Northgate takes control of Campbell Resources

Just three months after Northgate Exploration sold its Chibougamau, Que., gold/copper mines to Australia-based Western Mining Corp., the Toronto company has bought itself back into its old stomping ground.

With a 13% equity stake in Campbell Resources of Toronto (and an option to increase its interest to 19.6%) for an aggregate purchase price of $19.75 million, Northgate has returned to the region it knows best.

As operator of the Copper Rand and Portage Island gold-copper mines, which it sold recently to a Western Mining subsidiary, Northgate amassed considerable experience in the Chibougamau area.

“The transaction is a unique opportunity for Northgate to reinvest in a mining camp where we have already been successful,” said Northgate President John Kearney who replaces Richard Lister as Campbell’s President and Chief Executive Officer.

Under the agreement, Lister has been named Chairman of Campbell Resources while former Denison Mines president John Kostuik joins the board of directors.

Coming only three weeks after Northgate acquired a 20% stake in Vancouver-based Chelsea Resources, the deal allows Campbell and Northgate to pool their knowledge of the Chibougamau camp.

Under the Campbell agreement, Northgate bought 10.2 million Campbell share purchase warrants from Great Lakes Group Inc. and 1.3 million common shares from other vendors. The Great Lakes Group is a merchant banking wing of Toronto-based Brascan.

The warrants allow Northgate to buy 10.2 million common Campbell shares at exercise prices ranging from $1.25 to $3.70 per share.

Northgate will add $11.4 million to the Campbell treasury by exercising 5.1 million Campbell warrants immediately. It has until Jan. 14, 1992, to exercise the additional warrants.

The Campbell acquisition seems to fit perfectly into an acquisition strategy which favors small-to- medium-sized North American gold producers with some exploration potential.

While Campbell produced 21,000 oz gold in 1986, it recently added to its Chibougamau portfolio, including four gold-copper mines, by amalgamating with Meston Lake Resources. Meston’s main asset was the Joe Mann gold-copper mine which went into production in April, 1987.

Drowned and dewatered three times in a troubled 30-year history, the Joe Mann is scheduled to churn out 65,000 oz of the yellow stuff this year, an increase of about 15,000 oz on 1987 levels.

Lister said the infusion of $11.4 million into his company’s treasury will boost development at the Joe Mann operation where Campbell is currently sinking a new shaft.

According to Lister, a portion of the $11.4 million will be channelled toward development at Campbell’s Cedar Bay gold-copper mine where an expansion program is attempting to prove up one million tons of reserves.

Proven reserves at Cedar Bay currently stand at 500,000 tons grading 0.16 oz gold and 1.25% copper per ton.

Northgate says it has financed the Campbell acquisition without dipping into the proceeds from the sale of its Chibougamau mines to Western Mining.

Instead it has sold $40 million in 10% subordinated debentures to an affiliate of the Great Lakes Group. They are due for resale Feb 11, 1995.

As part of the transaction, Northgate will issue to Great Lakes 3.6 million common share warrants, representing 15.5% of Northgate’s outstanding common shares. Scheduled to expire Feb 11, 1993, the warrants are exercisable at $10 per share.

The Campbell deal, is Northgate’s second acquisition this month. As reported (N.M., Feb 8/88), Northgate recently acquired a 20% equity stake in Chelsea Resources.

Chelsea’s main asset is the Spotted Horse gold mine. Located near Lewiston, Mont., it is one of the highest grade gold mines in North America.