Placer Dome offers merger with Bre-X

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)