prior to this report, I made a decision to sell approximately three percent of my Bre-X position for personal reasons. I retain 97 percent of my Bre-X stock and remain the company's single largest shareholder. My desire to attain full value for Bre-X's stake in the Busang deposit is, and will remain aligned, with other Bre-X shareholders," Walsh added.