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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 MARCH 31, 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 March 31,1999, 155,486,121 Common Shares,
without par value
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CAMPBELL RESOURCES INC.
Table of Contents
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Page
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Unaudited Consolidated Balance Sheets as at March 31, 1999 and
December 31, 1998.............................................................................. 3
Unaudited Consolidated Statements of Operations for the Three Months
Ended March 31, 1999 and 1998.................................................................. 4
Unaudited Consolidated Statements of Deficit for the Three Months Ended March
31, 1999 and 1998.............................................................................. 4
Unaudited Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 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.
UNAUDITED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
MARCH 31 December 31
1999 1998
--------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and short-term deposits $ 40,375 $ 41,493
Receivables 1,863 2,653
Inventories (note 2) 4,214 4,538
Prepaids 400 474
--------- ---------
Total current assets 46,852 49,158
--------- ---------
OTHER ASSETS 462 502
MINING INTERESTS 174,558 173,866
Less accumulated depreciation and amortization (122,052) (120,749)
--------- ---------
52,506 53,117
--------- ---------
Total assets $ 99,820 $ 102,777
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 2,657 $ 2,254
Accrued liabilities 1,816 1,215
--------- ---------
Total current liabilities 4,473 3,469
--------- ---------
RECLAMATION AND OTHER LIABILITIES 2,273 2,571
CONVERTIBLE DEBENTURES (note 3) 4,970 5,652
DEFERRED MINING TAXES 3,262 3,616
SHAREHOLDERS' EQUITY
Capital stock (note 4) 124,220 123,632
Foreign currency translation adjustment 1,227 1,394
Deficit (40,605) (37,557)
--------- ---------
Total shareholders' equity 84,842 87,469
--------- ---------
Total liabilities and shareholders' equity $ 99,820 $ 102,777
========= =========
</TABLE>
Commitments and contingencies (note 6)
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CAMPBELL RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(Expressed in thousands of Canadian dollars except per share amounts)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
METAL SALES $ 6,601 $ 10,281
-------- --------
EXPENSES
Mining 7,808 9,524
General administration 769 695
Depreciation and amortization 1,389 1,621
Exploration 336 592
Care and maintenance 238
-------- --------
10,540 12,432
-------- --------
Loss from operations (3,939) (2,151)
Other income (expense)
Interest and other income 770 455
Foreign exchange gain 2 5
Convertible debenture interest expense (107) (146)
-------- --------
665 314
-------- --------
Loss before income taxes (3,274) (1,837)
Income and mining tax (recovery) (226) (107)
-------- --------
NET LOSS ($ 3,048) ($ 1,730)
======== ========
LOSS PER SHARE ($ 0.02) ($ 0.01)
======== ========
</TABLE>
UNAUDITED CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31,
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Balance at beginning of period ($37,557) ($16,709)
Net loss (3,048) (1,730)
-------- --------
Balance at end of period ($40,605) ($18,439)
======== ========
</TABLE>
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CAMPBELL RESOURCES INC.
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Expressed in thousands of Canadian dollars)
CASH PROVIDED BY (USED IN):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss ($ 3,048) ($ 1,730)
Items not involving cash
Depreciation and amortization 1,389 1,621
Deferred mining taxes (recovery) (354) (208)
Other (435) 382
-------- --------
(2,448) 65
Net change in non-cash operating working capital 2,192 (338)
-------- --------
(256) (273)
-------- --------
FINANCING ACTIVITIES
Issues of capital stock 63
-------- --------
0 63
-------- --------
INVESTING ACTIVITIES
Expenditures on mining interests (945) (2,991)
Short-term investments 18,242
Other 185
-------- --------
(945) 15,436
-------- --------
Effect of exchange rate change on cash
and short-term deposits 83 (66)
-------- --------
Increase (decrease) in cash and short-term deposits (1,118) 15,160
Cash and short-term deposits at beginning of period 41,493 13,638
-------- --------
Cash and short-term deposits at end of period $ 40,375 $ 28,798
======== ========
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
Receivables $ 790 ($ 1,173)
Inventories and prepaids 398 1,363
Accounts payable 403 (873)
Accrued liabilities 601 345
-------- --------
$ 2,192 ($ 338)
======== ========
</TABLE>
5
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CAMPBELL RESOURCES INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 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 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, 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 three 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 March 31, 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 three months ended March 31, 1999, debenture holders converted
US$400,000 (1998 - US$484,000) of debenture principal into 800,000 (1998 -
968,000) common shares of the Company resulting in a balance outstanding at
March 31, 1999 of US$3,293,000 (December 31, 1998 - US$3,693,000).
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4 -- CAPITAL STOCK
Changes in the issued and outstanding common shares for the three 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 800 588 968 669
Employee Incentive Plan and
Directors' Stock Option Plan 107 63
-------- -------- -------- --------
Balance at March 31 155,486 $124,220 152,520 $122,157
======== ======== ======== ========
</TABLE>
As of March 31, 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 5,994,000 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 three months which was 155,486,000 (1998 - 152,472,000).
5 -- STATEMENTS OF CASH FLOWS
During the quarter 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 months ended March 31, 1998 has 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 March 31
---------------------------
1999 1998
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<S> <C> <C>
Cash taxes paid $ 113 $ 100
Cash interest paid $ 1 $ 1
</TABLE>
6 -- COMMITMENTS AND CONTINGENCIES
a) At March 31, 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 March 31, 1999 the Company had sold forward US$9,000,000 to purchase
Canadian dollars during 1999 at an average rate of Cdn $1.4966 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 March 31
---------------------------
1999 1998
------- -------
<S> <C> <C>
Net loss for period as reported $(3,048) $(1,730)
Depreciation and amortization (a) 513 46
Deferred income taxes (b) (118)
Foreign exchange contracts (d) 438
------- -------
Net loss for the year in accordance
with United States accounting principles $(2,215) $(1,684)
------- -------
Other comprehensive income (loss):
Foreign currency translation adjustments (167) (58)
------- -------
Comprehensive loss for the year in accordance
with United States accounting principles $(2,382) $(1,742)
------- -------
Loss per share for the year in accordance
with United States accounting principles
Basic and fully diluted $ (0.01) $ (0.01)
------- -------
</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 March 31, 1999 and
December 31, 1998 would be to decrease mining interests by $22,890,000
(1998 - $23,403,000), increase long-term investments by $50,000,000
(1998 - $50,000,000), increase in other liabilities by $138,000 (1998 -
$576,000), increase long-term liabilities by $38,000,000 (1998 -
$38,000,000), decrease deferred mining taxes by $2,629,000 (1998 -
$2,747,000), increase preferred shares by $12,000,000 (1998 -
$12,000,000) and reduce shareholders equity by $20,399,000 (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, 2000. 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
MARCH 31, 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 million or $0.02 per share for the three months
ended March 31, 1999 compared to a loss of $1.7 million or $0.01 per share in
the comparable period of 1998. There was negative cash flow from operations
before the change in operating working capital of $2.4 million in the quarter
compared to cash flow of $nil in the first quarter 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 34% to 15,900 ounces from 24,200 ounces a year earlier.
REVENUE
Revenue from metal sales decreased 36% to $6.6 million in the quarter compared
to $10.3 million in 1998. The decrease is primarily attributable to the decrease
in gold production noted above combined with the 3% decrease in the average
price realized for gold sales during the three months compared to the same
period of 1998.
The average price recognized for gold produced in the three months ended March
31, 1999 was US$287 compared to US$297 in the comparable period of 1998. The
average Comex market price was US$287 in the first three months of 1999 compared
to US$294 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.
Revenue from copper production remained at approximately 4.3% of metal sales in
the first three months of 1999, the same as for 1998. Copper production
decreased to 304,000 pounds compared to 348,000 pounds in 1998 due to lower
copper head grades and tons milled.
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EXPENSES
Mining expense in the first quarter of 1999 was $7.8 million compared to $9.5
million in the comparable period of 1998. The overall cash production cost
increased to US$301 per ounce of gold for the three months compared to US$261 in
1998 primarily as a result of the cessation of lower cost leaching operations at
the Santa Gertrudis Mine at the end of 1998.
The Joe Mann Mine produced 15,300 ounces of gold in the quarter compared to
18,200 ounces in the comparable period of 1998. The tons milled decreased to
69,300 tons compared to 76,300 tons in 1998 while the mill head grade decreased
to 0.239 ounces of gold per ton compared to 0.258 ounces of gold per ton in
1998. The mill recovery rate was 93.9% in the quarter compared to 93.8% in 1998.
As a result of the lower gold production the cash production cost increased to
US$301 per ounce produced in the first three months of 1999 compared to US$290
for the comparable period in 1998.
The Joe Mann Mine achieved the Company's internal targets for the first quarter
in terms of gold production and cash cost. Gold production is expected to
increase during the second half of 1999 as production commences from the new
stopes below the 2350 level and the new ore zone on the 2575 level which is
expected to be mined using cut-and-fill mining methods. During the latter part
of March and all of April the mine experienced some unexpected dilution in the
upper portions of certain shrinkage stopes which are being mined using long-hole
methods. This has resulted in a higher tonnage of muck that will increase costs
and reduce gold production from that originally budgeted for the second quarter.
The Company is addressing the dilution but, as a result, has reduced its 1999
gold production estimate for the Joe Mann Mine to approximately 75,000 ounces
from the previously forecast 78,000 ounces and increased the estimated cash cost
to US$260 per ounce from US$250 per ounce.
The Santa Gertrudis Mine produced a nominal 600 ounces of gold in the quarter as
a result of periodic pumping of diluted solution over the heaps. This compares
to 6,000 ounces of gold in the same period of 1998 when the heaps were being
actively leached. The cash production cost at the Santa Gertrudis Mine was
US$173 per ounce in the first three months of 1998.
Depreciation and amortization expense decreased to $1.4 million for the quarter
compared to $1.6 million in 1998 primarily due to lower gold production. On a
per ounce produced basis, depreciation and amortization for the first three
months of 1999 increased to $87 per ounce compared to $67 per ounce in 1998 as a
result of the effective cessation of production from the Santa Gertrudis Mine.
Exploration expense decreased to $0.3 million in the first quarter of 1999
compared to $0.6 million in the comparable period of 1998. Exploration drilling
originally scheduled for the first quarter of 1999 has been deferred to the
second quarter as a result of unexpected delays in gaining access to the target
areas. The Company has budgeted US$0.75 million on exploration at Santa
Gertrudis in the first six months of 1999.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1999, the Company's cash and short-term deposits and working
capital decreased to $40.4 million and $42.4 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 quarter. Cash flow from operations before the net change
in non-cash operating working capital was an
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outflow of $2.4 million in the first three months of 1999 compared to an inflow
(as restated for the adoption of the new Canadian Institute of Chartered
Accountants Handbook Section 1540 "Cash Flow Statements") of $nil million in
1998.
Investing activities in the first three months of 1999 include expenditures on
natural resource properties of $0.9 million compared to $3.2 million in 1998.
Expenditures during 1999 were all at the Joe Mann Mine primarily for exploration
and development below the 2350 level. For 1998 the expenditures included $2.3
million at the Joe Mann Mine of which $1.8 million was for the shaft deepening
and $0.7 million at the Cerro Quema property in Panama. Expenditures on the
Cerro Quema project have all been expensed since September, 1998 and included as
Care and Maintenance expense. Capital expenditures are budgeted at $3.5 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 $42.4 million at March
31, 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 has now completed the replacement and upgrading of its corporate
office computer systems to make them Year 2000 compliant. The accounting system
hardware and software at the Joe Mann Mine is currently Year 2000 compliant.
Personal computers at the Joe Mann Mine are currently being evaluated and will
be upgraded during the second quarter as necessary. 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. Contact
with external suppliers to ensure that the supply of goods and services
continues uninterrupted is ongoing and is targeted for completion by the end of
the second quarter. The Mexican operations will be evaluated as part of the
feasibility for any future production decision.
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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
None
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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
May 12, 1999
15
<PAGE> 16
CAMPBELL RESOURCES INC.
FORM 10-Q - MARCH 31, 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 0.6626
<CASH> 40,375
<SECURITIES> 0
<RECEIVABLES> 1,863
<ALLOWANCES> 0
<INVENTORY> 4,214
<CURRENT-ASSETS> 46,852
<PP&E> 174,558
<DEPRECIATION> (122,052)
<TOTAL-ASSETS> 99,820
<CURRENT-LIABILITIES> 4,473
<BONDS> 4,970
124,220
0
<COMMON> 0
<OTHER-SE> (39,378)
<TOTAL-LIABILITY-AND-EQUITY> 99,820
<SALES> 6,601
<TOTAL-REVENUES> 6,601
<CGS> 9,533
<TOTAL-COSTS> 9,533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107
<INCOME-PRETAX> (3,274)
<INCOME-TAX> (226)
<INCOME-CONTINUING> (3,048)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,048)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
