THE GLOBAL SEARCH FOR GOLD SPECIAL — Bre-X discovery launches gold rush in Indonesia

The discovery by Bre-X Minerals (BXM-T) of millions of ounces of the yellow metal at its Busang property in East Kalimantan has induced mining companies the world over to flock to Indonesia.

During the first five months of this year, the Indonesian government approved 140 contract of work (CoW) applications, and the country now ranks as the fifth most popular mining investment target on the globe. By comparison, only 70 permits were issued between 1992 and 1995.

Canadian companies account for about 53% of all foreign applicants. As one Indonesian mining executive said: “All these Canadian companies have the idea that if Bre-X can find gold reserves, why can’t they find them also.” But anyone visiting Kalimantan soon learns that finding a geological setting similar to Busang is no easy task. Geological information is limited, and the pioneers familiar with the region and its geology, such as Bre-X, have already acquired ground that best fits the Busang model (a maar diatreme-dome complex). Like the Voisey’s Bay nickel discovery in Labrador, Busang is a rare geological recipe — one which Bre-X’s geological team spent years trying to figure out (T.N.M., July 29/96).

There are other challenges for Bre-X hopefuls. The ground to the north of Busang gets progressively more mountainous and less accessible. Some geologists familiar with this region believe it is more prospective for porphyry coppers and skarns than Busang-type deposits. And in the mountainous regions, the locals — former head-hunting peoples called Dayaks — are not over-friendly to foreign geologists. “People skills” here are a necessity.

To the south, some of the terrain is so swampy — even during the dry season — that it is difficult to imagine how geologists will be able to see (let alone map and sample) any exposures. All this does not mean that there is no good ground surrounding Busang; only that the best went first.

Meanwhile, Bre-X continues to drill in an attempt to define reserves containing at least 50 million oz. within a portion of the Southeast zone.

The latest calculation by Kilborn SNC Lavalin on sections 44-69, based on a cutoff grade of 0.75 gram, shows a measured and indicated resource of 111.5 million tonnes averaging 2.18 grams gold per tonne (7.85 million contained ounces), plus an inferred resource of 394.9 million tonnes averaging 2.14 grams (27.28 million oz.).

Taking into account resources from other drilled portions of the Southeast and Central zones, Busang hosts a total resource (in all categories) of 633.4 million tonnes of 2.34 grams (or 46.9 million contained ounces), again using a cutoff of 0.75 gram. With several kilometres of favorable geology yet to be fully tested, the exploration potential remains excellent.

Others active

Bre-X’s geological team is also exploring properties where Bresea Resources (BSR-M) has an interest. The company owns about 26% of Bre-X.

Bresea holds 25% of the Mirah N.E. property, where Tandem Resources (TDM-M) and Diadem Resources (DIR-M) each hold 30%. The remainder is held by Indonesians.

Situated at the headwaters of the Katingan River, the 10,000-acre property was selected because it contains extensive Mid-to-Upper-Tertiary volcanic rock types, as well as andesite/diorite plugs which have intruded along the intercepts of major regional lineaments. As Bre-X knows, major deposits such as Kelian, Mt. Muro and its own Busang were made at the intercepts of lineaments.

Bre-X geologist Michael de Guzman recently visited the joint-venture property in Central Kalimantan, to confirm the results of a 2-month reconnaissance program by company geologists.

Located during that program was an extensive quartz-vein stockwork known to outcrop over an area measuring 150 by 400 metres. That stockwork remains open-ended. Visual mineralization consists of fine-grained pyrite, chalcopyrite and minor chalcocite. Random grab samples of leached, oxidized outcrops returned encouraging results for both copper and gold. Gold assays ranged from 0.01 to 2.13 grams per tonne, plus 0.05-43 grams silver. A hand-trenching program is under way for mapping and channel sampling to confirm grades, continuity of the zone, and its lateral extent.

The joint venture also holds the Upper Mahakam River A and B properties, which cover 10,000 hectares in the headwaters of the Mahakam River in East Kalimantan, adjoining the Central Kalimantan border.

Preparations are under way for a helicopter-supported exploration program, to include prospecting and surface sampling.

This property was also selected to cover major structural and geological features similar to Busang and Kelian. Indeed, exploration at Busang began with testing of the drainages of the Atan River (particularly where locals panned for gold) because they often followed these favorable regional structures.

Carlin-type targets

Where there is potential for huge gold deposits, there is usually Barrick Gold (ABR-T). This is the case in Indonesia, where the major has its own holdings, plus rights to acquire 75% of its pick of any three resources outlined by Yamana Resources (YRI-T). The junior controls 2.7 million ha in Kalimantan, where it has already pinpointed eight gold targets (see separate story in this special section).

Barrick is also eyeing the Peninsula properties held by International Pursuit (IPJ-T) and its 18%-held affiliate, Dayak Goldfields, in Kalimantan. Pursuit holds rights to 747,900 ha and Dayak holds 101,000 ha. The land package is about 150 km north of Samarinda and 100 km east of Busang. Some preliminary work by Pursuit has identified a major structure running east through Busang and the Peninsula area.

Under a recent, joint-venture agreement, Barrick can earn a 50% interest by spending $6.5 million over the next two years. It will also manage the program. Pursuit President Stephen Dattels says the major’s interest reflects the fact the Peninsula area has the potential to host both epithermal and Carlin-type gold deposits. “A number of geologists now subscribe to the theory that Busang is, in fact, a similar deposit to Carlin,” he adds.

Pursuit geologist William Burton shares that view, on the grounds that mineralization at Busang is continuous over such a large area. The maar diatreme-dome complex was simply the feeder system that intersected the favorable lithology, he adds.

Burton also notes that the Peninsula area of Kalimantan is overlain by carbonates and may have similarities to the Minahasa gold deposit placed into production by Newmont Mining on the neighboring island of Sulawesi. Minahasa achieved commercial startup during the second quarter of 1996 and produced 26,900 oz. from 531,000 tons grading 0.4 oz. during the period at a total cash cost of US$205. Newmont says the operation, so far, has “exceeded initial expectations.”

Pursuit is the largest holder of mineral rights in Kalimantan, with 3.2 million ha held directly and an additional 1.8 million ha held indirectly through Dayak. To acquire the ground, Dattels says the company compiled information based on work done previously by the Australians. “We also did some satellite imagery work before we selected our ground,” he adds.

The juniors have started preliminary exploration surveys on their other Kalimantan properties. One of the areas is in Central Kalimantan and covers known anomalies.

Elsewhere in Kalimantan, Scorpion Minerals (SCP-T) plans to start a 5,000-metre drill program in the Lebau area of its Ruwai property, on which more than 20 targets have thus far been identified.

At least 1,000 metres of this program, in 5-10 holes ranging from 100 to 250 metres, will test the Tamajo prospect. Based on geology and radar imagery, the company says the prospect has potential for Carlin-style gold mineralization.

Drilling will also test the Pasir prospect at Ruwai. The prime target is porphyry copper-gold mineralization, with other targets being low-grade, bulk-tonnage gold mineralization

The Bukit Petai prospect at Ruwai will also be drill-tested. Again, the primary target is porphyry copper-gold deposits, as well as gold and copper
mineralization within skarn bodies. In addition to the drilling, ground reconnaissance teams will follow up other anomalies.

Work programs

Scorpion plans 3,000 metres of drilling for the Mangani property in Sumatra, where gold-silver mineralization has been identified. Exploration and geophysical work are also planned for two other properties in Kalimantan. In Sumatra, work will resume at the Salido property to test areas prospective for bulk-tonnage gold mineralization.

Another large landholder in Kalimantan is newly listed Indochina Goldfields (ING-T), which controls 3 million ha, including ground north of Busang. The company has field work under way at several locations.

Junior TNK Resources (TNKR-C) plans to explore further its 55%-owned Marunda Wahau CoW, 64 km north of Busang. The junior can increase its holding there to 80%.

Work to date has identified several geochemical gold anomalies that require follow-up exploration. Watts, Griffis & McOuat has proposed a $2-million program, to be carried out in two phases.

The first will entail preliminary investigations of radarsat imagery with airborne geophysical work, as well as a review of geochemical data. This will be followed by geological mapping and reconnaissance drilling.

Indomin Resources (IRL-V) is exploring its Busang North gold project in Kalimantan. Based on geophysical and synthetic aperture radar (SAR) imagery, five anomalies believed to be related to a volcanic centre have been identified. Stream sediment sampling and panning have identified several drainage areas containing anomalous gold, at least four of which are believed to be draining intrusive volcanics.

A geological team will follow up these anomalies with mapping, soil sampling and tanking of drill targets. Lee Spencer, Indomin’s vice-president of exploration, says the company is on schedule for definition of targets for drilling in the last quarter of 1996.

Exploration programs are under way at several Kalimantan properties held by Pacific Amber Resources (PCR-V). The list includes the Gunung Mas and Tujang properties in Central Kalimantan, the Long Bangun property in East Kalimantan and the Pitussibau properties in West Kalimantan.

At Pitussibau, an Australian company spent more than US$1.4 million outlining several gold prospects and gold-mercury anomalies. “We have two areas slated for drilling within the next few months,” says director Harold Jones.

Meanwhile, the junior is mobilizing a drill to Long Bangun, an epithermal prospect 60 km from Busang. The program will test an area anomalous in gold, measuring roughly 1,200 metres long by 400 metres wide, in a setting believed to be similar to the Kelian mine.

Field exploration is under way at several of Corsair Explorations’ (CXI-A) CoWs in Kalimantan. One is near CRA’s Kelian mine, which produces 450,000 oz.

annually, while another is 25 km from the Busang deposit. The company’s three other CoWs are in the eastern, western and central parts of Kalimantan. The junior also holds ground in Sulawesi.

Canarc Resource (CCM-T) is also gearing up to explore its holdings in Kalimantan, including five new blocks totalling 73,840 hectares — all within Indochina Goldfields’ landholdings. Canarc says they represent expired KPs (domestic mining permits) that were not covered by Indochina’s CoW applications. Work on the new lands will start once the CoW documents are initialed by the Indonesian government.

In addition, Alberta-based Tanqueray Resource (TQY-A) recently completed a financing to fund exploration of its various properties in Indonesia.