Bre-X keeps Busang close to its chest

Believing the law is on their side, officials at Bre-X Minerals (BXM-T) do not plan to bow to the demands of one of the company’s Indonesian partners for a bigger piece of the massive Busang gold project.

PT Krueng Gasui holds 10% of the 3-million-oz. Central zone at Busang, but none of the much larger Southeast zone, where the vast majority of Busang’s estimated 47-million-oz. gold resource is contained. It is now demanding a piece of that much bigger pie.

Another Indonesian firm, PT Askatindo Karya Mineral, holds 10% of the Central zone and 10% of the Southeast zone.

In 1987, a contract of work (CoW) for the Central zone was issued to PT Westralian Atan Minerals (PT WAM), an Australian company which had a deal with PT Krueng Gasui giving the latter company a 10% interest. Bre-X acquired PT WAM in 1993.

According to a company statement, Bre-X has undertaken a thorough review and investigation of the facts and circumstances relating to its dealings with PT Krueng and has also sought the advice of one of the leading law firms in Indonesia, which advised Bre-X that the PT Krueng’s claim is “without substance.”

“[PT Krueng] has failed to provide Bre-X with pertinent information and documents it has requested, all of which pre-date Bre-X’s acquisition of its interest in [the Central zone],” Bre-X officials state in the release.

PT Kruengr has requested that the issue be resolved by discussion and negotiation; no suit has been filed.

A recent press report indicated that Jean Anes, the vice-consul for investments with the Indonesian consulate in Toronto, stated that the government of Indonesia was investigating a claim made by PT Krueng that Bre-X breached the CoW relating to the Central zone by failing to obtain the approval of the relevant Indonesian government authorities when Bre-X acquired its 80% interest in PT WAM.

Bre-X Vice-president Stephen McAnulty says that claim won’t hold up, as Bre-X acquired the offshore parent company of PT WAM, and thus did not require approval from Indonesian authorities.

McAnulty is confident Indonesian authorities will see things Bre-X’s way.

“We can’t speak for the Indonesian government, but the director of mining was quoted recently as saying the CoWs would be signed before the end of October.” McNulty says the cancellation of its temporary exploration permit (SIPP) in August (as a result of PT Kreung’s claims) has had no practical effect on Bre-X because its KPs (mining leases) are in good standing.

“We are working under the auspices of our KPs. A lot of companies didn’t even renew their SIPPs this summer because they knew they were going to CoWs. We did renew, but just as a sort of double protection.”

McAnulty says Bre-X management does not expect the dispute with PT Krueng to impede its efforts in Indonesia.

“It’s a very minor inconvenience,” he says, adding that “if we do discover that it is a stumbling block, then we will take whatever action we feel is necessary to overcome it and get on with life, but we have no evidence that it is a stumbling block.”