SOUTHEAST ASIA SPECIAL — First Dynasty, partner envisage mining powerhouse

Indonesia’s state-owned mining company and the Friedland family’s First Dynasty Mines (TSE) will join forces to create a mining powerhouse, starting with the privatization of the Gunung Pongkor gold mine on the island of Java.

Kuntoro Mangkusubroto, Indonesia’s director-general of mines, says the alliance offers P.T. Aneka Tambang “the opportunity to participate in international mining projects [and] access to the capital-raising ability of Ivanhoe Capital.”

Ivanhoe is a private company owned by Robert Friedland.

Meanwhile, First Dynasty says “the influence, resources and participation of the government of Indonesia, as a major shareholder, will greatly benefit [its development prospects there].”

The partners hope to sign a definitive agreement and close the transaction by the end of August.

“We view it as the first step in a long-term relationship,” says Eric Friedland who, along with brother Robert, is one of First Dynasty’s largest shareholders.

Aneka Tambang will transfer to First Dynasty a 100% interest in the Gunung Pongkor gold mine and related exploration concessions in western Java. In return, Aneka Tambang will receive shares of First Dynasty worth US$120-145 million and the right to appoint two directors to First Dynasty’s board. As a result of the transaction, the Friedlands will no longer be the largest shareholders. “It will essentially become an Indonesian company,” Friedland says, “and that is the best way to do business in the country.” Gunung Pongkor is producing 65,000 oz. gold and 600,000 oz. silver per year, with cash costs forecast to average US$175 per oz. this year.

The 500-tonne-per-day underground mine was commissioned in 1994, and resources (minable by underground methods) are estimated at 4.9 million tonnes grading 0.46 oz. gold and 5 oz. silver per tonne.

A program to expand this resource is under way, with a goal of expanding the annual production rate to 150,000-200,000 oz. by late 1998. The expansion program is expected to cost about US$50 million.

Aneka Tambang has other Indonesian assets, including two nickel mines, a 2-line nickel smelter, the country’s largest gold refinery, and a large portfolio of exploration and development projects, involving both precious and base metals.

First Dynasty also brings something to the table. The company is involved in gold exploration and development efforts in Indonesia, Canada (through wholly owned subsidiary Ivanhoe Goldfields), Myanmar and Kazakhstan, and has oil interests in northeastern Kalimantan.

Using their Indonesian assets as a cornerstone, the partners intend to “compete aggressively” for other mineral projects throughout the world.

First Dynasty’s new president, Marcus Randolph, previously with Rio Tinto Zinc, has years of experience in southeast Asia. The company will be based in Singapore.

The Friedland family has other interests in Southeast Asia. Robert is a large (38.2%) shareholder of Indochina Goldfields, soon to be listed on the Toronto Stock Exchange, which holds a large land package of 3 million hectares in Indonesia, including ground near the Busang gold deposit on East Kalimantan.

Indochina is also active in Myanmar, where it holds rights to 840,000 hectares. Elsewhere in Southeast Asia, it holds 3,000 hectares of ground prospective for gold in South Korea, and 600,000 hectares in Vietnam, where gold is again the target of interest.

In April of this year, Indochina Goldfields signed a joint venture with a state-owned entity in Myanmar to develop a copper project using solvent extraction-electrowinning.

Eric Friedland, meanwhile, has been focusing his efforts on Carson Gold (VSE), which holds interests in mineral projects in China.