Samson Bélair (Deloitte & Touche)

Certain Activist Shareholders have an opinion that Campbell's Auditors may have certified company statements in an improper manner.  This alleged activity would have deprived Campbell of over $4 million in cash, hundreds of thousand of dollars of services (feasibility study) and led to the “giving up” of 50% of a cash flow stream that will generate at least $400 million in profits  (probably close to a billion dollars) over a 25 year period.

Read the details here:
 



Correction – February 14, 2009

I want back and read the original; 2006 agreement between Campbell and Nuinsco.  I am making the following correction:

I hereby retract my comments that Nuinsco was supposed to pay for the Corner Bay Feasibility study.   The exact words in the agreement ware difficult to follow, but I do see the words:

“feasibility study to be prepared by Nuinsco at the Company’s cost”.

The “company” in this case would actually be Campbell.


I strive for accuracy in my reporting, and I even have a rule on the “Serious Message Board” (where I am Moderator) that you can’t post information unless you can back it up with a reference or link.

Now before people get too excited over this correction, please read this discussion of problems with the Audits that I still see (the issues are now more severe):


1) This Corner Bay Feasibility study was never completed.  And Nuinsco’s 2006 buy-in depended on the completion of a Feasibility study.  
 
One excuse that was emailed to a shareholder (reported on the message boards) was that M. Fortier said they “completed an internal feasibility study”.  That is completely inadequate.  An “internal study” would not be independent, and would not be “bankable” (able to be used for outside financing)


2) The terms of the Corner Bay loan were never properly satisfied by Nuinsco (in my opinion).  This has always been the largest of the issues we see.  The exact words in the 2006 agreement were “Nuinsco agreed to obtain a non-recourse project loan (the “Corner Bay Loan”)…”

“Nuinsco agreed to obtain a non-recourse project loan (the “Corner Bay Loan”) in an amount up to a maximum of $4,000,000 and/or other financing sufficient to develop and bring into commercial production”.  

This clearly implies a financial contribution from Nuinsco!  But the action that was taken was that Nuinsco purchased debentures from Campbell.  I believe this to be invalid because it was a “quid pro quo” transaction.



CRSA members have spoken directly with the Auditor (Louise Rainville at Samson Bélair/ Deloite & Touche).  Madame Rainville gave our researcher the same (my opinion) “let play with words answer” that Meggymoo posted on the message boards.  Her answer was that [paraphrase] “the words ‘obtain a loan’ could mean to help someone else [Campbell] obtain a loan”.

My opinion is that this is a clever and deceptive interpretation.  When a homeowner “obtains a loan” on a home, he takes on the debt himself - he does not pass the debt to someone else.

The debenture purchase does not count as financing!  It was a quid pro quo, and the Auditor should have rejected the debenture financing as a form of contract fulfillment (in my opinion).   There is legal and accounting precedent on this.

Nuinsco paid ability nothing for their 50% stake in the mine.   For the original $2.5 million private placement, they got CCH shares.  And for the debenture financing, they got debentures.  They always got something is return (definition of "quid pro quo").

So on what basis is Nuinsco entitled to take 50% of the mine?  What did they put into the project?  
 
Then, to make matters worse, there was an “Operating and Consulting agreement” that lasted 2 years (it has now been terminated).  Nuinsco was paid more shares and cash every month.  Nuinsco proceeded to miss every single operating goal that was established in 2006.


3)  The 2006 agreement also stately that the “financing [would be] sufficient to develop and bring [Corner bay] into commercial production.  This implied that reaching commercial production was a responsibility of Nuinsco.  

That’s a new point to consider:  we could make a new argument that the terms of the agreement were still also not met because the mine never reached commercial production.  But this line of reasoning gets hard to follow because there have been several press releases that say the Corner Bay mine is ready for production (they started production and then stopped), and the ramp is deep enough – well past the beginning of the ore body.

4) Back to this story (excuse from Management?) that they completed an internal feasibility study…  If this is true, and the result of the feasibility study has not been shared with ordinary shareholders, then Nuinsco is in possession of Insider information.

As posted on the public CCH message board on February 14th, there is now legal precedent in Ontario Court  that due to the possession of Insider Information, shareholders can seek legal injunctions to prevent certain actions from taking place.


 
If Nuinsco has this information (the “internal feasibility study”, which M. Fortier has said - in emails reported by others - does exist), then Executives at Nuinsco and (most likely) Victory Nickel have seen this internal study.

Here is the latest precedent from Ontario Courts, as seen in the Rusoro / Gold Reserve case:


Summary

I (BensonAnalyst) am retracting my statement that Nuinsco was supposed to pay for the Feasibility study – there wording of the agreement was hard to follow. 

But Nuinsco was supposed to arrange for the study (at Campbell’s cost), and it still was not completed (a huge problem).  When a company talks about a “feasibility study” (without qualification), there is only one definition.

The larger issue still remains:  Nuinsco’s so called “50% buy-in” actually resulting in Nuinsco paying NOTHING for their stake in the mine.  All payments/project contributions were "quid pro quo", and there is legal precedent that states that a quid pro quo transaction cannot be used to satisfy an obligation.  This is highly inaproirpriate.

There are also other serous questions about the Audits performed by Samson Bélair. 

1) The Auditor may have also had a responsibility to point out the conflict of interest on the Board – with two of Nuinsco Executives sitting on the board when these events transpired.

2) On the Serious message board, there have been questions raised about the Auditing of the costs involved in the Corner Bay water problem (late 2007 – Feb 2008).



3) And shareholder have questioned the insertion of a sentence into a recent Annual report.  The words were [paraphrase] “We no longer consider ourselves a gold mining company.”  

This is an outrageous statement for a CEO to make to his shareholders, especially when we look more closely at what happened with Joe Mann (primary Gold mine).   The connection to the Auditor here is that M. Fortier apparently said the Auditor instructed the company to include those words in the report.   (This was reported on the message board at the time – a shareholder inquired about this, and that was the answer from M. Fortier).

Why would the Auditor be telling The Board to insert the words “We no longer consider ourselves a gold mining company” when:

a) The Consulting Geologist was so bullish (enthusiastic) on gold production at Joe Mann.

b) Campbell's own 2007 slide show (on the official company website) shows at least 20,000 ounces a year of gold production.
 
c) Campbell’s “underground” 2004 slide show documents production of 50,000 ounces a year from Copper Rand.

d) And Québec’s Department of Natural Resources had the 50,000 ounces of gold per year number (just from Copper Rand) on their own government website for about 2 years.

e) The April 2006 press relate also mentions the  “Cedar Bay” deposit, and M. Fortier has confirmed that the average gold grade at Cedar Bay is even higher than at Copper Rand.

f) And the company has denied that there is gold at Corner bay.  But the very first month of production at Corner Bay (yes, they opened Corner Bay and then closed it) revealed a gold content almost as high as the Louvicourt Mine.  And that actual result was from the first shallow depth production.  God only knows how much gold is at the deeper levels – drilling on the property next door revealed over an ounce per ton in one result set.

Discussion of GOLD at Corner Bay

So the Auditor made a recommendation to add those fatal words?  WHY?  I saw the words myself (I forget the exact date – but it has been discussed on the Serious message board)

It looks like Campbell Investor Relations has been running up hill screaming  “Oh No, we are NOT a gold producer”.  And the Auditors are now seen (thought) to be part of this message dissemination.

For 40 - 50 years, Campbell has been known as  “Gold and Copper Producer”.  How does this new Corporate Message help build shareholder value?  Remember that with a higher share price, the numerous private placements would have generated much more cash for Campbell.




So I hereby retract that one comment about the Feasibility study being at Nuinsco’s expense, but I hold firm in many other observations and opinions about the quality of the Audit.

- The Feasibility study was still not completed
- The so called “50% buy-in:” actually resulting in Nuinsco paying NOTHING for their stake

And there have also been questions raised about the appropriateness of the huge and unprecedented accounting write-offs that have occurred.   A completely separate topic.