Canadian firms square off over Indonesian gold find

Canadian firms square off over Indonesian gold find

TORONTO (Reuter): A dispute has erupted between two Canadian companies over the ownership of the spectacular Busang gold property in Indonesia.

Busang owner Bre-X Minerals Ltd. objects to a deal signed on Tuesday by its minority Indonesian partner with another small Canadian company, Minorca Resources Inc.

Minorca now claims 4.2 percent of what could become one of the largest gold finds outside South Africa after announcing a deal late Tuesday to help Bre-X's 10 percent partner, PT Askatindo Karya Mineral, raise its share of project financing.

Busang, still in the exploration stage, is estimated to hold a resource of 40 million ounces and could cost about C$750 million (US$547 million) to put into production.

Under its deal with PT Askatindo, Toronto-based Minorca said it will acquire 70 percent of the Indonesian company's rights to 6 percent of Busang's gold output. In return for the rights, Minorca will fund 60 percent of Askatindo's responsibility for project financing, which is 10 percent of the total.

Bre-X said the deal contravenes its original agreement with PT Askatindo.

"Under the terms of a Heads of Agreement between Bre-X Minerals and PT Askatindo Karya Mineral, no mining rights can be assigned or transferred without the prior written consent of the other partner," Bre-X said in a statement.

Consent

"Bre-X has not been asked to give its written consent to any transfer in accordance with the terms of the agreement, nor has it given its consent."

Minorca said Bre-X is confused.

"They are mixing up financing with ownership," said Minorca President Hermann Derbuch. "We have not acquired (Askatindo's) 10 percent. We are financing 60 percent of the 10 percent that Askatindo owns... The Askatindo family can choose their bankers."

The transaction complies fully with the original agreement between Bre-X and Askatindo and is not subject to Bre-X's consent, Minorca said.

Minorca has agreed to pay $2 million in cash and 3.0 million shares to Askatindo.

It will also provide at least another $13.5 million in staggered payments, one of which is a final feasibility report showing that Busang holds at least 12 million ounces of gold, with an additional payment of $600,000 for every proven one million ounces of gold beyond 12 million ounces.

Bre-X said it is under no obligation to provide any data or feasibility reports on Busang to anyone.

The Busang discovery last year transformed Alberta-listed Bre- X into Canada's hottest mining stocks. It closed C$1 higher at C$155 ($113) on Wednesday from a year-low of C$1.875. Montreal- listed Minorca closed C12.5 higher at C$6.125 ($4.47).