Russian project delivers high-grade results

Results from ongoing drilling by Bema Gold (BGO-T) on a high-grade gold-silver prospect in Russia’s Far East region are confirming the potential for a near-surface, multi-million-ounce deposit.

To date, 116 holes totalling 15,100 metres have been drilled on the Kupol property, testing a mineralized epithermal vein system. That represents more than half of a planned 26,000-metre program, which will continue until at least the end of September, weather permitting.

The latest drill results would seem to support a resource of at least 5 million oz. gold, and further work will likely advance the project towards 7-10 million oz., according to Brian Christie, an analyst with Canaccord Capital. In a recent market update, he writes: “This latest drilling only confirms our belief that this is one of the most existing discoveries to hit the global gold stage in decades.”

Drilling to date has covered a strike length of 2.8 km to varying depths of up to 250 metres. The mineralized system extends over a 4-km-long distance, based on geochemistry, the presence of high-grade boulders, and trenching. Assay results for the first 56 holes have been received, including the most recent batch of 40 holes.

“This project is living up to our lofty expectations that Kupol is a large, multi-million-ounce, high-grade gold-silver deposit, and hopefully something accessible as an open-pit target,” says Bema President Clive Johnson. “We started out at Kupol with a target of five to ten million ounces gold at something in the neighbourhood of the Julietta head grades of twenty-five to thirty grams per tonne. We’re feeling extremely comfortable about meeting, and potentially exceeding, that target based on results to date.”

A resource estimate will be completed by year-end.

The Kupol project is in a remote setting, 940 km northeast of Bema’s Julietta mine and 200 km east of the nearest town, Bilibino. From Bilibino, the property is accessible by road or helicopter.

“Development would be similar to any remote project in Canada’s north and would initially be open-pit, followed by underground mining,” writes analyst Jim Mustard of Haywood Securities, following a site visit in early July. “We believe Kupol is one of the most important discoveries in recent years, and it will undoubtedly become a highly coveted project.”

Kupol was discovered in 1995 through regional geochemistry, though the area was previously explored by a Russian operator. Thirty-five ditches and trenches have systematically tested more than 3 km of strike length, returning several bonanza intercepts from a 1,800-metre section highlighted by 183 grams gold and 2,557 grams silver per tonne across 11.8 metres, and 155 grams gold and 549 grams silver over 9 metres.

The Russian group completed 2,500 metres of drilling in 24 holes, testing a 400-metre-long section to a depth of no more than 140 metres. Better intercepts included 41.3 metres of 51.6 grams gold and 531 grams silver, 29.2 metres of 16 grams gold and 340 grams silver, and 6.6 metres of 85.3 grams gold and 704 grams silver. The drilled area was estimated to contain an inferred resource of 780,000 tonnes averaging 33.3 grams gold and 373 grams silver, representing 835,000 oz. gold and 9.3 million oz. silver.

Using four drill rigs, Bema kickstarted its summer campaign by testing some of the original trenching, re-drilling some of the Russian holes from a different direction, and testing what Bema is now calling the Big Bend area. Now, midway through the program, Bema is drilling off the area on roughly 100-metre centres to at least a 250-metre depth in an attempt to locate the largest ore shoots and determine the extent of the system along strike and to depth.

Based on the results from the first 56 holes, which have been drilled along 2.1 km of strike length, Bema’s geologists have broken down the gold-bearing system into four zones: South, Big Bend, Central and North.

Thomas Garagan, vice-president of exploration, notes that the area with the best results to date is the Big Bend zone. Highlights from the latest batch of holes include:

— 10.7 metres grading 27.2 grams gold and 364 grams silver in hole 18;

— 24.5 metres grading 41.7 grams gold and 499 grams silver in hole 49; and

— 13.4 metres of 45.9 grams gold and 282 grams silver in hole 56.

The Big Bend zone is a large flexure in the main structure, and it curves over about 500 metres of strike length. Garagan says gold mineralization in this area tends to be “well above thirty grams over significant widths.”

Assay results from all holes drilled on the Big Bend zone to date are shown in Table 1.

The Central zone is a fairly straight area along the structure, with little flexures or offshoots here and there. Drill results indicate Bema is hitting smaller mineralized shoots, which Garagan says will require more tightly spaced drilling. “The background grades in the Central area are still well above ore grade, certainly within an open pit,” he says.

The North zone extends at least 300 metres and is still open. Two of the most recent holes, numbers 47 (16.8 metres grading 43.4 grams gold and 331 grams silver) and 51A (11.7 metres grading 13 grams gold and 151 grams silver), may represent the start of another large shoot.

The South zone has been drilled over a 500-metre strike length, and the southernmost holes, numbers 42A (7.5 metres of 33.3 grams gold and 357 grams silver) and 31 (6.8 metres of 14.6 grams gold and 129 grams silver), seem to indicate that another large mineralized shoot is developing.

“We haven’t found the bottom of this deposit and we certainly haven’t found the northern and southern edges yet,” says Garagan. Bema’s geologists are finding mineralized showings well beyond the southern drill limits, and Garagan remains confident of further discoveries. Johnson says initial metallurgical work “looks clean and pretty straightforward.” Early bottle-roll tests show recoveries in the 90s for gold and the high 80s for silver.

Owing to the project’s remote location, Bema has installed an on-site preparation and fire-assay laboratory at Kupol. The lab is to be managed by an experienced Russian fire assayer and overseen by an independent consultant. Bema has also retained Smee & Associates Consulting to ensure the lab is operated to North American standards and that it includes a quality control program.

Under a definitive agreement with the government of Chukotka, Bema can acquire up to a 75% interest in the Kupol project by making certain expenditures and cash payments. The company has paid US$8 million cash for the right to earn an initial 20% interest by spending US$5 million on exploration before the end of 2003. It must make two more cash payments totalling US$22.5 million and spend a further US$5 million on exploration before December 2004 to earn a 40% interest. By completing a bankable feasibility study and paying US$5 per oz. for 75% of the gold defined as proven and probable, Bema can earn the final 35%. Upon a decision to begin mine production, Bema will pay a further US$5 per oz. for 75% of the ounces identified as ore.

On the back of the latest drilling results, Bema has entered into a bought-deal financing with a syndicate of underwriters for $60 million. The offering consists of 20 million shares priced at $3 apiece, with the option for an additional 3 million shares. Bema now has 319 million shares outstanding, or 365 million fully diluted.

Bema owns the Petrex mining operations in South Africa and a 79% interest in the Julietta mine in Russia’s Far East. In the first half of 2003, Bema produced 111,143 oz. and incurred a net loss of US$5.3 million (or 1.7 per share) on revenue of US$38.1 million, compared with a restated loss of US$299,000 (3 per share) on revenue of US$16.6 million in the first half of 2002.

Table 1: Drill Results from Big Bend Zone