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)