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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, 1999
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 June 30,1999, 156,903,041 Common Shares,
without par value
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CAMPBELL RESOURCES INC.
Table of Contents
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as at June 30, 1999 and December 31,
1998 ............................................................................ 3
Unaudited Consolidated Statements of Operations for the Three Months and the Six
Months Ended June 30, 1999 and 1998 ............................................. 4
Unaudited Consolidated Statements of Deficit for the Six Months Ended June 30,
1999 and 1998.................................................................... 4
Unaudited Consolidated Statements of Cash Flows for the Three Months and the
Six Months Ended June 30, 1999 and 1998.......................................... 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>
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CAMPBELL RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
UNAUDITED
JUNE 30 December 31
1999 1998
--------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits $ 33,424 $ 41,493
Receivables 2,063 2,653
Inventories (note 2) 4,279 4,538
Prepaids 321 474
--------- ---------
Total current assets 40,087 49,158
--------- ---------
OTHER ASSETS 409 502
--------- ---------
MINING INTERESTS 176,724 173,866
less accumulated depreciation and amortization (123,277) (120,749)
--------- ---------
53,447 53,117
--------- ---------
Total assets $ 93,943 $ 102,777
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,511 $ 2,254
Accrued liabilities 803 1,215
--------- ---------
Total current liabilities 3,314 3,469
--------- ---------
RECLAMATION AND OTHER LIABILITIES 2,049 2,571
CONVERTIBLE DEBENTURES (note 3) 3,865 5,652
DEFERRED MINING TAXES 3,094 3,616
SHAREHOLDERS' EQUITY
Capital stock (note 4) 125,236 123,632
Foreign currency translation adjustment 913 1,394
Deficit (44,528) (37,557)
--------- ---------
Total shareholders' equity 81,621 87,469
--------- ---------
Total liabilities and shareholders' equity $ 93,943 $ 102,777
========= =========
</TABLE>
Commitments and contingencies (Note 6)
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CAMPBELL RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of Canadian dollars except per share amounts)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30 June 30
------------------------ ------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
METAL SALES $ 6,424 $ 9,241 $ 13,025 $ 19,522
-------- -------- -------- --------
EXPENSES
Mining 7,655 9,033 15,463 18,557
General administration 694 661 1,463 1,356
Depreciation and amortization 1,373 1,640 2,762 3,261
Exploration 573 458 909 1,050
Care and maintenance 549 787
-------- -------- -------- --------
10,844 11,792 21,384 24,224
-------- -------- -------- --------
Loss from operations (4,420) (2,551) (8,359) (4,702)
-------- -------- -------- --------
Other income (expense)
Interest and other income 538 670 1,308 1,125
Foreign exchange gain (loss) 46 (12) 48 (7)
Convertible debenture interest expense (79) (132) (186) (278)
-------- -------- -------- --------
505 526 1,170 840
-------- -------- -------- --------
Loss before income taxes (3,915) (2,025) (7,189) (3,862)
Income and mining tax (recovery) 8 (22) (218) (129)
-------- -------- -------- --------
NET LOSS $ (3,923) $ (2,003) $ (6,971) $ (3,733)
======== ======== ======== ========
LOSS PER SHARE $ (0.03) $ (0.01) $ (0.04) $ (0.02)
======== ======== ======== ========
</TABLE>
UNAUDITED CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE SIX MONTHS ENDED JUNE 30
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Balance at beginning of period $(37,557) $(16,709)
Net loss (6,971) (3,733)
-------- --------
Balance at end of period $(44,528) $(20,442)
======== ========
</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
------------------------ ------------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (3,923) $ (2,003) $ (6,971) $ (3,733)
Items not involving cash
Depreciation and amortization 1,373 1,640 2,762 3,261
Deferred mining taxes (recovery) (168) (151) (522) (359)
Other (87) 14 (522) 396
-------- -------- -------- --------
(2,805) (500) (5,253) (435)
Net change in non-cash operating working capital (1,177) 1,918 1,015 1,580
-------- -------- -------- --------
(3,982) 1,418 (4,238) 1,145
-------- -------- -------- --------
FINANCING ACTIVITIES
Issues of capital stock 34 39 34 102
INVESTING ACTIVITIES
Expenditures on mining interests (1,153) (3,392) (2,098) (6,383)
Purchase of Roca Roja (1,562) (1,562)
Short-term investments 9,855 28,097
Proceeds on sale of assets 617 617
Other (50) 135
-------- -------- -------- --------
(2,715) 7,030 (3,660) 22,466
-------- -------- -------- --------
Effect of exchange rate change on cash
and short-term deposits (288) 284 (205) 218
-------- -------- -------- --------
Increase (decrease) in cash and short-term deposits (6,951) 8,771 (8,069) 23,931
Cash and short-term deposits at beginning of period 40,375 28,798 41,493 13,638
-------- -------- -------- --------
Cash and short-term deposits at end of period $ 33,424 $ 37,569 $ 33,424 $ 37,569
======== ======== ======== ========
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
Receivables $ (200) $ 1,355 $ 590 $ 182
Inventories and prepaids 182 1,133 580 2,496
Accounts payable (146) 2 257 (871)
Accrued liabilities (1,013) (572) (412) (227)
-------- -------- -------- --------
$ (1,177) $ 1,918 $ 1,015 $ 1,580
======== ======== ======== ========
</TABLE>
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CAMPBELL RESOURCES INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1999
(Tabular amounts are expressed in thousands of Canadian dollars)
1--GENERAL
The Company is incorporated under the Canada Business Corporations Act and is
engaged in the exploration, development, mining and processing of precious
metals in Canada, Mexico and Panama.
These unaudited consolidated financial statements reflect all adjustments that
are, in the opinion of management, necessary for 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 Form 10-K for the year ended December 31, 1998.
The financial statements are prepared in accordance with accounting principles
generally accepted in Canada and, except as described in note 7, 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 -- INVENTORIES
Inventories comprise materials and supplies at June 30, 1999 and December 31,
1998.
3 -- CONVERTIBLE DEBENTURES
In July 1994, the Company issued US$11,005,000 of 7.5% Convertible Subordinated
Debentures. 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, 1999, debenture holders converted
US$1,067,000 (1998 - US$1,180,000) of debenture principal into 2,134,000 (1998 -
2,360,000) common shares of the Company resulting in a balance outstanding at
June 30, 1999 of US$2,626,000 (December 31, 1998 - US$3,693,000).
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4 -- CAPITAL STOCK
Changes in the issued and outstanding common shares for the six months are as
follows (in thousands):
<TABLE>
<CAPTION>
1999 1998
--------------------- ---------------------
Shares Amount Shares Amount
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Common shares:
Balance at beginning of period 154,686 $123,632 151,445 $121,425
Issued:
Conversion of convertible debentures 2,134 1,570 2,360 1,635
Employee Incentive Plan and
Directors' Stock Option Plan 83 34 184 102
-------- -------- -------- --------
Balance at June 30 156,903 $125,236 153,989 $123,162
======== ======== ======== ========
</TABLE>
As of June 30, 1999, in addition to the shares reserved for issuance under the
terms of the convertible debentures (see note 3) there were outstanding stock
options under the Directors Stock Option Plan and the Employee Incentive Plan to
purchase 6,875,000 common shares at prices ranging from $0.44 to $1.48 per share
with such options expiring at various dates to August 18, 2003.
Loss per share has been calculated using the weighted average number of shares
outstanding during the six months which was 156,844,000 (1998 - 152,862,000) and
during the three months which was 156,862,000 (1998 - 152,986,000).
5-- STATEMENTS OF CASH FLOWS
During the first quarter of 1999 the Company adopted the provisions of the new
Canadian Institute of Chartered Accountants Handbook Section 1540 "Cash Flow
Statements". The Statement of Cash Flows for the three and six month periods
ended June 30, 1998 have been restated to conform to the new requirements. Cash
and short-term deposits consist of cash on hand, balances with banks and
short-term money market instruments (maturity on acquisition of less than 90
days).
Additional disclosures required with respect to the Statements of Cash Flows are
as follows:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash taxes paid $168 $157 $281 $257
Cash interest paid $147 $246 $148 $247
</TABLE>
6 -- COMMITMENTS AND CONTINGENCIES
a) At June 30, 1999 the Company had outstanding sold calls for 33,200
ounces of gold in 2001 and 20,000 ounces of gold in 2002 at an average
price of US$350 per ounce.
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b) At June 30, 1999 the Company had sold forward US$5,000,000 to purchase
Canadian dollars during 1999 at an average rate of Cdn$1.5225 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 charge against the assets will be released when the final tax
assessment covering this matter is issued in favour of the Company by
the tax authorities. On May 6, 1998, the tax authorities issued a tax
assessment identical to that issued in 1996 except that the amounts
claimed have increased to Mexican pesos 18,000,000 as a result of
inflation and additional interest. The Company has been advised that
this assessment is improper as it completely ignores the earlier
ruling. Accordingly the Company has filed a new appeal before the
Federal Tax Court to nullify the assessment. No provision has been made
in the financial statements for the amounts assessed on the basis of
the earlier ruling and the legal advice received.
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.
f) The Company is from time to time involved in various claims, legal
proceedings and reassessments for income, mining and other taxes,
arising in the ordinary course of business. The Company's current and
proposed mining and exploration activities are subject to various laws
and regulations governing the protection of the environment. These laws
and regulations are continually changing and are generally becoming
more restrictive. The Company conducts its operations so as to protect
its employees, the general public and the environment and, to the best
of its knowledge, believes its operations are in compliance with all
applicable laws and regulations, in all material respects. The
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Company has made, and expects to make in the future, submissions and
expenditures to comply with such laws and regulations. Where estimated
reclamation and closure costs are reasonably determinable, the Company
has recorded a provision for environmental liabilities based on
management's estimate of these costs. Such estimates are subject to
adjustment based on changes in laws and regulations and as new
information becomes available.
g) The Year 2000 Issue arises because many computerized systems use two
digits rather than four to identify a year. Date-sensitive systems may
recognize the year 2000 as 1900 or some other date, resulting in errors
when information using year 2000 dates is processed. In addition,
similar problems may arise in some systems which use certain dates in
1999 to represent something other than a date. The effects of the Year
2000 Issue may be experienced before, on, or after January 1, 2000,
and, if not addressed, the impact on operations and financial reporting
may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations.
Although the Company is addressing this issue, it is not possible to be
certain that all aspects of the Year 2000 Issue affecting the entity,
including those related to the efforts of customers, suppliers, or
other third parties, will be fully resolved.
7--DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
The reconciliation of net loss determined in accordance with generally accepted
accounting principles in Canada to net loss determined under accounting
principles which are generally accepted in the United States is as follows:
<TABLE>
<CAPTION>
Three months ended June 30 Six months ended June 30
-------------------------- ------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net loss for period as reported $(3,923) $(2,003) $(6,971) $(3,733)
Depreciation and amortization (a) 526 43 1,039 89
Deferred income taxes (b) (62) (180)
Foreign exchange contracts (d) 390 (491) 828 (491)
------- ------- ------- -------
Net loss for the year in accordance
with United States accounting principles $(3,069) $(2,451) $(5,284) $(4,135)
------- ------- ------- -------
Other comprehensive income (loss):
Foreign currency translation adjustments (314) 516 (481) 458
------- ------- ------- -------
Comprehensive loss for the year in accordance
with United States accounting principles $(3,383) $(1,935) $(5,765) $(3,677)
------- ------- ------- -------
Loss per share for the year in accordance
with United States accounting principles
Basic and fully diluted $ (0.02) $ (0.02) $ (0.03) $ (0.03)
------- ------- ------- -------
</TABLE>
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Differences between Canadian and United States accounting principles as they
affect the Company's financial statements are as follows:
a) Depreciation and Amortization - Under Canadian accounting principles,
depreciation and amortization may be calculated on the
unit-of-production method based upon the estimated mine life, whereas
under United States accounting principles the calculations are made
based upon proven and probable mineable reserves.
b) Deferred Income Taxes - Under Canadian accounting principles income and
mining taxes may be accounted for under the deferral method. Under
United States accounting principles the asset and liability method (FAS
109) is used, whereby deferred tax assets and liabilities are
recognized for the deferred taxes attributable to differences between
book value and the tax basis of the Company's assets and liabilities.
c) Contingent Liability - Under United States accounting principles the
contingent liability disclosed in note 6(e) would be reflected in the
balance sheet. Accordingly, for United States accounting principles
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.
d) Foreign Exchange Contracts - In accordance with Canadian accounting
principles, 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 United States accounting principles, changes in the
market value of the contracts would be included in current earnings.
e) Balance Sheets - The cumulative effect of the application of United
States accounting principles, noted in (a) to (d) above, on the
consolidated balance sheets of the Company as at June 30, 1999 and
December 31, 1998 would be to decrease mining interests by $22,364,000
(1998 - $23,403,000), increase long-term investments by $50,000,000
(1998 - $50,000,000), increase prepaids by $252,000 (1998 - $nil),
increase other liabilities by $nil (1998 - $576,000), increase
long-term liabilities by $38,000,000 (1998 - $38,000,000), decrease
deferred mining taxes by $2,567,000 (1998 - $2,747,000), increase
preferred shares by $12,000,000 (1998 - $12,000,000) and reduce
shareholders equity by $19,545,000 (1998 - $21,232,000).
f) Other Recent Accounting Pronouncements - In June 1998, the FASB issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 establishes methods of accounting for
derivative financial instruments and hedging activities related to
those instruments as well as other hedging activities. The Company will
be required to implement SFAS No. 133 for its fiscal year ending
December 31, 2001. The Company has not yet determined the impact, if
any, of the adoption of SFAS No. 133 on its reported financial
position, results of operations or cash flows.
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CAMPBELL RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
JUNE 30, 1999
(all dollars are Canadian unless noted otherwise)
FORWARD-LOOKING STATEMENTS
This report contains certain "Forward-Looking Statements" within the meaning of
the Private Securities Litigation Reform Act of 1995 and is subject to certain
risks and uncertainties, including those "Risk Factors" set forth in the
Company's current Annual Report on Form 10-K for the year ended December 31,
1998. Such factors include, but are not limited to: differences between
estimated and actual ore reserves; changes to exploration, development and
mining plans due to prudent reaction of management to ongoing exploration
results, engineering and financial concerns; and fluctuations in the gold price
which affect the profitability and ore reserves of the Company. Readers are
cautioned not to place undue reliance on these forward-looking statements which
speak only as of the date hereof. The Company undertakes no obligation to
release publicly any revisions to these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect unanticipated events
or developments.
OVERVIEW
Campbell recorded a loss of $3.9 million or $0.03 per share for the three months
and a loss of $7.0 million or $0.04 per share for the six months ended June 30,
1999 compared to a loss of $2.0 million or $0.01 per share and $3.7 million or
$0.02 per share for the comparable periods of 1998. There was negative cash flow
from operations before the change in operating working capital of $2.8 million
in the quarter and $5.3 million in the six months ended June 30, 1999 compared
to negative cash flow of $0.5 million and $0.4 million in the comparative
periods of 1998. The increase in the loss is primarily a result of lower gold
production and lower realized gold prices marginally offset by a weaker Canadian
dollar. Gold production decreased by 24% in the second quarter to 16,000 ounces
from 21,100 ounces a year earlier and by 30% in the six months to 31,900 ounces
from 45,300 ounces a year earlier.
REVENUE
Revenue from metal sales decreased 30% to $6.4 million in the second quarter and
33% to $13 million in the six months compared to $9.2 million and $19.5 million,
respectively in 1998. The decrease is primarily attributable to the decrease in
gold production noted above combined with the 8% decrease in the average price
realized for gold sales during the six months compared to the same period of
1998.
The average price recognized for gold produced in the six months ended June 30,
1999 was US$279 compared to US$302 in the comparable period of 1998. The average
Comex market price was US$280 in the first six months of 1999 compared to US$297
in 1998. Currently the Company has no gold hedged for 1999 or beyond. The
Company is contemplating a longer-term hedging program for its Joe Mann Mine
should the gold price increase above the current low levels. 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.
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<PAGE> 12
Revenue from copper production remained at approximately 4.9% of metal sales in
the first six months of 1999 compared to 4.3% in the same period of 1998. Copper
production in the second quarter at 341,000 pounds approximated the 1998 levels
and decreased to 645,000 pounds for the six months compared to 691,000 pounds in
1998 due to lower tons milled.
EXPENSES
Mining expense in the first six months of 1999 was $15.5 million and $7.7
million in the second quarter compared to $18.6 million and $9.0 million in the
comparable periods of 1998. The overall cash production cost increased to US$307
per ounce of gold for the six months and US$314 for the second quarter compared
to US$264 and US$267 in the comparable periods of 1998.
The Joe Mann Mine produced 31,100 ounces of gold in the first six months and
15,800 ounces in the second quarter compared to 36,600 ounces and 18,400 ounces
in the comparable periods of 1998. The tons milled decreased to 145,500 tons for
the six months and 76,000 tons for the three months ended June 30, 1999 compared
to 157,200 tons and 80,900 tons in 1998. The mill head grade decreased to 0.23
ounces of gold per ton in the six months and 0.223 ounces per ton in the second
quarter of 1999 compared to 0.252 and 0.246 ounces of gold per ton in the
respective periods of 1998. The mill recovery rate was 94% in the six months
compared to 93.7% in 1998. As a result of the lower gold production the cash
production cost increased to US$307 per ounce of gold for the six months and
US$314 for the quarter compared to US$278 and US$269 in the comparable periods
of 1998.
The Joe Mann Mine fell short of the Company's internal targets for the second
quarter in terms of gold production and consequently, unit cash costs due to a
number of factors. Delays in ramping up mining to 7 days per week affected
certain long-hole stopes where production will be delayed into the second half
of the year. As noted in the first quarter report, the upper part of certain
shrinkage stopes being mined using long-hole methods experienced ground control
problems resulting in excess dilution. In addition, certain lower grade stopes
have been removed from the mining plan following the fall in gold prices since
the beginning of the year. The West zone has also proved to be disappointing
with the grade in the stopes being inconsistent and lower than expected. As a
consequence, all development in the West has been suspended for the time being
and mining in this area will cease once available broken ore has been pulled
from the stopes.
As a result of these various negative factors including current low gold prices,
mine management has been reviewing the mining plans for the balance of 1999 and
2000. As previously discussed, the new zone on the 2575 level is to be mined
using cut-and-fill methods. This mining method is now to be employed for all
stopes below the 2350 level. This should result in cost savings overall as a
result of lower dilution and a higher percentage of ore extracted from the
stopes with no build up of broken ore inventory. It also has the added benefit
of reducing the total amount of development below the 2350 level. Campbell has
revised its target production for Joe Mann for 1999 to 66,000 ounces of gold at
a cash production cost of US$265 per ounce.
Campbell is currently reviewing the possibility of recommencing limited mining
operations at its Santa Gertrudis Mine in Mexico from certain economic deposits
as a means of generating cash flow to fund the property fixed costs and the
ongoing exploration effort. Gold production is expected in the fourth quarter.
The Santa Gertrudis Mine produced 700 ounces of gold in the six months and
approximately 200 ounces in the second quarter as a result of periodic pumping
of diluted solution over the heaps. This compares to 8,800 and 2,800 ounces of
gold in the same periods of 1998 when the heaps were being actively leached.
Commencing in the second quarter of 1999, the costs to maintain the mine
infrastructure is classified as care and maintenance expense. The cash
12
<PAGE> 13
production cost at the Santa Gertrudis Mine during 1998 was US$201 per ounce in
the first six months and US$263 in the second quarter.
Depreciation and amortization expense decreased to $2.8 million for the six
months compared to $3.3 million in 1998 primarily due to lower gold production.
On a per ounce produced basis, depreciation and amortization for the first six
months of 1999 increased to $87 per ounce compared to $72 per ounce in 1998 as a
result of the effective cessation of production from the Santa Gertrudis Mine.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company's cash and short-term deposits and working capital
decreased to $33.4 million and $36.8 million, respectively compared to $41.5
million and $45.7 million, respectively at December 31, 1998. The decrease is
primarily attributable to the negative cash flow from operations and capital
expenditures during the first half. Cash flow from operations before the net
change in non-cash operating working capital was negative $5.3 million in the
first six months and $2.8 million in the second quarter of 1999 compared to
negative (as restated for the adoption of the new Canadian Institute of
Chartered Accountants Handbook Section 1540 "Cash Flow Statements") $0.4 million
and $0.5 million in the comparable periods of 1998.
Investing activities in the first six months of 1999 were $3.7 million and
include $1.6 million for the acquisition of the Roca Roja mine, a former gold
producer, adjacent to the Company's Santa Gertrudis Mine property in Mexico.
Expenditures on mining interests during the six months were $2.1 million
compared to $6.4 million in 1998. Expenditures during 1999 were at the Joe Mann
Mine primarily for exploration and development below the 2350 level. For 1998
the expenditures included $5.1 million at the Joe Mann Mine of which $4.1
million was for the shaft deepening and $1.2 million at the Cerro Quema property
in Panama. Sustaining capital expenditures are now forecast at $2.6 million for
1999, all at the Joe Mann Mine, primarily to develop the new production areas
below the 2350 foot level.
The Company's principal sources of liquidity are cash flow from the Joe Mann
Mine and the Company's working capital that amounted to $36.8 million at June
30, 1999. The Company is subject to the normal risks and uncertainties
associated with mining, including 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.
YEAR 2000 PROJECT
The Company is continuing to assess the personal computers at the Joe Mann Mine
for Year 2000 compliance, which is expected to be completed shortly. Contact
with external suppliers to ensure that the supply of goods and services
continues uninterrupted is ongoing. As discussed in previous filings, internal
evaluation of the mining and milling operations at the Joe Mann Mine have
concluded that the operations are largely manually controlled with negligible
input from equipment containing date sensitive devices. Accordingly these
operations are considered to be Year 2000 compliant. The Mexican operations will
be evaluated as part of the feasibility for any future production decision.
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
At the Annual and Special Meeting of Shareholders held on May
18, 1999, the shareholders voted on election of a slate of
nine directors comprised of Messrs. Beatty, Clow, Douglas,
Kachmar, McCartney, Murphy, O'Kelly, Pralle, and Raymond.
105,035,661 votes were cast in favour of election of the slate
with 832,286 withheld.
At this meeting, the shareholders also voted on the
re-appointment of KPMG LLP as auditors for the coming year and
authorizing the directors to fix remuneration. 117,500,143
votes were cast in favour of this item and 795,166 votes were
withheld.
Shareholders also approved an additional 3,500,000 common
shares for use under the Employee Incentive Plan. 98,014,453
votes were cast in favour, 19,481,282 votes were cast against
and 1,219,943 votes were withheld.
ITEM 5. Other Information
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27.1 Financial Data Schedule.
(b No reports on Form 8-K were filed during the three
months ended June 30, 1999.
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.
"PAUL J. IRELAND"
---------------------------------------------------
Paul J. Ireland
Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer and
authorized signatory)
Toronto, Ontario
August 11, 1999
15
<PAGE> 16
CAMPBELL RESOURCES INC.
FORM 10-Q - JUNE 30, 1999
EXHIBIT INDEX
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS, CONSOLIDATED STATEMENTS OF OPERATIONS AND
CONSOLIDATED STATEMENTS OF CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> CANADIAN $
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 0.679
<CASH> 33,424
<SECURITIES> 0
<RECEIVABLES> 2,063
<ALLOWANCES> 0
<INVENTORY> 4,279
<CURRENT-ASSETS> 40,087
<PP&E> 176,724
<DEPRECIATION> 123,277
<TOTAL-ASSETS> 93,943
<CURRENT-LIABILITIES> 3,314
<BONDS> 3,865
0
0
<COMMON> 125,236
<OTHER-SE> (43,615)
<TOTAL-LIABILITY-AND-EQUITY> 93,654
<SALES> 13,025
<TOTAL-REVENUES> 13,025
<CGS> 19,134
<TOTAL-COSTS> 19,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 186
<INCOME-PRETAX> (7,189)
<INCOME-TAX> (218)
<INCOME-CONTINUING> (6,971)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,971)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
