Cambior slides on news of layoffs at Doyon

Shares in Cambior (CBJ-T) fell nearly 5% in Toronto on Sept. 13, after the company said that the lagging effects of a rock fall earlier this spring has forced the layoff of some 130 employees at its Doyon mine in northwestern Quebec.

In May, Doyon’s main ramp suffered extensive damage that disrupted development and production for four months. Despite rehabilitation, Cambior says production from some of the affected areas will be deferred until the operation’s final years.

The company also plans to reduce the mining rate between levels 8 and 12 by 30% to 700,000 tonnes of ore annually. Plans also call for mining to focus on higher-grade areas running around 5.5 grams gold per tonne. Beginning in 2005, the mine is expected to produce 120,000 oz. of gold per year. Additionally, Cambior says it will downgrade some 800,000 tonnes of reserves running 3.3 grams gold to the resource category based on the current gold price and estimated cost of production.

On a brighter note, Cambior plans to fill about 50 vacancies at the Mouska and Sleeping Giant mines with some of the displaced Doyon workers. The restructuring is expected to cost about $2.5 million. Production is about to resume at Mouska, where a shaft-deepening program is a month ahead of schedule, and slightly under budget. The deeper internal shaft will allow access to higher-grade ore. A similar program at Sleeping Giant is slated to wrap up in early 2005, with commercial production slated for the third quarter of that year.

Production estimates from the Doyon division (Doyon and Mouska mines) during 2004 have been trimmed by about 32,000 oz. to 160,000 oz.; thereafter production is pegged at 170,000 oz. per year at an estimated mine operating cost of US$380 per oz. During the second quarter, the division’s production slipped by 24% to 42,800 oz., while costs jumped by 30% to US$334 per oz.

Helping to offset the lower production from Canada is the company’s Rosebel mine in Suriname. During August, Rosebel, which achieved commercial production in early February, exceeded its design capacity of 14,000 tonnes per day by some 3,200 tonnes.

Cambior says that a recent evaluation of Rosebel’s mill circuit indicates that a daily throughput rate of 17,000 tonnes of ore (or around 300,000 oz. of gold per year) can be sustained over the long-term with no additions to the grinding circuit, and only minor additions and modifications to the carbon-in-leach and stripping circuit. A 2002 feasibility study had pegged the operation’s daily throughput at 12,000 tonnes once hard rock and transition ore were included to make up 50% of the mill feed 18 months along.

Cambior expects to spend some US$20 million (up from US$8 million estimated in the feasibility study) upgrading Rosebel’s mill, and installing a gyratory crusher, ore stacker, conveyor system, and effluent treatment plant over the next 12 months.

Meanwhile, results from development drilling on extensions of the Pay Caro, East Pay Caro and Royal Hill deposits, and an updated resource estimate are expected by the end of the year.

At the Omai mine in neighbouring Guyana, increased reserves in the Fennell pit, and production delays owing to the rainy season will extend production into the fourth quarter; the pit was to have been depleted in August. Estimated production for 2004 is slightly ahead of plan at about 240,000 oz. During the first nine months of 2005, Omai is expected to pour another 100,000 oz. as it runs through 3.7 million tonnes of stockpiled, low-grade hard-rock ore grading 0.9 gram gold.

In all, Cambior still expects to pour about 705,000 oz. of gold in 2004; production is forecast to slip to 663,000 oz. and 570,000 oz. in 2005 and 2006. Production is then expected to rebound to around 660,000 oz. a year once the Camp Caiman project in French Guiana cranks up in 2007. The increase also includes a contribution from the proposed acquisition of a 55% stake in the Poderosa mine in Peru. That deal is expected to close by the end of October.

Elsewhere in Guyana, Cambior is spending US$5 million in cash for a 70% stake in Omai Bauxite Mining, with the government retaining a 30% interest. The deal is part of the government’s plan to privatize certain assets of state-owned Linden Mining Enterprises.

The agreement will also see Cambior chip in US$5-million worth of mining equipment from its Omai Gold Mines subsidiary; the government will contribute a processing plant and service facilities, mining and prospecting licences, and the Montgomery mine, which is home to reserves totalling 62 million tonnes grading 60% Al2O3.

Omai Bauxite Mining has received a commitment for US$10 million worth of credit from a Caribbean financial institution. The 10-year credit facility is subject to a US$5-million, cost-overrun facility from Cambior, and bears interest at a rate of 10.5% annually. The funds will be used to at least double the capacity of the processing plant, improve storage and port facilities, expand the mining fleet, build an equipment shop and direct haulage road, and expand the tailings pond.

Both sides have also agreed to reinvest all free cash flow during the first five years to expand the operation into metallurgical bauxite and other non-metallurgical products. Cambior has agreed to install four diesel-powered generators to produce up to 17 megawatts of electricity to cover about 75% of the demand in the Linden area and 25% of that required by Omai Bauxite Mining.

Cambior expects the revamped operation to sell about 240,000 tonnes of high-alumina refractory bauxite per year; annual revenue is pegged at US$33 million with operating cash flows estimated at US$10 million per year.