<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended DECEMBER 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-8488
CAMPBELL RESOURCES INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Canada Not Applicable
------ --------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification No.)
or organization)
120 Adelaide Street West, Suite 1910, Toronto, Ontario M5H 1T1 Not Applicable
- -------------------------------------------------------------- --------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (416) 366-5201
--------------
</TABLE>
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- ------------------- -----------------------------------------
Common Shares New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [x]
At March 27, 2000, the registrant had outstanding 157,152,288 common shares,
without nominal or par value, the only class of registrant's stock outstanding.
The aggregate market value of the voting and non-voting common equity held by
non-affiliates at such date was US$36,716,803 (based on the closing price of
such common share of US$0.234 on such date as reported on the New York Stock
Exchange, Inc. composite listings.)
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of registrant's Proxy Circular relating to an Annual and
Special Meeting of Shareholders scheduled to be held on May 19, 2000 are
incorporated by reference into Part III of this report and certain portions of
the 1999 Annual Report to shareholders are incorporated herein by reference into
Parts I, II, and IV of this report. These portions of such Proxy Circular and
Annual Report are filed as exhibits to this Form 10-K.
<PAGE> 3
CAMPBELL RESOURCES INC.
Index
Annual Report on Form 10-K for
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Page
PART I
<S> <C> <C>
Items 1. and 2. Business and Properties...........................................................................2
Item 3. Legal Proceedings................................................................................24
Item 4. Submission of Matters to a Vote of
Security Holders.................................................................................24
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters.......................... .......................................25
Item 6. Selected Financial Data..........................................................................25
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations.................................................25
Item 7A. Quantitative and Qualitative Disclosures about Market Risk..................................... 26
Item 8. Financial Statements and Supplementary
Data.............................................................................................27
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.............................................................................27
PART III
Item 10. Directors and Executive Officers
of the Registrant................................................................................27
Item 11. Executive Compensation...........................................................................28
Item 12. Security Ownership of Certain Beneficial
Owners and Management............................................................................28
Item 13. Certain Relationships and Related Transactions...................................................28
PART IV
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K..........................................................................29
</TABLE>
<PAGE> 4
CURRENCY AND METRIC EQUIVALENTS
Unless otherwise indicated, all dollar amounts herein are expressed in
Canadian dollars. Amounts expressed in United States dollars are preceded by the
symbol "US$". The following table sets forth, for each of the years indicated,
certain information concerning the exchange rate for translating Canadian
dollars into United States dollars based upon the noon buying rate in the City
of New York for cable transfers in Canadian dollars and certified for customs
purposes by the Federal Reserve Bank of New York.
<TABLE>
<CAPTION>
Rate at Average
December 31 Rate (1) High Low
----------- ---- ---- ---
<S> <C> <C> <C> <C>
1995 0.7323 0.7286 0.7431 0.7076
1996 0.7301 0.7332 0.7513 0.7235
1997 0.6999 0.7198 0.7487 0.6961
1998 0.6447 0.6746 0.7105 0.6343
1999 0.6929 0.6728 0.6929 0.6446
</TABLE>
(1) The average rate means the average of the exchange rates on the last
day of each month during the year.
On March 27, 2000, the noon buying rate for Cdn. $1.00 was US$0.6847
TONNAGES referred to in this report are to either short tons equal to
2,000 pounds, referred to herein as tons, or to metric tonnes, equal to 2,204.6
pounds and referred to herein as tonnes or metric tonnes. A reference herein to
OUNCES means a troy ounce which is equal to 31.103 grams. To convert grams per
tonne to ounces per ton, multiply grams per tonne by 0.029. DISTANCES are
referred to either as miles, equal to 1.6093 kilometres; feet, equal to 0.305
metres; kilometres, equal to 0.621 miles; or metres, equal to 3.28 feet. ACREAGE
is referred to as acres, which represents 0.4046 hectares; hectares, equal to
2.471 acres; or square miles equal to 640 acres or 258.99 hectares.
As used throughout this report, the term "PROVEN (MEASURED) RESERVES"
means reserves for which (a) quantities are computed from dimensions revealed in
outcrops, trenches, workings or drill holes; (b) grade and/or quality are
computed from the results of detailed sampling and (c) the sites for inspection,
sampling and measurement are spaced so closely and the geologic character is so
well defined that size, shape, depth, and mineral content of reserves are
well-established. The term "PROBABLE (INDICATED) RESERVES" means reserves for
which quantity and grade and/or quality are computed from information similar to
that used for proven (measured) reserves, but the sites for inspection, sampling
and measurement are farther apart or are otherwise less adequately spaced. The
degree of assurance, although lower than that for proven (measured) reserves, is
high enough to assume continuity between points of observation.
<PAGE> 5
Cautionary "Safe Harbor" Statement Under the Private Securities Litigation
Reform Act of 1995.
This report contains certain forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, and is subject
to the safe-harbor created by such section. Such forward-looking statements
concern the Corporation's operations, economic performance and financial
condition. Such statements involve known and unknown risks, uncertainties and
other factors, including those identified under the "Risk Factors" section in
Item 1 and 2 and elsewhere in this report, that may cause the actual results,
performance or achievements of the Corporation, or industry results, to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
but are not limited to: differences between estimated and actual ore reserves
and recovery rates; failure of plant, equipment or processes to operate in
accordance with expectations and specifications; changes to exploration,
development and mining plans due to prudent reaction of management to ongoing
exploration results, engineering and financial concerns; environmental costs;
and fluctuations in gold price which affect the profitability and ore reserves
of the Corporation. These risks and uncertainties are the normal risks involved
in mining. Readers are cautioned not to put undue reliance on forward-looking
statements. See "Risk Factors", and elsewhere in Item 1 and 2, and "Management's
Discussion and Analysis of Financial Condition and Results of Operations in Item
7". The forward-looking statements are made as of the date of this report, and
the Corporation assumes no obligation to update the forward-looking statements
or to update the reasons why actual results could differ from those projected in
the forward-looking statements.
<PAGE> 6
PART I
ITEMS 1 AND 2 - BUSINESS AND PROPERTIES
GENERAL
Campbell Resources Inc. ("Campbell" or the "Corporation") was
incorporated in June 1950 under the laws of British Columbia. On September 8,
1982, the Corporation was continued under the Canada Business Corporations Act
and on June 8, 1983, in connection with an amalgamation of three other
companies, the name of the Corporation was changed from GM Resources Limited to
Campbell Resources Inc.
At the annual meeting of shareholders scheduled to be held on May 19,
2000, shareholders will be asked to approve, by special resolution, a
consolidation (reverse split) of the Corporation's common shares on the basis of
one post-consolidation common share for every ten pre- consolidation common
shares (or such lesser number as the directors in their discretion may
determine).
The Corporation is a gold mining and natural resource company whose
principal assets are the Joe Mann gold mine (the "Joe Mann Mine") located in the
Chibougamau area of northwestern Quebec, the Santa Gertrudis gold mine (the
"Santa Gertrudis Mine") located in the State of Sonora, Mexico and the Cerro
Quema gold property (the "Cerro Quema Property") located in the southern Azuero
Peninsula in the Los Santos province of Panama. Segmented financial information
with respect to the Corporation's domestic and foreign operations is set out in
Note 10 to the Corporation's consolidated financial statements for the year
ended December 31, 1999. Such financial statements are filed as a part of Item
14 of this report.
The Joe Mann Mine, an underground gold mine owned by Meston Resources
Inc., a wholly-owned subsidiary of the Corporation, is located near the town of
Chibougamau which is approximately 350 miles north of Montreal, Quebec. The Joe
Mann Mine was brought into production by Campbell in 1987. During 1999, as
production moved to lower levels, operations were significantly affected by
ground control problems and excessive dilution. The resulting higher cash
operating costs resulted in the temporary suspension of development and mining
operations to permit re-evaluation of the economic viability of the Joe Mann
Mine and development of a new Long Term Mine Plan ( the "Mine Plan"). This Mine
Plan, which provides for a change in the mining method from shrinkage and
longhole to cut-and-fill, was adopted in November, 1999 and production is to
resume in April, 2000. (See " New Long Term Mine Plan, Mine Development and
Exploration" on page 7).
In July 1994, the Corporation acquired the Santa Gertrudis Mine from
Phelps Dodge Corporation. The Santa Gertrudis Mine, an open pit heap leach gold
mine located near the town of Magdalena, Sonora, Mexico, approximately 150 miles
south of Tucson, Arizona, was brought into production in 1991 by its previous
owner. The Corporation holds its interests in Mexico through its wholly-owned
subsidiary, Oro de Sotula, S.A. de C.V. ("Sotula"). In December, 1997, mining
operations were temporarily suspended due to low gold prices and insufficient
developed ore reserves. Leaching operations continued until the end of 1998.
2
<PAGE> 7
In mid 1999, Sotula acquired the adjoining Roca Roja mining property.
This property hosted a former producing gold mine and was the focus of the 1999
exploration program. Following successful initial exploration efforts, limited
mining operations, at levels expected to be sufficient to cover most of the
ongoing planned exploration costs, resumed in the fourth quarter of 1999. There
can be no assurance that sufficient ore reserves will be discovered and
developed or that gold prices will rise to a level, that will make it economic
to continue limited mining operations or to increase production to historical
levels.
In March 1996, the Corporation acquired all of the shares of Minera
Cerro Quema, S.A., a Panamanian corporation ("Minera"), whose primary asset is
the Cerro Quema Property. In November 1996, a positive feasibility study, at an
assumed gold price of US$400 per ounce, was completed and presented to the Board
of Directors. Following completion of some additional test work and receipt of
required permitting and exploitation concessions, final approval for the project
was given in February 1997. In December 1997, as a consequence of sustained
lower gold prices, the Corporation decided to defer further development of Cerro
Quema until the gold price reaches a level that will ensure economic viability
of the project. There can be no assurance that such gold prices will be
attained.
The Corporation continues to have, as one of its primary business
objectives, the acquisition of additional sources of gold production through the
acquisition of producing mines or developed properties. The Corporation has and
is continuing to evaluate a number of such investment opportunities in North and
South America.
The Corporation sells metals on international markets at prices which
fluctuate daily based on world market supply and demand and is in competition
with other mining companies, insofar as they produce the same product, in a
market where price and quality advantages can not be claimed by any of the
market participants.
Factors which allow producers to remain competitive in the market over
the long-term are the quality (grade, metallurgy, etc.), and size of the
orebody, cost of production and the proximity to market. In all these factors
the Corporation is competitive to greater or lesser degrees; but because of the
number of companies and variables involved, no individual or group of producers
can be pointed to as being in direct competition with Campbell.
Except as otherwise noted herein, there have been no recent changes
with respect to properties which the Corporation owns, or in which it has
significant interests, which have materially affected operating profits. Except
as herein noted, to the knowledge of the Corporation, it and its subsidiaries
are in compliance with all environmental laws and regulations in effect in all
jurisdictions in which operations are being conducted.
Campbell and its wholly-owned subsidiaries employed approximately 231
persons as of December 31, 1999, of which 79 were covered by collective
bargaining agreements. The relationship of Campbell and its subsidiaries with
their employees and contractors is considered by Campbell to be satisfactory.
During 1999 and 1998, there were no material strikes or walkouts at either of
the Corporation's operating mines.
3
<PAGE> 8
In September 1996, the collective bargaining unit at the Joe Mann Mine,
represented by Le Syndicat des Travailleurs-euses de la Mine Meston ("CSN"),
consisting of 145 employees, approved a collective bargaining agreement covering
a three year period. In February 1999, CSN agreed to a two year extension of
current agreements with an annual wage increase of $0.25 per hour and a gold
price participation formula. Also in February 1999, a three year contract, on
the same terms as to wage increase and gold price participation, was approved by
the Metallurgistes Unis d'Amerique covering workers at the Camchib Mill. With
the decision to suspend development and mining operations in September, 1999,
approximately 140 employees were placed on temporary layoff. The recall of these
employees started in November, 1999 once the new Mine Plan was approved and
development work commenced in preparation of the change of mining method and is
expected to be complete by the end of the first quarter of 2000. See "Employees"
on page 11.
In December, 1997, the Corporation concluded an agreement with the
National Union of Miners, Metallurgists and Similar Workers of the Mexican
Republic, which represented the 143 hourly employees at the Santa Gertrudis
Mine, with respect to the cessation of mining operations and termination of all
employees covered by the agreement. With the resumption of limited mining
operations, the Corporation has entered into renewable three month contracts
with approximately 67 employees. On resumption of full scale mining activities,
a new union contract will be negotiated.
Intercorporate Relationships
The following chart illustrates the principal subsidiaries of the
Corporation, together with the jurisdiction of incorporation of each company and
the significant properties held by each company:
CAMPBELL RESOURCES INC.
(Canada)
| |
| |
| |
| |
SOTULA GOLD CORP. | | MESTON RESOURCES INC.
(Canada) --100%--------- --100%-- (Quebec)
| | Joe Mann Mine
| | Chibougamau Exploration Properties
| | |
| | |
100%------------ 100%
| |
| |
ORO DE SOTULA, S.A. de C.V. MINERA CERRO QUEMA, S.A.
(Mexico) (Panama)
Santa Gertrudis Mine Cerro Quema Property
Exploration Properties
4
<PAGE> 9
THE JOE MANN MINE
HISTORY
The Joe Mann property was acquired in July 1980 by Meston Lake
Resources Inc. ("Meston Lake"), a predecessor of Meston Resources Inc.
("Meston"), a wholly-owned subsidiary of the Corporation.
The original deposit was discovered in 1950. A three compartment
exploration shaft was sunk and some 859,000 tons of ore grading 0.176 oz/ton of
gold had been mined and milled until June 1975 when rising costs coupled with
poor recoveries prohibited further mining. Subsequently, Meston Lake acquired
the mine and the shaft was dewatered in 1980 before financial problems put a
halt to the operation.
Campbell became involved in the Joe Mann property in 1983 when it
acquired a minority position in Meston Lake and entered into a management
agreement under which it designed and implemented an exploration programme and
aided in the financing of this programme with the objective of determining the
commercial viability of the project.
The mine was dewatered in early 1985 and in June of that year, an
underground exploration programme began. The exploration programme resulted in
the discovery of 800,000 tons of ore reserves and prompted the decision to
re-start production. Commercial production began on April 2, 1987 with proven
and probable mineable reserves of 910,000 tons grading 0.22 ounces of gold per
ton at December 31, 1986. During 1987, Campbell also increased its ownership in
the mine to 100%. The mine has been in continuous operation since 1987. As part
of an expansion plan in 1989, a new shaft, the No. 2 shaft, was sunk to a depth
of 2,050 feet.
During 1992, the No. 2 shaft was deepened to a depth of 2,676 feet.
This deepening project opened up four new levels between the 1825 and 2350
levels. To date, the deposit has been mined along a 3,000 foot strike length to
a depth of 2,350 feet and remains open at depth. During 1997 and 1998, the No. 2
shaft was further deepened by 1,081 feet to a depth of 3,757 feet to permit six
new levels to be mined. This project was completed in July 1998 at a cost of
$13.1 million, approximately $1.4 million less than budget. The No. 2 production
shaft is constructed to permit future deepening without interruption of
production. During 1999, as production moved to the lower levels, operations
were significantly affected by ground control problems and excessive dilution.
Resulting higher cash operating costs compelled management to temporarily
suspend development and mining operations to permit re-evaluation of the
economic viability of the Joe Mann Mine and development of a new Mine Plan which
has since been approved. (See "New Long Term Mine Plan, Mine Development and
Exploration" on page 7).
At the Joe Mann Mine, the Corporation's subsidiary Meston holds a
number of mining concessions and a mining lease along with 25 mining claims
surrounding the concessions. Under Quebec mining law, the Corporation's interest
in the mining concessions and lease is maintained in good standing by payment of
an annual rental fee of $25.00 per hectare or by the completion of $25.00 of
exploration and development work annually per hectare. As to mining claims, a
fee of $22.00 per claim must be paid and $500 of exploration work incurred every
two years.
5
<PAGE> 10
Exploration expenses may be carried forward to future years and may be applied
to claims within a 3.2 square kilometre block distance. Current work credits
will entitle the Corporation to retain currently held mining claims for in
excess of twenty years. Under the exploration agreements with SOQUEM described
under "Mineral Exploration Properties--Chibougamau Exploration Properties" on
pages 19 and 20, SOQUEM pays the annual fees and incurs the expenditures
necessary to keep the applicable mining claims in good standing.
LOCATION AND ACCESS
The Joe Mann Mine is located approximately 40 miles south of
Chibougamau, Quebec which is approximately 350 miles north of Montreal. The
property consists of mining concessions covering 90 hectares, a mining lease
covering 14.8 hectares and 25 mining claims covering approximately 400 hectares.
In addition, Meston holds 197 mining claims covering approximately 3,150
hectares outside of the Joe Mann Mine area. The property is accessed from
Chibougamau by road. Highway 167 leads to the gravel mine access road, which is
approximately 12 miles in length and is serviced by Meston.
GEOLOGY
The deposit represents a classic Archean vein-type deposit with
gold-copper mineralization hosted by quartz veining within three laterally
continuous shear systems. In the mine area, the rocks consist predominantly of
mafic lavas intruded by gabbro sills and feldspar porphyry dykes. The intrusives
appear to have been introduced along a prominent east-west break structure. The
gabbro sills which are moderately magnetic are traceable over widths of 400 to
600 feet and for at least thirty miles along strike. Many late diabase dykes of
varying thicknesses crosscut the sequence and strike northeast.
Two principal veins account for approximately 100% of the known
reserves and 100% of the 1999 and planned 2000 production. The Main Vein is
located north of the shaft and has an east-west strike length of approximately
3,000 feet with an 80 degree dip to the north. The Main Vein contains about 87%
of the reserves. The South Vein accounts for 13% of reserves and is located
about 350 feet south of the Main Vein between the No. 1 shaft and the No. 2
production shaft. The South Vein has a strike length of about 3,000 feet in an
east-west direction and a north dip and appears to weaken below the 2750 level.
Exploration on the 2575 level, initiated in the fall of 1998,
encountered positive results approximately 1000 feet east of the shaft and led
to the discovery of a new zone situated north of the Main Vein. At present, it
is thought that the mineralization of the new ore zone is spatially and
genetically related to a large quartz-feldspar porphyry dyke. There are two
limbs of high-grade ore mineralization which occur at the northern and southern
contacts between the porpphyry dyke and a sheared gabbro. During 1999,
definition drilling confirmed a stoping unit containing 118,000 tons grading
0.317 ounces per ton on the 2575 level that will start to be mined in 2000. In
addition, definition drilling appears to confirm the extension of the zone in
the hanging wall of the Main Zone between the 2750 and 3100 levels. Definition
drilling is continuing in order to confirm grade and potentially wider zones in
this area.
6
<PAGE> 11
MINEABLE RESERVES
Mineable reserves at the Joe Mann Mine are continually updated by
management to reflect operations and exploration activity and are periodically
reviewed by independent consultants.
The following table summarizes diluted mineable reserves estimated by
management and calculated as at December 31, 1999 on the basis of a gold price
of US$300 per ounce, and as at December 31, 1998 and December 1997, on the basis
of gold prices of US$325 and US$375 per ounce respectively.
<TABLE>
<CAPTION>
Proven and Probable Mineable Reserves
December 31, 1999 December 31, 1998 December 31, 1997
Grade Grade Grade
Tons (oz/ton) Tons (oz/ton) Tons (oz/ton)
<S> <C> <C> <C> <C> <C> <C>
Proven 179,924 0.269 397,305 0.231 489,931 0.239
Probable 121,945 0.295 119,285 0.224 63,486 0.232
------- ----- ------- ----- ------- -----
Total 301,869 0.280 516,590 0.229 553,417 0.238
======= ===== ======= ===== ======= =====
</TABLE>
The total estimated diluted proven and probable mineable reserves at
the Joe Mann Mine decreased by 214,721 tons from 516,590 tons at December 31,
1998 to 301,869 tons at December 31, 1999. After taking into account production
during 1999 of 261,382 tons grading 0.211 ounces per ton, the total diluted
proven and probable mineable reserves increased on a net basis during this
period by 46,661 tons. Reserves decreased during 1999 because access to the
mineralization below the 2350 level can only be achieved on completion of the
development. The decrease in tonnage and increase in grade at December 31, 1999
also reflects the assumption of five foot mining widths compared to six foot
mining widths in the prior years and the reduction in the assumed gold price
from US$325 to US$300 per ounce. With this development work now under way on the
six mining levels below the 2350 level, reserves should return to historical
levels.
NEW LONG-TERM MINE PLAN, MINE DEVELOPMENT AND EXPLORATION
During 1999, as production moved to the lower levels, operations were
significantly affected by ground control problems and excessive dilution.
Resulting higher cash operating costs compelled management to make significant
changes at the Joe Mann Mine.
Despite the positive impact of the discovery of a new zone in 1998,
discussed above under "Geology" on page 6 and the introduction of a new work
schedule which materially increased the number of working days per year, as
described below under "Employees" on page 11, the excessive dilution resulted in
the temporary suspension of development and mining operations to permit
re-evaluation of the economic viability of the Joe Mann Mine and development of
a new Mine Plan.
This Mine Plan, which provides for a change in the mining method from
shrinkage and long hole to cut and fill, was adopted in November, 1999. Under
this Mine Plan, production of
7
<PAGE> 12
approximately 63,500 ounces is expected in 2000 with annual production over the
following three year period to average 90,000 ounces at an estimated average
cash operating cost of US$220. The Mine Plan assumes a gold price of US$300 per
ounce. Significant improvements are expected in the recovery of ore with lower
dilution due to selective mining at narrower widths. Development to enable the
Mine Plan to be implemented was started in December, 1999 and production is to
resume in April, 2000. There can be no assurance that the foregoing expectations
will be realized.
In light of the difficulties and changes described above, all
development and diamond drilling ceased in September, 1999. During 1999, 15,908
feet of lateral development and 75,107 feet of diamond drilling were completed
at cost of approximately $4,300,000 net of deferred revenue from development
ore. This compares to 17,361 feet of lateral development and 101,438 feet of
diamond drilling in 1998, completed at a net cost of approximately $4,552,000.
Continuity of gold mineralization has been confirmed to a depth of 3,700 feet,
1,125 feet below the current deepest production level of the mine and
mineralization remains open at depth.
Exploration in 2000 will be focussed on delineating additional reserves
within parallel shears to permit production to continue beyond mid 2004 as
currently provided for in the Mine Plan. In addition, initial drilling has
suggested the presence of wider, high grade zones of ore between the 2350 and
3450 levels. Should the recent drill results continue, an increase in both gold
and copper grades and a reduction in cash operating costs is possible.
WEST ZONE
In addition to ore from the Main and South Veins, which are situated
east of the production shaft, the prior mine plan had included some initial
production from the West Zone between the 1650 and 1825 levels of the mine. By
mid-1999, results from the West Zone were disappointing with the grade being
inconsistent and lower than expected. As a consequence, development in the West
Zone was suspended for the time being and only limited mining is being carried
out.
CHANGE TO CUT-AND-FILL MINING METHOD
Until mid-1999, mining was predominantly carried out using the
shrinkage stope mining method. In 1999, approximately 50% of the ore came from
the shrinkage stopes, 31% from longhole stoping, and 19% from development and
recovery muck.
As mining moved to lower levels, ground control problems were
experienced particularly in the upper portions of certain shrinkage stopes. In
order to control these problems and reduce dilution, the Mine Plan incorporates
the use of cut-and-fill mining methods that will replace the previously used
mining methods. It is expected that the ground stability problems, which led to
dilution and related increased costs experienced in 1999, will be controlled.
This method is well suited to mine steeply dipping vein deposits, such
as those found at the Joe Mann Mine. With this method, a series of haulage
drifts are driven in the footwall from the shaft parallel to the orebody.
Cross-cuts are tunnels perpendicular to the haulage drifts that are excavated
from the haulage drifts to intersect the orebody at regular intervals. Service
and ventilation raises, which provide access and air flow to the working area,
and ore passes, which
8
<PAGE> 13
are used to deliver ore to a collection point, are excavated from the cross-cut.
As a result of this development, the orebody is divided into convenient blocks
or stopes that are ready to be mined.
The ore will be mined in a series of horizontal slices or sequences
starting from the bottom of the stope, working upwards. Ore will be drilled
using jackleg drills, blasted and removed from the stopes through ore passes. It
will then be loaded on five-ton electric trams and hauled to the loading pocket
at the bottom of the shaft where it is hoisted to the surface for processing.
After a complete sequence has been extracted, part of the resulting
void will be filled with fill material which is fed by gravity from the surface.
At the Joe Mann Mine, Campbell will back fill with sand deposits that are found
in close proximity to the mine and cap the fill with cement floors. This fill
provides support for the sidewall of the excavation as well as the floor from
which the next sequence can be mined. A pillar will also be left above and below
each cross-cut to provide additional support and stability. As the stope
progresses upwards, the service and ventilation raises and ore passes are
maintained within the filled stope.
Cut-and fill mining has many advantages compared to other underground
mining methods. Usually cut-and-fill mining requires lower development
expenditures when compared with shrinkage and long-hole mining methods. It also
generally provides more stability in areas with poor ground conditions and
results in less dilution and greater ore recovery.
The problem of dilution caused by stope wall failure is more controlled
with stability provided by the fill. When blasting occurs, there is less risk of
waste from the walls being added to the ore. A mined out stope that is back
filled may provide support to adjacent work areas. At Joe Mann, this additional
stability is expected to enable mining widths to decrease from six feet to five
feet. Since the ore veins are typically less than five feet, miners will not be
extracting the additional one foot of waste rock. This results in an effective
increase in the grade of the ore, and lessens costs as anticipated in the
long-term mine plan.
Another advantage of cut-and-fill mining is that it allows miners to be
more selective giving rise to excellent grade control. Areas of uneconomic waste
rock may be left in place. With shrinkage and long-hole mining these waste
blocks would have to be mined, thereby lowering the mill head grade.
An additional important advantage of cut-and-fill mining deals with the
continuity of operations and speed of ore recovery. With shrinkage and long-hole
mining methods, approximately 60% of the ore remains in the stope until it is
completely drilled and blasted. In addition to the cash flow from individual
stopes being delayed because the ore is not immediately hauled to the surface,
several mining problems can result. Additional dilution following blasting can
occur as loose rock on the walls of the stope may fall into broken ore. Ore may
also become trapped within a particular stope as the walls converge because of
the stresses of the overlying rock. With cut-and-fill mining, ore is removed
from the stope through the ore pass and hauled to the shaft on a daily basis,
thereby reducing the risk of these potential problems.
9
<PAGE> 14
MINING
The production capacity of the No. 2 shaft system is estimated to be
2,000 tons per day assuming 12 hours of hoisting per day. During 1999, the No. 1
shaft was withdrawn from service.
Mucked ore is passed through a rock breaker then hoisted to the
surface. All production and development ore is hoisted from the No. 2 production
shaft to the surface. The equipment used in the mining operations is regularly
maintained and is in good working order.
The following table sets out production from the Joe Mann Mine for the
past three years:
JOE MANN MINE
PRODUCTION SUMMARY
Year ended December 31
----------------------
<TABLE>
<CAPTION>
1999 (1) 1998 1997
-------- ---- ----
<S> <C> <C> <C>
Tons Milled 267,000 299,000 266,000
Gold Grade (oz./ton) 0.204 0.252 0.299
Copper Grade (%) 0.22 0.243 0.28
Gold Produced (ounces) 51,300 70,100 73,500
Copper Produced (000's lbs) 1,065 1,316 1,367
Cash Operating Costs (2) (US$ $292 $257 $264
per oz. of gold)
</TABLE>
(1) Mining operations, other than ore recovery, were temporarily suspended
in September, 1999. Milling ceased in November, 1999.
(2) Operating costs include all on-site mining, processing and
administrative costs, net of copper and silver by-product credits.
MILLING
Ore from the Joe Mann Mine is transported approximately 40 miles by
truck to the Corporation's Camchib Mill for processing. The Camchib Mill was
commissioned in 1955 and is regularly maintained and is in good working order.
During 1999, the gold recovery rate at the Camchib Mill which processed
ore from the Joe Mann Mine was 94.2% and the copper recovery rate was 95.4%
compared to 94.3% and 94.2% respectively in 1998. The mill process includes
three separate circuits; a gravity circuit, a flotation circuit and a cyanide
circuit. Original design capacity at the Camchib Mill was 3,500 tons per day as
a flotation mill. The Camchib Mill was modified to include a cyanide circuit.
Gold recovered from the gravity and cyanide circuits is formed into dore bars on
site and is shipped to the Royal Canadian Mint for refining. The flotation
circuit uses standard technology to produce a copper-gold concentrate. The
copper-gold concentrate is shipped by rail to Noranda Inc.'s Horne Smelter in
Rouyn/Noranda, Quebec for smelting and refining.
10
<PAGE> 15
EMPLOYEES
At the Joe Mann Mine, 108 persons were employed as of December 31,
1999, compared to 228 persons as of December 31, 1998 of whom 77 mine workers
were covered by a collective bargaining agreement with Le Syndicat des
Travailleurs-euses de la Mine Meston (CSN), one mill worker was covered by a
collective bargaining agreement with Les Metallurgistes Unis d'Amerique (the
United Steelworkers of America) and one nurse was covered by a collective
bargaining agreement with La Federation des Infirmiers et Infirmieres du Quebec
(FIIQ). With resumption of operations at the end of the first quarter of 2000,
the level of employees during the remainder of 2000 is expected to return to
usual levels. During 1999 and 1998, there were no material strikes or walkouts
at the Joe Mann Mine.
In September, 1996, the collective bargaining unit at the Joe Mann
Mine, represented by CSN, approved a collective bargaining agreement covering a
three year period with wage increases of 0.73% in the first year and 1.22% and
in the second and third years. The new long-term mine plan continues the
seven-day per week mining schedule, which was introduced in 1999, as compared to
the previous five-day per week schedule and the elimination of the two-week
summer shut down. In February 1999, CSN, the union representing the hourly mine
workers, supported the implementation of the new work schedule and agreed to a
two year extension to the current labour agreement. Also in February, 1999, a
new three year contract was agreed to with Les Metallurgistes Unis d'Amerique
(the United Steel Workers of America), the union representing the hourly mill
workers, on the same terms regarding wages and gold price participation as were
approved by the CSN. The collective agreement with FIIQ has comparable terms to
the other two collective agreements. The agreements provide for an annual
increase of $0.25 per hour for the mine and mill workers amounting to an annual
cost of $120,000. In addition, a gold price participation formula has also been
approved. For a gold price ranging between $525 and $625 per ounce, the
employees would be entitled to a maximum of an additional $0.80 per hour. With
the decision in September, 1999 to suspend development and mining operations,
approximately 140 employees were laid off in accordance with the Quebec
employment standards legislation and the provisions of the collective
agreements. The recall of these employees started in November, 1999 once the
Mine Plan was approved and development work commenced in preparation of the
change of mining methods. The recall is expected to be complete by the end of
the first quarter of 2000 and the resumption of mining operations.
NET SMELTER ROYALTY
In May, 1993, Meston sold a graduated net smelter return royalty to
Repadre Capital Corporation, a subsidiary of Dundee Bancorp Inc., for $3 million
cash. The royalty, based on production from the Joe Mann Mine, is 1.8% at gold
prices up to $512 per ounce increasing to 3.6% at gold prices of $625 per ounce
and greater. A 2% royalty is also payable on copper production in excess of 5
million pounds per year and silver production in excess of one million ounces
per year. For the year ended December 31, 1999, $366,000 was paid to Repadre
under this agreement compared to $548,000 paid for the year ended December 31,
1998.
11
<PAGE> 16
THE SANTA GERTRUDIS MINE
HISTORY
The previous owner of the Santa Gertrudis Mine, Phelps Dodge
Corporation, through its Mexican exploration subsidiary, began to explore the
Santa Gertrudis district in 1984. The district was recognized to have potential
for sediment-hosted gold in fine-grained chemiclastic rocks similar to the gold
deposits of the Carlin trend in Nevada. A preliminary feasibility study was
completed in 1987 and the final feasibility study completed in October 1988. In
1989, Compania Minera Santa Gertrudis was formed for the purpose of holding the
concessions where deposits had been identified and for the eventual mining of
the deposits. The decision to begin production was made in 1989 and facility
construction started in May, 1990. See also page 2 for "History of Santa
Gertrudis".
The first shipment of gold precipitate from the initial 2,000 metric
tonne of ore per day heap leach facility was made in June, 1991. The initial
capital investment was US$28.4 million. In 1992, an expansion was completed
increasing mine production to 3,000 metric tonnes of ore per day. This level of
production continued until December, 1997 when mining operations ceased due to
a lack of ore. Leaching of the ore pads continued through to December, 1998.
Limited mining operations resumed in the fourth quarter of 1999.
LOCATION, ACCESS AND INFRASTRUCTURE
The Santa Gertrudis Mine is located mid-way between Tucson, Arizona and
Hermosillo, Sonora, Mexico, 80 miles south of the United States-Mexico border.
The property is accessible by road which is paved except for the last 20 miles.
The town of Magdalena is located about an hour drive from the site. The Santa
Gertrudis Mine consists of a heap leach facility, a processing plant and
associated facilities.
In September, 1995 the Santa Gertrudis Mine property was expanded by
28.2 square miles. Approximately half of the new property was acquired through
staking with the other half acquired through option agreements that allow the
Corporation to earn a 100% interest through staged payments aggregating a
maximum of US$1,000,000 over a five year period. As work was carried out on the
property, certain claims have been reduced or dropped and new claims acquired.
During 1999, the neighbouring Roca Roja property, comprising nineteen claims
covering an area of 4,500 hectares was acquired. The current property consists
of 61 claims comprising 23,893 hectares or 92.2 square miles.
The Corporation's subsidiary, Sotula holds both the exploration and
exploitation concessions. To maintain these concessions, Sotula was required
either to incur exploration or development work or to have production revenues
in 1999 amounting to approximately US$1.4 million or US$52.00 per hectare.
Exploration and development expenditures and production revenues for 1999 were
considerably in excess of this requirement. The excess from 1999 and prior years
can be carried-forward and should be sufficient to cover requirements for the
foreseeable future on all of the strategic claims. Some claims may be dropped or
reduced in size
12
<PAGE> 17
in the future if additional work fails to indicate potential for economic
mineralization. However, prior years' work plus planned exploration expenditures
exceed estimated work requirements for the foreseeable future on all claims. In
addition, an aggregate of US$146,000 was paid for property taxes during 1999.
The mine site includes a diesel power plant, four-bay maintenance shop,
warehouse, modern office and telecommunications network, medical building, and
recovery plant. As a cost cutting measure, mine site camp facilities were closed
during 1999 and workers are now transported to and from the neighbouring town of
Magdalena.
GEOLOGY
The gold deposits are generally located within a nine mile by two mile
belt of sedimentary rocks that trends northwesterly along the southern range
front of Cerro Azul. Mineralization occurs throughout the stratigraphic section;
however, economically significant deposits are preferentially hosted by limey
siltstone and carbonate rocks. The Santa Gertrudis deposits have strong
geological similarities to the deposits in the Carlin trend in Nevada.
Mineralized zones are usually completely oxidized and other Carlin features such
as siliceous alteration, jasperoid zones, carbonaceous material and low angle
thrusting are also present at Santa Gertrudis. Fifty gold deposits and
occurrences, including the recent discoveries of El Toro Norte, Mirador and the
Escondida Northwest Splay, have been identified in the District. Additional
prospects are in the early stages of exploration.
MINEABLE RESERVES
The following table summarizes mineable reserves estimated by
management on the basis of a gold price of US$300 per ounce:
<TABLE>
<CAPTION>
PROVEN MINEABLE RESERVES
December 31, 1999 December 31, 1998 December 31, 1997
Grade Grade Grade
Tonnes g/tonne Tonnes g/tonne Tonnes g/tonnes
------ ------- ------ ------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Proven 416,000 2.33 Nil Nil Nil Nil
</TABLE>
Following cessation of mining activities in December, 1997, approximately
732,900 tonnes of proven and probable material grading approximately 1.69 grams
per tonne remained. Due to lower gold prices and because the quantity of
material in these areas of the property is insufficient to support costs, this
material no longer met the definition of ore reserves and was reclassified as
possible mineralized material. Exploration work is continuing in an effort to
identify additional material which could lead to this material becoming economic
and being again classified as ore reserves and would permit the level of
operations to increase and production to continue beyond 2000.
OPERATIONS
Limited mining operations resumed in November, 1999. There can be no
assurance that sufficient ore reserves will be discovered and developed or that
gold prices will rise to a level, that
13
<PAGE> 18
will make it economic to continue limited mining operations or to increase
production to historical levels.
Until December, 1997, mining had been carried out on a continuous,
round-the-clock basis with hydraulic shovels, front-end loaders, drills and a
fleet of twelve 50-tonne and two 85-tonne haulage trucks. The average mining
rate during 1997 was approximately 22,000 tonnes per day of which approximately
3,000 tonnes was ore representing a strip ratio of 6.3:1. Since November, 1999
and through 2000, limited mining is being carried out at a planned mining rate
of 7,500 tonnes per day of which approximately 1,130 tonnes is ore representing
an average strip ratio of 5.6:1.
The ore is oxidized and processing utilises conventional heap leach
technology. In general, approximately 70% of the ore is crushed to minus three
inches before delivery to the leach pads and the remaining 30%, representing
fines, is amenable to direct delivery to the leach pads. Sodium cyanide
solutions are dripped over the ore piles on the leach pads and the gold-enriched
solutions are collected in solution ponds. Extraction of the gold from the
gold-enriched leach solutions is accomplished by pumping the solutions through a
series of carbon columns. The gold is adsorbed onto the carbon that is
subsequently transported to the plant for stripping using a hot caustic
solution. Zinc dust is added to the gold-laden strip solution to facilitate
precipitation of the gold. A filter system collects the gold-rich zinc
precipitate which was then dried. The zinc precipitate containing 75 to 90% gold
and approximately 5% silver is shipped to the United States for final refining.
Subsequent to the acquisition of the Santa Gertrudis Mine in July, 1994,
based on the ore placed on the leach pads and the gold recovered, a recovery
rate of approximately 77% was experienced.
The Phase IV leach pad, completed in mid 1997 to the east of the existing
Phase I pad provides an additional 1.23 million tonne capacity.
The following table sets out production from the Santa Gertrudis Mine for
the past three years:
SANTA GERTRUDIS MINE - PRODUCTION STATISTICS
<TABLE>
<CAPTION>
Year ended December 31
1999 1998 1997
---- ----- ----
<S> <C> <C> <C>
Tonnes ore mined 98,000 - 1,021,000
Gold Grade (g/tonne) 2.24 - 1.71
Gold Recovery (%) n/a - 69.5
Gold Produced (ounces) 2,400 12,300 39,200
Cash Operating Costs $n/a(1) $242(2) $333(3)
(US$ per ounce of gold)
</TABLE>
(1) Limited mining operations resumed in November, 1999.
(2) 1998 cash operating costs include overhead costs associated with
keeping the mine infrastructure in place while the exploration work
continues.
(3) 1997 operating costs include all on-site mining, plant, administration
and transportation costs.
14
<PAGE> 19
EXPLORATION
Exploration expenditures for 1999 were $2.3 million compared to $2.3
million in 1998. During 1999, exploration efforts at Santa Gertrudis were
focussed on evaluating the adjoining Roca Roja property acquired during the
year. US$1,500,000 has been budgeted for exploration in 2000.
In the second half of 1999, efforts were primarily focussed on the La
Peque-Escondida Shear Zone. This Shear Zone is a primary exploration target
situated approximately three kilometres north of the mine infrastructure. This
east-west trending structure is 2.6 kilometres in length and has 10 distinct
zones of mineralization many of which have been mapped and sampled and are the
focus of advanced drilling. In addition to the El Toro Norte deposit mined in
late 1999 and the Mirador deposits which contains 316,000 tonnes of ore grading
2.29 grams per tonne, a third deposit know as the Escondida Northwest Splay was
discovered in 1999. Situated close to the mine infrastructure, it will be ready
for production once necessary infill drilling has been completed. To date the
Escondida Northwest Splay has been tested with 13 reverse circulation drill
holes totalling approximately 1,130 metres and contains proven mineable reserves
of 99,000 tonnes averaging 2.44 grams per tonne gold. The Mirador and Escondida
Northwest Splay are included in the mineable reserves table under Ore Reserves
on page 13.
The Escondida West, Escondida Central and Escondida Northwest Zones are
situated close to the Escondida Northwest Splay deposit. Each has significant
potential to boost resources and potential reserves because of its proximity to
that deposit. The Escondida Central Zone, located approximately 275 metres east
of the Northwest Splay deposit, was the first zone drilled on the La
Peque-Escondida structure. In 1999, a total of 16 holes were drilled with many
reporting multi-gram values over widths of up to 21 metres. Some of the better
intersections from the 1999 program were 3.631 grams per tonne gold over 21.0
metres, 1.834 grams per tonne gold over 13.5 metres. Recently, several trenches
completed on the Central Zone in 1999 were deepened or extended to better expose
the mineralization and check assay results. Many of the results were in fact
better than previously reported leading to additional drilling of the zone. Two
drill holes have since been completed with the first hole intersecting 17.786
grams per tonne gold over 5.98 metres, while a second hole intersected 3.26
grams per tonne gold over 14.15 metres or 3.95 grams per tonne gold over 11.0
metres.
Once new resource calculations have been completed, it may be possible to
mine this zone economically in conjunction with the Northwest Splay deposit.
Exploration to further evaluate other zones of the Escondida portion of the La
Peque-Escondida Structure is now underway. The nearby Escondida Northwest Zone
is approximately 600 metres northeast of the deposit and the Escondida West Zone
is found 50 metres southeast of the deposit.
The Esco Zone, situated approximately 1.5 kilometres west of the Escondida
Northwest Splay, consists of four structures, only one of which is currently
being explored. The structure is defined by a series of old pits and shallow
shafts which have yielded values of up to 1.166 grams per tonne gold and greater
than 500 grams per tonne silver over 1.2 metres. The old workings suggest that
the target may have a width of approximately 10 metres. The structure is
associated with a 300 metre long gold soil geochemical anomaly with values in
excess of 0.2 grams per tonne gold. The presence of the old workings and the
extent of the sampling indicate the structure has a strike length of 80 metres;
however, a channel sample that returned a value of 3.668
15
<PAGE> 20
grams per tonne gold over 0.7 metres taken along strike suggest the potential
strike length for the structure is in excess of 200 metres.
Since many of the open pit deposits are related to fault or shear
structures with geochemical anomalies, reconnaissance exploration has been
focussed on these type of targets. Two target areas being explored are the
Viviana Fault and the San Enrique geochemical anomaly.
Additional exploration has been completed along the La Vivana Fault. This
east-west trending structure extends from the Maracias Fault to the west and is
approximately 3.8 kilometres long. The La Vivana Fault is a significant
structure because it is thought to be the upper portion of the structure that
hosted the past producing Amelia Mine on the Roca Roja property. As such it has
excellent potential to host the upper portion of that deposit. Initial
investigations have been focussed on a small portion of the fault in an area of
previous workings. To date three reverse circulation drill holes totalling 444
metres have been completed to test the structure. One hole, drilled to test a
surface sample from a strongly altered fault zone that yielded 3.924 grams per
tonne gold, returned a value of 1.589 grams per tonne gold over 4.5 metres.
Additional mapping and sampling will be completed to define additional drill
targets.
Ongoing regional exploration conducted in 1998 led to the discovery of the
San Enrique anomaly, a large soil geochemical anomaly with great potential
situated approximately seven kilometres south of the mine district. Further
exploration on the anomaly has been delayed because of difficulties in
concluding an agreement with the surface rights owner. As a result the
Corporation filed an application for temporary occupation from the Government of
Mexico. The Corporation has been advised that Temporary Occupation Resolution
was granted on March 17, 1999. This Resolution entitles the Corporation to
explore and exploit its claims, which underlie the property of the surface
rights owner, for five years and requires an annual payment of approximately
US$50,000. This amount was established by the Government of Mexico and is
adjusted annually for inflation.
Despite the granting of the Temporary Occupation Resolutions, and ongoing
negotiations, the surface rights owner has continued to deny access to the area.
The Corporation is continuing negotiations with the surface rights owner and the
Mexican Federal and State Government authorities to allow the company access to
the ground so that a comprehensive program can begin.
In addition, in 1997 Campbell started to investigate the potential for
deeper gold-bearing sulphide mineralization. A report by independent mineral
consultants concluded that the property has potential for a deep Carlin-type
target and that the geology, structure, geochemistry, geophysics and
mineralization are similar to the Post-Betze deposit located in Nevada's Carlin
Trend. Results of Campbell's exploration efforts and the independent report
supporting the similarities between Santa Gertrudis and the Carlin Trend
prompted management to seek a joint venture partner in order to undertake a
systematic exploration program to evaluate the deep sulphide potential. Several
senior mining companies with experience in exploring for and mining Carlin-type
orebodies have visited the property and concurred that there appears to be
excellent potential for the property hosting Carlin-type orebodies. However, the
current prevailing low gold prices have resulted in exploration budgets being
drastically cut within the gold mining industry making it difficult to
consummate a joint venture exploration program at this time.
16
<PAGE> 21
EMPLOYEES
In December, 1997, the Corporation concluded an agreement with the
National Union of Miners, Metallurgists and Similar Workers of the Mexican
Republic ("Union") pursuant to which mining operations were suspended and 143
employees covered by the collective bargaining agreement were terminated. With
the resumption of limited mining operations, the Corporation has entered into
renewable three month contracts with approximately 67 employees. On resumption
of full scale mining activities, a new union contract will be negotiated. An
additional 55 employees not covered by the collective agreement were also
terminated. At December 31, 1999, there were 107 employees and contract workers
of whom 67 were under three month renewable contracts and 18 were engaged in
exploration activities.
THE CERRO QUEMA PROPERTY
HISTORY
The Cerro Quema Property was acquired on March 4, 1996. The history of the
Property is described above in Items 1 and 2 "Business and Properties" under the
caption "General".
LOCATION, ACCESS AND INFRASTRUCTURE
The Cerro Quema Property is located approximately 250 km southwest of
Panama City, on the southern Azuero Peninsula of Panama. The property is
accessible by road and close to hydroelectric power. The regional city of Chitre
is approximately 50 km north of the property. Chitre has a population of 35,000
and is served by an airport which has two regular daily flights from Panama
City.
At the Cerro Quema Property, the Corporation's subsidiary, Minera Cerro
Quema, S.A. held exploration concessions covering approximately 20,000 hectares
which comprise the Cerro Quema Property. These exploration concessions were
converted to three extraction concessions totalling 15,000 hectares in February,
1997. Pre-extraction activities, which must commence within one year of the date
of the extraction concession, commenced in December, 1996. The mining law
permits a reduction or cessation of activities if prevailing economic conditions
hinder continuing activities. See "Mine Feasibility and Development" on page 18.
Under Panamanian mining law, a 2% net smelter return royalty is payable on
production. In addition, an annual surface tax of approximately US$1.00 per
hectare is also payable.
GEOLOGY
The geology at the Cerro Quema Property consists of host volcanic rocks
which originally contained pyrite and very low-grade gold. These rocks have been
highly weathered to result in a concentration of gold near the surface. The
highest grade ore is at the surface, with the grade gradually declining with
depth down to the lower limit of the oxidation boundary. Three near-surface
oxide deposits, the La Pava, Quema West and Quemita, currently comprise the
project, of which the La Pava deposit is the largest. The Quema West and Quemita
deposits are adjacent to each other and approximately 2.5 to 3.0 kilometres from
the La Pava deposit.
17
<PAGE> 22
The local topography consists of steep canyons and narrow ridges with
little or no extended flat or gently sloping areas. Below the steeper ridge
crests and canyons that form the core of the project area, the topography,
although still mountainous, is not as extreme and some wider canyons or valleys
and rolling hills are present.
MINE FEASIBILITY AND DEVELOPMENT
In November, 1996, a positive feasibility study was completed based on an
assumed gold price of US$400 per ounce, and presented to the Board of Directors
on the basis of which approval was given to proceed with pre-production
development including road construction and preparation of construction tender
documents. Following completion of some additional test work and receipt of
required permitting and exploitation concessions, final approval for the project
was given in February, 1997.
In preparing the feasibility study, the Corporation carried out a detailed
review of the data produced by a previous owner on the property and completed
some confirmation drilling and test work. It is believed that approximately
US$8.5 million was spent on the property prior to acquisition by the
Corporation, including 17,000 metres of reverse circulation drilling and 4,500
metres of diamond drilling. In the feasibility study which was prepared on the
basis of a gold price of US$400 per ounce, a probable mineable reserve of 8.8
million tonnes at a grade of 1.16 grams per tonne was estimated by the
Corporation. Given current gold prices, this reserve is no longer economic and
is now categorized as mineralized material.
Based on a review of the metallurgy of the mineralized material and
proposed mining plans and methods and on test work performed on representative
samples taken from the property, the feasibility study assumes a stripping ratio
of 0.64:1 and gold recoveries of 86% can be achieved in an open pit heap leach
operation. The oxidized nature of the gold mineralization accounts for the
favourable indicated recoveries.
The feasibility study estimates the capital cost to develop an open pit
heap leach mine capable of producing 50,000 ounces of gold annually at US$32.8
million which includes provisions for contingencies. The capital costs were to
be funded from available cash and through debt financing, if necessary. Based on
existing mineralization the feasibility study indicates an estimated minimum
mine life of six years. At such time as production may commence, the
Cerro Quema Mine is expected to have approximately 170 employees.
Construction and upgrading of the access road commenced in late 1996 with
main construction activities being commenced in early 1997, including the start
of the La Pava haul road, earthmoving and levelling of the general plant site
area, and initial construction of leach pad pond stability dams and the camp
infrastructure. Total construction and equipment cost incurred to December 31,
1997 was US$13.4 million. The fleet of mining equipment, acquired for the Cerro
Quema gold project, was sold in October, 1998 for US$2 million.
In June, 1997 construction at the Cerro Quema gold project was temporarily
suspended by government order following heavy rainfalls which created high
levels of sedimentation in the local rivers. The Corporation, working in
conjunction with the Panamanian authorities, resolved the problem by completing
a program of sedimentation control and revegetation. As a result of these
environmental efforts, a resolution was passed lifting restrictions on the
project's development.
18
<PAGE> 23
In December 1997, as a consequence of sustained lower gold prices, the
Corporation decided to defer further development of Cerro Quema until the gold
price reaches a level that will ensure economic viability of the project. The
project has been placed on a care and maintenance basis during 1999 and for
2000.
EXPLORATION POTENTIAL
A large portion of the 75 square mile property has only been covered by
reconnaissance exploration, usually including stream sediment sampling and rock
sampling on exposed ridges. An exploration programme will be initiated when
economics permit the project to proceed and once access and infrastructure are
in place.
MINERAL EXPLORATION PROPERTIES
The Corporation has interests in precious and base metal properties in the
Chibougamau region of northwestern Quebec.
CHIBOUGAMAU EXPLORATION PROPERTIES
Meston owns extensive exploration properties in the Chibougamau area,
including mining claims and several former producing mines. These former
producing mines include the S-3, Lac Chib, Kokko Creek, Quebec Chibougamau and
the Main Mine.
In June, 1992, Meston entered into two agreements with the Societe
quebecoise d'exploration miniere ("SOQUEM") under which SOQUEM could expend up
to $7 million towards exploration programmes on the Meston and Chibougamau
properties. During 1995, these agreements were amended to extend their term and
increase the expenditures. In July, 1997, these agreements were further amended
to provide that, SOQUEM can earn a 50% interest in the Meston property which
comprises 148 claims and one mining concession (and excludes the Joe Mann Mine),
in exchange for spending $1.6 million in the five year period ending June 1,
2002 and a 50% interest in the Chibougamau properties, which comprises 198
claims and three mining concessions, by spending $750,000 in the five year
period ending June 1, 2002. During 1997, four claims located northwest of the
Joe Mann Mine were added to the Meston property agreement, excluding the lateral
and at depth extension of the Main Vein of the Joe Mann Mine protected by a 500
foot wide corridor north of the Main Vein. A separate third agreement was also
entered into with SOQUEM covering four claims and one mining concession located
northeast of the Joe Mann Mine, excluding the lateral and at depth extension of
the Main Vein of the Joe Mann Mine protected by a 500 foot wide corridor north
of the Main Vein, pursuant to which SOQUEM can earn a 3.5% net smelter return by
expending $400,000 over the five year period ending June 1, 2002. Meston has the
right to repurchase the net smelter return, if earned, for $600,000 on or before
June 1, 2002 or $1,000,000 on or before June 1, 2007. Amounts expended under
this agreement shall also be credited against the spending requirements under
the Meston property agreement. As additional consideration for the 1997
amendments, SOQUEM agreed to fund $100,000 of underground drilling on a north
zone of the Joe Mann Mine. This amount was credited to the $1.6 million of
required expenditures on the Meston property
Should SOQUEM not spend the amounts set out above, SOQUEM will earn no
interest in the properties. Meston has retained the right of first refusal to
treat any ore produced from these
19
<PAGE> 24
properties at its Camchib Mill. If either party fails to fund its pro rata share
of expenditures once SOQUEM has earned its 50% interest, the defaulting party
will have its interest diluted. If either party's interest is diluted to 15% or
lower, such party's interest will automatically revert to a 3% net smelter
return.
From the inception of the programme in 1992 to December 31, 1997, SOQUEM
had spent approximately $2,548,000 on the Meston property and $2,431,000 on the
Chibougamau properties. To December 31, 1999, SOQUEM had incurred additional
expenditures under the amendments of $196,000 on the Meston properties and
$145,000 on the Chibougamau properties since the effective date of the 1997
amendments. The Corporation is not responsible for sharing expenditures with
respect to the referenced properties.
During 1999, SOQUEM carried out an induced potential survey and minor
trenching on the Chibougamau properties. A diamond drilling programme is planned
for 2000. On the Meston property, only claim renewal costs were incurred in
1999. Some surface exploration work is scheduled for 2000.
CAMPBELL FINANCINGS
In July, 1994, concurrent with the acquisition of Santa Gertrudis, the
Corporation entered into an underwriting agreement with First Marathon
Securities Limited pursuant to which the Corporation sold US$11,005,000
aggregate principal amount of 7 1/2% Convertible Subordinated Debentures
(Unsecured) (the "7 1/2% Debentures"). The 7 1/2% Debentures will mature on July
21, 2004, the tenth anniversary of their date of issue. The 7 1/2% Debentures
are convertible at the option of the holder into Common Shares at any time prior
to maturity at a conversion price of US$0.50 per Common Share. The 7 1/2%
Debentures are redeemable for cash at any time after the fifth anniversary of
the date of issue and, at the Corporation's option, may be redeemed in Common
Shares on the basis of one Common Share for each US$0.50 of 7 1/2% Debenture
principal being redeemed. The right of the Corporation to redeem the 7 1/2%
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 Corporation may, at its option, repay the 7 1/2%
Debentures at maturity by issuing Common Shares of the Corporation at the
conversion price of US$0.50 per Common Share. To March 27, 2000, debenture
holders had converted US$8,429,000 of debenture principal into 16,858,000 Common
Shares. Debentures in the amount of US$2,576,000 remain outstanding as of March
27, 2000.
MESTON DEBENTURES AND PREFERENCE SHARES
During 1991, a predecessor of Meston entered into a corporate
restructuring and financing arrangement (the "Financing") in which it issued to
a group of Canadian financial institutions $38,000,000 of Guaranteed Subordinate
Debentures and Notes (the "Guaranteed Debentures") and $12,000,000 of Guaranteed
Non-Cumulative Redeemable Retractable Preferred Shares (the "Preferred Shares")
and renounced Canadian development expenses. The Guaranteed Debentures bear
interest at varying rates and are repayable upon maturity in 2007. The Preferred
Shares are retractable in 2007. In order to secure the obligations in respect of
the Guaranteed Debentures and the Preferred Shares, a subsidiary of the
Corporation entered into an Interest Rate and Currency Exchange Swap Agreement
(the "Swap Agreement") with a major international bank and irrevocably assigned
all amounts receivable under the Swap Agreement directly to the
20
<PAGE> 25
investors. The proceeds of the Swap Agreement will be used to make all interest
payments, repay the Guaranteed Debentures upon maturity and retract the
Preferred Shares. Accordingly, such bank is primary obligor under the Financing.
The Guaranteed Debentures are subordinate to all current non-trade and future
senior indebtedness of the Corporation and its subsidiary.
ENVIRONMENTAL MATTERS
The Corporation believes that it and its subsidiaries are currently
complying in all material respects with applicable environmental legislation.
During 1995, proposed amendments to the Quebec Mining Act relating particularly
to rehabilitation and restoration plans came into force. This legislation
required that a rehabilitation and restoration plan be submitted for approval
within one year of the legislation coming into force and that a financial
guarantee be furnished with respect to such plan. The Corporation filed
preliminary rehabilitation and restoration plans on March 9, 1996, and has filed
additional information required thereunder within the extensions granted by
Quebec mining authorities. Annual financial guarantees are required to be filed
in connection with the rehabilitation and restoration plan within 15 days of
approval of the plan. The plan for the Joe Mann Mine site was recently approved
and the first financial guarantee in the amount of $22,050 was posted on March
3, 2000. The plan for the Camchib Mill site is pending approval. The appropriate
method of re-mediating acid spots which have appeared on fifty hectares of
previously re-vegetated tailings is currently being reviewed. Two alternate
methods are being considered which involve costs ranging from $10,000 to $30,000
per hectare. The Corporation currently estimates that the maximum annual
financial guarantees will range from $154,000 in the first year to $1,071,000
in the fourth year for an aggregate of $2,450,000. The Corporation currently
accrues for the estimated site restoration costs at the Joe Mann Mine over the
estimated life of the mine. The total cost of completing the work contemplated
under the rehabilitation plans for both the Joe Mann Mine site and the Camchib
Mill site is currently estimated at between $2,500,000 and $3,500,000. It is
expected that this cost will be partially offset by the salvage value of plant
and equipment. A significant portion of this work is to be completed over the
life of the mine and as a consequence is not anticipated to have a material
effect on the Corporation's financial condition.
At the Santa Gertrudis Mine in Mexico, based on general regulatory
guidelines, total reclamation costs are currently estimated at US$1,055,000
which has been accrued in the Corporation's books. This estimated cost will be
more than exceeded by the salvage value of plant and equipment. Only limited
reclamation will be carried out while the exploration programme and mining
operations continue.
On an ongoing basis, environmental compliance costs are not material at
the Joe Mann Mine or the Santa Gertrudis operation.
At the Cerro Quema Property in Panama, the feasibility study indicates
that, should the project be built, rehabilitation costs of up to US$2,000,000
which will be covered by the salvage value of the plant and equipment. Three
environmental studies were filed. A Preliminary Evaluation and an Environmental
Reconnaissance study were filed by the previous owner and an Environmental
Viability study was filed by the Corporation and was approved in December, 1996.
Based on current legislation and the recent experience of other mining projects,
the Corporation believes that environmental compliance can be achieved without
material impact on the economics of the Project. See "Mine Feasibility
Development" on page 18 for a discussion of stop work
21
<PAGE> 26
orders issued by Panamanian authorities in June, 1997 as a consequence of heavy
rainfall and sedimentation problems.
RISK FACTORS
MINING RISKS
The Corporation is subject to the risks typical in the mining business
including uncertainty of success in exploration and development; operational
risks including unusual and unexpected geological formations, rock bursts,
particularly as mining moves into deeper levels, cave-ins, flooding and other
conditions involved in the drilling and removal of material as well as
environmental damage and other hazards; risks that intended production schedules
or estimated costs will not be achieved; and risks of fluctuations in the price
of gold and currency exchange rates.
Gold prices are subject to volatile price movements over short periods of
time and are affected by numerous factors, all of which are beyond the
Corporation's control, including expectations for inflation, levels of interest
rates, sales of gold by central banks, the demand for gold, global or regional
political, economic and banking crises and production rates in major gold
producing regions. The aggregate effect of these factors is impossible to
predict with any degree of certainty. Although the Corporation does engage in
some limited hedging from time to time to protect against a portion of the
volatility (as described in Management's Discussion and Analysis and the notes
to the consolidated financial statements included in Exhibit 13.1 of this
report), a significant portion of the price movements in gold is not protected.
The Company's hedging and other activities involving financial instruments may
be subject to margin requirements. Although the Company has not been required to
post margin to date, significant changes in the factors affecting the pricing of
the financial instrument such as the price of gold, gold lending rates, option
volatility and foreign exchange rates, could result in the amount of margin to
be posted being material.
The Corporation is primarily dependent on production from one operation,
the Joe Mann Mine, as the source of its cash flow. The cash flows from the
limited mining at the Santa Gertrudis Mine are expected to be fully
utilized on exploration at that mine. At the Joe Mann Mine, the new mine plan
is based on a gold price of US$300 per ounce and anticipates cash production
costs of US$225 per ounce in 2000 decreasing to US$220 per ounce in 2001. The
ability of the Corporation to achieve the cash costs is largely based on the
successful adoption of cut-and-fill mining and expected improved ground
conditions. While the Corporation has undertaken studies and engaged
consultants to confirm the suitability and beneficial impact of cut-and-fill
mining on the ground conditions, the actual results will not be known until
mining resumes. Should gold prices decrease significantly or the cash cost be
higher than projected, the ability of the mine to generate cash flow will be
impaired.
The figures for ore reserves presented herein are estimates and no
assurance can be given that the anticipated tonnages and grades will be achieved
or the indicated level of recovery realized. In addition, no assurance can be
given that the gold price estimates on which the reserve
22
<PAGE> 27
calculations are based can be achieved. See "Mineable Reserves" on pages 7 and
13. As well, lead times required for underground stope and open pit preparation
and development in mining operations can affect production decisions and
schedules. Gold price fluctuations may render ore reserves containing relatively
lower grades of gold mineralization uneconomic. Moreover, short-term operating
factors relating to the ore reserves, such as the need for orderly development
of ore bodies or the processing of new or different ore grades, may cause the
Corporation to be unprofitable in any particular accounting period.
The Corporation carries insurance to protect against certain risks in such
amounts as it considers adequate. Risks not insured against include political
risk, environmental pollution, mine flooding, landslides or other natural
hazards relating to climate or topography as well as other hazards which cannot
be insured against or which the Corporation may elect not to insure against.
The Cerro Quema Property is a low grade open pit heap leach project
located in a region of steep topography which experiences seasonally heavy
rainfall. While the rainfall has been taken into account in preparing the
feasibility study, and the Corporation believes that its impact on the project
can be managed, given the difficulties experienced during 1997 (see "Mine
Feasibility and Development" on pages 18 and 19), there can be no assurance that
excessive rainfall will not have an unforeseen negative impact on the
construction schedule, operating conditions, recovery rates or environmental
compliance. While the feasibility study for the Cerro Quema project was
carefully prepared by experienced engineers and advisors, no assurance can be
given that gold prices will improve to a level that the Cerro Quema Project can
proceed or that it can be completed as contemplated in the feasibility study for
the estimated costs or within the estimated time schedule. Also no assurance can
be given that the intended production schedule or estimated operating costs can
be achieved. While appropriate testing has been carried out by the Corporation
and its independent mining experts, there can be no assurance that recovery
rates achieved in small scale laboratory tests will be achieved under onsite
conditions or in production scale leaching.
COMPETITION
The Corporation competes with other mining companies in connection with
the acquisition of mining claims and leases on gold and other precious metals
prospects and in connection with the recruitment and retention of qualified
employees.
There is significant competition for the limited number of gold
acquisition opportunities in North and South America. As a result of this
competition, some of which is with companies with greater financial resources
than the Corporation, the Corporation may be unable to continue to acquire
attractive gold mining properties on terms it considers acceptable.
Since there is a world market for gold, the Corporation believes that no
single company has sufficient market power to materially affect the price or
supply of gold in the world market.
23
<PAGE> 28
RISKS OF FOREIGN OPERATIONS
The operations at Santa Gertrudis and Cerro Quema are subject to the
federal, state and local laws of Mexico and Panama, respectively, including laws
and regulations relating to mining operations, environmental protection and
reclamation, labour relations and safety, land acquisition and mineral tenure,
expropriation of property and taxation and repatriation of profits. Future
changes in these laws or regulations or in their application are beyond the
control of the Corporation and may adversely affect its operations.
The Corporation believes the present attitude of the Mexican government
toward foreign investment and the mining industry is favourable. However, in
view of upcoming elections and other economic factors, investors should consider
the risks associated with projects in Mexico.
Over the last few years, Panama has modified its laws relating to mining
and the taxation of mining operations to stimulate foreign and local investment
in the mining sector. These include provisions that permit the duty-free
importation of all equipment, spare parts and materials required for mining
operations and the duty-free export of all minerals produced. The Corporation
views these legislative changes as reflecting an increasingly supportive
regulatory climate for mining investment in Panama.
ITEM 3. LEGAL PROCEEDINGS
During 1996, the Corporation's Mexican subsidiary received import duty
assessments claiming the subsidiary's interest in certain pieces of machinery
and equipment with an approximate value of US$2,200,000 and levying taxes,
penalties, interest and inflationary adjustments for a further Mexican pesos
9,200,000. The claim against the subsidiary's assets and the additional amount
payable arose as a result of the subsidiary not presenting certain import
documentation to tax authorities by a prescribed date in connection with their
audit of imports of the claimed machinery and equipment during 1990 and 1991
when the mine was not owned by the Corporation. The Corporation, which has all
of the required documentation, has not provided for these amounts in its
financial statements on the basis of professional advice received indicating the
basis for these assessments to be weak and accordingly appealed the assessments
on March 5, 1997 before the Local Tax Legal Administration for Revenues in
Nogales, Sonora. On May 26th, 1997, the Corporation was advised that it was
successful in its appeal and that Mexican pesos 9,200,000 was not payable. While
the local tax authority was requested by the federal tax authorities to issue a
re-assessment which must take into account the basis of the appeal, 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 Corporation has been
advised by its Mexican counsel that this assessment is improper as it completely
ignores the earlier ruling. Accordingly the Corporation 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. The charge against certain pieces
of machinery and equipment will be released when the final tax assessment is
issued.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
During the fourth quarter of the Corporation's fiscal year covered by this
report, no matters were submitted to the shareholders for approval through the
solicitation of proxies or otherwise.
24
<PAGE> 29
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET PRICE RANGES FOR COMMON SHARES
Information relating to the market prices for the Common Shares appears on
page 35 of the 1999 Annual Report to Shareholders which information is
incorporated herein by reference and is filed as Exhibit 13.1 to this report. On
March 27, 2000 the closing price of the Common Shares on The Toronto Stock
Exchange was $0.36 and on the New York Stock Exchange composite transactions was
US $0.2344 as reported by the Globe and Mail.
At the annual meeting of shareholders scheduled to be held on May 19, 2000,
shareholders will be asked to approve, by special resolution, a consolidation
(reverse split) of the Corporation's common shares on the basis of 1
post-consolidation common share for every ten pre-consolidation common shares
(or such lesser number as the directors in their discretion may determine).
SHAREHOLDERS
As of March 27, 2000, Campbell had 12,594 common shareholders of record.
DIVIDEND RECORD AND POLICY
The Corporation has not paid a dividend on its common shares since 1984.
The Corporation's present policy is to retain earnings to finance future growth.
Dividends on the common shares paid to non residents of Canada will generally be
subject to withholding tax under the Income Tax Act (Canada) at the rate of 25%.
Such rate may be subject to reduction under the provisions of a tax treaty
between Canada and the country in which the recipient is resident. The
Canada-U.S. Income Tax Convention (1980) provides for a general reduction in the
rate of withholding tax to 15% on dividends paid on shares of a corporation
resident in Canada (such as the Corporation) to a resident of the United States,
and also provides for a further reduction to 5% where the beneficial owner of
the dividend is a corporation, resident in the United States, which owns at
least 10% of the voting shares of the corporation paying the dividend.
ITEM 6. SELECTED FINANCIAL DATA
Information relating to this item appears under the caption "Five Year
Comparative Summary of Selected Financial Data" on page 34 of the 1999 Annual
Report to Shareholders which information is incorporated herein by reference and
is filed as Exhibit 13.1 to this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information relating to this item appears on pages 17 through 20 of the
1999 Annual Report to Shareholders which information is incorporated herein by
reference and is filed as Exhibit 13.1 to this report.
25
<PAGE> 30
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
See notes to the consolidated financial statements and "Management's
Discussion and Analysis" for additional information.
Gold Risk Disclosures
The results of the Company's operations are affected significantly by
the market price of gold. Gold prices are influenced by numerous factors over
which the Company has no control, including expectations with respect to the
rate of inflation, the relative strength of the United States dollar and certain
other currencies, interest rates, global or regional political or economic
crises, demand for jewellery and certain industrial products, and sales by
central banks, other holders of gold and gold producers.
To reduce the impact of negative changes in the gold price the Company
may attempt to fix the future price at which the Company's gold production is
sold through the use of fixed forward sale contracts, spot deferred gold sale
contracts or through the use of various derivative instruments such as puts and
calls. Campbell's general policy is to hedge a maximum of 50% of its gold
production for up to two years, dependent on market conditions and planned
capital expenditure commitments. The following table provides information as of
December 31, 1999 with respect to the Company's gold forward and option
contracts:
<TABLE>
<CAPTION>
Expected Year of Maturity Fair Value
------------------------- ----------
($000's)
<S> <C> <C> <C> <C> <C>
2000 2001 2002 2003 2004 Thereafter
-----------------------------------------------------------
Forward sales contracts: $nil
Ounces 10,000
Average price (US$ per o/z) $290
Call options written (1) $(1,750)
Ounces 33,200 20,000
Average price (US$ per o/z) $350 $350
</TABLE>
(1) The calls are subject to floating gold lease rates against which an
allowance of 1.50% is provided. The calls are also subject to margin calls
should the mark-to-market liability exceed US$3.5 million.
Foreign Currency Risk Disclosures
The Company's reporting currency is Canadian dollars. The sales price
of gold (represents approximately 95% of total metal sales) and copper
(represents approximately 5% of total metal sales) is denominated in United
States dollars. The Company's Joe Mann Mine is in Canada and the Santa
Gertrudis Mine operations are located in Mexico. The Company's future
profitability is impacted by fluctuations in the United States dollar and
Mexican Peso relative to the Canadian dollar. To reduce the impact of the
fluctuations in the relative exchange rates on the Company's operations the
Company may enter into fixed forward contracts to sell United States dollars
and buy either Canadian dollars or Mexican Pesos. At December 31, 1999 the
Company had no forward contracts to sell United States dollars.
26
<PAGE> 31
Other Financial Instrument Risk Disclosures
At December 31, 1999 the Company had US$2,492,000 of short-term
deposits maturing in the first quarter of 2000 and US$2,576,000 of 7.5%
convertible debentures outstanding that mature in 2004. As the Company's
financial statements are recorded in Canadian dollars the amount of the
liability recorded for the convertible debentures on the balance sheet will
fluctuate with changes in the United States to Canadian dollar exchange rates.
At December 31, 1999 the estimated fair value of the convertible debentures and
short-term deposits was US$2,492,000 and US$1,924,000, respectively. Money
market instruments are denominated in Canadian dollars and are invested in
investment grade instruments. The fair value of the money market instruments
approximates their carrying values as, at December 31, 1999, they have
maturities of less than 60 days.
ITEM 8. FINANCIAL STATEMENTS AND QUALITATIVE DISCLOSURES ABOUT MARKET
Information relating to this item appears on pages 21 through 33, and
under the caption "Selected Quarterly Financial Data (unaudited)" on page 34, of
the 1999 Annual Report to Shareholders which information is incorporated herein
by reference and is filed as Exhibit 13.1 to this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There are no disagreements on accounting and financial disclosure that
require mention in this Form 10-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain information relating to the Directors of Campbell is set out in
the Election of Directors section of the Proxy Circular in connection with the
2000 Annual and Special Meeting of Shareholders scheduled for May 19, 2000 which
information is incorporated herein by reference and is filed as Exhibit 20.1 to
this report.
EXECUTIVE OFFICERS OF REGISTRANT
The executive officers of the Corporation, together with the offices of
the Corporation held by them, their ages and their experience since January 1,
1994, is set out below:
<TABLE>
<CAPTION>
Years in Other Positions and
Name Office Office Business Experience Age
- ---- ------ ------ ------------------- -----
<S> <C> <C> <C> <C>
John O. Kachmar President and 9 Certified Management 63
Chief Executive Accountant.
Officer of the
Corporation
Lorna D. Vice President, 12 Lawyer. 48
MacGillivray Secretary and
General Counsel
Paul J. Ireland Vice President, 5 Chartered Accountant. 42
Finance and
Chief Financial
Officer
</TABLE>
27
<PAGE> 32
There are no family relationships existing among any of the executive
officers, directors, or nominees for same of the Corporation.
As a foreign private issuer pursuant to Rule 3a12-3 under the Securities
Exchange Act of 1934 ("Exchange Act"), the registrant is not subject to Section
16 of the Exchange Act.
ITEM 11. EXECUTIVE COMPENSATION
Information required under this item is set out in the Proxy Circular in
connection with the 2000 Annual and Special Meeting of Shareholders scheduled
for May 19, 2000 which is incorporated herein by reference and is filed as
Exhibit 20.1 to this report.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information required under this item not set out below is set out in the
Proxy Circular, in connection with the 2000 Annual and Special Meeting of
Shareholders scheduled for May 19, 2000 which is incorporated herein by
reference and is filed as Exhibit 20.1 to this report.
The following table lists the number of Common Shares beneficially owned
by each executive officer listed in the table under the caption "Executive
Compensation" in the Proxy Circular. The percentage ownership calculation for
each owner has been made on the basis that there are outstanding 157,152,288
Common Shares.
<TABLE>
<CAPTION>
Name Number of Shares % of Class
---- ---------------- ----------
<S> <C> <C>
John O. Kachmar ........ 190,000(1) (less than) 1%
Lorna D. MacGillivray .. 99,000(2) (less than) 1%
Paul J. Ireland ........ 16,638(3) (less than) 1%
Three executive officers
as a group ............. 305,638(4) (less than) 1%
</TABLE>
(1) Excludes 1,350,000 Common Shares subject to option, of which 1,000,000 are
currently exercisable or exercisable within the next 60 days.
(2) Excludes 400,000 Common Shares subject to option, of which 250,000 are
currently exercisable or exercisable within the next 60 days.
(3) Excludes 375,000 Common Shares subject to option of which 225,000 are
currently exercisable or exercisable within the next 60 days.
(4) Excludes 2,125,000 Common Shares subject to option of which 1,475,000 are
currently exercisable or exercisable within the next 60 days.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
No reportable transactions or relationships involving the registrant and
any of its directors or officers existed during the last fiscal year.
28
<PAGE> 33
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) DOCUMENTS FILED AS PART OF THIS REPORT:
1. Financial Statements
Auditors' Report
Consolidated Balance Sheets as at December 31, 1999 and 1998
Consolidated Statements of Operations
Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Retained Earnings (Deficit) -
Years Ended December 31, 1999, 1998 and 1997
Consolidated Statements of Cash Flows -
Years Ended December 31, 1999, 1998 and 1997
Notes to the Consolidated Financial Statements
2. Financial Statement Schedules
All financial Statement Schedules filed as a part of this
report are included in Item 8 of this report and reference is
made thereto.
3. Exhibits
(A) refers to documentation previously filed as an exhibit to
Campbell's Annual Report on Form 10-K for the year ended
December 31, 1987 and incorporated herein by reference.
(B) refers to documents previously filed as an exhibit to
Campbell's Annual Report on Form 10-K for the year ended
December 31, 1994 (Commission file number 1-8488) and
incorporated herein by reference.
(C) refers to documents previously filed as an exhibit to
Campbell's Annual Report on Form 10-K for the year ended
December 31, 1993 (Commission file number 1-8488) and
incorporated herein by reference.
(D) refers to documents previously filed as an exhibit to
Campbell's Current Report on Form 8-K dated March 28, 1996
(Commission file number 1-8488) and incorporated herein by
reference.
29
<PAGE> 34
(E) refers to documents previously filed as an exhibit to
Campbell's Annual Report on Form 10-K for the year ended
December 31, 1996 dated March 26, 1997 (Commission file number
1-8488) and incorporated herein by reference.
(F) refers to documents previously filed as an exhibit to
Campbell's registration statement on Form S-8 (Registration
No. 333-93063) and incorporated herein by reference.
Exhibits in parentheses are references to the Exhibit No. of
the filing indicated.
3 Articles of Incorporation and By-Laws
3.1 Restated Articles of Incorporation dated August 9, 1999
(Exhibit 4.(a))
3.11 By-Law No. 1 as amended and as in effect on the date hereof
(A) (Exhibit 3.12)
3.12 Amendment of By-Law No. 1 (A) (Exhibit 3.11)
4 Instruments Defining the Rights of Security Holders Including
Indentures
4.1 Trust Indenture made as of July 21, 1994 between the
Corporation and Montreal Trust Company of Canada regarding the
7 1/2% Convertible Subordinated Debentures (B) (Exhibit 4.1)
10 Material Contracts
Management Contracts and Compensatory Plans and Arrangements
10.1 The Corporation's Employee Incentive Plan as amended (F)
(Exhibit (99)
10.2 Amended Employment Agreement dated December 1, 1994 between
the Corporation and John O. Kachmar (B) (Exhibit 10.2)
10.3 Amended Employment Agreement dated December 1, 1994 between
the Corporation and Lorna D. MacGillivray (B) (Exhibit 10.3)
10.4 Amended Employment Agreement dated December 10, 1996 between
the Corporation and Paul J. Ireland (E) (Exhibit 10.4)
10.5 Directors' Stock Option Plan (C) (Exhibit 10.8)
Material Contracts
10.6 Royalty Agreement with Repadre Capital Corporation made as of
April 23, 1993. (C) (Exhibit 10.14)
10.7 Stock Purchase Agreement dated July 6, 1994 between the
Corporation, Sotula Gold Corp., Sonoran Mining Corporation and
Compania Minera Zapata S. de R.L. de C.V. relating to the
purchase of Santa Gertrudis (B) (Exhibit 10.11)
30
<PAGE> 35
10.8 Purchase and Sale Agreement dated March 4, 1996 between Cyprus
Exploration and Development Corporation, Campbell Resources
Inc. and Compania de Exploracion Mineral, S.A. (D) (Exhibit
1.1)
13.1 Certain Portions of the Annual Report to the Shareholders for
the year ended December 31, 1999 contained on pages 17 to 35
inclusive. [Note: Such Annual Report, except for those
portions thereof which are expressly incorporated by reference
in this Report on Form 10-K, is furnished for the information
of the Securities and Exchange Commission and is not deemed
"filed" as part of the filing of this Report on Form 10-K.]
20.1 Proxy Circular dated March 23, 2000 in connection with the
2000 Annual and Special Meeting of Shareholders scheduled to
be held on May 19, 2000.
21.1 Significant subsidiaries.
23.1 Consent of KPMG LLP.
27.1 Financial Data Schedule
(b) REPORTS ON FORM 8-K
There were no reports on Form 8-K filed in the fourth quarter of 1999.
(c) EXHIBITS
Exhibits are listed under (a)3 above.
(d) FINANCIAL STATEMENTS SCHEDULES REQUIRED BY REGULATION S-X WHICH ARE
EXCLUDED FROM THE CORPORATION'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR
ENDED DECEMBER 31, 1999.
Not applicable
31
<PAGE> 36
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 27, 2000 By:/s/JOHN O. KACHMAR
------------------------
John O. Kachmar
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ JOHN O. KACHMAR Principal Executive Officer March 27, 2000
John O. Kachmar, President and and Director
Chief Executive Officer
/s/ PAUL J. IRELAND Principal Financial and March 27, 2000
- -----------------------
Paul J. Ireland, Vice President, Principal Accounting
Finance and Chief Financial Officer Officer
/s/ JAMES D. BEATTY March 27, 2000
- -----------------------
James D. Beatty Director
/s/ GRAHAM G. CLOW March 27,2000
- -----------------------
Graham G. Clow Director
/s/ ROD P. DOUGLAS March 27, 2000
- -----------------------
Rod P. Douglas Director
/s/ JAMES C. McCARTNEY Chairman of the Board of March 27,2000
- -----------------------
James C. McCartney, Q.C. Directors and Director
/s/ DONALD R. MURPHY March 27, 2000
- -----------------------
Donald R. Murphy Director
- -----------------------
Francis S. O'Kelly Director
/s/ G.E."KURT" PRALLE March 27,2000
- -----------------------
G.E."Kurt" Pralle Director
/s/ JAMES D. RAYMOND March 27, 2000
- -----------------------
James D. Raymond Director
</TABLE>
32
<PAGE> 37
CAMPBELL RESOURCES INC.
1999 Form 10-K
EXHIBIT INDEX
13.1 Annual Report to the Shareholders for the year ended December 31, 1999
[Note: Such Annual Report, except for those portions thereof which are
expressly incorporated by reference in this Report on Form 10-K, is
furnished for the information of the Securities and Exchange Commission
and is not deemed "filed" as part of the filing of this Report on Form
10-K.]
20.1 Notice and Proxy Circular dated March 23, 2000 in connection with the
2000 Annual and Special Meeting of Shareholders scheduled to be held on
May 19, 2000 and Form of Proxy
21.1 Significant subsidiaries
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule
<PAGE> 1
[GRAPHIC OMITTED]
[LOGO] Campbell
Resources Inc.
1999 Annual Report
<PAGE> 2
[MAP OMITTED]
CORPORATE PROFILE
Campbell Resources Inc. is a gold mining and exploration company with two
producing operations and a development stage project.
In 1999, Campbell produced 51,300 ounces of gold from its Joe Mann Mine in
Quebec, Canada. Additional development is now being completed at Joe Mann and
the next phase of low-cost, high-production mining is expected to begin shortly.
Mining operations at the Santa Gertrudis Mine in Sonora, Mexico resumed in late
1999 and the operation is expected to produce approximately 22,500 ounces of
gold in 2000. Exploration is continuing in order to define additional reserves.
Campbell also owns the Cerro Quema development stage gold project in Panama that
is currently awaiting higher gold prices before development resumes.
The Company continues to maintain a strong balance sheet with working
capital of $31.4 million and negligible debt and, with the resumption of
production at both mines, is now positioned for growth. With gold prices
recovering, Campbell will continue to selectively develop its assets and search
out quality investment opportunities.
Campbell's common shares are listed on the New York and Toronto stock
exchanges, trading under the symbol "CCH".
FORWARD LOOKING STATEMENTS
Certain information contained in this report contains "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, 1999. 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.
<PAGE> 3
- --------------------------------------------------------------------------------
- --------------
YEAR IN REVIEW
- --------------
JOE MANN MINE
- --------------------------------------------------------------------------------
o New long-term mine plan adopted to address ground conditions. Incorporates
cut-and-fill mining that should allow mining at narrower widths with less
dilution. Annual production is expected to average 90,000 ounces at a cash
cost of US$220 per ounce
o Delineation of a new ore zone parallel to the Main Ore Zone. Intersections
up to 39 feet. Indications of similar zones at depth
SANTA GERTRUDIS MINE
- --------------------------------------------------------------------------------
o Acquired the adjacent Roca Roja mining property, a former gold producing
operation
o Exploration on the newly acquired property quickly proved up mineable
reserves of 514,000 tonnes averaging 2.313 g/tonne gold
o Restarted gold production at the Santa Gertrudis Mine
<TABLE>
<CAPTION>
($ in thousands except per share amounts) 1999 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Metal sales $ 22,465 36,388 52,635
Net loss $ (12,702) (20,848) (40,410)
Cash flow from operations $ (9,435) 411 556
Exploration expenditures $ 2,422 2,803 4,659
- --------------------------------------------------------------------------------
Working capital $ 31,420 45,689 49,008
Cash and short-term deposits $ 18,219 41,493 13,638
Money market instruments $ 7,958 28,097
Total assets $ 87,134 102,777 123,882
Shareholders' equity $ 75,673 87,469 105,124
Shares outstanding (000s) 157,152 154,686 151,445
- --------------------------------------------------------------------------------
Per share - Loss $ (0.08) (0.14) (0.27)
- Cash flow $ (0.06)
- --------------------------------------------------------------------------------
Gold Production (ounces)
- --------------------------------------------------------------------------------
Joe Mann 51,300 70,100 73,500
Santa Gertrudis 2,400 12,300 39,200
- --------------------------------------------------------------------------------
Total gold production 53,700 82,400 112,700
- --------------------------------------------------------------------------------
Cash operating cost per ounce (US$) $ 292 255 288
Gold revenue per ounce (US$) $ 276 304 336
- --------------------------------------------------------------------------------
</TABLE>
In this report, unless otherwise indicated, all monetary amounts are stated in
Canadian dollars.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
1
<PAGE> 4
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
- -------------
REPORT TO THE
SHAREHOLDERS
- -------------
The global gold mining industry and Campbell Resources Inc. had a
turbulent year in 1999. Gold prices fell to a 20-year low of US$253 per ounce in
August, 1999, before spiking to a 2-year high of US$340 per ounce in October.
During 1999, the spot gold price averaged US$279 per ounce, approximately US$15
per ounce lower than in 1998.
This year however, there is reason for optimism because of market
fundamentals. There is strong demand associated with an improving Asian economy
and there are supply deficits resulting from limited central bank sales and
lower global mine production due to lower exploration and development
expenditures. Gold prices are expected to average US$300 per ounce in 2000 and
to continue the upward trend in the foreseeable future.
Campbell's financial performance is linked to the price of gold. During
the past three years as the gold price has fallen from the US$400 per ounce
level to the US$250 per ounce level, Campbell struggled. With gold now
stabilizing and showing signs of strength, Campbell is completing key
development and exploration programs that are expected to increase ore reserves
and production.
- -------------------------------
FINANCIAL AND OPERATING RESULTS
- -------------------------------
In 1999, Campbell reported a loss of $12.7 million, or $0.08 per share,
compared to a loss of $20.8 million or $0.14 per share in 1998. There was
negative cash flow from operations before the net change in non-cash operating
working capital of $9.4 million compared to positive $0.4 million a year
earlier.
Campbell produced approximately 53,700 ounces of gold in 1999 compared to
82,400 ounces of gold in 1998. The decrease resulted from lower production at
the Joe Mann Mine and limited production from the Santa Gertrudis operation,
that resumed mining during the fourth quarter of 1999. Cash operating costs in
1999 were US$292 per ounce compared with US$255 per ounce in 1998.
- ------------------------------
JOE MANN MINE - QUEBEC, CANADA
- ------------------------------
The Joe Mann Mine, situated in northwestern Quebec, has undergone a
transformation over the course of the year. Early in 1999, the Company announced
the discovery of a new zone of high grade gold mineralization below the 2350
level. This new zone lies approximately 100 feet north of, and is parallel to
the Main Zone, and pinches and swells reaching a maximum known thickness of 39.2
feet on the 2550 level.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
2
<PAGE> 5
- --------------------------------------------------------------------------------
Despite the positive benefits of the discovery, operating performance was
significantly affected by ground condition problems and excessive dilution.
Resulting higher cash operating costs compelled management to temporarily
suspend development and mining operations and re-evaluate the viability of the
Joe Mann Mine during the third quarter. These investigations indicated that by
changing the mining method to cut-and-fill, ground stability problems could be
controlled and reduced accordingly.
A new mining plan was adopted in November 1999 under which production of
approximately 63,500 ounces is expected in 2000 and annual production over the
following 3-year period is expected to average 90,000 ounces annually. Cash
operating costs over the four years are expected to average US$220 per ounce.
Diamond drilling will be ongoing in an effort to delineate additional reserves
to extend the mine life beyond mid-2004. Initial development is now being
completed and mining operations are expected to resume at the end of the first
quarter of 2000.
Early ore definition drilling from the 2750 level for mine stope planning
purposes is confirming the existence of the wider zones of mineralization
identified during early exploration drilling from the 1650 and 2350 levels. The
wider zones appear to be at considerably higher gold and copper grades than
current ore reserve grades. While the majority of the tons of ore from these
zones is included in the new long-term plan, the higher grades are not
reflected. Although at an early stage, if these drill results are repeated in
other previously identified wider ore zones, there could be a significant
reduction in cash operating costs per ounce of gold.
- -------------------------------------
SANTA GERTRUDIS MINE - SONORA, MEXICO
- -------------------------------------
During 1999, exploration efforts were focused on highly prospective ground
situated near the leach pads and existing processing infrastructure. These
efforts were successful and mine operations resumed in the fourth quarter of
1999. Exploration was concentrated on the Roca Roja mining property, a former
gold producing property adjacent to Santa Gertrudis, which was acquired during
1999. A detailed program of mapping, sampling, trenching and drilling began
immediately thereafter. To date, three deposits have been delineated with
mineable reserves of approximately 514,000 tonnes averaging 2.313 grams of gold
per tonne. A fourth deposit has been identified and infill drilling is underway
which should further increase mineable reserves. The Santa Gertrudis Mine is
expected to produce 22,500 ounces at a cash operating cost of US$233 per ounce
in 2000. Production at these levels should be sufficient to cover most of the
exploration costs budgeted for the year of US$1.5 million.
In addition to exploration north of the mine district, Campbell remains
optimistic that it will be able to exercise its rights to resume exploration of
the San Enrique soil geochemical anomaly that was delineated as part of an
ongoing regional soil geochemical survey. The anomaly is 4 kilometres long by 2
kilometres wide and has excellent exploration potential. Campbell is continuing
negotiations with Mexican Federal and State of Sonora government authorities and
the surface rights owner to gain access to the ground so that a comprehensive
exploration program can begin.
- --------------------------------------------------------------------------------
3
<PAGE> 6
- --------------------------------------------------------------------------------
- -------------------
SHARE CONSOLIDATION
- -------------------
On August 16, 1999, Campbell was advised of changes to the continued
listing requirements of the New York Stock Exchange. These changes included the
new requirement that shares trade above a price of US$1 per share over a
consecutive 30-day trading period. Both the American Stock Exchange and NASDAQ
have similar stock price requirements.
The Board of Directors view the New York Stock Exchange listing as a
valuable asset of the Company providing excellent liquidity and upside potential
to the shareholders when there is an increase in the gold price. Following
discussions with financial advisors and significant shareholders, and given the
fact that a high percentage of Campbell's shares are held by United States
residents, the Directors have determined that a consolidation to retain the New
York Stock Exchange listing is in the best interest of its shareholders.
Shareholders will be asked to approve the share consolidation at the upcoming
annual meeting.
- ------------------------------
PERSONNEL AND ACKNOWLEDGEMENTS
- ------------------------------
We would like to thank all of Campbell's employees for their dedication
and hard work and the Directors and Shareholders for their continued support.
- -------
OUTLOOK
- -------
Campbell's focus for the year 2000 will be on its existing operations
while continuing to search for new opportunities. Implementing the new mining
method at the Joe Mann Mine on time and budget is a priority. Once development
in preparation for the change to cut-and-fill mining is completed at the end of
the first quarter of 2000, the Mine should start to generate meaningful levels
of cash flow.
The Santa Gertrudis Mine commenced prodution in the fourth quarter and is
expected to produce approximately 22,500 ounces of gold. We are confident that
further exploration will continue to define additional reserves.
/s/ James C. McCartney
James C. McCartney
Chairman of the Board
/s/ John O. Kachmar
John O. Kachmar
President & Chief Executive Officer
Toronto, Ontario
March 14, 2000
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
4
<PAGE> 7
- --------------------------------------------------------------------------------
[MAP OMITTED] JOE MANN MINE
-------------------------------------------
QUEBEC, CANADA
[GRAPHIC OMITTED]
- --------------------------------------------------------------------------------
5
<PAGE> 8
- --------------------------------------------------------------------------------
------------------------------
JOE MANN MINE - QUEBEC, CANADA
------------------------------
<TABLE>
<CAPTION>
================================================================================
Production Statistics 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Tons Milled 267,000 299,000 266,000
Gold Grade (oz./ton) 0.204 0.252 0.299
Copper Grade (%) 0.220 0.243 0.280
Gold Recovery (%) 94.2 94.3 93.9
Copper Recovery (%) 95.4 94.2 96.3
Gold Production (oz.) 51,300 70,100 73,500
Copper Production (000's lbs) 1,065 1,316 1,367
Cash Operating Cost
per Ounce Gold (US$) 292 257 264
</TABLE>
Reserves and Resources(1)
================================================================================
<TABLE>
<CAPTION>
Mineable Ore Reserves(2)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Proven and Probable
- tonnage 302,000 517,000 553,000
- gold grade (oz./ton) 0.280 0.229 0.238
- copper grade (%) 0.274 0.243 0.270
- contained oz. gold(3) 84,400 118,400 131,700
Possible(4)
- tonnage 981,700 1,462,000 1,417,000
- gold grade (oz./ton) 0.340 0.255 0.267
- copper grade (%) 0.310 0.250 0.260
- contained oz. gold(3) 333,700 372,900 378,200
</TABLE>
<TABLE>
<CAPTION>
Diluted Geological Resources
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Measured and Indicated
- tonnage 302,000 729,000 879,000
- gold grade (oz./ton) 0.280 0.210 0.225
- copper grade (%) 0.274 0.223 0.240
- contained oz. gold(3) 84,400 153,300 197,900
Inferred(4)
- tonnage 1,703,000 2,520,000 2,461,000
- gold grade (oz./ton) 0.329 0.261 0.264
- copper grade (%) 0.286 0.240 0.250
- contained oz. gold(3) 561,600 657,800 649,600
</TABLE>
1: Reserves and resources have been calculated based on an assumed 5-foot
mining width following the change in mining method to cut-and-fill mining
compared to a 6-foot mining width under the previous mining method for
1998 and 1997.
2: Mineable reserves at December 31, 1999 have been calculated based on a
gold price of US$300 per ounce. Mineable reserves at December 31, 1998 and
1997 were based on a gold price of US$325 and $US375 per ounce
respectively.
3: Actual recovered ounces will depend on metallurgical recovery rates.
4: The possible and inferred categories include material based largely on
assumed continuity or repetition for which there are reasonable geological
indications but for which there are limited samples and measurements.
================================================================================
The Joe Mann Mine is located approximately 350 miles north of Montreal,
in the Province of Quebec, Canada. Since production began in 1987, this
high-grade underground operation has produced more than 1 million ounces of
gold. As of December 31, 1999, Joe Mann has mineable reserves of approximately
418,000 ounces.
The Mine is situated in the eastern portion of the Abitibi greenstone
belt, one of the world's premier gold producing regions, encompassing more than
250 active mines and past-producing operations. Joe Mann is an Archean vein-type
deposit. Gold and copper mineralization is found in quartz veins within several
laterally continuous shear zones. Mining was temporarily suspended in the fourth
quarter of 1999, up to which time, ore had been mined along a 3000 foot strike
length, to depths of up to 2350 feet below the surface.
- -----------------
OPERATING RESULTS
- -----------------
Operating results for the year were negatively impacted by mining dilution
caused by worsening ground conditions and the subsequent temporary cessation of
operations to study the problem. Cash operating costs rose by 14% to US$292 per
ounce compared to US$257 per ounce in 1998, while gold production fell 27% from
70,100 ounces in 1998, to 51,300 ounces in 1999. The increased mine dilution
lowered mill head grades to 0.204 ounces of gold per ton compared to 0.252
ounces of gold per ton a year earlier. Mill recoveries were 94.2% compared to
94.3% in 1998. Production of copper was also affected by dilution. Annual copper
production fell from 1.3 million pounds in 1998, to 1.1 million pounds in 1999.
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
Gold Production
(thousands of ounces)
<S> <C>
96 70.4
97 73.5
98 70.1
99 51.3
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
Gold Reserves
(thousands of ounces)
Proven Proven and Probable
------ -------------------
<S> <C> <C>
96 617.4
97 509.9
98 491.3
99 418.1
</TABLE>
[The following table was depicted as a bar chart in the printed material.]
<TABLE>
<CAPTION>
Cash Operating Cost
(US$ per ounce)
<S> <C>
96 272
97 264
98 257
99 292
</TABLE>
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
6
<PAGE> 9
- --------------------------------------------------------------------------------
Longitudinal Section through the Main Zone
[GRAPHIC OMITTED]
3-D Model showing the Resource and Reserve Potential of the Joe Mann Mine
[GRAPHIC OMITTED]
- -------------------
LONG-TERM MINE PLAN
- -------------------
In response to the worsening ground conditions and dilution experienced by
mining with shrinkage and long-hole methods, management suspended mining
operations and reviewed alternative mining methods. As a result of these
studies, it was concluded that given the nature of the orebody, cut-and-fill
mining was the most practical alternative to cope with the excessive dilution
problems experienced in 1999. A new 5-year mine plan was developed and evaluated
by both management and independent mining and geotechnical consultants.
- --------------------------------------------------------------------------------
7
<PAGE> 10
- --------------------------------------------------------------------------------
The new mine plan incorporates the use of cut-and-fill mining methods that
will replace the previously used methods of extraction. It is expected that the
ground stability problems, which led to dilution and related increased costs
experienced in 1999, will be controlled.
Once production resumes in April, Joe Mann is forecast to produce 63,500
ounces of gold in 2000 at a cash operating cost of US$225 per ounce. Gold
production between 2001 and mid-2004 is expected to average approximately 90,000
ounces annually at an average cash operating cost of US$220 per ounce. With this
projected cash cost, Campbell will resume the 6-year cost-cutting trend that
started in 1993 when costs were US$336 per ounce. Total capital expenditures
during 2000 are forecast at $5.3 million and include $3.6 million during the
first quarter of 2000. In general, cut-and-fill mining requires lower
development expenditures when compared with shrinkage and long-hole mining
methods.
Cut-and-Fill Mining
The cut-and-fill method is well suited to mine steeply dipping vein
deposits, such as those found at the Joe Mann Mine. With this method, a series
of haulage drifts are driven in the footwall from the shaft parallel to the
orebody. Cross-cuts are tunnels perpendicular to the haulage drift that are
excavated from the haulage drift to intersect the orebody at regular intervals.
Service and ventilation raises, which provide access and air flow to the working
area, and ore passes, which are used to deliver ore to a collection point, are
excavated from the cross-cut. As a result of this development, the orebody is
divided into convenient blocks or stopes that are ready to be mined.
The ore will be mined in a series of horizontal slices or sequences
starting from the bottom of the stope, working upwards. Ore is drilled, blasted
and removed from the stopes through ore passes. It is then loaded on trams and
hauled to the loading pocket at the bottom of the shaft where it is hoisted to
the surface for processing.
After a complete sequence has been extracted, part of the resulting void
is filled with fill material which is fed by gravity from the surface. At the
Joe Mann Mine, Campbell will back fill with sand deposits that are found in
close proximity to the mine and cap the fill with cement floors. This fill
provides support for the sidewalls of the excavation as well as the floor from
which the next sequence can be mined. A pillar is also left above and below each
cross-cut to provide additional support and stability. As the stope progresses
upwards, the service and ventilation raises and ore passes are maintained within
the filled stope.
[GRAPHIC OMITTED]
Section showing typical cut-and-fill method
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
8
<PAGE> 11
- --------------------------------------------------------------------------------
Cut-and-fill mining has many advantages compared to other underground
mining methods. It generally provides more stability in areas with poor ground
conditions and results in less dilution and greater ore recovery.
The problem of dilution caused by stope wall failure is more controlled
with the stability provided by the fill. When blasting occurs, there is less
risk of waste from the walls being added to the ore. A mined out stope that is
back filled may provide support to adjacent work areas. At Joe Mann, this
additional stability is expected to enable mining widths to decrease from 6 feet
to 5 feet. Since the ore veins are typically less than 5 feet, miners will not
be extracting the additional 1 foot of waste rock. This results in an effective
increase in the grade of the ore, and lessens costs as anticipated in the
long-term mine plan.
Another advantage of cut-and-fill mining is that it allows miners to be
more selective giving rise to excellent grade control. Areas of uneconomic waste
rock may be left in place. With shrinkage and long-hole mining these waste
blocks would have to be mined, thereby lowering the mill head grade.
A final key advantage of cut-and-fill mining deals with the continuity of
operations and speed of ore recovery. With shrinkage and long-hole mining
methods, approximately 60% of the ore remains in the slope until it is
completely drilled and blasted. In addition to the cash flow from individual
stopes being delayed because the ore is not immediately hauled to surface,
several mining problems can result. Additional dilution following blasting can
occur as loose rock on the walls of the stope may fall into the broken ore. Ore
may also become trapped within a particular stope as the walls converge because
of the stresses of the overlying rock. With cut-and-fill mining, ore is removed
from the stope through the ore pass and hauled to the shaft on a daily basis,
thereby reducing the risk of these potential problems.
- -----------
EXPLORATION
- -----------
Exploration completed in 1999 led to the delineation of a new ore zone
which added approximately 137,000 tons averaging 0.328 oz./ton gold to the
reserves. Based on current reserves, the long-term mine plan projects production
continuing until mid-2004. Exploration is ongoing in order to delineate
additional reserves. There appears to be wider, high-grade portions to the ore
between the 2350 and 3450 levels. Some of the better intersections drilled
previously and partially incorporated into the ore reserves include 0.304
oz./ton gold over 39.5 feet, 0.534 oz./ton gold over 67 feet, 0.437 oz./ton gold
over 26.7 feet and 0.522 oz./ton gold over 19.3 feet. Recent drilling appears to
show these wider zones to be at considerably higher gold and copper grades than
the current ore reserve grades. While the majority of the tons of ore from these
zones are included in the ore reserves and in the long-term plan, the higher
grades are not reflected. Although at an early stage, should these drill results
be repeated in other previously identified wider ore zones, this could result in
a significant reduction in cash operating costs per ounce of gold.
As development and production continue, exploration will be focused on
finding additional reserves at depth as well as reserves within parallel shears.
The potential for additional wide, high-grade intersections is considered to be
good.
- --------------------------------------------------------------------------------
9
<PAGE> 12
- --------------------------------------------------------------------------------
[MAP OMITTED] SANTA GERTRUDIS
MINE
[GRAPHIC OMITTED] ---------------------------------------
SONORA, MEXICO
- -------------------------------------
SANTA GERTRUDIS MINE - SONORA, MEXICO
- -------------------------------------
The Santa Gertrudis Mine is an open pit heap leach mine situated in the
Mexican State of Sonora approximately 240 kilometres south of Tucson, Arizona.
The mine produced approximately 300,000 ounces of gold between 1991 and 1997
when production was temporarily suspended. Since Campbell acquired the property
in mid-1994 Santa Gertrudis has produced approximately 180,000 ounces at an
average cash operating cost of US$249 per ounce.
Following the suspension of mining operations in late 1997, Campbell
embarked on an aggressive exploration program to delineate additional reserves
to enable mining operations to resume. In addition to exploring within the mine
area and ground to the south of mining operations, Campbell focused exploration
on the adjoining Roca Roja mine property, situated north of the Santa Gertrudis
Mine area, that was acquired in 1999.
Successful exploration north of the mine area led to the discovery of four
deposits that are expected to provide modest production and cashflows that
largely fund exploration and fixed costs at Santa Gertrudis. Exploration is
ongoing with the expectation that additional reserves will be outlined allowing
operations to continue beyond 2000.
- --------------------------------------------------------------------------------
10
<PAGE> 13
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Production Statistics 1999 1998 1997
=========================================================================================
<S> <C> <C> <C>
Tonnes mined (ore+waste) 476,000 -- 7,432,000
Tonnes ore mined 98,000 -- 1,021,000
Strip Ratio 3.84 -- 6.28
Gold Grade (grams/metric tonne) 2.24 -- 1.71
(oz./ton) 0.07 -- 0.05
Gold Recovery (%) N/A -- 69.5
Gold Production (oz.) 2,400 12,300 39,200
Cash Operating Cost
per Ounce Gold (US$) N/A 242 333
<CAPTION>
Mineable Ore Reserves
=========================================================================================
Proven and Probable
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
- tonnage (metric tonnes) 416,000 -- --
- gold grade (grams/metric tonne) 2.33 -- --
(oz./ton) 0.06 -- --
- indicated gold(2) (oz.) 31,000 -- --
Possible(1)
- -----------------------------------------------------------------------------------------
- tonnage (metric tonnes) 1,301,000 1,992,000 2,422,000
- gold grade (grams/metric tonne) 1.95 2.08 2.00
(oz./ton) 0.06 0.06 0.06
- indicated gold(2) (oz.) 81,000 133,000 155,700
</TABLE>
1: The possible category includes material based largely on assumed
continuity or repetition for which there are reasonable geological
indications but for which there are limited samples and measurements.
2: Actual recovered ounces will depend on metalurgical recovery rates.
Ore deposits at Santa Gertrudis are found within silty carbonate rocks and
are generally associated with structural breaks such as fault zones and shear
zones. The gold mineralization at Santa Gertrudis is finely disseminated and ore
grades usually average 2.0 grams of gold per tonne (g/t gold). The ore is
oxidized, making it amenable to the low cost heap leach gold extraction method.
The style of mineralization combined with the property's geological, geochemical
and structural characteristics suggests that Santa Gertrudis has similarities to
the prolific Carlin trend in Nevada which hosts many rich oxide and sulphide
gold deposits.
- --------------------------------------------------------------------------------
11
<PAGE> 14
- --------------------------------------------------------------------------------
- ----------
OPERATIONS
- ----------
Exploration completed in 1999 led to the discovery of three mineable
deposits, the El Toro Norte, Escondida Northwest Splay and Mirador. Ore from the
El Toro Norte deposit was mined in the fourth quarter of 1999 and placed on the
leach pads, and to December 31, 1999, produced approximately 2,400 ounces of
gold. Production from the Mirador pit started shortly thereafter and is expected
to continue until mid-2000. Production from the Escondida Northwest Splay will
follow. As of December 31,1999, proven mineable ore reserves are 416,000 tonnes
averaging 2.328 grams of gold per tonne (g/t gold) or approximately 31,000
ounces.
In order to operate profitably at current gold prices, and at the reduced
production levels contemplated during this initial phase of mining, management
undertook a comprehensive review of the operation to determine where cost
savings were possible. As a result, the minesite camp facilities have been
eliminated and workers are transported to and from the site. The workforce has
been reduced to levels that better match the scale of the current operation.
- -----------
EXPLORATION
- -----------
La Peque-Escondida Structure
Exploration in 1999 was primarily focused on the La Peque-Escondida Shear
Zone. This Shear Zone is a primary exploration target situated approximately 3
kilometres north of the mine infrastructure. This east-west trending structure
is 2.6 kilometres in length and has 10 distinct zones of mineralization many of
which have been mapped and sampled and are the focus of advanced drilling.
The Escondida Northwest Splay
In addition to the El Toro Norte and the Mirador deposits, a third deposit
known as the Escondida Northwest Splay was discovered in 1999. Situated close to
the mine infrastructure, it will be ready for production once necessary infill
drilling has been completed. To date the Escondida Northwest Splay has been
tested with 13 reverse circulation drill holes totalling approximately 1130
metres and contains proven mineable reserves of 99,000 tonnes averaging 2.44 g/t
gold.
Escondida West, Central and Northwest Zones
The Escondida West, Escondida Central and Escondida Northwest Zones are
situated close to the Escondida Northwest Splay deposit. Each has significant
potential to boost resources and potential reserves because of its proximity to
that deposit.
The Escondida Central Zone, located approximately 275 metres east of the
Northwest Splay deposit, was the first zone drilled on the La Peque-Escondida
structure. In 1999, a total of 16 holes were drilled with many reporting
multi-gram values over widths of up to 21 metres. Some of the better
intersections from the 1999 program were 3.631 g/t gold over 21.0 metres, 1.834
g/t gold over 9.0 metres and 1.086 g/t gold over 13.5 metres.
Recently, several trenches completed on the Central Zone in 1999 were
deepened or extended to better expose the mineralization and check assay
results. Many of the results were in fact better than previously reported
leading to additional drilling of the zone. Two drill holes have since been
completed with the first hole intersecting 17.786 g/t gold over 5.98 metres,
while a second hole intersected 3.26 g/t gold over 14.15 metres or 3.95 g/t gold
over 11.0 metres.
Once new resource calculations have been completed, it may be possible to
mine this zone economically in conjunction with the Northwest Splay deposit.
Exploration to further evaluate other zones of the Escondida portion of the La
Peque-Escondida Structure is now underway with the hope that other zones can be
brought
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
12
<PAGE> 15
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Geology of Santa Gertrudis Mine District and Roca Roja Property
Location Map
[GRAPHIC OMITTED]
into the resource category. The nearby Escondida Northwest Zone is approximately
600 metres northeast of the deposit and the Escondida West Zone is found 50
metres southeast of the deposit.
Esco Zone
The Esco Zone, situated approximately 1.5 kilometres west of the Escondida
Northwest Splay, consists of four structures, only one of which is currently
being explored. The structure is defined by a series of old pits and shallow
shafts which have yielded values of up to 1.166 g/t gold and greater than 500
g/t silver over 1.2 metres. The old workings suggest that the target may have a
width of approximately 10 metres. The structure is associated with a 300 metre
long gold soil geochemical anomaly with values in excess of 0.2 g/t gold. The
presence of the old workings and the extent of the sampling indicate the
structure has a strike length of 80 metres; however, a channel sample that
returned a value of 3.668 g/t gold over 0.7 metres taken along strike suggest
the potential strike length for the structure is in excess of 200 metres.
- --------------------------------------------------------------------------------
13
<PAGE> 16
- --------------------------------------------------------------------------------
Reconnaissance Exploration
Since many of the open pit deposits are related to fault or shear
structures with geochemical anomalies, reconnaissance exploration has been
focused on these type of targets. Two key target areas being explored are the
Viviana Fault and the San Enrique geochemical anomaly.
La Viviana Fault
Additional exploration has been completed along the La Viviana Fault. This
east-west trending structure extends from the Maracias Fault to the west and is
approximately 3.8 kilometres long. The La Viviana Fault is a significant
structure because it is thought to be the upper portion of the structure that
hosted the past producing Amelia Mine on the Roca Roja property. As such it has
excellent potential to host the upper portion of that deposit.
Initial investigations have been focused on a small portion of the fault
in an area of previous workings. To date three reverse circulation drill holes
totalling 444 metres have been completed to test the structure. One hole,
drilled to test a surface sample from a strongly altered fault zone that yielded
3.924 g/t gold, returned a value of 1.589 g/t gold over 4.5 metres. Additional
mapping and sampling will be completed to define additional drill targets.
San Enrique Geochemical Anomaly
The San Enrique gold-in-soil geochemical anomaly was defined as part of an
ongoing soil geochemical survey conducted in 1998. The anomaly is situated
approximately 8 kilometres south of the mine infrastructure and is approximately
4 kilometres by 2 kilometres.
Exploration on the anomaly has been delayed because of difficulties in
concluding an agreement with the surface rights owner. In 1999, Campbell was
granted a temporary occupation order giving the Company the right to conduct
exploration on the San Enrique soil geochemical anomaly for a period of five
years. Campbell is continuing negotiations with the surface rights owner and the
Mexican Federal and State Government authorities to allow the company access to
the ground so that a comprehensive exploration program can begin.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
14
<PAGE> 17
- --------------------------------------------------------------------------------
- ----------------------------------------
CERRO QUEMA PROJECT - LOS SANTOS, PANAMA
- ----------------------------------------
The Cerro Quema project, situated 150 miles southwest of Panama City,
Panama, is currently on care and maintenance awaiting higher gold prices before
development resumes. A feasibility study completed by Campbell indicates the
Cerro Quema has mineable reserves, based on a gold price of US$400 per ounce, of
approximately 8,772,000 tonnes averaging 1.16 g/t gold, or approximately 330,000
ounces of gold. Cash operating costs are expected to be approximately US$180 per
ounce and capital costs are expected to be an additional US$100 to US$110 per
ounce. Should gold prices rise to the US$400 level, construction at Cerro Quema
could recommence immediately, and once finished, the project would produce
50,000 ounces annually.
- ---------------
GROWTH STRATEGY
- ---------------
During the course of the year management continued to review business
opportunities with respect to gold mining acquisitions and possible mergers.
Extensive due diligence was carried out on several operations located in the
Americas and elsewhere. To date, no transactions have been completed due to
results from due diligence and the inability to reach a consensus on value. With
the assistance of outside advisors, Campbell is continuing to search for a
transaction that will provide growth and increase shareholder value.
- --------------------------------------------------------------------------------
15
<PAGE> 18
Management's Discussion and Analysis
17 - 20
- --------------------------------------------------------------------------------
Management's Responsibility for Financial Reporting
Auditors' Report
21
- --------------------------------------------------------------------------------
Consolidated Balance Sheets
22
- --------------------------------------------------------------------------------
Consolidated Statements of Operations
Consolidated Statements of Retained Earnings (Deficit)
23
- --------------------------------------------------------------------------------
Consolidated Statements of Cash Flows
24
- --------------------------------------------------------------------------------
Notes to Consolidated Financial Statements
25-33
- --------------------------------------------------------------------------------
Five Year Comparative Summary
Selected Quarterly Financial Data
34
- --------------------------------------------------------------------------------
Shareholder Information
35
- --------------------------------------------------------------------------------
Corporate Information
36
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
16
<PAGE> 19
- --------------------------------------------------------------------------------
MANAGEMENT'S
DISCUSSION AND
ANALYSIS OF
FINANCIAL
CONDITION AND
RESULTS OF
OPERATIONS
- --------------
- --------
OVERVIEW
- --------
The past year has been one of mixed results for Campbell Resources. Poor
ground conditions at the Joe Mann Mine resulted in production being
significantly lower than target and prior years with costs commensurately
higher. When added to further deterioration in gold prices during the first nine
months of the year, together with the start-up costs at the Santa Gertrudis
Mine, this has resulted in a significant drain on the Company's cash resources
instead of the expected positive cash flow. For the year ended December 31, 1999
there was negative cash flow from operations before the net change in non-cash
operating working capital of $9.4 million compared to positive $0.4 million in
1998 and $0.6 million in 1997. Combined with sustaining capital expenditures at
the Joe Mann Mine this has resulted in the Company's working capital at December
31, 1999 decreasing to $31.4 million compared to $45.7 million in 1998. Campbell
recorded a loss in 1999 of $12.7 million, or $0.08 per share, compared to a loss
of $20.8 million ($0.14 per share) in 1998 and $40.4 million ($0.27 per share)
in 1997. There was a loss from operations of $14.4 million in 1999 compared to a
loss of $10.1 million in 1998 and a loss of $12.2 million in 1997, before the
writedown and loss on sale of mining interests in 1998 of $12.5 million and in
1997 of $31.7 million.
The Joe Mann Mine started 1999 on a positive note operating at seven days
a week compared to the previous five under a new mine plan following an
agreement with the Unions. The discovery of a wide ore lens on the 2575 level
further increased the optimism. Unfortunately ground conditions worsened as the
year progressed resulting in unexpected dilution and consequently lower grades
and higher costs. The West zone above the 2350 level was a disappointment as the
grade in the stopes was inconsistent and lower than expected. Continuing lower
gold production and negative operating cash flow resulted in mining operations
above the 2350 level being put in a recovery mode in September while management
addressed the dilution issue. As a result, a new mine plan incorporating the
change to cut-and-fill mining from shrinkage and long-hole mining was approved
by the Board of Directors in November. The plan is based on US$300 gold prices
and is expected to result in significant improvements in recovery of ore with
lower dilution due to selective mining at narrower widths. Development to enable
the change in mining methods commenced in December 1999 and production is
expected to resume in April 2000. Development costs during this period are
forecast at $3.6 million and will be capitalized to mining interests. Production
for the nine months to December 31, 2000 is forecast at 63,500 ounces of gold at
a cash operating cost of US$225 per ounce.
In Mexico, the Company completed the acquisition of the mining and
exploration claims of Minera Roca Roja, a former gold producer, adjacent to the
Company's Santa Gertrudis Mine at a total cost of $2.3 million. Gold reserves
were quickly discovered following exploration and drilling on those claims. Gold
production resumed at the Santa Gertrudis Mine from the acquired claims in the
fourth quarter of 1999 and is expected to continue through 2000 and into 2001 at
levels sufficient to substantially pay for the ongoing exploration effort.
- -------
REVENUE
- -------
Revenue from metal sales decreased in 1999 by 38% to $22.5 million
compared to $36.4 million in 1998 and $52.6 million in 1997. The decrease in
1999 was attributable to a 9% reduction in the gold price realized during the
year and a 35% decrease in gold production to 53,700 ounces compared to 82,400
ounces in 1998. The decrease in 1998 revenues relative to 1997 was due to lower
gold prices and lower gold production, offset to an extent by the weakening of
the Canadian dollar by approximately 7%.
<TABLE>
<CAPTION>
Gold produced (ounces): 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Joe Mann Mine 51,300 70,100 73,500
Santa Gertrudis Mine 2,400 12,300 39,200
- --------------------------------------------------------------------------------
53,700 82,400 112,700
================================================================================
Gold revenue per ounce US$276 US$304 US$336
Average market price US$279 US$294 US$331
</TABLE>
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
17
<PAGE> 20
- --------------------------------------------------------------------------------
The average gold price realized compared to the average market price is
disclosed in the table above. The lower gold price realized in 1999 compared to
the average market price for the year is due to the timing of gold production
during the year. The difference between the price realized and the market price
in prior years is primarily attributable to the Company's limited hedging
activities.
Campbell's general policy is to hedge a maximum of 50% of its gold
production for up to two years, dependent on market conditions and planned
capital expenditure commitments. The Company has 10,000 ounces of gold hedged
for 2000 under fixed forward contracts at an average price of US$290 per ounce.
These represent approximately 11% of anticipated production for the year. The
Company also has 53,200 ounces of calls outstanding with maturities in 2001 and
2002 at a strike price of US$350 per ounce. The calls were sold in 1997 and are
subject to floating gold lease rates against which the Company receives an
allowance of 1.50%. The calls represent a maximum of one third of the
anticipated gold production from the Joe Mann Mine in the respective years. The
calls are marked-to-market and subject to margin calls if the liability exceeds
US$3.5 million. The mark-to-market has not required the Company to post margin.
It is currently the Company's intention to deliver gold from the Joe Mann Mine
at the US$350 strike price if the calls are exercised.
Revenues from copper production at the Joe Mann Mine accounted for 5.3% of
total revenue in 1999 compared to 4.8% in 1998 and 3.6% in 1997. The increase
results from the reduction in total revenues as a result of the decrease in gold
production from the Santa Gertrudis Mine. Copper production decreased to 1.1
million pounds compared to 1.3 million pounds in 1998 and 1.4 million pounds in
1997 as a result of lower copper grades.
- --------
EXPENSES
- --------
<TABLE>
<CAPTION>
Cash cost per ounce 1999 1998 1997
================================================================================
<S> <C> <C> <C>
Joe Mann Mine US$292 US$257 US$264
Santa Gertrudis Mine N/A US$242 US$333
- --------------------------------------------------------------------------------
Overall US$292 US$255 US$288
================================================================================
</TABLE>
Mining expense decreased to $25.6 million in 1999 compared to $33.4
million in 1998 and $46.7 million in 1997. The decrease in 1999 results from the
effective cessation of mining operations, other than ore recovery in the upper
levels, at the Joe Mann Mine in September. In addition, the mine ceased milling
in November 1999 to begin the development necessary to start cut-and-fill mining
in the second quarter of 2000. All costs at the mine for December were
capitalized to mining interests. The decrease in 1998 compared to 1997 results
from cessation of mining operations at the Santa Gertrudis Mine in December
1997.
- -------------
Joe Mann Mine
- -------------
Production from the Joe Mann Mine decreased by 26.8% to 51,300 ounces of
gold in 1999 compared to 70,100 ounces in 1998 and 73,500 ounces in 1997. The
decrease is primarily attributable to lower mill head grades of 0.204 ounces of
gold per ton in 1999 compared to 0.252 in 1998 and 0.30 in 1997. Mill recoveries
increased to 94.2% in 1999 compared to 94.3% in 1998 and 93.9% in 1997. The tons
of ore milled decreased to 267,000 tons in 1999 compared to 299,000 tons in 1998
and 266,000 tons in 1997. As a result of the lower gold production the cash
operating cost per ounce increased to US$292 from US$257 in 1998. The decrease
in cash costs per ounce of gold produced in 1998 compared to 1997 was largely a
result of the weaker Canadian dollar.
- --------------------
Santa Gertrudis Mine
- --------------------
The resumption of mining operations at the Santa Gertrudis Mine in the
fourth quarter of 1999 resulted in 98,000 tonnes of ore being mined with a grade
of 2.24 g/t and a strip ratio of 3.84:1. Leaching commenced in November and
resulted in 1,700 ounces of gold being produced in the start-up period. The mine
also produced 700 ounces of gold during the earlier part of the year when the
heaps were being water washed.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
18
<PAGE> 21
- --------------------------------------------------------------------------------
During 1998, the Santa Gertrudis Mine produced 12,300 ounces of gold as a
result of the continued application of cyanide solutions to the heaps on the
leach pads. The cash cost per ounce of US$242 per ounce of gold produced in 1998
is higher than it would otherwise be as it included all overhead costs
associated with keeping the mine infrastructure in place while the exploration
effort is ongoing.
- -----------------------------
Depreciation and Amortization
- -----------------------------
Depreciation and amortization expense was $4.7 million in 1999 and $8.2
million in 1998 and $14.6 million in 1997. The decrease in 1999 and 1998 relates
to both the lower gold production from the Joe Mann Mine and the impact of the
writedown in 1997 together with the cessation of mining activities at the Santa
Gertrudis Mine from Decemeber 1997 to October 1999.
- -----------
Exploration
- -----------
Exploration expense was $2.3 million in 1999 compared to $2.2 million in
1998 and $0.3 million in 1997 and for 1999 and 1998 all relates to the Santa
Gertrudis Mine. Prior to 1998 exploration expenditures at the Santa Gertrudis
Mine were capitalized to mining interests and for 1997 amounted to $3.7 million.
- ----------------------
OTHER INCOME (EXPENSE)
- ----------------------
Other income was $0.8 million in 1999 compared to $2.4 million in 1998 and
$2.1 million in 1997. The decrease in 1999 is primarily due to the
mark-to-market loss of $0.8 million on the 53,200 ounce call position compared
to a $0.4 million gain in 1998 as well as the decrease in interest income as a
result of lower interest earning balances.
Interest expense on the Company's convertible debentures was $0.4 million
in 1999 compared to $0.5 million in 1998 and $0.6 million in 1997. The decrease
is attributable to the continuing conversion of a portion of the debentures to
common shares (see note 4 to Consolidated Financial Statements).
- -----------------------
INCOME AND MINING TAXES
- -----------------------
The Company recorded an income and mining tax recovery of $1.3 million in
1999 compared to expense of $0.1 million in 1998 and a recovery of $2 million in
1997. Reference should be made to note 6 to the Consolidated Financial
Statements for additional information on the reported tax provisions.
- -------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
At December 31, 1999, the Company's working capital decreased to $31.4
million compared to $45.7 million in 1998. Included in working capital is cash
and short-term deposits of $18.2 million and money market instruments (matured
in February 2000) of $8 million compared to cash and short-term deposits of
$41.5 million in 1998. As discussed in note 7 to the financial statements, the
Company adopted the new Canadian Institute of Chartered Accountants Handbook
Section 1540 "Cash Flow Statements" in 1999. The Section requires that
short-term deposits with initial maturities on acquisition of greater than 90
days not be classified as cash on the balance sheet. The Company periodically
invests in money market instruments with maturities of up to 180 days to take
advantage of interest rates and other factors. Accordingly, although these
instruments are readily convertible into cash they are now classified as money
market instruments with their acquisition and maturity included in investing
activities in the Statements of Cash Flows.
For the year ended December 31, 1999 there was negative cash flow from
operations before the net change in non-cash operating working capital of $9.4
million compared to positive $0.4 million in 1998 and positive $0.6 million in
1997. The negative cash flow in 1999 compared to the positive cash flow in 1998
results from the decrease in gold production and increase in costs at the Joe
Mann Mine, the lower average realized gold price and lower gold production from
the Santa Gertrudis Mine.
The main source of cash for the Company during 1998 was from the sale of
surplus mining equipment and the Wildcat property in Nevada, which yielded $3.7
million, and the reduction in operating working capital. The main source of cash
during 1997 was the early termination of various gold hedging instruments
totalling 118,100 ounces, which resulted in cash proceeds of $9.7 million.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
19
<PAGE> 22
- --------------------------------------------------------------------------------
- --------------------
Capital Expenditures
- --------------------
Capital expenditures were as follows ($000's):
<TABLE>
<CAPTION>
1999 1998 1997
================================================================================
<S> <C> <C> <C>
Joe Mann Mine:
- - sustaining capital $2,286 $2,017 $2,360
- - shaft deepening 238 4,452 6,564
- - cut-and-fill development 975
- --------------------------------------------------------------------------------
3,499 6,469 8,924
- --------------------------------------------------------------------------------
Santa Gertrudis Mine 6 82 3,091
Cerro Quema Project 1,580 15,129
Other 21 10 68
- --------------------------------------------------------------------------------
$3,526 $8,141 $27,212
================================================================================
</TABLE>
In addition to these capital expenditures, during 1999 the Company also
acquired the mining and exploration claims of the former gold producer, Minera
Roca Roja, SA. de C.V., for cash consideration of $1.6 million and the
assumption of the associated environmental obligations estimated at $0.7
million.
- ---------
YEAR 2000
- ---------
The Company has not experienced any computer system or operational issues,
either internally or with its suppliers, with respect to the Year 2000 issue.
- -------
OUTLOOK
- -------
Campbell's focus for the year 2000 will be on its existing operations
while continuing to search for new opportunities. Implementing the new mining
method at the Joe Mann Mine on time and budget is a priority. Once development
in preparation for the change to cut-and-fill mining is complete, expected at
the end of the first quarter of 2000, the mine should start to generate
meaningful levels of cash flow. Gold production is forecast at 63,500 ounces at
a cash cost of US$225 per ounce in the nine operating months of 2000 increasing
to approximately 90,000 ounces in 2001. Development and sustaining capital
expenditures for 2000 is forecast at $5.3 million of which $3.6 million relates
to the development period.
The Santa Gertrudis Mine is expected to produce approximately 22,500
ounces of gold at a cash operating cost of US$233 per ounce during 2000,
sufficient to fund the majority of the exploration effort, currently budgeted at
US$1.5 million.
At the Company's upcoming annual shareholders meeting, shareholders will
be asked to vote on a special resolution to consolidate (reverse split) the
issued and outstanding common shares. The resolution is in response to a new
continuing listing rule of the New York Stock Exchange requiring listed
companies stock price to be a minimum of US$1 per share. Both the American Stock
Exchange and NASDAQ have similar stock price requirements. Given the high
percentage of Campbell's shares held by United States residents, the Company
believes it is in the best interests of all shareholders to maintain a listing
in the United States.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
20
<PAGE> 23
- --------------------------------------------------------------------------------
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
To the Shareholders of Campbell Resources Inc.:
The accompanying consolidated financial statements of the Company were prepared
by management in accordance with accounting principles generally accepted in
Canada, consistently applied and within the framework of the summary of
significant accounting policies in these consolidated financial statements.
Management is responsible for all information in the annual report. All
financial and operating data in the annual report is consistent, where
appropriate, with that contained in the consolidated financial statements.
A system of internal accounting control is maintained in order to provide
reasonable assurance that assets are safeguarded and that transactions are
properly recorded and executed in accordance with management's authorization.
This system includes established policies and procedures, the selection and
training of qualified personnel and an organization providing for appropriate
delegation of authority and segregation of responsibilities.
The Board of Directors discharges its responsibilities for the consolidated
financial statements primarily through the activities of its Audit Committee
composed of three directors, none of whom are members of management. This
Committee meets with management to assure that it is performing its
responsibility to maintain financial controls and systems and to approve the
annual consolidated financial statements of the Company. The Audit Committee
also meets with the independent auditors to discuss the results of their audit
and their audit report prior to submitting the consolidated financial statements
to the Board of Directors for approval.
The consolidated financial statements have been audited on behalf of the
shareholders by the Company's independent auditors, KPMG LLP, in accordance with
generally accepted auditing standards. The auditors' report outlines the scope
of their examination and their opinion on the consolidated financial statements.
/s/ John O. Kachmar /s/ Paul J. Ireland
John O. Kachmar Paul J. Ireland
President and Vice President, Finance and
Chief Executive Officer Chief Financial Officer
AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS
We have audited the consolidated balance sheets of Campbell Resources Inc. as at
December 31, 1999 and 1998 and the consolidated statements of operations,
retained earnings (deficit) and cash flows for each of the years in the
three-year period ended December 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosure in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 1999
and 1998 and the results of its operations and the cash flows for each of the
years in the three-year period ended December 31, 1999 in accordance with
Canadian generally accepted accounting principles.
Canadian generally accepted accounting principles vary in certain respects from
accounting principles generally accepted in the United States. Application of
accounting principles generally accepted in the United States would have
affected results of operations for each of the years in the three year period
ended December 31, 1999 and shareholders' equity as at December 31, 1999 and
1998 to the extent summarized in note 12 to the consolidated financial
statements.
/s/ KPMG LLP
Chartered Accountants
Toronto, Canada
February 25, 2000
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
21
<PAGE> 24
- --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
as at December 31,
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1999 1998
- ------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets
Cash and short-term deposits $ 18,219 $ 41,493
Money market instruments 7,958
Receivables 1,999 2,653
Inventories (note 2) 4,891 4,538
Prepaids 460 474
- ------------------------------------------------------------------------------
Total current assets 33,527 49,158
- ------------------------------------------------------------------------------
Other assets 194 502
Mining Interests (note 3) 53,413 53,117
- ------------------------------------------------------------------------------
Total assets $ 87,134 $102,777
==============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 1,104 $ 2,254
Accrued liabilities 1,003 1,215
- ------------------------------------------------------------------------------
Total current liabilities 2,107 3,469
- ------------------------------------------------------------------------------
Accrued reclamation 2,169 1,652
Convertible debentures (note 4) 3,718 5,652
Deferred mining taxes 1,716 3,616
Other liabilities 1,751 919
Shareholders' equity
Capital stock (note 5) 125,339 123,632
Foreign currency translation adjustment 593 1,394
Deficit (50,259) (37,557)
- ------------------------------------------------------------------------------
Total shareholders equity 75,673 87,469
- ------------------------------------------------------------------------------
Total liabilities and shareholders equity $ 87,134 $102,777
==============================================================================
</TABLE>
Commitments and contingencies (note 8)
Approved by the Board, /s/ James D. Beatty
Director
/s/ John O. Kachmar
Director
See accompanying notes to the consolidated financial statements.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
22
<PAGE> 25
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31,
(Expressed in thousands of Canadian dollars except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Metal sales $ 22,465 $ 36,388 $ 52,635
- ------------------------------------------------------------------------------------------
Expenses
Mining 25,646 33,449 46,681
General administration 2,875 2,648 3,203
Depreciation and amortization 4,699 8,191 14,585
Exploration 2,299 2,219 317
Care and maintenance 1,394
- ------------------------------------------------------------------------------------------
36,913 46,507 64,786
- ------------------------------------------------------------------------------------------
Loss from operations before writedown and
loss on sale of mining interests (14,448) (10,119) (12,151)
Writedown and loss on sale of mining interests (note 3) 12,508 31,684
- ------------------------------------------------------------------------------------------
Loss from operations (14,448) (22,627) (43,835)
- ------------------------------------------------------------------------------------------
Other income (expense)
Other income 843 2,396 2,096
Convertible debenture interest expense (351) (526) (639)
- ------------------------------------------------------------------------------------------
492 1,870 1,457
- ------------------------------------------------------------------------------------------
Loss before taxes (13,956) (20,757) (42,378)
Income and mining taxes recovery (expense) (note 6) 1,254 (91) 1,968
- ------------------------------------------------------------------------------------------
Net loss $(12,702) $(20,848) $(40,410)
==========================================================================================
Loss per share (note 5) $ (0.08) $ (0.14) $ (0.27)
==========================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
for the years ended December 31,
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at beginning of year $(37,557) $(16,709) $ 23,701
Net loss (12,702) (20,848) (40,410)
- ------------------------------------------------------------------------------------------
Balance at end of year $(50,259) $(37,557) $(16,709)
==========================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
23
<PAGE> 26
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31,
(Expressed in thousands of Canadian dollars)
<TABLE>
<CAPTION>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash provided by (used in):
Operating activities
Net loss $(12,702) $(20,848) $(40,410)
Items not involving cash
Depreciation and amortization 4,699 8,191 14,585
Writedown and loss on sale of mining interests 12,508 30,239
Deferred mining taxes recovery (1,900) (582) (2,569)
Other 468 1,142 (1,289)
- ------------------------------------------------------------------------------------------
(9,435) 411 556
Net change in non-cash operating working capital (842) 2,551 2,945
- ------------------------------------------------------------------------------------------
(10,277) 2,962 3,501
- ------------------------------------------------------------------------------------------
Financing activities
Issues of capital stock 65 177 138
- ------------------------------------------------------------------------------------------
65 177 138
- ------------------------------------------------------------------------------------------
Investing activities
Expenditures on mining interests (3,526) (8,141) (27,212)
Purchase of Roca Roja claims (1,562)
Proceeds on sale of assets 3,876
Termination of hedging contracts 9,679
Money market instruments (7,800) 28,097 21,330
Decrease in other assets 157 313 165
- ------------------------------------------------------------------------------------------
(12,731) 24,145 3,962
- ------------------------------------------------------------------------------------------
Effect of exchange rate change on cash
and short-term deposits (331) 571 162
- ------------------------------------------------------------------------------------------
Increase (decrease) in cash and short-term deposits (23,274) 27,855 7,763
Cash and short-term deposits at beginning of year 41,493 13,638 5,875
- ------------------------------------------------------------------------------------------
Cash and short-term deposits at end of year $ 18,219 $ 41,493 $ 13,638
==========================================================================================
Changes in non-cash operating working capital
Receivables $ 654 $ 2,152 $ 3,465
Inventories and prepaids (134) 2,707 1,638
Accounts payable (1,150) (1,735) (1,515)
Accrued liabilities (212) (573) (643)
- ------------------------------------------------------------------------------------------
$ (842) $ 2,551 $ 2,945
==========================================================================================
</TABLE>
See accompanying notes to the consolidated financial statements.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
24
<PAGE> 27
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
- -----------------------------------------------
1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- -----------------------------------------------
The consolidated financial statements are prepared by management in accordance
with accounting principles generally accepted in Canada and, except as described
in note 12, conform in all material respects with accounting principles
generally accepted in the United States. The principal accounting policies
followed by the Company, which have been consistently applied, are summarized as
follows:
Intercorporate Investments: The consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant intercompany
balances and transactions have been eliminated on consolidation.
Cash and Short-Term Deposits, Money Market Instruments: 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) and are
carried at amortized cost, which approximates market. Money market instruments
with maturity on acquisition of more than 90 days are carried at amortized cost,
which approximates market. The Company's policy is to invest in highly rated
instruments and to limit the amount of credit exposure to any one institution.
Inventories: Mining and milling materials and supplies are valued at the lower
of average cost and net replacement cost. Work-in-process is valued at the lower
of average production cost or net realizable value. Production costs include
direct labour, benefits, supplies and equipment operating costs and maintenance.
Mining Interests: Plant and equipment are recorded at cost with depreciation
generally provided either on the unit-of-production method over the estimated
economic life of the mine to which they relate or on the straight-line method
over their estimated useful lives.
Mining properties and deferred mining expenditures are recorded at cost and are
depleted on the unit-of-production method over the estimated economic life of
the mine to which they relate. Development costs incurred to expand existing
capacity, develop new ore bodies and develop property substantially in advance
of production are capitalized.
Exploration expenditures are charged to income in the period incurred except
where these costs relate to specific properties for which economically
recoverable reserves exist, in which case they are deferred. Significant
property payments for active exploration properties are capitalized. If no
mineable ore body is discovered, previously capitalized costs are expensed.
Mining properties and deferred expenditures are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of these
assets may not be recoverable. If estimated future net cash flows expected to
result from the use of the properties and their eventual disposition are less
than the carrying amount, then these properties are written down to their
estimated recoverable amount determined on a non-discounted basis.
Stock-Based Compensation Plans: The Company has two stock-based compensation
plans, which are described in note 5. No compensation expense is recognized for
these plans when stock or stock options are issued to directors or employees
unless stock appreciation rights ("SAR") accompany the options. When stock is
issued on the exercise of a stock option under a SAR, the difference between the
market price and the option price is recorded as compensation expense and
credited to share capital. Any consideration paid by employees on the exercise
of stock options or purchase of stock is credited to share capital.
Site Restoration: Provisions are established for estimated future costs of site
restoration of mining properties, including the removal of production facilities
at the end of their useful lives. Costs are based upon estimates of the
anticipated method and extent of site restoration to meet current legal and
industry standards. These standards are continually changing and the estimated
provision is reviewed annually. The estimated future costs are accrued over the
estimated life of the underlying asset and the annual charge, determined on the
same basis as the amortization of the underlying asset, is included in mining
costs.
Recognition of Metals Revenue: Gold and copper revenues are recognized at the
time of production. Receivables include gold and gold concentrate settled
subsequent to year end, which are recorded at estimated net realizable value.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
25
<PAGE> 28
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
Commodity and Foreign Exchange Contracts: The Company uses forward and option
contracts to hedge the effect of exchange rate changes on foreign currency
exposures, and forward and option contracts to hedge the effect of price changes
on a portion of the commodities it sells. Gains and losses on hedging
instruments that effectively establish prices for future production are not
recognized in income until reflected in sales revenue when the related
production is delivered. From time to time, the Company has entered into options
contracts for the sale of commodities not designated as hedges. These contracts
are carried at quoted market values and included in other assets (liabilities)
and gains and losses arising from the changes in the market values of these
contracts are recognized in earnings in the period in which the changes occur.
Currency Translation: The U.S. dollar is considered to be the functional
currency of the Company's Mexican operations as most of those activities are
conducted in U.S. dollars. Accordingly, the Mexican operations are translated
from Mexican pesos into U.S. dollars using the temporal method whereby monetary
assets and liabilities are translated at the year end rate of exchange and
non-monetary assets and liabilities are translated at historical rates of
exchange. Exchange gains or losses are included in the determination of
earnings. The U.S. dollar financial statements of the Mexican operations are
translated into Canadian dollars at the year end rate of exchange for the
balance sheet and the average rate of exchange for the year for the statement of
income. Exchange gains or losses are included as a separate component of
shareholders' equity. The Panamanian operations are translated into Canadian
dollars using the temporal method.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities and the reported amounts of
revenue and expense during the period. Actual results could differ from
estimates. During the fiscal periods presented, management has made a number of
significant estimates and valuation assumptions, including estimates of the net
realizable value of accounts receivable, inventory, the useful lives of capital
assets, the recoverability of mining interests, the future costs associated with
environmental and site restoration matters, and the fair value of financial
assets and liabilities. These estimates and valuation assumptions are based on
current information and management's planned course of action, as well as
assumptions about future business and economic conditions. Should the underlying
valuation assumptions and estimates change, the recorded amounts could change by
a material amount.
Comparative Figures: Certain comparative figures have been reclassified to
conform to the current financial statement presentation.
- ----------------
2 -- INVENTORIES
- ----------------
<TABLE>
<CAPTION>
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Materials and supplies $ 4,369 $ 4,538
Work-in-Process 522
- --------------------------------------------------------------------------------
$ 4,891 $ 4,538
================================================================================
</TABLE>
- ---------------------
3 -- MINING INTERESTS
- ---------------------
<TABLE>
<CAPTION>
1999 1998
- ---------------------------------------------------------------------------------------------------------------------
Accumulated Accumulated
Depreciation and Depreciation and
Cost Amortization Net Cost Amortization Net
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Property, plant and equipment $ 24,673 $16,697 $ 7,976 $ 24,850 $ 16,138 $ 8,712
Mining properties and deferred expenditures 152,890 108,428 44,462 149,016 104,611 44,405
Construction in progress 975 975
- ---------------------------------------------------------------------------------------------------------------------
$178,538 $125,125 $53,413 $173,866 $120,749 $53,117
=====================================================================================================================
</TABLE>
During 1999 the Company acquired mining claims and other assets in Mexico for
$1,562,000 cash and the assumption of future environmental obligations with
respect to the property, estimated at acquisition to be $716,000.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
26
<PAGE> 29
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
During 1998, as part of its periodic evaluation of the carrying value of its
mining interests, the Company wrote down the carrying value of its Cerro Quema
project in Panama by $10,200,000. In 1997 the Company wrote down the value of
the Joe Mann Mine by $28,000,000.
During 1992, the Company entered into agreements under which the Societe
Quebecoise d'Exploration Miniere ("Soquem") could earn a 50% interest in the Joe
Mann property (excluding the Joe Mann Mine) and in the Company's other
properties in the Chibougamau area by incurring specified amounts on exploration
on those properties. To July 1, 1997, Soquem had incurred total qualifying
expenditures under the previous agreements of $2,548,000 on the Joe Mann
property and $2,431,000 on the Chibougamau property. Effective July 2, 1997, the
agreements were modified to provide that Soquem spend an additional $1,600,000
on the Joe Mann property and an additional $750,000 on the Chibougamau property
from the effective date until June 1, 2002 to earn a 50% interest in each of the
properties. To December 31, 1999, Soquem had incurred total qualifying
expenditures under the new amendment of approximately $196,000 on the Joe Mann
property and $145,000 on the Chibougamau area property.
- ---------------------------
4 -- 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 1999, debenture holders converted US$1,117,000 (1998 - US$1,444,000; 1997
- - US$454,000) of debenture principal into 2,234,000 (1998 - 2,888,000; 1997 -
908,000) common shares of the Company resulting in a balance outstanding at
December 31, 1999 of US$2,576,000 (1998 - US$3,693,000; 1997 - US$5,137,000).
- ------------------
5 -- CAPITAL STOCK
- ------------------
a) Authorized shares
Preference shares - unlimited, issuable in series, without par value
Common shares - unlimited
b) Issued and outstanding shares (in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
- ---------------------------------------------------------------------------------------------------------------------
Shares Amount Shares Amount Shares Amount
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Common shares:
Balance at beginning of year 154,686 $123,632 151,445 $121,425 148,588 $118,605
Issued:
Conversion of convertible debentures 2,234 1,642 2,888 2,030 908 611
Issued as part consideration on acquisition
of Minera Cerro Quema, SA. 1,770 2,071
Employee Incentive Plan and Directors'
Stock Option Plan 232 65 353 177 179 138
- ---------------------------------------------------------------------------------------------------------------------
157,152 $125,339 154,686 $123,632 151,445 $121,425
=====================================================================================================================
</TABLE>
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
27
<PAGE> 30
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
c) Employee Incentive Plan and Directors' Stock Option Plan
The Employee Incentive Plan comprises a Share Option Plan, a Share Purchase
Plan, a Share Bonus Plan and a Share Loan Plan. The Share Purchase Plan calls
for Company contributions of an amount equal to 50 per cent of the employees'
contributions, which can amount to a maximum of 5 per cent of their basic annual
salaries or wages. The common shares are issued on a quarterly basis at market
value.
Under the Share Bonus Plan, shares can be issued to full-time salaried employees
as a bonus in recognition of services as determined by the Compensation
Committee or the Board of Directors.
The Share Loan Plan provides the Compensation Committee or the Board of
Directors the discretion to make loans to full time employees to enable them to
acquire shares in the Company. No loans are outstanding under this plan.
Options granted under the Directors' and Employee Share Option Plans expire not
later than five years from the date on which they were granted and all current
options expire on or before August 10, 2004. Changes in the share option plans
are as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------
Shares Weighted Shares Weighted Shares Weighted
Average Average Average
Exercise Price Exercise Price Exercise Price
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 7,025 $0.93 7,250 $1.15 7,175 $1.18
Granted 1,075 $0.43 2,325 $0.44 450 $0.92
Exercised (19) $0.57
Expired (1,375) $0.65 (2,550) $1.12 (356) $1.34
- ----------------------------------------------------------------------------------------------------------------------------
Outstanding at end of year 6,725 $0.91 7,025 $0.93 7,250 $1.15
============================================================================================================================
Options exercisable at end of year 5,906 $0.97 5,994 $0.94 6,037 $1.12
</TABLE>
The following summarizes information about stock options outstanding at December
31, 1999 (in thousands except per share amounts);
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- ----------------------------------------------------------- -----------------------------------------------------------
Range of Exercise Number Outstanding Weighted Average Weighted Average Number Exercisable Weighted Average
Price Remaining Exercise Price Exercise Price
Contractual Life
- ----------------------------------------------------------- -----------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$0.43 - $0.44 3,375 3.9 years $0.44 2,631 $0.44
$0.89 - $0.91 300 2.6 years $0.91 225 $0.91
$1.26 - $1.48 3,050 1.5 years $1.43 3,050 $1.43
</TABLE>
d) Common share purchase warrants
As part of a public offering of units consisting of common shares and warrants
in February, 1996, the Company issued 9,000,000 warrants that entitled the
holder to purchase one common share of the Company for US$1.50 on or before
February 26, 1999. All of the warrants expired unexercised.
e) Loss per share
The weighted average number of common shares outstanding during the year ended
December 31, 1999 used to calculate the loss per common share amounted to
156,949,000 (1998 - 153,532,000; 1997 - 150,548,000). Outstanding warrants and
options were not dilutive to loss per share in any of the periods presented.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
28
<PAGE> 31
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
- ----------------------------
6 -- INCOME AND MINING TAXES
- ----------------------------
a) Geographic components
The geographic components of loss before taxes is as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Canada $ (9,001) $ (6,562) $ (32,729)
Mexico (4,448) (3,855) (9,101)
Panama (507) (10,340) (548)
- -------------------------------------------------------------------------------
$ (13,956) $ (20,757) $ (42,378)
===============================================================================
</TABLE>
The geographic components of income and mining taxes is as follows:
<TABLE>
<S> <C> <C> <C>
Current income tax expense:
Canada $ (79) $ (55) $ (220)
Mexico (567) (618) (381)
- -------------------------------------------------------------------------------
(646) (673) (601)
Deferred mining tax recovery - Canada 1,900 582 2,569
- -------------------------------------------------------------------------------
$ 1,254 $ (91) $ 1,968
===============================================================================
</TABLE>
b) Deferred mining taxes
The payment of certain mining taxes is deferred due to the recognition of
amounts for tax purposes in different periods than for accounting purposes. The
principal timing difference is depreciation and amortization.
c) Loss carry forwards
At December 31, 1999, the Company and its subsidiaries had operating losses for
income tax purposes in Canada approximating $4,800,000 and in Mexico
approximating $25,200,000 which are available to reduce taxes in future years
and expire over the period to the year 2009. In addition, the Company and its
subsidiaries had capital losses for income tax purposes in Canada of
approximately $25,500,000 available to apply against future taxable capital
gains. The Company's subsidiary has an additional $22,600,000 of capital loss
carry forwards which have not been accepted by the tax authorities. The Company
is objecting to the tax authorities' position. The Company also had unclaimed
deductions for income tax purposes in excess of carrying values for financial
statement purposes of approximately $53,000,000 in Canada and $13,000,000 in its
foreign subsidiaries. The potential future benefit of these tax losses and
deductions has not been recognized in these financial statements.
d) Effective tax rate
The recovery of (provision for) income taxes varies from the amounts that would
be computed by applying the Canadian federal and provincial statutory tax rates
of approximately 40% (1998 and 1997 - 40%) to income before taxes as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Expected income tax recovery using statutory income tax rates $ 5,585 $ 8,289 $ 16,785
Resource allowance (274) 67 167
Mining taxes recovery 1,900 582 2,569
Tax benefit of losses not currently recognized (5,310) (7,495) (16,952)
Non-deductible expenses (861)
Other (647) (673) (601)
- ----------------------------------------------------------------------------------------------
Income and mining tax recovery (provision) $ 1,254 $ (91) $ 1,968
==============================================================================================
</TABLE>
[LOGO] Campbell
Resources Inc.
================================================================================
29
<PAGE> 32
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
- -----------------------------
7 -- 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 years ended December 31, 1998
and 1997 have been restated to conform to the new requirements.
Additional disclosures required with respect to the Statements of Cash Flows are
as follows:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash taxes paid $ 573 $ 770 $ 695
Cash interest paid $ 306 $ 502 $ 616
</TABLE>
- ----------------------------------
8 -- COMMITMENTS AND CONTINGENCIES
- ----------------------------------
a) The Company has sold forward 10,000 ounces of gold for delivery in 2000
under forward contracts at an average of US$290 per ounce, and has
outstanding calls for 33,200 ounces of gold in 2001 and 20,000 ounces of
gold in 2002 at US$350 per ounce subject to floating gold lease rates.
b) 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.
c) 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 was advised that this assessment was
improper as it completely ignored the earlier ruling. Accordingly the
Company filed a new appeal before the Federal Tax Court to nullify the
assessment. The appeal is still awaiting consideration by the Tax Court.
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.
d) 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.
e) 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 Company has made, and
expects to make in the future, submissions
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
30
<PAGE> 33
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
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.
- -----------------
9 -- PENSION PLAN
- -----------------
The Company maintains a defined benefit pension plan for certain employees which
provides benefits based on length of service and remuneration. The most recent
actuarial valuation of the plan was as at December 31, 1996. As at December 31,
1999, the estimated projected benefit obligation was approximately $2,864,000
(1998 - $2,754,000) and the market value of assets aggregated $3,515,000 (1998 -
$3,508,000).
- --------------------
10 -- SEGMENTED DATA
- --------------------
The Company's operations consist principally of the exploration, development,
mining and processing of precious metals in Canada, Mexico and Panama. The
following is a summary of the Company's revenue by geographic area:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Canada $21,464 $31,030 $35,443
Mexico 1,001 5,358 17,192
- -------------------------------------------------------------------------------
$22,465 $36,388 $52,635
===============================================================================
</TABLE>
Revenues are attributed to countries based on the source of the production.
During 1999 the Company sold approximately 39% (1998- 35%; 1997 - 28%) of its
product to one smelter.
The following is a summary of the Company's mining interests by geographic area:
<TABLE>
<CAPTION>
1999 1998 1997
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
Canada $31,913 $33,054 $32,688
Mexico 12,419 10,963 12,182
Panama 9,081 9,100 22,632
Other 609
- -------------------------------------------------------------------------------
$53,413 $53,117 $68,111
===============================================================================
</TABLE>
- --------------------------------------------
11 -- FAIR VALUE AND CREDIT RISK DISCLOSURES
- --------------------------------------------
At December 31, 1999 the fair value of the Company's convertible debentures was
estimated to be $2,777,000 (1998 - $5,840,000) compared to the carrying amount
of $3,718,000 (1998 - $5,652,000) based on a quoted price. The carrying amount
of cash and short-term deposits, money market instruments, receivables, accounts
payable, accrued liabilities and other liabilities in the consolidated balance
sheets approximates fair value based on their short-term maturities and/or
quotes received. The Company had no foreign currency hedging contracts at
December 31, 1999. The fair value of the Company's foreign currency hedging
contracts at December 31, 1998 was a loss of approximately $576,000.
The Company is exposed to credit-related losses in the event of non-performance
by counter parties to financial instruments but does not expect any counter
parties to fail to meet their obligations. The Company deals with only highly
rated counter parties, normally major financial institutions including banks.
The credit risk exposure of derivative instruments is represented by the fair
value of contracts with a positive fair value at the reporting date. The credit
risk represents the maximum amount that would be at risk if the counter parties
failed completely to perform under the contracts.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
31
<PAGE> 34
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
- -----------------------------------------------------------------------
12 -- 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>
1999 1998 1997
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss for year as reported $(12,702) $(20,848) $(40,410)
Depreciation and amortization (a) 926 (9,389) 19,061
Deferred income taxes (b) (1,031) 285 (6,083)
Foreign exchange contracts (e) 576 (576)
- ------------------------------------------------------------------------------------------
Net loss for the year in accordance
with United States accounting principles $(12,231) $(30,528) $(27,432)
- ------------------------------------------------------------------------------------------
Other comprehensive income (loss):
Foreign currency translation adjustments (801) 986 656
- ------------------------------------------------------------------------------------------
Comprehensive loss for the year in
accordance with United States accounting
principles $(13,032) $(29,542) $(26,776)
- ------------------------------------------------------------------------------------------
Loss per share for the year in accordance
with United States accounting principles
Basic and fully diluted $ (0.08) $ (0.20) $ (0.18)
==========================================================================================
</TABLE>
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. Under Canadian
accounting principles capital assets should be written down to the net
recoverable amount if this exceeds the carrying amount, whereas under
United States accounting principles if the future net cash flows is less
than the carrying amount the capital asset should be written down to its
fair value.
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.
Significant components of the Company's deferred tax assets and
liabilities under United States accounting principles are as follows:
<TABLE>
<CAPTION>
1999 1998
- -------------------------------------------------------------------------------
<S> <C> <C>
Noncurrent deferred tax assets:
Mining interests $ 37,768 $ 37,956
Operating loss carry forwards 10,571 6,745
Capital loss carry forwards 10,168 10,380
Other 1,232 1,676
- -------------------------------------------------------------------------------
59,739 56,757
Valuation allowance 57,740 55,661
- -------------------------------------------------------------------------------
1,999 1,096
- -------------------------------------------------------------------------------
Current deferred tax liabilities:
Inventory 1,179 987
Noncurrent deferred tax liabilities:
Mining interests 869
Other 820 109
- -------------------------------------------------------------------------------
1,999 1,965
- -------------------------------------------------------------------------------
Net deferred tax liabilities $ $ (869)
===============================================================================
</TABLE>
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
32
<PAGE> 35
- --------------------------------------------------------------------------------
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts are expressed in thousands of Canadian dollars)
The tax loss carry forwards disclosed in note 6(c) and other temporary
differences giving rise to deferred taxes have been tax effected for
purposes of the above disclosure at the tax rate effective in the
applicable jurisdiction, that is, 40% for Canada, 34% for Mexico.
c) Stock Options
Beginning in 1996, United States accounting principles allow, but do not
require companies to record compensation cost for stock option plans at
fair value. The Company has chosen to continue to account for stock
options using the intrinsic value method as permitted under Canadian and
United States accounting principles. The United States accounting
pronouncement does, however, require the disclosure of pro forma net
income and earnings per share information as if the Company had accounted
for its employee stock options issued in prior years under the fair value
method. Accordingly, the fair value of these options has been estimated at
the date of grant using a Black-Scholes option pricing model with the
following assumptions for each year; risk free interest rates for 1999 of
5.70% (1998 - 5.50%; 1997 - 5.15-6.30%); dividend yields of 0%; volatility
factors of the expected market price of the Company's common shares of
100%; and a weighted average expected life of the options of four years.
The weighted average grant date fair values of options issued in 1999,
1998 and 1997 were $0.31, $0.21 and $0.43, respectively. For purposes of
pro forma disclosures, the estimated fair value of the options is expensed
over the options' vesting period, which is three years in the case of
employees and immediately in the case of Directors. For the year ended
December 31, 1999, the Company's pro forma net loss and loss per share in
accordance with United States accounting principles are a net loss of
$12,816,000 (1998 - net loss $31,432,000; 1997 net loss of $27,951,000)
and a loss of $0.08 (1998 loss of $0.20; 1997 loss of $0.19).
d) Contingent Liability
Under United States accounting principles the contingent liability
disclosed in note 8 (d) would be reflected in the balance sheet.
Accordingly, under 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.
e) 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 or the cost of goods to be purchased in
foreign currencies. Gains and losses related to changes in market values
of such contracts are deferred and recognized when the contract is settled
as part of sales revenue or the cost of purchased goods as appropriate.
Under United States accounting principles, changes in the market value of
the contracts would be included in current earnings.
f) Balance Sheets
The cumulative effect of the application of United States accounting
principles, noted in (a) to (e) above, on the consolidated balance sheets
of the Company as at December 31, 1999 and 1998 would be to decrease
mining interests by $21,695,000 (1998 - $23,403,000), increase other
liabilities by $nil (1998 - $576,000), increase long-term investments by
$50,000,000 (1998 - $50,000,000), increase long-term liabilities by
$38,000,000 (1998 - $38,000,000), increase deferred mining tax assets,
non-current assets by $1,999,000 (1998 - $1,096,000), increase deferred
mining tax, current assets by $1,179,000 (1998 - $987,000) and decrease
deferred mining taxes, non-current liability by $896,000 (1998 -
$2,638,000), increase preferred shares by $12,000,000 (1998- $12,000,000)
and reduce shareholders equity by $20,761,000 (1998- $21,232,000).
g) 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.
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
33
<PAGE> 36
- --------------------------------------------------------------------------------
FIVE YEAR COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended December 31 1999 1998 1997 1996 1995
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating results (in thousands):
- ---------------------------------------------------------------------------------------------------
Metal sales $ 22,465 36,388 52,635 67,180 67,418
Net income (loss) $ (12,702) (20,848) (40,410) 9,012 10,461
Cash flow from operations (before change
in non-cash operating working capital) $ (9,435) 411 556 21,439 18,703
Capital Expenditures $ 3,526 8,141 27,212 13,968 7,934
Financial position (in thousands):
- ---------------------------------------------------------------------------------------------------
Cash and short-term deposits $ 18,219 41,493 13,638 5,875 32,271
Money market instruments $ 7,958 28,097 49,427
Total assets $ 87,134 102,777 123,882 165,298 123,703
Long-term debt $ 3,718 5,652 7,341 7,657 10,782
Shareholders' equity $ 75,673 87,469 105,124 142,058 99,554
Per share data:
- ---------------------------------------------------------------------------------------------------
Net income (loss) per share $ (0.08) (0.14) (0.27) 0.06 0.09
Book value per share $ 0.48 0.57 0.69 0.96 0.80
Operational statistics:
- ---------------------------------------------------------------------------------------------------
Gold production-- ounces 53,700 82,400 112,700 124,800 120,100
Gold revenue per ounce-- US dollars $ 276 304 336 396 402
Cash cost per ounce-- US dollars $ 292 255 288 252 247
Shares outstanding (in thousands):
- ---------------------------------------------------------------------------------------------------
At year end 157,152 154,686 151,445 148,588 124,466
Weighted average during year 156,949 153,532 150,548 145,907 121,214
Foreign exchange rate-- US dollars:
- ---------------------------------------------------------------------------------------------------
Year end/average $ 0.69/0.67 0.65/0.67 0.70/0.73 0.73/0.73 0.73/0.73
High/low $ 0.69/0.65 0.71/0.63 0.75/0.69 0.75/0.72 0.75/0.70
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
(Expressed in thousands of Canadian dollars except per share amounts)
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Year ended December 31, 1999
- ---------------------------------------------------------------------------------------
Metal sales $ 6,601 6,424 5,699 3,741
Loss from operations $ (3,939) (4,420) (3,631) (2,458)
Net loss $ (3,048) (3,923) (5,677) (54)
Net loss per share $ (0.02) (0.03) (0.04) (0.00)
Year ended December 31, 1998
- ---------------------------------------------------------------------------------------
Metal sales $ 10,281 9,241 8,847 8,019
Loss from operations $ (2,151) (2,551) (3,575) (14,350)
Net loss $ (1,730) (2,003) (3,190) (13,925)
Net loss per share $ (0.01) (0.01) (0.02) (0.09)
</TABLE>
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
34
<PAGE> 37
- --------------------------------------------------------------------------------
SHAREHOLDER INFORMATION
Campbell Resources Inc. common shares are listed on the New York and Toronto
stock exchanges and trade under the symbol "CCH"
- ----------------------------
QUARTERLY TRADING STATISTICS
- ----------------------------
Common Share Prices
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Toronto Stock Exchange New York Stock Exchange
(Cdn$) (US$)
- --------------------------------------------------------------------------------------------------------
High Low Volume High Low Volume
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999
- --------------------------------------------------------------------------------------------------------
4th Quarter 0.47 0.31 1,785,500 0.31 0.22 9,279,600
3rd Quarter 0.53 0.35 2,233,200 0.38 0.23 16,525,900
2nd Quarter 0.48 0.31 3,830,900 0.34 0.23 18,421,000
1st Quarter 0.50 0.22 2.865,000 0.34 0.16 35,018,700
- --------------------------------------------------------------------------------------------------------
1998
- --------------------------------------------------------------------------------------------------------
4th Quarter 0.65 0.34 1,416,133 0.47 0.22 18,271,600
3rd Quarter 0.56 0.35 1,171,353 0.41 0.25 16,252,500
2nd Quarter 0.70 0.46 2,599,624 0.50 0.31 21,353,109
1st Quarter 0.80 0.50 2,496,000 0.63 0.34 24,880,500
- --------------------------------------------------------------------------------------------------------
</TABLE>
[GRAPHIC OMITTED]
- --------------
TRANSFER AGENT
- --------------
Montreal Trust Company
151 Front Street West
8th Floor
Toronto, Ontario M5J 2N1
Shareholder Services
Phone: (416) 981-9633
Toll free: 1-800-663-9097
Fax: (416) 981-9800
e-mail: [email protected]
ChaseMellon Shareholder Services
85 Challenger Road
Overpeck Center
Ridgefield Park, New Jersey
U.S.A. 07660
- ----------------------
FINANCIAL PUBLICATIONS
- ----------------------
A copy of the Annual Report on Form 10-K filed with the U.S. Securities and
Exchange Commission, or copies of the Annual Report and Quarterly Reports may be
obtained without charge, upon request.
- ---------
INQUIRIES
- ---------
Inquiries regarding shareholder-related matters, including change of address
notifications, can be directed to the Secretary or to the Transfer Agent.
Questions regarding the Company's operating and financial performance may be
directed to the Manager, Investor Relations at (416) 366-5201 or
[email protected]
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
35
<PAGE> 38
- --------------------------------------------------------------------------------
CORPORATE INFORMATION
- ------------------
BOARD OF DIRECTORS
- ------------------
James D. Beatty (2,3)
Chief Executive Officer
Trinity Capital Corporation
Graham G. Clow
President & Chief Executive Officer
Manhattan Minerals Corporation
Rod P. Douglas (2)
Mining Engineer
John O. Kachmar(1)
President & Chief Executive Officer
Campbell Resources Inc.
James C. McCartney, Q.C. (1,3)
National Chairman, Law Firm of McCarthy Tetrault
Donald R. Murphy (2)
Consultant to Societe de developpement
de la Baie James
Francis S. O'Kelly
Mining Engineer
G.E. 'Kurt' Pralle (3)
Mining Engineer
James D. Raymond
Private Investor
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Compensation Committee
- -------------
LEGAL COUNSEL
- -------------
McCarthy Tetrault
Toronto, Ontario
- --------
AUDITORS
- --------
KPMG LLP
Toronto, Ontario
- ----------------------
PRINCIPAL SUBSIDIARIES
- ----------------------
Meston Resources Inc. (Quebec, Canada)
Oro de Sotula, S.A. de C.V. (Mexico)
Minera Cerro Quema, S.A. (Panama)
- ------------------------------
OFFICERS AND SENIOR MANAGEMENT
- ------------------------------
James C. McCartney, Q.C.
Chairman of the Board
John O. Kachmar
President & Chief Executive Officer
Paul J. Ireland
Vice President, Finance & Chief Financial Officer
Lorna D. MacGillivray
Vice President, Secretary & General Counsel
William S. Hamilton
Manager, Exploration Santa Gertrudis
Steven Dawson
Manager, Investor Relations
- ----------
OPERATIONS
- ----------
Meston Resources Inc.
Joe Mann Mine
Alain Coulombe,
General Manager
Phone: (418) 745-2537
Fax: (418) 745-3238
Oro de Sotula S.A. de C.V.
Santa Gertrudis Mine
Dave Loder,
Vice President & General Manager
Phone: (52-631) 76668
Fax: (52-631) 76668
William S. Hamilton,
Vice President, Exploration
Phone: (52-631) 76666
Minera Cerro Quema, S.A.
Cerro Quema Project
Phone: (507) 612-2289
Jorge Morales,
Legal Representative
- ---------------------
CORPORATE HEAD OFFICE
- ---------------------
Campbell Resources Inc.
120 Adelaide Street West
Suite 1910
Toronto, Ontario
Canada M5H 1T1
Phone: (416) 366-5201
Fax: (416) 367-3294
e-mail: [email protected]
[LOGO] Campbell
Resources Inc.
=====================-----------------------------------------------------------
36
<PAGE> 39
- --------------------------------------------------------------------------------
Campbell Resources Inc.
120 Adelaide Street West, Suite 1910
Toronto, Ontario, Canada M5H 1T1
Telephone: (416) 366-5201
Fax: (416) 367-3294
e-mail: [email protected]
<PAGE> 1
EXHIBIT 20.1
[LOGO]
CAMPBELL RESOURCES INC.
Suite 1910, 120 Adelaide Street West
Toronto, Ontario M5H 1T1
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE is hereby given that the Annual and Special Meeting of
Shareholders of Campbell Resources Inc. (the "Corporation") will be held at the
Toronto Board of Trade, Room "Ketchum", 3rd floor, Adelaide Street Entrance, 1
First Canadian Place, Toronto, Ontario on Friday, May 19th, 2000 at 10:00 A.M.
(Eastern Daylight Saving Time) for the following purposes:
1. to receive the Consolidated Financial Statements of the
Corporation and Auditors' Report thereon for the fiscal year
ended December 31, 1999;
2. to elect directors for the ensuing year;
3. to consider and, if deemed advisable, to approve by special
resolution, an amendment to the Corporation's articles of
incorporation to consolidate all issued and outstanding Common
Shares on the basis of one (1) new post-consolidation common
share for every ten (10) pre-consolidation common shares or
such lesser number of pre-consolidation common shares as the
directors in their sole discretion may determine;
4. to appoint auditors for the ensuing year and to authorize the
Directors to fix their remuneration; and
5. to transact such other business as may properly come before
the Meeting or any adjournment or adjournments thereof.
The Board of Directors of the Corporation has fixed the close of
business on March 31, 2000 as the record date for the determination of
shareholders entitled to notice of and to vote at the Meeting and any
adjournment thereof.
If you do not expect to be present at the Meeting, please sign, date
and fill in the enclosed form of proxy and return it by mail in the enclosed
addressed envelope. All instruments appointing proxies to be used at the Meeting
must be deposited with the Secretary of the Corporation at the Corporation's
office in Toronto, or at the office of the Corporation's transfer agent,
Montreal Trust Company, in Toronto not later than 5:00 p.m. (Eastern Daylight
Saving Time) on Wednesday, May 17, 2000. Shares represented by instruments
appointing proxies that are not so deposited will not be voted at the Meeting.
By Order of the Board of Directors
Lorna D. MacGillivray
Vice President, Secretary and General Counsel
Dated: March 23, 2000
<PAGE> 2
CAMPBELL RESOURCES INC.
PROXY CIRCULAR
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
THIS PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY
THE MANAGEMENT AND BOARD OF DIRECTORS OF CAMPBELL RESOURCES INC. (THE
"CORPORATION" OR "CAMPBELL") OF PROXIES TO BE VOTED AT THE ANNUAL AND SPECIAL
MEETING OF SHAREHOLDERS (THE "MEETING") TO BE HELD ON MAY 19, 2000 AT THE
TORONTO BOARD OF TRADE, ROOM "KETCHUM", 3RD FLOOR, ADELAIDE STREET ENTRANCE, 1
FIRST CANADIAN PLACE, TORONTO, ONTARIO. The record date for determination of
shareholders entitled to receive notice of the Meeting is March 31, 2000. If a
person has acquired ownership of shares since that date he may, in accordance
with the provisions of the Canada Business Corporations Act (the "Act"), produce
properly endorsed share certificates or otherwise establish that he owns such
shares and demand, not later than the close of business on May 9, 2000, to be
included in the list of shareholders entitled to vote at the Meeting, in which
case the transferee is entitled to vote his shares at the Meeting.
EACH SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON, WHO NEED NOT BE A
SHAREHOLDER, OTHER THAN THE PERSONS SPECIFIED IN THE ENCLOSED FORM OF PROXY TO
ATTEND AND ACT FOR HIM AND ON HIS BEHALF AT THE MEETING. SUCH RIGHT MAY BE
EXERCISED BY STRIKING OUT THE NAMES OF MANAGEMENT'S NOMINEES IN THE ENCLOSED
FORM OF PROXY AND INSERTING THE NAME OF THE PERSON TO BE APPOINTED IN THE BLANK
SPACE PROVIDED IN THE FORM OF PROXY, SIGNING THE FORM OF PROXY AND RETURNING IT
IN THE REPLY ENVELOPE PROVIDED.
Any person giving a proxy may revoke it by depositing an instrument in
writing executed by him or by his attorney authorized in writing at the
registered office of the Corporation at any time up to the close of business on
the last business day preceding the Meeting or any adjournment thereof or with
the Chairman at the Meeting or in any other manner permitted by law. ALL
PROPERLY EXECUTED PROXIES, NOT THERETOFORE REVOKED, WILL BE VOTED ON ANY POLL
TAKEN AT THE MEETING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED THEREIN. IF
NO INSTRUCTIONS ARE GIVEN WITH RESPECT TO ANY PARTICULAR MATTER, THE PROXY
AUTHORIZES A VOTE IN FAVOUR OF SUCH MATTER AND IT WILL BY VOTED ACCORDINGLY.
Proxies must be received by the Corporation not later than 5:00 p.m. (Eastern
Daylight Saving Time) on Wednesday, May 17, 2000.
All dollar amounts contained in this Proxy Circular are expressed in
Canadian dollars unless specifically stated otherwise. As of March 23, 2000, the
Noon Buying Rate in New York City for Canadian dollars was U.S.$0.6790.
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
As of March 23, 2000, the Corporation had outstanding 157,152,288
Common Shares entitled to be voted at the Meeting. Each Common Share is entitled
to one vote.
1
<PAGE> 3
To the knowledge of the Corporation, as of March 23, 2000, the
following is the only party who beneficially owned or exercised control or
direction over more than 5% of the Common Shares of the Corporation:
<TABLE>
<CAPTION>
Name and Address Number of Common Shares Percentage of Class
- ---------------- ----------------------- -------------------
<S> <C> <C>
David A. Rocker 14,117,500 (1) 9.0%
Rocker Partners, L.P.
Suite 1759, 45 Rockefeller Plaza
New York, New York 10111
</TABLE>
1. Based on U.S. Securities and Exchange Commission Schedule 13G filing
dated February 10, 2000. Includes: (i) 10,662,300 shares of Campbell
Resources Inc. common stock owned by Rocker Partners, L.P., a New York
limited partnership and (ii) 3,455,200 shares of Campbell Resources
Inc. common stock owned by Compass Holdings, Ltd., a corporation
organized under the International Business Companies Ordinance of the
British Virgin Islands. David A. Rocker has sole voting and dispositive
power over such 14,117,500 shares by virtue of his position as the sole
managing partner of Rocker Partners, L.P. and, as president of Rocker
Offshore Management Company, Inc. the investment adviser to Compass
Holdings, Ltd.
ELECTION OF DIRECTORS
(ITEM NO. 2 OF NOTICE OF MEETING)
Shareholders will be asked to elect nine directors to serve, subject to
the Corporation's by-laws, until the next annual meeting of shareholders or
until their respective successors have been duly elected or appointed. IT IS THE
INTENTION OF THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY TO VOTE AT THE
MEETING FOR THE ELECTION AS DIRECTORS OF THE PERSONS NAMED BELOW. IF ANY SUCH
NOMINEE SHOULD BE UNABLE TO SERVE, AN EVENT NOT CURRENTLY ANTICIPATED, PROXIES
WILL BE VOTED FOR SUCH PERSON AS SHALL BE DESIGNATED BY THE BOARD OF DIRECTORS
OF THE CORPORATION TO REPLACE SUCH NOMINEE.
The following table sets forth certain information concerning the
persons to be nominated for election as directors of the Corporation, including
their beneficial ownership of Common Shares of the Corporation as of March 23,
2000. Unless otherwise indicated, each nominee holds sole voting and investment
power over his shares.
<TABLE>
<CAPTION>
Number of
Name & Municipality of Principal Occupation Director Common Percent
Residence and Business Experience Since Age Shares of Class
- --------- ----------------------- ----- --- ------ --------
<S> <C> <C> <C> <C> <C>
James D. Beatty Chief Executive Officer, Trinity 1983 55 2,500(1) *
Toronto, Ontario Capital Corporation, Toronto,
Ontario, investment company.
</TABLE>
2
<PAGE> 4
<TABLE>
<CAPTION>
Number of
Name & Municipality of Principal Occupation Director Common Percent
Residence and Business Experience Since Age Shares of Class
- --------- ----------------------- ----- --- ------ --------
<S> <C> <C> <C> <C> <C>
Graham G. Clow Mining Engineer; President & Chief 1996 49 2,500(2) *
North Vancouver, BC Executive Officer, Manhattan
Minerals Corp., Vancouver, BC; prior to June,
1998, Senior Vice President, Operations,
Breakwater Resources Ltd., President,
CanZinco Ltd., Toronto, Ontario; prior to
June, 1996, President, Granduc Mining
Corporation; Toronto, Ontario, mining
companies.
Roderick P. Douglas Mining Engineer; Director of 1994 74 10,000(3) *
Vancouver, BC Ashton Mining of Canada Inc.,
Vancouver, BC, mining company.
John O. Kachmar President and Chief Executive 1992 63 190,000(4) *
Toronto, Ontario Officer of the Corporation.
James C. McCartney Q.C. Chairman of the Corporation; 1993 62 75,000(5) *
Toronto, Ontario National Chairman, McCarthy
Tetrault, Barristers & Solicitors, Toronto,
Ontario; Director of Algoma Steel Inc., Sault
Ste Marie, Ontario, steel company.
Donald R. Murphy Consultant; prior to May, 1999, 1987 56 nil(1) -
Rouyn/Noranda, Quebec President, Societe de developpement
de la Baie James, Matagami,
Quebec, government owned
corporation; Director of MSV
Resources Inc. and Maude Lake
Exploration Limited, Montreal,
Quebec; mining companies.
Francis S. O'Kelly Mining Engineer. 1993 58 5,000(6) *
Lima, Peru
G. E. "Kurt" Pralle Mining and Metallurgical 1993 65 100,000(6) *
Ramsey, New Jersey Consultant.
James D. Raymond Private Investor and Director; 1979 74 10,000(7) *
Montreal, Quebec Director of Canadian 88 Energy
Corporation and Prize Energy Inc., Calgary,
Alberta, oil and gas companies; and Denbridge
Capital Corporation, Toronto, Ontario,
manufacturers-radar and electronics.
</TABLE>
Notes:
(1) Excludes 500,000 Common Shares subject to option.
(2) Excludes 250,000 Common Shares subject to option.
3
<PAGE> 5
(3) Excludes 350,000 Common Shares subject to option.
(4) Excludes 1,350,000 Common Shares subject to option.
(5) Excludes 800,000 Common Shares subject to option.
(6) Excludes 400,000 Common Shares subject to option.
(7) Excludes 600,000 Common Shares subject to option.
* Less than 1% of the outstanding Common Shares.
As of March 23, 2000, the directors and officers of the Corporation as
a group beneficially owned 510,638 Common Shares representing approximately 0.3%
of the outstanding Common Shares of the Corporation excluding 5,825,000 Common
Shares subject to option. The information as to Common Shares beneficially owned
or over which control or direction is exercised, not being within the knowledge
of the Corporation, has been furnished by the respective directors and officers
individually.
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive Committee of the Board of Directors consists of three
directors, Messrs. Kachmar, McCartney and Raymond and has substantially all of
the powers of the Board of Directors, except those required by law to be
exercised by the Board of Directors. The Audit Committee of the Board of
Directors consists of three directors, Messrs. Beatty, Douglas and Murphy. The
Audit Committee reviews the Corporation's financial statements and audit
procedures and reports thereon to the Board of Directors. The Compensation
Committee consists of three directors, Messrs. Beatty, McCartney and Pralle. The
Compensation Committee considers and approves compensation, remuneration and
incentive arrangements for officers and senior employees of Campbell. The
Corporation does not have a nominating committee.
CORPORATE GOVERNANCE
In December, 1994, The Toronto Stock Exchange (the "Exchange")
Committee on corporate governance in Canada released a report (the "Report")
containing guidelines for effective corporate governance for corporations listed
on the Exchange. The Report has been adopted by the Exchange and corporations
listed on the Exchange are required to disclose their corporate governance
practices and to provide an explanation where those practices differ from the
guidelines.
The Corporation's Board of Directors (the "Board") is currently
comprised of nine persons including seven directors who are not officers or
employees of the Corporation and are unrelated to management. The Chairman and
the President and Chief Executive Officer are the remaining members of the
Board. As recommended by the Report, the positions of Chairman of the Board and
Chief Executive Officer are separate. Accordingly, a majority of the Board is
unrelated to management and is in a position to review and evaluate management's
activities and to act independently of management.
The Board is empowered by the Corporation's incorporating documents and
by-laws to manage, or supervise the management of the affairs and business of
the Corporation. The Board is not involved in the day-to-day activities of the
Corporation. The Board performs its functions
4
<PAGE> 6
through quarterly and special meetings and has delegated certain of its
responsibilities to those committees described above under "Committees of the
Board of Directors".
The Report recommends that committees of the Board be comprised of
persons who are not officers or employees of the Corporation. The Audit and
Compensation Committees are comprised of non-management persons. However, the
Board has determined that due to the technical nature of the Corporation's
business, its Executive Committee would be more effective by having the
President and Chief Executive Officer on that Committee. The non-executive
Chairman is also on the Executive Committee. Unless specifically directed by the
Board, the Executive Committee may not approve capital expenditures or
dispositions or borrowing other than in the ordinary course of carrying out the
Corporation's business, in excess of $3,000,000. In practice, the Executive
Committee does not give final approval to transactions but rather makes its
recommendations to the full Board.
The Board itself has assumed general responsibility for development and
monitoring of corporate governance issues.
The Board is actively involved in establishing corporate strategies and
monitoring achievement thereof including optimization of performance of the
Corporation's current operations and achieving growth through acquisitions. The
Board monitors the performance of current mining operations through receipt of
monthly reports, the holding of quarterly meetings and its review and approval
of an annual financial forecast presented by management. Consideration and
approval of an acquisition of mining properties or other companies is carried
out by the full Board. Outside consultants and professionals are engaged and
report to the Board as required.
The Board has identified the principal risks associated with the
Corporation's business. These risks and the steps taken to minimize such risks
are reviewed on an ongoing basis at the regularly scheduled quarterly meetings
of the Board.
In 1990, the Board adopted an Environmental Policy, as recommended by
the Mining Association of Canada, which is administered at each site by an
environmental committee comprised of the President and Chief Executive Officer,
the General Manager and the environmental officer of the site. The President and
Chief Executive Officer reports to the Board on a quarterly basis which enables
the Board to monitor the effectiveness of compliance with environmental policy.
The Board also approves a Treasury and Investment Policy which governs
investment of the Corporation's cash and foreign exchange and currency hedging.
Compliance with this policy is reviewed by the Board and the Audit Committee on
a quarterly basis.
The Board has delegated responsibility for communication with the
public and the Corporation's shareholders to its Vice President, Secretary and
General Counsel and its Manager of Investor Relations. Procedures are in place
to ensure timely dissemination of information about the Corporation. Any
significant shareholder concerns which may be communicated to the above persons
are communicated to the Board at its regularly scheduled quarterly meetings.
5
<PAGE> 7
The responsibility of monitoring the effectiveness of the Corporation's
internal financial information systems has been delegated to the Vice President,
Finance and Chief Financial Officer who reports to the Board and the Audit
Committee on a quarterly basis. The Audit Committee meets each quarter and
reviews and approves the Interim Report on Form 10Q and financial statements and
Management's Discussion and Analysis contained therein prior to filing. In
addition, the Audit Committee meets annually with the auditors of the
Corporation to review the year-end financial statements. For a portion of that
meeting, the Audit Committee meets with the auditors in the absence of
management.
The duty of monitoring the technical affairs of the Corporation falls
to the President and Chief Executive Officer who is a member of the Board and of
the environmental committees.
A program for succession of management and training has not been
adopted. Given the availability of trained mining industry personnel in Canada
and the size of the Corporation, management personnel who are already trained
are engaged as required to fill vacancies.
The Corporation does not have a standing nominating committee for
directors nor does it have an ongoing process for the training or evaluation of
performance of directors, as recommended by the Report. The Corporation is a
medium sized company which is still in a growth stage and accordingly, a variety
of technical, legal and financial experience at the Board level is important.
When it is determined that additional expertise is required on the Board, a
number of candidates are considered and the full Board meets with a proposed
nominee. The decision to nominate or appoint an additional director is taken by
the Board as a whole.
The performance of the management team is reviewed annually by the
Compensation Committee in the context of the Corporation's success in meeting
its objectives which are established as part of the review of the annual
financial forecast. This Committee is comprised solely of non-management members
being the Chairman and two independent directors. The philosophy of the
Compensation Committee is stated below under "Report on Executive Compensation".
In addition, the Compensation Committee periodically reviews the compensation
paid to members of the Board and makes recommendations to the Board on
compensation of directors.
COMPENSATION OF DIRECTORS
All directors of the Corporation receive an annual director's fee of
$6,000 and an attendance fee of $750 per meeting and out-of-pocket expenses
relating to attendance at a board or committee meeting. The Corporation paid
aggregate remuneration of $125,250 to the 9 incumbent directors in their
capacities as such during the fiscal period ended December 31, 1999.
In 1999, the Corporation purchased directors' and officers' liability
insurance with a liability limit of $20,000,000 for which the Corporation paid
an annual premium of $67,800. The policy provides for a deductible payable by
the Corporation of $100,000 other than for claims brought in the United States
in which case the deductible is $250,000.
In 1999, Mr. Francis S. O'Kelly, a director of the Corporation,
provided consulting services to the Corporation for an aggregate of US$1,500.
6
<PAGE> 8
In 1999, the Corporation continued to engage the law firm
McCarthy Tetrault of which James C. McCartney, Q. C., a director and chairman of
the Corporation, is a senior partner to provide legal advice to the Corporation.
An aggregate of $41,831 was paid to McCarthy Tetrault for legal services in
1999.
DIRECTORS' STOCK OPTION PLAN
At December 31, 1999, options to acquire an aggregate of 3,900,000
Common Shares were outstanding under the Directors' Stock Option Plan. During
1999, options to acquire an aggregate of 550,000 common shares at $0.43 were
granted, primarily to replace options to acquire 550,000 common shares which
expired on August 10, 1999, in accordance with their terms. These options expire
on August 10, 2004. No options were exercised by the Directors during 1999.
EXECUTIVE COMPENSATION
The following table (presented in accordance with the regulation (the
"Regulation") made under the Securities Act (Ontario)) sets forth all annual and
long-term compensation for services in all capacities to the Corporation and its
subsidiaries for the fiscal years ended December 31, 1999, 1998 and 1997 (to the
extent required by the Regulation) in respect of the individuals who were at
December 31, 1999, the Chief Executive Officer and the other most highly
compensated individuals who were serving as executive officers of the
Corporation and whose total salary and bonus exceeded $100,000 (the" Named
Executive Officers"):
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
===================================================================================================================================
Annual Compensation Long-Term Compensation
------------------------------------- -------------------------------------
Awards Payouts
--------------------------- --------
Securities
Under Restricted
Other Options/ Shares or
Annual SARs Restricted LTIP All Other
Name and Salary Bonus Compensation granted Share Units Payouts Compensation
Principal Position Year ($) ($) ($)(2) (#) ($) ($) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
John O. Kachmar 1999 285,000 -- -- 200,000 Nil Nil 15,750(3)
President & Chief 1998 285,000 -- -- 600,000 Nil Nil 17,250(3)
Executive Officer 1997 285,000 70,000(1) -- -- Nil Nil 18,000(3)
- -----------------------------------------------------------------------------------------------------------------------------------
Lorna D. MacGillivray 1999 130,000 -- -- 100,000 Nil Nil Nil
Vice President, Secretary 1998 130,000 15,000 -- 150,000 Nil Nil Nil
& General Counsel 1997 115,000 56,500 -- -- Nil Nil Nil
- -----------------------------------------------------------------------------------------------------------------------------------
Paul J. Ireland 1999 130,000 -- -- 150,000 Nil Nil Nil
Vice President, Finance 1998 130,000 15,000 -- 75,000 Nil Nil Nil
& Chief Financial Officer 1997 115,000 56,500 -- -- Nil Nil Nil
===================================================================================================================================
</TABLE>
Notes:
(1) Of the $70,000 bonus paid to Mr. Kachmar, $15,000 was paid in cash, and
$27,500 was paid through the issuance of 50,000 Common Shares issued
net of tax.
(2) Perquisites and other personal benefits for the Named Executive
Officers did not exceed the lesser of $50,000 and 10% of total annual
salary and bonus.
(3) Represents director's fees.
7
<PAGE> 9
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
====================================================================================================================================
% of Total Market Value of
Options/SARs Securities Underlying
Securities Under Granted to Exercise Options/SARs on
Options/SARs Employees or Base Price Date of Grant Expiration
Name Granted($)(1) in Fiscal Year ($/Security)(3) ($/Security) Date
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
John O. Kachmar 200,000(1)(2) 38.1% .43 .43 10/08/2004
President & CEO
- ------------------------------------------------------------------------------------------------------------------------------------
Lorna D. MacGillivray 100,000(1) 19.0% .43 .43 10/08/2004
Vice President, Secretary &
General Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Paul J. Ireland 150,000(1) 28.6% .43 .43 10/08/2004
Vice President, Finance &
Chief Financial Officer
====================================================================================================================================
</TABLE>
Notes:
(1) These options were granted on August 10, 1999, are for a term of 5
years and are accompanied by SARs. The options are exercisable as to
25% immediately with 25% becoming exercisable cumulatively on each of
the first, second and third anniversary date of the grant.
(2) Excludes options to acquire 100,000 Common Shares granted during 1999
under the Directors' Stock Option Plan which are also for a 5 year term
and are fully exercisable at $0.43 per Common Share.
(3) The exercise price represents the average of the closing prices of the
Corporation's Common Shares on The Toronto Stock Exchange during the
five days prior to the date of grant.
The following table (presented in accordance with the Regulation) sets
forth information concerning the exercise of stock options and SAR's by Named
Executive Officers in 1999 and the number and the unrealized value of
exercisable and unexercisable stock options held by Named Executive Officers at
December 31, 1999.
AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL
YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
====================================================================================================================================
Securities, Aggregate Unexercised
Acquired Value Options/SARs at Value of Unexercised in-
on Exercise Realized FY-End (#) the-Money Options/SARs at FY-
Name (#) ($) Exercisable/Unexercisable End ($) Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
John O. Kachmar Nil Nil 1,000,000(1)/350,000 NIL/NIL
President & CEO
- ------------------------------------------------------------------------------------------------------------------------------------
Lorna D. MacGillivray Nil Nil 250,000/150,000 NIL/NIL
Vice President, Secretary &
General Counsel
- ------------------------------------------------------------------------------------------------------------------------------------
Paul J. Ireland Nil Nil 225,000/150,000 NIL/NIL
Vice President, Finance & Chief
Financial Officer
====================================================================================================================================
</TABLE>
8
<PAGE> 10
Note:
(1) Includes options granted under the Directors' Stock Option Plan to
acquire 100,000 Common Shares exercisable at $0.43 share, 200,000
Common Shares at $0.44 per share and 100,000 Common Shares at $1.48 per
share.
EMPLOYEE INCENTIVE PLAN
The Corporation maintains an Employee Incentive Plan consisting of the
Share Purchase Plan, the Share Option Plan, the Share Bonus Plan and the Share
Loan Plan. Directors who are not officers do not participate in the Employee
Incentive Plan.
SHARE OPTION PLAN
The Share Option Plan is intended to promote the interests of Campbell
and its shareholders by making provisions for stock options as an additional
incentive to attract, retain and motivate officers and salaried employees.
Grants are made at the discretion of the Board of Directors or a committee of
the board comprised of members, a majority of whom are not eligible to
participate in the Plan (the "Compensation Committee"). The Board of Directors
or the Compensation Committee may, in its discretion, determine which officers
or employees will be granted options, the number of Common Shares to be the
subject of each option, the purchase price of such shares and the duration of
the options, which may not exceed five years. The Board of Directors or the
Compensation Committee may also impose other terms and conditions respecting any
option granted as it may consider appropriate or necessary.
Freestanding "SARs" are not provided for under the Share Option Plan.
The options may, at the discretion of the Board of Directors or the Compensation
Committee, be accompanied by SARs which entitle the holder to elect to terminate
his or her options, in whole or in part and, in lieu of receiving the Common
Shares ("Option Shares") to which the terminated options relate, elect to
receive that number of Common Shares, disregarding fractions, which have a total
value equal to the product of the number of Option Shares times the difference
between the fair value (at the date of such election) and the option price per
share of the Option Shares, less any amount withheld on account of income taxes,
which income taxes will be remitted on the employee's behalf by the Corporation.
All currently outstanding options are accompanied by SARs.
During 1999, options to purchase 450,000 Common Shares were granted
under the Share Option Plan to Named Executive Officers and options to purchase
75,000 Common Shares were granted to employees who are not Named Executive
Officers. These options were granted to replace options to acquire 525,000
Common Shares which expired on August 10, 1999, in accordance with their terms.
These options are exercisable at $0.43 per share and are exercisable as to 25%
immediately, with a further 25% becoming exercisable cumulatively on each of the
first, second and third anniversary dates and are accompanied by SARs. All of
the options were granted for a term of five years.
As at December 31, 1999, a total of 2,825,000 Common Shares were
issuable upon exercise of options under the Share Option Plan including
1,725,000 Common Shares issuable upon exercise of options held by the three
Named Executive Officers. Such options are exercisable at exercise prices
ranging from $0.43 to $1.48 per share. These options expire between August 15,
2001 and August 10, 2004.
9
<PAGE> 11
SHARE PURCHASE PLAN
The Share Purchase Plan is designed to encourage employees of Campbell
to purchase Common Shares on a regular basis. Employees of Campbell who have
been continuously employed by Campbell for at least one year, or less at the
discretion of the Compensation Committee or the Board of Directors, are eligible
each January 1 to participate in the Share Purchase Plan. Each eligible employee
may contribute up to 5% of his or her basic salary to the Share Purchase Plan
through monthly deductions. On a quarterly basis, Campbell will contribute an
amount equal to 50% of the employee's contributions to such date and each
participating employee will then be issued Common Shares having a value equal to
the aggregate amounts contributed by such employee and Campbell. In 1999, 22,084
Common Shares were issued to Lorna D. MacGillivray in respect of which Campbell
contributed $2,438 and 210,083 Common Shares were issued to employees who are
not Named Executive Officers in respect of which Campbell contributed $24,524
pursuant to the Share Purchase Plan. Of these Common Shares, 82,920 were issued
at June 30, 1999, 59,819 Common Shares were issued September 30, 1999 and,
89,428 Common Shares were issued December 31, 1999. The issue prices were $0.41,
$0.44 and $0.23 respectively.
SHARE BONUS PLAN
The Share Bonus Plan is intended to promote the interests of Campbell
and its shareholders by permitting the Board of Directors or the Compensation
Committee, in its discretion, to issue Campbell Common Shares to full-time
salaried employees of Campbell as a bonus in recognition of services provided to
Campbell by such employee. The issue of Common Shares to such employee may be
subject to such terms and conditions as are determined by the Board of Directors
or the Compensation Committee. During 1999, no Common Shares were issued
pursuant to the Share Bonus Plan.
SHARE LOAN PLAN
The Share Loan Plan is intended to provide an additional incentive to
motivate full time officers who will make important contributions to the success
of Campbell by assisting such persons to acquire shares of the Corporation. The
Compensation Committee may in its discretion make loans to full time officers of
the Corporation. Such loans shall be subject to such terms and conditions
including rates of interest, if any, as the Compensation Committee may consider
appropriate. During 1999, no loans were granted and no loans are outstanding
under the Share Loan Plan.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
No directors or officers of the Corporation are indebted to the
Corporation.
PENSION PLAN
The Corporation has a defined benefit pension plan (the "Pension Plan")
available on a voluntary basis to all employees of the Corporation and its
subsidiaries other than those who are subject to the provisions of a collective
agreement. The Pension Plan provides a pension equal to 2% of the average annual
salary not including bonuses and other compensation during the three most highly
paid years for each year of credited service subject to the maximum benefit
limitation applicable to registered pension
10
<PAGE> 12
plans under the Income Tax Act (Canada). Benefits under the Pension Plan vest
after two years. Early retirement is permitted after age 55, subject to
reductions. The Pension Plan also provides that certain members may be
designated as "Class A" non-contributory members. Head office and certain senior
employees have been designated as "Class A" non-contributory members.
The following table sets forth the benefits calculated under the
Pension Plan at various salary levels and years of employment on the assumption
such benefits become payable upon retirement at age sixty-five. Benefits under
the Pension Plan are not reduced by social security or other offset amounts. The
payment of such benefits is subject to the maximum benefit limitation applicable
to registered pension plans under the Income Tax Act (Canada) which currently is
$1,722 for each year of service.
PENSION PLAN TABLE
<TABLE>
<CAPTION>
=====================================================================================================================
Years of Service
---------------------------------------------------------------------------------------------------
Remuneration
15 20 25 30 35
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
125,000 37,500 50,000 62,500 75,000 87,500
150,000 45,000 60,000 75,000 90,000 105,000
175,000 52,500 70,000 87,500 105,000 122,500
200,000 60,000 80,000 100,000 120,000 140,000
225,000 67,500 90,000 112,500 135,000 157,500
250,000 75,000 100,000 125,000 150,000 175,000
300,000 90,000 120,000 120,000 180,000 210,000
400,000 120,000 160,000 200,000 240,000 280,000
=====================================================================================================================
</TABLE>
Three Named Executive Officers participate in the Pension Plan. Mr.
Kachmar had 9 years of credited services, Ms. MacGillivray had 6.4 years of
credited service and Mr. Ireland had 3 years of credited service under the
Pension Plan at December 31, 1999.
EMPLOYMENT CONTRACTS
On December 1, 1994, the Corporation entered into an employment
agreement with Mr. Kachmar as President and Chief Executive Officer. The
agreement stipulates, among other things, a base salary of $285,000 per annum
effective January 1, 1997 and provides that in the event that Mr. Kachmar's
employment is terminated, he will be entitled to be paid up to thirty-six
months' salary and benefits. In the event of a change of control, as defined,
Mr. Kachmar will be entitled to resign within six months thereof and be paid
thirty-six months' salary and benefits. The agreement also provides that in the
event of resignation or termination, options held by Mr. Kachmar will
immediately become fully exercisable. Such options will expire ninety days after
resignation or termination.
On December 1, 1994, the Corporation entered into an employment
agreement with Ms. MacGillivray as Vice President, Secretary and General
Counsel. The agreement stipulates among other things, a base salary of $130,000
per annum effective January 1, 1997 and provides that in the event that Ms.
MacGillivray's employment is terminated, she will be entitled to be paid up to
twenty-four months' salary and benefits. In the event of a change of control, as
defined, Ms. MacGillivray will be entitled to resign within six months thereof
and be paid twenty-
11
<PAGE> 13
four months' salary and benefits. The agreement also provides that in the event
of resignation or termination, options held by Ms. MacGillivray will immediately
become fully exercisable. Such options will expire ninety days after resignation
or termination.
On December 10, 1996, the Corporation entered into an employment
agreement with Mr. Paul J. Ireland as Vice President, Finance and Chief
Financial Officer. The agreement stipulates a base salary of $130,000 effective
January 1, 1997 and provides that in the event that his employment is
terminated, he will be entitled to be paid up to twenty-four months' salary and
benefits. In the event of a change of control, as defined, Mr. Ireland will be
entitled to resign within six months thereof and be paid twenty-four months'
salary and benefits. The agreement also provides that in the event of
resignation or termination, options held by Mr. Ireland will immediately become
fully exercisable. Such options will expire ninety days after resignation or
termination.
COMPOSITION OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors considers and
approves compensation, remuneration and incentive arrangements for directors,
officers and senior employees of the Corporation. The members of the
Compensation Committee are James C. McCartney, Q.C. (Chairman), James D. Beatty
and G. E. "Kurt" Pralle. Mr. McCartney is Chairman of the Corporation and he is
also Chairman of the Compensation Committee. Mr. McCartney is a senior partner
with the law firm McCarthy Tetrault which provides legal advice to the
Corporation. Neither Mr. Beatty nor Mr. Pralle is, nor was, at any time, an
officer or employee of the Corporation or any of its subsidiaries. In 1994, the
Committee established an executive compensation philosophy and policy to be
followed in its future consideration of executive compensation and incentive
arrangements.
EXECUTIVE COMPENSATION PHILOSOPHY AND POLICY
The Corporation's Executive Compensation Policy is primarily based on a
pay for performance philosophy. The main objective of the policy is the
alignment of all financial reward systems with shareholder interests. The
compensation structure must also reflect the Corporation's current financial
position and the scope of its operations. As a consequence, a heavy emphasis is
placed on the long-term business objectives of creating wealth, decreasing risk
by expanding operations, and providing returns to the Corporation's
shareholders.
The particular elements of the executive compensation program for
senior executives of the Corporation, designed to encourage, compensate and
reward employees on the basis of individual and corporate performance, may be
summarized as follows:
- BASE SALARy The program is designed to attract and retain executive
officers by delivering a competitive rate of base pay. Market
competitive rates will be determined by comparison with average
compensation levels of comparable mining companies. It is believed that
the average pay of these companies is a reasonable reference point from
which to target and manage base
12
<PAGE> 14
pay, while recognizing the need for executive level experience and
skills in the current phase which will further the Corporation's
achievement of its growth objectives.
- ANNUAL INCENTIVE COMPENSATIOn The Corporation currently does not
offer a short-term variable pay or incentive plan but may in future
implement an annual incentive plan. The Corporation's Employee
Incentive Plan has a Share Bonus Plan component which may be used to
provide annual incentive compensation. The use of this plan can combine
both short and longer term incentives and, through increased share
holding, would also align the interests of executive officers with
those of the Corporation's shareholders. Grants of annual bonuses would
be based on the employee's contribution towards the Corporation's
success in meeting its goals.
- STOCK OPTION PROGRAMS The Corporation strongly believes that by
providing those persons who have substantial responsibility for the
management and growth of the Corporation with an opportunity to acquire
the Corporation's stock, the interests of shareholders and executives
will be increasingly aligned. The number of stock options that will be
granted to executive officers will be based on competitive practices of
comparable mining companies and will reflect an emphasis on long-term
performance awards. Options will generally become exercisable gradually
over their term and will generally be for a five-year term.
REPORT ON EXECUTIVE COMPENSATION
In July, 1999, the Compensation Committee considered the long term
incentive arrangements of the Corporation. The level of outstanding and expiring
stock options under the Employee Incentive Plan were reviewed. The Committee
considered the recommendation of the Chief Executive Officer that only
replacement stock options be granted. In approving the grant of options, the
Committee took into account the number, terms and pricing of previously
outstanding options. Consideration was also given to the employee's level of
responsibility and potential contribution to the Corporation achieving its
long-term goals.
The Committee also considered and determined to replace expiring
options to directors under the Directors' Stock Option Plan at its July meeting.
Given the historical low gold prices, it was determined that base
salary and annual incentive compensation of senior executives should not be
reviewed.
Base salaries including that of the Chief Executive Officer were
maintained at existing levels and no annual incentive awards were awarded to
reflect the difficult circumstances facing the Corporation at sustained lower
gold prices. Cash compensation of executive officers was maintained in the lower
half of the peer group levels.
March 23, 2000 COMPENSATION COMMITTEE
James D. Beatty
James C. McCartney, Q.C.
G. E. "Kurt" Pralle
13
<PAGE> 15
SHAREHOLDER RETURN PERFORMANCE GRAPH
The chart below (as required by the Regulation) compares the yearly
percentage change in the cumulative total shareholder return on the
Corporation's Common Shares against the cumulative total shareholder return of
The TSE 300 Stock Index and the TSE Gold and Precious Metals Index for the five
fiscal year periods commencing December 31, 1994 and ending December 31, 1999.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* BETWEEN CAMPBELL
RESOURCES INC., THE TSE 300 INDEX AND TSE GOLD AND PRECIOUS METALS INDEX
<TABLE>
<CAPTION>
RATIO TO RATIO TO RATIO TO
YEAR END DEC. 31, 1990 #VALUE! 0
DECEMBER 31 CLOSING PRICE CLOSING PRICE CLOSING PRICE
- ----------- ------------- ------------- -------------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 171.43 109.43 114.53
1996 162.34 119.45 146.99
1997 68.83 67.90 169.01
1998 46.75 63.46 166.33
1999 29.87 52.68 219.08
</TABLE>
*$100 INVESTED ON 12/31/94 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF
DIVIDENDS.
APPROVAL OF ARTICLES OF AMENDMENT - SHARE CONSOLIDATION
(ITEM NO. 3 OF NOTICE OF MEETING)
The New York Stock Exchange has adopted certain changes to its criteria
for continued listing, which provides for de-listing if the average closing
price of the Corporation's listed security is less than US$1.00 over a
consecutive 30 trading day period. A listed company is also subject to
de-listing procedures if both its global market capitalization and its total
stockholders' equity are under US$50,000,000.
The Board of Directors view the New York Stock Exchange listing as a
valuable asset of the Corporation providing excellent liquidity and upside
potential to shareholders when there is an increase in the price of gold.
Following discussions with financial advisors and significant shareholders, the
directors have determined that a consolidation of outstanding shares, in order
to retain the New York Stock Exchange listing, is in the best interests of its
shareholders. Based on the low share price and the Corporation's healthy balance
sheet and cash position, the Board of Directors believe that the
postconsolidation share price should not decline as a result of the
consolidation. In the event that the
14
<PAGE> 16
consolidation is not approved or the US$1.00 minimum share price is not
achieved, while the Corporation's shares would continue to be listed on The
Toronto Stock Exchange, the shares would trade in the United States only on the
NASD pink sheets. Without a consolidation, an alternate listing would not be
possible on either the American Stock Exchange or the Nasdaq SmallCap Market
which have initial listing criteria requiring minimum stock prices of US$3.00
and US$4.00 respectively and continued listing criteria of US$1.00.
Shareholders will be asked to pass a special resolution authorizing the
Corporation to amend its Articles of Incorporation to consolidate all of the
issued and outstanding Common Shares of the Corporation on the basis of one (1)
new post-consolidation Common Share for every ten (10) preconsolidation Common
Shares, or such lesser number of pre-consolidation Common Shares as the
directors in their sole discretion may determine. TO THE EXTENT THAT THE
DIRECTORS DETERMINE, BASED ON MARKET CONDITIONS AT THE TIME OF CONSOLIDATION,
THAT THE MINIMUM SHARE PRICE REQUIREMENT OF THE NEW YORK STOCK EXCHANGE CAN BE
ACHIEVED AND SUSTAINED THROUGH A CONSOLIDATION ON THE BASIS OF ONE (1) NEW
POST-CONSOLIDATION COMMON SHARE FOR LESS THAN TEN (10) PRE-CONSOLIDATION COMMON
SHARES, THE DIRECTORS WILL IMPLEMENT THE CONSOLIDATION ON SUCH LESSER BASIS.
Fractional shares which result from the consolidation will not be issued since
the administrative cost of issuing fractions or processing payment in lieu would
far exceed the value of any fractions. Accordingly any fractional shares
resulting from the consolidation will be cancelled without any repayment of
capital or other compensation and the number of shares to be issued will be
rounded down to the next lower whole number of shares.
While the Corporation's stockholder equity at December 31, 1999 was in excess of
US$50,000,000, there can be no assurance that this will be sustained
particularly if the price of gold were to drop again to recent historical lows.
Similarly, there can be no assurance that the post-consolidation stock price
will not decline. In either case, the Corporation may be subject to de-listing
by the New York Stock Exchange.
A copy of the proposed special resolution is attached to this Proxy Circular as
SCHEDULE "A". Management recommends that shareholders vote FOR the approval of
this special resolution. In order to pass the resolution, at least two-thirds of
the votes cast by holders of Common Shares, present in person or by proxy, must
be voted in favour of the special resolution. If the special resolution is duly
passed at the Meeting, management intends to file the Articles of Amendment with
the Director under the Act to give effect to the changes described herein. The
special resolution permits the directors to revoke the special resolution in
whole or in part without further approval by the shareholders at any time prior
to effecting the filing of the Articles of Amendment, if in their discretion, it
is deemed desirable to do so.
If the special resolution amending the Articles of Incorporation does not
receive the requisite approval, the Articles will remain unchanged.
UNLESS SUCH AUTHORIZATION IS WITHHELD, THE PERSONS NAMED IN THE ENCLOSED FORM OF
PROXY INTEND TO VOTE AT THE MEETING FOR THE APPROVAL OF THE AMENDMENT OF THE
ARTICLES OF INCORPORATION TO PROVIDE FOR A CONSOLIDATION OF THE COMMON SHARES OF
THE CORPORATION.
15
<PAGE> 17
ISSUE OF NEW SHARE CERTIFICATES
Upon filing of the Articles of Amendment, the Common Shares of the Corporation
will be consolidated into new Common Shares as set out above. In accordance with
the rules of The Toronto Stock Exchange, a new CUSIP will be assigned and
replacement share certificates will be issued. To obtain a new share certificate
evidencing the Common Shares after the consolidation is effective, shareholders
must tender the certificates evidencing pre-consolidation shares held by them.
As soon as practicable after the filing of the Articles of Amendment effecting
the consolidation, a letter of transmittal containing instructions with respect
to the surrender of the share certificates will be sent to shareholders for use
in exchanging their share certificates. Shareholders may obtain new share
certificates by completing and returning the transmittal forms and share
certificates, following announcement by the Corporation that the Articles of
Amendment are effective.
The aggregate cost basis of the post-consolidation common shares will be the
same as the aggregate cost basis of the pre-consolidation common shares.
APPOINTMENT OF AUDITORS
(ITEM NO. 4 OF NOTICE OF MEETING)
UNLESS SUCH AUTHORIZATION IS WITHHELD, THE PERSONS NAMED IN THE
ENCLOSED FORM OF PROXY INTEND TO VOTE AT THE MEETING FOR THE RE-APPOINTMENT OF
KPMG LLP, CHARTERED ACCOUNTANTS, AS AUDITORS OF THE CORPORATION TO HOLD OFFICE
UNTIL THE NEXT ANNUAL MEETING OF SHAREHOLDERS AND TO AUTHORIZE THE BOARD OF
DIRECTORS TO FIX THEIR REMUNERATION. Representatives of KPMG LLP are expected to
be present at the Meeting and will have the opportunity to make statements if
they so desire and will be available to respond to appropriate questions.
OTHER MATTERS WHICH MAY COME BEFORE THE MEETING
Management does not know of any matters to be presented to the Meeting
other than those specifically set forth in the Notice of Annual and Special
Meeting of Shareholders. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING
AND ARE SUBMITTED TO A VOTE, ALL PROXIES WILL BE VOTED IN ACCORDANCE WITH THE
BEST JUDGMENT OF THE PERSONS NAMED THEREIN.
PROPOSALS BY SHAREHOLDERS
Pursuant to the Act, resolutions intended to be presented by
shareholders for action at the 2001 Annual Meeting must comply with the
provisions of the Act and be deposited at the Corporation's head office not
later than February 19, 2001 in order to be included in the Proxy Circular and
form of proxy relating to such Meeting.
SOLICITATION OF PROXIES
The Corporation will bear the cost of this proxy solicitation. The
Corporation will reimburse banks, brokerage firms and other custodians, nominees
and fiduciaries for reasonable expenses incurred by them in sending proxy
material to beneficial owners of Common Shares and requesting authority to
16
<PAGE> 18
execute proxies. In addition to the use of the mails, proxies may be solicited
by telephone or facsimile and in person, by the directors, officers and regular
employees of the Corporation, none of whom will receive any extra compensation
therefor. In addition, the Corporation has retained D.F. King & Co. Inc. to
assist in the solicitation of proxies for a fee of US$4,000 plus reimbursement
of reasonable out- of-pocket expenses.
MISCELLANEOUS
The Corporation files with the United States Securities and Exchange
Commission an annual report on Form 10-K containing certain information with
respect to the Corporation and its business and properties, including financial
statements and related schedules. A copy of this Form 10-K will be filed with
Canadian securities commissions in lieu of an Annual Information Form. Upon the
written request of any beneficial owner of the Corporation's Common Shares, the
Corporation will mail to such owner, without charge, a copy of its Form 10-K for
the fiscal year ended December 31, 1999. Requests for copies of the Form 10-K
should be addressed to:
Manager, Investor Relations
Campbell Resources Inc.
120 Adelaide Street West, Suite 1910
Toronto, Ontario, Canada M5H 1T1
APPROVAL BY DIRECTORS
The Board of Directors of the Corporation has approved the contents of
this Proxy Circular and has approved its being sent to shareholders.
By Order of the Board of Directors
Lorna D. MacGillivray
Vice President, Secretary and General Counsel
Dated: March 23, 2000
17
<PAGE> 19
SCHEDULE "A"
SPECIAL RESOLUTION OF SHAREHOLDERS
AMENDMENT OF ARTICLES OF INCORPORATION
BE , AND IT HEREBY IS RESOLVED as a special resolution of the Corporation that:
1. the Articles of the Corporation be amended to consolidate all of the
issued and outstanding Common Shares of the Corporation on the basis of
one (1) new post-consolidation Common Share for every ten (10)
pre-consolidation Common Shares, or such lesser number of
preconsolidation Common Shares as the directors in their sole
discretion may determine;
2. no fractional shares will be issued as a result of the share
consolidation. A fractional share will be disregarded and cancelled
without any repayment of capital or other compensation.
3. the Corporation be and is hereby authorized and directed to make
application pursuant to the Act for a Certificate of Amendment under
the Act to give effect to this special resolution;
4. the proper officers of the Corporation be and they are hereby
authorized to take all such actions and execute and deliver all such
documents, including without limitation, Articles of Amendment in the
form prescribed by the Act, which are necessary or desirable for the
implementation of this special resolution; and
5. notwithstanding the foregoing provisions, the directors of the
Corporation be and they hereby are authorized to revoke this resolution
without any further approval of the shareholders at any time prior to
the issuance of a Certificate of Amendment under the Act giving effect
hereto.
18
<PAGE> 20
FORM OF PROXY
CAMPBELL RESOURCES INC.
THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT AND THE BOARD OF
DIRECTORS FOR USE AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD
ON FRIDAY, MAY 19 , 2000.
The undersigned shareholder of CAMPBELL RESOURCES INC. (the
"Corporation") hereby nominates, constitutes and appoints James C. McCartney or,
failing him, John O. Kachmar, or failing him, Lorna D. MacGillivray, or, instead
of any of them __________________________________________ lawful attorney and
proxy of the undersigned, with full power of substitution to vote in respect of
all common shares held by the undersigned at the above noted meeting or any and
all adjournments thereof in the following manner:
1. FOR [ ] WITHHOLD FROM VOTING [ ] in respect of the election of the
directors.
2. FOR [ ] AGAINST [ ] WITHHOLD FROM VOTING [ ] in respect of approval,
by special resolution, of an amendment to the Corporation's Articles
of Incorporation to consolidate all issued and outstanding Common
Shares on the basis of one (1) new post-consolidation common share
for every ten (10) pre-consolidation common shares or such lesser
number of pre-consolidation common shares as the directors in their
sole discretion may determine;
3. FOR [ ] WITHHOLD FROM VOTING [ ] in respect of the appointment of
KPMGLLP as auditors for the coming year and authorizing the directors
to fix remuneration.
4. Upon such other matters (none known at the time of solicitation of this
proxy) as may properly be brought before the Meeting or any and all
adjournments thereof.
The shares represented by this proxy will be voted as directed by the
shareholder. IF NO DIRECTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE
ELECTION OF ALL NOMINEES AS DIRECTORS, FOR THE APPROVAL, BY SPECIAL RESOLUTION,
OF AN AMENDMENT TO THE CORPORATION'S ARTICLES OF INCORPORATION TO CONSOLIDATE
ALL ISSUED AND OUTSTANDING COMMON SHARES ON THE BASIS OF ONE(1) NEW
POST-CONSOLIDATION COMMON SHARE FOR EVERY TEN(10) PRE-CONSOLIDATION COMMON
SHARES OR SUCH LESSER NUMBER OF PRE-CONSOLIDATION COMMON SHARES AS THE
DIRECTORS IN THEIR SOLE DISCRETION MAY DETERMINE, AND FOR THE APPOINTMENT OF
KPMGLLP AS AUDITORS. THE PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO
AMENDMENTS OR VARIATIONS TO THE MATTERS IDENTIFIED IN THE NOTICE OF MEETING AND
ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
YOU HAVE THE RIGHT TO APPOINT ANY PERSON (WHO NEED NOT BE A
SHAREHOLDER) TO ATTEND AND ACT ON YOUR BEHALF AT THE MEETING. IF YOU DESIRE TO
EXERCISE SUCH RIGHT, STRIKE OUT THE NAMES OF THE BOARD'S NOMINEES AND INSERT THE
NAME OF SUCH OTHER PERSON IN THE BLANK SPACE PROVIDED.
The undersigned hereby acknowledges receipt of the Notice of Annual
Meeting and the Proxy Circular.
Dated this day of , 2000.
______________________________________________________
Signature of Holder
This form of proxy must be dated and signed exactly as your name
appears herein. When signing in a fiduciary or representative capacity, please
give full title as such. In the case of joint shareholders, each must sign.
Proxies from a corporation must be signed under corporate seal by an officer
thereof, or by an attorney thereof duly authorized in writing.
If this proxy is not dated in the space above, it will be deemed to
bear the date on which it is mailed by management.
PRINTED IN CANADA
<PAGE> 1
EXHIBIT 21.1
CAMPBELL RESOURCES INC.
SIGNIFICANT SUBSIDIARIES
December 31, 1999
The following significant subsidiaries are consolidated in the financial
statements submitted as a part of this report:
<TABLE>
<CAPTION>
Jurisdiction of Percentage of
Incorporation Voting
Securities
Owned
<S> <C> <C>
Controlled by Campbell Resources Inc.:
Meston Resources Inc. Quebec 100%
Sotula Gold Corp. Canada 100%
Controlled by (i) Campbell Resources Inc. and Mexico 100%
(ii) Sotula Gold Corp.
Oro de Sotula, S.A. de C.V.
Controlled by Meston Resources Inc.
Minera Cerro Quema, S.A. Panama 100%
</TABLE>
<PAGE> 1
Exhibit 23.1
KPMG
KPMG LLP
Chartered Accountants
Suite 3300 Commerce Court West Telephone (416) 777-8500
PO Box 31 Stn Commerce Court Telefax (416) 777-8818
Toronto ON M5L 1B2 www.kpmg.ca
Securities and Exchange Commission
450 Fifth St., N.W.
Washington, D.C. 20549
USA
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We hereby consent to the inclusion in the Annual Report on Form 10-K of
Campbell Resources Inc. (the "Corporation") for the year ended December 31,
1999 of our report dated February 25, 2000 which appears under Item 14 of the
aforementioned Annual Report on Form 10-K.
We also consent to the incorporation by reference of our report in the
Registration Statements on Form S-8 (registration Nos. 33-28296 and 333-93063)
pertaining to the Corporation's Employee Incentive Plan and Directors' Stock
Option Plan.
/s/ KPMG LLP
Chartered Accountants
March 30, 2000
Toronto, Canada
<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 statements.
</LEGEND>
<CURRENCY> CANADIAN
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 0.6929
<CASH> 18,219
<SECURITIES> 7,958
<RECEIVABLES> 1,999
<ALLOWANCES> 0
<INVENTORY> 4,891
<CURRENT-ASSETS> 33,527
<PP&E> 178,538
<DEPRECIATION> 125,125
<TOTAL-ASSETS> 87,134
<CURRENT-LIABILITIES> 2,107
<BONDS> 3,718
0
0
<COMMON> 125,339
<OTHER-SE> (49,666)
<TOTAL-LIABILITY-AND-EQUITY> 87,134
<SALES> 22,465
<TOTAL-REVENUES> 22,465
<CGS> 32,644
<TOTAL-COSTS> 32,644
<OTHER-EXPENSES> 1,394
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 351
<INCOME-PRETAX> (13,956)
<INCOME-TAX> (1,254)
<INCOME-CONTINUING> (12,702)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,702)
<EPS-BASIC> (0.08)
<EPS-DILUTED> (0.08)
</TABLE>
