Cambior sharpens trimmers in ’03

With gold climbing to prices not seen in years, Cambior (CBJ-T) plans to trim its hedge book by about 40% to around 800,000 oz. gold in 2003.

The reduction would see the company’s hedge position drop to the lowest level allowed by its lenders under a proposed US$65-million credit facility. As previously announced, the US$55-million non-revolving term loan and US$10-million revolving credit facility arranged with a syndicate of banks stipulate that Cambior hedge 30% of its production at a minimum of US$290 per oz. during the life of the loan. The facility will help fund development of the Rosebel gold project in Suriname.

The hedge requirement decreases in tandem with loan repayments, and delivery of ounces can be delayed until the loan’s final maturity at the end of 2007. The hedge book is not subject to margin calls.

In 2002, Cambior cut its hedging commitments by 600,000 oz., or 32%, by delivering into existing positions, restructuring certain obligations, and repurchasing other positions. During the year, the price of gold averaged US$310 per oz. — the highest since 1997.

At the end of 2002, Cambior’s total commitments amounted to 1.3 million oz. at an average of US$301 apiece, including 114,000 oz. of call options sold at an average of US$301 per oz.

Cambior poured 568,900 oz. gold in 2002, down from 614,900 oz. in 2001. Fourth-quarter production slipped by about 27,700 oz. to 133,000 oz. on lower production from the Omai mine in Guyana.

Omai cranked out 319,600 oz. gold, 34,1000 oz. better than planned, thanks to higher milled grades. For the final three months of 2002, Omai production fell by 17,000 oz. to 74,000 oz. The operation is slated to pour 273,000 oz. at a mine cost of US$216 per oz. in 2003. Lower milled tonnage is planned, reflecting the expectation that saprolite and soft rock ores will be depleted in the second quarter.

The Doyon division in Quebec chipped in 216,200 oz., down from 228,700 oz. in 2001. Of that amount, 50,900 oz. came in the fourth quarter, down from 62,000 oz. a year earlier. Mill throughput slipped 10% during the last four months of the year on a harder mix of lower-grade underground ore. Doyon is expected to produce 218,000 oz. at a higher mine operating cost of US$241per oz. in 2003. The higher costs reflect development for stope preparation.

Cambior’s half-share of production from the Sleeping Giant mine in northwestern Quebec climbed 800 oz. to 33,100 oz. Of that amount, 8,100 oz. were poured in the fourth quarter, slightly higher than a year earlier, owing to higher grades. The mine is co-owned by Aurizon Mines (ARZ-T).

With production winding down at Omai (slated to close at the end of 2005), Cambior hopes to secure political-risk insurance for the Gross Rosebel project in central Suriname, where all required permits are in place.

Beginning in early 2004, and based on current reserves, the US$95-million operation is slated to produce 220,000 oz. gold per year at an average mine operating cost of US$187 per oz. During its projected 8-year life, the mine will employ 600 people.

Looking ahead, Cambior pegs overall production in 2003 at 522,000 oz. at a mine operating cost of US$227 per oz., including a non-cash charge of US$9 per oz. for deferred stripping capitalized in prior years.