Bema lines up Kupol construction loans

Bema Gold‘s (BGO-T, BGO-X) 75%-owned subsidiary Chukotka Mining and Geologic (CMGC) has signed US$425 million worth of loan agreements for the construction of the Kupol mine in Far East Russia.

The first US$250-million tranche of the US$400 million project loan is underwritten by Bayerische Hypo- und Vereinsbank AG and Societe Generale Corporate & Investment Banking. The remaining $150 million is from a group of multilateral and industry finance institutions.

CMGC has also signed a subordinated US$25 million loan with the World Bank Group’s International Finance Corporation (IFC) arm. The non-recourse loan will have an 8.5-year term from drawdown, which is expected in the first quarter of 2006.

As part of the agreement, Bema will issue 8.5 million warrants to the IFC, with each warrant good for a Bema share at US$2.94 apiece. Proceeds from the exercise of the warrants will go to repay the loan.

A total of US$380 million of the project loan is earmarked for construction, with the remaining US$20 million to be set aside for contingencies. Likewise, US$19.5 million of the IFC loan can be applied to construction, with US$5.5 million withheld to cover interest payments.

Construction at Kupol is expected to run US$470 million; Bema is required to cover around US$53 million of that, with the government of Chukotka responsible for the remainder.

One of the project loan underwriters has also offered a US$17.5-million cost overrun facility in return for the issue of convertible unsecured notes with a 7-year term from drawdown. The conversion price of the notes will be a 35% premium to Bema’s average share price in the 20 trading days following the initial drawdown of the project loan.

Bema hops to have Kupol churning out 552,000 oz. gold and 5.86 million oz. silver annually over 6.5 years, beginning in mid-2008. The proposed 3,000-tonne-per-day operation would focus on a probable reserve totalling 7.1 million tonnes averaging 16.9 grams gold and 214 grams silver per tonne.