A deal with
Under the terms of the deal, Cambior is buying Gross Rosebel for cash: Golden Star receives US$5 million on closing and US$1 million annually on the second, third and fourth anniversaries of closing. It gets Golden Star’s 30% shareholding in Omai’s operating company, Omai Gold Mines, in exchange for assuming Golden Star’s US$900,000 debt to Omai Gold.
At Gross Rosebel, Golden Star keeps a conditional royalty that becomes effective at gold prices exceeding US$300 and US$350 per oz. Under the terms of the royalty, if Cambior brings the deposit into production, Golden Star will receive any revenue in excess of US$300 per oz. on production from “soft” (rippable) ores and any revenue in excess of US$350 per oz. from hard-rock ores, up to a limit of 7 million oz. A 2% net smelter return royalty, payable either to the government of Suriname or to state-owned aluminum producer Grassalco, would be deducted from the revenue applicable to the Golden Star royalty.
Gross Rosebel has a resource of 25 million tonnes grading 1.7 grams gold per tonne. A final feasibility study is being updated this year at a cost of US$400,000.
Cambior also takes over Golden Star’s interest in two projects south and east of Gross Rosebel: the Hadley’s Reef and Thunder Mountain properties. Should either property go into production, Golden Star will get US$500,000 each year for two years.
At the same time, Cambior will trade off its interests in two properties in French Guiana. One, Yaou-Dorlin, is an equal joint venture with Golden Star subsidiary
Cambior posted lower earnings for the three months ended Sept. 30, owing to lower revenue and adjustments in the valuation of its non-hedge derivative instruments.
The third-quarter loss amounted to US$8.5 million (or 9 per share) on revenue of US$48.4 million, compared with year-ago earnings of US$10.5 million (14 per share) on US$51.8 million. Included is a US$8.2-million unrealized loss on derivative instruments, compared with a gain of US$24 million during the corresponding period of 2000.
Cash flow from remaining operations during the recent quarter was US$1.3 million, a third of what was reported a year ago.
For the first nine months of 2001, the loss tallies to US$20.3 million (or 22 per share), compared with a year-ago profit of US$20.1 million (28 per share). Revenue between the two periods fell to US$145.8 million from US$157.7 million.
During the quarter, the company received a $1.3-million grant from the Quebec government. The funds are earmarked for advanced exploration at the Mouska, Doyon and Sleeping Giant gold mines in the Abitibi region.
Cambior produced 148,900 oz. in the quarter at a cash cost of US$223 per oz., little changed from the 149,600 oz. produced at the same cost a year earlier. The company realized a price of US$293 per oz. for its production, a US$19-per-oz. premium over the period’s average market price but down from the US$318 per oz. realized a year ago.
Production over the nine months was 454,200 oz. at US$226 per oz., compared with year-ago output of 458,300 oz. at $224 per oz. The realized cash price was US$287 — US$18 higher than the average market price during the period but down from the US$324-per-oz. cash price of a year ago.
The bulk of production again came from the Omai open-pit gold mine in Guyana, which spat out 88,600 oz. during the quarter and 263,200 oz. so far this year. Direct mining costs rang in at US$217 per oz. for the quarter and $222 per oz. for the 9-month period — in both cases US$2 per oz. lower than in the corresponding periods of 2000, when Omai churned out 84,600 oz. and 243,200 oz., respectively. The improved performance is attributed to higher grades and increased tonnage. Omai is expected to produce a record 360,000 oz. gold in 2001.
The Doyon division chipped in 52,400 oz. during the quarter and 166,700 oz. over the nine months. A year earlier, the division contributed 55,200 oz. and 173,000 oz., respectively. The shortfall is attributed, in part, to a late-September labour stoppage at the Mouska mine. With a new, 3-year pact signed at Mouska in mid-October, Cambior expects the Doyon division to meet its 2001 production target of 225,000 oz.
At Sept. 30, 2001, the company’s hedge book covered a total of 1.4 million oz. at a price of US$297 per oz. and total commitments of 2.1 million oz. at US$305 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.
Cambior’s share of third-quarter niobium production from the Niobec mine in Quebec was 354 tonnes, up 36% from a year ago, thanks to expansion production. For the first nine months of 2001, Cambior’s share totalled 1,073 tonnes. The mine contributed cash flow of $1.9 million during the quarter and $4.7 million for the year to date. Following a 10-day strike at the mine this past summer, a three-year agreement was reached.
The third quarter also saw Cambior reduce its debt by $15.4 million to US$51 million. Cash and equivalents stand at US$7 million.
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