Bema looks for improved year

With President Clive Johnson likening his company’s past fiscal year to the recent misfortunes experienced by Britain’s royal family, Bema Gold (TSE) is looking ahead to better times.

Faced with extremely weak gold prices and protracted negotiations with Amax Gold (NYSE) over its involvement in the Refugio project in Chile, Bema experienced a drop in its share price to a low of 57 cents late last year. The recent upward move in bullion prices helped reverse the downward trend, pushing the issue to its recent close at $1.80.

Amax completed the purchase of a 50% interest in Refugio from Bema’s Chilean partners early this year, making the two companies partners in the project. Johnson said Bema supported Amax’s purchase, noting that the major’s involvement raises the profile of the project.

At the annual meeting, a shareholder expressed concern over Amax’s operating problems at its Hayden Hill mine in California, where cash costs totaled US$432 per oz. last year. The shareholder noted that, if the problems continue, Amax could be severely hobbled and that this could represent a potential liability to the Refugio project.

Johnson expressed optimism that Amax would be able to iron out operating problems at Hayden Hill. He also said the recently proposed merger of Amax Gold’s parent company, Amax Inc., with Cyprus Minerals (NYSE) is a positive development. In concert with the merger, Amax will distribute a 28% interest in Amax Gold to shareholders, effectively reducing its interest to about 40%. Refugio hosts an estimated minable reserve of 112 million tons grading 0.03 oz. gold per ton at a strip ratio of 1-to-1. A final feasibility study recommends it be put into production at 33,000 tons per day, using open-pit mining and heap leaching to produce 233,000 oz. gold per year at a cash cost of US$175 per oz.

Financing for the project has yet to be arranged. Bema and Amax plan jointly to finance the projected capital cost of US$130 million, utilizing US$75 million in gold or dollar loans, US$25 million in equipment lease financing and about US$20-30 in equity financing. Johnson said he hopes to announce, within 60 to 90 days, how the company will arrange the financing. As of Dec. 31, 1992, Bema had a working capital deficit of $365,000, about $1 million in capital lease obligations, $22.2 million in convertible debentures issued and about 31.4 million shares outstanding.

Subsequent issues have brought the shares outstanding up to about 33 million, or about 50 million fully diluted, and left the company with about $1 million in working capital.