Bema losses mount despite record revenue and production

Vancouver Despite record annual gold production and revenue, Bema Gold (BGO-T, BGO-X) posted a 2005 net loss of US$81 million, or US$0.20 per share, roughly on par with the US$79.6-million loss reported for 2004.

Total production in 2005 reached a record 256,668 oz., produced at an average cash cost of US$327 per oz. and total costs of US$347 per oz. The 79%-held Julietta mine in Far East Russia produced 90,133 oz. at a total cash cost of US$257 per oz., while the wholly owned Petrex mines in South Africa churned out 147,126 oz. at a total cash cost of US$406 per oz.

The 50%-held Refugio mine in Chile’s Maricunga district achieved commercial production in the fourth quarter of 2005, but the ramp-up period took longer than expected, resulting in fewer oz. produced at higher costs than projected. The company’s share of production was 19,409 oz., produced at an operating cash cost of US$286 per oz. and a total cost of US$313 per oz.

Revenue from gold sales topped US$100 for the first time in the company’s history, but the bottom line was hit by unrealized hedge-derivative loss of US$30.2 million, and a US$9.6-million write-down of the Monument Bay gold property in Manitoba.

Bema ended the year with US$76.3 million in cash, and working capital of US$63.1 million, down from US$87.1 million in cash and working capital of US$85.6 million a year earlier.

Looking ahead, Bema expects to dramatically boost production once the 75%-owned Kupol mine project in Russia comes on stream. Based on a 2005 feasibility study, Kupol is projected to produce more than 550,000 oz. gold and 5.8 million oz. silver annually over the initial 6.5-year mine life. Cash costs are estimated at US$47 per oz. and total costs at US$88 per oz., after silver credits.

An equity financing last fall raised net proceeds of US$115 million that will be used to develop the Kupol mine, and for general working capital. In June of 2005, Bema increased a bridge-loan facility to US$150 million from US$100 million announced earlier that spring. This was the second increase since the first US$60-million bridge loan was announced in the summer of 2004. In late 2005, Bema signed loan agreements for up to US$425 million of debt financing for mine construction at Kupol. Drawdown is expected in April of this year.

Bema also holds a 24% interest in the large Cerro Casale gold-copper project in Chile, with the controlling 51% interest previously held by Placer Dome. Bema believes the low-grade project is economically viable, but Placer took the opposite view. Now that Placer has been acquired by Barrick Gold (ABX-T, ABX-N), Bema has asked Barrick to clarify plans for development of the low-grade project or propose an alternative arrangement.