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.