Cambior achieves record gold production

Montreal-based Cambior (CBJ-T) enjoyed a solid second quarter, thanks in large part to strong performances from its Doyon and Omai gold mines.

For the 3-month period ended June 30, the company posted revenues of US$92 million, up US$17 million from the second quarter of 1997, while net earnings rose to US$2.1 million (or US3 cents per share) from US$200,000 (nil per share).

Over the year-long period, Cambior boosted its gold production by 34% to a record 163,000 oz. and reduced the average direct mining cost by 14% to US$237 per oz. Compared with the first three months of 1998, gold production for the second quarter increased by 10%, whereas direct mining costs fell by 5%.

The increase in gold production is mostly due to an agreement, signed in January, that saw Barrick Gold (ABX-T) sell its 50% stake and operatorship in the Doyon gold mine in Quebec to equal partner Cambior for US$95 million.

Doyon produced 63,600 oz. during the second quarter of 1998, which represents a 29% increase from the first quarter of 1998 and a 153% increase from the previous year, when Cambior was half-owner. Direct mining costs at Doyon decreased to $239 per oz. for the recent second quarter, down 31% from the corresponding period of 1997 and 5% from the first three months of last year. Mill throughput was 328,000 tonnes in the second quarter, with an average head grade of 6.3 grams gold per tonne.

Development work at Doyon is focused on stope availability and preparation for production below the eighth level — moves that are expected to increase gold production in the second half of the year. As well, a foundation and steel erection for a paste-fill plant have been completed, and a distribution system is being extended.

In Guyana, at Cambior’s 65%-owned Omai mine (which is 30%-owned by Golden Star Resources [GSC-T]), mill throughput during the second quarter averaged 20,800 tonnes per day, processing 72% hard rock, compared with 19,900 tonnes of 62% hard rock a year ago. The direct mining costs were $10.54 per tonne for the second quarter of 1998, down 10% from a year ago. The average grade milled was 1.46 grams gold, yielding a total of 82,700 oz. at a direct mining cost of US$242 per oz. Exploration work has continued on the adjacent Omai River and Quartz Hill concessions, as well as on the Hicks property, in an effort to increase soft rock reserves.

Cambior’s gold hedging generated an average price of US$391 per oz. during the second quarter of 1998. As of June 30, the hedging program ensured an average price of US$348 per oz. on 1.25 million oz. gold over the next four years, including full coverage of this year’s remaining gold production at $350 per oz.

The company’s zinc production increased significantly as grades at the Bouchard-Hebert and Langlois mines in northwestern Quebec improved.

Bouchard-Hebert produced 10,100 tonnes zinc and 1,600 tonnes copper in the recent second quarter, compared with 7,400 tonnes zinc and 2,000 tonnes copper in the corresponding period last year. The Langlois mine produced 8,300 tonnes zinc and 340 tonnes copper during this year’s second quarter, compared with 6,900 tonnes zinc and 290 tonnes copper in the first quarter (Langlois was reopened in the third quarter of 1997).

Cambior’s half share of production from the Niobec mine in the Lac-Saint-Jean region of Quebec was 270 tonnes niobium for the second quarter. Operator Teck (TEK-T) holds the remaining interest.

On the exploration and development front, work continued at the Cerro San Pedro project in Mexico. Expenditures of US$5.4 million were incurred during the quarter, bringing the total spent by Cambior on the project to US$10.2 million. Recent work has focussed on permitting, metallurgical testing and engineering. A core drilling program of 5,000 metres is planned for the third quarter, as well as an updated feasibility study by year-end.

At the La Arena project in Peru, 23 holes in a 3,140-metre program were completed during the second quarter, bringing the total to 112 holes and 20,700 metres. A resource calculation and prefeasibility are due in the second half of the year.

Cambior’s investments during the second quarter totalled US$25.5 million, including the following expenditures: US$6.6 million at Omai; US$7.2 million at Doyon; US$2.6 million at Bouchard-Hebert/Langlois; US$5.4 million at Cerro San Pedro; and US$1.1 million at La Arena.

Cambior has entered into a 5-year revolving line of credit in a deal arranged by the Chase Manhattan Bank and the Bank of Nova Scotia. The amount is for up to $250 million (or 750,000 oz. gold), an increase of US$25 million and 150,000 oz. from the previous line of credit.

At June 30, Cambior had US$33 million in cash.