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Indonesia accepts Bre-X proposal to develop Busang

Reuters - February 19 1997

Jakarta – Indonesia has accepted a proposal by Canada's small Bre-X Minerals Ltd mining company to develop the huge Busang gold find, Mines and Energy Minister Ida Bagus Sudjana confirmed yesterday.

The approval follows news on Monday that Bre-X and its local partners had formed a joint venture with US giant Freeport McMoRan Copper and Gold Inc to develop Busang in Indonesia's East Kalimantan province, one of the world's richest gold finds.

"The government has agreed to accept the Bre-X proposal," Mr Sudjana told a Jakarta news conference.

Under the Bre-X proposal to develop Busang, whose estimated 70.95 million ounces of gold reserves are worth over US$24 billion (S$34 billion) at current prices, Bre-X would take a 45 per cent stake in the venture and Indonesian and government interests 55 per cent.

The Indonesian interests had agreed to allocate a portion of their share to Freeport McMoRan, which amounted to 15 per cent.

Freeport McMoRan, which has run one of the world's biggest copper and gold mines in Indonesia's Irian Jaya province through PT Freeport Indonesia for the past 30 years, would develop and operate the Busang II and Busang III properties. Mr Sudjana said yesterday that Indonesian state-owned companies would have the opportunity to participate in the development of Busang at the production level.

But he did not specify the state-owned companies.

Tin miner PT Tambang Timah and nickel and gold miner PT Aneka Tambang have both indicated their interest in participating in Busang.

The Indonesian government last November pressed Bre-X to team up with Canada's Barrick Gold Corp, the world's second largest gold miner, which had an agreement with President Suharto's eldest daughter Siti Hardiyanti Rukmana.

It said in December they had agreed to split the find 22.5 per cent for Bre-X, 67.5 per cent for Barrick and 10 per cent for the government.

But there was no mention of Barrick in the recent announcements.