Stronger loonie bites Cambior

A stronger loonie and lower gold production took a bite out of Cambior‘s (CBJ-T) earnings during the third quarter.

During the three months ended Sept. 30, Cambior’s net earnings slipped to US$700,000 (or nil per share) on revenue of US$48.7 million, compared with year-ago net earnings of US$4 million (3 a share) on US$52.6 million. The recent quarter’s earnings included a non-cash accounting loss of $2.4 million, compared with a gain of US$800,000 in 2002. Cash flow from operating activities was just more than halved to US$4.6 million.

So far this year, Cambior’s net loss comes to US$3.7 million (2 a share), compared with a net loss of US$9.5 million (7 a share) during the corresponding period of 2002. The non-hedge derivative loss was US$1 million, versus US$14.8 million in 2002. Revenue between the two periods slipped US$12.1 million to US$138.7 million, and cash flow fell 63% to US$6.8 million.

Third-quarter gold production slipped by 25,700 oz. to 124,000 oz. at a mine operating cost of US$238 per oz. Costs grew by US$22 per oz., with US$17 per oz. attributed to the strengthening of the Canadian dollar relative to the greenback. For the first three quarters a total of 378,400 oz. were poured at US$245 apiece, down from the 435,800 oz. at US$218 each a year earlier.

The drop off in production resulted from fewer tonnes being milled at the Omai gold mine in Guyana, where soft-rock reserves are being depleted. Omai’s third-quarter production fell 31% to 62,200 oz.; costs climbed US$3 to US$213 per oz. For the first nine months, cash costs were up US$12 at US$228, while production fell 21% to 193,800 oz.

Meanwhile in neighbouring Suriname, construction of the Rosebel open-pit gold mine is on schedule and budget. At quarter’s end, the company had spent around US$64.6 million, with another US$6.8 million committed. More than 1,200 workers are on site completing:

• The erection of power transmission towers and sub-stations (commissioning is planned for November );
• Mechanical, electrical and piping installations in the mill area;
• Leaching tanks (around 80% complete); and
• Lay out of the pipeline to the tailings area;

Cambior says the sample preparation and analysis laboratory is operational, and pre-production mining has begun at the Pay Caro deposit. The company has also begun construction of tailings dams. Commissioning at Rosebel is slated for January; commercial production is expected in early 2004.

Quarterly production from the Doyon division edged up by 900 oz. to 53,000 oz. at US267 apiece (up from US$224 per oz.) thanks to higher mill grades (up about 10% at 6 grams gold per tonne). Slightly fewer tonnes were milled owing to the unavailability of several load haul dump units in July.

Cambior plans to deepen the shaft at the division’s Mouska mine by 210 metres to 880 metres below surface. The 10-month $11-million project will require the mine’s closure as existing infrastructure cannot accommodate the simultaneous hoisting of ore during shaft deepening. The plan is designed to provide access to 142,000 tonnes of probable reserves grading 15.4 grams gold plus 173,000 tonnes of inferred resources running 14.6 grams. The deepening program, which includes lateral and vertical development work, will begin in January.

Cambior recently extended the current collective agreement with its employees at Mouska by three years to Oct. 17, 2007.

Cambior plans to eliminate all (except the remaining 52,000 oz. under its prepaid gold forward sales agreement) by the end of 2004. So far this year, the company has trimmed some 469,000 oz., or 36%, from the pages of its hedge book. In August, the company eliminated the hedging covenant under its credit facilities after closing a $100 million equity financing. At the end of September, total commitments stood at 817,000 oz. at an average of US$304 per oz.

On the exploration front, wedge drilling at the Westwood property in northwestern Quebec continues to cut gold zones, which appear to correlate with those at the Doyon gold mine, 2 km to the west.

Selected results from the North corridor include:

• 3.9 grams gold and 8.9 grams silver over 4.1 metres;
• 12.1 grams gold over 2.9 metres, including 111.5 grams over 1 metres;
• 36.1 grams gold over 0.6 metre; and
• 2.5 grams gold and 2.6 grams silver over 6.1 metres, including 6.5 grams gold and 3.2 grams silver over 0.6 metre.

The Westwood corridor returned up to 5.2 grams gold and 2.4 grams silver over 7.5 metres, including 23.6 grams gold and 5.2 grams silver over 0.8 metre.

Plans at Westwood call for a new deep hole to test the lower extension of the current mineralization to a depth of 2,600 meters. Cambior also intends to drive an exploration drift from level 14 of the Doyon mine towards the Westwood area to allow exploration of Doyon’s eastern sector.

Cambior’s quarter-ending cash and equivalent position totalled US$68.6 million; the common share count stood at 212.1 million.