Bema eyes EAGC

Vancouver-based junior Bema Gold (BGO-T) has agreed to merge with fellow Vancouverite EAGC Ventures (YEV-V), formerly East Asia Gold.

Under the deal, Bema is offering EAGC shareholders one of its own shares for each EAGC share held. Any of EAGC’s outstanding convertible securities will be good for Bema shares on their original basis. In the end, Bema would issue about 50 million shares.

EAGC’s board of directors has unanimously recommended the business combination. The plan is subject regulatory approval and EAGC shareholder approval and EAGC wrapping up its US$67-million acquisition of Petrex Proprietary Ltd.

In September, EAGC agreed to buy Petrex, South African-based Petra Mining’s holding company, which owns three gold miners in South Africa’s Gauteng Province. EAGC expects the acquisition to close around Oct. 25.

EAGC has arranged a US$35 million loan facility and US$5 million working capital facility from Standard Bank London. The company has also entered into an agreement with Griffith McBurney & Partners, BMO Nesbitt Burns and Canaccord Capital to raise about US$40 million via the sale of 45 million special warrants at C$1.40 apiece. Each special warrant allows the holder to buy, for no additional consideration, one EAGC share plus half of a share purchase warrant. One full warrant is good for one EAGC shares at C$1.90 for five years. Bema has agreed to acquire US$10 million of the special warrants, and has an option to acquire another US$10 million.

Bema will assume the bank facility once the business combination is complete.

EAGC also plans on issuing a maximum of 1.75 million options to acquire EAGC shares at C$1.40 apiece to certain of its directors, officers and employees.

Petrex’s key asset is the Petrex Mining camp in East Rand South Africa.

Petrex’s mining operations comprise 8 shafts and 3 open pit operations. In all, gold production for the year ended June 30, amounted to 137,180 oz. from more than 1.5 million tonnes of ore. Total cash costs, including development capital and water pumping costs averaged around US$218 per oz.

Combined, the three mines, referred to as the Golden Reefs Mines, contain proven reserves are pegged at 10.6 million tonnes averaging 3.09 grams gold per tonne for 1.05 million oz. gold. Another 4.9 million tonnes of probable reserves run 3.41 grams for 538,000 oz. gold.

Based on an independently audited 10-year mine plan, the mine is expected to churn out an average of 185,000 oz. of gold annually. Cash operating cash costs are estimated around US$185 per ounce.

Beam says the addition of the Golden Reefs material will boost its reserves to about 2.8 million oz. gold; resources will climb to around 11 million oz. The post-merger company will boast annual production of some 315,000 oz. gold at a cash cost of about US$135 per oz.

The mines are situated 45 km from Johannesburg in the Witwatersrand Basin of South Africa, one of the world’s most prolific gold producing regions with historical production of approximately 1.48 billion ounces of gold.

The respective companies shares quickly moved toward equilibrium after the news broke. Bema shares finished off 23 or more than 12% at $1.68 in Toronto. EAGC shares ended 11 or 7.6% higher at $1.56 on the TSX Venture Exchange.

In other news, Bema and equal partner Kinross Gold (K-T) recently received a US$24-million award settlement from Fluor Daniel Chile Ingenieria y Construccion, Fluor Daniel, and Fluor Daniel Wright. An arbitrator ruled that Fluor was “grossly negligent” in certain aspects of the construction of the Refugio open-pit heap-leach gold mine in northern Chile.