Bema Gold sees US$80-million loss in 2004

Vancouver – Escalating costs coupled with currency issues pushed Bema Gold (BGO-T) deeper into the red for 2004.

The company posted an US$80-million loss (US22 per share) for 2004, more than double its US$31-million loss (US9 per share) in the previous year. Fourth quarter losses in 2004 were US$45 million versus a US$20-million loss in Q4-2003.

Continued strength in the South African Rand significantly impacted the company’s Petrex operations in the country. In reevaluating Petrex, Bema resultantly wrote down US$27.3 million of the project’s carrying value assessed towards goodwill.

Bema’s wholly owned Petrex mines produced 146,000 oz. gold in 2004 at cash costs of US$388 per oz. (adjusted to reflect a Rand-denominated gold put option gain). Despite a successful program of optimizing operations, it remains very sensitive to currency issues that adversely impact operating costs. In addition to the write-down, Petrex incurred an US$8.9-million operating loss for the year.

The company’s 79%-owned Julietta mine in far eastern Russia saw 2004 production of just over 83,000 oz. gold at total cash costs of US$234 per oz. Bullion output was down almost 30% from the 118,000 oz. seen in 2003 due to a warehouse fire in early-2004 plus delays in accessing higher-grade veins scheduled to be mined in 2004. The fire destroyed most of the spare parts inventory resulting in reduced mining and milling rates while equipment was replaced.

Start-up costs at Bema’s 50%-owned Refugio gold mine in northern Chile saw a charge of US$6.4 million incurred over the year. Restart of the mine has been delayed and is scheduled for mid-2005. Production for 2005, during ramp-up of operations, is forecast at about 100,000 oz. gold. Bema’s 50%-partner and operator on the project is Kinross Gold (K-T).

The company is advancing development of its 40%-owned Kupol gold-silver project, in the Chukotka region of northeastern Russia, where it can earn a 75% interest. The 2004 infill drilling program has resulted in an updated resource calculation for the deposit. Within indicated resources, contained gold increased 230% to 4.2 million oz. while contained silver has been increased over 270% to almost 53-million oz. The high-grade vein-hosted deposit has an indicated resource of 6.4-million tonnes grading 20.3 grams gold per tonnes and 257 grams silver per tonne. An additional inferred resource of 4.1-million tonnes at 12.4 grams gold and 171 grams silver has been calculated. The main Kupol deposit remains open along strike to the north and south, as well as to depth in the north. A feasibility study is scheduled to be completed by May-2005, to be followed by a planned 45,000-metre drill program to test potential extensions and some further infill work.

Bema holds 24% interest in the large Cerro Casale gold-copper deposit in northern Chile. Arizona Star Resource (AZS-V) owns 25% of the project with operator Placer Dome (PDG-T) holding 51%. Placer is responsible to arrange development financing by the end of 2005, estimated to be in the order of about US$1.3 billion, to maintain its interest in the joint venture. In late-2004, Bema launched a takeover bid for sister-company Arizona Star, offering 1.85 shares for each Arizona Star share in its effort to consolidate the minority interest in the project.

With 383-million shares outstanding, Bema posts a market capitalization of about $1.2 billion. Investors were disappointed at the company’s increased loss with the issue dropping about 20 to the $3.20 per share level.