German bank loans US$60 million for Kupol

Vancouver – Bema Gold (BGO-T) sees a US$60 million loan by a major foreign bank as a strong vote of confidence in its development plans for the Kupol gold and silver project in far eastern Russia. The financial support from a major foreign bank should also ease investor’s concerns over potential jurisdictional issues surrounding the government of Chukotka, an autonomous region, from which Bema is earning a majority interest.

Bema signed an agreement led by German-based Bayerische Hypo-und Vereinsbank to arrange a US$60 million bridge loan facility to pay for the ongoing development of its wholly-owned Kupol project situated in northeastern Russia. The project is now at the prefeasibility stage and in the midst of an extensive drill program. Construction has begun on a runway and other facilities.

Bema has first hand mining experience in Russia from its operating Julietta gold mine also in northeastern Russia.

The company is planning an open pit and underground operation over a 12 year mine life at a capital cost estimated at over US$280 million. A preliminary economic assessment of the Kupol project in June, shows that it can be developed as a high-grade, low-cost mine with robust economics.

Bema has been considering ways to finance the project which is currently at the prefeasibility stage, and looked at more traditional means like equity and convertible debt. However, it decided to go with debt financing so as not to dilute the stock.

It is securing the loan with the ounces of gold contained in the ground and in that respect says Ian MacLean, the company’s manager of investor relations, "it is somewhat unprecedented in the industry; we are using our ounces in the ground to secure the loan. This is not a project loan but rather a loan to take us to a project loan". He says that it shows how confident the bank is in those ounces and the Russian jurisdiction where the Kupol project is situated.

Although Bema will guarantee the loan, which will mature two years from the signing of the agreement, Bema wants to combine it with the Kupol project construction financing which it will arrange by early next year.Kupol is a high-grade gold and silver deposit within an epithermal vein system that is up to 30 metres wide. The system has been defined over 4 km of strike length and remains open along strike and at depth.

The project contains a preliminary indicated resource of 2.6 million tonnes grading 22.3 grams gold and 232 grams silver per tonne containing 1.8 million oz. gold and 19.1 million oz. silver. An inferred resource of 7.2 million tonnes of 18.4 grams gold and 243 grams silver contains another 4.2 million oz. gold and 55.9 million oz. silver was estimated.

Bema is in the midst of a 57,000-metre infill drilling program to raise the inferred resource to the measured and indicated category and is testing the northern strike and depth extent of the Kupol vein. The drilling will continue throughout the fall, followed by a final feasibility study, which is scheduled to be completed by March 2005.