Busang gold deposits overstated

JAKARTA (JP): Indonesia's Nusamba business group has confirmed that analyses of seven core holes drilled in the Busang II parcel in East Kalimantan over the past three weeks indicated insignificant amounts of gold.

"We are continuing with due diligence work which will be completed only later next month," a statement from Nusamba, which holds 30 percent of the Busang mine, said here on Thursday.

Nusamba, the investment company of three foundations chaired by President Soeharto, issued the statement following news reports from Toronto on Wednesday that Bre-X Minerals Ltd.'s claim on the biggest gold discovery this century was cast into doubt.

Calgary, Alberta-based Bre-X which found the deposit, admitted on Wednesday that the test samples from the Busang gold property in East Kalimantan may have been overstated or much smaller than its earlier estimate of 71 million ounces.

The news stunned investors just one week after the mysterious death of Bre-X's chief Busang geologist Michael de Guzman who plunged out of a helicopter into the jungle in East Kalimantan on March 19.

Guzman's wife Theresa Cruz, friends and family members held a service at the Gatot Subroto hospital here yesterday before his body is to be flown to the Philippines today.

Bre-X has a 45 percent stake in the property, New Orleans- based Freeport McMoRan Copper & Gold Inc.15 percent and Indonesian parties, which include the government and Nusamba group, headed by businessman Muhammad "Bob" Hasan, a close associate of President Soeharto, the other 40 percent.

Bre-X Chief Executive David Walsh, who has made millions from the discovery and now lives in the Bahamas, acknowledged in a statement that "there appears to be a strong possibility that the potential gold resources on the Busang project in East Kalimantan, Indonesia have been overstated because of invalid samples and assaying of those samples."

Freeport said in a separate statement minutes earlier that analyses of its own drilling results so far "indicate insignificant amounts of gold."

Freeport said it had drilled seven core holes in the project in the past three weeks to confirm results of core holes drilled by Bre-X.

"To date," it said, "analyses of these cores, which remain incomplete, indicate insignificant amounts of gold."

Nusamba added that the representatives of the three parties' technical team handed over all available information on the property to Bre-X officials at a meeting in Jakarta on Wednesday.

"Nusamba, Freeport and their Indonesian partners were informed by Bre-X that based on the recommendations of its independent technical consultants there was a strong possibility that the potential gold resources in the Busang gold project as previously reported by Bre-X had been overstated," the statement added.

Nusamba said Bre-X was undertaking a review that would include drilling additional holes at the Busang II zone, which was previously thought by Bre-X to contain the motherlode.

"Nusamba, Freeport and its Indonesian partners would like to participate in the development of the Busang project only if development is economically feasible," it pointed out.

The news caused pandemonium on the Toronto Stock Exchange, where Bre-X has been the hottest story for months. Traders were quoted by Reuters as saying the share price, which was last quoted at C$15.50, could collapse to C$2. But the stock was immediately suspended in Toronto on Wednesday and Thursday.

But Reuters quoted traders in Toronto as saying that some Bre- X shares were changing hands in private deals on Thursday at 75 Canadian cents (US$0.50) a share, compared to over C$15.50 on Tuesday.

Freeport shares fell $2.25 to $29.625 on the New York Stock Exchange on Wednesday after the news before they rose again to $30.12 on Thursday.

Canadian regulators and the Toronto Stock Exchange are investigating the biggest mining controversy.

The mines and energy ministry's director general of mines Kuntoro Mangkusubroto said on Thursday he was putting aside applications for contracts of work from Bre-X to explore and develop the Busang gold property.

"I will not attend to it," he told reporters when asked whether the ministry would continue to process the applications for the contracts, needed to further explore and develop the property in East Kalimantan.

Kuntoro said the ministry had asked Bre-X to submit a report on the Busang situation.

Kuntoro said the ministry would also seek a report from mining giant Freeport which is carrying out evaluation or due diligence work at the southeast zone or Busang II.

Bre-X earlier this year had issued confirmed estimates that the Busang deposit held at least 71 million ounces of gold, worth about $20 billion at current gold prices.

At that level, Busang would be the most significant gold find since the discovery of the Witwatersrand goldfields in South Africa in the late 1800s.

Bre-X's board assured shareholders as recently as Monday that it had "absolute confidence in the integrity and accuracy of assay results and resource calculations."

Barrick spokesman Vince Borg said in Toronto that Barrick's findings from its brief due diligence of the Busang site were bound by a confidentiality agreement.

Another unsuccessful suitor, Vancouver-based Placer Dome Inc. said on Wednesday its $5 billion offer for Bre-X was based on published reports and second-hand information.

Placer Dome spokesman Hugh Leggatt said company officials were due to visit the Busang property last December when talks with Bre-X broke off abruptly.

He noted that it can take years of study to form an accurate picture of a major gold deposit. "Gold deposits are notoriously difficult to evaluate. It does take time." (vin)

Amien -- Page 2

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