A year or so after the Busang gold salting scandal in the jungles of Indonesia's Kalimantan rocked the world, Newcrest is moving fast to bring its A$90 million Gosowong gold mine on stream between Sulawesi and Irian Jaya.

The world gold market remains quiet and directionless as investors punt on interest rates and stocks. But Newcrest is in action mode at Gosowong, with a start of construction imminent and the first gold scheduled to be produced about July 1999.

Newcrest sees Gosowong, with its low costs and rich grades near the surface, providing a fast cash flow and up to 20 per cent of its annual production.

But are there any lessons for Newcrest from the Busangscam, which involved planted gold at a dud mine in Indonesia owned by Canada's Bre-X Minerals Ltd?

This took Bre-X on a wild ride to amarket capitalisation of C$6 billion in 1997 before it became worthless when Busang was shown to have virtually no gold.

Apart from problems of control in difficult physical and cultural terrain, Indonesia also presents the additional problem of continuing political instability after the exit of Suharto after 32 years as president.

"The board has deliberated long and hard about it and have decided that the rewards certainly outweigh any risks," Newcrest spokesman David Sasson told Reuters on Thursday.

"We've been watching what's been going on in Indonesia very carefully and we are confident that the contract of work framework (for the mine) is still very secure," he said.

"(Busang was) an out and out fraud," Sasson also said."We're extremely confident of the quality and integrity of our exploration geologists. We do our normal tests where we put in blind samples and send them off to independent labs, we put a lot of safeguards into what we do."

Newcrest uses laboratories in Perth and Indonesia.Blind tests are samples which have known values before they are sent to the lab. The company compares values reported by the labs with the known value.

Gosowong would be a significant producer for Newcrest over a comparatively brief mine life of only five years, Sasson said.

"You couldn't wish for a better mine to start off your operations in a new country. We have a very high grade portion at surface," he said.

With near-surface grades of 27 grams/T, or nearly an ounce, production costs of less than $100 an ounce and a strong net present value, Gosowong would be a low-cost producer with "the cash flow right way around", he said.

Gosowong will not require a special approach to mining but will use the Merrill Crowe processing technique to maximise recovery from very high grades.

Newcrest plans that Gosowong will produce on average 155,000 ounces a year, with production in the first years to be considerably higher than that. The new mine will contribute around 20 per cent to Newcrest's annualproduction, Sasson said.

Newcrest has forecast total gold production of 690,000 ounces in the year to June 30 1990 and has said it expects to reach one million ounces of production in 2000/01. The company swung from loss to marginal profit in 1997/98.