Placer Dome optimistic in battle for Busang mine

JAKARTA (JP): Canadian mining giant Placer Dome Inc remains upbeat about its chances of victory in the battle for the Busang gold mine in East Kalimantan despite the fact that its main rival, Barrick Gold Corp, is close to sealing a partnership deal with Bre-X Minerals.

Placer Dome's Chief Executive Officer John Willson said here Saturday that there was still an opportunity for his company to form an alliance with Bre-X.

"Our offer of 40 percent share ownership for Indonesia and the merger of equals for Bre-X cannot be beaten by other competitors, including Barrick," Willson said in an interview with The Jakarta Post.

Placer Dome was engaged in negotiations with Bre-X over the possibility of jointly exploiting the huge Busang gold mine before the government decided to allow Barrick into the project last October.

The company, however, did not retreat. In a surprising move earlier this month, it announced that it would give a 40 percent stake to Indonesian parties if it is given the chance to work with Bre-X, the holder of the provisional contract for the Busang gold mine. The offer is much more higher than the 10 percent requested by the government from Bre-X and Barrick.

In addition, Placer Dome is also offering 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.

The gold prospector is also contemplating building a facility at Busang of up to four modules, each with a 50,000-tons-per-day capacity, over four years at an average cost of US$1.7 billion.

Placer Dome, which has total assets of $2.5 billion, assured Bre-X that construction of the first module, estimated to cost $600 million, would commence soon after the merger was completed, and that gold production would start in 1999.

Willson said the offer would only be realized if Barrick quits from the joint venture for Busang. "We're only interested in setting up a joint venture company with Bre-X and not with the others," he said.

Bre-X Chairman David Walsh said in Vancouver last week that Bre-X's board of directors, financial advisors and legal counsel would consider the offer and would respond in due course.

The Indonesian government has given Bre-X and Barrick one month -- until Feb. 17 -- to reach an agreement over shares in Busang. If none is reached the government will seek other foreign investors.

Last week Barrick reported that it had already secured approval from the government to develop the gold mine.

But Minister of Mines and Energy I.B. Sudjana said last week that there was still a possibility other foreign companies, including Placer Dome, might get a share in the development of the gold mine.

Willson pointed out that his company was currently engaging in intensive negotiations with Bre-X and the Indonesian government to win the contract for the Busang gold mine, which is estimated to contain 57 million ounces of gold.

He told The Post that his company was scheduled to have a meeting with Bre-X in Canada this week.

He claimed that Bre-X needed Placer Dome as a qualified and experienced mining company to develop the gold mine properly. "We have the funds and capability to develop the gold mine. We also have experience of exploiting for gold in tropical areas, like Busang, in Papua New Guinea and Chile," he said.

Mining analyst, Herman Afif Kusumo, who is also the chairman of the Association of Indonesian Mining Experts, said over the weekend that the government should award the contract for the Busang gold mine to foreign mining firms with experience in community development and protecting the environment.

He refused to say which of the three Canadian companies -- Placer Dome, Barrick and Bre-X -- fitted these criteria the best.

But he said that Placer Dome's proposal to give Indonesia a 40 percent share in Busang was not an offer that should be dismissed too quickly.

When asked whether he was optimistic that the government would accept his company's offer, Willson said, "I think if the government wants to give the most benefit to the country then our offer is the right one to choose."

A number of analysts in the country have been pressuring the government to increase local companies's share in the gold mine. Several even suggested that the gold mine should be managed 100 percent by Indonesian companies. (bnt)

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