Indonesia pays nothing for big Busang share

Indonesia pays nothing for big Busang share

TORONTO (Reuter): Bre-X Minerals Ltd. Chief Executive David
Walsh has confirmed his company, which once owned 90 percent of
the Busang gold deposit in East Kalimantan, received no cash
compensation for giving up an additional 30 percent of Busang to
its Indonesian partners.

But he told analysts Wednesday that the Indonesian partners
provided "tangible value" in developing the site.

"This relationship will ensure that things run smoothly.
Without a good relationship, things can take years to get
processed, and years of hold up for a four million ounce a year
producer is very, very costly," Walsh said.

His comments came after an agreement announced on Monday on
ownership of the Busang discovery in Indonesia. Under the deal,
Bre-X would have 45 percent, with 15 percent to U.S.-based
Freeport-McMoRan Copper and Gold Inc., 30 percent to Indonesia's
PT Askatindo Karya Minerals and PT Amsya Lyna and partners and 10
percent to the Indonesian government.

Before the deal, Askatindo has had 10 percent of the Busang II
gold area.

Earlier, Adrianto Machribie, president of PT Freeport
Indonesia, a 90-percent owned subsidiary of Freeport which mines
copper and gold in Irian Jaya , told newsmen in Timika that his
company paid US$400 million for its 15 percent share in the
Busang gold venture.

Bre-X said it would consider merger offers at the right price,
but was content for now to develop Busang -- the richest gold
discovery this century -- with its existing partners.

"The 'For Sale' sign is not on the front yard," Walsh told
analysts in a conference call. "That is not to rule out
discussions with a potential suitor if the price is right. The
old expression 'everything has its price' must be taken into
account here."

Bre-X officials declined to speculate on potential bidders for
their Calgary, Alberta-based company, which discovered the 71
million-ounce Busang gold find. Some Bre-X executives said the
gold field, which was not yet fully explored, may contain as much
as 200 million ounces of gold.

He said the Indonesian government indicated it would process
contracts of work, known as COWS, for the Busang site as early as
possible. "I do know the government has a wish to process these
very, very quickly. So I would not think that we would have to
wait very long," said Walsh.

A feasibility study of the project should be completed later
in 1997, with construction of the mine expected to begin in 1998.
Capital expenditure is estimated at about $1.5 billion.

Production was expected to begin in 2000 at a rate of two
million ounces annually and climb to four million ounces a year
in 2002, said John Felderhoff, Bre-X's senior vice-president of
exploration.

Bre-X's latest estimate for the Busang Two area was about 71
million ounces of gold, but Felderhoff said it could be much
higher. "If you would ask me what is the total potential, I would
feel very comfortable with 200 million ounces," he said.

Bre-X's financial adviser, J.P. Morgan and Co. Inc., said on
Wednesday it would provide a fairness opinion on the agreement.

"We're very confident it provides very good value to the
shareholders of Bre-X," said J.P. Morgan's Leslie Morrison, who
is advising Bre-X on the deal.

Canadian newspapers reported on Wednesday that Indonesian
businessman Jusuf Merukh alleged that the deal with Freeport and
the Indonesian interests was illegal and asked Indonesian
President Soeharto to cancel it.

Merukh is suing Bre-X for $2 billion in a Canadian court,
alleging that his company was entitled to 30 percent of Busang.

Bre-X has filed a motion to dismiss the suit.

Placer Dome

In Vancouver, gold miner Placer Dome Inc. Wednesday dropped
its month-old $5 billion merger offer for Bre-X Minerals Ltd.,
saying it was no longer feasible on the terms originally proposed
because Bre-X's deal on a vast Indonesian gold find has made the
explorer worth less.

But Placer reiterated it remains interested in gaining a role
in the Busang gold project and said it would like to hold talks
with Bre-X.

"We've now concluded that our merger proposal is not really
feasible," Placer Dome spokesman Hugh Leggatt said. "The goal
posts have moved. The terms we described were aimed at gaining
control of the property," Leggatt said.

"The value of Bre-X has diminished," he said.

Placer said the decline in Bre-X's stake in the project and
the fact that operatorship of the project was no longer available
made Bre-X worth less to Placer.

"That's what it comes down to," Leggatt said.

But he said Placer still wanted to talk to Bre-X, which had
not formally responded to the original merger offer. The two
companies have not been in contact since the pact with Freeport
was announced, he said.

He said a deal with Bre-X on different terms or with the
Busang joint venture might be options but stressed Placer Dome
had no fixed intentions. "We'll continue monitoring the situation
to see if there is some role for us," Leggatt said.