Official says Busang causes investors concern

Official says Busang causes investors concern

TORONTO (Reuter): A top Indonesian mining official said on
Tuesday that the recent battle over the huge Busang gold deposit
in East Kalimantan has caused some uncertainty among foreign
investors in Indonesia.

"We realize...that successes in the mineral sector were
overshadowed by the Busang controversy which caused some
uncertainty within the international mining community and
questions (about) the integrity of Indonesia's mining policy,
particularly with regard to the security of foreign investment,"
Rozik B. Soetjipto, head of mining industry development at
Indonesia's Directorate General of Mines, told a mining
conference in Toronto.

The Busang deposit was the subject of an intense bidding war
with several mining companies trying to woo the Indonesian
government to take control of possibly the biggest gold find of
the century.

Busang contains at least 71 million ounces of gold, valued at
about US$25 billion.

He said the Indonesian government was working to improve the
contract of work (COW) system, but Soetjipto added foreign
companies also have to do a better job of understanding the
country's mining policy.

"If you are looking to invest or explore in Indonesia, then
you have to be sure that you have a contract of work. As long as
you have the contract, you are secure to do the exploration and
investment," he told reporters after delivering a speech to the
Prospectors & Developers Association of Canada annual convention.

Although finding a local partner is not necessary to do
business in Indonesia, Soetjipto said: "In some cases it might be
better to have a local partner to know how to do business in
Indonesia because it's a different culture (and) that has created
problems."

Toronto-based Barrick Gold Corp initially dominated the
negotiations for control of Busang, which was discovered by
Calgary-based prospector and Bre-X Minerals Ltd.

But Barrick's inside track ended when the government of
President Soeharto brought in businessman Muhammad "Bob" Hasan in
January.

Hasan subsequently brokered a deal that gave New Orleans-based
Freeport McMoRan Copper & Gold Inc 15 percent of Busang and the
right to mine the deposit.

The arrangement left Bre-X with 45 percent and the rest to the
Indonesian government and to two Indonesian companies.

Bre-X's shares have been under pressure amid investor
confusion over the company's stake in Busang. Bre-X has said the
company did not originally own 90 percent of the discovery and
investors were mistaken to believe otherwise.

Bre-X and its partners are waiting for the Indonesian
government to issue a contract of work before mine construction
can begin. Bre-X has said a contract of work is expected during
March.

Bre-X's stock fell 0.25 to close at 17.75 on 716,000 shares on
the Toronto Stock Exchange on Tuesday.