Bema finances Julietta project

Bema Gold (BGO-T) intends to raise $9.5 million in a private placement of 10 million special warrants priced at 95 each. A portion of the proceeds will be used to explore the 79%-owned Julietta gold-silver project in far eastern Russia.

The special warrants will be exchangeable into one share and a half-share purchase warrant. A whole warrant will entitle the holder to buy an additional share at $1.15 in the first year and at $1.30 in the second.

The private placement comes on the heels of commitments from two European banks to underwrite a US$25-million loan facility for construction of the mine. The lenders have also agreed to make available a US$5-million convertible debenture as protection against construction cost overruns.

Julietta has proven and probable reserves of about 538,446 tonnes grading 24.65 grams gold and 407.5 grams silver per tonne, equivalent to 426,700 oz. gold and 7.1 million oz. silver. An additional possible component is estimated at 600,854 tonnes averaging 15.93 grams gold and 277.9 grams silver, equal to 307,700 oz. gold and 5.4 million oz. silver.

Based on a revised development plan that lowered capital cost projections to US$38.5 million, Julietta is expected to produce an annual average of 113,000 oz. gold-equivalent over the first five years, or 95,000 oz. gold-equivalent per year over nine years. Cash operating costs, including royalties and tax revenues, are forecast to be US$93 per oz. gold-equivalent over the life of the mine.

Underground mechanized cut-and-fill methods will be used to mine 350 tonnes per day. The metallurgy of the deposit, which comprises 14 quartz-sulphide veins averaging 1-1.5 metres in width, is said to be straightforward, with projected recoveries of 93% for gold and 85% for silver. Bema has opted to use conventional flotation concentration, cyanide leach and standard Merrill-Crowe precipitation to produce dore bars.

Based on a gold price of US$280 per oz. and a silver price of US$5.50 per oz., the mine should generate an after-tax internal rate-of-return of 43%.

Bema expects to close the US$25-million project loan facility and complete the remaining financing arrangements by the end of January 2000. Construction is to begin in June 2000, with startup slated for one year later. Bema spent US$2 million in 1999 on site preparation, including road upgrades and concrete work on mill footings and foundations.