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Gold/Mining/Energy : BRE-X, Indonesia, Ashanti Goldfields, Strong Companies.
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To: Joseph Votto who wrote (5770)2/19/1997 3:53:00 AM
From: Gerald R. Lampton   of 28369
 
Since I do not have access to the investors' conference call tomorrow, here are some questions I'd like answered. Could someone with access please make sure the questions get asked and post the answers?

1. What is Bre-X's long-term game plan? I think I know the answer, but let's hear it from the horse's mouth.

2. Is Bre-X preparing to hold an auction for its 45 percent interest?

2. What are the full terms and conditions of the JV? By what mechanics are each of the partners going to formally acquire their interests? Who pays whom for what and how? What are the costs Bre-X will have to incur out of its 45 percent, and how do they compare with the costs the others will have to incur out of their shares? In other words, let's flat out ask Walsh the question whether he thinks he gave away 45 percent for nothing and see what he says.

3. Will the Indonesian interests be indemnifying the North American interests against the various lawsuits that have been filed? I know Bre-X thinks the suits are meritless, but who is going to pay the cost of the defense and/or a settlement?

4. What safeguards have been put in place to make sure that Bre-X will not be muzzled should it desire to release drill results which partner/potential acquiror Freeport might prefer to keep under wraps?

5. Will Freeport be collecting Royalties on production on top of its 15 percent participation? What will Freeport be bringing to the table in the way of preferencial, low cost financing or operating efficiencies to justify its acquisition of a 15 percent interest for what seems to be an unusually low price?

I, for one, am satisfied that this was probably a fair deal. It gives Bre-X a bigger interest than the 33 percent we would have gotten had we exchanged gold in the ground for Placer's paper (stock). Placer's stock was worth about $21 at the time, but that price probably would have dropped to parity with Bre-X stock. The deal is MUCH better than Barrick's deal, at least that portion of Barrick's deal that was disclosed. (That's a challenge to JV to tell me why I am wrong to think this is better than Barrick's deal.) On the other hand, Barrick is a well-managed company, and I would have been happy to get stock in Barrick as consideration in this deal.

I think the current fair market value of this stock as I sit here today and type is $18 a share. Apart from a takeover, the price can go up in one of three ways:

1. An increase in reserves.

2. An increase in the price of gold.

3. Increased efficiency in the mining of the ore (bringing it to market faster, cheaper).
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