Placer Dome and Barrick capabilities to be probed
JAKARTA (JP): The government has asked investment bank JP Morgan to help it choose which of two Canadian mining giants will develop the Busang gold mine in East Kalimantan.
The Ministry of Mines and Energy's secretary-general, Umar Said, told a hearing of House Commission VI for mines and manufacturing yesterday that his office had studied the proposals of the Canadian firms, Barrick Gold Corp. and Placer Dome Inc.
"We have studied all the proposals and we are consulting JP Morgan because we do not want to regret in future," Umar said when asked what the government thought of Placer Dome's attractive offer.
Placer Dome said its proposal provided for 40 percent Indonesian ownership of the gold mine. It said it had written to President Soeharto about this.
Umar said JP Morgan estimated that Barrick would book a US$220 million net profit for 1996, compared to Placer Dome's $74 million.
Barrick's cash flow was estimated at $475 million for 1996, while Placer Dome's was $139 million.
But Placer Dome's vice president and treasurer, R.J. McLennan, asserted here yesterday that his company's operating cash flow ranged from $250 million to $400 million.
"In addition, we have $1.25 billion in cash reserves and fully committed credit facilities which we can draw immediately," McLennan added.
Umar said Barrick had about 42 million ounces of gold reserves last year compared to Placer Dome's 20 million ounces.
Barrick and Placer Dome are competing to partner Bre-X Minerals Ltd., the Canadian mining firm which found the Busang deposit, and the Indonesian government to exploit the deposit, believed to contain at least 57 million ounces of gold.
Placer Dome said it had been negotiating with Bre-X since Oct. 1996, but their negotiations were interrupted when the government directed Bre-X to negotiate with Barrick.
Barrick and Bre-X are negotiating with prospective Indonesian partners. The government has set a Feb. 17 deadline for negotiations.
Umar said JP Morgan's reports provided detailed accounts of Placer Dome's negative actions.
He said Placer Dome had given up its operational role in Marcopper Mining Corp. in the Philippines because of environmental problems. And the Philippines government had banned it from operating there.
"It is important to note that as a member of the Association of Southeast Asian Nations, we should not let a company which has been rejected by another member operate in our country.
"Similarly, we can feel how it would be if the Philippines government let Ramos Horta enter its country," Umar said, referring to the Australia-based Nobel laureate who is fighting for East Timor's independence.
Placer Dome has rejected the accusation that it damaged theenvironment in the Philippines. It said an earthquake might have caused the release of mine tailings into a river system.
The company said it took immediate action after the tailings were released by using all its technical resources to stop the flow of tailings and contain environmental damage.
Placer Dome claims it maintains high environmental awareness in every operation. It was awarded by the United States Northwest Mining Association 1995 Platinum Award for Corporate Excellence in recognition of environmental integrity, corporate citizenship and community involvement.
Placer Dome promised to encourage the transfer of technology and financial and technical skills to develop the Busang mine if it was awarded the project.
PT Nusantara Ampera Bhakti, PT Tambang Timah and PT Aneka Tambang are among the Indonesian firms which have expressed an interest in the project. (rid)