Bre-X renews CoWs for Indonesian properties

Directors of Bre-X Minerals (ASE) moved to reassure investors following reports in the financial press that cast doubt on the analytical methods the company has used at its Busang project on the Indonesian island of Kalimantan.

Bre-X’s stock fell to as low as $132 on March 25 before the company and analysts from several investment houses released statements expressing confidence in the cyanide-leach gold analyses being used by Bre-X. Shares in Bre-X closed at $156 on April 2, up $12 from the closing price one week before.

Most gold exploration programs have drill core samples analyzed by classical fire-assay methods, which produces a metal bead; the bead is then weighed to determine the gold content directly, or dissolved to allow the concentration of gold in the sample to be determined by instrumental analysis.

The laboratory analyzing Bre-X’s samples is using a method that bypasses the fire-assay stage by dissolving the gold directly from the sample with a cyanide solution. It then uses standard instrumental methods to determine the gold concentration in the leachate, from which the concentration of gold in the rock sample can be calculated.

Bre-X is sampling the Busang cores at 2-metre intervals, crushing the entire core, and sending a 750-gram sub-sample to the laboratory for the cyanide-leach test. This sub-sample is much larger than the typical sample used in fire-assay work, and in gold sampling a larger sample is more likely to give a reproducible result than a smaller one.

The cyanide leach itself is similar to standard metallurgical processes for gold extraction, in which cyanide solutions are used to dissolve gold from ore. Bre-X has pointed out that when duplicate samples have been sent for fire-assay and cyanide-leach analyses, fire-assay has tended to give a higher gold concentration, implying that the routine cyanide-leach values are understating, rather than overstating, the gold content. This seems to apply, whether the duplicates are analyzed by the same laboratory or by two different ones.

Metallurgical tests by consulting firm Kilborn Engineering appear to confirm the company’s contention, finding that the actual gold content of test samples can be up to 12% higher than the cyanide-leach results.

Bre-X now has four drills working at Busang, and expects to release results from nine drill holes shortly. Samples from 10 more drill holes are currently out for assay.

The Indonesian Department of Mines and Energy has approved contract-of-work (CoW) agreements covering four of Bre-X’s properties, including the Busang Southeast and Northwest Blocks. These contracts will be submitted to the Legislative Assembly and the Foreign Investment Board for final ratification. Under these “sixth-generation” CoWs, title to the property, taxation rates, and the right to export revenues are guaranteed.

The two other properties covered by the new CoWs are the Sangihe concession, covering an area on an island off Sulawesi, and the Sable concession in Sumatra. Bre-X’s Indonesian partner, Askatindo Karya Mineral (AKM), retains a 20% interest in Sable and 10% in the other properties.

Under an agreement, Minorca Resources (ME) will receive a 60% share of AKM’s interest in Busang, in exchange for financing 60% of AKM’s interest in the Busang project and 3 million shares.