Government urged to solve Busang gold conflict soon

JAKARTA (JP): The government should quickly solve the conflict between Bre-X Minerals and Barrick Gold Corp. of Canada over the potentially huge Busang gold mine in East Kalimantan to maintain foreign investor confidence, analysts said yesterday.

Speaking yesterday at a panel discussion on Indonesia's minerals policy, organized by the Association of Indonesian Mining Professionals, the analysts said the protracted Busang dispute would discourage new foreign investors.

"We still need foreign funds to explore and exploit our mining potential. And the funds we need are actually bigger than those available on the world's financial market. We, therefore, have to compete with other developing countries such as China and Vietnam to get limited international funds," said Soebroto, a former minister of mines and energy.

He said that he and several mining analysts met Minister of Mines and Energy I.B. Sudjana on Wednesday to urge the government not to let the Busang dispute drag on.

Soebroto, also a former secretary-general of the Organization of Petroleum Exporting Countries, said the government should stick to its current regulation, allowing Bre-X to get its final contract of work for the Busang II and III concessions.

When asked whether this meant that Bre-X was legally qualified to get a bigger share than Barrick, he said that was up to the government.

"What I'm trying to say is that the government should stick to the existing regulation on the contract of work. This is very important for us in maintaining foreign investors' confidence to invest in mining businesses in this country," he said.

According to the regulation, a foreign mining company should have an exploratory contract from the government after consent is given by the House of Representatives before it can start any exploration. After finding a mineral deposit, a company must request a temporary contract to start production. A company with such a temporary contract, like Bre-X Minerals in Busang, is qualified for a final contract of work. The company also has the right to a bigger share in the concession.

Bre-X has an exploration contract and a temporary production contract for the Busang II and III areas.

Soetaryo Sigit, a former senior official of the ministry of mines and energy and the architect of the contract of work system, shared Soebroto's view saying that the Busang conflict should not delay the issuance of 68 other mining contracts of work.

"Foreigners are now asking whether Indonesia still needs foreign investment to exploit its mining resources," he said.

"We all agree that due to our limited funds and technology, and also the high risk of mining businesses, we cannot yet exploit our natural resources without foreign support," Soetaryo said.

But he said competition among developing countries for foreign funds was tightening, therefore Indonesia had no choice but to formulate its mining regulations to attract as much foreign investment as possible.

Rachman Wiriosudarmo, the president of PT Transconsult Nusantaratama, warned that the government should not apply a "bubu" approach in attracting foreign funds for mining (Bubu is a fish trap that looks good from the outside but harmful for those inside).

"The government's regulation on the contract (of work) has won the interest of foreign investors. But look what happens when they get inside," he said.

M. Simatupang, the vice president of the Indonesian Mining Association, said the government considered the Busang gold mine as a special case because of its huge deposit. Bre-X estimates that the Busang deposit contains 57.33 million ounces of gold reserves.

He said the government's request for a 10 percent stake in the gold mine was also a special case, which did not happen for the country's other mineral mines, such as Newmont's in North Sulawesi.

Darmoko Slamet, the president of the state-owned PT Aneka Tambang, complained during the discussion that, because of the protracted Busang dispute, his company had delayed a plan to seek foreign funds to finance its mines.

"We'll have problems if we do it now. We need to solve the Busang gold conflict as soon as possible so that our mining business still remains interesting to foreign investors," he concluded. (bnt)