Intrepid's woes worsen with latest Java twist

Intrepid Mines has a jumbo gold project on the island of Java. At least, that's the official line.

Documents obtained by BusinessDay show that Intrepid's joint venture partners in Indonesia have sold the huge Tujuh Bukit project to someone else, right out from underneath their noses.

A shareholding approval by the head of government of Banyuwangi regency shows a change in ownership for the company that holds the project's mining licence. The licence is no longer held by Intrepid's joint-venture partner Indo Multi Niaga (IMN) but by another company, Bumi Sukses Indo (BSI).

Asked to comment, Intrepid's chief executive, Brad Gordon, said he was not aware of a change of ownership and he questioned the document's authenticity.

"We get reports regularly from the Laws and Human Rights Department. We have had nothing official from the department," he said.

Intrepid had already lost control of the project in July when, in dramatic circumstances, a helicopter set down in the jungle clearing at Tujuh Bukit and ordered all 460 workers to down tools and evacuate the site.

Its joint venture partners, an Indonesian couple, Maya Ambarsari and Reza Nazaruddin, and their company IMN, had introduced new investors to the project and simply cut the Australian explorer out of the picture.

It came as more than just a shock for Intrepid, which had already spent $95 million proving up the resource and its 25 million ounces of gold, 80 million ounces of silver and 7 million tonnes of copper.

There were also questions about disclosure. Although the company rejected suggestions that it might not have fully met its obligations under the continuous disclosure regime, it was not obvious, at least until the project was seized in July, that Intrepid's stake in Tujuh Bukit was "economic" rather than legally enforceable.

As Intrepid's share price tanked, Mr Gordon moved quickly to salvage the venture. Ms Maya and Mr Reza avoided all communication, however, and left him with little option other than to put a brave face on things and try to pull some strings in Indonesia.

So Mr Gordon struck a deal with an influential Jakarta businessman and TV network owner, Surya Paloh. Mr Paloh was issued with 5 per cent of the company's stock, with options over another 10 per cent, on account of his "vast experience in navigating the waters of Indonesian business".

Yet even with the inducement of 13 per cent of the company's stock, Mr Paloh has been unable to get Ms Maya and Mr Reza and the PT IMN joint venture partner back to the negotiating table.

A month before the project was seized by Intrepid's partners Ms Maya and Mr Reza, the couple had registered a change of ownership of their company IMN.

They transferred 80 per cent to new investors. In July, they transferred the mining licence from their company IMN to a 51 per cent owned subsidiary of IMN called Bumi Sukses Indo (BSI). Via this transfer, Intrepid still had a claim to the gold project because its contracts were held with IMN, and IMN still held 51 per cent.

The most recent disclosures, however, show that Intrepid's partners IMN, and IMN's principals Ms Maya and Mr Reza, are no longer shareholders of the company that holds the mining licence. The new shareholding is PT Alfa Sukses Indo (5 per cent) and PT Merdeka Serasi Jaya (95 per cent).

The type of mining licence held by Intrepid's joint venture partner (PT Indo Multi Niaga) is known as an "IUP" and could not be held by foreigners, so the company had been running some legal risk all along, since it struck the deal with IMN in August 2007.

Ironically, Intrepid has just fielded a lawsuit filed by its former partner Paul Willis, who claims he had been cut out of Tujuh Bukit in 2007, just as Ms Maya and Mr Reza had cut Intrepid out of the picture this year.

Mr Willis and his company IndoAust have filed a suit in the Jakarta court seeking to have the agreements between Intrepid and IMN declared null and void because they were the direct product of an act of duress.

Mr Willis alleges that he was intimidated by thugs acting for Ms Maya and Mr Reza into relinquishing his stake in the project. Last week, Intrepid responded to the claim. "The company believes the action brought is totally without foundation and suffers from material legal deficiencies and will vigorously defend the action."

Mr Willis says he is also bringing a class action against Intrepid for failing to inform the market of its lack of legal rights to the project.

There is no doubt some tactical benefit to be gained by Mr Willis in making a pincer movement in two legal claims. For its part, Intrepid has dismissed claims of a failure of disclosure.

It is difficult, though, to find relevant disclosure of ownership risk in the statutory materials until February 2009. Even then, it seems to be buried in quarterly management reports rather than displayed prominently enough in the likes of JORC resource statements, which are more widely viewed by investors.

Before Intrepid came on the scene, Mr Willis had begun working the Tujuh Bukit area, armed with some old Placer Dome data. He and his partner, Sam Garret, had struck a deal with Ms Maya and Mr Reza.

Under Indonesian law, foreigners could not legally own shares in Indonesian companies so their private company, IndoAust, had an arrangement with Ms Maya and Mr Reza's company IMN.

IMN held the mining licence, which was then known as a KP.

The drilling results were promising, so Mr Willis went looking for a partner to fund the project. He found Emperor Mines in 2007, which was to change its name to Intrepid.

By the following March, the alliance agreement between IndoAust and the then Emperor Mines had fallen asunder.

IndoAust and its workers were forced to evacuate the Tujuh Bukit site in April 2008 in the same dramatic fashion as Intrepid did in July this year.