Cambior trims Q1 loss, hedge book

A higher realized gold price enabled Cambior (CBJ-T) to reduce its loss for the first quarter of 2003, compared with the corresponding period last year.

The loss amounted to US$2.3 million (or a penny a share), compared with a US$10.4 million (10 per share), while revenue between the two periods slipped by US$3.9 million, to US$45.6 million, on lower gold sales.

Cash flow from operations withered to just US$500,000, down from US$9.2 million a year earlier. The decrease reflects higher fuel prices, increased energy consumption during harsh winter weather, and a stronger Canadian dollar. An added drawback were high costs incurred at the Doyon mine in Rouyn-Noranda, Que. — specifically, the costs associated with transporting ore and supplies via Doyon’s ramp system following the failure of the mine’s production hoist.

Toronto-based Hepburn Engineering was contracted to supply a replacement for Doyon’s damaged 7.6-metre drum shaft and bearings. This new drum shaft was forged, heat-treated, machined and delivered in only three weeks, allowing the miners to resume skipping ore several weeks earlier than expected.

Cambior produced 133,900 oz. gold in the recent quarter at a cash cost of US$263 per oz., down from 149,100 oz. at US$216 per oz. a year earlier. The decrease reflects lower production (albeit 3% higher than expected) at Doyon and the Omai mine in Guyana.

Omai

Omai produced 74,400 oz. in the 3-month period. Mine operating costs climbed to US$241 per oz., from US$208 a year earlier, owing to high fuel prices and a non-cash charge of US$17 per oz. for deferred stripping.

In April, operations at Omai were suspended for three days after protestors in the town of Linden blocked a road that is normally used to haul fuel and supplies to the mine. The protesters were angry over the failure of the town’s power plant and an associated shortage of water.

Meanwhile, an open letter issued by the Guyana Research Education and Environmental Network announced plans to re-file a US$1-billion class action lawsuit against Cambior on behalf of the 23,000 residents of Guyana’s Essequibo region.

The suit, which is subject to an appeal of an earlier dismissal, seeks monetary damages related to a 1995 tailings spill at Omai. The spill released 3 million cubic metres of waste water containing 28 parts per million cyanide and large quantities of suspended silt into the waterways that flow into the Essequibo River. A commission appointed by the Guyanese government subsequently found no criminal liability attached to the owners or the contractors but did leave the door open for civil actions.

Mining at Omai is expected to finish in 2005. Production for 2003 is pegged at 272,800 oz. at an estimated mine operating cost of US$216 per oz. Cambior plans to dismantle and ship part of Omai’s mill to the Gross Rosebel gold project in Suriname this year. A secondary crusher will be added at Omai to maintain throughput.

However, the residents’ suit seeks to prevent the transfer of Omai’s mining assets to Rosebel.

Construction at Rosebel proceeded on schedule in the first quarter, and engineering is now 60-70% complete. Startup is slated for the first quarter of 2004 at the annual rate of 269,000 oz. gold, which would boost Cambior’s total production to more than 700,000 oz. per year. Mine operating costs at Rosebel are pegged at US$157 per oz.

In Canada, higher grades at the Mouska and Sleeping Giant mines helped offset lower production at the Doyon mine, which cranked out 51,800 oz. at a mine operating cost of US$272 per oz. A year earlier, the mine produced 58,100 oz. at US$208 per oz.

Cambior’s take from Sleeping Giant slipped 1,300 oz., to 7,700 oz., as mine operating costs jumped US$38, to US$235 per oz. The lower production reflects a shift to shrinkage stoping from sub-level stoping, and the associated lag time involved accumulating broken ore in the stopes.

Sleeping Giant

Cambior and equal partner Aurizon Mines (ARZ-T) intend to extend the shaft at Sleeping Giant by 200 metres, to a depth of 1,060 metres. The project, which is budgeted at $7 million, should allow miners to mine zones 8 and 30 below level 785.

Cambior’s quarterly half-share of niobium sales from the Niobec mine in Quebec amounted to US$5.2 million, down from US$6 million in the first quarter of 2002.

In March, Cambior further trimmed its hedge book by repurchasing 189,000 oz. of gold at an average of US$342 apiece; 134,000 of the ounces went to close hedging contracts in 2003, resulting in a US$1.7-million payout. The remaining ounces will be applied against hedging positions in subsequent years. About 42% of 2003 production remains unhedged.

So far this year, Cambior has reduced its hedge book by 24%, or 313,000 oz. At the end of March, the book contained commitments of 973,000 oz. at an average of US$296 per oz., including call options on 114,000 oz. at an average of US$301 apiece.

At the quarter’s end, Cambior had US$27.3 million in cash and equivalents, down from US$42.8 million a year earlier. The company’s debt was US$56 million, compared with US$65 million.