Cambior boosts stake in Gross Rosebel

Cambior (CBJ-T) has reached an agreement to acquire the half-interest in the advanced Gross Rosebel project in central Suriname, it doesn’t already own from joint venture partner Golden Star Resources (GSC-T).

Under the deal, Cambior will boost its ownership in the project to 100% by paying $8 million, $5 million at closing, plus three $1-million payments over the next four years.

Cambior will also grant Golden Star a gold price participation right on future production from Gross Rosebel, up to a 7 million oz. Under the plan, Golden Star would receive:

• 10% of the market price of production from Gross Rosebel’s soft and transitional rock portions, if the gold price exceeds US$300 per oz., and
• 10% of the market price of production from the hard rock portion of the Gross Rosebel property if the price exceeds US$350 per oz.

Both payments would be less a 2% royalty payable to the Government of Suriname or Grasshopper Aluminum, a state-owned Suriname company.

Cambior’s purchase price and the participation payments could be lower if Grassalco exercises a 1994 option to purchase up to a 40% interest in Gross Rosebel

Gross Rosebel is situated 80 km south of Paramaribo, the Suriname capital, and is accessible by plane or road. A hydroelectric power plant at the Afobaka Dam is about 18 km away. An updated pre-feasibility study of the open-pit project examined the mining and the processing of only soft rock and transition ore, and significantly reduced capital cost to $80 million from the $175 million estimated in the original 1997 feasibility study. Cambior plans to further reduce capital costs by transferring available equipment from the Omai mine in Guyana.

Mineral reserves at Gross Rosebel stand at 25.2 million tonnes grading 1.7g grams gold per tonne. Average annual gold production is pegged at 170,000 oz. at an operating cost of US$166 per oz. The reserve calculation employed a gold price of US$300 per oz. The company intends to complete a new feasibility study by mid-2002.

In connection with the Gross Rosebel deal, Cambior will transfer its rights in the Yaou, Dorlin and Bois Canon exploration properties in French Guiana to Golden Star. In return Cambior will receive Golden Star’s rights to the Headley’s Reef and Thunder Mountain properties in Suriname. Should Cambior bring a mine into commercial production on either of the transferred properties, Golden Star would receive two annual cash payments of $500,000 after production begins.

Cambior has also agreed to acquire Golden Star’s 30% equity interest and preferred shares in Omai Gold Mines (OGML) shares by assuming the remaining $900,000 owed on a non-interest bearing loan made to Golden Star by OGML. Golden Star has also agreed to cancel any future payments on the Eagle Mountain property in Guyana.

In other news, Jipangu, Cambior’s largest shareholder, has entered into a subscription agreement, subject to regulatory approval, for 4.95 million units at a price of $1.173 per unit. Each unit comprises one share and one purchase warrant. One warrant is good for an additional share at $1.31 apiece for a year after closing.

Jipangu has also decided to exercise 2.1 million previously issued warrants at $1.60 apiece. Following the exercise of the previously issued warrants and the closing of the private placement, Jipangu will hold about 32% of Cambior’s issued and outstanding shares. Both transactions are expected to wrap up by the end of November. If all warrants involved are exercised, Jipangu would have a 35% stake in Cambior.

Proceeds from the private placement and warrant exercise will be used to fund the initial $5-million payment for Gross Rosebel.

Under the subscription agreement:

• Jipangu is responsible for providing $50 million in non-recourse financing for the construction and development of the Gross Rosebel property;
• Jipangu will not acquire more 45% of Cambior’s total issued and outstanding shares;
• If a third party launches a bid for Cambior, Jipangu must either tender its shares to an approved bid, or make a superior offer;
• If Jipangu decides to sell more than 10% of its Cambior shares, it must do so in a way that will minimize adverse impacts on the market price of Cambior shares; and
• Jipangu may propose a number of nominees, up to a maximum of four, for election to Cambior’s board of directors, as long as it holds at least a 10% stake. Two of the nominees must be unrelated directors to Jipangu.