Bre-X starts search for Indonesian gold partner

Bre-X starts search for Indonesian gold partner

TORONTO (Reuter): Bre-X Minerals Ltd., Canada's hottest junior
mining company, has officially started its hunt for a partner to
develop its spectacular Indonesian gold discovery.

The Calgary-based company said on Thursday it has hired
international investment bank J.P. Morgan and Co. as its
financial adviser and Republic National Bank of New York as its
corporate adviser.

"This is the first step in finding a joint venture partner," a
company spokesman said in an interview. "We've hired J.P. Morgan
and the Republic National Bank to evaluate our options."

Bre-X said it wants to find a big, experienced mining concern
to buy 25 percent of the Busang gold property and help Bre-X to
develop and market the deposit.

"Every major mining company in the world, quite literally, has
expressed interest in working with us on Busang," said the
spokesman.

"So pick the biggest mining companies in the world. If you
want names, RTZ, Barrick, Placer Dome, all the way to some of the
South African companies to Australian companies, you name it," he
added.

The company said it hopes to have a deal sewn up by the end of
the year and start production in late 1998 or 1999.

The global gold mining community has been holding its breath
for months, waiting for Bre-X to open up bidding for its prized
Busang deposit.

The choice of J.P. Morgan as an adviser "reflects that this is
going to be a large international process," Gordon Capital
analyst Barry Allan said in an interview. "Everyone is
interested. The question is who can afford it."

Buying a chunk of Bre-X will not be cheap. With the company's
stock hovering around C$25 ($18.25), it has a market
capitalization of about C$5.9 billion ($4.3 billion) fully
diluted.

Bre-X shares, which soared from a penny stock to more than
C$160 ($116) before a 10-for-one stock split last spring, is
expected to climb higher, pushing up the price tag for a 25
percent stake in the deposit.

The decision on a financial adviser is only the first of a
slew of announcements expected from Bre-X this month that could
drive the stock.

An Indonesian government contract is expected within weeks,
which will outline environmental, social, tax and financial
obligations for Bre-X and its Indonesian partner.

While details of the draft contract of work are already
public, some observers fear the government may try to grab a
bigger share of the profits as they see the deposit blossom.

New drilling results are also expected to hit the market
within a couple of weeks, Bre-X said.

Both the contract of work and the drilling results will likely
send the stock higher, analysts said.

For now, drilling at the Busang deposit has outlined 46.92
million ounces of gold. The next set of drill results should bump
up the deposit to more than 50 million, analysts say.

"I've made the joke that everybody who goes to the property
tends to see God," Gordon Capital analyst Allan said just days
after returning from an analysts' trip to the site. "And I guess
I did. There's every probability it will be one of the largest in
the world."

The mine should be low cost, especially in the first years,
said Allan, with operating costs around US$150 an ounce.

He has set a target of $35 for the stock, in the middle of the
C$30 to C$40 range set by most analysts after the most recent
tour and a previous tour in July.

"I continue to be really impressed by the deposit," said
analyst Chris Bradbrook at Loewen Ondaatje McCutcheon, who has
visited the site twice. "It keeps getting bigger and bigger. The
upside is substantial."

Bradbrook has a C$30 target for the stock for now, since
investors want to see who the company's partner will be and how
the partner will develop the property before they bid up the
stock. "That is the biggest potential driver."

But Allan said Bre-X's options in developing the site include
going it alone.

"They don't want to sell too low and give up some of the
upside potential," he said. "I'm sure they'll look at those
offers and if they don't find any that are reasonable, I suspect
they will go on their own."

The economics of the project are robust enough for Bre-X to
finance the mine itself, he added.

Bre-X said it would consider that option too.