PLACER PICKS PUEBLO MINE
US$1.35-BILLION INVESTMENT Angers partners in nascent Chilean gold mining project
Placer Dome Inc. shook up the gold business yesterday, announcing it will spend US$1.35billion to build the massive Pueblo Viejo gold mine in the Dominican Republic and delay development of the long-awaited Cerro Casale gold and copper mine in Chile.
Pueblo Viejo is expected to produce 800,000 ounces of gold a year at a cost of up to US$185 an ounce for at least six years when gold sits at US$462.90, its close yesterday.
“Pueblo Viejo is a huge part of our strategy going forward,” said Peter Tomsett, chief executive of Vancouver-based Placer. “It’s a great project. It’s the biggest capital expenditure our company has ever committed to, and it will give us our biggest mine.”
Yet the news was a bombshell for Placer’s two joint- venture partners in the Cerro Casale project — 24% owner
Bema Gold Corp. and 25% owner Arizona Star Resource Corp. Placer owns a controlling 51% stake.
“This news is negative for both Bema Gold and Arizona Star,” said Michael Fowler, analyst with Desjardins Securities, in a note to clients. Bema shares closed on the Toronto Stock Exchange yesterday at $3.14, down 23¢. Arizona Star was down 40 ¢ to $ 4.25.
Clive Johnson, Bema’s chief executive, accused Placer of stalling Cerro Casale so it can focus on Pueblo Viejo. He demanded Placer transfer control of the project to Bema and Arizona Star.
“Give it back. Be men,” Mr. Johnson said during a speech at the Denver Gold Show yesterday. “The arrogance is unbelievable to me and there’s a callous disregard for the shareholders of two other public companies here.”
Cerro Casale, located high in the Andes Mountains, is believed to be one of the 10 biggest undeveloped gold deposits in the world, with reserves estimated at 22.9 million ounces. A mine would cost US$1.65-billion and produce 975,000 ounces of gold a year. Placer was supposed to secure about US$1.3-billion of the project financing, but yesterday Placer said Cerro Casale is “ not financially viable at this time.”
Mr. Tomsett, also in Denver for the show, said in a phone interview that Placer has acted in good faith and according to the terms of the Cerro Casale agreement.