With the underperforming Refugio mine in Chile about to close,
Julietta is expected to be a low-cost underground producer and a source of cash flow even in today’s weak metal markets. During the first five years of operation, production is forecast to average 87,000 oz. gold and 1.3 million oz. silver annually, or 113,000 oz. gold-equivalent. Cash operating costs, including taxes and royalties, are pegged at less than US$100 per oz. gold-equivalent.
Proven and probable reserves stand at 540,000 tonnes grading 24.7 grams gold and 407 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 grading 15.93 grams gold and 277.9 grams silver, equivalent to 307,700 oz. gold and 5.4 million oz. silver. Upgrading the possible reserves into the proven-and-probable category would extend the mine life to beyond nine years, for an average annual output of 95,000 oz. gold-equivalent.
The project is being developed at an estimated cost of US$45 million. Bema was able to arrange a US$25-million project loan from Hypo-Vereinsbank and Standard Bank, plus a US$10-million loan from International Finance Corp., a division of the World Bank. In addition, Bema secured a US$5-million cost overrun facility with Hypo-Vereinsbank and Standard Bank.
At the end of April, more than 1,500 metres of underground development drifting had been completed, camp construction was finished and the 350-tonne-per-day mill was entering the final stage of construction.
A development plan, completed in June 1999, recommended Julietta be developed by means of mechanized cut-and-fill mining methods. The metallurgy of the deposit is said to be straightforward, with projected recoveries of 94% 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 after-tax internal rate of return is projected to be 43%.
Julietta is 250 km northeast of the port city of Magadan and 600 km south of
The deposit was discovered in 1989 and has been extensively explored and developed, first by Russian expeditions and later by Arian. The work, which has focused only on a small portion of the property, consisted of geological mapping, extensive trenching, 57,000 metres of diamond drilling and 3,000 metres of underground development.
Julietta is a low-sulphidation epithermal vein deposit hosted in Cretaceous volcanics. The steeply dipping veins strike east-west and vary in width from 10 cm to 7 metres, for an average of 1-1.5 metres. The current reserve comprises more than a dozen quartz veins in an area measuring 1 by 2 km. Bema believes there is potential to expand reserves as several of the veins remain open along strike and at depth. In addition, there are numerous untested high-grade surface showings that warrant further attention.
Last year was another disappointing one for the Refugio open-pit heap-leach gold mine, which is shared equally by Bema and Kinross. The high-altitude operation once again failed to meet projections, resulting in unexpected cash calls to Bema of more than US$6.8 million to fund budget shortfalls. Despite the installation of four crushers and numerous other improvements in the previous year, gold production at Refugio in 2000 was 26% below budget at 169,832 oz., whereas cash operating costs were 24% over budget at US$286 per oz. The mine and plant are designed to produce between 200,000 and 250,000 oz. per year.
The production shortfall was caused by two factors: poor crushing plant throughput in the second half of the year, and extensive freezing of the leach solution distribution system caused by a power failure during a storm last June. Bema took the position that Kinross, as operator, was responsible for the budget over-runs. Kinross disagreed and unilaterally suspended all mining and crushing activities in early November 2000. The partners reached an understanding and ultimately agreed to restart mining in mid-December to take advantage of favourable Chilean spring and summer conditions.
Unfortunately, the mine’s costly performance in 2000, combined with the low gold price and the requirement for additional capital to build more leach pads, forced Bema and Kinross to cease mining at the end of May. Residual leaching will continue.
Proven and probable reserves at the end of 2000 totalled 62 million tonnes grading 0.9 gram gold, or 1.9 million contained ounces, based on a gold price of US$300 per oz. The average ultimate recovery for these reserves is projected at 64%. Additional measured and indicated resources total 54.2 million tonnes grading 0.9 gram.
Production at Refugio for the first three months of 2001 was 51,521 oz. at a cash cost of US$230 per oz., compared with 41,941 oz. at US$321 per oz. in the prior quarter. Bema’s share of gold production from Refugio in 2000 was 84,916 oz., compared with 89,733 oz. in 1999. Total cash costs for the year were US$292 per oz., up US$24 over the previous year, while total production costs rose US$37 to US$379 per oz.
During 2000, the partners continued with arbitration proceedings in Chile against the original construction contractor of the Refugio mine in an attempt to recover losses attributed to design and construction failures. A final arbitration decision is expected by year-end.
For the year ended Dec. 31, 2000, Bema posted a loss of US$51.1 million (or 36 per share) on revenue of US$30.6 million, versus a loss of US$4 million (3 per share) on sales of US$35.3 million in 1999. The loss for 2000 included a US$20-million writedown in the carrying value of Refugio, as well as investment losses of US$9.3 million from the sale of shares of
Cash from operations was US$700,000 (nil per share) in 2000, compared with US$3.3 million (3 per share) in 1999. At the end of 2000, the company had US$3.2 million in cash and working capital of US$7.4 million.
Be the first to comment on "Bema looks to far-eastern Russia"