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billion-dollar gold mining project in Gorontalo, northern Sulawesi, is now at risk following an ongoing dispute between village cooperative unit (KUD) Dharma Tani, and two investors '€” Australia-based One Asia Resources and Jakarta-listed PT J Resources Asia Pasifik.

The dispute broke out after KUD Dharma Tani, which had signed an agreement with the Australian company, abruptly withdrew from the deal and later inked a new agreement with PT Puncak Emas Gorontalo, a company linked to PT J Resources.

One Asia managing director and chief executive officer Stephen Walters said his company and KUD Dharma Tani agreed in 2009 and established a joint venture called PT Pani Dharma Mas.

The joint venture worked on the gold mining site with a permit, locally known as an IUP, issued by the local administration.

'€œHowever, they [KUD Dharma Tani] unilaterally terminated the agreement. They sent a letter in November demanding Rp 10 billion [US$820,000], which was not stated in the agreement,'€ Walters said on Wednesday.

'€œWe offered that we would pay in stages but they refused it. The next thing we know, they signed a new agreement with another company.'€

Walters said his company had disbursed $10 million for exploration works on the site and was now conducting a feasibility study for further development.

According to him, One Asia planned to invest up to Rp 2 trillion, excluding exploration spending, for construction works, which were expected to start next year after feasibility and environmental studies finish in mid-2014.

Following the dispute, according to Walters, a number of works had been halted, including an engineering study and geotechnical drilling.

The gold mining site, which is located in Marisa district, Pohuwato regency, Gorontalo, is an appealing prospect because, according to One Asia'€™s data, it has 1.9 million ounces of gold resources. When the mining site is in operation, it can produce 170,000 ounces of gold per year, according to figures on One Asia'€™s website.

The dispute between One Asia and KUD Dharma Tani has entered legal stages and both are scheduled to attend a mediation process in the Marisa district court next week.

Meanwhile, after withdrawing from the deal, KUD Dharma Tani signed a cooperation agreement with J Resources in December and formed a joint venture called PT Puncak Emas Gorontalo.

In a recent announcement submitted to the Indonesia Stock Exchange (IDX), J Resources said that the agreement was the company'€™s move to integrate between the contract of work (CoW) of its subsidiary PT Gorontalo Sejahtera Mining and the IUP of Dharma Tani.

Dharma Tani'€™s IUP is located inside Gorontalo Sejahtera'€™s CoW, according to J Resources director Edi Permadi.

'€œWe actually have nothing to do with the matter because it involves the KUD and its previous partner. We and the KUD already had a long consultation with the central government. If any problems emerge, we will obey the law,'€ Edi said last week.

He said that J Resources estimated an investment of around $240 million for the development of the Pohuwato mining site. It also expects to start construction on the project in 2015 and kick off production in 2016.