Placer Dome offers merger with Bre-X
JAKARTA (JP): Placer Dome Inc., the second biggest gold producer in North America, has offered to merge with Bre-X Minerals, another Canadian gold mining company, to expedite the development of gold reserves in Busang, East Kalimantan.
"We understand Indonesia's interests in the development of Busang and believe that a combination of Bre-X and Placer Dome will best serve that interest," said John Willson, Placer Dome's chief executive officer, in a statement released Tuesday in Vancouver, Canada.
A copy of the statement and Willson's proposal to Bre-X was released here yesterday by Rob King, Placer Dome's Indonesian representative.
Placer Dome said its proposal provided for significant Indonesian ownership of the Busang gold mine as well as an opportunity for Bre-X shareholders to gain while continuing their participation in Busang.
"We are experienced in building mines like Busang and have the financial strength to fund construction," Willson said.
Bre-X, a prospecting company based in Calgary, Alberta, which began exploring gold deposits in Busang in 1955, has estimated that Busang has 57 million ounces of gold reserves.
The Indonesian government confirmed last month that Bre-X and Barrick Gold Corp., another Canadian mining firm, had agreed on a 25 percent-75 percent split of the Busang gold venture. They also agreed to provide a 10 percent stake to the Indonesian government.
The Busang gold project raised controversy last October after Bre-X teamed up with President Soeharto's eldest son Sigit Harjojudanto and Barrick teamed up with Sigit's sister Mrs. Siti Hardianti Rukmana in a bid to speed up approvals to develop the mine.
But Placer Dome has proposed that Indonesian participation in the gold venture be set at up to 40 percent.
The proposal offers Bre-X a tax effective, stock-for-stock merger-of-equals at a significant premium to the current market price, accounted for as a pooling of interests in which all of the outstanding shares of Bre-X common stock would be exchanged for a fixed number of shares of Placer Dome common stock.
Placer Dome said it was contemplating building a facility at Busang in up to four modules, each with a 50,000-ton-a-day capacity, over four years with an average cost of US$1.7 billion.
AFP quoted Bre-X chairman David Walsh as saying in Vancouver on Tuesday that "Bre-X's board of directors, financial advisors and legal counsel will consider this offer and will respond in due course".
"While we welcome Placer's interest in our company, our highest priority remains providing for the best return for our shareholders, the Republic of Indonesia and the Indonesian people through achieving a satisfactory resolution of all the issues surrounding the development of the Busang gold property," Walsh said.
Placer Dome assured Bre-X that construction of the first 50,000-ton-a-day module, estimated to cost $600 million, would commence soon after the merger was completed and gold production would start in 1999.
Meanwhile, informed sources here said yesterday that politically-well-connected businessman Muhammad (Bob) Hasan had entered the battle for the huge Busang gold mine.
The sources said Bob had teamed up with PT Askatindo Karya Minerals which holds a 10 percent stake in the Busang gold project.
"We still have to do a lot of talking to many people," King told The Jakarta Post yesterday in commenting on his company's proposal.
Willson said Placer Dome was prepared to participate immediately in discussions between Bre-X, the Indonesian government and Bre-X's partners in Busang with a view to resolving the Contract of Work and the ownership interests of the mine.
He added that completion of the transaction and implementation of the proposal were subject to customary due diligence procedures, satisfactory transaction documents, receipt of a suitable contract of work, resolution of ownership issues and regulatory and shareholder approvals.
The Indonesian government has given Bre-X until February to complete the incorporation of its joint venture to develop the Busang gold mine. (vin)