Bema Gold Corporation: 2003 Second Quarter Results
THURSDAY, AUGUST 07, 2003 10:54 AM
VANCOUVER, BRITISH COLUMBIA, Aug 7, 2003 (CCNMatthews via COMTEX) -- Bema Gold Corporation ("Bema or the "Company") is pleased to report the results from its operations for the second quarter ended June 30, 2003. All dollar figures are in United States dollars unless otherwise indicated.
- Produced 68,197 ounces of gold
- Revenue of $26.1 million
- Commenced drilling Kupol gold and silver property, Russia
- Increased resource and grade at Monument Bay
Bema reported revenue of $26.1 million for the second quarter 2003 compared to $7.5 million for the same period last year. Cash flow from operations during the period was $208,000 compared to $294,000 for the second quarter 2002. Cash flow from operations would have been $2.2 million higher had the Company received proceeds from an end of quarter gold sale at Julietta in June instead of on July 2, 2003. The Company reported a net loss of $4.1 million ($0.013 per share) for the period mainly due to higher general and administrative expenses. In the second quarter 2002 Bema reported restated (see Note 3 to the Notes to the Consolidated Financial Statements) net earnings of $1.2 million ($0.005 per share) in the second quarter of 2002.
For the first six months of 2003, the Company reported a net loss of $5.3 million ($0.017 per share) on revenue of $38.1 million compared to a restated net loss of $299,000 ($0.003 per share) on revenue of $16.6 million in 2002.
Bema produced 68,197 ounces of gold during the quarter at an operating cash cost of $252 per ounce and a total cash cost of $267 per ounce compared to 30,394 ounces of gold at an operating cash cost of $138 per ounce and a total cash cost of $178 per ounce during the second quarter last year. Operating costs in the first six months reflect the acquisition of the Petrex Mines from February 14 onwards. Petrex completed mill modifications in July which will result in lower cash costs and increased gold production once the ramp up to full mill capacity has been achieved. (see "Petrex Mines" section).
For the first six months Bema produced 111,143 ounces of gold at an operating cash cost of $253 per ounce and a total cash cost of $272 per ounce.
The Julietta Mine, Russia
The Julietta Mine produced 29,835 ounces of gold in the second quarter at an operating cash cost of $121 per ounce and a total cash cost of $156 per ounce compared to 28,383 ounces of gold at an operating cash cost of $129 per ounce and a total cash cost of $171 per ounce during the same period last year. Revenue from Julietta was $10.9 million from the sale of 33,010 ounces of gold sold at an averaged price of $330 per ounce. This is compared to 21,838 ounces of gold sold at and average spot price of $311 in the second quarter 2002.
The Petrex Mines, South Africa
Process plant modifications continued in the second quarter at Petrex and by the end of the period the major construction projects had been completed. Management expects production levels to increase and cash cost to decrease as the benefits of the mill improvements are realized.
During the ramp up period, cash costs for the first six months of 2003 were budgeted to be significantly higher than those budgeted for the second half of 2003 and beyond. In the second quarter the Petrex Mines produced 38,362 ounces of gold at total cash cost of $354 per ounce. The main reasons for the high cash costs were the strength of the South African rand versus the U.S. dollar and the mill ramp up. The South African rand averaged 8% higher against the U.S. dollar in the second quarter of 2003 compared to the first quarter. The rand, however, increased 30% versus the budgeted rate of exchange (10 Rand to 1 USD) which has added approximately $81 per ounce to the total cash cost for the quarter. For the remainder of 2003, should the rand retain its strength, approximately 85% of the resulting higher U.S. dollar denominated cash costs will be mitigated by increased revenue realized from the rand denominated gold put options purchased. Over the next six years approximately 70% of production is protected by Rand denominated put options. (see "Gold Forward and Option Contracts" section).
Second quarter revenue from Petrex was $15.2 million from the sale of 39,880 ounces of gold sold at an average realized price of $381 per ounce compared to an average spot gold price for the period of $347 per ounce. The average realized price benefited from the exercise of rand denominated put options having a strike price of 3,000 rand per ounce.
Bema completed the acquisition of the Petrex Mines on February 14, 2003 therefore, production from the first four and one half months from the date of the acquisition is 56,445 ounces of gold at total cash costs of $366 per ounce.
The Refugio Mine, Chile (Bema 50%)
During the second quarter of 2003, the Refugio Mine in Chile recovered 2,861 ounces of gold from residual leaching versus 4,947 ounces recovered in the first quarter. The decrease in gold recovery quarter to quarter was due to the shut down of the solution processing plant as scheduled at the end of May 2003 for the Chilean winter. The Company's share of the Refugio Mine's production in the second quarter of 2002 was 1,911 ounces of gold produced in April and May.
All revenue from gold recovered is credited to Refugio care and maintenance costs until mining recommences which is anticipated to be sometime in 2004.
When mining was suspended at the Refugio Mine in June 2001, due to low gold prices, there were four years of reserves remaining at the Verde deposit. The Company and its joint venture partner agreed to consider recommencing production at Refugio when the gold price recovered to $325 per ounce. In October 2002, an extensive drilling program at the Refugio Mine began with the goal of increasing reserves and thereby extending the projected mine life. The drilling program has been successful, extending ore grade mineralization well below the previously projected pit bottom. Management believes that the result of this program will be to significantly increase the mine life at Refugio's Verde deposit, thereby improving the project's economics. Currently the joint venture partners are recalculating reserves, completing engineering studies and metallurgical test work in anticipation of recommencing production in 2004. With the inclusion of the Company's 50% share of the Refugio Mine production, the Company's projected annual production would increase by an additional 115,000 ounces to approximately 400,000 ounces of gold.
The Monument Bay Project, Manitoba
The winter drill program at the Monument Bay Project concluded during the second quarter of 2003. Based on this drill program and previous work, Bema has increased the inferred resource to 639,377 tonnes averaging 20.4 grams per tonne containing 418,371 ounces of gold, representing a 30% increase in contained ounces over the initial inferred resource of 500,572 tonnes grading 18.3 grams per tonne containing 294,874 ounces gold. The resource was calculated using 50 meter radius polygons on an inclined two-dimension long-section with a cut off grade of 8 grams per tonne and a minimum true width of 1 metre. High gold assays were cut to 100 g/t.
The original intention of the winter 2003 program was to focus on the Twin Lakes Zone where previous drilling had identified the bulk of the initial resource. However, favourable ice conditions this winter allowed drill rigs to access the river which has lead to the discovery of the Twin Lakes West Zone. The increase in the inferred resource at Monument Bay is mainly as a result of this new discovery. The summer 2003 program has commenced consisting of geological mapping and geochemical sampling and diamond drilling should recommence shortly. Bema has recently closed a non brokered flow through private placement for gross proceeds of CDN$ 5 million to fund the exploration program at Monument Bay.
Liquidity and Capital Resources
The Company ended the quarter with $17.5 million in cash and cash equivalents compared to $24.9 million at March 31, 2003. The decrease in cash is due mainly to exploration expenditures at the Kupol and Monument Bay projects as well as capital improvements at the Petrex Mines.
Gold forward and Option Contracts
The Company's hedging program as of June 30, 2003 consists of the following gold contracts:
2003 2004 2005 2006-2010
Forward contracts (ounces) 32,450 61,050 38,550 -
Average price per ounce $ 322 $ 321 $ 337 $ -
Dollar denominated -
Put options purchased
(ounces) 21,796 32,086 26,364 83,778
Average price per ounce $ 287 $ 289 $ 290 $ 290
Rand denominated -
Put options purchased
(ounces) 75,294 146,244 136,086 351,204
Average price per ounce
(ZAR) 3,000 3,050 3,100 3,198
Call options sold (ounces) 5,000 - - -
Average price per ounce $ 400 $ - $ - $ -
$320 strike price (ounces) 10,000 20,000 10,000 -
$350 strike price (ounces) 16,500 33,000 34,500 204,000
The Company was required by the lenders of the Julietta and Petrex project loan facilities to enter into gold hedge contracts over the loan life period in order to cover the value of the mine's future operating and debt service costs.
The $320 contingent forward contracts ("CFC") are exercisable based on the average quarterly spot price of gold. The number of ounces exercisable per quarter under the CFC is prorated based on a gold price between $320 and $370 per ounce. The $350 CFC are exercisable each month-end evenly throughout the year based on the spot price. The number of ounces deliverable for the month is prorated based on a gold price between $350 and $400.
The rand denominated put options provide the Company with protection against a strengthening South African rand without limiting the Company's leverage to a rising gold price or a declining rand. For example, at a conversion rate of eight rand to one U.S. dollar, the Company will receive $375 per ounce of gold on its rand put options in 2003.
The mark-to-market value of the Company's hedges as at June 30, 2003 was negative $1.7 million.
Management is focused on continued production growth and exploration for the remainder of 2003 and beyond. As the benefits of the mill modifications at Petrex are realized, Bema's projected gold production rate will reach 300,000 ounces per year. With the expected recommencement of production at Refugio in mid-2004, Bema's annualized gold production rate is projected at over 400,000 ounces.
At the Kupol Project in Russia, Bema has completed over 100 diamond drill holes totaling over 14,000 metres. The Company is currently compiling assay results and plans to release a series of holes by mid August.
Exploration continues at the Julietta Mine and the Petrex Mines where drill rigs are currently operating to convert resources into reserves and discover new resources.
Bema plans to increase gold production from existing assets through ongoing exploration at Julietta and Petrex, recommencing production at Refugio and continuing to advance the Kupol and Monument Bay Projects.
On Behalf of BEMA GOLD CORPORATION
Clive T. Johnson, Chairman, C.E.O., & President
Bema Gold Corporation trades on The Toronto Stock Exchange and the American Stock Exchange. Symbol: BGO.
Marc Simpson (P.Geo) is the project manager and qualified person for the Monument Bay Project, and is a member of APEGBC and APEGM. Mr. Simpson has supervised all aspects of drill hole planning, implementation and quality control programs.
Some of the statements contained in this release are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements. Forward-looking statements in this release include statements regarding: the Company's projections regarding annual gold production in future periods. Factors that could cause actual results to differ materially from anticipated results include risks and uncertainties such as: risks relating to estimates of reserves, mineral deposits and production costs; mining and development risks; the risk of commodity price fluctuations; political and regulatory risks; and other risks and uncertainties detailed in the Company's Form 40-F Annual Report for the year ended December 31, 2001, which has been filed with the Securities and Exchange Commission, and the Company's Renewal Annual Information Form for the year ended December 31, 2001, which is an exhibit to the Company's Form 40-F and is available at the Canadian Depository for Securities Web site. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
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