Cambior profits from higher gold prices (October 28, 2002)

Riding higher gold prices, Cambior (CBJ-T) managed to post a tidy profit for the three months ended Sept. 30 — its first quarterly profit since the last three months of 2001.

Third-quarter earnings amounted to US$4 million (or 3 per share) on revenue of US$52.6 million, compared with a year-earlier loss of US$8.5 million (9 per share) on US$48.4 million. Cash flow between the two periods vaulted to US$9 million from $1.3 million.

However, for the first nine months of this year, Cambior incurred a loss of US$9.5 million (7 per share) on revenue of US$150.8 million, which is still better than the US$20.3-million loss (22 per share) on revenue of US$145.8 million in the first nine months of 2001. Cash flow between the two 9-month periods dwindled to US$18.3 million from US$76.1 million (including US$55 million in proceeds from a prepaid gold forward-sale agreement).

Gold production during the recent third quarter totalled 149,700 oz. at a cash cost of US$226 per oz., up slightly from 148,900 oz. at US$223 per oz. in the corresponding period of 2001.

The higher production is due to the excellent performance of the Omai mine in Guyana, which produced 90,100 oz. at an operating cost of US$210 per oz., up from 88,600 oz. at US$216 per oz. a year earlier. The increase reflects higher grades (1.58 grams gold per tonne versus 1.48 grams). Omai is pegged to beat its 2002 production target of 285,000 oz. by more than 20,000 oz.

Meanwhile, quarterly production from the Doyon and Sleeping Giant operations slipped slightly as fewer tonnes were milled. Both mines are in northwestern Quebec.

For the first nine months of the year, production totalled 435,800 oz. at US$228 per oz., compared with 454,200 oz. at US$226 per oz. a year earlier. The decrease reflects lower grades at Omai early in the year.

For the recent quarter, the company realized an average of US$315 per oz. on its production — a US$22 improvement over the year-earlier quarter, and better than the quarter’s average market price of US$314 per oz.

For the nine months, Cambior averaged US$305 per oz., up from US$287 per oz. a year earlier but a dollar off the quarter’s average market price of US$1 per oz.

Total gold-hedging commitments have been reduced by 31% since the beginning of the year to 1.3 million oz. at US$299 per oz. at the end of September. The company plans to trim its hedge to 1 million oz. by year-end.

Cambior’s quarterly share of niobium production from the half-owned Niobec mine in Quebec rang in at 371 tonnes, up 41 tonnes from a year earlier.

The company, together with equal partner Mazarin (MAZ-T) recently boosted proven and probable reserves to 22 million tonnes averaging 0.67% Nb205, compared with 18.2 million tonnes running 0.68% Nb205 at the end of 2001. Lower production costs and a higher recovery rate at the mine allowed for the inclusion of some slightly lower-grade material.

Most of the increase is in proven category, which has climbed to 14.6 million tonnes grading 0.64% Nb205 from 11.7 million tonnes of 0.65% Nb205. The increases reflect additional drilling and an independent rock mechanics study.

Ninety per cent of the reserves are above the 1,450-ft. level and can be mined using existing underground infrastructure. The new reserve is enough to keep the mine running for close to 18 years at the current mining rate. The partners are confident reserves can be expanded at depth.

With mining at Omai slated to finish by the end of 2005, Cambior is preparing to begin mine construction at the Rosebel open-pit gold project in Suriname. Cash on hand and cash flow generated during the next 18 months will cover the project’s initial price tag of US$95 million. The company is also in talks aimed at increasing an existing credit facility by about US$45 million to cover the balance.

Reserves at Rosebel are pegged at 36.9 million tonnes running 1.63 grams gold per tonne, equivalent to 1.9 million contained ounces of gold.

The feasibility study envisages average annual gold production of 220,000 oz. at an operating cost of US$187 per oz. Reserves are sufficient for eight years of mining.

At the quarter’s end, Cambior had US$35 million in cash and equivalents, plus a total debt load of US$26 million.


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