Cambior puts Omai bauxite on the block (July 10, 2006)

Rather than sink significant capital into a badly needed expansion to compete with stiff Chinese competition, Cambior (CBJ-T, CBJ-X) is looking for a vertically integrated alumina producer to acquire all or part of its 70% stake in loss-making Omai Bauxite Mining.

Omai Bauxite owns several bauxite deposits in the Linden region of Guyana. A first-quarter net loss of US$1.9 million by the subsidiary prompted Cambior to recently suspend part of its operations for July and August. The move was accompanied by the layoff of some 350 workers.

A boost in chemical-grade bauxite output is planned to help offset the impact of the suspension of high-alumina calcined bauxite production. The 2-month suspension is expected to cost the company $1 million.

In the 1970s, Guyana supplied more than 80% of the worldwide supply of high-alumina calcined bauxite. It has since lost that market dominance to China owing to unreliable production and cheaper Chinese products.

At the end of 2005, Omai’s probable reserves totalled 55.4 million tonnes averaging 60% Al2O3, with proven reserves of 6.4 million tonnes running 59.8%.

Cambior says the government of Guyana, which owns the remaining 30% of Omai Bauxite, is behind the auction as it involves the potential for an expansion of the business. Cambior adds that several producers have already expressed interest in Omai’s metallurgical bauxite production potential.

The divestiture is designed to allow Cambior to focus on its gold business. The company has hired BMO Nesbitt Burns to solicit business proposals, and hopes to wrap up a deal by year-end.