Higher cash flow buoys Cambior

Despite taking a US$5.4-million writedown on its Omai gold mine in Guyana, Cambior (CBJ-T) managed to post a profit during the last three months of 2001. It was the first time the Montreal-based company had turned a quarterly profit since July-September 2000.

Earnings for the recent quarter totalled US$12.1 million (or 12 per share) on revenue of US$52.4 million, compared with a loss of US$101.7 million ($1.35 per share) on US$52.9 million in the fourth quarter of 2000.

Cash flow from operations rose to US$5.2 million from US$3.7 million as a result of lower production costs and financial expenses.

For all of 2001, Cambior lost US$8.2 million (9 per share), a vast improvement over the US$81.6 million ($1.12 per share) lost in 2000, when the company wrote down US$94.3 million in assets.

Revenue between the two periods slipped to US$198.2 million from US$210.6 million, owing to a slightly lower realized gold price. However, cash flow from operations climbed to US$32.4 million from US$25.7 million.

Fourth-quarter gold production totalled 160,700 oz. at a cash cost of US$203 per oz., up from the 154,600 oz. produced at US$230 per oz. in the year-earlier period. Cambior’s share of fourth-quarter niobium production from the Niobec mine in Quebec was 430 tonnes, compared with 278 tonnes in the fourth quarter of 2000.

For all of 2001, the company pumped out 614,900 oz. gold at US$220 each, up from 612,900 oz. at US$226 per oz. in 2000. Its share of ferroniobium production climbed to 1,503 tonnes, from 1,085 in 2000.

The company realized an average of US$294 per oz. for its quarterly gold production (down from US$312 per oz. a year earlier) and US$289 per oz. (US$321 per oz.) for the year.

The bulk of gold production came from Omai, which churned out 91,100 oz. during the quarter and 354,300 for the year. Direct mining costs rang in at US$198 per oz. for the quarter and $214 per oz. for the year, both better than year-earlier figures. During the 2000 fourth quarter, Omai produced 86,800 oz.; for the whole year, 330,000 oz. The improved performance is attributed to higher grades and increased tonnage.

During the year, Omai added only 50,000 oz. to its mineral reserves, a direct result of the complete definition of the two deposits currently being mined. The deposits are slated for depletion in 2005. Ongoing exploration is aimed at finding a new gold deposit near the mine.

Cambior’s Doyon division in Quebec chipped in 62,000 oz. gold during the quarter and 228,700 oz. during the year. A year earlier, the division contributed 58,700 oz. and 231,700 oz., respectively.

At the end of the year, Cambior recalculated the book value of its properties and reserves based on a gold price of US$300 per oz. The results included the US$5.4 million writedown at Omai.

Hedge book

The company’s hedge book, at year-end, covered a total of 1.25 million oz. at a price of US$298 per oz. and total commitments of 1.9 million oz. at US$306 per oz., through to 2007. The hedge positions include fixed-forward contracts, spot-deferred contracts, prepaid gold-forward sales and the minimum quantity of variable-volume forward contracts.

At the end of 2001, Cambior’s total debt stood at US$51 million, virtually unchanged from the third quarter but well under the US$130 million reported at the end of 2000. Cash and equivalents amounted to US$15 million.

Total ongoing capital expenditures for 2002 are expected to be US$15 million, well below those of 2001, owing mostly to minimal deferred stripping costs at Omai and lower development expenditures.

This year, the company plans to spend US$7.3 million on exploration near mine sites and on completing the feasibility study at the Gross Rosebel gold project in Suriname.

Gold production for 2002 is projected at 547,000 oz. at a direct mining cost of US$225 per oz. The drop in production reflects the planned decrease at Omai.

Meanwhile, a 7-year-old class action lawsuit related to a 1995 tailings spill at Omai has been dismissed. The spill released 3 million cubic metres of waste water containing 28 parts per million cyanide and large quantities of suspended silt into waterways that flowed into the Essequibo River.

A commission appointed by the Guyanese government subsequently found no criminal liability attached to the owners or contractors but left the door open for civil actions.

At the end of February, an underwriting syndicate led by Sprott Securities and including National Bank Financial and Scotia Capital exercised its option to buy 7.5 million additional special warrants for $1.30 apiece, for gross proceeds to Cambior of $9.75 million.

Each special warrant entitles its holder to one Cambior share and half a warrant, with one whole warrant entitling its holder to buy another share for $1.70 within 12 months.

The syndicate had earlier bought 13.8 million special warrants at the same price for gross proceeds of $18 million.

The aggregate gross proceeds of $27.8 million will be added to Cambior’s working capital.