Fire hampers Julietta mine

A fire in a warehouse has forced Bema Gold (BGO-T) to scale back mining and milling at the Julietta mine in Far Eastern Russia.

No one was hurt in the fire, which destroyed most of the operation’s spare parts inventory. A faulty heater is apparently to blame, though a full investigation is under way.

Full production is expected to resume in early March, once the spare parts have been replenished.

In the meantime, the mine will operate at lower tonnage rates and be supplemented by ore from lower-grade stockpiles to maintain mill throughput.

In 2003, Julietta produced 118,145 oz. gold (nearly half the company’s total output) at a total cash cost of US$148 per oz. Production for 2004 is expected to slip to 102,000 oz. while cash costs are expected to hit US$177 per oz. as lower-grade ore is processed. Costs will also be affected by higher royalty taxes on a higher spot-gold-price budget of US$375 per oz.

Julietta had its first full year of commercial production in 2002: 108,844 oz. gold and 1.4 million oz. silver at an operating cash cost of US$119 per oz. and a total cash cost of US$159 per oz.

Bema owns 79% of the Julietta mine; Russian-based Nedra owns 11%, and Dukat Mining & Geologica, 10%.

Meanwhile, some 940 km to the northeast, Bema has tabled a preliminary resource estimate for the Kupol gold-silver project in the Chukotka region. Based on 21,860 metres of drilling in 2003, indicated resources stand at 2.5 million tonnes running 22.3 grams gold and 232 grams silver per tonne. An additional 7.1 million tonnes of 18.4 grams gold and 243 grams silver are inferred.

The estimate excludes significant sections of the Kupol vein in the Central and North extension zones. Bema will begin a 57,000-metre program of infill and exploration drilling in May. Seven rigs will test the North zone extension and drill stepout holes farther north. The holes will also fill-in and explore the Big Bend zone.

So far, drilling on the Kupol vein has delineated gold mineralization to a depth of at least 300 metres over 3.1 km of drilled strike length. The zone remains open to the north, south, and at depth.

Preliminary bottle-roll cyanidation tests on Kupol ore indicate recoveries of 94.5-96.5% for gold and 70-80% for silver. Bema will perform a preliminary economic assessment in May, and construction is slated for 2005.

Bema can acquire a 75% stake in Kupol from the government of Chukotka (T.N.M., Sept. 15-21/03).

Bema recently closed an offering of US$70 million’ worth of senior unsecured convertible notes due in February 2011. The notes carry a coupon rate of 3.25% per year, and the conversion price is US$4.664 per share — a premium of 37.5% over the volume-weighted average share price of US$3.392 on Feb. 11. Proceeds will be used to resume mining at the Refugio gold mine in Chile, and to develop the Kupol project.