Gold sales hurting price, says Cambior president

Gold prices have dropped partly because of dumping on the world market, including by the owners of the fraud-riddled Bank of Credit and Commerce International, says Cambior (TSE) President Louis Gignac.

“The information we have is that some Arab states are selling off (their gold reserves), especially in the Abu Dhabi area,” Gignac told reporters after the company’s annual meeting.

Sheikh Zaid bin Sultan al-Nahayan of Abu Dhabi was the majority shareholder of the scandal-ridden BCCI before it was shut last year. The directors of the bank are also reported to have defrauded the sheikh of $2 billion. Gignac said other large-scale gold holders such as Russia, the Bank of Canada and the Bank of Brazil are also selling off their reserves for hard cash and to pay down debt.

Gold prices have dropped to about US$335-340 per oz. from about US$360 earlier this year.

Gignac said gold prices would rise again if dumping of reserves stopped. “In the past few years, utilization of gold in jewelry alone has exceeded world production,” he said.

The fortunes of Cambior, Quebec’s largest gold mining company, are heavily dependent on the fluctuations of the metal.

First-quarter results show net income of $3.9 million, down from $4.3 million a year earlier. Cambior in 1991 earned $13.9 million, a steep drop from the $24 million in profit for 1990. Gignac said he expects at least to match last year’s profit in 1992.

Gignac said he expects the price of gold to jump to US$380 this year. Cambior also expects to decide next year whether to tap its Carlota copper deposit in Miami City, Ariz.

The $50-million project, the major asset of Westmont Mining (acquired last August), is the subject of a feasibility study that should be completed late this year, Gignac said.

The company will likely decide on the Carlota mine early next year, company official Robert LaValliere said.

The $162.5-million Omai open pit gold mine project in Guyana in South America that Cambior bought into in 1990 is on schedule, with the first 326,044 oz. sold forward at US$368 per oz. Indications are the mine could be producing gold by the end of this year.

All of Cambior’s 1992 production — an estimated 350,000 oz. — has been sold forward at an average price of US$395 per oz.

But the company can “roll over part of that and pick up a better price” if gold makes gains, Gignac added.

As with other Canadian mining companies, especially those in gold mining, Cambior is increasingly looking south and other places abroad for mining deposits. Quebec’s gold mines, for example, are narrow and deep underground which means they are costly to exploit.

But Gignac cautioned that it doesn’t mean Canadian companies are abandoning Quebec in favor of foreign ventures.

“It’s a balance,” he said. “You won’t be able to invest in developing countries without a strong North American base that allows you to (go abroad).”

–The Montreal Gazette