Cambior’s loss widens

Cambior‘s (CBJ-T) slow recovery from a hedge book gone wrong in 1999 stumbled a bit during the second quarter of 2001 as its losses widened thanks to lower realized gold prices.

During the three months ended June 30, the company suffered a net loss of US$10.9 million (or 12 per share) on revenue of US$49.9 million, compared with a year-ago loss of US$6.8 million (10 per share) on US$55.7 million. One bright spot in the company’s book was its cash flow from remaining operations, which increased 34% to US$7.3 million.

The second-quarter net loss includes a US$9.5-million unrealized loss on derivative instruments, up from US$5.4 million in 2000.

For the first half of the year, the company’s loss hit US$11.8 million (13 per share), compared with earnings of US$9.5 million (14 per share) in the same period of 2000. Revenue between the two periods fell to 97.4 million from the year-ago 105.9 million.

During the latest quarter, the company was the beneficiary of a $2-million grant from the Quebec government. The funds are earmarked for advanced exploration at the Mouska, Doyon and Sleeping Giant gold mines in Quebec’s Abitibi region.

Second-quarter gold production amounted to 153,400 oz. at a total cash cost of US$227 per oz. The company realized a price of US$283 per oz. for that production. A year earlier, the figures were 158,300 oz. at US$217 per oz., which sold for US$303 per oz.

Gold production for the first half of 2001 totalled 305,300 oz. averaging US$227 per oz., compared with year-ago production of 308,700 oz. at US$224 per oz. Realized cash prices fell to US$290 from US$304 per oz.

The bulk of production came from the Omai open-pit gold mine in Guyana, which churned out 86,000 oz. during the quarter and 174,600 oz. during the recent half-year. Direct mining costs were US$227 and USUS$220 per oz., not far off year-ago costs. A year earlier the mine produced 86,200 oz. and 158,600 oz., during the respective periods. The improved performance is attributed to higher grades.

The Doyon division produced 59,300 oz. during the quarter, down from 61,800 a year earlier. First-half production was 114,300 oz., down from 117,800 oz. as fewer tonnes were milled.

Cambior’s hedging program generated US$2.3 million ($15 per oz.) in additional cash flow for the second quarter of 2001, lower than the US$7.3 million (US$24 per oz.) in the first half of 2001.

At the end of June, Cambior’s hedge book covered a total of 1.3 million oz. at an average price of US$297 per oz. The hedge positions include fixed forward contracts, spot deferred contracts, prepaid gold forward sales and the minimum quantity of variable volume forward contracts. Total commitments over seven years total 2.1 million oz. averaging US$305 per oz.

During the quarter, as part of its financial restructuring, Cambior entered into an agreement with Noranda (NRD-T) for the sale of its interest in the El Pachon copper project in Argentina. Cambior will receive US$15 million — US$13 million at closing and US$2 million when Noranda makes a production decision, or in four years of closing, whichever comes first.

"We are pleased with the progress achieved since the beginning of the year," says Louis Gignac, Cambior’s CEO. "For the first half of the year, the Omai mine saw a 10% improvement in gold production over the corresponding period last year. We exceeded our production target for the first half of the year and we are on our way to surpassing our 2001 gold production target, originally set at 585,000 oz. and subsequently increased to 600,000 oz."

At June 30, Cambior’s cash and equivalents stood at US$10 million.