Competition for Busang gold mine hots up

JAKARTA (JP): Competition to get a stake in the Busang II gold mine in East Kalimantan has become fiercer with three more companies reportedly entering the battle to secure a share of the 57-million ounce gold reserve.

Local media reports said Newmont of the United States and Teck of Canada were the latest two firms wanting to team up with Canada's Bre-X Minerals Ltd, which found the gold deposit, and local companies to develop the Busang project.

The Republika daily reported the two companies -- likely to propose a joint bid -- had offered a 40 percent stake to Indonesian partners.

Another state-owned gold and nickel mining company, PT Aneka Tambang, also announced yesterday it had notified the government on its intention to acquire a stake in the huge gold mine.

Early last week state-owned tin mining firm PT Timah announced it was also interested in developing the project.

Timah President Erry Riyana Hardjapamekas said yesterday the Minister of Mines and Energy I.B. Sudjana had given it the go- ahead to exploit the mine.

Based on the minister's instructions the firm had taken the initiative and held serious discussions with politically well- connected businessman Mohamad "Bob" Hasan, who currently has a 10 percent stake in the Busang II mine through PT Askatindo.

Erry said no agreement had been reached. But the two parties had "exchanged ideas over how to exploit the gold mine".

Timah's subsidiary, PT Timah Investment Mineral, reportedly also has an eye on the mine. Republika reported the firm was attempting to team up with President Soeharto's daughter, Siti Hediati Prabowo, to bolster its bid.

Meanwhile Canada's Placer Dome Inc., whose proposal included a 40-percent stake for Indonesia, yesterday denied it could not finance the Busang project should it win the bid.

John Loney, President of PT Placer Emas Indonesia -- Placer Dome's subsidiary in Indonesia -- said yesterday his company had cash and fully-committed credit facilities worth US$1.3 billion which were immediately accessible.

Furthermore, the company's operations were expected to generate $300 million to $400 million in cash flow a year, he said.

Loney was responding to reports in which the government had quoted investment bank JP Morgan as saying Placer Dome's cash flow last year was estimated at $139 million and Barrick's at $475 million.

Loney said that contrary to earlier reports Placer Dome's debt equity ratio was less than 15 percent of its $5 billion market capitalization. Reports had put the company's debt equity ratio at 50 percent.

He said although his company had proposed a 40-percent stake for Indonesia, it was still "open to negotiations" should the government request a larger stake.

"We have a history of working with local governments and government entities, such as in our projects in the Philippines and in Papua New Guinea. So it will be fine with us if we were asked to team up with state enterprises or other local partners in the project," Loney said.

"But now it's up to the government to decide who should carry out the project," he said.

The mining contract for the Busang II gold mine had previously been fought for by Bre-X and Barrick Gold Corp.

Both companies joined with politically well-connected local partners in hope of winning the contract. It was predicted Bre-X would get the contract after it signed up Sigit Hardjojudanto -- President Soeharto's eldest son -- as its local partner.

But the dispute took a new twist when Barrick got Siti Hardijanti Rukmana -- Sigit's sister -- on board.

Earlier this year, the government asked for a 22.5 percent share for Bre-X, a 67.5 percent share for Barrick and 10 percent for itself.

But the two firms have yet to agree on the shareholding composition with their Indonesian partners and the government has given until Feb. 15 for the two to reach an agreement.

Other foreign firms have been approaching the government and all bidders claim to have met with Bre-X's Indonesian partner Bob Hasan. (09/pwn)