Placer nixes Cerro Casale, nods Pueblo Viejo

Vancouver — To the dismay of two minority partners, Placer Dome (PDG-T, PDG-N) has concluded that the Cerro Casale gold-copper project in Chile’s Maricunga district “is not financially viable at this time.” Instead, the company gave the nod to development of the Pueblo Viejo gold project in the Dominican Republic.

Cerro Casale — described as one of the world’s largest undeveloped gold and copper deposits — is owned 51% by Placer Dome, 24% by Bema Gold (BGO-T, BGO-X, BAU-L) and 25% by Arizona Star Resource (AZS-V).

Bema and Arizona Star disagree with Placer Dome’s conclusion and are taking steps to have their senior partner’s interest returned to them under the terms of their joint-venture agreement. If successful, the companies would then seek a new senior partner for the project.

Earlier this year, Arizona Star released a NI-43-101-compliant technical report that cited total measured and indicated resources of 1.3 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. These resources (inclusive of reserves) are based on a cutoff grade of 0.4 gram gold, within a pit defined on the basis of a gold price of US$500 per oz. and US$1.25 per lb. for copper.

A previous study projected that the Cerro Casale mine would cost US$1.65 billion to build. Production was estimated at 975,000 oz. gold annually at a cash cost of US$71 per oz. (net of copper credits) and total costs of US$186 per oz. (net of copper credits) for 18 years.

Bema and Arizona Star believe that Cerro Casale can be financed in today’s metal market, and note that Placer Dome has not completed “key optimization studies” promised to the joint venture. They also maintain that Placer Dome used the same metal price assumptions for pit design as were used in a 2000 feasibility study, namely US$350 per oz. gold and US$0.95 per pound copper.

“This approach to mine planning has resulted in the loss of 4.3 million oz. gold and 1.1 billion pounds of recoverable copper over the life of the project,” states Arizona Star President Paul Parisotto.

Placer Dome has presented its partners with a proposal to evaluate “alternative development scenarios” for Cerro Casale, which suggests it intends to defend its rights to the project.

Meanwhile, the company plans to advance Pueblo Viejo, which it describes as a “long-life, low-cost opportunity.” The proposed, open-pit mine would produce about 12 million oz. gold over a 20-year mine-life, at average cash costs of between US$200 and US$210 per oz. Capital costs are estimated at about US$1 billion.

Production in the initial six years is expected to average 800,000 oz. gold annually at cash costs of between US$175 and US$185 per oz.

Before construction begins, Placer Dome must file a project notice with the government, and obtain necessary permits for the mine and for a US$350-million, 140-megawatt power plant to support the mine.