News: Financial Post Story of the day. Thursday, January 16/97
Bre-X merry-go-round leaves investors unsteady
By JOHN SCHREINER
Vancouver Bureau Chief The Financial Post
Shares of Bre-X Minerals Ltd. rose sharply yesterday but remain significantly below the $29 a share value of Placer Dome Inc.'s merger offer, a sign that uncertainty still hangs over the Calgary-based discoverer of the rich Busang gold find in Indonesia. Bre-X shares are also trading below the rumored $26-$28 a share value of the undisclosed offer to Bre-X from Toronto-based Barrick Gold Corp.
"People have a chance once again to get off their [Bre-X] shares today," said Yorkton Securities Inc. mining analyst Douglas Leishman in a comment reflecting the uncertainty. "Why don't they?"
Bre-X shares (BXM/TSE), with a 52-week range of $28.65-$17.70, rose $1.10 to $24.45 yesterday. Placer shares (PDG/TSE) were unchanged at $28.10
On Tuesday, Vancouver-based Placer proposed a $6.4-billion stock-for-stock merger with Bre-X, a plan that would also provide 40% equity participation to the Indonesian government and
Indonesian companies. "A very creative bid by Placer," a Canadian mining engineer in Jakarta said in a fax yesterday to his
employer, a Vancouver junior. "It looks very attractive."
"It's quite innovative," agreed Teck Corp. chairman Norman Keevil. "It's started the pot boiling again." Vancouver-based Teck is one of what is presumed to be a growing list of major mining companies
interested in pursuing Bre-X and Busang. "We were negotiating extensively with [Bre-X chief executive] David Walsh and Bre-X until the process got pre-empted," Keevil said. "Are we interested? Yes. Are we going to chase it at any price? No."
"Both of them [Placer Dome and Barrick] have very creative offers," said the president of the junior, who asked not to be named. He said he understands that the Barrick proposal achieves most of its value by giving shareholders a handsome deferred royalty payment from the mine.
Analysts and company executives believe that the openly disclosed Placer Dome bid has provided authorities in Indonesia with the opportunity to open up bidding on Busang. It might also allow
Indonesia to dispel the confusion surrounding mineral title in Indonesia, created when the government ordered a shotgun deal between Bre-X and Barrick. "It's been my sense for a couple of weeks that it will open up," Keevil said. "The read I get is that President Suharto is fed up with all the bad international press he's getting,"
said newsletter writer Brian Fagan, publisher of Asian World Stock Report, based in Grayland, Wash. "I think the Indonesian government will be forced to make an auction process," said Hiro Ogata,
president of Pacific Amber Resources Ltd., a Vancouver junior with exploration properties in Indonesia.
Like Teck, Placer Dome had been negotiating with Bre-X last fall until the Indonesian government intervened to suggest Bre-X make an agreement with Barrick. "I don't think Placer Dome had any choice but to make an offer," Fagan said. "They were probably caught off-guard when the Indonesian government forced the Barrick deal."
The uncertainty overhanging Bre-X was created by what appeared to be Indonesian threats last month to cancel Bre-X's mineral titles entirely. Fagan believes that threat has passed because Indonesian officials apologized to Bre-X and because a major like Placer Dome has now waded into the battle for Busang. Fagan and others say a storm of criticism from the mining community hit the top levels of the
Indonesian government. Mining companies have become vocal in criticism of the title confusion created by Indonesia's delay in granting contracts of work on mining concessions. "Nobody wants to release any news of any consequence on mineral exploration there," Fagan said.
"There's a curfew on news until the mineral rights situation has been resolved."
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