CAMBIOR RESTRUCTURING COMPLETED
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.
Gold and Share Prices
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
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
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
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
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.
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
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