Krueng Gasui refuses to sell Busang shares

Krueng Gasui refuses to sell Busang shares

JAKARTA (JP): PT Krueng Gasui, one of Bre-X Minerals Ltd's
Indonesian partners developing East Kalimantan's Busang gold
deposit, has refused to sell its shares to Bre-X's new ally, PT
Panutan Duta.

Krueng Gasui stated yesterday that it and the other Indonesian
partner in the Busang project, PT Sungai Atan Perdana, had heard
nothing from Bre-X or Panutan on the planned takeover of their
interests.

Krueng Gasui and Sungai Atan have a combined 40 percent-
interest in the project.

"The Indonesian partners have advised Bre-X that their
interests are not for sale," said the statement by Krueng Gasui
and Golden Valley Mines NL of Australia.

Golden Valley has a financial and technical assistance
agreement with Krueng Gasui on the project. Yesterday's statement
was signed by Krueng Gasui President Jusuf Merukh and Golden
Valley Chairman Warren T. Beckwith.

According to the statement, the Indonesian partners believe
the support services arrangement recently announced by Bre-X is
likely to hamper the introduction of an operator and the
development of the mine.

They said any transfer of interests by Bre-X would require the
Indonesian partners' consent and the Indonesian government's.

Earlier this week, Toronto-listed Bre-X announced it had
forged an alliance with Panutan, a company 60-percent owned by
President Soeharto's son Sigit Hardjojudanto.

Bre-X said it planned to grant Panutan a stake potentially
worth C$580 million (US$430 million) from a 10-percent interest
in each of the project's mining deposits in East Kalimantan,
namely Busang I and Busang II.

If the plan goes ahead, Panutan's interests would entitle it
to a proportionate share of the project's distributable cash flow
after it begins production.

Bre-X would lend money to Panutan to buy out its two
Indonesian partners, Sungai Atan and Krueng Gasui.

Bre-X also agreed to hire Panutan as a "consultant" for 40
months, paying it a $1 million consultancy fee each month.

Merukh stated that if Sigit got involved in the project, he
would welcome the "increased participation of Indonesians".

"Indonesians would then hold 50 percent of the Busang gold
deposit which would bring significant benefits to the national
interest of Indonesia," Merukh said.

"As a long-standing supporter of President Soeharto's
government and the New Order, Merukh has expressed pleasure at
the prospect of the participation of the President's family," the
statement read.

The Busang gold deposit was discovered in 1988 by Bre-X's
predecessor and manager of the project, Montague Gold NL.

Bre-X has a market capitalization of C$5.8 billion on the
Toronto Stock Exchange. Its shares fell sharply this month over a
dispute with Krueng Gasui after the latter complained to the
Indonesian government that Bre-X had unfairly left it out of the
Busang II phase of the project.

Bre-X shares went into a free-fall on rumors the dispute would
mean the government would not issue a final works contract. On
Oct. 4 alone, Bre-X shares lost C$510 million in value.

The mining company's share price had earlier soared from C$4.5
to C$250 before it had extracted any gold. (pwn)