Government urged to solve Busang gold conflict soon

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)