Campbell, Nuinsco cash up for Corner Bay (August 13, 2007)

Campbell Resources (CCH-T, CBLRF-O) is planning to carry out bulk sampling of the Corner Bay copper deposit in the Chibougamau region of north-central Quebec now that Nuinsco Resources (NWI-T, NWIFF-O) has finished an earn-in.

Campbell has issued $4 million in convertible debentures to Nuinsco and to Ocean Partners, providing immediate cash for the program. The debentures bear 11.5% interest and can be converted into a share and half a warrant at 13. A full warrant can buy a Campbell share at 16 for two years.

Corner Bay has a measured and indicated resource of 446,000 tonnes grading 5.58% copper, plus 1.4 million tonnes in the inferred category grading 6.76% copper. It is open at depth.

Contractors have completed 350 metres of a planned 725-metre ramp at Corner Bay, with mining of the initial bulk sample, 42,000 tonnes, scheduled to start in the fall. Resource models predict it will have a head grade of 3.7% copper. The bulk sample will be milled at Campbell’s Copper Rand mill.

The companies have done internal economic studies, not based on audited resources, on production at 450 tonnes per day, assuming a copper price of US$7,210 per tonne (US$3.27 per lb.) and a Canadian dollar at US95. At the 450-tonne production rate, the project should produce 6,350 tonnes copper annually. The study estimated cash production costs at $2,400 per tonne (US$1.09 per lb.), and showed $60 million in cash flow after development capital was recovered.

The two companies will share the cash flow out of Corner Bay under a formula where Campbell first recovers the capital expenditures it incurred from the beginning of this year, then recovers previous capital costs (about $4 million) out of 50% of cash flow, while sharing the other half equally with Nuinsco. Once the capital costs are paid back — probably some time in 2008 — the partners share the cash flow equally.

The debenture issue triggers an early warning under securities regulations, as Nuinsco could convert the debenture and warrants to 23 million Campbell shares. Combined with the 37 million shares and 83 million warrants Nuinsco already owns, the 23 million shares (plus another 23 million issuable under a private placement agreement) would give Nuinsco a 27.9% shareholding in Campbell.

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