Bank willing to loan $1 billion for Cerro Casale

Vancouver – A major international bank has reportedly offered $1 billion in the form of a loan toward financing the Cerro Casale porphyry gold and copper project to development, at a time when its future is on shaky ground. This is evidence in support of the project’s financeability, say Arizona Star (AZS-T) and affiliate, Bema Gold (BGO-T). The issue of financing is at the heart of a current dispute with their joint venture partner, Placer Dome (PDG-T) which is the operator of the project.

Discovered by Bema in 1995, Cerro Casale is one of the world’s largest undeveloped porphyry copper projects. It is situated on the Aldebaran property in northern Chile, 30 km south of Bema’s Refugio mine.

A major upgrade of the Refugio mine facilities is underway with the aim of getting the plant restarted by the end of this year. Costs which were budgeted initially at US$100 million have jumped by about 10%. Full production is planned to begin in the first quarter of 2005 at the rate of 250,000 oz. per year at cash costs of some US$225 per oz. with a ten year mine life.

Cerro Casale had shown an increase in the projected capital cost from $1.43 billion to $1.65 billion after Placer had another look at the economics of the project, in light of higher metal prices, earlier this year.

The feasibility study confirmed proven and probable reserves of 23 million ounces of gold and 6 billion pounds of copper and that a large scale open pit gold-copper mine would be technically feasible at Cerro Casale.

According to the feasibility study, Cerro Casale could produce 975,000 ounces of gold and 130,000 tonnes of copper per year over an 18-year mine life. Cash production costs are estimated at US$111 per ounce of gold with total costs estimated at US$225 per ounce of gold (assuming credits for copper at $0.95 per pound and a silver price of $5.50 per ounce).

Arizona Star and Bema Gold which together have a 49% interest in the property, threatened to go to arbitration last month to get back Placer Dome’s 51% stake in the project after Placer Dome said the Cerro Casale project was not financeable. The companies alleged that Placer hadn’t done enough to arrange the necessary funding for the project’s estimated $1.65 billion cost.

For its part, Placer Dome was required to arrange $1.3 billion in financing to bring the mine to production, to retain the 51% interest it earned when it delivered the bankable feasibility study in February 2000.