Cambior secures US$65m for Rosebel

Cambior (CBJ-T) says it has received a commitment for US$65 million in new financing to put toward developing the Rosebel gold project in Suriname.

The financing comes in the form of a US$55-million non-revolving term loan and a US$10-million revolving credit facility arranged with a group of banks led by Scotia Capital and including Standard Bank London, the Bank of Nova Scotia, Societe Generale and NM Rothschild and Sons Ltd. Both mature on Dec. 31, 2007. The term loan repayment schedule calls for quarterly payments ranging from US$2-US$5 million from 2004 to 2007.

The credit facility will begin to bear interest at the London Interbank Offering Rate (LIBOR) plus 2.5% once construction begins. Once the project is complete the premium over LIBOR will vary from 1.5% to 2.5% based on certain financial ratios. The first US$15-million instalment is due June 30, 2004. Cambior plans on using money raised via the exercise of warrants and new share issuances to repay US$5 million during 2003.

As part of the deal, Cambior must hedge 30% of its production at a minimum price of US$290 per oz. during the life of the loan. The hedge requirement decreases in tandem with loan repayments. The hedging plan allows Cambior to delay delivery of hedged ounces until the loan’s final maturity. Also, the hedge book is not subject to margin calls.

Finally, the financing agreement is subject to Cambior securing necessary operating and development permits at Rosebel. Cambior must also subscribe to political risk insurance for its investment in the project.

Cambior plans to use the facility mainly to repay US$22 million owed under its existing credit facility and to finance construction and development of the Rosebel project.

Development at Rosebel comes with an initial price tag of US$95 million. The company says the difference will be made up from cash on hand and cash flow. At the end of September, Cambior had US$35 million in cash.

Cambior hopes to begin construction at Rosebel before year-end. Toward that end, the company is submitting its recently completed feasibility study and environmental impact study so that permitting can begin.

Slated for a 2004 startup, the mine will produce about 220,000 oz. annually, with average direct mining costs pegged at US$187 per oz. In all, the operation is expected to churn out 1.8 million oz. gold.

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 an assumed, long-term gold price of US$300 per oz.

Of the reserve, 21.2 million tonnes grading 1.47 grams gold are soft rock material, 11.7 million tonnes are transitional material grading 1.81 grams gold, and the remaining 3.9 million tonnes are hard-rock material averaging 1.93 grams gold. Total measured and indicated resources stand at 68 million tonnes grading 1.5 grams gold.

Initial mining will target the soft material at an average rate of 43,000 tonnes per day. Some 1.7 million tonnes running 0.9 gram gold will be stockpiled for processing near the operation’s demise. For the first 18 months of operation, the mill will run through 14,000 tonnes of soft material each day. During the second year, the mill will be fed up to 50% transitional and hard-rock material at a slightly reduced rate.

In mid-afternoon trade in Toronto on Nov. 22, Cambior shares were fetching $1.58, up three pennies form their previous close.