MINING IN CHILE — Financing last hurdle for Refugio

Joint-venture partners Bema Gold (TSE) and Amax Gold (NYSE) have resumed negotiations with banking institutions to finance the Refugio gold project in north-central Chile.

The capital cost of placing the open-pit, heap-leach project into production is estimated at US$130 million. The partners are negotiating a $100-million debt facility, with the balance to be supplied equally by the partners as equity.

The latest development follows an extensive technical review and update of the project by Amax’s largest shareholder, Cyprus Amax Minerals (NYSE). The updated capital and operating costs reflect current prices and show minor increases over those outlined in previous feasibility studies. The deposit is in Chile’s Maricunga district, 50 miles east of the town of Copiapo. Bema has already spent $14.7 million on exploration and feasibility work.

Most of the work was focused on the Verde deposit, estimated to have a “base case” minable reserve of 112 million tons grading 0.03 oz. gold per ton at a stripping ratio of 1-to-1. An “extended base case” places reserves at 204 million tons grading 0.026 oz.

The study recommends processing at 33,000 tons per day. At that rate, the Verde deposit “base case” is projected to produce 233,000 oz. annually at an operating cost of US$175 per oz. for the first 9.4 years. The extended base case would extend the mine life by 7.8 years to a total of 17.2 years. Subject to financing, Bema expects to begin constructing the mine in October. The junior recently completed a special warrant financing for gross proceeds of $14.7 million, although this is subject to arrangement of the required debt financing.