Campbell’s debt key to profits

A drastically reduced debt load is the key to Campbell Resources’ return to profitability, says President Richard Lister.

For the fiscal year ended June 30, the company reported a net loss of $16 million on revenue of $48 million with interest payments of $6 million, but Dr Lister says the fourth quarter was profitable. By the end of the fiscal year long-term obligations had been reduced from $75 million to $17 million. Which means interest payments for the next fiscal period will be less than $2.5 million.

Perhaps in three or four years Campbell will be completely out of debt,” he said at the company’s annual meeting.

Dr Lister says the third and fourth calendar quarters of 1986 will be profitable. That would give it three consecutive profitable quarters.

The company is changing its fiscal year-end to Dec 31 so the last six months of this calendar year will constitute an entire fiscal period.

Some shareholders, however, remain concerned about Campbell and its management. The company’s common shares trade near the $2-mark compared to a high during 1985 of more than $7, $12.50 in 1984, $15.25 in 1983 and as high as $20.38 in 1981.

At the annual meeting one shareholder nominated Toronto Maple Leaf Gardens owner Harold Ballard as a director because “I like the way he fires people.” The nomination was not seconded.

Campbell’s major source of cash flow is its interest in a Quebec asbestos mi ne, the result of amalgamating several asbestos operations under different owners into one entity. Because of amalgamation and consolidation costs associated with that change, asbestos didn’t generate a profit in 1986.

Coal operations are also running at a loss because of reclamation efforts. All but one of Campbell’s coal operations, all in the United States, are closed.

The company’s Henderson 2 copper mine in Chibougamau, Que., is a marginal operation, says Dr Lister, currently operating at about 800 tons per day. Its Cedar Bay gold-copper mine, also at Chibougamau, is running at a rate that would turn out 55,000 oz of gold a year although its 1986 calendar year output is expected to be about 35,000-40,000 oz.

Gold production from its Chibougamau operations have a combined cash cost of about $270(US) per oz.

Campbell also owns 31% of Meston Lake Resources which is developing the Joe Mann gold mine in the Chibougamau area where about 800,000 tons of ore grading 0.225 oz gold per ton have been outlined. It is expected to go into production in mid-1987.

The company also has interests in several gold prospects in Mexico, the first of which could go into production in 1988.