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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8488
CAMPBELL RESOURCES INC.
(Exact Name of registrant as specified in its charter)
Under the Canada Business Corporations Act
(Jurisdiction of Incorporation)
I.R.S. Employer Identification No - Not Applicable
120 ADELAIDE ST. WEST, SUITE 1910
TORONTO, ONTARIO M5H 1T1 CANADA
TELEPHONE - (416) 366-5201
(Address, including zip code, and telephone number including area code
of registrants principal executive offices)
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days. YES X NO
--- ---
Indicate the number of shares outstanding of each of issuer's classes of common
stock, as of the latest practicable date.
Shares Outstanding as of June 30,1997, 150,440,528 Common Shares,
without par value
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CAMPBELL RESOURCES INC.
Table of Contents
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as at June 30, 1997 and
December 31, 1996...............................................................................3
Unaudited Consolidated Statements of Income for the Three Months and the Six
Months Ended June 30, 1997 and 1996.............................................................4
Unaudited Consolidated Statements of Retained Earnings for the
Six Months Ended June 30, 1997 and 1996.........................................................4
Unaudited Consolidated Statements of Cash Flows for the Three Months and the
Six Months Ended June 30, 1997 and 1996.........................................................5
Notes to the Unaudited Consolidated Financial Statements .......................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .....................................................................11
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings..............................................................................15
ITEM 2. Changes in Securities..........................................................................15
ITEM 3. Defaults Upon Senior Securities................................................................15
ITEM 4. Submission of Matters to a Vote
of Security Holders............................................................................15
ITEM 5. Other Information..............................................................................15
ITEM 6. Exhibits and Reports on Form 8-K...............................................................15
SIGNATURES.....................................................................................16
</TABLE>
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CAMPBELL RESOURCES INC.
(Incorporated under the laws of Canada)
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
June 30 December 31
1997 1996
----------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits $ 37,957 $ 55,302
Receivables 10,614 8,270
Inventories 9,507 9,134
Prepaids 1,478 749
----------------------------
Total current assets 59,556 73,455
----------------------------
OTHER ASSETS 1,063 1,271
----------------------------
NATURAL RESOURCE PROPERTIES 166,397 149,879
Less accumulated depreciation and amortization (66,300) (59,307)
----------------------------
100,097 90,572
----------------------------
Total assets $ 160,716 $ 165,298
==========================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,379 $ 5,504
Accrued liabilities 1,423 2,337
Income taxes payable 5 94
----------------------------
Total current liabilities 5,807 7,935
----------------------------
OTHER LIABILITIES 888 881
CONVERTIBLE DEBENTURES (NOTE 3) 7,718 7,657
DEFERRED MINING TAXES 6,725 6,767
SHAREHOLDERS' EQUITY
Capital stock (Note 2) 120,750 118,605
Foreign currency translation adjustment (320) (248)
Retained earnings 19,148 23,701
----------------------------
Total shareholders' equity 139,578 142,058
----------------------------
Total liabilities and shareholders' equity $ 160,716 $ 165,298
==========================
</TABLE>
Commitments and contingencies (Note 4)
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CAMPBELL RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
(Expressed in thousands of Canadian dollars except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
June 30 June 30
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
METAL SALES $ 13,569 $ 18,733 $ 25,858 $ 37,130
--------------------------------------------------------
EXPENSES
Mining 10,998 11,455 22,645 22,788
General administration 707 783 1,447 1,420
Depreciation and amortization 2,323 3,085 4,484 5,723
Exploration 1,445 548 2,510 1,110
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15,473 15,871 31,086 31,041
--------------------------------------------------------
Income (loss) from operations (1,904) 2,862 (5,228) 6,089
Other income (expense)
Interest income 471 1,094 1,142 1,663
Foreign exchange loss (54) (170) (85) (205)
Convertible debenture interest expense (169) (173) (318) (385)
--------------------------------------------------------
248 751 739 1,073
--------------------------------------------------------
Income (loss) before income taxes (1,656) 3,613 (4,489) 7,162
Income tax provision 115 386 64 469
--------------------------------------------------------
NET INCOME (LOSS) ($ 1,771) $ 3,227 ($ 4,553) $ 6,693
========================================================
EARNINGS (LOSS) PER SHARE ($ 0.012) $ 0.022 ($ 0.030) $ 0.047
========================================================
</TABLE>
UNAUDITED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Balance at beginning of period $ 23,701 $ 14,689
Net income (loss) (4,553) 6,693
------------------------
Balance at end of period $ 19,148 $ 21,382
========================
</TABLE>
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CAMPBELL RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
Three months ended Six months ended
------------------ ----------------
CASH PROVIDED BY (USED IN): June 30 June 30
------- -------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($1,771) $ 3,227 ($4,553) $ 6,693
Items not involving cash
Depreciation and amortization 2,323 3,085 4,484 5,723
Deferred mining taxes 58 223 (42) 223
Other 769 617 1,687 496
--------------------------------------------------
1,379 7,152 1,576 13,135
Net change in non-cash operating working capital (5,040) 1,159 (5,574) (739)
--------------------------------------------------
(3,661) 8,311 (3,998) 12,396
--------------------------------------------------
FINANCING ACTIVITIES
Issues of capital stock 41 138 2,145 33,404
Reduction of convertible debentures (13) (2,929)
--------------------------------------------------
41 125 2,145 30,475
--------------------------------------------------
INVESTMENT ACTIVITIES
Expenditures on natural resource properties (6,695) (3,565) (15,914) (5,556)
Acquisition of Cerro Quema gold project (13,160)
Decrease in other assets 22 938 208 1,155
--------------------------------------------------
(6,673) (2,627) (15,706) (17,561)
--------------------------------------------------
Effect of exchange rate change on cash
and short-term deposits 141 229 214 176
--------------------------------------------------
Increase (decrease) in cash and short-term deposits (10,152) 6,038 (17,345) 25,486
Cash and short-term deposits at beginning of period 48,109 51,719 55,302 32,271
--------------------------------------------------
Cash and short-term deposits at end of period $ 37,957 $ 57,757 $37,957 $ 57,757
==================================================
CHANGES IN NON-CASH WORKING CAPITAL
Receivables ($2,435) $ 1,169 ($2,344) ($154)
Inventories and prepaids (1,141) (25) (1,102) (575)
Accounts payable (6) 1,437 (1,125) 1,473
Accrued liabilities (1,377) (1,429) (914) (1,460)
Income taxes payable (81) 7 (89) (23)
--------------------------------------------------
($5,040) $ 1,159 ($5,574) ($739)
==================================================
</TABLE>
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CAMPBELL RESOURCES INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997
(Tabular amounts are expressed in thousands of Canadian dollars)
1--GENERAL
These Unaudited Consolidated Financial Statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of results for
the interim period presented. The unaudited financial statements presented
herein have been prepared in accordance with the instructions to Form 10-Q and
do not include all the information and note disclosures required by generally
accepted accounting principles for complete financial statements. For further
information, refer to the financial statements and related footnotes included in
the Company's annual report on Form 10-K for the year ended December 31, 1996.
The financial statements are prepared in accordance with accounting principles
generally accepted in Canada which, except as described in note 5, conform in
all material respects with accounting principles generally accepted in the
United States.
The results of operations for the first six months of the year are not
necessarily indicative of the results to be expected for the full year.
2--CAPITAL STOCK
Changes in the issued and outstanding common shares for the six months are as
follows (in thousands):
<TABLE>
<CAPTION>
1997 1996
-------------------- ---------------------
Shares Amount Shares Amount
------ ------ ------ ------
<S> <C> <C> <C> <C>
Common shares:
Balance at beginning of period 148,588 $118,605 124,466 $ 85,040
Issued:
Conversion of convertible debentures 4,494 2,929
Public issue for cash 18,000 28,631
Issued to CEMSA 1,770 2,071 730 1,256
Employee Incentive Plan and
Directors' Stock Option Plan 83 74 602 588
-------- -------- -------- --------
Balance at June 30 150,441 $120,750 148,292 $118,444
======== ======== ======== ========
</TABLE>
In March, 1997, the Company issued 730,000 common shares from treasury at $1.17
per share as part of the final payment to purchase the right of first refusal to
acquire the Cerro Quema gold project in Panama. This right was purchased in
January, 1996 and exercised in March, 1996. In March, 1997 the Company also
issued 1,040,000 common shares from treasury at $1.17 per share as payment to
the former holder of the right of first refusal ("CEMSA") for the reduction in
the precious metals net smelter royalty on the Cerro Quema property from 3.5% to
2%.
The Company has 9,000,000 warrants outstanding which arose as a result of the
public issue of units in 1996 that
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entitle the holders to purchase one common share of the Company for US$1.50 on
or before February 26, 1999. As of June 30, 1997, in addition to the shares
reserved for issuance under the terms of the common share purchase warrants and
convertible debentures (see note 3) there were outstanding stock options under
the Directors Stock Option Plan and the Employee Incentive Plan to purchase
7,125,000 common shares at prices ranging from $0.57 to $1.48 per share with
such options expiring at various dates to December 11, 2001.
Earnings per share have been calculated using the weighted average number of
shares outstanding during the six months which was 149,645,000 (1996 -
143,276,000) and during the three months which was 150,403,000 (1996 -
148,225,000).
3 -- CONVERTIBLE DEBENTURES
In July 1994, the Company issued US$11,005,000 of 7.5% Convertible Subordinated
Debentures (Unsecured). The debentures are unsecured, bear interest at 7.5%
payable in arrears on June 1 and December 1 each year and mature on July 21,
2004. The debentures are convertible at the option of the holder into Common
Shares of the Company at any time prior to maturity at a conversion of US$0.50
per Common Share. The debentures are redeemable for cash at any time after the
fifth anniversary of the date of issue or, at the Company's option, may be
redeemed in Common Shares on the basis of one Common Share for each US$0.50 of
debenture principal being redeemed. The right of the Company to redeem the
debentures for cash or Common Shares is conditional on the average price of the
Common Shares exceeding US$0.50 during a period of 20 consecutive days prior to
notice of redemption. The Company may, at its option, repay the debenture at
maturity by issuing Common Shares of the Company at the conversion price of
US$0.50 per Common Share.
During the six months ended June 30, 1997, debenture holders converted nil (1996
- - US$2,247,000) of debenture principal into nil (1996 - 4,494,000) Common Shares
of the Company resulting in a balance outstanding at June 30, 1997 and December
31, 1996 of US$5,591,000.
4--COMMITMENTS AND CONTINGENCIES
(a) At June 30, 1997 the Company's hedging program consisted of the
following:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Gold (ounces):
Fixed forward contracts - amount 17,500
- average price (US$) $448
Puts (purchased) - amount 15,000 30,000 17,200 8,400
- average price (US$) $380 $405 $405 $405
Calls (sold) - amount 33,200 20,000
- average price (US$) $440 $440
Participating forwards - amount 25,000 20,000
- average price (US$) $434 $450
Copper (000's pounds):
Fixed forward contracts - amount 660 660
- average price (US$) $0.95 $0.95
</TABLE>
(b) At June 30, 1997 the Company had sold forward US$2,500,000 to purchase
Canadian dollars during 1997
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at an average rate of Cdn$1.35 to the US dollar.
(c) The Company's Joe Mann mine is subject to a graduated net smelter
return royalty increasing from 1.8% up to a gold price of Canadian $500
per ounce to 3.6% at a gold price of Canadian $625 per ounce.
(d) During 1996, the Company's Mexican subsidiary received import duty
assessments claiming the subsidiary's interest in certain pieces of
machinery and equipment with an approximate value of US$2,200,000 and
levying taxes, penalties, interest and inflationary adjustments for a
further Mexican pesos 9,200,000. The claim against the subsidiary's
assets and the additional amount payable arose as a result of the
subsidiary not presenting certain import documentation to tax
authorities by a prescribed date in connection with their audit of
imports of the claimed machinery and equipment during 1990 and 1991
when the mine was not owned by the Company. The Company, which has all
of the required documentation, appealed the assessments and has not
provided for these amounts in the financial statements. On May 26,
1997, the Company received notice that it was successful in its appeal
and that the Mexican pesos 9,200,000 was not payable. The tax
authorities have the ability to issue another tax assessment in
connection with their audit but any such assessment must take into
account the supporting documentation in the Company's possession. The
assets charged by the tax authorities will be released when the final
tax assessment covering this matter is issued.
(e) During 1991, a subsidiary of the Company entered into a corporate
restructuring and financing arrangement ("Arrangement") in which it
issued to a group of Canadian financial institutions $38,000,000 of
Guaranteed Subordinate Debentures and Notes ("Debentures") and
$12,000,000 of Guaranteed Non-Cumulative Redeemable Retractable
Preferred Shares ("Preferred Shares"). The Debentures are unsecured,
subordinate to all existing non-trade debt and future senior debt, bear
interest at varying rates, are repayable upon maturity in 2007, and
cannot be prepaid. The Preferred Shares are redeemable at any time at
an amount of $240,000 per Preferred Share, rank equally and pari passu
with the common shares for dividends when declared, and are retractable
in 2007. In order to secure the performance of the Debentures and
Preferred Shares the Company's subsidiary entered into an Interest Rate
and Currency Exchange Swap Agreement ("Swap Agreement") with a major
international bank. The Swap Agreement provides for the conversion of
one floating rate interest basis to another and for differences in the
timing of payments so as to match the interest payment requirements
under the Debentures, repay the Debentures upon maturity and retract
the Preferred Shares. All payments are denominated in Canadian dollars.
The Company's subsidiary placed Canadian dollar deposits with the
counter party to the Swap agreement which deposits have been charged to
secure the performance under the Swap agreement. These deposits earn
interest at Canadian Bankers Acceptance rates. The Swap Agreement was
irrevocably assigned directly to the investors. Accordingly the bank is
the primary obligor under the Arrangement.
5--DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The effect on the financial statements of differences between generally accepted
accounting principles (GAAP) in Canada and the U.S. is outlined below:
(a) Under Canadian GAAP the Company uses the deferral method of accounting
for deferred income taxes whereas under U.S. GAAP the liability method
is used. The effects on the consolidated statements of income of the
above differences are as follows:
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<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
1997 1996 1997 1996
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income under Canadian GAAP $(1,771) $ 3,227 $(4,553) $ 6,693
Application of liability method under FAS 109 1,023 (617) 1,023 (1,837)
------- ------- ------- -------
Net income under U.S. GAAP $ (748) $ 2,610 $(3,530) $ 4,856
------- ------- ------- -------
Net income per share under U.S. GAAP $(0.005) $ 0.017 $(0.023) $ 0.035
------- ------- ------- -------
</TABLE>
(b) Under Canadian GAAP, the issuance of common shares on the conversion of
convertible debentures and as part of the purchase consideration for
the acquisition of the Cerro Quema project and as consideration for the
reduction in the royalty thereon has been reflected as a financing
activity in the consolidated statements of cash flows. Under U.S. GAAP
these non-cash transactions would have been excluded from financing and
investing activities and disclosed in the notes to the financial
statements.
Included in cash and short-term deposits at June 30, 1997 are
investments of $17,932,000 (1996 - $17,180,000) with maturities on
acquisition of greater than 90 days. Under U.S. GAAP these investments
would not be included in cash and short-term deposits.
After adjusting for the above, for U.S. GAAP purposes the sources of
cash from financing activities would be $74,000 for the six months and
$41,000 for the three months ended June 30, 1997 (1996 - $29,219,000
and $125,000, respectively), the use of cash for investing activities
would become a source of cash of $17,860,000 for the six months and a
use of cash of $1,925,000 for the three months (1996 - use of
$33,485,000 and source of $910,000, respectively) and the decrease in
cash and short-term deposits would become an increase of $14,150,000
for the six months and a decrease of $5,404,000 for the three months
(1996 - increases of $8,306,000 and $9,575,000, respectively). This
would result in cash and short-term deposits and short-term investments
at June 30, 1997 of $20,025,000 and $17,932,000, respectively, at
December 31, 1996 of $5,875,000 and $49,427,000, respectively and at
June 30, 1996 of $40,577,000 and $17,180,000, respectively.
Additional disclosures required under U.S. GAAP with respect to the
Statements of Cash Flows are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30
-------------------------- ------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash taxes paid $257 $291 $418 $513
Cash interest paid $275 $301 $283 $308
</TABLE>
(c) Under U.S. GAAP the contingent liability disclosed in note 4 (e) would
be reflected in the balance sheet. Accordingly, for U.S. GAAP total
assets and liabilities would increase by $50 million. The increase in
assets represents investments (non-current) comprising Canadian dollar
payments under the Swap agreement and Canadian dollar deposits with the
counter party to the Swap agreement. The liabilities (non-current)
represent the Guaranteed Subordinate Debentures and Notes of $38
million and the Guaranteed Non-Cumulative Redeemable Retractable
Preferred Shares of $12 million which would be included outside of
shareholders' equity.
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(d) In accordance with Canadian GAAP, certain long-term foreign exchange
contracts are considered to be hedges of sales revenue denominated in
foreign currencies or the cost of goods to be purchased in foreign
currencies. Gains and losses related to changes in market values of
such contracts are deferred and recognized when the contract is settled
as part of sales revenue or the cost of purchased goods as appropriate.
Under U.S. GAAP, changes in the market value of the contracts would be
included in current earnings. The impact of this GAAP difference has
not been material during the reporting periods presented.
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CAMPBELL RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
JUNE 30, 1997
(all dollars are Canadian unless noted otherwise)
OVERVIEW
For the six month and three month periods ended June 30, 1997 the Company
produced 53,580 ounces and 28,060 ounces of gold compared with 68,310 ounces and
34,980 ounces in the corresponding periods of 1996. The decrease is primarily
attributable to lower gold production at the Santa Gertrudis Mine in Mexico,
mostly as a result of mining ore with lower gold grades and lower recovery rate
characteristics. As a result of this decrease in gold production and the
decrease in average gold prices realized in 1997 compared to 1996, the Company
recorded a loss of $4.6 million or $0.030 per share for the six months and $1.8
million or $0.012 per share for the three months ended June 30, 1997 compared to
income of $6.7 million ($0.047 per share) and $3.2 million ($0.022 per share) in
the comparable periods of 1996. Cash flow from operations before the change in
operating working capital was similarly impacted being reduced to $1.6 million
in the six months compared to $13.1 million in 1996.
Gold prices continued to fall in July of 1997 reaching a 12 year low of $314
before rebounding slightly. In view of these lower gold prices the Company is
reviewing its capital and operating programs in an effort to cut costs and defer
capital programs where such measures are feasible without impairing future
operations. At the Santa Gertrudis Mine, certain deposits which were considered
to be ore at December 31, 1996 are not economic at current gold prices. The
removal of these deposits from the mine plan combined with the delay in the
commencement of mining from the La Trinidad deposit due to the longer than
anticipated access road construction has resulted in the Company revising its
forecast of gold production from the mine in 1997 to 48,000 ounces from the
originally forecast 55,000 ounces. The Company continues to assess the results
of the 1997 exploration program at the Santa Gertrudis Mine to determine whether
a temporary cessation in production may be required in 1998. Preliminary
indications are that the lead time to bring into production any reserves
resulting from this exploration effort will be too long to allow production at
the mine to continue at current levels.
The current low gold prices and the pessimistic outlook for gold has caused
management to reassess the construction schedule at the Cerro Quema Mine in
Panama. In addition, with the onset of the rainy season, soil sediment from
construction at the site was entering the region's waterways. As a result, work
on the project was stopped in response to a Resolution adopted by the General
Office of Mineral Resources of the Ministry of Commerce and Industry in Panama.
Remedial measures have been carried out to prevent further sedimentation
problems and the Company is working closely with the Panamanian authorities to
ensure that the Project proceeds in a timely and responsible manner. Minimal
construction work will be carried out until the end of the current rainy season
in December, 1997. At that time the Company will reassess the outlook for gold
and the regional opposition to the Project, if any, and will proceed
accordingly. Assuming work on the Project commences in December, 1997, the
current schedule indicates a nine month delay in production until the first
quarter of 1999.
Gold production at the Joe Mann Mine to June 30, 1997 is approximately 5,000
ounces higher than the Company's internal forecasts and should result in
production for the year of approximately 72,000 ounces of gold. Accordingly, the
Company currently estimates 1997's gold production of 120,000 ounces compared to
the originally forecast 125,000 ounces. Based on this revised forecast of
production, the Company anticipates the cash production cost for the year will
be approximately US$275 per ounce. This cash cost together with the Company's
strong balance sheet and
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hedging program (see note 4 (a) to the Unaudited Consolidated Financial
Statements) will enable the Company to continue with its overall strategic
objectives in the current low gold price environment.
REVENUE
Revenue from metal sales decreased 27% to $13.6 million in the second quarter
and 30% to $25.9 million in the six months ended June 30, 1997 compared to $18.7
million and $37.1 million, respectively in 1996. The decrease is primarily
attributable to the 22% decrease in gold production noted above combined with
the 11% decrease in the average price received for gold sales during the six
months compared to the same period of 1996.
The average gold price received in the six months ended June 30, 1997 was US$354
including US$8 of hedging gains compared to US$398 including US$4 of hedging
gains in the comparable period of 1996. The average Comex market price was
US$347 in the first six months of 1997 compared to US$395 in 1996. The Company
has hedged approximately 25% of its 1997 gold production at a price of US$380
per ounce of gold. Campbell's general policy is to hedge up to 50% of its gold
production for up to two years, dependent on market conditions and capital
expenditure commitments.
Revenue from copper production increased to 4.3% of metal sales in the first six
months of 1997 from 3.2% in 1996 due to the decrease in gold revenues. Copper
production decreased to 676,000 pounds compared to 794,000 pounds in 1996 due to
lower tonnage and copper head grades.
EXPENSES
Mining expense in the first six months of 1997 was $22.6 million and $11 million
in the second quarter of 1997 compared to $22.8 million and $11.5 million in the
comparable periods of 1996. The overall cash production cost increased to US$295
per ounce of gold for the six months and US$271 for the second quarter compared
to US$234 and US$229, respectively in 1996.
The Joe Mann Mine produced 35,820 ounces of gold in the first six months of 1997
and 18,660 in the second quarter compared to 36,870 ounces and 19,400 ounces in
the comparable periods of 1996. The tons milled decreased to 133,600 tons in the
first half of 1997 compared to 141,200 tons in 1996 while the mill head grade
increased to 0.290 ounces of gold per ton compared to 0.283 ounces of gold per
ton in 1996. The mill recovery rate was 93.8% in the first half of 1997 compared
to 93.4% in 1996.
The cash production cost at the Joe Mann Mine increased to US$276 per ounce
produced in the first half of 1997 compared to US$270 for the comparative period
in 1996 and was constant at US$258 per ounce for the second quarter of both 1996
and 1997. The increase is attributable to the 3% decrease in gold production in
1997 compared to 1996.
.
The cash production cost at the Santa Gertrudis Mine was US$333 per ounce in the
first half and US$298 in the second quarter of 1997 compared to US$191 and
US$193, respectively in 1996. The increase is primarily due to the decrease in
gold production to 17,760 ounces of gold in the first half and 9,400 ounces in
the second quarter of 1997 compared to 31,430 ounces and 15,570 ounces,
respectively in 1996. During the first six months of 1997, 488,000 tonnes of ore
with a grade of 1.63 grams per tonne and 4,260,000 tonnes of waste were mined
compared to 496,000 tonnes of ore with a grade of 2.21 grams per tonne and
4,002,000 tonnes of waste in 1996. Gold grades and the associated gold recovery
rates are expected to increase in the third and fourth quarters as production
moves into the main part of the Dora deposit.
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Depreciation and amortization expense decreased to $4.5 million for the first
half of 1997 compared to $5.7 million in 1996 due to lower gold production. On a
per ounce produced basis, depreciation and amortization for the first half of
1997 was $84 per ounce, the same as the corresponding period of 1996.
Exploration expense increased to $2.5 million in the first six months of 1997
compared to $1.1 million in 1996. The increase is attributable to the
amortization and write-off of previously deferred exploration costs at the Santa
Gertrudis Mine totalling $2.3 million compared to $0.9 million in 1996. The
remainder of the expense relates to grass roots exploration and general
exploration overhead costs in Mexico.
Interest income for the six months ended June 30, 1997 was $1.1 million compared
to $1.6 million in 1996. The decrease is due to the decrease in the average
balance of interest bearing short-term deposits as a result of the capital
expenditure programs described below.
The decrease in the income tax provision in the first six months of 1997 to $0.1
million from $0.5 million in 1996 primarily results from the recovery of
deferred Quebec Mining Taxes in 1997 compared to a provision in 1996
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1997, the Company's cash and short-term deposits and working capital
decreased to $38 million and $53.7 million, respectively compared to $55.3
million and $65.5 million, respectively at December 31, 1996. The decrease is
attributable to capital expenditures on the Cerro Quema project and the shaft
deepening at the Joe Mann Mine as well as reduced cash flow from operations.
Cash flow from operations before the net change in non-cash operating working
capital decreased to $1.6 million in the first half of 1997 compared to $13.1
million in 1996. The decrease is due to the lower gold production and gold
prices as discussed above.
As disclosed in note 2 to the financial statements, in March of 1997 the Company
issued 1,770,000 common shares as final payment for its acquisition of the right
of first refusal to acquire the Cerro Quema gold project and to reduce the
royalty thereon from 3.5% to 2%. During the comparable period of 1996, in
addition to the initial issue of 730,000 common shares on the acquisition of the
right of first refusal, the Company also issued 18 million units comprising one
common share and one half common share purchase warrant at a unit price of
US$1.25 for net proceeds of $28.7 million.
Investment activities for the first six months of 1997 include expenditures on
natural resource properties of $15.9 million compared to $5.6 million in 1996.
Expenditures, include $4.5 million (1996 -$2.4 million) at the Joe Mann Mine
which includes $3.2 million for the shaft deepening (1996 - nil), and $2.4
million (1996 - $2.9 million) at the Santa Gertrudis Mine primarily comprising
deferred exploration expenditures and the construction of Phase IV of the leach
pad, and $9 million at the Cerro Quema property in Panama including $2.1
million comprising US$250,000 cash and 1,770,000 shares as the final
acquisition payment as discussed above. The $14.5 million Joe Mann Mine shaft
sinking project to access six new production levels is currently under budget
and approximately on schedule with ore production still expected for June,
1999. Investment activities in 1996 also include $13.1 million for the initial
acquisition of the Cerro Quema property.
Shareholders' equity decreased to $139.6 million at June 30, 1997 from $142.1
million at December 31, 1996 as a result of the loss during the period.
The Company's principal sources of liquidity are cash flow from the Joe Mann and
Santa Gertrudis mines and the
13
<PAGE> 14
Company's working capital which amounted to $53.7 million at June 30, 1997. The
Company is not aware of any significant uncertainties or risks with respect to
liquidity and capital resources except for fluctuations in gold prices, the
relative U.S./Mexican/Canadian exchange rates, the ability of the Company to
meet its production estimates and any unforeseen environmental problems and
other normal risks associated with underground and open pit gold mining.
14
<PAGE> 15
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not Applicable
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are being filed with this report.
(b) No reports on Form 8-K were filed during the three
months ended June 30, 1997.
15
<PAGE> 16
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.
CAMPBELL RESOURCES INC.
"PAUL J. IRELAND"
-----------------
Paul J. Ireland
Vice President, Finance
Toronto, Ontario
August 12, 1997
16
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
UNAUDITED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10Q FILING.
</LEGEND>
<CURRENCY> CANADIAN DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 0.7244
<CASH> 37,957
<SECURITIES> 0
<RECEIVABLES> 10,614
<ALLOWANCES> 0
<INVENTORY> 9,507
<CURRENT-ASSETS> 59,556
<PP&E> 166,397
<DEPRECIATION> 66,300
<TOTAL-ASSETS> 160,716
<CURRENT-LIABILITIES> 5,807
<BONDS> 7,718
0
0
<COMMON> 120,750
<OTHER-SE> 18,828
<TOTAL-LIABILITY-AND-EQUITY> 160,716
<SALES> 25,858
<TOTAL-REVENUES> 25,858
<CGS> 22,645<F1>
<TOTAL-COSTS> 31,086
<OTHER-EXPENSES> 85
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 318
<INCOME-PRETAX> (4,489)
<INCOME-TAX> 64
<INCOME-CONTINUING> (4,553)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,553)
<EPS-PRIMARY> (0.030)
<EPS-DILUTED> (0.030)
<FN>
<F1>CGS excludes deprecation and amortization and exploration expenses.
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