Busang scandal barely impacts mining investment

JAKARTA (JP): The scandal over the Busang gold field in East Kalimantan, which involved Canadian exploration company Bre-X Minerals, did not have much of an impact on Canadian mining investment, a Canadian official said yesterday.

Toronto Stock Exchange senior vice president John Carson admitted that the Busang scandal had made investors in Canada shy away from financing junior mining companies, but he believed the effect of the scandal was only temporary.

He believed investors' reluctance to finance mining activities was also caused by the weak price of gold, which was affecting the entire precious metal sector.

Once the gold price improved, the mining sector would rebound, Carson told The Jakarta Post on the sidelines of a seminar on the Indonesian-Canadian cooperation in the mining sector.

The two-day seminar, which ends today, was co-organized by the Canadian government, the Association of Indonesian Mining Professionals (PERHAPI) and the Prospectors and Developers Association of Canada.

The relationship between Indonesia and Canada has generally been strong as Indonesia's mining sector has thus far been dominated by Canadian companies. But the relationship was tainted by the Busang scandal.

Bre-X claimed late last year it had discovered the world's largest gold find at Busang, prompting several giant international mining companies and top Indonesian businesspeople to vie for a stake, while Bre-X collected profits from the rising value of its stock.

However, an independent analyst found in May this year that Bre-X's claim was a hoax, accusing Bre-X of salting the ore taken from the area to make it look like it had a high gold content.

Carson said although the impact of the Busang scandal was not as much as expected, the Toronto Stock Exchange, where Bre-X listed its shares, had taken measures to prevent similar cases from reoccurring.

He said the Toronto Stock Exchange, with the Ontario Securities Commission, had set up a task force to tighten rules for mining and exploration companies on how exploration should be carried out and how exploration results should be reported and disclosed to financial markets.

"The task force is expected to complete its work in the first quarter of next year," he said.

Carson believed the rules by the task force, which would be applied at the Toronto Stock Exchange, would globally influence the security of mining companies due to the exchange's position as the world center of mining. (jsk)