Bema Gold to become new producer with Champagne mine

Bema Gold is the result of last year’s amalgamation of associated companies Amir Mines, Normine Resources and Bema International Resources. In recent year s,the group’s focus has been on heap leach gold properties in the Western U.S., mainly in Idaho and to a lesser extent in California.

Having financed the Champagne mine project in Europe, Bema Gold is keenly aware that its production debut will be watched closely by investors, particularly the 27 European institutional backers that pieced together its recent $2.8-million financing.

Because the welcome mat in Europe is being pulled back for Canadian juniors these days, the company was challenged to convince mine-jaded fund managers it had the goods to deliver a small, low-cost, low-risk and profitable mining operation.

“We’ve had to restructure the company and assemble a technical team on the production side,” said Clive Johnson, president. A key player is Barry Reyment, president of Bema’s wholly-owned U.S. subsidiary, who put together an experienced heap leach operating team for the Idaho properties. Johnson also noted the company’s long- standing working relationship with heap leach pioneer, Glamis Gold (TSE).

“We also feel we have a starting point that is realistic,” added Johnson, referring to the Champagne mine which is expected to turn out a modest 17,500 oz gold equivalent in 1989. The company is projecting a production cost of less than $150(US) per oz because of the low strip ratio and because crushing and agglomerating are not required.

The mine will be operated by the Idaho Gold Corporation, which is owned 85% by Bema Gold and 15% by Glamis Gold. Heap leach trials were successfully completed by the operating company last winter, and the open pit mine is viewed as a year round operation to produce about 19,000 oz gold equivalent in 1990 and beyond.

Capital costs are expected to be $2 million(US), with payback expected within three to four months of start-up. Current mineable reserves are reported as 2.4 million tons grading 0.038 oz per ton gold equivalent (sufficient for about five years), with additional inferred reserves of two million tons of similar grade material.

Johnson said heap leach mining opportunities provide an ideal vehicle for juniors to become producers because of low exploration costs (only shallow drilling is required), and because of low capital costs requirements and the speed with which it is possible to go from exploration to production.

Because of high costs in Nevada, the company focused its efforts in prospective areas of Idaho, even though much of its mineral potential is hidden by massive overburden.

“What we did was apply Canadian exploration technology for finding mass deposits using geochemical and geophysical means to the southwestern U.S. open pit model,” Johnson said. By using this approach, the company was able to advance a number of projects in the Idaho land assemblage to the mine development stage.

Two of these projects, Buffalo Gulch and Erickson Reef, are currently being permitted for full scale production in 1990, although Johnson said the start-up date could be delayed if gold prices are very weak.

These modest-sized, low-cost operations are expected to help boost gold production to about 42,000 oz in 1990, and to 75,400 oz in 1991. Buffalo Gulch and Erickson Reef will have a slightly higher production cost than the Champagne mine. In view of more immediate priorities, the Harrison Lake gold project in British Columbia was put on the back burner to await better metal prices.

Although Bema has set itself an ambitious long-term goal of achieving a production level of 150,000- 200,000 oz per year some five years down t he road, Johnson maintains this will be done “one step at time.”

For its long-term growth, the company is looking at expanding reserves at its existing projects and to advanced property acquisitions using gold-backed loans, a strategy meant to keep share dilution to a minimum and corporate control and independence to a maximum.

Because Bema Gold is viewed as the flagship company for subsidiary companies in the Bema group, another strategy for growth involves the use of these junior vehicles to continue the momentum that has been built up over the years in exploration. The Bema group has its roots in consulting, specializing in difficult mineral exploration.

“We have an aggressive mandate in terms of where we want to be in five years as a company, but it’s based on a logical progression,” said Johnson. “In this business it’s hard to be patient, but we’re a young group that intends to be around for a long while.”

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