| MELBOURNE/JAKARTA, June 19
MELBOURNE/JAKARTA, June 19 Australia's Intrepid
Mines Ltd is learning that business in Indonesia is
personal as it wages a difficult fight to win back rights to a
$5 billion copper and gold prospect in East Java.
Intrepid was booted off the site last year by its Indonesian
partner who transferred the Tujuh Bukit mining leases into a new
company, a move the Indonesians say was legitimate. Intrepid
argues the action violated transfer laws.
The Australian company splashed out $95 million, nearly
double what it had originally agreed to spend, to prove up the
find over nearly five years.
Since losing the rights to drill on the Tujuh Bukit site
just over a year ago, the company's value has crashed to A$140
million ($132.53 million), down from more than A$1 billion in
Intrepid's big mistake was that it never had the presence on
the ground essential to protecting its interests, say analysts,
while it spent aggressively to prove up the huge scale of Tujuh
Bukit without having finalised agreements to secure a direct
stake in the project.
"Business is very personal. It's the reputation you have,
it's the relationships you have that allow you to enforce a
contract. If you go to court or arbitration, no matter the
outcome, you've actually lost the deal," says Colin Brown, an
adjunct professor at the Griffith Asia Institute.
From 2008, everyone involved - Intrepid, its Indonesian
partners Maya Ambarsari and Reza Nazaruddin, and their
Australian partner, wealthy businessman Paul Willis - realised
the project was so huge that bigger miners were going to be
needed to develop it.
"All we saw was this massive copper-gold resource. Everybody
was just blinded by it, including the investors," Willis told
Rather than sticking together, the partners went off in
different directions to try to attract large investors into a
project that may hold 19 billion pounds of copper and 30 million
ounces of gold.
In 2008, Intrepid bought Willis out of the project for $2
million after he tried to bring in a major Indonesian company
without first getting the consent of his partners.
But Intrepid was left stranded a year ago when its
Indonesian partners Maya and Reza transferred the Tujuh Bukit
exploration licenses into a new company and sold most of it to
powerful businessman Edwin Soeryadjaya.
At a shareholders' meeting in Brisbane on Thursday, Intrepid
hopes to overcome at least one challenge by defeating a push by
a new 5.4 percent shareholder, Hong Kong-based Quantum Pacific,
to oust the board and carve out a deal with Soeryadjaya.
Even if it clears that hurdle, Indonesian experts believe
Intrepid will be lucky to break even on the $100 million it has
already spent on the project through a compensation deal with
the new owners.
If the board survives Quantum Pacific's attempted coup, it
could negotiate with Soeryadjaya, the chairman of coal miner
Adaro Energy and founder of a private equity firm
Sarataga Investama, who has so far kept a low profile through
Soeryadjaya has said in a letter to Quantum Pacific that he
would be willing to negotiate with the fund and was not happy
with Intrepid's attempt to use the courts.
Intrepid CEO Brad Gordon has said he would be willing to
negotiate with Soeryadjaya, and is keeping an option of taking
Maya and Reza to international arbitration as a last resort.
Intrepid has also launched a case against the local regent
of Banyuwangi for allowing the exploration permits to be
transferred to a new company.
"The courts rarely give victory to foreign companies," says
Griffith Asia Institute's Brown.
A lawyer for Maya and Reza, Hendry Muliana Hendrawan, said
the transfer of the Tujuh Bukit licenses was allowed under
government regulations, a position backed by the Banyuwangi
Administration's mining permit division chief Abdul Kadir.
Intrepid is also defending a case brought by Willis, who
argues he was bought out of the project under duress.