LITERATURE REVIEW — Campbell Resources toughs out disappointing quarter

Campbell Resources (CCH-T) reported a loss of $1.8 million (or 1 cents per share) for the three months ended June 30, compared with income of $3.2 million (2 cents per share) in the same period a year earlier.

The company attributes the loss to lower gold production and gold prices, as well as to increased exploration costs.

For the 6-month period ended June 30, Campbell recorded a loss of $4.6 million (3 cents per share), compared with income of $6.7 million (5 cents per share) in the same period of 1996.

During the quarter, Campbell produced 28,060 oz. gold, compared with 34,980 oz. in the corresponding period of 1996. Production over the 6-month period was 53,580 oz., down from 68,310 oz. a year earlier. The drop in production is attributable to lower-grade ores recovered from the Santa Gertrudis mine, situated 70 miles south of the U.S.-Mexican border in Sonora state.

Decreased gold production also affected average cash costs. Costs for the second quarter were US$271 per oz., compared with US$229 per oz. in the same period of 1996. For the latest 6-month period, cash costs topped US$295 per oz., up from US$234 per oz. in the same period last year.

During the first half of 1997, Campbell sold its production at US$354 per oz., compared with US$398 per oz. in the first half of 1996. The company hedged one-quarter of its 1997 gold production at US$380 per oz., and has hedged 118,000 oz. at US$425 per oz. between 1998 and 2000.

The Joe Mann mine in northwestern Quebec produced 35,820 oz. gold at a cash operating cost of US$276 per oz. during the first six months of 1997, compared with 36,870 oz. at US$270 per oz. in the first half of 1996.

Production in the second quarter fell to 18,660 oz., compared with 19,400 oz.

in the year-ago period.

Joe Mann goes deeper

A program to deepen the main production shaft at Joe Mann is on schedule.

About 500 ft. of the 1,104-ft. shaft extension have been completed since December, and three of six stations have been constructed. In addition, development headings are being driven on the 1,825-ft. and 2,000-ft. levels of the West zone in preparation for exploration of the mine’s down-plunge potential. Production from the West zone is targeted for June 1999.

Gold production at the Santa Gertrudis mine in Mexico was 17,760 oz. in the first six months of 1997, down from 31,430 oz. a year earlier. Production during the quarter was 9,400 oz., down from 15,570 oz. over the same period last year.

Cash operating costs there increased to US$333 per oz. in the first half of the year from US$191 per oz. a year earlier. During the second quarter, costs increased to US$298 per oz. from US$193 per oz. in the same period in 1996.

During the first six months of 1997, 488,000 tonnes of ore grading 1.63 grams gold per tonne were mined at Santa Gertrudis, compared with 496,000 tonnes grading 2.21 grams gold in 1996. The company expects both grades and recovery rates to increase in the third and fourth quarters as production moves into the main part of the Dora deposit.

Although Campbell expects to exceed targeted production levels at Joe Mann by 2,000 oz. for the year, output at Santa Gertrudis will be lower than anticipated. Deposits considered economic in 1996 are no longer profitable at current gold prices, leading the company to lower its production target to 48,000 oz. from 55,000 oz.

In light of the low gold price, Campbell is reassessing the construction schedule at its Cerro Quema project in Panama. Minimal construction will be completed during the remainder of the rainy season, which is expected to end in December. The company will then reassess its position there.

Exploration at Santa Gertrudis continues. Stepout drilling over a strike length of 250 metres south of the discovery hole at the zone known as El Tigre, 4 km southeast of the mine, continues to return significant mineralized intersections. Results include 6 metres of 7.05 grams gold, 1.5 metres of 3.35 grams, 7.5 metres of 1.35 grams and 3 metres of 2.84 grams.

The zone remains open along strike and at depth, and additional drilling will test both the continuity and extent of El Tigre.

Recent stepout drilling on the Ontario zone, 1 km east of El Tigre, continues to intersect high-grade gold values related to a near-surface, shallow-dipping structure. Among the most encouraging intersections are 3 metres of 2.93 grams gold, 7.5 metres of 5.13 grams and 4.5 metres of 13.5 grams.

A drill hole sunk into the area being mined returned 2.9 grams gold over 9 metres. That result correlates to drill intersections taken from the hangingwall of the Corral open pit, which assayed up to 5.2 grams gold over 5 metres.

Encouraging results are also being received from the zone known as La Peque, 2 km north of the open pit. A recently identified structure has returned intervals of 1.5 metres of 7.9 grams gold, 4.5 metres of 2.35 grams, 16.5 metres of 0.8 gram, 6 metres of 1.77 grams and 1.5 metres of 3.15 grams.