Yet more:
Dow Jones Business News -- March 27, 1997
Indonesia/Busang/Amplifier -3: Future Deals Troubled
AP-Dow Jones News Service
Analysts added the Busang affair could effect investment not only in other Southeast Asian countries and Papua New Guinea, but conceivably in Australia and West Africa too.
'North American markets tend to think (of these places)...as exploration countries where you risk capital,' Walker added. 'They tend not to distinguish that much.'
Mining companies in Indonesia, however, currently operating or attempting to operate mines in the country, shuddered at the effect Busang could have. The consensus is that Indonesia's government, smarting from the fiasco, will grow much more scrutinizing in offering licenses in the future.
'I think there is no doubt that there will be more difficulty in getting contracts of work (if Busang is a hoax),' said one Jakarta-based executive at an Australian mining company. 'Even the 68 contracts of work waiting to be signed could be delayed again.'
President Suharto recently approved 68 CoW's from the sixth generation of licenses brought before the mining ministry. The CoW's, however, still need the signature for Indonesia's Minister of Mines and Energy before work can go forward.
Joe Widartoyo, a director at the Indonesian Mining Association, added 'if this a hoax, the government will first move by punishing Bre-X. But as a result, they are going to become much more careful in screening foreign investors. I just hope it doesn't hurt investment too much.'
Buried amongst this anxiety over the future of mining in Indonesia remains continued uncertainty over whether Busang was truly a hoax. Many in Indonesia admit to have been sceptical over the size of the Bre-X find, but few say they thought it was a hoax.
'We were skeptical at first, but virtually everyone I knew felt that there was a significant find at Busang,' said Neville Thomas, an executive at exploration company PT Normandy Anglo PTE Ltd. He is also a director of the Indonesian Mining Association. 'Some of the initial testing methods were circumspect but no one felt the numbers could be this far off.'
Normandy Anglo is a joint venture between Normandy Australia and Anglo American of South Africa.
Others noted a total disbelief that such well respected companies as Indoassay and Kilborn SNC Lavalin could have either overestimated Busang's gold amount or been tricked into doing so. Indoassay is the laboratory that tests mining samples for a wide array of mining companies in Indonesia, while subsidiary PT Kilborn Pakar Rekayas has been in charge of calculating the resource levels at Bre-X's Busang find.
'To pull off a scam at this level would be very difficult to propagate,' said the Australian mining executive. 'These companies are both highly respected, and you'd hope Freeport would more comprehensively test Busang. It took Bre-X more than two years of work to reach their resource conclusion. You'd think Freeport would drill more than seven holes.'
This mining executive, who visited the Busang property, added that Canada's Barrick Gold Corp. - previously an aggressive bidder for control of Busang - drilled at least one hundred test holes as part of due diligence work on Busang. He said that it was only after Bre-X tutored the company on its own assaying techniques that they reached a similar conclusion.
'Maybe they (Freeport) should have been more patient in making a decision,' the executive added.
Others in Indonesia, however, stood behind Freeport, saying that the company most likely used more stringent assaying techniques than either Bre-X or Barrick and that securities laws in the U.S. forced the company from withholding its information any longer. They also noted that the likelihood of fraud as the answer for the Busang mystery is continuing to escalate.
'Up to early this week I was 80% certain that the gold was there (in Busang),' said one prominent mining analyst in the U.S., who spoke on the condition of anonymity. 'Now I would say I'm only at 20%. It is just incomprehensible to me that I could have misjudged the characters involved by such a wide margin. But this whole affair has been crazy.' |
