On Sept. 17 at 7:55 a.m., former U.S. president George Bush landed in the sleepy town of Elko, Nev., on a luxe Gulfstream jet owned by Barrick Gold Corp. of Toronto. The residents of Elko (population 35,000), who had only recently welcomed their first Wal-Mart and their second McDonald’s, had never seen anything like it. The motorcade. The swarming security force. Nor were they used to having the likes of former prime minister Brian Mulroney, former Bundesbank head Karl Otto Pöhl and former U.S. senator Howard Baker Jr. in their midst. That evening there was a party at the local convention centre. “Everybody got to shake Mr. Bush’s and Mr.
Mulroney’s hand,” says Larry Kornze, a Barrick geologist. “It was a really big > do, I’m telling you.” Bush gave a small | speech. He called Mulroney his “great, £ good friend” who “got me involved on 1 this advisory board for Barrick that he heads.” Said Bush: “It’s one of the luckiest things to happen to me.” The body in question is Barrick’s international advisory board, to which Bush is an honorary adviser. Bush et al are on the board at the behest of Barrick chairman Peter Munk to consult on international corporate conquests—to open doors. The morning of their arrival they gathered at Red’s Ranch, a bed and breakfast outside Elko. They later visited three nearby Barrick mines, the multimillion-ounce gold producers on which Barrick has staked a reputation as one of the world’s pre-eminent mine houses. “I’d thought I’d seen a lot of things in my life, but this was absolutely mind-boggling,” Bush said in his speech. “I expect that there is as much enthusiasm here for Barrick as I have in my own heart.”
Two days later, according to the Far Eastern Economic Review, Bush wrote a letter to an old friend, Indonesian President Suharto. “It was a short letter,” says Jim McGrath, Bush’s spokesman
The fight heats up for a $50 billion Indonesian
in Houston. It merely, McGrath says, expressed Bush’s “highly favorable” impression of Barrick.
This is the way Munk does business. The business at hand is his determination to secure for Barrick the Busang gold properties in the jungles of Kalimantan, the gold find of the century discovered by little Bre-X Minerals Ltd. of Calgary. While Bush provided assurances of Barrick’s credentials to the top level of the dictatorship, Munk had earlier in the year squired Suharto’s eldest daughter, Tutut, and made her a partner. But the conquest, which seemed assured in November, has not gone at all smoothly. Barrick, says someone close to the negotiations, is “going bananas.”
Last week, both Barrick and Bre-X acknowledged receiving yet another missive from Indonesia’s minister of mines and energy, setting yet another deadline. The letter, dated Jan. 15 and addressed to both Munk and Bre-X senior vice-president of exploration John Felderhof, reminds both parties that they have as yet no legal rights
to the richest pieces of Busang. It was Felderhof who discovered Busang, which is believed to contain 100 million ounces of gold worth nearly $50 billion. Bre-X and Barrick, say the Indonesians, have until mid-February to form a new company to develop Busang. In its own release, Bre-X said it would “work diligently with senior executives of our Indonesian partners, PT Askatindo Karya Minerals and PT Amsya Lyna, to resolve outstanding matters.” No mention was made of Barrick, which, with its own unnamed partners, was set to take 67.5 per cent of Bre-X’s interest, leaving 22.5 per cent for Bre-X and giving 10 per cent to the Indonesian government. The wording of the Bre-X release—“We remain anxious to join forces with local and foreign partners acceptable to the government of Indonesia”—suggests that the deal-making door is wide open.
As with any good soap opera, there are several plot lines at work. The first goes back to 1993, when Larry Kornze and geologist Paul Kavanagh, both then in the employ of Barrick, visited the Busang site. Kavanagh subsequently recommended that Barrick join with Bre-X and fund further exploration. “The Barrick folks took over negotiations with Bre-X and never pulled off a deal,” says Kornze. As Bre-X’s own exploration at Busang progressed, it became increasingly clear that Busang was the motherlode. Barrick reopened negotiations with Bre-X, at one point reaching a tentative agreement. Then, Barrick started demanding changes, and the deal was off. It had not helped that Bre-X CEO David Walsh has never been crazy about Barrick, a distaste that seems to stem from Bre-X’s allegations that Barrick used proprietary information provided by Bre-X when it cranked up its own exploration efforts in Kalimantan. Barrick denies the charge.
Other mining companies were keen to be the successful suitor. RTZ Corp., the U.K. giant, was the first. Newmont Mining Corp. of Denver, and Teck Corp. and Placer Dome Inc., both of Vancouver, followed. Placer was in the middle of negotiating a confidentiality agree-
ment with Bre-X in November, and had mobilized its troops for the company’s first trip to Busang, when the Indonesian government announced its forced teaming of Bre-X and Barrick.
Placer CEO John Willson was publicly scathing of the inside deal wrought by Barrick. Privately, he started to work an agenda of his own. On Jan. 14, Placer unveiled its game plan, a proposed $6.2-billion merger with Bre-X. Last week, Ian Austin, Placer’s chief financial officer, had his first meeting with Bre-X at the Four Seasons Hotel in downtown Toronto. Alongside was Gordon Dyal, from Morgan Stanley & Co. in Manhattan, Placer’s investment advisers. “The beauty of our proposal,” says Austin, “is that existing Bre-X shareholders will get substantial exposure to the Busang property.”
The Placer proposal significantiy ups the Indonesian share of the project, just when Munk is desperate to close his deal. “If this thing is structured right, there can be up to 40 per cent available for the Indonesian minority partners, the government and the Indonesian public,” says Willson. On the phone from Jakarta, where he was in meetings at the end of last week, Willson declined to clarify whether the government would have to kick in any money for its piece. “That clearly needs to be talked about with the government,” says Willson.
But the government, as of the weekend, had not responded to Placer officially. And Willson well knows that if the fight for Busang is thrown open, other mining companies will join the battle. Last week, he met with Bob Hasan, the Indonesian lumber baron and billionaire who controls 50 per cent of PT Askatindo, which in turns owns 10 per cent of the richest piece of Busang. Willson said it would be wrong to describe those discussions as negotiations, but rather “talks about principles, philosophies and how we both see the world.” Will| son is a practical man. “Whoever is in this thing,” he says, “has I to make a deal that’s satisfactory to Hasan.”
I Hasan has said publicly that he wants Busang auctioned. s Last week, he was rumored to be on the verge of a minority investment in Freeport-McMoRan Inc.’s copper-gold mine on the Indonesian island of Irian Jaya. Hasan’s ties to Jim Bob Moffett, who runs the New Orleans-based Freeport, are as close as his friendship with Suharto. That has led to speculation that the next mining company to enter, if it has not already, will be Freeport itself.
All of this means more headaches for Munk. That suits Gregory Chorny just fine. Chorny, a 47-year-old multimillionaire who lives just north of Toronto, is one of a group of Bre-X shareholders that has so far spent $400,000 “opposing the Barrick monopoly.” The group hired a Houston law firm that, says Chorny, has been to Jakarta to amass evidence on what some now call “the intrigues,” including copies of various mining permits secured by Bre-X. And the shareholders have beseeched other mining companies, including Teck, Newmont and Anglo American, to enter the fray. At one time, Chorny had 2.1 million Bre-X shares. He now has 1.4 million— worth $30 million—having sold a huge chunk after what he calls Barrick’s “threat of expropriation.” Chorny says there is nothing Barrick can do to make him veer from his anti-Barrick attack. “I will never be satisfied until I have my day in court with that gentleman,” he says, meaning Munk. Paul Yetter, a Houston lawyer who is acting for the shareholders, is planning the legal assault. “As owners of Bre-X [the shareholders! have been injured by what appears to be deliberate interference with their company’s property rights and business by manipulation in the marketplace,” says Yetter. Yetter fought a similar “bigger dog grabs the bone” fight before, representing Pennzoil against Texaco. Pennzoil won.
As for Munk, he departed Toronto last week for the Swiss ski resort of Klosters. He likely will not be there for long. Munk now has to get Hasan onside if he is ever going to see Busang in the Barrick portfolio. He has three weeks, or so it would seem. But as anyone who has tried to follow the Busang saga knows, appearances are often not as they appear. □
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