Placer joins Arizona Star, Bema at Aldebaran in northern Chile

Placer Dome (PDG-T) has reached a deal with Arizona Star Resource (AZS-V) and Bema Gold (BGO-T) for the right to acquire a 51% interest in the Aldebaran property in northern Chile.

Aldebaran is host to the large, low-grade Cerro Casale gold-copper porphyry deposit, as well as several other attractive gold-bearing zones. The property covers about 15 by 30 km of ground in the Maricunga region of the Andes Mountains, 150 km inland from the Pacific coast, and is owned 49% by Bema and 51% by Arizona Star. Bema’s 33% equity ownership in Arizona Star gives it an effective 66% interest in Aldebaran.

Placer is committed to paying US$60 million in upfront costs while it completes a feasibility study on Cerro Casale within a 2-year period and explores the other known mineralized targets on the Aldebaran property.

Placer will initially pay Arizona Star and Bema a total of US$10 million cash on a 51-49 basis and subscribe to a US$10-million private placement of 900,000 shares of Bema at $7.50 per share and 1.1 million shares of Arizona Star at $6.20 each.

The feasibility study is expected to cost US$25 million, and the exploration program over the next two years is set at US$15 million. In the event further exploration work is warranted, Placer has the option of funding an additional US$25 million.

Upon completion of the feasibility study, Placer can acquire a 51% interest in Aldebaran by arranging up to US$1.3 billion in capital costs for mine construction. These funds can be raised through a combination of debt and equity financing, including a US$200-million equity contribution on behalf of all the partners.

Placer will be responsible for arranging senior debt financing for at least half the capital cost, supported by a completion guarantee of up to US$1.1 billion. Placer will provide a subordinated loan, to be repaid by the project, that will make up the difference between US$1.1 billion and the actual amount of senior debt.

“I believe this agreement represents a big win for Placer Dome and for Bema Gold and Arizona Star,” says Placer Dome President John Willson. “For our part, we are getting access to this very attractive opportunity with a sensible entry cost. Cerro Casale and whatever else we may find at Aldebaran is remarkably well-suited to Placer’s own [technical] ability. Our exploration people are eager to get back on to the property, and our project development group is very enthusiastic about the prospect of optimizing the feasibility and then putting this enormous deposit into production. If our feasibility study is positive, the property has the potential to increase our proven and probable reserves by over 25%.”

.SViable

Placer’s decision to acquire an interest in Aldebaran comes on the heels of an independent prefeasibility study of Cerro Casale. Completed by California-based Mineral Resource Development (MRDI) on behalf of Arizona Star and Bema, the study concluded that a large-scale open-pit mine, combined with a 150,000-tonne-per-day milling operation, is technically and economically viable.

MRDI estimates Cerro Casale contains a minable reserve of 19.5 million oz. gold and 5 billion lbs. of copper. About 85% of the reserve is in the proven and probable category.

The sulphide portion of the deposit is estimated to contain 791 million tonnes grading 0.71 gram gold per tonne and 0.29% copper, whereas the oxide portion contains about 56 million tonnes grading 0.84 gram gold. The stripping ratio is expected to average 2.6-to-1 over the life of the mine.

The in-depth study suggests that, on an annual basis, 916,000 oz. gold and 282 million lbs. of copper can be recovered using standard grinding and flotation techniques over a mine life of 16 years. The cash operating cost (net of copper revenue) is projected at US$79 per oz.; the total cost (including life-of-mine capital) at US$182 per oz.

Metallurgical tests indicate recovery rates of 74% for gold and 89% for copper. The gold-rich copper concentrate will average a grade of 25% copper.

Initial capital costs are pegged at US$1.3 billion, with a payback period of 6.5 years. The internal rate of return is 13.7%, and deferred capital is estimated at US$115 million.

The economic projections are based on a gold price of US$375 per oz. and a copper price of US$1 per lb. If these costs are lowered to US$350 per oz. and US95cents per lb., the operating cash cost rises to US$93 per oz. and the total cost increases to US$196 per oz. The internal rate of return is 13.7%.

Placer has conducted its own due diligence on the property. In May, the company fielded a team of geologists and engineers, who spent two weeks on the site. A property-wide mapping and sampling program was carried out and one hole was drilled into Cerro Casale.

“This is [about] much more than acquiring part of the Cerro Casale deposit, which we have the technical ability to make successful,” says Willson. “Aldebaran has outstanding exploration potential and we believe it could become one of our better-quality assets. There is a lot of upside on the property.”

The immediate focus of Placer’s exploration team will be the Cerro Roman and Romancito prospects, which, along with the Jotabeche target, are 8 km north of Cerro Casale. It is believed that three gold-bearing porphyry zones, known as the “Three Amigos,” could be part of one large mineralized body. Thirty-five holes have been drilled into Cerro Roman and Romancito, whereas two holes have tested Jotabeche.

At Arizona Star’s recent annual meeting, Bema’s vice-president of exploration, Thomas Garagan, told shareholders that the Three Amigos had the potential to contain 2 million oz. gold and possibly some copper. Placer feels Cerro Roman and Romancito could have the potential to improve the economics of the Cerro Casale project in its early years. Cerro Casale lacks a high-grade starter-pit, which would improve the project’s rate of return. The Aldebaran property also contains the Eva, Estrella and Anfiteatro gold zones, where preliminary drilling has returned promising results.

Bema President Clive Johnson said: “We believe that Placer Dome, with its proven technical expertise and financial resources, is the ideal partner to join forces with Bema and Arizona Star to develop the Aldebaran property. This new partnership will enable the Bema technical team to focus on developing our other numerous gold discoveries and explore other promising properties in Chile and elsewhere.”