Campbell closes Joe Mann financing (January 28, 2002)

Taking another step toward 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: $105,000 in 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 Feb. 1, 2003; and $11.7 million in promissory notes due Dec. 31, 2011.

The notes bear interest at 6.25% per year and can 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 is sold, the aggregate royalty rate will be: $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. The last figure will be reduced to $1.50 per ton after the royalty reaches “payout” (return of the investment plus 10%).

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

Campbell will soon begin processing 10,000 tons of development ore at Joe Mann. Then there will be a hiatus in milling operations until March 1, 2002, when mining will begin at a planned daily production rate of 1,040 tons, based on a 5-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, on the east shore of Chibougamau Lake, hosts resources of 850,900 tons grading 6.41% copper.

Also, Campbell has withdrawn from the Santa Gertrudis gold project in Mexico’s Sonora State, having received notice from Queenstake Resources (QRL-V) that it will exercise its option to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 project, which was suspended in 2000.

The purchase price of Oro will be satisfied by two notes totalling 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 3-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.