Busang scandal may drop mine financing

Busang scandal may drop mine financing

SINGAPORE (Reuter): The Busang gold mine debacle in Indonesia
will probably lead to a sharp reduction in finance for mining
projects, the chief financial official of Canada's Placer Dome
Inc said yesterday.

"In the near-term, people are going to be very cautious," Ian
Austin told Reuters in an interview on the sidelines of a mining
finance conference in Singapore.

"Clearly, it's going to have an effect on the ability of
junior companies to raise financing for exploration," he said.
"What we are seeing is a number of junior companies coming to
talk again to us for (a possible) partnership."

He said mining companies spent an estimated US$3.5 billion in
1996 on mineral exploration, up 40 percent from about $2.5
billion in 1995.

"What's interesting to watch is what will happen to that post-
Busang," Austin said, adding funding for mine exploration may
slow down significantly.

The Busang gold find, which had been touted by Canadian
exploration firm Bre-X Minerals Ltd as the biggest discovery of
the century, collapsed two weeks ago after an independent audit
said it contained no viable gold deposits.

Bre-X said earlier this year the deposit could contain up to
71 million ounces of gold.

Consultant Strathcona Mineral Services Ltd said data on
Busang, in the jungle of Kalimantan in Indonesia, had been
falsified on an unprecedented scale.

Bre-X, the darling of investors early in 1997, has been
delisted from the Toronto Stock Exchange and has sought court
protection from its creditors.

Canadian and Indonesian police have opened an investigation
into the debacle, which some analysts have called the biggest
mining fraud in history.

But Austin said he was optimistic things would return to
normal because demand for copper and gold would grow at a steady
pace. Gold would also continue to prosper despite sales by
central banks, he added.

"My cautious expectation is for a continuation of healthy gold
prices during the next 10 years," Austin said, adding much of the
growth in consumption would come from countries like China, India
and Southeast Asia.

In copper, market worries that supply will outstrip demand
should easily be offset by the fact most long-term economic
forecasts project global economic growth to average two-three
percent over the next 10 years.

"A common projection of copper demand growth is up to three
percent a year, which would mean that today's consumption of
about 10.6 million tons will rise to about 14 million tons by
2007," Austin said.

"It is well worth remembering that it requires three, 100,000
ton capacity new mines each year to offset a three percent per
year trend growth in demand, assuming that no existing mines
close," he explained.

Meanwhile, DPA reported from Manila yesterday that
the Geological Society of the Philipppines has launched an
investigation into the involvement of some Filipino scientists in
the Busang gold fraud in Indonesia.

The geological society said the independent probe would
determine the extent of Filipino participation in the hoax
involving Canada's Bre-X Minerals Ltd. that has been labelled one
of the biggest frauds in global mining history.

Society President Rolando Pena said reports linking Filipino
geologists working for Bre-X to the scam have "demoralized and
affected" other colleagues.

"The problem of salting of samples is something we have to
look into," Pena said. "But we believe our geologists are not
capable of pulling off a scam."