Cambior boosts profit, production in 1997

Despite the weakness in gold prices during 1997, Cambior (CBJ-T) managed to boost its earnings, revenues and gold production for the year.

The good news is partly due to the company’s far-sighted hedging program, which generated an average realized gold price of US$424 per oz. for the year ended Dec. 31, 1997, compared with US$423 in 1996.

Furthermore, the company’s gold hedging will ensure an average price of US$412 per oz. on 650,000 oz. produced over the next three years, including full coverage at US$398 per oz. of 1998’s planned gold production.

Cambior’s net earnings for 1997 were US$7.1 million (or US12cents per share) compared with US$4.6 million (US8cents per share) for 1996. Revenues for 1997 were US$324 million, up US$11 million from the previous year.

In the fourth quarter of 1997, net earnings dropped to US$200,000 on revenues of US$85 million. The company states that its financial performance for the quarter was negatively affected by weak zinc prices and increased depreciation charges resulting from adjusting its year-end reserves.

Specifically, Cambior now uses a long-term value for gold of US$350 per oz.

when estimating reserves, down from $400 per oz. Base-metal price assumptions have been maintained.

On a positive note during 1997’s fourth quarter, Cambior converted its gold loan back into a dollar loan, generating a gain of US$28 million.

Cambior’s gold production reached 520,000 oz. in 1997, up from 502,000 oz.

for 1996. The increase is mostly due to the first full year of operation at the expanded Omai mill in Guyana, where 338,000 oz. gold was produced last year, including 83,000 oz. in the fourth quarter.

In December 1997 at Omai, arbitration for the wage negotiations for hourly employees was completed, with increases set at 12% for 1997 and 7% for 1998.

The increased gold production from the Omai mine was offset by lower production at the Doyon mine in Quebec and the scheduled shutdown of the Chimo and Silidor mines (both in Quebec) because of reserve depletion.

Cambior says that the weak performance at Doyon in the first three quarters of 1997 was mainly due to an accumulated development shortfall following two months of labor disruption in 1996. A bottleneck was caused by major mine development below the eighth level and stability problems in Zone 1.0 which limited the availability of underground ore to the mill.

Since its recent US$95-million acquisition of Barrick Gold’s half-interest in the Doyon mine (T.N.M., Jan. 26-Feb. 1, 1998), Cambior has begun a 3-year program designed to boost gold production to 260,000 oz. annually and reduce the average direct mining costs to below US$200.

The company’s overall average direct mining cost for gold production declined last year, averaging US$255 per oz. for 1997 and US$231 per oz. for the fourth quarter.

Total zinc and copper production was up slightly during 1997, at 48,000 and 9,000 tonnes.

Cambior’s 1997 zinc production was lower than during the previous year due to the Langlois mine in Quebec being brought back into production only for the last six months of the year. Langlois’ zinc and copper production for the fourth quarter was 8,100 tonnes and 370 tonnes, respectively.

The Bouchard-Hbert mine in Quebec improved its performance during the fourth quarter of 1997, attaining a daily throughput of 2,800 tonnes at the mill with higher head grades.

Cambior’s half-share of production from the Niobec mine in Quebec (operator Teck [tek-t] is Cambior’s equal partner) was 1,100 tonnes of niobium, the same amount as in the two previous years.

Cambior’s investments during 1997 totalled US$102 million, with major spending allocated to Omai (US$14 million), Doyon (US$13 million), Carlota (US$12 million) in Arizona and La Granja (US$16 million) in Peru.

At Dec. 31, 1997, Cambior had US$51 million in cash and an unused credit line of US$73 million. The company holds a net debt position of US$90 million, up US$2 million from Dec. 31, 1996.