Emerging Busang tale stuns Aussie mine experts
Emerging Busang tale stuns Aussie mine experts
SYDNEY (Reuter): Indications that Indonesia's Busang gold lode may contain much less gold than investors were led to believe has stunned Australian mining experts.
The assaying techniques used to calculate the level of known reserves have come into question as has the ability to expand the reserve base over a relatively short period.
"There were very serious claims about the size of the deposit being made in a very short timeframe," a senior gold mining executive with experience in the Kalimantan region of Indonesia, now employed in Ghana, said on Thursday.
Still, failure of Busang to live up to expectations as one of the world's largest untapped gold mines would be hard to fathom, the executive added.
"Our big query was that they never turned the (exploration) rigs," said Keith Goode, mining analyst for Bell Securities Ltd. "They always drilled in one direction, southwest," he said.
Experts point to the danger in such procedures in that a miner can end up drilling only in a line of gold mineralization providing a less accurate read of the size of the deposit.
"If you draw the picture only in right angles, you only find out what's happening on a right angle," Goode said.
On Feb. 17, Canadian prospector Bre-X Minerals Ltd issued a statement estimating gold reserves at Busang at nearly 71 million ounces.
Trading in Bre-X shares were halted on Wednesday by the Toronto Stock Exchange. They last traded at C$15.50.
Freeport McMoRan Copper & Gold Inc., Bre-X's partner in Busang, said that analyses of its own drilling results so far "indicate insignificant amounts of gold."
While such a revelation from an experienced miner such as Freeport, which has a long history in mining the rich copper and gold deposits of Irian Jaya province is surprising enough, in hindsight there were signals something may be astray.
But it may not only be the partners in Busang that suffer.
"Any Indonesian exploration company is being valued based on its location relative to Busang," said Aaron Colleran, an analyst for stockbrokers Eyres Reed Ltd.
A number of Canadian exploration companies are in this category, he said.
In Australia, the fallout in Bre-X is taking its toll on peripheral Busang player Golden Valley Mines. Golden Valley has a technical and financial agreement with Indonesian company PT Krueng Gasui (KG), controlled by businessman Joseph Merukh.
KG owns an undisputed 10 percent stake in the Muara Atan Contract of Work, which contains part of the Busang deposit.
Golden Valley shares lost 16 cents on Thursday to close at 72 cents.
Golden Valley company secretary Chris Ferrier noted that it does not have an interest in the Busang 2 project, where Freeport has carried out core drilling that led to its concern.
However, Golden Valley has written to Bre-X, as operator of Muara Atan, to verify resources published regarding the central zone of Muara Atan.
"The company also will closely monitor the position at Busang II with regard to its potential impact on PT Kreung Gasui's continuing submissions to the Indonesian government and its Canadian court proceedings," Ferrier said in a statement.
Merukh claims another 10 percent interest through PT Sungai Atan Perdana and an option for a further 20 percent of Busang.
KG filed a C$2 billion lawsuit on January 15 in Canada against Bre-X to reinforce its claim to the deposit.