Canadian mining company Bema Gold Corp. on Tuesday acknowledged mounting debt in a South African gold mine and said it was pursuing a joint venture there.

In the next couple of weeks we intend to close a deal with Pamodzi (Resources Ltd) which will make the new entity a gold mining company that will be majority-owned by a black empowerment company, said Chief Executive Officer Clive Johnson.

Addressing the Denver Gold Forum here, he said Bema had acquired the Petrex Mines in South Africa three years ago. The idea at the time was we could more than double our annual gold production by putting out 20 percent more shares. I thought it was a good idea at the time, Johnson said.

What nobody saw coming was the (South African) rand going from 11-to-1 to the U.S. dollar to 6-to-1. So obviously what we are producing in South Africa has been hit by significantly higher costs in U.S. dollar terms, he added.

Johnson said the Vancouver-based company recently approached Pamodzi, a group of businessmen who have been successful in other industries and were now looking at the gold mining business. Our bankers are working with us to take shares to debt; we have $20 million debt at Petrex in South Africa, Johnson said.

The idea of the new joint venture was to improve the economics of the Petrex project and eliminate debt, he said. Bema, with its partner Pamodzi, intends to list the new company on the Johannesburg stock exchange by the end of the year, Johnson said.