Gold mining to suffer if Busang find fails

Gold mining to suffer if Busang find fails

ZURICH (Reuter): The gold mining and mining equities
businesses could suffer if the "find of the century" gold
discovery at Busang, Indonesia turns out to be below
expectations, executives said on Tuesday.

But delegates attending the ABN-AMRO Hoare Govett World Gold
Conference saw some bright patches if the 71-million ounces of
gold super deposit failed to deliver.

Brought to light by a Canadian "junior" or exploration company
Bre-X Minerals Ltd in the Indonesian jungle over the past few
years, development rights for the mine started a huge-scale
bidding war which U.S. mining major Freeport McMoRan Copper and
Gold finally won.

Then the trouble started. First Bre-x's geologist in charge of
exploration died falling out of a helicopter.

Due diligence drilling by Freeport revealed drill samples
vastly lower than the results announced by Bre-X which had sent
its stock market price soaring as it sucked in investors large
and small.

Its price crashed losing millions for many investors
especially in Bre-X's homeland Canada before trading was halted
on March 26.

The Bre-X crash brought down the price of many other small
exploration companies whose prospects of success had been
inflated by Bre-X's apparent El Dorado.

Due diligence drilling continues but a Freeport executive due
to speak at the ABN-AMRO gold conference pulled out last week.

His company has stated that it will make no statement until
its due diligence drilling program is complete.

The key U.S. gold mining share index has slumped as well
arguably reflecting investor concerns about the industry as a
whole.

Executives at the Zurich conference were unwilling to be
quoted and in some cases even speak on the record. "This story
isn't finished yet. Any comment now could be potentially
dangerous," one miner said.

However from the podium one speaker U.S. exploration
consultant Michael Chender described the situation as "Busang-
gate" in reference to the Watergate scandal which lead to the
fall of U.S. President Richard Nixon in the 1970s.

Conference delegates contacted by Reuters were clear that the
impact would be most keenly felt in two areas -- the Canadian
stock exchanges, especially Vancouver and Toronto where shares
were still struggling as the ripples fanned out. The other losers
would be the exploration companies.

"It's an entirely different world over there," said one
London-based mining share analyst referring to the Canadian
markets.

"Here there are maybe 20 good clients interested in mining and
that includes institutions and private clients. In Canada there
are so many private clients, if one gets trashed another just
turns up," he claimed.

But that might change now. "People will be very careful now
about dealing in mining shares in Canada. London and the European
markets could benefit by business coming here," he said.

The other thing, another executive said, which Bre-X had
changed was the relationship between the major and junior mining
companies with the majors with proven records and established
principles for announcing reserves the beneficiaries.

"It is going to make it very difficult at least for a while
for a junior company to raise equity because people just will not
believe what it says. That means a big company can by it and its
prospects for a song," another analyst said.

One thing delegates were anxious to talk about was how this
could not happen to them or at least in their countries of
operation.

"A Busang is not likely in Australia," David Walker, director
of research at ABN-AMRO Hoare Govett Australia assured his
audience.

He explained that Australian stock exchange regulations were
very rigorous regarding mining companies' reporting of resources,
reserves and results and independent examinations were required
before large stock placements could take place.

"The Australian industry is much more robust to prevent a
repeat of the Busang situation," he said.