Bema Gold (BGO-T) and Arizona Star Resource (AZS-V) have handed Placer Dome (PDG-T) a notice of default under their shareholders’ agreement after the major’s recent decision to pull the plug on financing development of the Cerro Casale copper-gold project in Chile.
Arizona Star said in a prepared statement that it believes that Placer Dome has failed to use its reasonable commercial efforts to arrange financing in the amounts and on the terms that are reasonable and customary for projects of this kind.
The company also claims that Placer failed to complete an updated feasibility study and project optimization.
Bema and Arizona Star say they have identified several areas in which Placer is in default of their agreement, and intend to pursue arbitration aimed at reclaiming Placer’s stake in the project if the major doesn’t remedy its defaults within a month.
Cerro Casale is owned 51% by Placer Dome, 24% by Bema Gold, and 25% by Arizona Star. If Placer’s stake was reclaimed, the project will revert back to Bema (51%), and Arizona Star (49%).
The minority partners disagree with Placer recent conclusion that the project cannot be financed at today’s metal prices. They note that Placer used the same metal price assumptions for pit design as were used in a 2000 feasibility study — namely US$350 per oz. gold and US95 per pound copper. They say the conservative numbers shave up to 4.3 million oz. of gold and 1.1 billion lbs. of recoverable copper from the proposed operation.
Bema and Arizona Star issued a similar default notice to Placer in mid-2004.
At last count, Cerro Casale had measured and indicated resources totalling 1.1 billion tonnes grading 0.71 gram gold per tonne and 0.26% copper, plus an inferred resource of 171 million tonnes of 0.63 gram gold and 0.33% copper. The estimates (inclusive of reserves) employ a cutoff grade of 0.4 gram gold.
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