Heres an Australian perspective you may find interesting.It was printed on April,18.http://www.afr.com.au/content/970418/world/wjakarta.html
The print is off but here it is.(Australian Financial Reveiw)
All aboard the Indonesian
roller-coaster gold rush
By Greg Earl
For a small Australian mining company prospecting at the
edges of the biggest gold exploration story in the world,
Monday afternoon must have seemed like a bonanza.
Golden Valley Mines chairman Warren Beckwith had
barely paused after presenting a well-worn spiel about his
company's claim to the now notorious Busang gold
reserve when he was fielding media questions from
around the world.
After seeing his company's shares halve earlier this year
when it appeared to be dealt out of the Busang saga, it
was quite a recovery to be restating his claim before the
world's media while the big winners of February were all
scurrying for cover.
But Beckwith, who sold out after failing to find significant
gold in the 1980s and came back last year to help his
original Indonesian partner stay in the game, is a good
parable for the whole amazing Busang saga.
Fortunes have been changing almost by the week so far
this year and the biggest could still be in the balance over
the next month.
Take Dr Kuntoro Mangkusubroto. This time last year,
foreign miners were flocking to the door of Indonesia's
top mining official and quietly predicting they had the tip
he was the country's next Minister of Mines. Now
Kuntoro is back to academia after Monday's dismissal
which may have had as much to do with vice-presidential
politics as his handling of Busang. Kuntoro was a protege
of former mines minister and potential vice-president
Ginandjar Kartasasmita.
Then there is Freeport McMoRan, Indonesia's
best-connected mining company and the unexpected
winner of the battle to develop Busang. But the leaking of
its preliminary due diligence drilling at Busang has cost
Bre-X shareholders more than $2 billion in the last two
weeks.
As one Canadian stockbroker observes: "If Freeport is
not right, it's got the deepest pockets in town and there's
a lot of lawyers looking for deep pockets right now."
And finally President Soeharto. The rumours started last
June that the Soeharto family wanted a slice of what was
supposed to be the world's richest gold mine and it took
three tries before foundations controlled by Soeharto
received free equity worth $1 billion in the February
development deal.
To see all that effort evaporate at a time when Indonesia
has been nominated as Asia's most corrupt country may
cause some unpredictable consequences especially if the
stockmarket rumours about the Soeharto family also
losing money punting Bre-X shares are true.
But punting losses seem unlikely given the reported heavy
buying of Bre-X shares at this week's low prices out of
Hong Kong which, brokers say, could be short covering
by people who had access to Freeport's negative drilling
results before they were released.
Bre-X officials say they got the results four days before
Canadian market regulators forced Freeport to announce
them and Indonesian interests possibly had them even
earlier, opening the way for some profitable short selling
when Bre-X was trading at around $15 compared with
today's $3.
The mood in Canada appears to have swung towards a
belief that the Bre-X drilling results were salted with
added gold at the mine site although there are still many
impartial observers who say there is a good chance of a
significant gold reserve -- if a lot smaller than Bre-X had
claimed.
Indonesian officials have taken a cautious response to
criticising Bre-X and a key issue facing the markets is
how much gold has to be found by the two separate
independent investigations now going on for Bre-X to
retain an interest. One Indonesian miner yesterday
nominated a margin of error of about 30 per cent from
Bre-X's original 71 million ounces below which the
Government would simply exclude the company entirely.
Either way, the Indonesian gold mining industry has been
severely tarnished by the whole affair. Former mining
official Rachman Wiriosudarmo argues that some
personnel changes were needed in the ministry to
overcome a severe split but the pressure is now on the
new team to make the system work. He is concerned the
Busang affair will make officials want to get involved in
assessing exploration results which would be a
"dangerous precedent" for Indonesia's highly acclaimed
minerals policy.
There is also an emerging nervousness that any company
that finds a large deposit will be "Busanged" -- forcing all
companies to try to keep their true reserves secret and
creating a disclosure issue in their home stockmarkets.
"Whether there is gold there (Busang) or not, the damage
has clearly been done for junior exploration companies,"
says an executive who operates a mine. He says the
Government will want better established companies to
develop its minerals but the problem is that it is the
smaller companies which traditionally do the exploration
hard work.
ANZ Securities put the entire saga in perspective this
week with a survey of about a third of the Canadian
mining companies with Indonesian interests which
showed that they created $10 billion in new equity value
in the year to March 1996 and lost slightly more than $10
billion in the year to this month.
"We're really back to where we were two years ago,"
according to Indonesian research director Tom Soulsby.
But how might it have cost to cause all the trouble? A
Kalimantan-based goldminer estimates that it would have
cost less than $60,000 to buy enough readily available
alluvial gold from illegal mines around the province to salt
Bre-X's entire three years of drilling results.
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