Beama sees 225,000 oz. a year from Chile

Armed with a positive preliminary feasibility report, Bema Gold (TSE) is aiming to bring on stream a heap leach gold mine in Chile with an annual production rate of about 225,000 oz. gold. That represents an ambitious production leap for the Vancouver- based junior which became a mine operator in 1989 when it built and opened the modest-sized Champagne mine in Idaho. Bema has a 85% interest in this open pit, heap leach operation which turned out 27,000 oz. gold equivalent in 1990, some 2,000 oz. above its projected production rate. (Gold equivalent is determined by computing the value of all minerals produced, then dividing by the price of gold.)

In the same year, Bema took on the Refugio gold project by securing an option agreement with a Chilean company allowing it to earn a 50% interest by advancing the project to feasibility.

Bema’s work included a total of 164,000 ft. of drilling on the Verde deposit, one of a series of disseminated gold porphyry bodies within the property. Gold mineralization at Verde is contained within a strong stockwork system hosted by silicified intrusive rocks.

This work led to the outlining of a preliminary reserve of 215 million tons grading 0.026 oz. gold per ton, at a cutoff grade of 0.015 oz. From this reserve, the study identified, as the base case, an initial minable reserve of 111 million tons at an average grade of 0.028 oz. gold per ton, which Bema said, contains “an estimated 3.1 million oz. gold.”

President Clive Johnson said the base case was restricted by a management-imposed ceiling of about US$100 million initial fixed capital costs.

“We are trying to be realistic about who we are and what we can handle,” he said. “We may be aggressive, but we aren’t reckless.”

The remaining lower-grade minable reserve of 160 million tons of 0.026 oz. gold will allow for either an extension of the mine life beyond that of the base case, or exploitation of the deposit at a higher production rate. Both minable reserve cases have a strip ratio of 0.82-to-1. The deposit remains open at depth in possible reserves that may be upgraded by future drilling.

Bema’s recent preliminary feasibility study, completed by Mineral Resources Development (MRD), concluded that the Verde deposit is both technically and financially viable.

Based on the report’s findings, Bema decided to proceed with development of the deposit. It has already initiated discussions for project financing and contractor selection for engineering, procurement and construction management.

The study recommended that the deposit be developed as an open pit, heap leaching operation. At a processing rate of 33,000 tons per day, or 11.9 million tons per year, Verde is expected to have an initial mine life of 9.4 years and a payback period of 3.4 years. The mine would employ 357 in the first year, rising to 407 by year six.

Operating costs are projected as US$192 per oz. over the first five years, with life of mine average operating costs at US$207 per oz. Utilizing a constant gold price of US$400 per oz. over the initial 9.4-year mine life, the mine is projected to generate a real internal rate of return of 29.3% before tax.

The scope of work presented in the report includes geological and metallurgical interpretation of the Verde deposit, conceptual mine planning, engineering studies, and the development of capital and operating cost estimates to support the economic analysis of the project.

The Verde deposit consists of oxide, mixed and unoxidized ore types which metallurgical test work found to be amenable to heap leaching. The projected average oxide recovery is 72%, with an overall 67% average gold recovery for the deposit.

The oxide ores will be crushed to 1/2 inch, followed by 1/4-inch crushing for mixed and unoxidized ores. Carbon adsorption, stripping and electrowinning will be used to recover gold from the leach solutions. Electrowon cathodes will be smelted to dore bars for shipment.

The metallurgical work is of no small interest in view of the fact that other mines in the Maricunga district were reported to have encountered gold recovery problems because of copper in the ores. The Verde deposit contains minor copper, but Johnson said it is not presenting a problem.

“We feel the study puts the metallurgy to rest,” he said. “This report is more comprehensive than you would typically find in a preliminary study because we plan to use it to arrange project financing.”

In order to minimize dilution, Bema is seeking to arrange financing for the entire project which will be owned 100% by a new company held equally by Bema and its Chilean partner. Johnson hopes to debt finance about 70% of capital costs largely through gold loans. Some funds will be raised through equity, and the company hopes to substantially reduce its up front costs by arranging a lease-to- purchase of the mining fleet.

“These are difficult times but good projects do get financed,” Johnson said.

The final feasibility study for the Verde project is scheduled for completion at the end of March, 1991. The Refugio property is accessible by road and has water sources, but power would have to be brought in by a 77-mile line.