Canadian, U.S. firms team up to mine huge Indonesian gold deposit
February 17, 1997
Web posted at: 2:30 p.m. EST (1930 GMT)
JAKARTA, Indonesia (CNN) -- The tiny Canadian mining company
Bre-X Minerals announced Monday a joint venture with U.S.
giant Freeport McMoran Copper and Gold to develop and operate
what may become the world's largest gold mine.
The Busang gold deposit in Eastern Kalimantan had been the
center of an ownership battle that included North America's
two largest minding companies and members of Indonesian
President Suharto's family.
Bre-X CEO David Walsh released a statement saying the new
agreement gives his company a 45 percent stake in the mine,
Indonesian interests 40 percent and Freeport 15 percent.
Bre-X discovered the Busang deposit, which it says contains
at least 71 million ounces of gold, worth over $26 billion at
Freeport, one of Indonesia's largest international investors,
will develop and operate the Busang deposit. Freeport
operates the Grasberg mine, with the world's largest proven
gold reserves, in Irian Jaya province.
Development of the new mine is expected to cost up to $1.6
Surprising end to Cinderella story
The battle over Busang, which began when Bre-X announced its
discovery nearly two years ago, shook investor confidence in
After the discovery, Bre-X's stock shot from 36 cents to over
$200, but that dramatic rise was cut short last November when
the Indonesian government ordered Bre-X to form a partnership
with Barrick, North America's largest mining firm.
The order stopped any open bidding process.
Insiders say Barrick used influential connections --
including President Suharto's daughter -- to push the deal.
Barrick also has a high-powered advisory board that includes
former Canadian Prime Minister Brian Mulroney and former U.S.
President George Bush.
But sources close to the Indonesian government say Indonesia
decided to step in because the government had waited too long
for Bre-X to begin developing the find with a partner of its
choice. During that time, the sources say, officials saw
little action except for announcements of more gold found in
The announcements, they said, drove Bre-X's share prices
higher, but did little for Indonesia.
Since that time, a behind-the-scenes bidding process
apparently took place. North America's second largest mining
company, Placer Dome, was also involved, offering to Merge
with Bre-X for $5 billion.
The Indonesian government had given Bre-X until Monday to
settle with Barrick. Instead, Barrick bowed out and Walsh
announced the Freeport deal.
The man largely credited with putting the Freeport deal
together is timber tycoon Bob Hasan. He entered the picture
with the Nusamba group, closely tied to President Suharto and
his eldest son.
The Freeport deal has been submitted to the Indonesian
government for approval, but it would appear to satisfy the
interests of both Bre-X and the Indonesian officials, while
eliminating the stigma of a shotgun marriage with Barrick.
And Freeport's years of experience in Indonesia place it in
position for the next step -- to see if the Busang deposit
can live up to its promise.
Jakarta Bureau Chief Maria Ressa and Reuters contributed to this report.
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