Cambior profits from higher gold prices (October 22, 2002)

Riding higher gold prices, Cambior (CBJ-T) managed to post a tidy profit for the three months ended Sept. 30, the first quarterly profit since the last three months of 2001.

Cambior’s third-quarter net earnings came to US$4 million (or 3 per share) on revenue of US$52.6 million, compared with a year-ago net loss of US$8.5 million (9 a share) on US$48.4 million. Cash flow from operations vaulted to US$9 million from $1.3 million.

For the first nine months of the year, Cambior’s net loss piled up to US$9.5 million (7 per share) on revenue of US$150.8 million, better than the US$20.3 million (22 a share) lost on revenue of US$145.8 million a year earlier. Cash flow dwindled to US$18.3 million from US$76.1 million (including US$55.in proceeds from the prepaid gold forward sale agreement).

Gold production during the recent third quarter tallied to 149,700 oz. at total cash cost of US$226 per oz., up slightly from the 148,900 oz. produced at US$223 per oz. the previous year. The increased production is attributed to the excellent performance of the Omai mine during the quarter

During the quarter, the Omai mine in Guyana cranked out 90,100 oz. at an operating cost of US$210 per oz., up from the 88,600 oz. produced at US$216 apiece. The increase is attribute to higher grades (1.58 grams gold per tonne versus 1.48 gram). Omai is pegged to beat its 2002 production target of 285,000 oz. by more than 20,000 oz. Quarterly production from the Doyon and Sleeping Giant operations slipped slightly as fewer tonnes were milled.

For the first nine months of the year, production totalled 435,800 oz. at US$228 apiece, compared with year-ago production of 454,200 oz. at US$226 per oz. Again the cause was found at Omai where grades suffered earlier in the year.

For the recent quarter, the company realized an average of US$315 per oz. for its production, a US$22 improvement year-on-year, and better than the quarter’s average market price of US$314 per oz. For the nine-month period, the company averaged US$305 for each oz., up from US$287 per oz. a year ago, but a dollar off the quarter’s average market price of US$1 per oz.

The company’s total gold-hedging commitments have been reduced by 31% since the beginning of the year to 1,306,000 oz. at US$299 per oz. at the end of Sept. The company plans on trimming its hedge to 1 million oz. by the end ounces by year-end.

Cambior’s quarterly share of niobium production from the half-owned Niobec mine in Quebec rang in at 371 tonnes, up 41 tonnes from a year ago.

Cambior, and equal partner Mazarin (MAZ-T) recently boosted proven and probable reserves to 22 million tonnes averaging 0.67% Nb₂O₅, compared with 18.2 million tonnes running 0.68% at the end of 2001. Lower production costs and a higher recovery rates at the mine allowed the inclusion of some slightly lower grade material.

The bulk of the increase is in proven category, which climbs to 14.6 million tonnes grading 0.64% Nb₂O₅, from 11.7 million tonnes of 0.65%. Probable reserves have increased to 7.4 million tonnes of 0.71% Nb₂O₅, from 6.5 million tonnes of 0.72% Nb₂O₅.

The update reflects additional drilling and an independent rock mechanics study.

The partners note that 90% of the reserves are situated above the 1450-ft. level and can be mined using the mine’s existing underground infrastructures. The new reserve is enough to keep the mine running for close to 18 years at the current mining rate. The partners are confident reserves can be expanded further at depth.

With mining at the Omai open-pit gold mine in Guyana slated to finish by the end of 2005, Cambior is readying for construction at the Rosebel open-pit gold project in Suriname later this year. Cash on hand and cash flow generated during the next 18 months will cover the project’s initial price tag of US$95 million. The company is also in talks aimed at increasing an existing credit facility by about US$45 million to cover the balance.

Rosebel’s reserves are pegged at 36.9 million tonnes running 1.63 grams gold per tonne, equivalent to 1.9 million contained ounces of gold, based on a gold price of US$300 per oz.

The feasibility study envisages average annual gold production of 220,000 oz. at an operating cost of US$187 per oz. The reserves are enough for an 8-year operation.

At quarter’s end, Cambior had US$35 million in cash and equivalents an total debt of US$26 million.