Cambior pares its loss, adopts poison pill plan

Cambior (CBJ-T, CBJ-X) trimmed its losses by nearly two thirds during the recent third quarter thanks largely to its non-gold operations.

The company posted a net loss of US$2.2 million (or a penny a share) on revenue of US$91.7 million, compared with a year-ago net loss of US$6.1 million (US2 per share) on US$80.7 million. Much of the increase in revenues is attributed to the Omai Bauxite operation in Guyana, where sales jumped 32% to US$9.6 million. Overall cash flow from operations tallied to US$11.7 million, off the year-ago US$16.9 million.

On the production side, Cambior poured 158,300 oz. of gold during the recent quarter, off 10% from the corresponding period of 2004. Mine operating costs jumped nearly 20% to US$314 per oz. The decrease in gold production reflects the termination of mining at the Omai gold mine’s Fennell pit in September of 2004 and the subsequent processing of the low-grade stockpile material.

“We continue to face cost pressures arising from the record fuel prices, strong Canadian dollar and other inflationary increases, which are offsetting the improved gold market conditions,” said Cambior chief executive Louis Gignac in a prepared statement.

The company’s total production costs surged around 15% to US$400 million year-over-year.

Gignac said that operating results from Omai, where production ceased in September, took a particular toll on the company explaining that excluding Omai, company-wide production would have totalled 129,500 oz. of gold at a mine operating cost of US$288 apiece.

With the closure of Omai, Cambior says it will be far less exposed to rising fuel prices and company-wide mine operating costs are expects to fall to their lowest level of the year during the fourth quarter.

He added that progress has also been made at the Doyon division in Quebec, where production amounted to 37,700 oz. at US$360 per oz., compared with 28,900 oz. at US$442 a year earlier. The improvements come compliments of a major restructuring at the Doyon mine in September 2004.

The division is expected to continue to improve during the balance of the year, especially at the Mouska mine where higher grades are anticipated.

Gignac also said progress was made on a turnaround at the Sleeping Giant mine in Quebec, which produced 9,800 oz. at US$525 per oz., compared with 8,200 oz. at US$279.

On the sales side, the company realized an averaged of US$427 per oz., up from US$365 per oz. in 2004. By comparison, the quarter’s average market price was US$440 per oz.

The company says it remains on track to produce 640,000 oz. of gold during 2005.

At the end of September, Cambior’s hedge book contained 156,000 oz. of gold, a 24% decrease from the end of 2004. The company plans to deliver the final 12,980 oz. of prepaid gold during the fourth quarter to terminate that portion of its delivery obligations.

The company’s cash and short-term investments totalled US$13 million at quarter’s end; long-term debt was US$67.8 million.

In the boardroom, Cambior has adopted a shareholder-rights plan aimed at discouraging “coercive or unfair take-over bids” and gives the company time to pursue alternatives deals should an unsolicited takeover bid emerge. The move comes amid a renewed flurry of merger and acquisition activity currently sweeping across the mining industry.

While the company says the plan has not been adopted in response to any specific bid proposal, it does admit that its weak share price makes it ripe for such a move.

Shares in Cambior were off a nickel, or 2.1%, at $2.30 in late afternoon trading in Toronto on Nov. 4. The shares have traded in a 52-week window of $1.94-$3.83