Low key Cambior Inc. growing at a fast pace

Since Quebec crown corporation Soquem spun off its assets in 1986 to form Cambior Inc. (TSE), the new entity has been one of the least vociferous of Canada’s mining outfits.

Rather than boast about its exploits, the Montreal-based company has quietly gone about the business of making acquisitions with the least possible fanfare.

But nearly eight months after it acquired Aiguebelle Resources and Sullivan Mines for $53.6 million, the company is forecasting a 1988 production quota of 200,000 oz gold from five gold mines.

In addition to a 34% stake in Arthur White gold mine in Balmertown, Ont. and an option to acquire a 50% interest in the Valdez Creek placer mine in Alaska, Cambior’s other interests include a 50/50 joint venture interest with Teck Corp. (TSE) in the Niobec mine which produced 6.1 million lb of niobium pentoxide last year. Located near Chicoutimi, Que., it is the world’s second largest niobium producer.

Through an aggressive exploration and development program, three new gold mines should be in production by 1990, bringing Cambior’s production rate to 275,000 oz from 141,524 oz in 1987.

That’s not bad for a company which was born with a number of working constraints (since lifted) including a mandate to remain within the bounds of its native province. Expansion plan

It also makes the shares a buy, says mining analyst Thomas Komlos in Dean Witter Canada’s recent Canadian Mining Investment guide. “We are impressed with the aggressive nature of management which has drawn up a carefully planned expansion path,” said Komlos.

With $15.1 million in working capital at the end of 1987 and a debt equity ratio of 0.15:1, Cambior was in excellent financial position, he said. To protect itself against adverse price fluctuations, the company sold forward 190,000 oz gold over a 4-year period at an average price of $554(US) per oz.

As part of its expansion policy, Cambior and joint venture partner Lac Minerals (TSE) are involved in a $15.6-million underground development program at the Doyon mine in northwestern Quebec. Canada’s largest open pit gold mine, the Doyon produced 250,000 oz last year but the operation’s annual output is scheduled to drop to 220,000 oz next year as the partners go underground.

However, Komlos says mining costs will remain static ($220(US) per oz) as higher-grade ore from the Main zone is mined. Proven and probable reserves which stand at 11.25 million tons grading 0.16 oz gold per ton are sufficient to support a 10-year mine life. Flavrian property

In another important development for the company, Cambior is bringing the old Flavrian property out of its 26-year hiatus.

As reported (N.M., May 2/88), Cambior has decided to put the wholly-owned former producer into production this year at an initial rate of 18,000 oz annually. Rolled into the Cambior portfolio along with the Aiguebelle and Sullivan acquisitions, the Rouyn, Que., property is expected to produce around 40,000 oz from the Eldrich- Flavell deposits by 1990.

Mineable reserves currently stand at 1.58 million tons with a diluted grade of 0.15 oz and average production costs over the life of the mine are estimated at $340(C) per oz.

The second in Cambior’s portfolio of new mines is expected to be the Pascalis project where reserves at year-end stood at 800,000 tons grading 0.1 oz. Located 15 miles east of Val d’Or, Que., it is expected to begin production next year at a rate of about 39,000 oz annually. But before that, the company is spending $8.2 million to sink a shaft, drift into the ore on the 550 and 800 levels and extract a 30,000-ton bulk sample.

Cambior is also spending $12 million on a shaft sinking project at the Mouska property which lies next door to the Doyon mine. With drill-indicated reserves to a depth of 400 m adding up to 1.6 million tons grading 0.18 oz gold, the first output from Mouska is expected in 1990. Maximum grid

According to the company’s annual report, Cambior spent $3.7 million last year on surface exploration. That program intersected gold-bearing lenses on a maximum grid of 130 ft and down to 1,150 ft below surface.

Cambior says a feasibility study and production decision are planned for July, 1989, some 27 months after the discovery hole on the deposit was drilled.

During the first three months of 1988, revenues increased 40.4% to $26.2 million from $18.9 million in the same period last year and a moderate earnings increase of $3.6 million or 15 cents per share.

“Based on a 40.4% increase in gold production to 198,700 oz this year from 141,524 oz in 1987, a $475 per oz gold price and operating costs of $225 per oz, we expect the company’s per share earnings to rise 26.3% in 1988 to $1.20,” said Komlos.

Over the next three years, by virtue of tax banks accumulated when the company operated as a non- taxable crown corporation, Cambior will pay no income taxes and a mining tax of only 15%.

Cambior’s shares were trading recently on The Toronto Stock Exchange at $16 in a 52-week range of $31.88 and $12.75.