Offering could raise $37.5m for Bema Gold

An underwriting syndicate, led by RBC Dominion Securities, has agreed to buy 8 million shares of Bema Gold (BGO-T) at $3.75 each. The deal is expected to raise proceeds of $30 million.

The underwriters can, under the same terms, buy up to an additional 2 million shares. If the option is exercised in full, Bema will receive total proceeds of $37.5 million, increasing its cash position to about $50 million.

The proceeds will be used chiefly to advance exploration and development projects in Latin America.

In related news, the Refugio gold mine in northern Chile continued to experience technical problems during the first quarter of 1998. The mine, which is owned equally by Amax Gold (AU-N) and Bema, is striving to ramp-up to its designed output of 233,000 oz. per year, with a cash operating cost projected at US$240 per oz.

Operations were affected by material-handling problems, which, though eventually resolved, resulted in a slight decrease in production, compared with last year’s quarter. In January and March, the mine was up in the 18,000-to-19,000-oz. range, but repairs to the solution ponds caused output to fall to 13,000 oz. in February.

Bema’s president, Clive Johnson, says March was a good month in terms of delivering the ore to the heap-leach pads. On a daily basis, the mine averaged 29,970 tonnes of finely crushed ore.

“We’re getting consistency now, and this project is starting to show the kind of numbers that we always thought it was capable of,” says Johnson.

“It’s not there yet, but it is definitely heading in the right direction.” The mine produced 48,546 oz. during the first quarter at a cash operating cost of US$290 per oz. The total cash cost, which includes royalties and applicable production taxes, was US$304 per oz. By comparison, output in the first quarter of 1997 totalled 51,860 oz. at a cash cost of US$248 per oz., and a total cash cost of US$265 per oz. Cash costs are expected to improve during 1998, Bema reports.

Steps have been taken to prepare Refugio for Chile’s coming winter months.

An access road has been constructed, and an emergency camp was installed at the fine crushing building. The facilities are such that workers will be able to stay at the site in the event of a major snow storm. Previously, the workers had to be evacuated for safety reasons.

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Placer at Aldebaran

In terms of regional exploration, Placer Dome (PDG-T) is carrying out an aggressive program at the Aldebaran property. About 20,000 metres of drilling are planned for 1998, and a feasibility study is in the works.

Placer can acquire a 51% interest in the property, which is currently held 51% by Arizona Star Resource (AZS-V) and 49% by Bema. As part of the deal, Placer must spend at least US$15 million on exploration over the next two years. The feasibility study is expected to cost an additional US$25 million.

Aldebaran is host to the Cerro Casale gold-copper porphyry deposit, as well as several other attractive, near-surface gold-bearing zones. Cerro Casale, a large, low-grade deposit, contains a minable resource of 19.5 million oz.

gold and 5 billion lbs. copper. The sulphide portion of the body is calculated to contain 791 million tonnes grading 0.71 gram gold and 0.29% copper, while an outcropping oxide portion is pegged at 56 million tonnes grading 0.84 gram gold.

Placer has been carrying out infill drilling at the northern and southern edges of Cerro Casale. The work is aimed at closing off areas that were still open, as well as following up on a strong anomaly that occurs on the northern portion. The drilling is expected to provide Placer with enough data to complete a reserve estimate.

A total of 60 tonnes of material has been collected for metallurgical testwork, and Placer is investigating the hydro-metallurgical process of recovering cathode copper as an alternative to a copper concentrate.

Several studies are under way in an attempt to determine the best plan for open-pit mining. “Basically it comes down to using the biggest equipment you can find,” says Dennis Stansbury, Bema’s vice-president of development and production.

A prefeasibility study concluded that a large-scale open-pit mine, combined with a 150,000-tonne-per-day milling operation, could result in production of 916,000 oz. gold and 282 million lbs. copper per year over a mine life of 16 years. Initial capital costs are estimated at $1.3 billion. Cash operating costs (net of copper revenue) are projected at US$79 per oz.; the total cost (including life-of-mine capital), at US$182 per oz. The projections are based on a gold price of US$375 per oz. and a copper price of US$1 per lb. If these prices are lowered to US$350 per oz. and US95cents per lb., the operating cost rises to US$93 per oz. and the total cost increases to US$196 per oz.

Placer is examining ways to reduce the project’s consumable costs; possibilities include using natural gas, making cyanide in Chile, and building a lime plant. A closer source of water has been located at a higher elevation, which will improve the project’s economics.

To date, 18 holes have been drilled on the Cerro Roman gold-bearing porphyry prospect, and another seven have been completed on the Eva target.

Meanwhile, Bema is engaged in a 3,000-metre program of diamond drilling on the Q-Seca porphyry zone at its Quebrada property, 11 km east of Aldebaran.

Concurrently, a 3,000-metre program of reverse-circulation drilling is testing several other targets, including a number of new discoveries. Seven holes have so far been completed on Q-Seca.

Through its affiliated company, 39.7%-owned El Callao Mining (ECM-V), Bema is calculating a new reserve estimate for the Lo Increible gold property in Venezuela.

Several new discoveries on the 70%-held property are expected to add to the 2 million contained ounces that are known to exist. In July 1997, reserves were estimated to total 16.6 million tonnes grading 3.71 grams, based on 1-gram cutoff grade.

The new discoveries also have the potential to enhance the economics of an independent scoping study, prepared last year by California-based Mineral Resource Development Inc. That study concluded that a 1,500-tonne-per-day operation, employing both open-pit and underground methods, could produce 87,500 oz. annually over an initial mine life of nine years. Capital costs were projected at US$63.5 million, operating cash costs were estimated at US$160 per oz., and total costs (including capital costs) came in at US$245 per oz.

A prefeasibility study is expected by mid-year.