Busang's impact on world gold will be slight
Busang's impact on world gold will be slight
SYDNEY (Reuter): Development of the giant Busang gold deposit on the island of Borneo into one of the all-time motherlodes would place Indonesia among the top six gold producing nations worldwide.
But the impact on world supplies would be slight, analysts said on Tuesday.
Estimated production of up to some 90 tons a year at Busang -- doubling Indonesia output to about 170 tons -- in itself pales against the 36,000 tons or so held by central banks and countless more hoarded by investors, they said.
"Another 90 tons or whatever is not going to cause much damage," said Keith Goode, analyst for Bell Securities Ltd.
From the perspective of strictly mine-supply-to-actual- demand the need for more gold to meet the requirements of jewelry makers and other fabricators of the metal is apparent.
Figures from the Australian Bureau of Agricultural and Resource Economics (ABARE) point to overall demand for 3,277 tons of gold last year against production of 2,328 tons.
"You're still getting a need for metal coming from the scrap sector and from the financial interests to meet demand," said Grant Craighead of Macquarie Equities Ltd.
Moreover, even with Busang in full swing, Indonesia's production would still lag behind South Africa, the United States and Australia and the Commonwealth of Independent States, Craighead said.
Canada's Bre-X Minerals Ltd [BXM.TO] said on Monday it had teamed up with U.S. giant Freeport McMoRan Copper and Gold Inc to develop Busang in partnership with Indonesian interests.
It also said further tests had lifted the calculated gold reserves of Busang by 16.6 million ounces to 70.95 million ounces.
The reserve base places Busang at or near the top of known gold deposits in terms of size, said Simon Middleton, gold analyst for ABARE.
"Most Australian projects are happy to operate with much less reserves up their sleeves," Middleton said. "It's just off the scale compared to Australia."
Freeport-McMoran, already a strong presence in Indonesia through its copper and gold mines in Irian Jaya, ousted Canada- based rivals Barrick Gold Corp and Placer Dome Inc for a stake in Busang.
Barrick has dropped out of the race for a controlling role in Busang while Placer Dome said it is reevaluating its proposal.
Placer
Meanwhile, Gold miner Placer Dome Inc said in Vancouver Monday it would study its US$5 billion offer to merge with Bre-X Minerals Ltd in light of a deal between Bre-X and Freeport- McMoRan Copper and Gold Inc to develop Bre-X's Busang gold discovery in Indonesia.
"Naturally, we are disappointed by the news that we were not selected as the developer and operator," said John Willson, Placer's chief executive officer. "In view of these developments, we will of course have to re-evaluate our offer to merge with Bre-X." Willson's statement echoed earlier comments from the company's spokesman.
Placer said it was still willing to assist development of Busang with its financial resources and expertise.
"Given the size, complexity and importance of Busang to Indonesia, we remain prepared to contribute our financial resources and unique mine development capabilities to this very attractive project," Willson said.
Investors have speculated that Bre-X, which would have 45 percent of the Busang project, could now become a takeover target for mining companies such as Placer or Barrick Gold Corp
In Toronto, shares in Bre-X Minerals Ltd jumped on Monday after the Canadian gold miner signed a deal to co-develop the massive Busang gold deposit.
Bre-X rose 1.05 to 25 in brisk late morning turnover of 600,000 shares on the Toronto Stock Exchange.
Bre-X, Freeport-McMoRan Copper & Gold Inc and Indonesian interests have signed a Memorandum of Understanding for the development of Busang, Bre-X said earlier.
However, Toronto stocks closed flat in light trading on Monday with its upward bias kept in check by battered Barrick Gold Corp. and the fact U.S. markets were closed for a holiday.
"Barrick dragged down the gold index," said Maison Placements Canada president John Ing.