Business Page – May 13th, 2001

Amidst the most difficult period lasting several years, Cambior Inc., the Montreal based Canadian parent of Omai Gold Mines Limited, has successfully completed its restructuring which has largely restored the company’s credibility in the financial market. An international diversified group with operations, development projects and exploration activities in North and South America, Cambior operates five mines - including underground and open-pit projects - in Canada and Guyana. The most important gold producing asset in Canada is the 100-percent-owned Doyon mine but its largest asset is the Omai mine in Guyana.

With a work force of over 1,600 employees, Cambior has over the past few years been producing more than 600,000 ounces of gold annually and, according to the company’s stock market report, its total proven and probable reserves stand at around 4 million metric tons. The company also mines Ferro niobium (used to make steel and specialty metals) in Canada. Although its hedging programme in 1999 generated a US$77 premium over the average market price for gold, it was during that year that the company, facing large financial obligations, took the difficult decision to dispose of major assets with a view to restoring shareholder value.

In 1998 gold prices reached their lowest level since 1979. There were two principal reasons for this: an anticipated slowdown of the world economy and a complete change in attitude of central bankers around the world to the wisdom of holding an unproductive asset in their portfolio. This negative environment for gold and non-ferrous metals impacted on capital markets and the attractiveness of companies’ share prices. The trend was for selling, and such companies not only had difficulty raising funds but saw the value of their shares tumbling.

A Stabroek News article on May 6, 2001 quoted Mr. Satkumar Hemraj of the Guyana Gold Board as saying “ the gold mining industry has been under siege since 1996. From a high in February of that year of US$440 per ounce, the price of gold fell to a low in July 1999 of US$252 per ounce. The price on May 11, 2001 was just above US$269 per ounce while the cost of fuel has almost doubled.

Cambior's shares trade on the Toronto and American (AMEX) stock exchanges under the symbol "CBJ". On May 11, 2001 the share price was US$0.53 per share with US$1.05 per share being the highest for the year. Stock market analysts currently rate the company’s shares as a “moderate sell”.

Sudden but brief events in the gold market in September 1999 required Cambior to refinance its $225 million financial obligations and to restructure its hedging programme. Continuing weakness in the gold price, which averaged $279 per ounce for 2000, maintained pressure on operational profitability. With less money to spend, operations suffered, exploration expenditure reduced and the company’s ability to replace mineral reserves severely constrained.

Under the restructuring, Cambior repaid its lenders a total of $75 million. Funds came from the sale of two zinc mines in northern Québec, a Mexican subsidiary, the proceeds of a private placement and from cash resources.

On January 12, 2001, Cambior completed its financial restructuring with the closing of a $65 million revised Credit Facility and a $55 million prepaid gold forward sale. The proceeds of these transactions were used to refinance Cambior's remaining bank debt. At January 2001, the Company's debt had been reduced from $214.4 million at December 1999 to $68.2 million.

In 2000, Cambior’s gold operations produced 613,000 ounces at an average direct mining cost of $217 per ounce, results similar to 1999. Output at the Omai mine increased 8% to 330,000 ounces, while Cambior’s share of production from the Sleeping Giant mine reached a record level of 39,000 ounces. Production at the Doyon Division fell by 5% to 232,000 ounces of gold. The group’s share of niobium production from the Niobec mine stood at 1,085 tonnes, a 5% reduction from 1999.

During 2000, the Company’s financial restructuring efforts necessitated the imposition of severe spending constraints, including a 65% reduction in capital outlays to $25 million. The major expenditure undertaken at Omai was for advanced stripping and tailings dam construction.

For the year ended December 31, 2000, Cambior’s realised gold price was $321 per ounce compared with $356 in 1999. Revenues from gold and niobium activities totaled $210.6 million compared to $229.0 million in 1999. The operating margin was $51.3 million (70¢ per share) as compared to $63.5 million (90¢ per share) in 1999.

The net loss from continuing operations was reduced to $73.5 million ($1.01 per share) compared with $181.4 million ($2.57 per share) in the previous year.

The net loss for the group for the year 2000 was $81.6 million, down from $373.6 million in the previous year. This is a remarkable turnaround although the net loss is still considerably higher than for 1998 when it was only $13.8 million. The shareholders’ equity was reduced from $522 million to $283 million dollars. The company’s current assets position also declined although its liquidity is now significantly improved.

OUTLOOK

In Cambior’s Annual Report which is available on the internet and has been fairly widely distributed in Guyana, Louis P. Gignac, President and CEO of Cambior, stated that "the Company is pleased to have finally completed its financial restructuring. After more than 15 months of sustained effort, the Company's debt has been reduced by more than $100 million, and with the revised Credit Facility in place, interest expenses for 2001 will be less than half of what they were in 2000".

The Guyana Perspective

For Guyana, it must be good fortune that the ownership of Omai has not changed hands. While there have been criticisms of certain provisions of the Omai Mineral Agreement the company has generally operated as a good corporate citizen. Its worst period must no doubt be the Tailings Pond spill some years ago posing a major danger to the environment. Damage was controlled and the environmental management of the company has secured for it the prestigious ISO 14001 certification after a rigorous evaluation process.

In the nature of the product, the Omai reserves will soon be fully mined and both the country and the company will have to consider what next. Funds for exploration have dried up on most stock exchanges and with the bleak prospects for gold prices, optimism in the industry is in short supply. With such significant assets employed at Omai, the company must no doubt be praying that it can make another major discovery or enter into an alliance with an existing local operator in a viable project. The search should begin long before the existing mine runs out. As the company’s Annual Report indicates however, limited cash resources impact on exploration and development expenditure and the company will have to consider creative options for sourcing funds for such expenditure.

The country will also have to re-consider its economic and mining policies to respond to the challenges facing the industry. Already the Brazilians seem to be taking over the industry while we debate on whether there are five thousand or ten thousand of them pillaging the country’s resources not only of minerals but increasingly of forest and animal products as well. While we justifiably raised the roof at the threat and damage caused by the Omai spill, as a country we have been too silent on the activities of our own miners and the boys from Brazil.

All dollar figures quoted in this article are in United States dollars.