Amax Gold, Bema to combine on Refugio property in Chile

If a recently signed letter of intent to purchase Cia Minera Refugio’s 50% interest in the Refugio property is completed, Amax Gold (NYSE) and Bema Gold (TSE) will become joint venture partners in the Chilean heap leach gold project.

Amax negotiated a deal to purchase the Chilean company’s 50% interest in the project for an undisclosed sum, and at the same time renegotiated the property agreement with Bema.

Amax and Bema will become equal partners, forming a jointly owned company to construct and operate the Refugio mine.

Clive Johnson, president of Bema, said the two companies will jointly finance the project using the financing plan already developed by Bema. He said the prospects for completing the financing are “substantially increased” with the involvement of Amax.

Capital cost of the project is estimated at US$130 million and Bema has already arranged US$25 million in equipment lease-financing. The balance of the funds are to be raised through a US$75-million gold loan plus US$30 million in equity financing.

Bema received a commitment for 20% of the loan from London-based Sharps Pixley last September. Sharps, the lead banker and syndicate manager of the gold loan, has since been attempting to arrange the balance of the loan. Johnson noted that terms of the loan, including a stipulation that gold must be above US$350 per oz., are being renegotiated.

Bema’s feasibility study estimates the project will produce an average of 233,000 oz. gold per year at an operating cost of US$189 per oz. over 9.4 years. This is based on preliminary reserves of 112 million tons grading 0.030 oz. gold per ton with a strip ratio of about 1-to-1. Total reserves are estimated at 204 million tons grading 0.026 oz. gold which would increase the mine life to over 17 years.