Campbell looks to Joe Mann for financial turnaround

After a write-down in the carrying value of the Henderson II gold- copper mine, which closed recently, Campbell reported a consolidated loss of $60.9 million or $1.13 per share in 1988.

At $367(US) per oz, of gold produced the average operating costs of its four Chibougamau mines last year was considered much too high by Northgate Exploration (TSE), which holds a 20% controlling stake in Campbell.

With three operating mines in its portfolio, Campbell’s production rate is expected to remain steady at about 60,000 oz gold and five million lb copper this year.

But the company is unwilling to carry the cost of operating the expensive S-3 mine (just how expensive has not been disclosed) and spokesman Gregg Bowes said it would be shut down as soon as jobs can be found for the unionized workforce.

While it isn’t nearly as expensive to operate as the Henderson II, which averaged $800(US) per oz in 1988, S-3 is considered marginal at current gold prices. It produced 11,500 oz gold and 840,000 lb copper in 1988.

Campbell had planned to close S-3 down by the middle of this year but union agreements require it to remain open until the expanding Joe Mann mine can provide jobs for the existing staff, Bowes told The Northern Miner.

With the number of mines in its portfolio reduced from four to two, Campbell’s future will rest with the Joe Mann (where an $18.2-million expansion program recently got under way) and Cedar Bay mines.

As the expansion program, which includes the sinking of a 2,050-ft shaft, progresses, Joe Mann gold output is expected to increase to around 100,000 oz from 36,000 oz at a cost of around $250 per oz by 1992.

Proven, probable reserves at Joe Mann stand at 3.7 million tons grading 0.24 oz. Expansion is being financed through a $6.5-million private placement with Northgate and a rights offering which Campbell hopes will raise up to $13.5 million.

Under the proposed rights offering, shareholders can subscribe for one additional share at 85 cents per share for every four shares currently held. Campbell says a $20-million loan facility could increase the amount available for Joe Mann and other corporate purposes to around $40 million.

With reserves of 238,000 tons of grade 0.128 oz gold and 1.07% copper in place, the Cedar Bay mine will remain in production for the time being. It produced 8,800 oz gold and 1.2 million lb copper last year.

Campbell retains a 30% stake in a Quebec asbestos company which reported a $4.7-million operating profit last year. According to Bowes, the asset will also remain part of Campbell’s cost reduction plans.

Meanwhile, Campbell’s financial results for 1988 included a charge of $58.4 million or $1.09 per share following the closure of the Henderson mine, a review of the economic feasibility of the S-3 mine and a re-evaluation of the company’s asbestos business.

A $6.8-million (13 cents per share) extraordinary charge relating to an increased provision for future reclamation costs for discontinued coal operations brought the final loss for 1988 to $67.7 million, the company said.

The Campbell issue was trading recently $1.13 on the Toronto Stock Exchange in a 52-week range of $2.20 and 75 cents .

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