Ariane shares rocket on Cambior merger

Longueuil, Quebec-based miners Cambior (CBJ-T) and Ariane Gold (AGD-T) have agreed to merge with an eye toward developing Ariane’s Camp Caiman gold project in French Guiana.

Under the proposed nuptials, Ariane shareholders would receive one Cambior share for every 2.91 Ariane shares tendered. The deal values Ariane’s shares at $1.32 apiece, representing a 36% premium over Ariane’s closing price in Toronto on Sept. 25. Cambior says it will issue about 16.3 million shares to Ariane shareholder, for a deal valued at around $62 million.

Also under the proposal, Ariane is on the hook for a $2.2 million break-up fee should it decide to accept a competing offer.

The transaction is subject to due diligence by Cambior, a formalized agreement, and regulatory approval. Pending the thumbs up from at least two-thirds of Ariane’s shareholders, the proposed deal is slated to during the fourth quarter.

Camp Caiman is situated about 45 km southeast of the capital city of Cayenne. So far, more than 90,500 metres worth of diamond and reverse-circulation drilling has outlined measured and indicated resources totalling 10.4 million tonnes running 2.9 grams gold per tonne for 975,700 contained oz. of gold. Another 1.8 million tonnes of inferred material grades 3.2 grams gold.

Of the measured and indicated resources, 7.7 million tonnes averaging 2.5 grams gold, or 620,500 contained oz., is contained in saprolite and transitional ores; the balance is found in fresh rock. The estimates employ a cutoff grade of 0.8 gram gold for the saprolite, 1 gram for the transition ore, and 1.6 grams for the sulphides.

Camp Caiman covers metavolcanic and metasedimentary rocks, which have been cut by an east-west structural zone. Gold mineralization is controlled by both stratigraphy and late structures, and is associated with quartz-sulphide veinlets.

Two major mineralized zones have been traced for 1.8 km along strike. The Scout zone is marked by steeply dipping elongated mineralized shoots averaging 8 metres in thickness, with the strike length reaching 250 metres. The oxidized saprolite cover extends to 100 metres.

Earlier this summer, drilling cut new mineralized lenses in the deposits two main zones, the Scout and CC-88 zones. Drilling also extended the zones along strike. Intervals from the new lens at Scout run up to 4 grams over 35.1 metres. The new lens at CC-88 yielded 10.7 metres of 3 grams gold.

Limited diamond drilling on zone CC-08, between Scout and CC-88, encountered 21 metres running 1.1 grams gold and 5 metres of 2.2 grams. Reverse-circulation drilling extended known mineralization and cut new zones generally grading around 1 gram and less.

A preliminary assessment of the project indicated the economic feasibility of an open-pit operation churning out 96,000 oz. of gold annually for 10 years (T.N.M., Sep. 1-7/03). The study assumed a reserve base totalling 12.2 million tonnes grading 3 grams gold, and concluded that additional reserves would significantly improve the project’s economics.

Cambior plans an exploration program aimed at increasing resources in anticipation of a final feasibility study and environmental impact assessment within the next year. Cambior hopes to have a mine running by 2007.

In a prepared statement, Ariane’s chief executive James Crombie said, “We are very enthusiastic with this business combination and we welcome Cambior to the Camp Caiman project and gain the benefit from their expertise and the liquidity of their shares in the market place.”

Cambior is no stranger to the region with its Omai gold mine in nearby Guyana winding down, while its Rosebel gold project nears completion in neighbouring Suriname.

Mining at Omai is expected to wrap up in 2005, after 12 years of production. For 2003, the mine is forecast to pour 272,800 oz. of gold at an estimated mine operating cost of US$216 per oz.

Meanwhile, by the end of August, Cambior had completed all of Rosebel’s foundations, initiated the installation of towers for the power transmission line, and dismantled Omai’s grinding circuit and shipped it to Suriname. Subsequently, the company has begun dam construction.

Rosebel remains on time and budget, with US$63 million spent so far this year and another US$9 million committed over the balance of the year. The total budget is US$95 million. Startup at Rosebel is slated for the first quarter of 2004 at the annual rate of 269,000 oz. gold; mine operating costs are pegged at US$157 per oz.

Ariane shares rocketed 23, or 24%, to $1.20 in early trading in Toronto following the news on Sept. 25; shares in Cambior were off 24 to $3.59. Cambior has about 211 million shares outstanding, while Ariane has 47 million fully diluted shares outstanding.