LATIN AMERICA SPECIAL — Bema/Amax Gold venture —

More than six years ago, junior company Bema Gold (TSE) headed off to Chile to take on a gold project which would enable it to make the transition from a small, 20,000-oz.-per-year producer to one that churns out more than 100,000 oz. annually.

The road to becoming a mid-size gold producer proved to be much tougher, and longer, than originally anticipated. But mine construction is finally under way at the Refugio project in Chile’s Maricunga district, and on schedule for completion by December.

Bema and its 50-50 partner, Amax Gold (TSE), expect the first gold to be poured in February, 1996. Ore will be processed at a rate of 30,000 tonnes per day, with gold recovered through conventional heap leaching and carbon recovery technology. Production is expected to average 233,000 oz. annually, over a mine life of 9.4 years.

Refugio’s road to production has been so rocky it picked up the nickname “Refuse-to-go.” And in the beginning, the project did have its share of skeptics, Bema President Clive Johnson told The Northern Miner. “We think our decision to come to Chile over six years ago was a bold decision, and the right decision,” Johnson said. “But it was difficult to raise money for Chile at that time, and we were also battling the negative sentiment from the failure of the Marte gold mine in the Maricunga district.” Johnson says Marte failed for technical reasons particular to Marte. “We have a much different deposit (in Refugio), with none of Marte’s metallurgical problems, that makes for a simple, straightforward, heap-leach mine,” he said. A reflection of the initial skepticism is that four feasibility studies were carried out (including one by Amax Gold), plus an engineering audit that confirmed the findings of those studies.

Most of the early concerns focused on the effects of altitude on leaching, Johnson recalls, concerns which have since been dispelled. “We are not pioneering here, and not doing anything that has not been done before,” he said.

Instead, the partners focused on the effects of cold weather, and studied heap-leach operations in North America that operate in similar conditions. “Solution management is the most important factor,” Johnson explained, adding that despite cold winter temperatures at Refugio, the abundance of sunlight renders winter leaching feasible.

After addressing technical concerns, Bema set out to raise financing based on the first (1991) feasibility study. Those efforts were somewhat tortuous, Johnson recalled. Gold prices fell to below US$320 per oz.; other snags followed, including the corporate and financial problems of joint-venture partner Amax Gold and the financial weakening of Bema itself. It was only after control of Amax Gold went to Cyprus-Amax Minerals (NYSE) that the financing package fell into place. Earlier this year, Amax Gold and Bema announced they had raised the US$127 million required for construction. The financing consists of a US$85-million gold loan and US$21 million of equity contribution from each of Amax Gold and Bema. The gold loan was provided by the Canadian Imperial Bank of Commerce, Credit Lyonnais, Deutsche Bank North America, Internationale Nederlanden (US) Capital and NM Rothschild. Flour Daniel Chile is building the mine facilities under a guaranteed fixed price construction contract. To date, a construction camp for 400 has been completed, and formation of the permanent camp, water pipeline, leach pads and on-site buildings is under way.

The mine is being modelled on “base case” reserves of 112 million tons grading 0.03 oz. gold per ton, with a stripping ratio of 1-to-1. The project has additional reserves of 204 million tons grading 0.026 oz., which could extend the mine life to 17.2 years.

Cash production costs are projected at US$208 per oz., which is slightly higher than previous estimates, owing to a decision to enlist contract miners (thereby reducing capital costs).

In recent years, Bema has focused on strengthening its financial position and seeking opportunities elsewhere in South America. The company has several subsidiaries active in South America, including 50%-owned El Callao Mining (VSE), 61%-owned Abo Resource (VSE) and 21%-owned Arizona Star Resources (VSE).