Bank offers $1b loan for Cerro Casale

Vancouver — An unnamed major international bank has offered $1 billion in the form of a loan toward financing development of the Cerro Casale porphyry gold-copper project in northern Chile.

Arizona Star (AZS-T) and affiliate Bema Gold (BGO-T) together have a 49% interest in Cerro Casale; Placer Dome (pdg-t), the operator, owns 51%. Arizona Star and Bema recently threatened to go to arbitration to get back Placer Dome’s interest after Placer Dome said the project is not financeable. Arizona Star and Bema alleged Placer had not done enough to arrange financing for the project’s estimated $1.65-billion cost. Placer Dome was required to arrange $1.3 billion in financing to bring the mine to production and thereby retain the 51% interest it earned when it delivered the bankable feasibility study in February 2000.

Discovered by Bema in 1995, Cerro Casale is one of the world’s largest undeveloped porphyry copper projects. It is on the Aldebaran property in northern Chile, 30 km south of Bema’s Refugio mine. (A major upgrade of the Refugio mine facilities is under way in an attempt to get the plant restarted by year-end. Costs were initially budgeted at US$100 million, but have increased by about 10%. Full production is slated for the first quarter of 2005 at the yearly rate of 250,000 oz. Cash costs are pegged at US$225 per oz.; the mine life, at 10 years.)

The feasibility study confirmed proven and probable reserves of 23 million oz. gold and 6 billion lbs. copper, and called for a large open-pit operation.

The study suggested Cerro Casale is capable of producing 975,000 oz. gold and 130,000 tonnes copper annually over a mine life of 18 years. Cash production costs are estimated at US$111 per oz. gold; total costs, at US$225 per oz. gold (assuming copper credits of US95 per lb. and a silver price of US$5.50 per oz.).

Meanwhile, Bema has received a loan arranged through Bayerische Hypo-und Vereinsbank for its Kupol project in northeastern Russia.