Junior miner’s fight in Indonesia a dangerous new twist on a familiar story

Unfortunately, it is a familiar chain of events in the mining industry: Junior makes discovery in faraway land. Junior sinks oodles of capital into the ground to establish a world-class resource. Discovery draws the interest of powerful local business concerns and/or governments. Deposit is seized under suspicious circumstances. Miner’s shareholders are annihilated.

That story has played out all over the world in the last five years, from Venezuela to Mongolia to the Democratic Republic of Congo.

But the case of Toronto-listed Intrepid Mines Ltd. has introduced a new nugget: a shady proxy fight to take over the junior company’s board, which could eliminate any legal challenge to the usurping.

The astonishing move still stuns Intrepid Chief executive Brad Gordon, who has spent his career chasing mineral deposits around the world and has never seen anything quite like it.

“What is disappointing is these Indonesian businessmen think they can act outside the law with impunity,” he said. “That’s the disappointing aspect for foreign investors like us.”

The Intrepid story has flown under the radar in Canada, as the company moved its headquarters to Australia from Toronto following a 2008 merger with Emperor Mines Ltd. But it retains major Canadian links — the miner raised $ 112-million in a 2010 offering that was led by RBC Capital Markets and Wellington West Capital Markets (now National Bank).

At its peak, Intrepid’s market value was around $ 1.4-billion; today, it is not worth much more than the $ 106-million of cash on its balance sheet. It is not clear what future value the miner would have if the proxy fight succeeds and leads to a “soft” takeover, but Mr. Gordon promises to do everything in his power to prevent that from happening.

Intrepid’s misadventures in Indonesia began in 2007, when it signed an agreement with a local company called PT IMN, which owned the rights to the Tujuh Bukit copper-gold project. The deal allowed Intrepid to earn up to 70% of the project by spending A$ 8-million on exploration and up to A$ 42-million on a feasibility study for what was then considered to be a relatively small deposit.

Everything changed in July 2008 as Intrepid drilled a 630-metre intercept of very high-grade copper and gold. Further drilling established that Tujuh Bukit holds 19 billion pounds of copper and 28 million ounces of gold, making it one of the largest discoveries of its kind in decades.

The problems started in 2011, when Intrepid was having trouble negotiating a new shareholder agreement with PT IMN (which was required following changes in Indonesian law). Mr. Gordon started to notice delays and obfuscations coming from his joint venture partner, so Intrepid stopped paying IMN’s salaries in Jakarta while continuing to fund work at the site. It was a pointed message that Intrepid would not spend money forever without a deal.

The relationship deteriorated in the months after that, and Intrepid became suspicious. It did some digging and discovered that 80% of IMN’s shares were sold to two individuals and two companies, all linked to a high-profile Indonesian billionaire named Edwin Soeryadjaya.

 Junior miner’s fight in Indonesia a dangerous new twist on a familiar story

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