<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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 SEPTEMBER 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)
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 September 30,1997, 150,495,233 Common Shares, without
par value
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CAMPBELL RESOURCES INC.
Table of Contents
<TABLE>
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Page
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as at September 30, 1997 and
December 31, 1996.................................................................. 3
Unaudited Consolidated Statements of Income for the Three Months and the Nine
Months Ended September 30, 1997 and 1996........................................... 4
Unaudited Consolidated Statements of Retained Earnings for the Nine Months
Ended September 30, 1997 and 1996.................................................. 4
Unaudited Consolidated Statements of Cash Flows for the Three Months and the
Nine Months Ended September 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.................................................................. 14
ITEM 2. Changes in Securities.............................................................. 14
ITEM 3. Defaults Upon Senior Securities.................................................... 14
ITEM 4. Submission of Matters to a Vote
of Security Holders................................................................ 14
ITEM 5. Other Information.................................................................. 14
ITEM 6. Exhibits and Reports on Form 8-K................................................... 14
SIGNATURES......................................................................... 15
</TABLE>
2
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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>
SEPTEMBER 30 December 31
1997 1996
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits $ 43,239 $ 55,302
Receivables 7,175 8,270
Inventories (Note 2) 8,286 9,134
Prepaids 1,276 749
--------- ---------
Total current assets 59,976 73,455
--------- ---------
OTHER ASSETS 1,041 1,271
--------- ---------
NATURAL RESOURCE PROPERTIES 166,560 149,879
Less accumulated depreciation and amortization (70,268) (59,307)
--------- ---------
96,292 90,572
--------- ---------
Total assets $ 157,309 $ 165,298
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 4,464 $ 5,504
Accrued liabilities 1,378 2,337
Income taxes payable 12 94
--------- ---------
Total current liabilities 5,854 7,935
--------- ---------
OTHER LIABILITIES 888 881
CONVERTIBLE DEBENTURES (NOTE 3) 7,714 7,657
DEFERRED MINING TAXES 6,610 6,767
SHAREHOLDERS' EQUITY
Capital stock (Note 4) 120,793 118,605
Foreign currency translation adjustment (330) (248)
Retained earnings 15,780 23,701
--------- ---------
Total shareholders' equity 136,243 142,058
--------- ---------
Total liabilities and shareholders' equity $ 157,309 $ 165,298
========= =========
</TABLE>
Commitments and contingencies (Note 5)
3
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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 Nine months ended
September 30 September 30
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
METAL SALES $ 12,979 $ 16,191 $ 38,837 $ 53,321
-------- -------- -------- --------
EXPENSES
Mining 11,857 11,067 34,307 33,855
General administration 774 673 2,221 2,093
Depreciation and amortization 2,294 2,737 6,778 8,460
Exploration 1,704 877 4,214 1,987
-------- -------- -------- --------
16,629 15,354 47,520 46,395
-------- -------- -------- --------
Income (loss) from operations (3,650) 837 (8,683) 6,926
Other income (expense)
Interest income 474 866 1,421 2,529
Foreign exchange gain (loss) (87) 127 (172) (78)
Convertible debenture interest expense (163) (123) (481) (508)
-------- -------- -------- --------
224 870 768 1,943
-------- -------- -------- --------
Income (loss) before income taxes (3,426) 1,707 (7,915) 8,869
Income tax provision (58) 242 6 711
-------- -------- -------- --------
NET INCOME (LOSS) ($ 3,368) $ 1,465 ($ 7,921) $ 8,158
======== ======== ======== ========
EARNINGS (LOSS) PER SHARE ($ 0.022) $ 0.010 ($ 0.053) $ 0.056
======== ======== ======== ========
</TABLE>
UNAUDITED CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
FOR THE NINE MONTHS ENDED SEPTEMBER 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) (7,921) 8,158
-------- -------
Balance at end of period $ 15,780 $22,847
======== =======
</TABLE>
4
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CAMPBELL RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
Three months ended Nine months ended
CASH PROVIDED BY (USED IN): September 30 September 30
------------------ -----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($ 3,368) $ 1,465 ($ 7,921) $ 8,158
Items not involving cash
Depreciation and amortization 2,294 2,737 6,778 8,460
Deferred mining taxes (115) 135 (157) 358
Other 847 238 2,534 734
-------- -------- -------- --------
(342) 4,575 1,234 17,710
Net change in non-cash operating working capital 4,909 (1,026) (665) (1,765)
-------- -------- -------- --------
4,567 3,549 569 15,945
-------- -------- -------- --------
FINANCING ACTIVITIES
Issues of capital stock 43 154 2,188 33,558
Conversion of convertible debentures (12) (77) (12) (3,006)
-------- -------- -------- --------
31 77 2,176 30,552
-------- -------- -------- --------
INVESTMENT ACTIVITIES
Expenditures on natural resource properties (9,126) (3,361) (25,040) (8,917)
Termination of hedging contracts 9,679 9,679
Acquisition of Cerro Quema gold project (13,160)
Mining duties received 669 669
Decrease in other assets 22 5 230 1,160
-------- -------- -------- --------
575 (2,687) (15,131) (20,248)
-------- -------- -------- --------
Effect of exchange rate change on cash
and short-term deposits 109 (65) 323 111
-------- -------- -------- --------
Increase (decrease) in cash and short-term deposits 5,282 874 (12,063) 26,360
Cash and short-term deposits at beginning of period 37,957 57,757 55,302 32,271
-------- -------- -------- --------
Cash and short-term deposits at end of period $ 43,239 $ 58,631 $ 43,239 $ 58,631
======== ======== ======== ========
CHANGES IN NON-CASH WORKING CAPITAL
Receivables $ 3,439 ($ 200) $ 1,095 ($ 354)
Inventories and prepaids 1,423 (679) 321 (1,254)
Accounts payable 85 (747) (1,040) 726
Accrued liabilities (45) 587 (959) (873)
Income taxes payable 7 13 (82) (10)
-------- -------- -------- --------
$ 4,909 ($ 1,026) ($ 665) ($ 1,765)
======== ======== ======== ========
</TABLE>
5
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CAMPBELL RESOURCES INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 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 periods 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 Form10-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 6, conform in
all material respects with accounting principles generally accepted in the
United States.
The results of operations for the first nine months of the year are not
necessarily indicative of the results to be expected for the full year.
2--INVENTORIES
<TABLE>
<CAPTION>
September 30 December 31
1997 1996
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<S> <C> <C>
Materials and supplies $5,451 $5,813
Ore in stockpiles 2,835 3,321
------ ------
$8,286 $9,134
====== ======
</TABLE>
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 nine months ended September 30, 1997, debenture holders converted
US$9,000 (1996 - US$2,307,000) of debenture principal into 18,000 (1996 -
4,614,000) Common Shares of the Company resulting in a balance outstanding at
September 30, 1997 of US$5,582,000 ( December 31, 1996 - US$5,591,000).
6
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4--CAPITAL STOCK
Changes in the issued and outstanding common shares for the nine 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 18 12 4,614 3,006
Public issue for cash 18,000 28,585
Issued to CEMSA 1,770 2,071 730 1,256
Employee Incentive Plan and
Directors' Stock Option Plan 119 105 764 711
------- -------- ------- --------
Balance at September 30 150,495 $120,793 148,574 $118,598
======= ======== ======= ========
</TABLE>
The Company has 9,000,000 warrants outstanding which arose as a result of the
public issue of units in 1996 that entitle the holders to purchase one common
share of the Company for US$1.50 on or before February 26, 1999. As of September
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 7,250,000 common shares at prices ranging
from $0.57 to $1.48 per share with such options expiring at various dates to
August 13, 2002.
Earnings per share have been calculated using the weighted average number of
shares outstanding during the nine months which was 149,917,000 (1996 -
145,018,000) and during the three months which was 150,462,000 (1996 -
148,481,000).
5--COMMITMENTS AND CONTINGENCIES
(a) At September 30, 1997 the Company's hedging program consisted of the
following:
<TABLE>
<CAPTION>
1997 1998 1999 2000 2001 2002
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Gold (ounces):
Puts (purchased) - amount 7,500
- average price (US$) $ 380
Calls (sold) - amount 33,200 20,000
- average price (US$) $ 440 $ 440
Copper (000's pounds):
Fixed forward contracts - amount 330 1,320
- average price (US$) $ 0.95 $ 0.95
</TABLE>
7
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(b) At September 30, 1997 the Company had sold forward US$8,000,000 to
purchase Canadian dollars during 1997 and 1998 at an average rate of
Cdn$1.3803 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 $512
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 following an audit 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. On May 26, 1997, the
Company received notice that it was successful in its appeal against
the assessments 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 that
was presented at the appeal. The charge against the assets will be
released when the final tax assessment covering this matter is issued
by the tax authorities.
(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.
6--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:
8
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<TABLE>
<CAPTION>
Three months ended Sept 30 Nine months ended Sept 30
-------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income under Canadian GAAP $(3,368) $ 1,465 $(7,921) $ 8,158
Application of liability method under FAS 109 (1,840) (446) (817) (2,283)
------- ------- ------- -------
Net income under U.S. GAAP $(5,208) $ 1,019 $(8,738) $ 5,875
------- ------- ------- -------
Net income per share under U.S. GAAP $(0.034) $ 0.007 $(0.058) $ 0.040
------- ------- ------- -------
</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 September 30, 1997 are
investments of $27,753,000 (1996 - $48,472,000) 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 $105,000 for the nine months
and $31,000 for the three months ended September 30, 1997 (1996 -
$29,296,000 and $77,000, respectively), the use of cash for investing
activities would be $1,065,000 for the nine months and $18,925,000 for
the three months (1996 - use of $68,133,000 and $34,648,000,
respectively) and the decrease in cash and short-term deposits would be
$68,000 for the nine months and $14,218,000 for the three months (1996
- decreases of $22,781,000 and $31,087,000, respectively). This would
result in cash and short-term deposits and short-term investments at
September 30, 1997 of $15,486,000 and $27,753,000, respectively, at
December 31, 1996 of $5,875,000 and $49,427,000, respectively and at
September 30, 1996 of $9,490,000 and $48,472,000, respectively.
Additional disclosures required under U.S. GAAP with respect to the
Statements of Cash Flows are as follows:
<TABLE>
<CAPTION>
Three months ended Sept 30 Nine months ended Sept 30
-------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash taxes paid $132 $180 $550 $693
Cash interest paid $ 18 $ 8 $301 $316
</TABLE>
(c) Under U.S. GAAP the contingent liability disclosed in note 5 (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.
9
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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. 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. 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.
10
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CAMPBELL RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
SEPTEMBER 30, 1997
(all dollars are Canadian unless noted otherwise)
OVERVIEW
Campbell recorded a loss of $7.9 million or $0.053 per share for the nine months
and $3.4 million or $0.022 per share for the three months ended September 30,
1997 compared to income of $8.2 million ($0.056 per share) and $1.5 million
($0.010 per share) in the comparable periods of 1996. Cash flow from operations
before the change in operating working capital was reduced to $1.2 million in
the nine months compared to $17.7 million in 1996. The loss is primarily
attributable to the decrease in gold production for the nine months to 81,570
ounces from 98,760 ounces in 1996, combined with the decrease in the average
price of gold recognized to US$346 per ounce compared to US$395 per ounce in
1996.
Mining at Campbell's Santa Gertrudis Mine in Mexico is to be suspended at the
end of November, 1997 to focus on building ore reserves through exploration.
Since acquiring the mine in 1994, Campbell has been successful in replacing ore
mined through its exploration efforts in the immediate mine area. Commencing in
1996, increased emphasis was placed on exploring promising targets further from
the current mine infrastructure in an effort to develop ore reserves for the
longer term. It had been anticipated that this exploration program would allow
the mine to continue production at an economically viable rate while continuing
the long-term exploration program. However, current low gold prices and
insufficient developed ore renders mine production uneconomic at the forecast
levels. Mining operations will resume when sufficient ore reserves have been
discovered and developed to enable production at a rate that is economic at the
then prevailing gold price. There can be no assurance that gold prices will
rise to a level or that sufficient ore reserves will be discovered and
developed that will make it economic to resume mining operations.
Ore will be mined at Santa Gertrudis from the Dora, El Toro and La Trinidad pits
through the end of November at which time the Dora and El Toro pits will be
exhausted. Thereafter, the leach pads will continue to be operated until the
level of gold production is uneconomic, currently estimated to be between six
months and one year. The suspension of mining operations will result in the
lay-off of approximately 160 personnel in December and a further 30 personnel
at the completion of the leaching cycle. The initial severance and other costs
resulting from the cessation is estimated at US$500,000 and will be accrued in
the fourth quarter.
As a result of the termination of mining operations in November and the less
than expected production in the third quarter due to high rainfall caused by the
El Nino weather effect, the production estimate for 1997 has been reduced to
38,000-40,000 ounces of gold from the 48,000 ounces forecast in the second
quarter.
Campbell is committed to an exploration program at the Santa Gertrudis Mine.
The recent compilation of the results from airborne geophysics, radar satellite
imagery, ground geophysical and soil geochemical surveys, together with
drilling results have all contributed to a significantly better understanding
of the complex mineralization process on the property. This information has
already resulted in the more scientific selection of oxidized mineralization
targets and the preliminary indentification of deep sulphide targets. With
respect to the deep sulphide potential, the Company has obtained a "Carlin
type" expert report confirming the strong similarity of the Santa Gertrudis
property with typical Carlin deposits. The Company is engaged in initial
discussions with significantly larger gold mining companies to review the
possibility of forming a joint venture to explore the deep sulphide potential
of the property, while continuing to explore for oxide mineralization itself.
There can be no assurance that such a joint venture will be successfully formed
or that additional reserves will be located on the property.
Gold prices have remained in the low US$300 per ounce range for the whole of the
third quarter of 1997 and appear unlikely to increase significantly by year end.
As discussed in the second quarter, the Company will reassess the outlook for
gold in December, the beginning of the dry season in Panama, to determine how to
proceed with the Cerro Quema gold project in Panama.
11
<PAGE> 12
REVENUE
Revenue from metal sales decreased 20% to $13 million in the third quarter and
27% to $38.8 million in the nine months ended September 30, 1997 compared to
$16.2 million and $53.3 million, respectively in 1996. The decrease is primarily
attributable to the 17% decrease in gold production noted above combined with
the 13% decrease in the average price received for gold sales during the nine
months compared to the same period of 1996.
The average gold price received in the nine months ended September 30, 1997 was
US$346 compared to US$395 in the comparable period of 1996. The average Comex
market price was US$339 in the first nine months of 1997 compared to US$392 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 3.8% of metal sales in the first
nine months of 1997 from 3.2% in 1996 due to the decrease in gold revenues.
Copper production decreased to 988,000 pounds compared to 1,172,000 pounds in
1996 due to lower tonnage and copper head grades.
EXPENSES
Mining expense in the first nine months of 1997 was $34.3 million and $11.9
million in the third quarter of 1997 compared to $33.9 million and $11.1 million
in the comparable periods of 1996. The overall cash production cost increased to
US$294 per ounce of gold for the nine months and US$290 for the third quarter
compared to US$240 and US$256, respectively in 1996.
The Joe Mann Mine produced 53,020 ounces of gold in the first nine months of
1997 and 17,420 in the third quarter compared to 54,620 ounces and 17,750 ounces
in the comparable periods of 1996. The tons milled decreased to 195,200 tons in
the first nine months of 1997 compared to 204,700 tons in 1996 while the mill
head grade increased to 0.296 ounces of gold per ton compared to 0.290 ounces of
gold per ton in 1996. The mill recovery rate was 93.8% in the first nine months
of 1997 compared to 93.3% in 1996.
The cash production cost at the Joe Mann Mine increased marginally to US$268 per
ounce produced in the first nine months of 1997 compared to US$265 for the
comparative period in 1996 and decreased to US$250 per ounce in the third
quarter of 1997 compared to US$255 in 1996.
The cash production cost at the Santa Gertrudis Mine was US$341 per ounce in the
first nine months and US$353 in the third quarter of 1997 compared to US$210 and
US$256, respectively in 1996. The increase is primarily due to the decrease in
gold production to 28,560 ounces of gold in the first nine months and 10,790
ounces in the third quarter of 1997 compared to 44,150 ounces and 12,710 ounces,
respectively in 1996. During the first nine months of 1997, 806,000 tonnes of
ore with a grade of 1.67 grams per tonne and 5,753,000 tonnes of waste were
mined compared to 760,000 tonnes of ore with a grade of 2.05 grams per tonne and
6,937,000 tonnes of waste in 1996.
Depreciation and amortization expense decreased to $6.8 million for the first
nine months of 1997 compared to $8.5 million in 1996 due to lower gold
production. On a per ounce produced basis, depreciation and amortization for the
first nine months of 1997 was $83 per ounce compared to $86 per ounce in 1996.
Exploration expense increased to $4.2 million in the first nine months of 1997
compared to $2 million in 1996. The increase is attributable to the amortization
and write-off of previously deferred exploration costs at the Santa Gertrudis
12
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Mine totalling $4 million compared to $1.6 million in 1996. The remainder of the
expense relates to general exploration overhead costs in Mexico.
Interest income for the nine months ended September 30, 1997 was $1.4 million
compared to $2.5 million in 1996. The decrease is due to both the decrease in
the average balance of interest bearing short-term deposits as a result of the
capital expenditure programs described below and a decrease in interest rates.
The decrease in the income tax provision in the first nine months of 1997 to
$nil from $0.7 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 September 30, 1997, the Company's cash and short-term deposits and working
capital decreased to $43.3 million and $54.1 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 $1.2 million in the first nine months of 1997 compared to
$17.7 million in 1996. The decrease is due to the lower gold production and gold
prices as discussed above.
Investment activities for the first nine months of 1997 include expenditures on
natural resource properties of $25 million compared to $8.9 million in 1996.
Expenditures include $7 million (1996 -$3.2 million) at the Joe Mann Mine which
includes $5.1 million for the shaft deepening (1996 - nil), $2.9 million (1996 -
$4.3 million) at the Santa Gertrudis Mine primarily comprising deferred
exploration expenditures and the construction of Phase IV of the leach pad, and
$15.1 million (1996 - $1.3 million) at the Cerro Quema property in Panama.
In the third quarter of 1997, the Company terminated part of its hedging program
based on the view that gold prices were near the bottom of the current cycle.
The Company received cash proceeds of $9.7 million on the termination which has
been credited against the cost of the Cerro Quema project to which they related.
The Company's principal sources of liquidity are cash flow from the Joe Mann and
Santa Gertrudis mines and the Company's working capital which amounted to $54.1
million at September 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.
13
<PAGE> 14
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 September 30, 1997.
14
<PAGE> 15
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.
/s/ PAUL J. IRELAND
---------------------------
Paul J. Ireland
Vice President, Finance
Toronto, Ontario
November 13, 1997
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
UNAUDITED CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF INCOME AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q FILING.
<MULTIPLIER> 1,000
<CURRENCY> CANADIAN
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<EXCHANGE-RATE> 072.64
<CASH> 43,239
<SECURITIES> 0
<RECEIVABLES> 7,175
<ALLOWANCES> 0
<INVENTORY> 8,286
<CURRENT-ASSETS> 59,976
<PP&E> 166,560
<DEPRECIATION> (70,268)
<TOTAL-ASSETS> 157,309
<CURRENT-LIABILITIES> 5,854
<BONDS> 7,714
0
0
<COMMON> 120,793
<OTHER-SE> 15,450
<TOTAL-LIABILITY-AND-EQUITY> 157,309
<SALES> 38,837
<TOTAL-REVENUES> 38,837
<CGS> 34,307<F1>
<TOTAL-COSTS> 47,520
<OTHER-EXPENSES> 172
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (481)
<INCOME-PRETAX> (7,915)
<INCOME-TAX> 6
<INCOME-CONTINUING> (7,921)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,921)
<EPS-PRIMARY> (0.053)
<EPS-DILUTED> (0.053)
<FN>
<F1>EXCLUDES DEPRECIATION AND AMORTIZATION AND EXPLORATION EXPENSE.
</FN>
</TABLE>
