Petrex mines sink Bema

Higher-than-expected costs at the Petrex mines in South Africa, combined with an unrealized US$13.4 million derivative loss pushed Bema Gold (BGO-T) US$21.5 million into the red during the last three months of 2003.

The loss translatesUS6 per share, and came despite a more than tripling of revenue to US$26.7 million. Operations consumed US$2 million, compared to eth US$1.4 million they generated during 2002.

For all of 2003, Bema’s loss piled up to US$30.6 million (or 9 per share), compared with a year-ago loss of US$3.3 million (2 per share). Again the loss comes as revenues increased by 139% to US$86.8 million. Cash flow from operations slipped by US$2.2 million to US$8.1 million.

In all, bema churned out 250,315 oz. of gold in 2003, a 113% improvement over 2002. Operating cash costs were US$262 per oz., total cash cost came in at US$279 per oz. The unrealized mark-to-market loss on the company’s hedge book for all of 2003 was US$7.5 million.

Of the total production, 132,170 oz. came from the Petrex operations, which Bema acquired in February 2003. Total cash cost at Petrex were US$100 per oz. higher than expected at US$397 per oz. The increase is attributed to a stronger rand. A delay in the ramp up of ore production, and lower grades, from the open-pit operations also helped to push costs higher.

Providing a glimmer of light, Bema’s 79%-owned Julietta mine in Russia’s Far East exceeded its budget by about 1,800 oz. of gold producing 118,145 oz. at a total cash cost of US$148 per oz.

Petrex is currently in talks with its lenders aimed at obtaining a waiver for all of 2004, on certain covenants that it failed to comply with at the end of 2003. If a deal isn’t reached, Bema’s 2003 balance sheet will require an amendment to reflect, as a current liability, Petrex’s non-recourse project debt of US$21.5 million and the working capital facility of US$7.7 currently disclosed as long-term debt.

At year-end, Bema hadworking capital of US$19.9 million, including US$30.8 million, both improved over the end of 2002. The company paid US$11.2 million in payments on the Julietta project loan to reduce the balance to US$18.3 million. Bema plans to pay off the loan in 2004. A further US$8.0 was paid to reduce the Petrex project loan to US$27 million.

Bema’s shares were off 26, or more than 5%, at $4.78 in late afternoon trading in Toronto following the news on Mar. 26.

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