Campbell closes Joe Mann financing (January 18, 2002)

Taking another big step towards resuming commercial operations at the Joe Mann gold mine in Quebec, Campbell Resources (CCH-T) has closed a $14.3-million private placement comprising an initial tranche of royalty units.

Net of expenses, Campbell raised the following: $105,000 cash; $912,635 in promissory notes due Feb. 1, 2002; $201,200 in promissory notes due on or before Aug. 15, 2002; $417,925 in promissory notes due on Feb. 1, 2003; and $11.7 million in promissory notes due on Dec. 31, 2011.

The notes bear interest at 6.25% per year and may be prepaid at any time without penalty.

Campbell may sell up to $47.4-million worth of royalty units. If the maximum number of royalty units are sold, the aggregate royalty rate will be the following: $8 per short ton of ore produced from Joe Mann and the nearby Corner Bay property in 2002 and 2003; $14 per ton in 2004; and $35 per ton beginning in 2005 — a figure that will reduce to $1.50 per ton after the royalty reaches “payout” (where payout is defined as the return of the investment plus 10%.)

The company may repurchase the royalty units at fair market value at any time after July 1, 2007.

Campbell will soon begin processing about 10,000 tons of development ore at Joe Mann. Then there will be a hiatus in milling operations until March 1, 2002, when mining operations will begin at a planned daily production rate of 1,040 tons, based on a five-day work week.

Yearly production is expected to reach 260,000 tons yielding 65,000 oz. gold, 22,000 oz. silver and 1,230,000 lbs. copper.

Furthermore, Campbell has budgetted $5 million for exploration and another $5 million for development.

The Corner Bay copper deposit, situated on the east shore of Chibougamau Lake, hosts resources of 850,900 tons grading 6.41% copper.

Earlier in the week, Campbell finalized its exit from the Santa Gertrudis gold project in Mexico’s Sonora State, receiving official notice from Queenstake Resources (QRL-V) that it will exercise its option to acquire all of the shares of Campbell’s Mexican subsidiary, Oro de Sotula, effective Jan. 31, 2002.

Oro de Sotula owns the Santa Gertrudis gold property, which was placed on care and maintenance in 2000.

The purchase price of Oro will be satisfied by two notes totaling US$2 million. The first US$1-million note is payable in tranches at certain milestone gold prices (US$315, $330 and $350 per oz.) that must be reached and sustained for 120 days before Dec. 31, 2005. The second note has a three-year term and is dependent on certain issues relating to liabilities of Oro and reclamation costs.

Should Queenstake sell or enter into a joint venture on the Santa Gertrudis property, Campbell will be entitled to one-third of any proceeds and a 1% net-smelter-return royalty.