What if you found a mine and no one cared?
If you can; imagine an important birthday coming up. You just know your significant other has planned a surprise birthday party for you with all your friends. Think about opening the door and finding no one there. Because no one came. No one cared.
That’s much the position Barisan (BG-V) finds themselves in. They have made one of the highest-grade gold rich copper porphyry discoveries in many years and no one cares.
I think that most regular readers of 321gold would realize I’m a bit of an anarchist. But I’m an equal opportunity anarchist. I despise all governments equally. In my mind, the least government is the best government.
All governments love mining companies when they can’t make money. They welcome every possible Canadian or Australian scam mining company as long as the price of the commodity they seek is so low they can’t possibly make any money. Keep Peru, Mexico, Chile, Albania, Tanzania, Canada, Nevada, Khuzestan, Indonesia green. Bring money.
But in the unlikely event that commodity prices actually go up to the point the junior can see a light at the end of the tunnel, up go the barriers. We want your money; we just don’t want you to make any money as a result of all the green you have poured into the ground. Even when the basic economy and tens of thousands of jobs are on the line, governments do everything possible to kill mining profits. When there is no profit, commodities belong to everyone interested. When there is profit, the government wants it all.
I’d be hard pressed to vote on Stupid Government of the Era if it came to a vote. Certainly listening to Dick Cheney and Tony Blair whine about how invading Iraq had nothing to do with ISIS gaining power 10 years later makes the US and UK governments significant candidates. But if you limit voting for Stupid Government of the Era to those issues having to do with mining, Indonesia stands out. Ecuador and Peru are serious competitors but mining is such an important part of Indonesia’s economy that seeing them shoot themselves in the foot is a work of art.
When you pick up a project such as Barisan Gold did in their Abong gold project located in the province of Aceh, Indonesia, you have a seven-year period to conduct your exploration. Barisan did a bunch of drilling and outlined an initial 43-101 resource of 405,000 ounces of gold and 3 million ounces of silver in early February of 2012. Now they need to obtain a forestry permit. Those take forever and the Abong project is in limbo both legally and actually until all the permits are obtained. But keep that 43-101 resource in mind because if you valued +2 g/t Au in the ground at $11 an ounce, Barisan would be worth $5.5 million in market cap if they didn’t have another project.
But they do have another project located on the famous Ring of Fire in Indonesia home of Grasberg, the world’s largest copper and gold mine owned by Freeport, Batu Hijau, a giant gold and copper mine owned by Newmont and the flowing off your tongue Gosowong high-grade gold mine operated by Newcrest.
Barisan did a deal with East Asia Minerals Corporation in 2013 and took over the Barisan II project containing the Upper Tengkereng gold rich copper porphyry target in 2013 and immediately began drilling. Barisan owns 80% of the project and two Indonesian companies own the remaining 20%. They are carried to feasibility. Barisan completed their first hole, UTD-003 in October of 2013 with results released on November 5, 2013. The shares ran from $.09 on the news to a high of $.44 a month later.
To say the results were spectacular is to understate the grade and tonnage indicated. The company called it 262 metres of 1.0% copper equivalent but they were not telling the entire truth. Given today’s prices for gold and copper, that would be 262 meters of $68 rock. What they didn’t bother saying and of far more importance was the total of 904 meters of $34.45 rock starting near surface. The hole bottomed in mineralization.
The good news only got better. Hole UTD-004 had 1058 meters of $28 rock with mineralization from the surface to the bottom of the hole. Barisan called it 202 metres of $57 rock. Hole UTD-005 contained 962 meters of $37 rock that Barisan called 190 metres of 1.3 g/t gold and .6% copper worth a blistering $96 a ton. With hole UTD-006 Barisan reported 262 metres of .6 g/t gold and .6% copper worth $67 a ton. The entire hole was worth $41 a ton from 4 meter to 990 meters. That’s simply nuts. That’s 986 meters of $41 rock. Hole UTD-007 showed 508 meters of $53 rock, hold UTD-008 showed 596 meters of $61 rock with more results to come. The +8,000 meters of drilling Barisan has completed in the last year in 9 holes have an average of over 900+ meters of .6-0.7% copper equivalent ranking the project in the 90th percentile of new porphyry discoveries in the last 30 years. With a total of three distinct high-grade zones within the Upper Tengkereng system showing over 1.0% equivalent copper, those zones rank in the top 99th percentile of new discoveries.
Porphyries are big. Porphyries come in clusters. Barisan has identified 8 targets on their Indonesian 90,000 hectare property. Among porphyries, Indonesian porphyries tend to be very high grade. The outcrop at surface shows a footprint of about 500 meters by 500 meters with a depth of at least 1000 meters identified by drilling so far. That indicates with a back of the envelope calculation, a possible deposit of 625 million tons.
Barisan plans a drill program of 2,000 meters per month with an objective of 20,000 meters of drilling over 15-20 holes in the next year. The company intends to have an initial 43-101 resource on the high-grade zones in the next 12 months. Expect to see drill results from two holes a month for the foreseeable future.
Mining and milling costs on that kind of tonnage would be in the neighborhood of $12-$16 a tonne all in cost. No matter what the value of copper, this is going to be one of the most attractive copper projects on earth. It becomes more attractive with lower copper because all of the marginal projects falling by the wayside. Projects such as this were worth $250 million just three short years ago.
The government in Indonesia tends to be both corrupt and very stupid. Their stupidity hit the stops last January when they announced a ban on the exports of unprocessed material. In theory this ban would require mining companies to build their own refineries adding value and jobs to the economy. In practice, no mining company also runs a refining company. They are totally different skill sets. It’s like demanding a drummer in a band become a lighting expert. And in fact, Indonesia was already seeing the benefit of 95% of the revenue of mining. Actually what the government was trying to do was slip through a new tax.
Indonesia lacks refining capacity. If the market thought refining in Indonesia made sense, someone would have built a major refinery. Newmont declared a force majeure and shut down production at Batu Hijau. The government has threatened to take their mining license away unless Newmont bows to the new rules and increased taxation.
The storm may be a tempest in a teaspoon. A new pro-mining government has been elected and will take power in two months. In addition, all mining companies in Indonesia negotiate and sign what is called a Contract of Work. (CoW)
The CoW in Indonesia is interesting and all the existing mines in the country signed one before they could build a mine. Each is different. The law said,
A sole foreign investor or a joint venture between foreign investors and Indonesian investors may carry out mining activities through a CoW granted to an Indonesian foreign investment company. A CoW is signed between the PMA company established by the foreign investors (and, if applicable, their Indonesian partners) and the Government of Indonesia.
The CoW sets out in detail the rights and obligations of the mining company in relation to the development and operation of the mining project. From the initial CoWs signed in the sixties to the last of those signed in the late nineties, there have been a number of revisions to the CoW terms. Each revision is referred to as a generation of CoW itself.
The regulation of the rights and obligations of a mining company engaged under a CoW principally constitutes the CoW itself. The CoW covers all stages of the mine development.
Under Indonesian law, the CoW has the status of special law, meaning that it overrides the Indonesian laws of general application (for instance, general tax law) where the relevant subject matter is specifically dealt with in the terms of the CoW itself. This treatment is of utmost importance in relation to the taxation provisions of the CoW, which set out the detailed tax regime applicable to the relevant mining company throughout the life of the CoW, regardless of occasional changes to Indonesia’s tax regulations.
Newmont has begun arbitration proceeding to force the government to honor the agreement, the CoW, they signed years ago. Newmont will win but it will cost the company and the country billions of dollars of revenue first. Expect the new government to be far more reasonable.
Meanwhile, Barisan has drifted from $.30 at the first of the year to as low as $.11 in spite of some of the best gold rich copper porphyry grades I have ever seen.
When I saw the drill results and looked at the length of the intercepts I began to pick up shares. While Barisan has not become an advertiser, I suspect they realize they need to get out and start telling their story. It’s compelling and anyone buying shares below $.30 a share is picking the low hanging fruit. Obviously the company will need to continue to issue shares to continue their major drill program. When a deposit comes right to the surface as this does, it’s like shooting fish in a barrel.
I own shares and I am biased. As always do your own due diligence. I think you can easily see potential for a billion ton project with $30 a rock minimum. This is going to be big and the chance of it becoming the next Indonesian mine is very high.
Barisan Gold Corp.