Cambior looking to shed assets

In a new strategy aimed at reducing its heavy debt burden, Cambior (CBJ-T) has announced its intention to sell “substantial” gold or base metal assets, or both, and begun soliciting offers from interested parties.

After losing US$33 million as a result of its failed hedging program (T.N.M., Nov. 8-14/99), the besieged company had, at Sept. 30, long-term debt of US$181 million plus current liabilities of US$67 million (including the US$33-million provision for hedging restructuring). Cash and equivalents amounted to only US$21 million.

Cambior continues to work with financial advisor Bunting Warburg Dillon Read in an effort to fulfil its obligations, and the company’s standstill agreement with its lenders and hedging counterparties has been extended to Dec. 10; it was originally due to expire on Nov. 26.

Cambior’s obligations under its standstill agreement included commitments to: grant a security interest in its Doyon mine in Quebec and related assets; convert London Inter-Bank Offer Rate borrowings under its loan agreement into U.S. Base Rate borrowings (resulting in higher interest payments for Cambior); renegotiate certain hedging-related provisions; submit to independent technical, financial and environmental reviews; not to incur additional debt during the standstill period without consent; not to pay dividends; not to modify its gold-hedging position without permission; and pay standstill fees and related expenses to the counterparties.

Meanwhile, Cambior and equal partner Teck (TEK-T) have completed a positive feasibility study for the expansion of a concentrator at the underground Niobec niobium mine, 11 km north of Chicoutimi, Que.

The expansion will be completed in two phases: the first requires $7 million in spending and is expected to increase production by 20% in the second half of next year; the second, which requires a further $3 million, is designed to boost output by an additional 20%.

Niobec is the only primary niobium mine in North America and ranks as the third-largest in the world. During the first nine months of 1999, Niobec produced 1,735 tonnes of niobium (in the form of ferro-niobium), compared with 1,652 tonnes in the corresponding period last year.

In the Niobec partnership, Teck acts as operator while Cambior oversees marketing.

When it opened in 1976, the mine produced niobium pentoxide (Nb2O5); 19 years later, following the installation of a ferroniobium conversion plant, it began turning out higher-value ferroniobium.

In 1998, the partners deepened Niobec’s shaft to 550 from 404 metres, developed a ramp and installed a new crusher. The work, part of a $15.7-million program, has made it possible for the lower block to be mined. Proven and probable reserves in this block stand at 7 million tonnes grading 0.73% Nb2O5.

On a daily basis, five days a week, the partners mine 2,250 tonnes by means of open-stoping. The ferro-niobium conversion plant runs five days a week as well.

Overall, reserves are estimated at 10.6 million tonnes grading 0.52% Nb2O5 — enough to maintain the current operating rate until about 2015. The deposit remains open at depth.

Ferroniobium is used as an alloying agent in high-strength and corrosion-resistant specialty-steel products.

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