Placer Dome cautiously "optimistic" on Cerro Casale

Toronto-based senior Placer Dome (NYSE: PDG) needs more time before it can green light its majority-held US$1.65bn Cerro Casale gold-copper project in Chile, a company official said to BNamericas Wednesday. "It's a very big project, even by Placer Dome standards, and it's important for us to take the time to get it right," company media relations spokesperson Meghan Brown said, adding the company was "optimistic" about the project's potential. Compania Minera Casale (CMC), the project's holding company, announced late Tuesday that capital cost estimates for the project had increased by US$220mn from US$1.43bn to US$1.65bn and total operating costs from US$203/oz gold to US$225/oz. "These increases basically reflect the changes in construction, mining and labor rates in Chile since the original feasibility was done in 2000," said Brown, adding that the contingency consideration had risen from US$128mn to US$150mn. Cerro Casale was put on hold in 2000 due to weak metal markets and Placer Dome has been re-evaluating the project's feasibility study over the last few months in light of a stronger price environment. "We've got higher metal prices, but we are also looking at higher costs," said Brown, stressing that the review did not look at optimizing the mining, milling or metallurgical parameters of the project. Brown said Placer Dome, which holds 51% of the project, plans to evaluate the technical aspects over the next "several" months. But first it needs to agree to a budget for the study with its JV partners Canadians Bema Gold (TSX, Amex: BGO) and its subsidiary Arizona Star Resource, which hold 24% and 25% respectively. A verdict by Placer Dome on the ability of the JV partners to finance Cerro Casale has been postponed until June 30, 2004 from end-March to allow the new numbers to be absorbed and technical aspects analyzed, said Brown. Placer Dome is required to arrange US$1.3bn in financing with the balance shared on a pro-rata basis by the JV partners. The 2000 feasibility study envisaged a large-scale open pit mine producing annually approximately 975,000oz of gold and 130,000t of copper over 18 years based on a estimated measured and indicated resource of 25.4Moz of gold and 2.90Mt of copper. Cerro Casale is one of three large development projects that Placer Dome is currently working on that together hold resources of some 40Moz, said Brown. The others are Pueblo Viejo in the Dominican Republic and Donalin Creek in Alaska. "We remain optimistic that Cerro Casale has the potential to be a significant producer and we are keen to see what it holds," said Brown, adding it was one of the world's largest undeveloped gold projects. Also known as Aldebaran, Cerro Casale in located at 3,800m in northern Chile's Region III. Following news of the higher capex, and decision to defer a financing verdict, Placer Dome's stock was down 0.28% to US$17.99/apiece, Bema's was off 3.5% to Cdn$4.41 and Arizona Star had fallen 2.17% to Cdn$6.75 in midday trading Wednesday.