The Montreal-based miner has negotiated to buy an initial 55.3% interest in the Peruvian mining company Compaia Minera Poderosa from a group of private shareholders. The cost is about US$31 million, to be paid as US$25 million in cash and 2.2 million common shares. There may be a contingent payment of US$6 million subject to resolution of outstanding tax legislation.
Cambior plans to complete due diligence in the next few weeks. The deal should close one month later.
At June 30, the estimated proven and probable reserves (at a gold price of US$350 per oz.) were 563,000 tonnes grading 18.8 grams gold per tonne, or 341,000 contained ounces. Cambior has reviewed Compaia Minera Poderosa’s resources and has estimated that there may be an inferred 3.3 million tonnes averaging 12.8 grams gold per tonne (primarily from 29 veins).
The Poderosa mine has produced 1.25 million oz. since 1982 and is currently producing 100,000 oz. per year at a projected cash cost of US$175 per oz. The company operates two mills, one at 600 tonnes per day (Maraon) and the other, at 200 tonnes per day (Santa Maria). Poderosa employs about 800 non-unionized staff.
Compaia Minera Poderosa owns about 60% of the 5-by-80-km Pataz batholith, an area that produces 400,000 oz. gold per year. The granodiorite batholith is intersected by multiple veins trending northwest and dipping 20 to 45 to the east. Mining access is through adits, with mining on high-grade veins averaging 1.2 metres in width and extending for hundreds of metres along strike and for at least 100 metres downdip. Last year, the average grade mined was 18 grams gold per tonne.
The quartz veins are sulphide-bearing and average about 20% sulphide (predominantly pyrite with lesser galena, sphalerite and arsenopyrite).
Cambior has been working in the Pataz batholith since 1993 and expects to be able to increase reserves and resources in the area. CEO Louis Gignac says that in 2000, Compaia Minera Poderosa produced 64,000 oz. gold and had 152,000 oz. in reserves, whereas last year it produced 90,000 oz. gold and the reserves had increased by 180,000 oz., to 340,000 oz. The reserves were firmed up at the cost of about $40 per oz., he says.
Compaia Minera Poderosa also purchases high-grade ore from smaller mines. Last year, this accounted for 9,251 oz. gold.
At June 30, Poderosa had outstanding bank and creditors’ debts that totalled US$34.7 million, including US$18 million in shareholders’ advances. By the end of this year, half of this liability will have been paid. The third-party debt is expected to be repaid by the end of the third quarter of 2006.
Poderosa pays about a 2% net smelter return royalty, which is projected to rise by 1%, subject to decisions made by the Peruvian government.
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