10
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
x Quarterly report under Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1998
Transition report under Section 13 or 15(d) of the
Exchange Act
For the transition period from to
Commission File Number 1-1761
CHIEF CONSOLIDATED MINING COMPANY
(Exact name of Small Business Issuer as Specified in Its
Charter)
Arizona 87-0122295
(State or other jurisdiction of incorporation or
organization)(I.R.S. Employer ID. No.)
500 Fifth Avenue, Suite 1021, New York, NY 10110-1099
(Address of Principal Executive Offices)
212-354-4044
(Issuer's Telephone Number, Including Area Code)
Check whether the issuer (1) filed all reports required to
be filed by Section 13 or 15 (d) of the Securities and
Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such
reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
6,505,709
Number of shares of $.50 par value Common Stock
outstanding at August 9, 1998
PART 1.FINANCIAL INFORMATION
Item 1.FinancialStatements.
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
ASSETS
June 30,1998
CURRENT ASSETS:
Cash $ 165,099
U.S.treasury bills(at cost which approximates
market value 693,912)
Accounts receivable 6,248
Other current assets 44,995
Total current assets 910,254
INVESTMENT IN CENTRAL STANDARD CONSOLIDATED MINES 78,101
ADVANCES TO CENTRAL STANDARD CONSOLIDATED MINES 26,650
MINING CLAIMS AND PROPERTIES,
less accumulated depletion of $819,444 8,375,895
MACHINERY AND EQUIPMENT,
less accumulated depreciation of $78,778 43,503
OTHER ASSETS 104,552
Total assets $ 9,538,95
s 5
LIABILI
TIES
AND
SHAREHO
LDERS'
EQUITY
CURRE
NT
LIABI
LITIE
S:
Accou 79,419
nts
payab
le
and
accru
ed
liabi
litie
s
Total 79,419
current
liabili
ties
ACCRU 300,000
ED
RECLA
MATIO
N
COSTS
MINOR 2,502,12
ITY 6
INTER
EST
SHARE
HOLDE
RS'
EQUIT
Y:
Prefe
rred
stock-
$0.50
par
value
;
1,500
,000
share
s
autho
rized
,
5,200
share
s
outst
andin
g
2,600
Commo
n
stock-
$0.50
par
value
;
20,00
0,000
share
s
autho
rized
,
6,505
,709
outst
andin
g3,252
,855
Addit 12,891,3
ional 57
paid-
in
capit
al
Defer [8,589]
red
compe
nsati
on
Notes [87,500]
recei
vable
from
share
holde
rs
Accum [9,393,3
ulate 13]
d
defic
it
Total 6,657,41
shareho 0
lders'
equity
Total $
liabili 9,538,95
ties 5
and
shareho
lders'
equity
The
accom
panyi
ng
notes
to
conde
nsed
conso
lidat
ed
finan
cial
state
ments
are
an
integ
ral
part
of
this
state
ment
CHIEF
CONSO
LIDAT
ED
MININ
G
COMPA
NY
AND
SUBSI
DIARI
ES
CONDENS
ED
CONSOLI
DATED
STATEME
NTS OF
OPERATI
ONS
(Unau
dited
)
For the
Three
Months
Ended
For the
Six
For the
Six
Months
Ended
June 30, June 30, June 30, June
1998 1997 1998 30,1997
REVEN
UES:
$ $ $ $
Inter 10,725 4,804 21,761 12,002
est
15,484 3,449 31,484 12,769
Land
sales
and
other
Total 26,209 8,253 53,245 24,771
reven
ues
EXPEN
SES:
143,136 101,271 322,162 209,636
Gener
al
and
admin
istra
tive
Minin
g
prope
rties
opera
ting
124,605 77,970 177,075 186,094
and
explo
ratio
n
costs
2,867 2,988 11,808 12,310
Taxes
other
than
incom
e
taxes
Total 270,608 182,229 511,045 408,040
expen
ses
NET [244,399] [173,976 [457,800] [383,269
LOSS ] ]
BEFOR
E
MINOR
ITY
INTER
EST
MINOR 40,972 81,782
ITY - -
INTER
EST
NET $ $ $ $
LOSS [203,427] [173,976 [376,018] [383,269
] ]
NET
LOSS
PER
COMMO
N
SHARE
(Basi $ $ $ $
c and [0.03] [0.03] [0.06] [0.06]
Dilut
ed)
WEIGH
TED
AVERA
GE
NUMBE
R OF
COMMO
N
SHARE
S 6,505,709 6,008,94 6,420,140 5,998,52
OUTST 2 5
ANDIN
G
(Basi
c
&Dilu
ted)
The
accom
panyi
ng
notes
to
conde
nsed
conso
lidat
ed
finan
cial
state
ments
are
an
integ
ral
part
of
this
state
ment
CHIEF
CONSO
LIDAT
ED
MININ
G
COMPA
NY
AND
SUBSIDIAR
IES
CONDENS
ED
CONSOLI
DATED
STATEME
NTS OF
CASH
FLOWS
(Unaudite
d)
Incre
ase
(Decr
ease)
in
Cash
For the
Six
months
ended
June 30, June
1998 30,1997
CASH
FLOWS
FROM
OPERA
TING
ACTIV
ITIES
:
Net $ $
loss [376,018] [383,269
]
Adjus
tment
s to
recon
cile
net
loss
to
net
cash
used
in
opera
ting
activ
ities
:
9,100 8,900
Depre
ciati
on
12,500 12,500
Amort
izati
on of
defer
red
compe
nsati
on
[81,782]
Alloc -
ation
of
loss
to
minor
ity
inter
est
Chang
e in
asset
s and
liabi
litie
s:
[3,323] [1,057]
Incre
ase
in
accou
nts
recei
vable
[102,047] [17,698]
Incre
ase
in
other
asset
s
[11,136] [20,544]
Decre
ase
in
accou
nts
payab
le
and
accru
ed
liabi
litie
s
Net [552,706] [401,168
cash ]
used in
operati
ng
activit
ies
CASH
FLOWS
FROM
INVES
TING
ACTIV
ITIES
:
[693,912] 171,259
Decre
ase
(incr
ease)
in
U.S.
treas
ury
bills
, net
[329,799] [2,000]
Minin
g
prope
rty
devel
opmen
t and
purch
ase
of
prope
rty
and
equip
ment
[1,500]
Advan -
ces
to
affil
iates
Net [1,025,211] 169,259
cash
(used
in)
provide
d by
investi
ng
activit
ies
CASH
FLOWS
FROM
FINAN
CING
ACTIV
ITIES
:
Net 1,397,500 237,500
proce
eds
from
sale
of
commo
n
stock
Net 1,397,500 237,500
cash
provide
d by
financi
ng
activit
ies
NET [180,417] 5,591
INCRE
ASE
(DECR
EASE)
IN
CASH
CASH 345,516 52,250
AT
BEGIN
NING
OF
PERIO
D
CASH $ $
AT 165,099 57,841
END
OF
PERIO
D
The
accom
panyi
ng
notes
to
conde
nsed
conso
lidat
ed
finan
cial
state
ments
are
an
integ
ral
part
of
this
state
ment
CHIEF CONSOLIDATED MINING COMPANY
AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
The accompanying condensed consolidated financial statements
have been prepared by registrant, without audit, pursuant to
the rules and regulations of the Securities and Exchange
Commission. Certain information and disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted pursuant to such rules and regulations, although
registrant believes the following disclosures are adequate
to make the information presented not misleading. In the
opinion of management, all adjustments (consisting only of
normal recurring adjustments) considered necessary for a
fair presentation have been included. Results of operations
for interim periods are not necessarily indicative of
results for a full year. These condensed consolidated
financial statements and notes thereto should be read in
conjunction with registrant's consolidated financial
statements and notes thereto, included in registrant's Form
10-KSB for the year ended December 31, 1997.
Tintic Utah Metals LLC Joint Venture
On July 17, 1996, registrant, Akiko Gold Resources, Ltd.
("Akiko") and Korea Zinc Co., Ltd. ("Korea Zinc") formed
Tintic Utah Metals LLC ("Tintic"). Registrant contributed
$3,975,873 of its mining claims and properties and machinery
and equipment for an undivided 50 percent interest in
Tintic. Akiko and Korea Zinc were obligated to contribute
$3,000,000 in cash each for a respective, undivided 25
percent interest in Tintic. On March 11, 1997, registrant,
Akiko and Korea Zinc entered into an amendment of the Tintic
operating agreement. The amendment provided for Akiko and
Korea Zinc to vest in their interests in Tintic as they each
contributed the $3,000,000 to Tintic in accordance with an
agreed-upon schedule. The amendment also provided that if
Akiko did not make timely contributions to Tintic, Korea
Zinc could make the required contribution and increase its
respective interest in Tintic.
During 1996 and 1997, Korea Zinc contributed $2,000,000 and
$1,000,000, respectively. Akiko did not make its required
contributions in 1997, and Korea Zinc did not elect to make
any more contributions. As a result, in accordance with the
amended agreement,
effective August 15, 1997, registrant's vested interest in
Tintic increased to 75 percent while Korea Zinc's vested
interest remained at 25 percent. As a result of its failure
to contribute the required capital to Tintic, Akiko
forfeited any rights of ownership in Tintic. Registrant and
Korea Zinc are required to make additional capital
contributions to fund approved programs and budgets in
proportion to their respective ownership percentages in
Tintic. The failure of a member to meet its contribution
requirement could result in the dilution of that member's
percentage ownership interest.
The investment in Tintic is accounted for as a majority
owned consolidated subsidiary by registrant. Registrant did
not consolidate this subsidiary during the six month period
ended June 30, 1997 because its ownership was not more than
50%.
Rehabilitation Costs Capitalized
Through June 30, 1998, registrant has capitalized $381,355
related to the rehabilitation of its Chief Number 2 shaft
located on registrant's property and related buildings and
equipment. All underground drilling and related costs have
been expensed as exploration costs. Further activity
commenced in the second quarter of 1998 and continues to
date.
Recent Accounting Pronouncement
In June 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 131.
"Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131"). SFAS 131 establishes new
standards for public companies to report information about
their operating segments, products and services, geographic
areas and major customers. This segment will be effective
for financial statements issued for fiscal years beginning
after December 31, 1997. Registrant plans to adopt SFAS 131
in its December 31, 1998 financial statements.
In June 1998, the Financial Accounting Standard's Board
issued Statements of Financial Accounting Standard No. 133
"Accounting for derivative investments and hedging
activities" ("SFAS 133"). SFAS 133 establishes new
accounting and reporting standardization for companies to
report information about derivative instruments, including
certain derivative instruments embedded in other contracts
and for hedging activities. Registrant will adopt SFAS 133
in its first fiscal quarter of 2000 financial statements.
Neither SFAS 131 nor SFAS 133 are anticipated to have a
material impact on the Company's results from operations,
financial statements or liquidity.
Subsequent Event
Prior to July 1998, registrant used the Sunshine Mining
Company's reclamation and mining permit while Tintic
continued rehabilitation and exploration activities on its
East Tintic operational area properties. During June 1998,
registrant placed $100,000 in escrow in connection with a
proposed transfer of the Sunshine Mining Company's
reclamation and mining permit to Tintic. This amount is
included in other assets amount in the attached unaudited
condensed consolidated balance sheet. An insurance policy
was obtained to cover the remaining $200,000 liability which
is included in accrued reclamation liability in the
unaudited condensed consolidated balance sheet. In July
1998, the State of Utah formally approved Tintic's
reclamation plan and transferred to Tintic the Sunshine
Mining Company's mining permit.
Item 2. Management's Discussion and Analysis or Plan of
Operation.
PLAN OF OPERATION
Please refer to "Item 6. Management's Discussion and
Analysis or Plan of Operation - (a) Plan of Operation," and
"Item 1. - Description of Business." as contained in
registrant's Annual Report dated March 23, 1998 on Form 10-
KSB for the fiscal year ended December 31, 1997 (hereafter
"1997 Form 10-KSB".) See "Item 1. Description of Business -
Operating Agreement - Capital Contribution - Initial Capital
Contributions" of 1997 Form 10-KSB for information
concerning Korea Zinc's and Akiko's obligation to each pay
$3,000,000 to Tintic Utah Metals LLC ("Tintic") as initial
capital contributions. Korea Zinc paid its full $3,000,000
initial capital contribution and earned a vested 25%
membership interest in Tintic. On August 15, 1997, Akiko
failed to pay its initial $1,000,000 installment due with
respect to its capital contribution obligation. As a result
of Akiko's failure to pay, Korea Zinc had a right under the
Operating Agreement, as amended on March 11, 1997, to
increase its membership interest by 8-1/3% by contributing
an additional $1,000,000 to the capital of Tintic by October
2, 1997. Korea Zinc did not make such payment. As a
result, registrant's vested membership interest
increased to 75%. Korea Zinc's membership interest is now
fixed at 25% and Akiko no longer has the right to acquire
any membership interest in Tintic. Registrant will continue
to work with Tintic on the exploration and development of
the silver fissure area and other sections of the Burgin
Mine that are above the water table and accessible.
Registrant anticipates that during the remainder of 1998, it
will continue its efforts to further the development of the
Trixie Mine on its own or by seeking a joint venture
partner. Registrant will also continue its underground
drilling and other work on its Main Tintic District mining
properties. These current activities will be funded by
utilizing its cash and US treasury bills on hand.
Registrant, based on increasing interest in its buildable
real estate holdings in Utah, will continue to pursue the
possibility of real estate sales or joint venture
development of its real estate in areas that are suitable
for residential or commercial building.
Results of Operations and Liquidity and Capital Resources:
Registrant's net loss for the six months ended June 30,
1998, as compared to registrant's net loss for the six
months ended June 30, 1997 decreased in the amount of
$7,251. Registrant's net loss for the three months ended
June 30, 1998, as compared to registrant's net loss for the
three months ended June 30, 1997, increased in the amount of
$29,451. The decrease in net loss for the six months ended
June 30, 1998 resulted primarily from the initiation of
rehabilitation work in April, 1998 at the Trixie Mine, while
more substantial exploration activities occurred during the
six months ended June 30, 1997. The increase in net loss
for the three months ended June 30, 1998 resulted primarily
from the initiation of rehabilitation work in April 1998 at
the Trixie Mine. The Trixie Mine is 100% owned by Chief
Gold Mines, Inc., a wholly owned subsidiary of registrant.
Interest income for the six months ended June 30, 1998, as
compared to the six months ended June 30, 1997 increased in
the amount of $9,759. Interest income for the three months
ended June 30, 1998 as compared to the three months ended
June 30, 1997 increased in the amount of $5,921. Increase
for both periods resulted primarily from an increase in US
treasury bill holdings, increasing the interest received.
Mining properties operating costs and exploration expenses
for the six months ended June 30, 1998, as compared to the
six months ended June 30, 1997, decreased in the amount of
$9,019. This decrease was primarily the result of the
completion of the initial drilling program on registrant's
Main Tintic District properties after the first quarter of
1997. Mining property operating costs for the three months
ended June 30, 1998 as compared to the three months ended
June 30, 1997, increased in the amount of $46,635. This
increase resulted primarily from initiation of
rehabilitation work in the Trixie Mine, which was initiated
in April 1998, and continued work in registrant's Main
Tintic District Plutus Mine.
General and administrative expenses for the six months ended
June 30, 1998 as compared to the six months ended June 30,
1997 increased in the amount of $112,526. This increase was
primarily a result of the consolidation of registrant's 75%
owned subsidiary, Tintic and the inclusion of its direct
general and administrative expenses in the first six months
of 1998. Tintic was not consolidated in the first six
months of 1997.
General and administrative expenses for the three months
ended June 30, 1998 as compared to the three months ended
June 30, 1997 increased in the amount of $41,865. This
increase was primarily a result of the consolidation of
registrant's 75% owned subsidiary, Tintic and the inclusion
of its direct general and administrative expenses for the
three months ended June 30, 1998. Tintic was not
consolidated for the three months ended June 30, 1997.
Registrant expects to continue funding its operating
overhead for the balance of 1998 and the first three months
of 1999 by utilizing cash from sales of surface real estate
and other sources, in addition to its cash and U.S. treasury
bills on hand. If required, registrant will seek additional
funding through the private placement of its common shares,
however, there can be no assurance that such sales of common
shares will be achieved.
PART II. OTHER INFORMATION
Item 5. Other Information
On June 29, 1998, Tintic Utah Metals LLC and registrant
signed a Letter of Intent with a subsidiary of U.S. Filter
Corporation. U.S. Filter Corporation is a leading global
provider of industrial and municipal water and waste water
treatment systems, products and services. Under the terms
of the Letter of Intent, U.S. Filter Operating Services will
determine the feasibility of U.S. Filter designing,
building, owning and operating a water treatment plant on
the site of the Burgin Mine in the East Tintic Mining
District of Utah to treat and recycle water for beneficial
use. The Burgin Mine is currently under development by
registrant's subsidiary, Tintic Utah Metals. U.S. Filter
would construct the water treatment plant at an estimated
cost of $30 million. Tintic Utah Metals would be
responsible for the Burgin Mine dewatering system that would
supply water to the U.S. Filter plant. A projected
dewatering rate of up to 12,000 gallons a minute from the
Burgin Mine would be treated at the U.S. Filter plant, which
would result in dewatering the Burgin Mine to its lowest
planned operating levels in an environmentally sound manner.
In July 1998, U.S. Filter Operating Services initiated its
feasibility study under the Letter of Intent.
Registrant has assessed the impact of the Year 2000 issues
affecting its internal software (including embedded systems
contained in the Company's buildings, plant, equipment and
other infrastructure) and concluded that any Year 2000
issues would not have a material effect on registrant's
business, resulting operations, or financial condition.
Item 6. Exhibits And Reports On Form 8-K
None
Safe Harbor Statement under the Private Securities Reform
Act of 1995:
This Report contains forward-looking information and
therefore it necessarily involves risks and uncertainties
that could cause actual events to differ materially from
those set forth or implied herein. Factors that could cause
actual events to differ from these forward-looking
statements include, but are not limited to, the following:
Tintic Utah Metals, LLC's ability to obtain a positive
feasibility study or to obtain financing necessary to fund a
mining operation at the Burgin Mine; a negative feasibility
study is issued under the Letter of Intent with U.S. Filter
Operating Services or the water treatment plant and
dewatering system contemplated under the Letter of Intent
does not become operative; Tintic Utah Metals is unable to
obtain necessary approval and permits relating to
dewatering the Burgin Mine from the Utah Division of Water
Quality and other governmental authorities; the matters
referred to in registrant's Letter of Intent with Thyssen
Mining and Thyssen Mining's agreement with Tintic Utah
Metals LLC are not consummated; Registrant is unable to
enter into an agreement with a real estate developer
relating to registrant's surface real estate properties.
These and other risks are described in registrant's filings
with the Securities and Exchange Commission, including
Registrant's Annual Report on Form 10-KSB for the year ended
December 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
CHIEF CONSOLIDATED MINING COMPANY
(Registrant)
August 13, 1998 /s/LEONARD WEITZ
(Signature and Title)
Leonard Weitz
President, Chairman of the Board of
Directors, and
Principal Executive Officer
August 13, 1998 /s/EDWARD R. SCHWARTZ
(Signature and Title)
Edward R. Schwartz
Director, Treasurer,
Principal Financial Officer and
Principal Accounting Officer
