Busang gold dispute may be settled in courts

Busang gold dispute may be settled in courts

SYDNEY (Reuter): Indonesian parties in the Busang gold discovery dispute hope to resolve matters through administrative action in Indonesia but are prepared to take legal action in Canada if necessary, Warren Beckwith, managing director of Australia's Golden Valley Mines NL, said yesterday.

The Indonesian interests of businessman Jusuf Merukh, which have signed a technical assistance agreement with Golden Valley for the big Busang gold find in Kalimantan, would pursue legal action against Canada's Bre-X Minerals Ltd if needed, he said on his return to Australia from talks in Indonesia.

"The Indonesian parties are hoping that it will be resolved by discussion and by Indonesian government administrative action," Beckwith said.

"But (they) feel that there's been very little willingness on the part of Bre-X so far to address the concerns, and legal action may be the result," he said.

The root of the complicated dispute is options on ownership of equity stakes in the Busang gold discovery, which according to majority owner Bre-X contains a gold resource of 622 million tons of ore at an average grade of 2.34 grams per ton for 46.92 million ounces of contained gold.

Merukh's PT Krueng Gasui owns an undisputed 10 percent interest in the Muara Atan Contract of Work, which contains part of the Busang deposit. Another of his interests, PT Sungai Atan Perdana, owns another 10 percent, Merukh says.

Merukh also claims to hold an option for a further total of 20 percent in Busang.

Golden Valley's technical assistance and financial agreement with Merukh's interests entitled the Australian company to fees and royalties, based on future cash flows from Busang, Beckwith said. "It's not an equity stake," he in telephone interview.

With the payments to be based on cash-flow from Busang, it was difficult to say what the payments would be until the cash flow emerged, he said.

Beckwith would not disclose the formula on which the cash flow would be based. "There's many a slip betwixt cup and lip in the mining game," he said.

"It would be a bit rash of me to speculate on the numbers until the operators ... if it remains Bre-X ... are further advanced in their pit design and mineable reserves calculations," he said. But he said cash-flow to Golden Valley from Busang would be significant.

Bre-X this week described statements that Golden Valley was entitled to part of the big Busang gold discovery as "false and misleading".

Beckwith said yesterday Golden Valley had teamed up with Jusuf Merukh for the whole of the Indonesian's Busang interests.

"Essentially our position is that if the call option is exercised, that would give Jusuf Merukh -- and therefore would flow through to the benefit of our interests -- an extra 20 percent," Beckwith said.

There was no question about Golden Valley's agreement with PT Krueng Gasui, with its 10 percent of Busang.

There was probably no question about Golden Valley's agreement in principal with PT Sungai, with its 10 percent of Busang, Beckwith said.

Beckwith said there was no question of Merukh's rights through his options over the remaining 20 percent of Busang.

"But until such time as the shares are in his name, you've got to ... exercise a bit of caution," he said.

Golden Valley was anxious to clear the matter up as soon as possible, but most pressure was on Bre-X and the Indonesian government, he said.

"We're assisting the Indonesian government to try to clean it up as soon as possible," he said.