Cambior has announced that it has concluded an agreement with the government to privatise certain assets of Linden Mining Enterprises Ltd. (Linmine).
The deal is expected to be closed within the next month dependent on proper legal documentation and other conditions, says the company.
Prime Minister Sam Hinds told Stabroek Business that there were several fine details still to be explored. "Everything is not yet done." He estimated that the signing may take place two weeks past the initial target date of September 30 adding that there were 30 or 40 documents to be settled and "we are working hard to reach completion point." There are also issues of ensuring that all mining licences are properly completed and how to deal with the numerous properties Linmine has on its books. He added that privatisation has been proposed since 1989 as a means to stop the bauxite company from being a burden on the treasury and it is now expected that "we have an operation that at the minimum pays its way."
Cambior will invest $10 million to acquire a 70% interest; of this amount, $5 million will be cash and the balance will represent $5 million in mine equipment transfers from Omai Gold Mines Ltd (OGML). The new company Omai Bauxite Mining Inc (OMBI) has also received a commitment for a $10 million credit facility from a Caribbean financial institution on a non-recourse basis, but subject to a $5 million construction cost-overrun facility from Cambior. This facility is for 10 years at an interest rate of 10.5% per year.
Stabroek Business understands that the financial institution is Clico Financing.
A Business Wire release noted that Cambior, through its subsidiary Omai Services Inc. will install a facility to generate initially up to 17 MW of electrical power at Linden by using available gensets from the Omai mine. Power supply agreements will be finalised with the government to supply both the Linden area (75% of demand) and OBMI for the bauxite operation (25% of demand). Currently the mine experiences frequent power outages causing disruption to the mining operation. OGML will initially transfer four diesel generators valued at $2.2 million to Omai Services Inc. which has also received a financing commitment from a Caribbean financial institution of $8 million over 10 years at a rate of 10.5% on a non-recourse basis for the power plant.
Omai official, Norman McLean said the company would not be involved in any kind of billing but would be providing the government with bulk supply of electricity through a metering system. He expected the plant to be up and running by early next year.
OBMI has been created to give effect to the privatization and will be owned 70% by Cambior and 30% by the government. The government will contribute the processing plant and service facilities, the Montgomery mine with mineral reserves of 62 million tonnes of bauxite at 60% Al203, and other mining leases and prospecting licences on additional bauxite resources in the Linden area, said the release. Current production from Linmine is for non-metallurgical (other than aluminum production) applications. The main product is a high-alumina refractory bauxite or RASC (Refractory A Super Calcined) due to the unique chemical and physical properties of Linden bauxites. Minor sales of chemical-grade bauxite (CGB) and cement-grade bauxite (CeGB) are also realised.
Mclean added that he has seen little movement in bauxite prices despite a general rise in commodity prices and noted that any increase would be cancelled out by the sharply higher costs for fuel.
The release continues: "As part of the agreement, both shareholders have agreed to reinvest all free cash flows during the initial five years of operation to expand the operation into other non-metallurgical products, as well into metallurgical bauxite (for aluminum production) based on market conditions. Cambior has received expressions of interest from large clients for both metallurgical and non-metallurgical products."
The initial investment, totalling nearly $20 million, will permit the refurbishing of the process plant in order to increase its capacity by at least 100%, improvement of storage and port infrastructures, construction of a new mine mobile equipment shop, construction of a direct haulage road and expansion of the tailings pond, in addition to expansion of the mine fleet.
The press release states that, "In the 18 month-period prior to July 2003, average RASC production had been 5,000 tonnes per month. Cambior was successful in doubling production and sales and generating operating cash flows to initiate critical rehabilitation work. More importantly, Cambior established itself as a reliable supplier of high-quality RASC to Europe, North America, South America, Asia and Australia over the last twelve months."
After completing the privatisation and the initial investment in OBMI and the power plant, OBMI is expected to sell approximately 240,000 tonnes of RASC and generate net revenues of $33 million and operating cash flows of $10 million per year.
As for Cambior's Omai Gold Mine the statement says, "An increase in mineral reserves in the Fennell pit and production delays during the rainy season will extend production from the Fennell pit into the fourth quarter of 2004, well beyond the planned August closure. Gold production for 2004 is now estimated at 240,000 ounces compared to the original forecast of 234,000 ounces. Current production from the Fennell pit is being complemented with low-grade hard rock ore from the stockpile. It is estimated that 3.7 million tonnes at 0.9 g Au/t will remain to be processed in the first 9 months of 2005 for production of 100,000 ounces.
Mclean added that the company is still continuing to explore the area around its site for new reserves but there was so far nothing to get excited about. He said a team would be going to Eagle Mountain next week to explore that area.