<PAGE> 1
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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 SEPTEMBER 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 September 30,1999, 157,061,156 Common Shares, without
par value
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<TABLE>
<CAPTION>
CAMPBELL RESOURCES INC.
Table of Contents
-----------------
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as at September 30, 1999 and
December 31, 1998 ..................................................................................3
Unaudited Consolidated Statements of Operations for the Three Months and the
Nine Months Ended September 30, 1999................................................................4
Unaudited Consolidated Statements of Deficit for the Nine Months Ended
September 30, 1999..................................................................................4
Unaudited Consolidated Statements of Cash Flows for the Three Months and the
Nine Months Ended September 30, 1999................................................................5
Notes to the Unaudited Consolidated Financial Statements ...........................................6
ITEM 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations .........................................................................11
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings..................................................................................15
ITEM 2. Changes in Securities..............................................................................15
ITEM 3. Defaults Upon Senior Securities....................................................................15
ITEM 4. Submission of Matters to a Vote
of Security Holders................................................................................15
ITEM 5. Other Information..................................................................................15
ITEM 6. Exhibits and Reports on Form 8-K...................................................................15
SIGNATURES.........................................................................................16
</TABLE>
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CAMPBELL RESOURCES INC.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
Unaudited
Setpember 30 December 31
1999 1998
-------------------------------------------
ASSETS
CURRENT ASSETS
<S> <C> <C>
Cash and short-term deposits $21,841 $41,493
Money market instruments 7,858
Receivables 1,970 2,653
Inventories (note 2) 4,422 4,538
Prepaids 177 474
-------------------------------------------
Total current assets 36,268 49,158
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OTHER ASSETS 394 502
-------------------------------------------
MINING INTERESTS 177,171 173,866
less accumulated depreciation and amortization (124,460) (120,749)
-------------------------------------------
52,711 53,117
-------------------------------------------
Total assets $89,373 $102,777
===========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $1,570 $2,254
Accrued liabilities 682 1,215
-------------------------------------------
Total current liabilities 2,252 3,469
-------------------------------------------
RECLAMATION AND OTHER LIABILITIES 4,428 2,571
CONVERTIBLE DEBENTURES (note 3) 3,787 5,652
DEFERRED MINING TAXES 2,878 3,616
SHAREHOLDERS' EQUITY
Capital stock (note 4) 125,334 123,632
Foreign currency translation adjustment 899 1,394
Deficit (50,205) (37,557)
-------------------------------------------
Total shareholders' equity 76,028 87,469
-------------------------------------------
Total liabilities and shareholders' equity $89,373 $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 Nine months ended
------------------ -----------------
September 30 September 30
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
METAL SALES $5,699 $8,847 $18,724 $28,369
---------------------------------------------------------------------------------
EXPENSES
Mining 6,078 7,361 21,541 25,918
General administration 762 631 2,225 1,987
Depreciation and amortization 1,191 1,472 3,953 4,733
Exploration 759 820 1,668 1,870
Care and maintenance 540 1,327
---------------------------------------------------------------------------------
9,330 10,284 30,714 34,508
---------------------------------------------------------------------------------
Loss from operations before writedown (3,631) (1,437) (11,990) (6,139)
---------------------------------------------------------------------------------
of mining interests
Writedown of mining interests 2,138 2,138
---------------------------------------------------------------------------------
Loss from operations (3,631) (3,575) (11,990) (8,277)
---------------------------------------------------------------------------------
Other income (expense)
Interest and other income (2,000) 483 (644) 1,601
Convertible debenture interest expense (85) (125) (271) (403)
---------------------------------------------------------------------------------
(2,085) 358 (915) 1,198
---------------------------------------------------------------------------------
Loss before income taxes (5,716) (3,217) (12,905) (7,079)
Income and mining tax (recovery) (39) (27) (257) (156)
---------------------------------------------------------------------------------
NET LOSS ($5,677) ($3,190) ($12,648) ($6,923)
=================================================================================
LOSS PER SHARE ($0.04) ($0.02) ($0.08) ($0.05)
=================================================================================
</TABLE>
UNAUDITED CONSOLIDATED STATEMENTS OF DEFICIT
FOR THE NINE MONTHS ENDED SEPTEMBER 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 (12,648) (6,923)
----------------------------------------
Balance at end of period ($50,205) ($23,632)
========================================
</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
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
OPERATING ACTIVITIES
<S> <C> <C> <C> <C>
Net loss ($5,677) ($3,190) ($12,648) ($6,923)
Items not involving cash
Depreciation and amortization 1,191 1,472 3,953 4,733
Writedown of mining interests 2,138 2,138
Deferred mining taxes (recovery) (216) (197) (738) (556)
Other 2,425 1,171 1,903 1,567
----------------------------------------------------------------------------
(2,277) 1,394 (7,530) 959
Net change in non-cash operating working capital (968) 119 47 1,699
----------------------------------------------------------------------------
(3,245) 1,513 (7,483) 2,658
----------------------------------------------------------------------------
FINANCING ACTIVITIES
Issues of capital stock 25 41 59 143
INVESTING ACTIVITIES
Expenditures on mining interests (474) (1,007) (2,572) (7,390)
Purchase of Roca Roja (1,562)
Money market instruments (7,858) (7,858) 28,097
Proceeds on sale of assets 617
Other 135
----------------------------------------------------------------------------
(8,332) (1,007) (11,992) 21,459
----------------------------------------------------------------------------
Effect of exchange rate change on cash
and short-term deposits (31) 309 (236) 527
----------------------------------------------------------------------------
Increase (decrease) in cash and short-term deposits (11,583) 856 (19,652) 24,787
Cash and short-term deposits at beginning of period 33,424 37,569 41,493 13,638
----------------------------------------------------------------------------
Cash and short-term deposits at end of period $21,841 $38,425 $21,841 $38,425
============================================================================
CHANGES IN NON-CASH OPERATING WORKING CAPITAL
Receivables $93 $1,022 $683 $1,204
Inventories and prepaids 1 (18) 581 2,478
Accounts payable (941) (712) (684) (1,583)
Accrued liabilities (121) (173) (533) (400)
----------------------------------------------------------------------------
($968) $119 $47 $1,699
============================================================================
</TABLE>
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CAMPBELL RESOURCES INC.
NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 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 nine 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 September 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 nine months ended September 30, 1999, debenture holders converted
US$1,117,000 (1998 - US$1,180,000) of debenture principal into 2,234,000 (1998 -
2,360,000) common shares of the Company resulting in a balance outstanding at
September 30, 1999 of US$2,576,000 (December 31, 1998 - US$3,693,000).
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>
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 2,234 1,643 2,360 1,635
Employee Incentive Plan and
Directors' Stock Option Plan 141 59 254 143
-------- -------- -------- --------
Balance at September 30 157,061 $125,334 154,059 $123,203
======== ======== ======== ========
</TABLE>
As of September 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 $0.43 to $1.48
per share with such options expiring at various dates to August 10, 2004.
Loss per share has been calculated using the weighted average number of shares
outstanding during the nine months which was 156,906,000 (1998 - 153,242,000)
and during the three months which was 157,013,000 (1998 - 153,993,000).
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 Statements of Cash Flows for the three and nine month periods
ended September 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 Nine months ended
------------------ -----------------
September 30 September 30
------------ ------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash taxes paid $194 $ 182 $475 $439
Cash interest paid $ 7 $ - $255 $247
</TABLE>
6 -- COMMITMENTS AND CONTINGENCIES
a) At September 30, 1999 the Company had sold forward 20,000 ounces of
gold under a spot deferred contract, currently at US$282 per ounce,
and had outstanding sold calls for 33,200 ounces of gold
7
<PAGE> 8
in 2001 and 20,000 ounces of gold in 2002 at an average price of
US$350 per ounce subject to floating gold lease rates.
b) At September 30, 1999 the Company had sold forward US$3,000,000 to
purchase Canadian dollars during 1999 at an average rate of
Cdn$1.5224 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
8
<PAGE> 9
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 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 Nine months ended
------------------ -----------------
September 30 September 30
------------ ------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net loss for period as reported $ (5,677) $ (3,190) $(12,648) $ (6,923)
Depreciation and amortization (a) 443 39 1,482 128
Deferred income taxes (b) (68) (187) (248) (187)
Foreign exchange contracts (d) (95) (537) 733 (1,028)
Net loss for the year in accordance
-------- -------- -------- --------
with United States accounting principles $ (5,397) $ (3,875) $(10,681) $ (8,010)
-------- -------- -------- --------
Other comprehensive income (loss):
Foreign currency translation adjustments (14) 508 (495) 966
-------- -------- -------- --------
Comprehensive loss for the year in accordance
with United States accounting principles $ (5,411) $ (3,367) $(11,176) $ (7,044)
-------- -------- -------- --------
Loss per share for the year in accordance
with United States accounting principles
Basic and fully diluted $ (0.03) $ (0.03) $ (0.07) $ (0.05)
-------- -------- -------- --------
</TABLE>
9
<PAGE> 10
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 that 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 September 30, 1999
and December 31, 1998 would be to decrease mining interests by
$21,921,000 (1998 - $23,403,000), increase long-term investments by
$50,000,000 (1998 - $50,000,000), increase prepaids by $157,000
(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 $2,499,000 (1998 - $2,747,000),
increase preferred shares by $12,000,000 (1998 - $12,000,000) and
reduce shareholders equity by $19,265,000 (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.
10
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CAMPBELL RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SEPTEMBER 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 $5.7 million or $0.04 per share for the three months
and a loss of $12.6 million or $0.08 per share for the nine months ended
September 30, 1999 compared to a loss of $3.2 million or $0.02 per share and
$6.9 million or $0.05 per share for the comparable periods of 1998. The 1998
comparatives include a writedown of mining interests of $2.1 million. There was
negative cash flow from operations before the change in operating working
capital of $2.3 million in the quarter and $7.5 million in the nine months ended
September 30, 1999 compared to cash flow of $1.4 million and $1 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 together with the impact of the mark-to-market loss on
the outstanding call options. Gold production decreased by 28% in the third
quarter to 13,400 ounces from 18,700 ounces a year earlier and by 29% in the
nine months to 45,200 ounces from 64,100 ounces a year earlier. The decrease is
attributable to the cessation of the active leaching of the heaps at the Santa
Gertrudis Mine in late 1998 and the unexpected impact of dilution at the Joe
Mann Mine.
Since the beginning of September, 1999, to mitigate the cash losses from the Joe
Mann Mine, mining has been limited to workplaces above the 2350 level. In
addition, all development was temporarily suspended and as a result, the work
force was reduced by approximately 130 employees. A new long-term mine plan that
incorporates cut-and-fill mining methods is nearing completion. The adoption of
cut-and-fill mining should largely eliminate concerns about ground conditions
and resulting mine dilution. Production at the Joe Mann Mine under the previous
mining method will cease in late-November, having produced approximately 50,000
ounces in the year. It is expected that production development under the
long-term plan would commence immediately with gold production re-commencing
towards the end of the first half of the year 2000.
11
<PAGE> 12
REVENUE
Revenue from metal sales decreased 36% to $5.7 million in the third quarter and
34% to $18.7 million in the nine months compared to $8.8 million and $28.4
million, respectively in 1998. The decrease is primarily attributable to the
decrease in gold production noted above combined with the 9% decrease in the
average price realized for gold sales during the nine months compared to the
same period of 1998. The average price recognized for gold produced in the nine
months ended September 30, 1999 was US$275 compared to US$306 in the comparable
period of 1998. The average Comex market price was US$273 in the first nine
months of 1999 compared to US$294 in 1998.
As disclosed in Note 6(a) to the Unaudited Consolidated Financial Statements the
Company has sold calls for a total of 53,200 ounces of gold in the years 2001
and 2002 at a strike price of US$350 per ounce and subject to floating gold
lease rates. These calls are not designated as hedges and accordingly are
carried in the accounts at their market values. As a result of the increase in
the gold price and gold lease rates in late September, the potential liability
should the Company wish to unwind these calls increased to $3.3 million at
September 30, 1999, resulting in an expense of $2.4 million in the quarter that
is included in interest and other income. On November 1, 1999 this potential
liability had decreased to $2.4 million. The Company has not been required to
post margin to date and currently has no plans to unwind these calls.
Currently Campbell has 20,000 ounces of gold hedged under a spot deferred
contract at a current price of US$282 per ounce that is intended to hedge a
portion of the production from the restart of the Santa Gertrudis Mine. Should
the new long-term mine plan for the Joe Mann Mine be approved when finalized,
the Company may contemplate a longer-term hedging program for a portion of the
production. 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 marginally to 5.3% of metal sales in
the first nine months of 1999 compared to 4.5% in the same period of 1998.
Copper production in the third quarter decreased to 275,000 pounds compared to
306,000 pounds in 1998 and decreased to 919,000 pounds for the nine months
compared to 997,000 pounds in 1998 due to lower grades in the third quarter as
explained above.
EXPENSES
Mining expense in the nine months was $21.5 million and $6.1 million in the
third quarter compared to $25.9 million and $7.4 million in the comparable
periods of 1998. The overall cash production cost increased to US$301 per ounce
of gold for the nine months and US$284 for the third quarter compared to US$258
and US$250 in the comparable periods of 1998.
The Joe Mann Mine produced 44,500 ounces of gold in the nine months and 13,400
ounces in the third quarter compared to 53,200 ounces and 16,700 ounces in the
comparable periods of 1998. The tons milled were approximately the same at
223,000 tons for the nine months and 77,500 tons for the three months ended
September 30, 1999 compared to 222,400 tons and 65,100 tons in 1998. The mill
head grade decreased to 0.214 ounces of gold per ton in the nine months and
0.184 ounces per ton in the third quarter of 1999 compared to 0.258 and 0.274
ounces of gold per ton in the respective periods of 1998. The mill recovery rate
was 94.2% in the nine months compared to 94% in 1998. As a result of the lower
gold production the cash production cost increased to US$301 per ounce of gold
for the nine months and US$284 for the quarter
12
<PAGE> 13
compared to US$268 and US$250 in the comparable periods of 1998.
Early in the fourth quarter Campbell restarted mining operations at its Santa
Gertrudis Mine in Mexico as a means of generating cash flow to fund the property
fixed costs and the ongoing exploration effort. The two deposits currently being
mined should produce in excess of 20,000 ounces of gold through to mid 2000 at
an estimated cash cost of US$220 per ounce. Gold production of approximately
3,000 ounces is expected in the fourth quarter. The Santa Gertrudis Mine
produced 700 ounces of gold in the nine months as a result of periodic pumping
of diluted solution over the heaps. This compares to 10,800 ounces of gold in
the same periods of 1998 when the heaps were being actively leached. Commencing
in the second quarter of 1999, the cost to maintain the mine infrastructure is
classified as care and maintenance expense. The cash production cost at the
Santa Gertrudis Mine during 1998 was US$211 per ounce in the nine months.
General and administration expense increased to $2.2 million for the nine months
compared to $2 million in the corresponding period of 1998 primarily as a result
of increased analysis and due diligence procedures performed on potential
acquisition and merger targets.
Depreciation and amortization expense decreased to $4 million for the nine
months compared to $4.7 million in 1998 primarily due to lower gold production.
On a per ounce produced basis, depreciation and amortization for the nine months
increased to $87 per ounce compared to $74 per ounce in 1998 as a result of the
effective cessation of production from the Santa Gertrudis Mine.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1999, the Company's cash and short-term deposits plus money
market instruments decreased to $29.7 million compared to $41.5 million at
December 31, 1998. Working capital also decreased to $34 million at September
30, 1999 compared to $45.7 million at December 31, 1998. The decrease is
primarily attributable to the negative cash flow from operations and capital
expenditures during the nine months. Cash flow from operations before the net
change in non-cash operating working capital was negative $7.5 million in the
nine months and negative $2.3 million in the third quarter of 1999 compared to
cash flow of $1 million and $1.4 million in the comparable periods of 1998.
Investing activities in the first nine months of 1999 were $12 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 nine months were $2.6 million
compared to $7.4 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 $6 million at the Joe Mann Mine of which $4.4 million
was for the shaft deepening and $1.3 million at the Cerro Quema property in
Panama. Investing activities also include the purchase of money market
instruments with maturities on acquisition greater than 90 days of $7.9 million
compared to the maturity in 1998 of $28.1 million.
The Company was advised on August 16, 1999 of certain changes to the continued
listing requirements of the New York Stock Exchange. Of immediate concern to the
Company is the new requirement that shares trade above a price of US$1.00 per
share. The Company advised the Exchange that it intended to propose to its
shareholders that approval be given for a share consolidation/reverse split in
order that the listing be preserved and liquidity of trading be maintained. The
Company is currently evaluating shareholder response to this proposal.
13
<PAGE> 14
The Company's principal sources of liquidity are cash flow from the Joe Mann and
Santa Gertrudis Mines and the Company's working capital that amounted to $34
million at September 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 has substantially completed its assessment of the Year 2000 Issue at
all of its operations and the corporate office and believes it is currently Year
2000 compliant in all material respects. Campbell relies on third parties for
supplies and services, especially utilities as it relates to the Joe Mann Mine.
Accordingly, the Company continues to communicate with and monitor the Year 2000
readiness plans of key suppliers. Given that the Joe Mann Mine will likely be in
a development phase at the end of 1999, it is considered unlikely that the
failure of a key supplier will have an immediate impact on the Company's
operations.
14
<PAGE> 15
ITEM 1. Legal Proceedings
Not applicable
ITEM 2. Changes in Securities
Not Applicable
ITEM 3. Defaults Upon Senior Securities
None
ITEM 4. Submission of Matters to a Vote of Security Holders
None
ITEM 5. Other Information
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27.1 Financial Data Schedule
(b No reports on Form 8-K were filed during the
three months ended September 30, 1999.
15
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CAMPBELL RESOURCES INC.
/s/ PAUL J. IRELAND
-------------------
Paul J. Ireland
Vice President, Finance and Chief Financial Officer
(Principal Financial and Accounting Officer and
authorized signatory)
Toronto, Ontario
November 10, 1999
16
<PAGE> 17
CAMPBELL RESOURCES INC.
FORM 10-Q - SEPTEMBER 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 0.6802
<CASH> 21,841
<SECURITIES> 7,858
<RECEIVABLES> 1,970
<ALLOWANCES> 0
<INVENTORY> 4,422
<CURRENT-ASSETS> 36,268
<PP&E> 177,171
<DEPRECIATION> 124,460
<TOTAL-ASSETS> 89,373
<CURRENT-LIABILITIES> 2,252
<BONDS> 3,787
0
0
<COMMON> 125,334
<OTHER-SE> (49,306)
<TOTAL-LIABILITY-AND-EQUITY> 89,373
<SALES> 18,724
<TOTAL-REVENUES> 18,724
<CGS> 27,162
<TOTAL-COSTS> 27,162
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 271
<INCOME-PRETAX> (12,905)
<INCOME-TAX> (257)
<INCOME-CONTINUING> (12,648)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,648)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
