Cambior streamlines debt load

After more than a year of twists and turns, Cambior (CBJ-T) has finally completed an extensive restructuring, shedding most of its non-gold assets and streamlining its debt load and hedge book.

The restructuring became necessary after Cambior was caught offside during gold’s brief rally in October 1999 and racked up US$33 million in hedging losses (T.N.M., Jan. 8-14/01).

The company’s major dispositions in 2000 included: the US$48-million sale of the Bouchard-Hbert and Langlois zinc-copper mines in Quebec to Breakwater Resources (BWR-T); the US$7-million sale of its Mexican gold assets to Glamis Gold (GLG-N); and the US$35-million sale of the La Granja copper project in Peru to Britain’s Billiton.

Only four producing assets remain: the wholly owned, underground Doyon gold division in Quebec; a 50% stake in the underground Sleeping Giant gold mine in Quebec; an effective 100% interest in the open-pit Omai gold mine in Guyana; and a half-interest in the underground Niobec niobium in Quebec.

Cambior completed its restructuring by simultaneously arranging a new US$65-million line of credit with four banks and closing a US$55-million forward gold sale. Total proceeds were used to refinance Cambior’s remaining bank debt.

The credit facility has a term of five years and bears interest at the London Interbank Offer Rate plus 3% until March 31, 2001, after which time the spread will vary from 2-3%.

Cambior must repay a minimum US$5 million in each of 2001 and 2002, US$20 million in each of 2003 and 2004, and US$15 million in 2005, as well as pay an upfront fee of 2%.

The facility requires that the company’s gold-delivery commitments not exceed 90% of its total proven and probable reserves. Furthermore, after March 31, 2001, Cambior must have hedges on a minimum of 70% of the forecasted production over the life of the loan in order to establish an average minimum gold price of US$295 per oz. on all production, including the forward gold sale.

As well, Cambior may roll forward its contracts up to the final maturity date of the loan, and the hedging facility will not be subject to margin calls.

As part of the transaction, Cambior has issued to the four banks 1.3 million warrants to buy Cambior shares at 56 apiece anytime before 2006.

With respect to the new hedging arrangement, Cambior has sold forward 233,600 oz. gold, to be delivered between July 2001 and December 2005.

Cambior’s financial white knight, Japan’s Jipangu, will soon conclude a US$6.3-million private placement by subscribing for 15 million shares at US42 each.

Proceeds will be used to repay much of Jipangu’s US$10-million mortgage on Cambior’s stake in Niobec. The mortgage will be reduced to US$3.7 million and become subordinated to the credit facility.

Upon closing of the private placement, Jipangu will have a 22% stake in Cambior.