Busang deal still awaited

The Busang gold deposit in Kalimantan continues to interest major mining companies, despite uncertainty related to the status of negotiations between the deposit’s owner, Bre-X Minerals (BXM-T), and suitor Barrick Gold (ABX-T).

This uncertainty was compounded by reports that the Indonesian government had threatened to cancel Bre-X’s contract of work. At presstime, Barrick said it was seeking “clarification on statements” made by the government.

The Indonesian government had directed the companies to come to an agreement to develop Busang, 75% in favor of Barrick, with a 10% carried interest going to the government. However, at presstime, both companies denied that a deal had been struck, and Bre-X director Steven McAnulty was quoted as saying Bre-X still hoped the Indonesian government would allow an open bidding process for the project.

Meanwhile, other potential partners have been waiting for a chance to make a pitch to Bre-X. “I’m not sure how it’s all going to end up,” says Norman Keevil, president of Vancouver-based Teck (TEK-T), which had been in negotiations with Bre-X when the government forced the junior into talks with Barrick in late November. Keevil says Teck, which has about $700 million in cash and securities, had the financial strength to take on the project and could have put a quality bid in front of Bre-X.

“This whole thing was done behind the scenes, and suddenly Bre-X was presented with the ultimatum that they had to deal with Barrick,” says Keevil. Comparing the situation to Teck’s involvement at Voisey’s Bay, he says: “We didn’t go in and ask the government of Newfoundland to issue an edict that Diamond Fields would give us 75% of Voisey’s Bay. It’s pretty sordid — we don’t play that way.”

Keevil suggests that Teck might have been the best technical choice to bring Busang into production: “We’re talking here about a project of about 100,000 tonnes a day, and the only one of the four suitors who has ever been involved in an operation on that scale is Teck. . . . If you haven’t built a 100,000-tonne-per-day mill, then you’re going to have to learn a lot of things from scratch.”