Montreal-based miners
Under the proposed nuptials, Ariane shareholders would receive one Cambior share for every 2.91 Ariane shares tendered. The deal values Ariane’s shares at $1.32 apiece, representing a 36% premium over the company’s closing price in Toronto on Sept. 25, the day before the deal’s announcement. Cambior says it will issue 16.3 million shares to Ariane shareholders, valued at around $62 million.
The deal also calls for Ariane to pay a $2.2-million break-up fee should it decide to accept a competing offer.
The transaction is subject to due diligence by Cambior, a formal agreement, and regulatory approval. Cambior’s due diligence is substantially complete. Pending the thumbs-up from at least two-thirds of Ariane’s shareholders, the deal is slated to close by late November or early December.
Camp Caiman is 45 km southeast of the capital city of Cayenne. So far, more than 90,500 metres of diamond and reverse-circulation drilling have outlined measured and indicated resources of 10.4 million tonnes grading 2.9 grams gold per tonne, equivalent to 975,700 contained ounces. An additional 1.8 million tonnes of inferred material grades 3.2 grams gold.
Of the measured and indicated resources, 7.7 million tonnes averaging 2.5 grams gold, or 620,500 contained oz., are hosted by saprolite and transitional ores; the balance is found in fresh rock. The estimates employ a cutoff grade of 0.8 gram gold for the saprolite, 1 gram for the transition ore, and 1.6 grams for the sulphides.
The Camp Caiman deposit covers metavolcanic and metasedimentary rocks, which have been cut by an east-west structural zone. Gold mineralization is controlled by both stratigraphy and late structures, and is associated with quartz-sulphide veinlets.
Two major mineralized zones have been traced for 1.8 km along strike. The Scout zone is marked by steeply dipping elongated mineralized shoots averaging 8 metres in thickness, with the strike length reaching 250 metres. The oxidized saprolite cover extends to 100 metres.
Earlier this summer, drilling intersected new mineralized lenses in the deposits’ two main zones: Scout and CC-88. Drilling also extended the zones along strike. Intervals from the new lens at the Scout zone run up to 4 grams over 35.1 metres. The new lens at CC-88 yielded 10.7 metres of 3 grams gold.
Ariane CEO James Crombie says the Scout and CC-88 zones have more than adequate continuity. “We’ve drilled the core of both of them at a maximum spacing of 25 metres and, in some places, 12.5 metres,” he says. “Outside of that and the inferred material, it’s a maximum of 50 metres. The Scout zone is continuous over 1.1 km and still not closed off.”
The depth of oxidation in the CC-88 zone averages 75-80 metres; in the Scout zone, it runs as deep as 120 metres, but averages 90 metres.
Blob
Crombie describes the CC-88 zone as a “semi-vertical blob,” and says the Scout zone “rolls a bit going from 80 to 65 degrees, and pinches and swells. The Scout zone comprises a core structure with several parasitic lenses that come and go. It’s really a corridor of mineralization with a core zone flanked by subsidiary zones.”
Limited diamond drilling on zone CC-08, between Scout and CC-88, encountered 21 metres running 1.1 grams gold and 5 metres of 2.2 grams. Reverse-circulation drilling extended known mineralization and cut new zones generally grading around 1 gram gold and less.
Crombie says the potential to expand resources at Camp Caiman is excellent, noting that the Scout and CC-88 zones remain open and that the 08 zone has not been fully outlined.
Says Cambior CEO Louis Gignac: “Camp Caiman is a large property. I think Ariane and their predecessors explored about twenty-five to thirty-five per cent of the large geochemical anomaly identified on a small portion of the property. The interest for us is to add Camp Caiman to our pipeline of development projects. We believe it warrants additional exploration work.”
He says his company plans to perform stepout drilling on extensions east and west of the current reserves, and that infill drilling will attempt to boost inferred resources to the measured and indicated category in anticipation of conversion to reserves under the next pit design. Drilling will also target areas north and south of the Scout zone.
Crombie says Ariane owns, or has interests in, several other exploration projects in the region.
Cambior plans to spend US$5-6 million on exploration, metallurgical tests and feasibility work in 2004. Gignac says the resources identified to date are sufficient to enable production of about 100,000 oz. gold per year for 10 years.
“We’re satisfied this is a viable project,” he adds. “There’s no doubt we’ll have an operating mine, and, with some work, we’ll add some reserves and resources and get to our twelve per cent return on total capital, including acquisition costs. . . . At the end of the day, if we don’t add anything, we’ll still have a mine and we’ll recover our capital; our rate of return will just be more modest.”
A preliminary assessment of the project indicates the economic feasibility of an open-pit operation churning out 96,000 oz. gold annually for 10 years (T.N.M., Sept. 1-7/03). The study assumed a reserve base of 12.2 million tonnes grading 3 grams gold and concluded that additional reserves would enhance the project’s economics considerably.
Gignac says a straight leaching of Camp Caiman’s ore gives recoveries of 60-65% from the sulphide portion, 75% from transition material, and 90% from the oxidized saprolite. Cambior plans further work to boost recoveries. Cash costs are pegged at US$172 per oz.
Cambior expects to complete a final feasibility study and environmental impact assessment (EIS) within the next year. Both are required before permitting, which should be completed 20-24 months from now. Gignac believes construction could begin in about two years, with production following a year later. Indeed, he says recent meetings with French authorities provide hope that startup could occur as early as mid-2006. Meanwhile, the company is considering building a new access road to the property, ahead of the operating permit.
The project’s scheduling over the next two years will largely be dictated by the permitting process in French Guiana, an Overseas Department of France. Ariane has already begun the process of obtaining the mining concession from the government of France based on its filing of the prefeasibility study and EIS. The pair expect to obtain the concession outright within 12-14 months.
In the meantime, Cambior plans to continue with exploration, geotechnical drilling and EIS monitoring; Ariane’s existing environmental advisory committee will be retained.
Tax exemption
On the financial front, Camp Caiman has been granted a tax exemption for the first 10 years of production; thereafter, the corporate tax rate of 35% kicks in, with some reductions possible via allowable “evergreen investments.” The French government also offers grants for overseas projects, as is the case at
Gignac expects to finance the project out of internal cash flow as its new Rosebel gold project in neighbouring Suriname will have been up and running for several years. Camp Caiman is currently subject to a 0.5% royalty payable to the French government, though the royalty is expected to rise to 1%.
Says Crombie: “We’re enthusiastic about this business combination and welcome Cambior to the Camp Caiman project.”
Cambior is no stranger to the region: its Omai gold mine in nearby Guyana is winding down, and its Rosebel project is nearing completion.
Mining at Omai is expected to wrap up in 2005, after 12 years of production. In 2003, the mine is forecast to pour 272,800 oz. gold at a mine operating cost of US$216 per oz.
Meanwhile, by the end of August, Cambior had completed all of Rosebel’s foundations, begun installing towers for the power transmission line, and dismantled Omai’s grinding circuit and shipped it to Suriname. The company is also building a dam.
Rosebel remains on time and budget: US$63 million has been spent so far in 2003, and another US$9 million is committed over the balance of the year. The project’s total budget is US$95 million. Startup is slated for the first quarter of 2004 at the annual rate of 269,000 oz. gold; mine operating costs are pegged at US$157 per oz.
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