EXPLORATION ROUNDUP — Cambior joins Metallica at Cerro San Pedro

Montreal-based Cambior (CBJ-T) will join with Metallica Resources (MR-T) of Denver, Colo., to develop the latter’s Cerro San Pedro gold-silver project, 350 km northwest of Mexico City.

Cambior can acquire a half interest in the project by spending US$20 million on development. The company will also provide a development loan for up to US$60 million, and a gold-silver hedging facility for up to a maximum of 150,000 oz. gold.

Cambior will subscribe to 2 million Metallica shares at two prices: 1 million shares at $2.60 in cash, and another million shares by exchanging Cambior shares at the market price of the two companies during the 10 trading days between Nov. 4 and 17, 1997.

The deal is expected to close Dec. 8, 1997.

As part of its evaluation process, Cambior has already completed confirmatory drilling and metallurgical studies of the Cerro San Pedro deposit.

The company plans to update a March 1997 feasibility study prepared for Metallica by consultants Kilborn International, which assumed gold and silver prices of US$400 and US$5, respectively.

The Kilborn study delineated 77 million tonnes grading 0.6 gram gold and 24.8 grams silver per tonne, representing 1.5 million and 62 million contained ounces of gold and silver, respectively.

Kilborn estimated that US$70 million in expenditures would be required to bring the open-pit, heap-leach project to production at the daily rate of 30,000 tonnes. Total cash costs over the 8-year mine life were estimated at US$220 per oz. gold-equivalent.

The deal’s announcement comes on the heels of Metallica’s termination of its underwriting agreement with Dresdner Kleinwort Benson an BZW (the investment banking divisions of the Dresdner Bank Group and Barclays Bank, respectively).

In July 1997, Metallica had engaged these banks to arrange and, if feasible, underwrite a debt financing of up to US$70 million for development at Cerro San Pedro.

In a release, Metallica Chairman Craig Nelsen said: “Now is not the time for Metallica to be committing to a large debt financing because of the excessive dilution that would result from trying to raise its share of the required equity. Both Dresdner and Barclays have been excellent to work with on this transaction, but we cannot fight the general precious-metal market conditions.”