Still trying to survive a close encounter with the nasty side of a hedging program,
The Quebec-based miner reported operating improvements at all its gold operations in the 1999 fourth quarter, churning out 167,000 oz. of the yellow metal, compared with 150,000 oz. in the previous quarter. In addition to the 11% increase in gold production, Cambior produced 14,800 tonnes of zinc, 2,600 tonnes of copper and 279 tonnes of niobium during the last three months of 1999.
For the full year, Cambior produced 630,000 oz. gold, compared with 638,000 oz. in 1998. This year’s production is targeted to increase to 640,000 oz., owing mostly to continuing improvements at the Doyon gold mine in northwestern Quebec, and the Omai open-pit operation in Guyana.
Total metal production for the past year was 66,000 tonnes of zinc, 8,300 tonnes of copper and 1,147 tonnes of niobium. The target production for 2000 is estimated at 65,000 tonnes of zinc, 8,400 tonnes of copper and 1,180 tonnes of niobium.
The improved performance at some of Cambior’s mines will no doubt be of interest to the mining companies known to be circling around those assets since the company lost US$33 million as a result of a failed hedging program. The losses occurred when gold spiked to about US$300 in early September of last year.
By the end of that month, Cambior’s liabilities reached US$67 million (including the US$33-million provision for hedging restructuring), plus long-term debt of US$181 million. Cash and equivalents amounted to only US$21 million.
Cambior then sat down with its financial advisor, Bunting Warburg Dillon Read, to work out a standstill agreement with its lenders and hedging counter-parties.
In late December, Cambior signed a restructuring agreement, as well as an amended credit agreement, with its creditors. These agreements effectively extend the loan obligations, which total US$212 million, to the end of this year.
Having obtained some breathing room, Cambior has since turned its attention to reducing its heavy debt burden. Toward that end, the company announced plans to sell “substantial” gold or base metal assets, or both, and had already started soliciting offers from interested parties.
Cambior’s largest producer is the Omai mine in Guyana, an open-pit operation. It produced 73,600 oz. gold in the third quarter of 1999 at an average mining cost of US$244 per oz.
Other major producers of the yellow metal in the company’s stable are the Doyon and Sleeping Giant mines in Quebec. The Doyon division turned out 57,500 oz. in the 1999 third quarter at an average mining cost of US$196 per oz., whereas Sleeping Giant produced a modest 8,800 oz. at US$218 per oz. for the same period.
Cambior is considering selling its half-interest in the Niobec niobium mine, 11 km north of Chicoutimi, Que. The other half is owned by operator
A positive feasibility study was recently completed to expand the concentrator at the underground mine in two phases. The first, to result in a 20% expansion, will require $7 million to complete. The second, which requires a further $3 million, is designed to boost output by an additional 20%.
Niobec is the only primary niobium mine in North America and ranks as the third-largest in the world. It produced 1,735 tonnes of niobium (in the form of ferro-niobium) in the first nine months of 1999, compared with 1,652 tonnes a year earlier.
Reserves are estimated at 10.6 million tonnes grading 0.52% Nb2O5 — enough to maintain the current operating rate until 2015.
Farther afield, Cambior’s La Granja copper project in Peru and El Pachon (also copper) in Argentina are on the block as well. Another potential candidate for sale is the producing Langlois zinc mine in northwestern Quebec. Cambior also holds a large roster of exploration projects, mostly in the Americas, which may be put on the block.
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