Bre-X Strikes It Rich in Indonesia

John Felderhof is pacing like a panther. Boxed in a place he does not want to be. Hounded by people he does not like. He is grey-pale, his skin approximating the color of the smoke that rises from his Marlboro cigarette. Outside, the Jakarta air hangs at 30°C. The scenery is chaotic, Kodachromatic.


Bre-X Strikes It Rich in Indonesia

 The car pulls out of Sukarno Hatta airport and heads towards downtown Jakarta. The management of the airport itself is contracted to companies owned by two of the offspring of President Suharto, who has ruled Indonesia for more than 30 years. As the car makes its way towards the city, it travels along a road built by a construction company controlled by Suharto's eldest daughter, Tutut. It passes through Tutut's toll booth, then proceeds towards the seven-tower galleria shopping-and-condo project, a posthumous commercial tribute to Suharto's wife, Madam Tien. Along the way, the driver overtakes a couple of Timor sedans, the "national car" for which Suharto's second son, Tommy, won the manufacturing contract, beating his own brother, Bambang. Having been relieved of all tax obligations on the Korean-built autos, Tommy can sell them for half of what the competition must charge. This is how the Suhartos make a market. Along a muddy canal, men fish for bandeng. It is a rare scene of commercial simplicity amidst this remarkable tableau of insiderism, greed and graft. Welcome to Indonesia.

John Felderhof is pacing like a panther. Boxed in a place he does not want to be. Hounded by people he does not like. He is grey-pale, his skin approximating the color of the smoke that rises from his Marlboro cigarette. Outside, the Jakarta air hangs at 30°C. The scenery is chaotic, Kodachromatic. Inside, the carpet is thin, the lighting is poor and everything has the pallor of grey plasticine. This could be the office of a young exploration company in any old mining town. Timmins, Ont. Sudbury, Ont. Aerial maps pinned on walls. Maps of drilling progress, too.

The fax machine keeps spitting out paper, the phone keeps ringing, and Felderhof cannot quite figure which he should attend to first. He slams his hand into a box of Dutch lozenges. He tries to sit. He cannot. It is Friday, Feb. 14, and Felderhof, senior vice-president of exploration, and his corporate peers from Bre-X Minerals Ltd. are running right to the wire. They have just 72 hours to finalize an agreement on the ownership and operation of the gold find called Busang, scrambling to meet yet another deadline imposed by the Indonesian government. There have been so many deadlines before; they have all drifted away. But Felderhof says this one is real. Two days previous, Barrick Gold Corp. of Toronto - for months the leading contender in the Busang stakes - was shut down by Mohamad (Bob) Hasan, the timber tycoon and Suharto confidant who had wedged his way into the Busang story not just as a participant, but rather as the deal-maker. "He was upset that Barrick came in and made Indonesia look like a Third World country," Felderhof says of Hasan.

Hasan may indeed be a great patriot, but surely what was uppermost in his mind was, "What's in it for Bob?" Hasan had recently acquired control of a company called PT Askatindo, which has a 10 per cent portion of the project called Busang II - which happens to contain the great majority of the gold. Hasan, however, wanted more than 10 per cent if he was going to partner with Barrick. Busang had become a political football. Pressure was mounting to find an Indonesian solution to the battle for Busang - to give Indonesian interests a majority. Barrick said no. "Everything else is negotiable, but you can't negotiate who controls a mine of this magnitude," says Barrick CEO Peter Munk. Barrick's last proposal was put on the table by Munk's longtime confidant Bill Birchall and his chief financial officer, Randall Oliphant. Barrick, says Munk, was willing to work all manner of compensation, from cash to royalty streams. But not control. That, he says, was always made clear to the Indonesian government. "I didn't know Hasan was to become the kingmaker," Munk says. "I thought the [mines and energy] minister was going to do that."

On Feb. 12, the same day Barrick was slapped down, Hasan notified Bre-X that they would be meeting that evening with Jim Bob Moffett, the Texan who runs Freeport-McMoRan Copper & Gold Inc. of New Orleans. There is precious little time for Felderhof to assess how palatable this latest development is. Parts of the proposal are mighty pungent, for there is Hasan with not 10 per cent, but 30. Not only does he get to triple his interest, but Hasan does not have to pay up for his increased stake. For weeks, Jakarta has been a hothouse of deal-meisters. Each group has its own base camp. The team from Bre-X, and one from Vancouver's Placer Dome Inc., are staked out at the Shangri-La, the kind of hotel that has the aura of illicit romance about it. Ten minutes away by Steady Safe taxi is the Grand Hyatt - the Barrick hotel, as everyone calls it. The Hyatt smells of commerce and power and has very hard edges. A defeated Oliphant checked out on the morning of Feb. 14. Birchall was supposed to arrive in a day's time. But he flew in early, to give Busang Barrick's last shot. Now, all the Barrick birds have flown, except for Luc Lavoie, a hired-gun public relations man and press aide to former prime minister Brian Mulroney, a member of Barrick's board of directors.

Back at the Shangri-La, Bre-X chief financial officer Rolly Francisco has checked out, overwhelmed by the demands on his time. He moves to the Regent under an assumed name. The Regent is an ugly hotel, but it has a nice business floor, where Houston-based lawyer Tom Ajamie has sat for just about every day of the past seven weeks, trying to unravel the twisted tale of Busang for the benefit of disgruntled Bre-X shareholders.

Busang. Once the name of a spit of a creek running through a lowland jungle. Now the fantastic tale of a Canadian junior exploration company from Calgary called Bre-X Minerals Ltd. that found an embarrassingly rich gold mine on Borneo island, in the Indonesian province of East Kalimantan. It was Felderhof who led the charge into Kalimantan, a crazed geologist methodically combing the jungle for the proverbial pot, finding it finally near the native settlement of Mekar Baru, where the Dayak dwell. That is a long way from Nova Scotia, to which Felderhof moved from Holland at the age of 12. His father was a doctor, and Felderhof thought he would become one, too. Then, he changed his mind. "I didn't want to look at miserable faces, so I became a geologist. Now, I look at miserable places."

Felderhof has had malaria 13 times. He has lost a dozen workmates to helicopter crashes, landslides and flash floods. The bush claims many sacrifices. But for Felderhof, it is almost a mystical match. Some who have met him say he thinks he can walk on water. What he does not love is the hotel life he has been living for the past seven months, trying to keep hold on at least part of his find, which at last count was reported to contain a minimum of 70 million ounces of gold, but which, Felderhof suggests, will likely hit 200 million ounces. Two, four, then maybe even six million ounces will be pulled from Busang annually. There has never been an El Dorado like this. Never has a single gold mine proved so rich. For a while, it looked like a godsend. Then, it became a curse. Says Felderhof: "We found something too big."

Two days have passed, and a very different Felderhof is heading past the azure pool at the Shangri-La, past the little bridge, into the garden, where the breeze runs high. Wailing from a mosque wafts in from the distance as Felderhof pulls from his beer, drags from his cigarette. He is a man now relaxed, but not without his anxieties.

Bre-X announced this morning the barest of a corporate ownership outline for what is known as Busang II and Busang III. Bre-X will be allowed to keep 45 per cent, half its previous stake. Its Indonesian partners (aka Bob Hasan) will take 30 per cent. Freeport gets 15 per cent. And the Indonesian government gets 10 per cent. Bre-X shareholders hate it. The stock falls. Dissident shareholder Gregory Chorny of Aurora, Ont., immediately sells 700,000 shares and says he may sue Bre-X. Felderhof claims he likes the arrangement and says he is very happy to have Hasan as his partner, even though he had no choice but to accept what Hasan had to offer. What Felderhof particularly likes is the removal of Barrick, at least for now.

It was August when Felderhof first felt the weight of the mighty Barrick, the world's second-largest gold producer, a company whose international advisory board boasts the likes of Mulroney, former U.S. president George Bush and former Bundesbank head Karl Otto Pöhl. Felderhof was called to a meeting with other Bre-X types at the Park Plaza Hotel in downtown Toronto. There, he met Munk and Oliphant. It was a defining moment: Felderhof and Bre-X chief executive officer David Walsh had hoped to entertain competitive bids for Bre-X, but at the Park Plaza that idea died a horrible death. It was the Indonesian government's wish, Munk announced, that Barrick be the favored partner to develop Busang. Three months later, the government publicly dictated the marriage of the two companies.

Thereafter, the Bre-X people, says Felderhof, were "portrayed as a bunch of assholes," a couple of rubes and a reformed bankrupt. Felderhof's own academically dense work on the geology of Kalimantan puts a lie to the former. But that never got much media play. Throughout the hijacking, the focus was often on Bre-X and its violations of Indonesian mining law. Given that Bre-X did not "own" anything, its critics said, the company had no right to squawk. But Bre-X did squawk. And so did its shareholders. Felderhof says that Barrick tried to pre-empt due process, and adds that its tactics were tantamount to expropriation. "The Indonesian government owns the resource," counters Munk. "Who else should decide who should be the steward of this resource?"

Rachman Wiriosudarmo is admiring an orchid in a neighbor's garden, a particularly beautiful bloom. He is dressed in shorts, padding in bare feet, ready for a pickup game of tennis anytime. Like many businessmen in Indonesia, Rachman works out of his home.

He used to work for Indonesia's state-owned tin company, before he found himself developing policy at the ministry of mines. Now, he is a consultant to the mining industry, and he knows as well as anyone how that industry works.

He takes from his bookshelf two hefty volumes. "In Christianity, you have a Bible. In Islam, you have a Koran. In Indonesia, we have this report." The report dates to 1949, the work of a Dutch geologist named Reinout Willem van Bemmelen, when Jakarta was still called Batavia, and when the country was still ruled by the Dutch. "A European mining industry might be possible for some deposits," van Bemmelen wrote. "Borneo does not seem to be a promising gold-mining country, but surprises are not impossible."

The Dutch were moderately successful miners in Indonesia. After then-President Sukarno won independence for Indonesia in 1945, the mines were nationalized: one company for tin, another for coal, a third, PT Aneka Tambang, for other minerals, including gold. But Tambang had scant success. In 1966 - when there was still blood running in the streets from the political clash that allowed Suharto to seize power - Freeport-McMoRan Copper & Gold moved in, giving Indonesia its first major foreign investment in mining. There was no framework for foreign mineral ownership, so a "contract of work" was drawn up, granting mineral tenure for a period of 30 years after production start-up at Freeport's copper mine, called Ertsberg. In the decades since, the contracts of work have been refined, each new "generation" of COW covering new mining applications.

Rachman designed the fifth generation of COWs, incorporating a requirement for community development and environmental responsibility. At the time, Freeport was moving towards the development of a mammoth mining project, called Grasberg, on the Indonesian island of Irian Jaya. It is with some pride that Rachman says it took Freeport 2 1/2 years to get COW status on that property, and that the company had to post a $1-million bond.

Rachman says the barriers to entry are supposed to be high. When they are not, Indonesia gets burned. As it did in the mid-1980s, when there was a great gold rush and junior mining companies, particularly Australian ones, went charging in. Sixty per cent of those COW applications were subsequently terminated. As the Indonesians saw it, the Australians were simply using the Indonesian exploration plays to sell their shares, from which they would pocket the profits. They were "irresponsible investments" with "rubbish technology," says Rachman. "Now, the Canadians are coming here. It's a repetition of history. It's not really a gold rush. It's rather a stock market rush."

The COW process has won the respect of the international mining community. Inco, which has been running a nickel mine in Sulawesi for 29 years, has had no difficulty operating under the COW system. In a report he wrote a decade ago on Indonesia's deposit prospects, Felderhof said the idea of the contract of work is "excellent. For the foreign company, it provides assurances that if economic mineralization is found, the Indonesian government guarantees title to the deposit, fixes taxation rates, permits export of profit and many other conditions that, when known, reduce the variables that determine the attractiveness of investment." As Rachman puts it: "Certainty is the beauty of the contract of work."

The problem for Bre-X is that it did not have - and still does not have - contracts of work for Busang II, the motherlode, and Busang III, where the company has yet to do any drilling. It does have a single contract of work on a block of property in which it is partnered with a local businessman, Jusuf Merukh, through a company called PT Westralian Atan Minerals. It was there that Bre-X geologists first started to get exciting drilling results, in 1993. But in following the run of the mineral, they stepped beyond the bounds of this piece of property, running their drill lines to the southeast. A new corporate alliance was formed to cover the new property, one from which Merukh was excluded.

Bre-X applied for its contract of work and, in the interim, explored the property under a so-called SIPP, a preliminary exploration permit that is meant to keep properties active while they await COW approval. A SIPP, however, provides for minimal work: trenching, augering. Deep drilling, which is what Bre-X was doing, is prohibited. Technically, that is. Rozik Sutjipto, the director in charge of permitting at the ministry today, says that "in a certain way, to be honest, it's good for us that they are very aggressive in doing exploration, because when the contract is signed, in a few years they'll be ready to start production."

Bre-X's eagerness was its weakness, too, for as the fabulous drill results proved the richness of Busang - and as those results were reported, as required by Canadian securities law, to shareholders and regulators - Busang II started to look awfully tantalizing to Merukh. On June 25, 1996, Merukh wrote a letter of complaint to Kuntoro Mangkusubroto, director general of the mines department, saying that he had been wrongfully left out of the new partnership. Although Kuntoro now believes there is no merit to Merukh's claim, he took it seriously at first. On Aug. 15, he cancelled the SIPP permit, sent a letter to Bre-X informing it of the cancellation and inviting the company to request return of the SIPP bond, on the order of $100,000, facts that Bre-X failed to disclose to its shareholders.

Kuntoro's directive did not have the desired effect of shutting Bre-X down. Instead, the company continued drilling under the contract licence of its local partner, PT Askatindo. Again, Bre-X was technically out of line: only companies subcontracted by the local partner could do such work. Bre-X, being the senior partner, did not qualify.

Kuntoro assigned his people to investigate the Merukh complaint. But through the fall of 1996, there was a not-so-subtle shift in authority. On Oct. 17, Ida Bagus Sudjana, the country's minister of mines and energy, issued decree number 2409, cancelling Kuntoro's authority in those matters and handing that role instead to his ministry's secretary general, Umar Said.

There are a number of places where the Busang story went off the rails, but perhaps none as significant as Oct. 17. For while Kuntoro is respected as a straight shooter who well understands the permitting process, Said falls far short of the mark. In his hands, the battle for Busang became a platform for shrill threats and misinformation. It was in October that the government made sure Bre-X understood that it expected to get 10 per cent of Busang for itself, gratis, and that it intended to keep a close watch on the file.

All the corporate contenders had that in mind as they jockeyed for position. Bre-X's Felderhof says that his company sought a partnership with Sigit Harjoyudanto, eldest son of Suharto, because Barrick had already connected to the Suharto power base through daughter Tutut and her construction company. The arrangement with Sigit was odious, for not only was he to get 10 per cent of Busang, but a further $1 million a month in consulting fees for 40 months. Barrick's arrangement with Tutut, by contrast, was opaque. At first, Barrick suggested that Tutut's firm would merely be rewarded with construction contracts tied to mine development. In that way, the Barrick version looked positively virginal when compared with Bre-X's pact.

On Nov. 14, mines minister Sudjana summoned the Bre-X team to his offices. The Barrick people were already there, along with Tutut's lawyer, Madam Yoke, and the son of Sudjana's boss, with whom Barrick had formed an alliance. The forced marriage initially sounded like a 25-75 split, the power to Barrick. But, of course, that neglected the government's demand for 10 per cent off the top, so Barrick was actually looking at 67.5 per cent to Bre-X's 22.5 per cent. Barrick proposed carving a further 10 per cent to Askatindo, to which it was entitled. So that left Barrick with 57. Barrick chief financial officer Oliphant now says that FHR, a firm controlled by Tutut, would have taken her own slice, presumably 10 per cent, had Barrick's proposal been accepted.

Barrick, of course, hoped for a speedy conclusion, a neat signing of documents before Christmas. It was not to be. As discussions stalled, local interest in the Busang affair grew and grew. Economists and political commentators were critical of the government for its interference, critical of Bre-X for behaving like a stock promotion, critical of Barrick for its hubris.

Barrick, says Rachman, simply had no appreciation of the business culture, of the understated Javanese style. He finds the company's "cowboyisms" distasteful. He says he has never seen business behavior like Barrick's.

These are sensitive times in Indonesia. Everyone is quick to say so. There is an election looming, for the lower house in the spring, and the presidency next year. That, of course, will go to Suharto again, his sixth term. It has been 30 years of relative stability, and, statistically, the country has been transformed. There has been tremendous progress from poverty, from illiteracy.

But the rich have grown very, very rich. In downtown Jakarta, where actor Demi Moore came to open a Planet Hollywood restaurant, where Cindy Crawford and her sister models opened a fashion café, where the car dealers cannot keep $480,000 Mercedes-Benz ragtops in stock, there is the slick feel of big money.

It is now the week of Id al-Fitr, the Muslim New Year's celebration. Each year, a third of the capital's nine million inhabitants leave the city for celebrations outside Jakarta. Each year, when they return, they bring family members with them, another 300,000 new Jakarta residents. There is no room. There is no air. They will set up street stalls.

There is only one true power, and that is Suharto himself. The government's clampdown on the Indonesian Democracy party last summer was a reminder of that, if anyone needed reminding. The oppression and violence in East Timor, a former Portuguese colony that was invaded and annexed in 1975, keep Indonesia on the international human rights agenda. There has recently been bloody fighting in West Kalimantan between warring tribesmen. Two weeks ago, Malaysia closed its border there.

Suharto's development policies have, naturally, sprung first from the country's natural resources wealth. Oil. Timber. Copper and coal. It is from this, promised Suharto, that Indonesia - its 250 nationalities, its 195 million inhabitants on 6,000 islands - would be provided with equitable economic growth.

Some people hold more equitable positions than others. Suharto's offspring have worked as powerful agents of Suharto's enterprise agenda, gorging themselves on percentages of companies from oil to telecommunications. And then there's Hasan. A Javanese-born ethnic-Chinese who abandoned his given name, The Kian Seng, and converted to Islam, Hasan was adopted by Gen. Gatot Subroto, onetime chief of staff to Suharto. Hasan built his first fortune in plywood, and then in shipping, to ship the plywood, and insurance, to insure the shipping. Last week, he moved into the top spot at Astra, the country's largest carmaker. He heads Nusantara Ampera Bhakti, or Nusamba, an investment company that represents not only his own interests, but those of the Suhartos as well. It was through Nusamba that Hasan took control of Askatindo in January.

It was a brilliant chess play. Busang had moved far too high on the political agenda, was too "eye-catching," as one observer puts it. Public opinion rose both to condemn the behind-the-scenes machinations of the Barrick-Bre-X marriage, and to call for a higher percentage interest for Indonesia, a majority stake for Indonesia, and at the extreme, outright nationalization. "From the beginning, I think there was a secret deal between Barrick and Bre-X and my government," says Amien Rais, a political science professor. "The reason the deal was not made public is that some bureaucrats were playing a very corrupt game."

Arif Arryman, managing director of the Econit Advisory Group in Indonesia, put out the call for a much higher Indonesian participation than 10 per cent. "The Indonesian government has the right to decide on the size of share ownership without allocating any funds," he said in Bisnis Indonesia, a local daily. Last week, he reiterated that, according to the constitution, "the product that is in the ground is the right of the people. The 90 per cent that Bre-X says it owns is not true. Bre-X has a right to explore and a guarantee to exploit the mine. I think that is the problem."

Hartojo Wignjowijoto somehow manages to squeeze through the very narrow space in his office between his desk and his overstuffed bookcase. Hartojo has become one of the economic celebrities of Busang. CNN had him on air. NBC, too. Today, it's just SCTV, a local commercial broadcaster in Jakarta.

Hartojo has a rant about capital markets in which he argues that Indonesia should somehow slap an extraterritorial capital gains tax on Bre-X shares. But Hartojo is a serious economist, with a doctorate from Harvard and a long list of corporate clients who value his advice. Like many, he echoes the clause in Indonesia's constitution that mineral resources must be used to the benefit of the people.

Hartojo's is one of the more moderate voices. Bre-X, he says, should have been free to settle its own commercial disputes, should have been free to find its own partner. He is scathing of the system the company found itself trapped within. "Of course, Indonesia's situation is very weak, and very greedy, and very corrupt," he says. "For politicians, it's always short term. If the foreign multinational companies bring cash, their eyes turn green, you know. They don't realize what they're doing has repercussions on international capital markets."

But he is critical of Bre-X, too, as a high-flying stock play, rather than a company that is in it for the long haul, which, he says, will do Indonesia no good. This is understandable. Indonesia does not share the Canadian experience, of the mine bonanza struck by the penny-stock junior that then gets taken over by an experienced mining company. "I don't want to see Indonesia be like Africa," he says. "The people are very poor. They have uranium. They have minerals, but they have nothing to eat. Just suck it in, suck it out, you know. I don't want that to happen to this country."

Benny Wahju smiles when he hears of Hartojo's comments. Wahju is a member of the Indonesian Mining Association, which sent a letter of complaint to the government over its handling of Busang. Sitting in his office in a suburban Jakarta business park, Wahju says: "Since the first day, we told the government that we are not in agreement with them when they tried to interfere. We told the parliament that's not the way of doing business."

The government, eventually, did get the message. Sort of. On Feb. 18, at 6 a.m., the ministry informed mines director general Kuntoro that he was to prepare the government's statement on the ownership of Busang. He had three hours to do it. At 11:30 a.m., a well-Brylcreemed mines minister Sudjana arrived at a conference room in the ministry of mines and energy. He moved to the microphone to read Kuntoro's statement. He took one question from the audience, then slid away, secretary general Said following his trail. In their absence, Kuntoro himself stepped forward to answer media queries. Yes, he said, Bre-X's contracts of work would now be processed. They could receive their presidential blessing within days. "It was good luck that Bre-X found the gold," said a ministry official last week. "It was bad luck they found it before the COW was signed." If only it had happened the other way around, he says. Then there would not have been a problem. One will never know if that is true. The chaos over Bre-X, he argues, "does not give any impairment at all with regard to our country" - would not damage Indonesia's reputation among foreign investors.

Last Wednesday morning, Bre-X's Walsh, Felderhof, Francisco and their financial advisers took a conference call with analysts. "Some have mistakenly thought that we owned 90 per cent of this venture," said Walsh, dropping a small bomb right off the bat. "This was never the practical reality, nor was it ever the basis for the valuation of the Bre-X stock." The deal was a victory, he said. "Unfortunately, I do not think that the market understands the deal."

Bre-X shareholder Chorny says he has a very clear understanding of the deal. "There's a multibillion-dollar heist going on here," he says. "I'm sick and fed up with my management." Chorny says that when he first heard of the corporate resolution on Busang, he "enjoyed the first few hours of getting Barrick out of the deal." Then, he turned his attentions to Indonesia. "They sure picked our pockets, boy." Walsh's comment on the 90-per-cent stake aired on Toronto radio. Chorny was in his truck at the time. He nearly cracked it up when he heard Walsh say those words. "I can show you dozens of news releases that say Bre-X had 90 per cent of this zone," says Chorny. "David," he says of Walsh, "bought himself potentially a class-action suit for serious nondisclosure."

The Bre-X annual report for 1995 is a case in point. "The company, through foreign subsidiaries, entered into a joint agreement with PT Askatindo Karya Mineral, which entitles the company to a 90-per-cent participating interest in a contract of work application," it says.

Now, Walsh was saying that was not true at all. That it was never true.

This time last year, at the annual Prospectors and Developers Convention in Toronto, Walsh, Felderhof and prospector Mike de Guzman addressed a crowded ballroom in the Royal York Hotel. Such a story they had to tell. Of this great gold mine in a land far, far away. Felderhof tried to explain the geology of his find, a volcanic lake that hosts the gold. His Dutch accent still heavy, his delivery dry, Felderhof was less than inspirational. He said the mine contained 30 million ounces, "plus, plus, plus." De Guzman said he would not rule out 50 million. The background noise was that the mine really had 100 million ounces. Now, Felderhof suggests it will have twice that, so shareholders should not feel badly. In that scenario, their 45-per-cent interest is equivalent to 90 million ounces. That is three times the size of the average gold mine. Chorny sees it the other way around. That shareholders have lost 90 million ounces.

John Willson, the CEO of Placer Dome Inc. who badly wanted Busang, sighs deeply. "Today, we're all a good deal wiser," he says. For a time, it really did appear as though the battle for Busang would be opened up. "Then all of a sudden, it has disappeared again." He is surprised at the resolution. Placer's sources had said Freeport was not interested in a project of this magnitude. But then, "I would not have thought you could buy for a small amount of money absolute operating rights." There is huge disappointment. "It is," he says, "a great, great gold mine."

Barrick CEO Munk takes a different tack. "I tell you, if I had a choice, I would much rather do three Arequipas," he says of the billion-dollar Peruvian acquisition he made last year. "I built this company laying down some fundamental principles. We're not a passive investor. We are a mining house in gold. That requires that we run our own destiny. I have to have control of my capital."

Munk says his people have now spent a year trying to take Busang. It is not the first time Barrick has failed. Failing to take over Denver-based Newmont Mining Corp. in 1991 was "a helluva setback." He will not be baited into a discussion on Barrick's Indonesian manoeuvrings, the optics of the government's complicity in forcing Bre-X into Barrick's arms last fall. "Once, when I write my book - and I intend to write a best-seller - I will reflect on it."

Seven hours after the conference call with analysts, Felderhof was heading back to the bush - not to Busang, but to other Bre-X gold properties in the province of Aceh and on the island of Sulawesi. Busang should move forward swiftly now. A full feasibility study. The plotting of the infrastructure. Bre-X is building homes for the local Dayak tribespeople, so that when the new roads go in, they won't cluster dwellings by the roadside. The company recently built a Catholic church - the Dayak are Christian - and will supply electricity and build a school.

One day, the Dayak will see a great pit where their jungle once grew. It will measure six kilometres by three kilometres, and from it Freeport will pull more gold than has ever been pulled from a single mine. One might think there would be some satisfaction in this for Felderhof. But the real satisfaction, he says, was proving the veracity of his geological theory, something "conceptually new." Felderhof looks back on the past seven months of aggravation. On finding something that everyone wants a piece of. On mulling the possibility that another company might step in and take Bre-X over - assuming the terms of the joint venture leave that possibility open, which at this point is unclear. "Business is business," he says. "You do away with your passions."

But surely, if the Busang wrangle teaches anything, it is that business is not just business at all. As Felderhof disappeared back to the bush, there were still games being played all around. The Bre-X players say they are being persecuted by unnamed interests set on driving down the company's share price. Controversies keep flaring up about the 90-per-cent ownership question, the issue of insider share sales last August and September, the issue of whether Bre-X is even free to have itself bought out. The only conclusion one can draw is that the story of Busang is a long way from over yet.

In a Chinese restaurant in downtown Jakarta, two gentlemen enjoy their after-dinner Djarum cigarettes, the paper snapping as they inhale, the clove-scented tobacco curling in the air. They believe that Bre-X has been more than a sloppy operator in Indonesia. The company has badly broken the rules, they say. They provide some maps, and a copy of the letter of complaint by Merukh. But they never give proof of their chief allegation, that Bre-X's application for its contract of work was cancelled.

It never comes clear how these men would have gained if Bre-X had been ousted from the property, which is what they maintain should have happened. It never comes clear whether they represented a specific corporate interest ready to move in on Busang, should an opportunity arise. Their connections are cloaked in secrecy, other than being "high level" and "close to the Suhartos."

In this, the meeting perfectly suits the mystery of Indonesia, the darkly creeping politics, the smell of money. Rachman Wiriosudarmo says there is a Muslim expression, which, roughly translated, goes something like, "If you have an interest, you will not find the truth." That could be the motto for the battle for Busang.

The Road To Busang

May 6, 1993

Bre-X purchases control of the Busang gold project, believed to contain one million ounces of gold. CEO David Walsh says the company targeted Indonesia "by virtue of its geological setting, favorable investment climate and political stability."

January 24, 1994

Prompted by new drilling results, Peter Munk's American Barrick Resources Ltd. offers to buy a minority stake in Bre-X.

February 11, 1994

Bre-X turns down the offer, saying it can do better.

June 20, 1995

Drill results show that the project's central zone, Busang I, contains at least 2.3 million ounces of gold.

January 15, 1996

Bre-X chief of exploration John Felderhof announces that "a resource of 30 million ounces can easily be attained."

March 24, 1996

Bre-X says that four applications for contracts of work - mining permits - have been initialled by the Indonesian department of mines and energy. Walsh praises Indonesia's "excellent and progressive" mining legislation.

August, 1996

Munk tries to gain control of Busang by forging an agreement with Suharto's eldest daughter, Tutut. Later, Munk tells Bre-X that Indonesia has chosen Barrick as the favored partner to develop the site.

August 15, 1996

Indonesia quietly cancels Bre-X's preliminary licence, pending settlement of an ownership complaint lodged by Jakarta businessman Jusuf Merukh.

August-September, 1996

Bre-X executives sell nearly 1.5 million shares before the public learns of the company's troubles in obtaining contracts of work.

October 17, 1996

Mines Minister Ida Bagus Sudjana takes personal control of the Busang file.

October 28, 1996

In a desperate effort to buy favor, Bre-X agrees to give Suharto's eldest son, Sigit, 10 per cent of Busang and $1 million a month in consulting fees for 40 months.

November 26, 1996

Walsh announces that Indonesia has "given guidance to Bre-X to finalize a joint venture between Bre-X and Barrick Gold Corp."

January 14, 1997

Placer Dome Inc. of Vancouver bids $6.4 billion for Bre-X. On the same day, Merukh files a $2-billion lawsuit in Canada against Bre-X, claiming the company used his information to discover the richest parts of Busang.

January 15, 1997

Indonesian timber tycoon Bob Hasan acquires 50 per cent of Bre-X's junior partner on the richest section of Busang.

February 17, 1997

Bre-X announces a new deal giving it 45 per cent of Busang. The rest is divided among Hasan, the Indonesian government and Freeport-McMoRan Copper & Gold Inc., a New Orleans-based mining company.

Maclean's March 3, 1997