NO HEADLINE (December 09, 1991)

Giant Pacific purchasing Chutine’s Mexican project Giant Pacific Petroleum (VSE), controlled by Australian entrepreneur Chrisilios Kyriakou, has signed a deal with Chutine Resources (TSE) to acquire 100% of the Amelia gold properties in Mexico.

Four months ago, Chutine granted Giant Pacific an option to earn 70% of the 15,685-acre property by spending $1.2 million, while retaining the right to back in for 50%.

But Giant Pacific can now secure Chutine’s remaining interest in the Amelias by paying $100,000 in cash and issuing 666,666 common shares and 333,333 share purchase warrants exercisable for one year at 20 cents each. As soon as the remaining option payments have been made and it has fulfilled the terms of the new deal, Giant Pacific becomes sole owner of the Amelia properties, subject to a 1.5% net smelter royalty to Chutine. In a separate deal, Kyriakou’s private company Walhalla Mining is putting up half of the funds needed to bring the project to feasibility in return for a 50% stake in the Amelias.

Located 30 miles northeast of Magdelena in Sonora, the Amelia properties were owned by Chutine’s 49% owned affiliate Minera Sanex. The properties consist of the Amelia 7 Group, which directly adjoins a heap leach gold mine operated by Phelps Dodge (NYSE), and the past-producing Amelia mine claims. With reserves of about one million tons grading 0.12 oz. gold per ton outlined within sedimentary sequence of intercalated limestone, Giant Pacific is hoping to prove up sufficient ore to support an 80,000-oz.-per-year heap leach mine.

The company is also attempting to expand reserves at the Goldfield project in Nevada, which hosts about 1.2 million tons of grade 0.05 oz., and begin mining at a rate of 40,000 tons per month. After changing its name to Red Rock Mining and consolidating its shares on a 1-for-10 basis, Giant Pacific will be a 62% owned subsidiary of Walhalla.

Chile has been pursuing the course of laissez-faire capitalism even before the demise of Augusto Pinohet’s dictatorship in 1988. The country’s move toward democracy and free-market economy has attracted an inflow of capital from foreign countries, Canada among them. Vancouver-based Bema Gold, for one, is seeking financing for its 50% owned Verde gold deposit at the Refugio property in Chile.

Chairman Clive Johnson, 34, notes that Canadian companies are discouraged by the cumbersome processes involved in getting mining permits. “We will still do the same studies in Chile to ensure the project is as environmentally sound as those in North America.”

Bema prides itself as a low-cost, open pit and heap leach gold producer. At an average operating cost of US$189 per oz., Refugio is estimated to produce 233,000 oz. gold by heap leach method annually.

If Bema raises the necessary funding, it plans to start construction in March, 1992, and schedules the first gold pour for October, 1993. The total cost to bring the Refugio project into production is estimated at US$130 million. Should there be cost overruns, contractor Davy McKee has agreed to absorb a portion, says Johnson.

Meanwhile Sharps Pixley has committed to finance 20% of a US$75-million gold loan for Bema’s share of mine construction costs. The balance, about US$30 million, will be shared between Bema and its Chilean partner. And Caterpillar America will provide US$24.6-million worth of equipment for Refugio; the loan will be repaid in quarterly instalments over 5.25 years.

Johnson has been with Bema since 1975 as it grew from an exploration consulting firm to a gold producer. He describes himself as a “bush rat,” and his responsibility as “raising money.”

His right-hand man is Barry Rayment, president and chief operating officer, who headed the team that developed the Champagne mine in Idaho from an exploration project. The gold-silver heap leach operation, which went into production in August, 1989, netted a gross profit of US$6.5 million last year at an operating cost of US$164 per oz.

Johnson enjoys playing golf and is a rugby fan. He and his wife, Devi, have two boys.

Although the New Democratic Party’s landslide victory in British Columbia’s recent provincial election is a concern, Johnson notes Bema is not actively involved in the local mining scene. “Our projects are in the states and Chile,” he says.

Should Canadian mining companies keep their investment at home? “With the cash flow from Refugio, we can develop our Harrison project in Canada,” he says. “My first loyalty is to Bema Gold.”