Campbell tackles costs

Excess dilution has prompted Campbell Resources (CCH-T) to switch mining methods at its Joe Mann gold mine, near Chibougamau, Que.

Since September, production has been restricted to upper levels, with development halted. In late November, production will be suspended to allow for development in accordance with a new mining plan. The mining method, currently shrinkage stoping, will switch to cut-and-fill as part of an effort to reduce dilution. Production from the new stopes should start by mid-2000.

In the third quarter, Joe Mann cranked out 13,400 oz. at an average cash cost of US$284 per oz. In the first nine months of the year, production totalled 44,500 oz. at US$301 per oz.

Annual production under the new plan (after byproduct credits of US$12 per oz.) is expected to top 90,000 oz. at a cash operating cost of US$220 per oz. Capital and development costs will add about US$15 per oz. to those costs.

Meanwhile, mining has resumed on a limited basis at the San Gertrudis project in Sonora state, Mexico. Two open-pit deposits are expected to produce in excess of 20,000 oz. by mid-2000 at a cash cost of US$220 per oz. The cash flow generated will be used to fund fixed costs and ongoing exploration.

Recent exploration at Santa Gertrudis has led to new discoveries, including a splay off the Escondida West target. Hole 120 returned 9 metres grading 5.12 grams gold per tonne, while hole 127, drilled above hole 120, intersected 9 metres grading 3.42 grams gold. Also, hole 128, collared 35 metres northwest of hole 126, intersected 3 metres grading 0.7 gram gold.

Drilling has traced the structure, which is oxidized, for 125 metres along strike, and mapping followed it an additional 475 metres at surface. Mineralization is in the horizon that hosts the Trinidad deposit. Hole 113, collared 3 km north of the leach pads, intersected 15 metres grading 1.42 grams. The new northwesterly trending structure lies near surface.

Drilling continues.

During the three months ended Sept. 30, Campbell lost $5.7 million (or 4 cents per share) on equivalent revenue, compared with losses of $3.2 million on $8.8 million in the third quarter of 1998. Losses in the first nine months of 1999 and 1998 were $12.6 million and $6.9 million, respectively.

The recent quarter’s loss included a paper loss on the value of gold call options. Campbell, which hedged only minimal production, had sold calls for 53,200 oz. gold a US$350 per oz., which, at the end of the quarter, represented a potential liability of $3.3 million; that potential liability had fallen to $2.4 million by the beginning of November, and Campbell has not been forced to post margin against the calls.

Meanwhile, Campbell’s New York Stock Exchange listing is threatened by a new listing policy that requires listed companies to maintain a stock price above US$1. Campbell has six months in which to meet the new requirements and is now floating the idea of a consolidation aimed at bringing its stock price back above US$1 to its shareholders.

At Sept. 30, Campbell had $34 million in working capital.