Freeport tipped to grab stake in Busang mining

JAKARTA (JP): Bre-X Minerals and Barrick Gold Corp. have failed to agree with their Indonesian partners on terms to develop the huge Busang gold mine in Kalimantan, an informed source said yesterday amid rumors Bre-X had struck a deal with U.S. firm Freeport McMoran.

The American source, who requested anonymity, has been closely monitoring negotiations between the two Canadian companies since last month.

He said he had heard of a preliminary agreement between Bre-X, the Indonesian government and Freeport.

"But I have yet to verify the rumors about the unexpected deal between Bre-X and Freeport. For sure, though, I know the two Canadian companies have failed to reach agreement with their local partners," the executive said.

None of Freeport's executives here were available for comment last night.

The secretary of PT Freeport Indonesia's president Louis Clinton said her boss was out of town until Feb. 17.

Reports said Bre-X would own 45 percent of the joint venture, Indonesian shareholders, including the government, 40 percent and Freeport 15 percent.

Meanwhile, the Toronto Globe and Mail quoted Thursday unnamed sources in Toronto as saying Bre-X had reached a deal with its partners.

The sources were uncertain whether Barrick would wind up as Bre-X's partner or if rival Placer Dome Inc. would get access to Busang through its merger proposal with Bre-X.

But Sudjana said Placer Dome Inc. did not count in the current negotiations between Bre-X and Barrick.

Rumors of Freeport's surprising deal surfaced immediately after Minister of Mines and Energy I.B. Sudjana met President Soeharto.

But Sudjana did not say anything about Freeport's entry into the battle when he met reporters after talking with the President.

Instead, he said the government might put the right to develop the Busang sight up for international tender if the two Canadian companies failed to reach an agreement with their local partners.

Until Monday

"They have until Monday to settle with their Indonesian partners before we decide the next move," Sudjana said.

He said an international tender was one option being mulled over in case the two companies failed to settle with their Indonesian partners.

The minister said the government had given the two Canadian companies, Bre-X Minerals Ltd. and Barrick Gold Corp. until Monday to conclude negotiations with their local partners.

"I told them in my letter last month that if they fail to settle with their local partners by the deadline (Feb. 17) all things which have been discussed with the Ministry of Mines and Energy will become null and void," Sudjana said.

Bre-X which found the estimated 57 million ounce gold deposit in the Busang area last year initially agreed to a joint venture. Bre-X was to own 22.50 percent, Barrick 67.50 percent and the Indonesian government 10 percent.

But the two companies have yet to agree with their local partners on a shareholding structure.

The local partners are the Panutan Group which is controlled by President Soeharto's son Sigit Harjojudanto, the Citra Lamtorogung Group which is controlled by Sigit's sister Mrs. Siti Hardijanti Rukmana, the Nusamba Group which is controlled by three foundations chaired by President Soeharto and another private company, PT Krueng Gasui, which is controlled by Yusuf Merukh.

Two other potential players have also entered the contest. They are State-owned mining companies PT Aneka Tambang and PT Tambang Timah.

It will reportedly cost US$1.5 billion to develop the Busang mine. (vin)