UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1998
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file No. 0-6202-2
NORD RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 85-0212139
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
201 3rd St NW, Suite 1750, Albuquerque, NM 87102
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (505) 766-9955
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
----------------------- ------------------------
Common Stock, par New York Stock Exchange
value $.01 per share
Securities registered pursuant to Section 12 (g) of the Act: None
(Title of Class)
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 ]
Aggregate market value of voting stock held by non-affiliates,
based on the closing price of $.6875as of March 23, 1999, was
$10,098,668.
The number of shares of Common Stock outstanding as of March 23,
1999 was 21,905,488.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement to be dated on or about April 30, 1999 (Part III).
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Nord Resources Corporation (the "Company") owns a 50% interest
in Sierra Rutile Holdings Limited ("SRL"), a company which was engaged
in the mining and processing of titanium dioxide (rutile and ilmenite
- - both industrial minerals) in Sierra Leone, West Africa, and a 28.5%
interest in Nord Pacific Limited ("Pacific"), a company engaged in the
production of copper and in the exploration for gold, copper, nickel,
cobalt and other minerals in Australia, Papua New Guinea and North
America. As used herein the term "Company", unless the context
indicates otherwise, includes all subsidiaries and investees.
RECENT DEVELOPMENTS
Provision for Impairment of Investment In SRL
As a result of the initial rebel attack on SRL's mining
operations in Sierra Leone and the continuing uncertainty resulting
from the ongoing rebel activity in the country, as set forth below,
significant uncertainty exists as to the Company's ability to recover
its investment in SRL. Accordingly, the Company has recorded a
provision for impairment of its investment in SRL, including its
estimate of amounts it will be required to advance to SRL for the
repayment of loans payable by SRL which it has guaranteed. Since the
uncertainty arose as a result of the rebel attack in 1995, the
provision for impairment has been recorded as a prior period
adjustment to retained earnings in the Company's financial statements
as of January 1, 1996. The provision totals $47,435,000, including
$30,032,000 to reduce the investment to zero, and $17,403,000 recorded
as obligations under guarantee of loans payable by SRL.
Activities in Sierra Leone
In January 1995, Company's 50% owned mining operation in Sierra
Leone was attacked by rebel forces. Due to concern for the safety of
SRL's employees, the minesite was evacuated and mining operations were
suspended, as security could not be assured for personnel in and
around the minesite. In 1996 a civilian president was elected and in
December 1996, a peace accord between the government and the opposing
faction was signed. However, on May 25, 1997 the democratically
elected government was overthrown by a military coup. On October 23,
1997 an accord was reached between the Economic Community of West
Africa States ("ECOWAS"), a coalition of sixteen West African
countries and the Armed Forces Revolutionary Council ("AFRC") of
Sierra Leone. The accord provided, among other things, for the
reinstatement of the democratically elected government of President
Kabbah; immediate cessation of hostilities; disarmament,
demobilization, and reintegration of combatants; provision of
humanitarian assistance; the return of refugees and displaced persons;
and the broadening of the power base in Sierra Leone. Although this
accord was signed, sporadic, isolated acts of aggression continued to
occur. After several abortive attempts for a peaceful resolution, in
February 1998, ECOWAS provided a military force, ECOMOG, to forcibly
remove the AFRC from power and President Kabbah and his government
were reinstated in Sierra Leone on March 10, 1998. Pockets of
resistance continued to exist and throughout 1998 there were sporadic
outbreaks of rebel activity, especially in the northern and eastern
parts of the country. In December 1998, fighting broke out between
ECOMOG forces and Revolutionary United Front ("RUF") rebels in the
areas surrounding the capital city of Freetown. On January 6, 1999
rebels attacked Freetown and took control of the eastern part of the
city. Nigerian led ECOMOG forces ultimately pushed the rebels out of
Freetown and the surrounding area.
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Because of the civil unrest in Sierra Leone, since the second
quarter of 1996, SRL has maintained only a small group of employees at
the minesite to secure assets, perform limited maintenance and
rehabilitation procedures and assess damage to assets. These
employees have been supported by a private security force and no
incidents have occurred in the areas in which the employees have been
present.
SRL employees at the minesite have reported that looting and
damage to certain assets has occurred, primarily at the mine
warehouse, including foodstores, furniture and fixtures, small
vehicles, housing and office buildings. The reports indicate that
SRL's major assets remain substantially intact, but significant
restoration efforts will be required to repair much of the equipment
which has been idle for over four years. SRL employees have compiled
a detailed estimate of the costs to resume operations, including
repair or replacement of assets which have incurred damage and
deterioration during the period of suspension of operations, and costs
to reestablish and train a workforce, replenish supplies and restore
and recommission facilities.
In 1998, the Company completed a feasibility study, a portion of
which described certain rehabilitation procedures which are critical
to the mine reopening plan at SRL. These procedures include
development of a master plan for the rehabilitation of the mine and
repair of the powerhouse and of a dam located in the Lanti mining
deposit. At the time of discontinuance of operations, SRL was in the
process of a major expansion of the facility, including construction
of a second dredge and a new powerhouse. The feasibility study
indicates approximately $112 million may be required for asset
rehabilitation, completion of the second dredge and the new
powerhouse, mine development and working capital.
In July 1998 the Company engaged Rothschild, Inc. and its
affiliate, Rothschild Natural Resources LLC (collectively
"Rothschild") to assist in arranging financing for its share of the
costs to resume operations. Representatives of SRL, the Company and
Rothschild met with SRL's current lenders and others in February 1999,
to update them on the current situation in Sierra Leone as well as to
present them with information related to the feasibility study. While
these meetings were beneficial, the Company cannot project the
willingness of these or other lenders to provide financing to resume
operations in Sierra Leone.
Resumption of the Sierra Leone operations is dependent upon a
number of conditions including, (1) a sustainable acceptable political
environment in Sierra Leone within which to operate, (2) adequate
levels of security in and around the minesite area, (3) the successful
renegotiation of operating agreements between SRL and the Government
of Sierra Leone, (4) the existence of a suitable marketing environment
and (5) the receipt of adequate financing on acceptable terms to cover
the costs of resuming operations.
Receipt of Insurance Proceeds
In May 1998, the Company received the $14,205,000 balance of the
proceeds from its Overseas Private Investment Corporation ("OPIC")
civil strife insurance claim of $15,705,000. The Company had received
a $1,500,000 payment in 1996. The $14,205,000 proceeds were used as
follows: (1) $5,630,000 was advanced to SRL for the May 15, 1998
principal and interest payment to SRL's bank lenders; (2) $5,510,000
was advanced to SRL for the September 30, 1998 principal and interest
payment to SRL's bank lenders; (3) $3,065,000 was deposited in the
Company's general account.
SRL Loan Restructure
The Company and SRL's other shareholder advanced $11,276,000 on
May 15, 1998 and $12,119,000 on September 30, 1998 to SRL to fund
principal and interest payments on SRL's loans. Further, the Company
has guaranteed payment of 50% of SRL's remaining debt to SRL's bank
lenders. Concurrent with the payments made in May 1998, SRL's debt
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agreements were amended. The amendments provided for a reduction in
the interest rate to 6.875% and for an extension of the principal
maturities. Prior to the amendments, interest was payable at a
variable rate. The amendments also provided that the loans would be
payable in two installments of $3,028,000 in September 1999 and 2000,
with the balance of $6,055,000 due in September 2001. As a further
condition to the restructuring, the Company agreed to maintain cash,
cash equivalents or marketable securities with an aggregate value of
not less than 150% of the Company's guaranteed portion of the
aggregate outstanding principal amount of the debt and cash or cash
equivalents having an aggregate value of not less than 100% of the
Company's guaranteed portion of the aggregate principal amount of the
debt scheduled to be paid during the next six months. At December 31,
1998, the Company was not in compliance with the first stated
condition. As a result, the lender could demand repayment of the
loans, although as of March 24, 1999, they have not done so.
INVESTMENT IN SRL
SRL was established to mine and process titanium dioxide minerals
(rutile and ilmenite) in Sierra Leone, West Africa and to market these
products. Both rutile and ilmenite are used in the production of more
highly concentrated titanium dioxide, which is used as a pigment in
the manufacture of paint and in many types of paper and plastic
products. Titanium dioxide is also used in the production of
fiberglass, enamels and coated fabrics. Rutile is used to a lesser
extent in welding rod electrode coatings and in the production of
titanium metal. SRL has leased a total of 360.4 square miles from the
government of Sierra Leone until the year 2014, when the lease is
subject to a renewal option of fifteen years on terms to be
established at the time of renewal.
Production Facilities
SRL's production facilities include a bucket-ladder dredge
equipped with 68 buckets, each with a capacity of 28 cubic feet. The
average digging rate of the bucket-ladder dredge under good conditions
is about 1,100 metric tonnes ("tonnes" = 2,204.6 pounds) per hour.
Production from this dredge totaled 8.4 million tonnes of crude ore in
1994 from which 138,000 tonnes of rutile were produced. Additional
production capacity is available through use of a smaller, bucket-
wheel dredge, with an average digging rate under good conditions of
about 500 tonnes per hour. This dredge last operated in 1993. Annual
production is dependent on the ore grade and other recovery factors
inherent in the deposits, as well as down time for maintenance and
equipment installation.
The concentrating of the crude ore, which has a titanium dioxide
content of between 1.5% and 2.0%, begins on the bucket-ladder dredge.
The first stages of processing consist of primary and secondary
scrubbing and two stages of screening. The bucket-wheel dredge pumps
reclaim ore to a supplemental wet processing plant where primary and
secondary scrubbing and two-stage screening are also carried out. The
screened material, containing 2.7% to 3.0% titanium dioxide, is then
pumped to the floating wet plant where slimes are removed by cyclones.
The cyclone discharge, consisting of screened, deslimed sand
containing approximately 4% titanium dioxide is then pumped to the
concentrating section, consisting of banks of spiral separators.
These increase the titanium dioxide content of this wet semi-
concentrate to approximately 50%, which is pumped to shore for
dewatering. From there it is transported by truck to the table plant
where shaking tables are used to concentrate the material to a grade
of approximately 60% titanium dioxide. This material is then fed to
the dry plant where, following drying to less than 0.1% moisture,
electrostatic and magnetic separation complete the process, producing
a final rutile product containing approximately 96% titanium dioxide
and an ilmenite by-product containing approximately 64% titanium
dioxide.
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During 1993, SRL began a production expansion and
facilities improvement program, primarily the construction of a third
dredge and a new power generating facility. The dredge was expected
to cost approximately $30,000,000 and have expected annual production
capacity of over 100,000 tonnes of finished rutile product while
mining in the Gangama ore body, where it was to initially begin
production. The new power generating facility, consisting of two,
five-megawatt diesel generators, which have been delivered to the
minesite in Sierra Leone, was initially expected to be operational in
mid-1995. The power generated by this facility was anticipated to be
available to the third dredge, as described above, and to supplement
the existing power generating equipment. Initial reports from
minesite inspections indicate that these assets remain substantially
intact; however, deterioration in their mechanical components has
occurred and numerous components have been stolen or vandalized. The
Company is not able to determine when these two facilities will be
operational.
Other physical assets of SRL include support plant and equipment
including a power plant, workshops, tugs, barges, concentrate loading
facilities, administrative buildings and a "company town" of furnished
homes for senior and intermediate staff. Significant looting and
damage has occurred, including looting of and damage to foodstores,
furniture and fixtures, small vehicles, housing and office buildings.
In conjunction with settlement of the OPIC insurance claim, the
Company determined that the damage to these assets, the power plant
and the dredge described above and inventories totaled approximately
$37,000,000.
Reserves
Based on drill hole testing and geological analysis carried out
by SRL personnel, proven reserves as of December 31, 1994 were
278,244,000 tonnes of ore, averaging 1.43% recoverable rutile in the
size ranges from which recovery is possible, which computes to
3,991,000 tonnes of recoverable rutile. Minimal production occurred
during 1995 prior to suspension of operations. An update of the
reserve estimates was not practical and the reserve estimate at
December 31, 1998 is believed to reasonably approximate the estimates
at December 31, 1994, as disclosed below. Prior to the suspension of
operations, actual recovery had steadily improved and is now estimated
at 75% of recoverable rutile, or about 3,000,000 tonnes. SRL's
estimate of mineral reserves as of December 31, 1992 were reviewed and
verified by independent consulting geologists in March 1993. The data
below are derived therefrom. Reserves are located in four separate
deposits in the Gbangbama area and five separate deposits in the
Sembehun area.
Tonnes of proved recoverable reserves and recoverable rutile
grade and tonnes for each of the Gbangbama deposits and the total for
the Sembehun deposits are as follows (tonnes in 000's):
Crude Ore Recoverable Rutile
Deposit Tonnes Grade Tonnes
Gbangbama:
Lanti North 20,074 1.87% 376
Lanti South 51,582 1.69% 871
Gbeni 31,288 1.56% 489
Gangama 21,311 1.70% 362
------- ------
124,255 2,098
------- ------
Sembehun 153,989 1.23% 1,892
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278,244 1.43% 3,990
======= ======
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SRL believes that additional exploration in the lease areas, or
in other nearby areas for which exploration concessions may be
obtained and in which there are indications of rutile mineralization,
may identify additional reserves. The reserves at Sembehun are
located in the Northern portion of SRL's mining concession, which is
approximately 26 miles from the present plant location and the other
four deposits. The mining operations in 1995 were exclusively in the
Lanti North deposit, which is adjacent to the Lanti South and Gbeni
deposits. The dredge presently under construction is expected to
initially operate in the Gangama deposit.
Customers
SRL sold 3,000 tons of rutile in 1997 and 3,000 tons in 1996, all
from stockpiled material. These sales were made to non-US companies.
The potential customers for SRL's products consist primarily of
five major companies, four of which were customers of SRL in 1994, the
last full year of operation. All of SRL's major customers as of the
date of the suspension of mining operations had been long time
customers and had long-term supply agreements with SRL, which were
periodically subject to renewal. The supply agreements generally
provided for a fixed rutile tonnage each customer was expected to
purchase under various pricing structures. Historically, each of the
customers had purchased at least the minimum amounts required under
their respective sales agreements. As long as operations at the mine
are suspended for reasons beyond the control of SRL, it will not be
able to deliver the contracted amounts of rutile to its customers.
These missed deliveries have been canceled by SRL due to force
majeure. Certain contracts contain purchase commitments through 2002
but for less than SRL's expected production. Although contracts for
the sale of all of SRL's projected production have not been finalized
as to price and volume, SRL is optimistic that prior to commencement
of operations it will be able to negotiate acceptable contracts with
these four customers for the sale of a significant amount of
production, although there can be no assurance that it can do so.
Competition
The two principal minerals mined by titanium raw material
producers are natural rutile (concentrated to 94% to 96% titanium
dioxide) and ilmenite (concentrated to between 55% and 63% titanium
dioxide, with an accompanying high iron content). SRL had been one of
the world's largest producers of natural rutile, accounting for
approximately 25% of the total. The majority of the world's total
production of natural rutile comes from Australia and South Africa.
Minor production comes from the United States, India and Sri Lanka and
nominal amounts from other sources. Most of the companies currently
producing rutile have greater financial resources than SRL.
The world's known reserves of natural rutile are not sufficient to
supply the world's raw material need for high titanium dioxide raw
materials required for pigment. As a result, processes have been
developed to upgrade ilmenite to provide high-content titanium dioxide
substitutes known as slag and synthetic rutile, typically containing
85% - 93% or more titanium dioxide. However, since natural rutile
remains a higher-grade raw material source and contains less waste, it
continues to be a preferred feedstock for the production of paint
pigment. Any significant improvement in the economics of upgrading
lower grade titanium minerals to higher grade titanium products other
than slag and synthetic rutile could adversely affect SRL's
competitive position if and when it resumes operations.
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SRL's current plan, subject to the successful resumption of
operations, is to increase annual natural rutile production to over
230,000 tonnes. The plan includes adding production from the new,
partially built dredge, under the present mine reopening plan. SRL
forecasts that market demand for rutile at that time should enable SRL
to sell the production from the new dredge. However, the market
demand and pricing for natural rutile and the competing slag and
synthetic rutile has been susceptible to historical fluctuations due
to domestic and worldwide economic cycles, which may have an impact on
SRL's ability to sell its production at acceptable prices.
Employees
As a result of the suspension of mining operations in Sierra
Leone, SRL terminated all of its personnel in 1995. Currently SRL has
a core staff of about 20 senior expatriates and Sierra Leone
nationals. SRL has historically been one of Sierra Leone's largest
private employers. Current SRL projections indicate that once
operations resume in Sierra Leone, after completion of the
rehabilitation program, it expects to employ up to 12 expatriates and
over 1,000 Sierra Leone nationals.
Political and Other Risks of Operating in Sierra Leone
Sierra Leone is an independent republic on the West African coast.
A former British colony, it is pro-western and retains ties to Great
Britain through its membership in the Commonwealth. The economy of
Sierra Leone has been based largely on agriculture, fishing and the
mining of rutile, bauxite, gold and diamonds.
Sierra Leone's former one-party government was overthrown in late
May 1992 by a group of young military officers, headed by Captain
Valentine Strasser. The new ruling body was known as the National
Provincial Ruling Council ("NPRC"). In January 1996, Captain Strasser
was deposed as Chairman of the NPRC and was replaced by Brigadier
General Julius Maada Bio, Chief of Defense Staff. In early 1996, for
the first time in almost 20 years, democratic elections were held in
Sierra Leone to elect a civilian government, including a president and
parliamentary representatives. Mr. Ahmad Tejan Kabbah, an attorney
who worked in East Africa and New York for the United Nations
Development Program, was elected president on March 15, 1996.
During most of 1995 and into mid-1996, Sierra Leone experienced a
general state of civil unrest, including military actions by non-
government forces, which resulted in the suspension of operations at
the mine. Discussions between representatives of the Government of
Sierra Leone (the "GOSL") and the opposing forces, which began in
early 1996, culminated in the signing of a November 1996 peace
agreement between the parties. Final implementation of the terms of
the peace accord were interrupted in May 1997 when Major Johnny Paul
Koroma, who was being held in prison on coup plotting and treason
charges, was broken out of jail by young sympathetic army officers who
then overthrew the GOSL in a coup d'etat. The GOSL moved into exile
in neighboring Guinea and a new military government was formed called
the Armed Forces Revolutionary Council ("AFRC"). Major Koroma was
placed as Chairman of this council. The AFRC immediately consolidated
its position in Sierra Leone by joining forces with the RUF. The
combined forces have been the cause of the civil unrest in Sierra
Leone.
In response to the overthrow of the democratically elected GOSL,
the international community universally condemned the ruling junta and
called for the immediate return of democracy in Sierra Leone. After
several abortive attempts for a peaceful resolution in late 1997 and
early 1998, the ECOWAS provided a military force, ECOMOG, to forcibly
remove the junta from power in February 1998. President Kabbah and
GOSL were reinstated in Sierra Leone on March 10, 1998 amid unanimous
support from the Sierra Leonean civilian population and the
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international community. In December 1998, fighting broke out between
ECOMOG forces and RUF rebels in the areas surrounding the capital city
of Freetown. On January 6, 1999 rebels attacked Freetown and took
control of the eastern part of the city. Nigerian-led ECOMOG forces
ultimately pushed the rebels out of Freetown and the surrounding area.
ECOWAS has pledged to continue to support the democratically elected
GOSL and maintain security in the country until the GOSL can
adequately maintain its own security. Additionally, the United
Nations has pledged to provide military monitors and establish a
mission in Sierra Leone to coordinate and facilitate humanitarian
activities in the country. The International Monetary Fund ("IMF")
had a Structural Adjustment Program in place at the time of the May
1997 coup. The GOSL has pledged to continue working with the IMF to
strengthen its economy. The country is currently receiving
considerable support from several multi-lateral and bilateral
international agencies including the World Bank, the European Union,
the Commonwealth and others.
Under the current agreement between SRL and the GOSL, the GOSL has
an option to purchase a 47% ownership interest in SRL on or after
January 1, 2000 at a purchase price of $57,400,000. Both shareholders
of SRL would sell equal interests in SRL if this purchase option is
exercised. Under the agreement, SRL continues to maintain its
currency outside of Sierra Leone and will not be subject to
withholding tax on any shareholder dividend payments until the year
2000, after which the GOSL has the right to impose a 10% withholding
tax on dividends. The agreement also defines the rate at which income
tax, royalty and mining lease payments are to be made by SRL. Prior
to the May coup, SRL had entered into negotiations with the GOSL to
eliminate the purchase option and change certain aspects of the fiscal
regime. In 1998, management of SRL had several meetings with the GOSL
and believes it has made significant progress towards finalizing the
formal agreement with the GOSL although there can be no assurance that
it will be successful.
Because the mine has been protected by a private security force,
the civil unrest that occurred during 1997 and 1998 has not affected
SRL's maintenance operations at the mine. SRL anticipates that a
security force will remain at the mine as a condition of its
reopening. Due to the need to restructure and refinance SRL's current
and anticipated financial obligations, to address ongoing security
issues, and to finalize the renegotiated agreement with the GOSL, it
is unlikely that the commencement of mining operations at SRL will
occur in the near future.
As Sierra Leone is a third-world country, the Company's
investment in SRL is subject, at any time, to the potentially volatile
effects of political instability and economic uncertainty often
present in such countries, including civil strife and expropriation,
excessive taxation and other forms of government interference
INVESTMENT IN PACIFIC
The Company owns 28.5% of Nord Pacific Limited ("Pacific") (NASDAQ
NNM; NORPF - Toronto Stock Exchange; NPF), a company engaged in the
production of copper and the exploration for gold, copper, nickel,
cobalt and other minerals in Australia, Papua New Guinea, Mexico, and
North America. Pacific owns a 40% interest in the Girilambone Copper
mine which has been in production since May 1993, and a 50% interest
in the Girilambone North Copper mine which has been in production
since July 1996. At present projected annual production rates, it is
estimated that it can sustain production from its present estimated
reserves through the year 2001. Pacific also owns a 50% interest in
the Tritton Copper Project, a 100% interest in the Tabar Islands Gold
Project, a 35% interest in the Ramu Nickel-Cobalt Project, and various
interests in other exploration properties. Feasibility studies have
been completed on the Tritton Copper Project, the Tabar Islands Gold
Project and the Ramu Nickel-Cobalt Project and Pacific is seeking the
financing necessary to develop these projects.
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Pacific owns a 50% interest in the Tritton Copper Project, a
sulfide copper deposit discovered in 1996. This project has
identified a massive medium-to-high grade pyrite-chalcopyrite sulfide
ore deposit about fourteen miles southwest of the present Girilambone
copper operations. This deposit has an estimated recoverable, diluted
resource of approximately 9,230,000 tonnes at a grade of 2.63% copper.
The identified resource is also projected to contain gold and silver.
A feasibility study has examined the economics of two processing
alternatives for the project. The first alternative assumes a
conventional flotation concentrate is produced for sale to a smelter.
The second alternative produces copper metal on-site by regrinding the
flotation concentrate and then employs low temperature-pressure
oxidation, acid leaching and solvent extraction electrowinning
processing to produce copper cathode using existing Girilambone
facilities.
Pacific also owns 100% of the Tabar Island Gold Project in Papua
New Guinea, at which current exploration has identified oxide gold
mineralization on Simberi Island as well as identifying promising
drilling results in other areas of the project.
In May 1998, revised resource estimates for Simberi resulting
from the recent drilling program were calculated as follows:
Total Simberi Oxide and Sulfide Resources
Resource Million Gold Grade
Mineralization Category Tonnes (Grams/Tonne)
Measured and
Oxide indicated 10.7 1.25
Oxide Inferred 9.0 1.1
Sulfide Inferred 9.3 2.5
---- ------
Total 29.0 1.6
===== ======
A feasibility study on the development of the oxide resources was
completed in 1996 and updated in 1998 to include additional oxide
resources identified by a 21,000 meter drilling program completed in
early 1998. The feasibility study estimates gold production of
approximately 40,000 ounces per year at an average cost of $173 per
ounce over a mine life in excess of six years. Pacific has been
granted a mining lease over these deposits by the government of Papua
New Guinea and has received all necessary operating permits
In addition, Pacific owns 35% of a nickel-cobalt project also
located in Papua New Guinea (the "Ramu Project"). Highlands Pacific
Limited ("HPL"), holds a 65% interest and is the manager of the
project. HPL, as operator, pursued a program of reserve drilling,
metallurgical testwork, engineering studies and preparation of a
feasibility study which was completed in late-1998. Unit total
operating costs when full production levels are reached are estimated
to be approximately $1.38 per pound of nickel produced. After cobalt
credits, based on a cobalt price of $10.00 per pound, these operating
costs are estimated to be $0.41 per pound of nickel. Capital costs
for development are estimated to be $838 million.
The feasibility study assumes a mine life of 20 years. The study
projects annual production of 32,800 tonnes (72 million pounds) of
nickel and 3,200 tonnes (7.1 million pounds) of cobalt. Projected
nickel production costs, before cobalt credits, of $1.38/lb, and
$0.41/lb after cobalt credits (assuming cobalt at $10.00/lb), would
place the proposed operation in the lower cost decile of the worldwide
cost curve for nickel. Development of the project will be dependent
on the availability of financing.
Pacific also has interests in other properties, which will require
additional exploration in order to determine the existence of
commercial mineral deposits.
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DISCONTINUED OPERATIONS
On April 23, 1997, the Company sold for cash substantially
all of the assets (except for cash and accounts receivable) of its 80%-
owned kaolin and Norplexr operations (Nord Kaolin Company - "NKC").
The purchaser has assumed certain reclamation and lease obligations of
NKC, while the Company settled NKC's remaining liabilities. The
financial statements of the Company reflect the accounts of NKC as
discontinued operations.
ITEM 2. PROPERTIES
Reference is made to Item 1 of this Form 10-K for information
concerning the nature and location of the properties of the Company's
investees.
ITEM 3. LEGAL PROCEEDINGS
On December 2, 1998 MIL Investments, S. A. ("MIL"), derivatively
on behalf of the Company brought a civil action in the District Court
of Dallas County, Texas, naming as Defendants, Nord Pacific Limited
(Pacific"), W. Pierce Carson, Edgar F. Cruft, Terence H. Lang, and
Hicor Corporation. Counsel for Messrs. Carson, Cruft and Lang removed
the case on December 31, 1998 to the United States District Court for
the Northern District of Texas, Dallas Division. Together with its
Notice of Removal, Messrs. Carson, Cruft, and Lang filed a Motion to
Realign the Company as party defendant and, in addition, filed a
Motion to Dismiss the case for lack of personal jurisdiction and,
alternatively, to transfer venue of the case to the United States
District Court for the District of New Mexico at Albuquerque. The
Company, Pacific and each individual defendant is being represented
under a directors and officers liability policy. On behalf of
Pacific, on January 13, 1999, a Motion to Dismiss the case was filed
asserting that the Court lacked personal jurisdiction over Pacific and
that the Plaintiff had failed to state a claim upon which relief could
be granted against Pacific. On January 13, 1999, the Plaintiff filed
a Motion to Remand the case to the 298th Judicial District Court of
Dallas County, Texas, a Motion for Leave to Amend the Complaint and a
Response to the Company's Motion to Realign the Parties. All of these
Motions are pending and have not been ruled upon by the Court.
The Plaintiff's Original Petition and Jury Demand sets forth a
number of alleged corporate events involving the Company's
relationship with Pacific, all of which have been approved by MIL's
nominees to Resource's Board of Directors. Causes of action are
alleged against Messrs. Carson, Cruft, and Lang for breach of
fiduciary duties, negligence and gross negligence. The damages sought
in connection with those causes of action are stated to be "in excess
of the minimum jurisdictional limits of this Court of not more than
$50 million". No specific causes of action are alleged against the
Pacific. Nonetheless, a prayer for punitive damages against all
defendants is alleged in the amount of $50 million.
The Company expects to contest the claims vigorously if they are
not dismissed for lack of jurisdiction by the courts in Texas. The
cost of defense is being covered by a policy of insurance.
An action was instituted on behalf of the Company and Pacific in
the Supreme Court, New York County on January 15, 1999, seeking a
determination that MIL is not entitled to demand representation on the
Board of Directors of the Company and that the failure to designate
such a representative does not constitute a violation or breach of any
of the Company's obligations to MIL. The time within which to respond
to that complaint has been extended.
10
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of 1998.
11
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The following table sets forth, for the calendar periods
indicated, the high and low closing sale price of the Company's Common
Stock on the New York Stock Exchange Composite Tape.
1998 1997
High Low High Low
FIRST QUARTER 2 5/8 1 3/16 4 5/8 3 1/2
SECOND QUARTER 2 7/8 1 3/4 3 7/8 2 1/2
THIRD QUARTER 2 5/16 1 1/16 3 1/4 1 15/16
FOURTH QUARTER 2 1/4 15/16 2 5/16 1 1/4
The approximate number of equity security holders at December 31,
1998 of the Company's Common Stock was 2,510.
The Company has never paid cash dividends on its Common Stock and
does not expect to do so in the immediate future.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
1998 1997 1996 1995 1994
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS
Revenues $ 71 $ 46 $ 35 $ 86 $ 30,590
Loss from
continuing operations (7,831) (12,041) (5,676) (52,203) (12,316)
Loss from
discontinued kaolin operations -- (271) (27,174) (4,610) (3,295)
----------- ----------- ---------- ----------- -----------
Net loss $ (7,831) $ (12,312) $ (32,850) $ (56,813) $ (15,611)
=========== ============ ========== =========== ===========
Basic loss per common share
From continuing operations $ (.36) $ (.55) $ (.30) $ (3.30) $ (.80)
From discontinued operations -- (.01) (1.43) (.29) (.22)
----------- ----------- ---------- ----------- -----------
Net loss per common share $ (.36) $ (.56) $ (1.73) $ (3.59) $ (1.02)
=========== ============ ========== =========== ===========
<CAPTION>
YEAR ENDED DECEMBER 31,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital $ 6,106 $ 26,117 $ 42,834 $ 21,396 $ 13,228
Total assets 18,391 39,909 54,722 69,222 108,083
Stockholders' equity 10,159 18,148 28,981 42,102 97,669
</TABLE>
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Act
of 1995. The statements contained in this report which are not
historical fact are "forward looking statements" that involve various
important risks, uncertainties, and other factors which could cause
the Company's actual results for 1999 and beyond to differ materially
from those expressed in such forward looking statements. These
important factors include, without limitation, the risks and factors
set forth below in "Economic Outlook" as well as other risks
previously disclosed in the Company's securities filings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operating activities provided cash of
$4,919,000 for the year ended December 31,1998 compared to cash used
in operations of $11,901,000 and $7,751,000 for the years ended
December 31, 1997 and 1996, respectively. Cash provided by operations
for the year ended December 31, 1998 included the receipt of a
$14,205,000 insurance claim as a result of the damage suffered at SRL.
In February 1998, the Company filed a claim for damage due to
political violence at SRL under a $15,705,000 political risk insurance
policy. The Company received a $1,500,000 provisional payment from
the insurer in 1996 and received the balance of the claim in May 1998.
Cash used in operations for the years ended December 31, 1997 and 1996
included cash used in discontinued operations of $1,033,000 and
$4,785,000, respectively. Cash used in operating activities included
advances to SRL of $5,001,000 in 1998, $8,645,000 in 1997 and
$1,356,000 in 1996 which were amounts used to fund SRL's operations
and interest payments due on its loans.
Cash used in investing activities included a reduction in loan
obligations to SRL's lenders of $12,476,000 in 1998, $3,089,000 in
1997 and $1,838,000 in 1996. Net advances to Pacific (repayments
from) Pacific were $345,000 in 1998, $98,000 in 1997 and $(1,147,000)
in 1996. Capital expenditures for leasehold improvements and
furniture and equipment were $132,000 in 1998 and $44,000 in 1997,
primarily incurred in opening the Company's office in Albuquerque. In
April 1997, the Company sold the assets of Nord Kaolin Company. Net
proceeds from the sale, after the collection of receivables and
payment of liabilities and transaction costs, were approximately
$10,528,000. In connection with this sale, previously restricted
investments were released for sale. Proceeds from the sale of these
investments during 1997, amounted to $2,376,000. Cash used in
investing activities also included increases in other assets of
$1,203,000 in 1997 and $1,177,000 in 1996, primarily representing
funds deposited in non-qualified trusts designated for funding of
retirement benefits.
Cash provided by financing activities includes common stock
issued for cash, including amounts received upon the exercise of stock
options. The Company received $17,773,000 during the year ended
December 31, 1996 from the private placement of 5,160,000 shares of
its Common Stock and $2,100,000 from the issuance of a convertible
loan. The convertible loan was subsequently converted into common
stock.
As a result of the discontinuance of the kaolin operations, the
Company's business consists of a 50% ownership in SRL and a 28.5%
ownership in Pacific. At December 31, 1998, the Company has working
capital of $6,106,000. The Company expects to fund its administrative
activities for the next year from its existing working capital.
Due to the lengthy suspension of its operations, SRL has relied
and will continue to rely on funds from the Company and its other 50%
owner to sustain its operations. During 1998, 1997 and 1996, the
Company provided SRL with $17,477,000, $11,734,000 and $3,194,000
respectively, as its 50% share of funding required by SRL for
14
<PAGE>
maintenance of a limited workforce, payment to vendors, costs of
security at the mine and payments of principal and interest on loans
outstanding. Due to the continuing rebel activity in Sierra Leone, it
is doubtful that restart operations will begin any time in the near
future. Consequently, SRL has taken steps to reduce budgeted costs in
1999, including employee reductions and reduction in the cost of the
security force. The Company is not obligated to continue to advance
funds to SRL for SRL's operating expenses, however it expects to do
so in the near term while SRL pursues its plan to restart operations.
The Company believes that it has adequate working capital and other
liquid assets sufficient to fund its share of SRL's operating expenses
for the next year, if it elects to do so.
In May 1998, SRL's debt agreements were amended. The amendments
provided for a reduction in the interest rate to 6.875% and for an
extension of the principal maturities. Prior to the amendments,
interest was payable at a variable rate. The amendments also provided
that the loans would be payable in two installments of $3,028,000 in
September 1999 and 2000, with the balance of $6,055,000 due in
September 2001. As a condition to the restructuring, the Company
agreed to maintain cash, cash equivalents or marketable securities
with an aggregate value of not less than 150% of the Company's
guaranteed portion of the aggregate outstanding principal amount of
the debt and cash or cash equivalents having an aggregate value of not
less than 100% of the Company's guaranteed portion of the aggregate
principal amount of the debt scheduled to be paid during the next six
months. At December 31, 1998, the Company is not in compliance with
the first of these two conditions. As a result, the lenders could
demand repayment of the loans, although as of March 19, 1999, they
have not done so. Should the lenders demand repayment of the loans,
SRL does not have sufficient funds to repay the amounts due.
Consequently, the Company may be required to fulfill a portion or all
of its obligation under the guarantee. In that event, it may be
required to liquidate certain of its assets. There can be no
assurance that the Company will have sufficient funds to fulfill its
obligation under the guarantee if it is called upon to do so.
One of the key uncertainties in returning SRL to operations is
the availability of adequate financing. SRL's preliminary projections
indicate that it may require approximately $112,000,000 for asset
rehabilitation, completion of a new powerhouse and dredge, mine
development and working capital. In July 1998 the Company engaged
Rothschild to assist in arranging financing for its share of the
restart costs. SRL intends to continue to pursue discussions with its
current lenders and other lending sources to determine if funds would
be available from these sources to finance a portion or all of the
above requirements. The Company cannot determine if additional
financing will be available at terms which would be acceptable to SRL
and the Company, if at all. To the extent funds are not available
from these or other sources, the Company would be required to
contribute its 50% share of SRL's cash requirements. However, the
Company would not be able to provide significant funding to SRL
without obtaining capital from other sources.
RESULTS OF OPERATIONS
The Company incurred a loss from continuing operations for the
year ended December 31, 1998, of $7,831,000 compared to a loss of
$12,312,000 incurred in 1997. Selling, general and administrative
expenses ("SG&A") increased slightly for the year ended December 31,
1998 compared to 1997. Increases in accounting expenses and
professional fees offset significant reductions in employee costs,
insurance expense and other expenses. Also contributing to the
increase in SG&A were non-recurring moving costs in 1998 related to
the Company's move of its corporate office and employees to
Albuquerque, New Mexico and costs associated with the computation and
filing of the insurance claim.
Interest income decreased to $782,000 for the year ended December
31, 1998 as compared to $1,223,000 in 1997 due to reduced funds
15
<PAGE>
available for investment and lower interest rates in 1998 compared to
1997. The Company's losses relating to its investment in SRL were
$5,001,000 for the year ended December 31, 1998 compared to $8,645,000
in 1997. During the year ended December 31, 1997, SRL was engaged in
activities necessary to the restart of the mine, including asset
refurbishment and negotiations with the Government of Sierra Leone.
This activity significantly increased expenses and correspondingly
increased the loss incurred by SRL. Due to continuing rebel activity
in Sierra Leone, SRL was forced to curtail its level of activity in
1998. Equity in net earnings from Pacific was $38,000 for the year
ended December 31, 1998 compared to equity in net loss of $949,000 in
1997. Pacific's earnings for the year ended December 31, 1998 were
impacted by a significant decline in copper prices. The equity in net
loss for the year ended December 31, 1997 included an impairment of a
development project resulting from the decline in gold prices in 1997.
The Company incurred a loss from continuing operations for the
year ended December 31, 1997, of $12,041,000 compared to a loss of
$5,676,000 incurred in 1996. Selling, general and administrative
expenses increased slightly for the year ended December 31, 1997 due
primarily to severance and other costs involved in closing the
Company's offices in Dayton, Ohio. Interest income increased to
$1,223,000 for the year ended December 31, 1997 as compared to
$700,000 in 1996 due to additional funds available for investment.
The Company's losses relating to its investment in SRL were $8,645,000
for the year ended December 31, 1997 compared to $1,356,000 in 1996
due to the increased level of activity at SRL in 1997 as described
above. Equity in net loss from Pacific was $949,000 for the year
ended December 31, 1997 and $1,331,000 in 1996. Pacific suffered a
loss for the year ended December 31, 1997 due primarily to impairment
of exploration projects resulting from the decline in gold prices in
1997 and suffered a loss in 1996 due primarily to exploration
expenses.
NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133
establishes standards for derivative instruments, including certain
derivative instruments imbedded in other contracts, and for hedging
activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position
and measure those instruments at fair value. This statement is
effective for all fiscal quarters of fiscal years beginning after June
15, 1999. Since the Company does not participate in hedging
activities, SFAS 133 will have no effect on the Company's financial
statements.
The Accounting Standards Executive Committee ("AcSEC") of the
AICPA has issued Statement of Position ("SOP") 98-5, "Reporting on the
Costs of Start-Up Activities" effective for financial statements for
fiscal years beginning after December 31, 1998. SOP 98-5 requires
that the costs of start-up activities, including organization costs,
be expensed as incurred. The Company has determined that SOP 98-5
will have no effect on its financial statements.
YEAR 2000
In January 1998, the Company initiated a Year 2000 project to
address the issue of computer programs and embedded computer chips
being unable to distinguish between the year 1900 and the year 2000.
The project involves converting to Year 2000 compliant accounting
software, testing existing software, hardware and operational systems
and communicating with third-party customers, suppliers and service
providers to ensure that they are taking appropriate action to remedy
their Year 2000 issues.
The Company has installed Year 2000 compliant accounting software
and is in the process of converting its existing system. The Company
anticipates that the implementation of this software will be completed
16
<PAGE>
by September 30, 1999. The Company's local area network and PC
hardware and non-accounting software, such as spreadsheets and word
processing, have been tested and, to the best of the Company's
knowledge, are Year 2000 compliant. Other non-information technology
systems, such as the telephone system and other office equipment, are
currently being assessed for Year 2000 readiness. Management expects
to have substantially all of the system and application changes,
except for the accounting software, completed by April 30, 1999, and
expects to complete testing of substantially all systems and
applications by June 30, 1999.
The Company believes that the computer systems and applications
it maintains would not have a material impact on the operations of the
Company or its revenues in the event that the systems fail to operate
in the Year 2000. A contingency plan to replace any non-compliant
systems has been developed. If the conversion to Year 2000 compliant
accounting software is not complete by December 31, 1999, the Company
may be able to use compliant spreadsheet software until the accounting
software is operational. A decision regarding the preparation of a
contingency plan will be made by June 30, 1999.
The Company is communicating with third party customers and
suppliers and has received notification from its building manager, its
bank, the New York Stock Exchange and other service providers
indicating that they expect to be Year 2000 compliant. The Company
has prepared surveys for distribution to its customers, major vendors
and other service providers to ascertain their state of Year 2000
readiness. It is anticipated that these surveys will be completed and
distributed on or about March 31, 1999. Due to the general uncertainty
inherent in the Year 2000 problem, resulting in part from the
uncertainty of the Year 2000 readiness of third-party customers,
suppliers, and service providers, the Company is unable to determine
at this time whether the consequences of Year 2000 failures will have
a material impact on the Company's results of operations or financial
condition.
The estimated total cost of Year 2000 testing and compliance is
expected to be approximately $50,000, which includes costs related to
the purchase and conversion to Year 2000 compliant accounting
software. No costs directly related to the Year 2000 issue have been
incurred as of December 31, 1998. The costs of the project and the
expected completion dates are based on management's best estimates.
17
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements as of December 31, 1998 and 1997
and for each of the years in the three-year period ended
December 31, 1998 follow.
18
<PAGE>
Independent Auditors' Report
The Board of Directors
Nord Resources Corporation:
We have audited the accompanying balance sheets of Nord Resources
Corporation and subsidiaries as of December 31, 1998 and 1997, and the
related statements of operations, stockholders' equity, and cash flows
each of the years in the three-year period ended December 31, 1998.
These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the
audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures 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. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Nord
Resources Corporation and subsidiaries as of December 31, 1998 and
1997 and the results of their operations and their cash flows for each
of the years in the three-year period ended December 31, 1998, in
conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
April 13, 1999
19
<PAGE>
<TABLE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1998 AND 1997
(In thousands)
<CAPTION>
ASSETS
1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,136 $ 12,581
Accounts receivable - insurance claim (Note 3) -- 14,205
Accounts receivable - Nord Pacific Limited ("Pacific") 443 98
Other accounts receivable 29 29
Prepaid expenses 73 166
---------- ----------
TOTAL CURRENT ASSETS 6,681 27,079
INVESTMENT IN AND ADVANCES TO SIERRA RUTILE LIMITED AND ITS
SUBSIDIARIES AND AFFILIATES ("SRL") (Note 3) -- --
INVESTMENT IN PACIFIC (Note 4) 5,733 5,695
PROPERTY AND EQUIPMENT, at cost less
Accumulated depreciation (Note 5) 247 150
OTHER ASSETS (Note 6) 5,730 6,985
---------- ----------
$ 18,391 $ 39,909
========== ==========
See notes to consolidated financial statements
</TABLE>
20
<PAGE>
<TABLE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1998 AND 1997
(In thousands)
<CAPTION>
LIABILITIES AND
STOCKHOLDERS' EQUITY
1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable $ 471 $ 93
Accrued expenses 104 869
---------- ----------
TOTAL CURRENT LIABILITIES 575 962
OBLIGATION UNDER GUARANTEE OF LOANS PAYABLE
BY SRL (Note 3) -- 12,476
RETIREMENT BENEFITS (Note 7) 7,657 8,323
COMMITMENTS AND CONTINGENT LIABILITIES
(Notes 3, 7, 9 and 11)
STOCKHOLDERS' EQUITY (Notes 4, 7 and 10)
Common stock, par value $.01 per share. Authorized
50,000,000 shares; issued and outstanding 21,905,488
shares 219 219
Additional paid-in capital 81,539 81,531
Accumulated deficit (70,714) (62,883)
Accumulated other comprehensive loss (Note 2) (885) (719)
---------- ----------
10,159 18,148
---------- ----------
$ 18,391 $ 39,909
========== ==========
See notes to consolidated financial statements
</TABLE>
21
<PAGE>
<TABLE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands except per share amounts)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
REVENUES
Other $ 71 $ 46 $ 35
OPERATING COSTS AND EXPENSES
Selling, general and administrative expenses (3,630) (3,548) (3,477)
------------ ----------- ------------
LOSS FROM OPERATIONS (3,559) (3,502) (3,442)
OTHER INCOME (EXPENSE)
Interest income 782 1,223 700
Interest expense (91) (118) (117)
Litigation recoveries -- -- 150
Provision for impairment of investments -- (50) (280)
Losses relating to investment in SRL (Note 3) (5,001) (8,645) (1,356)
Equity in net earnings (loss) of Pacific (Note 4) 38 (949) (1,331)
------------ ----------- ------------
Total other expense (4,272) (8,539) (2,234)
------------ ----------- ------------
LOSS FROM CONTINUING OPERATIONS (7,831) (12,041) (5,676)
============ =========== ============
LOSS FROM DISCONTINUED
OPERATIONS (Note 8) -- (271) (27,174)
------------ ----------- ------------
NET LOSS $ (7,831) $ (12,312) $ (32,850)
LOSS PER SHARE
From continuing operations $ (.36) $ (.55) $ (.30)
From discontinued operations -- (.01) (1.43)
------------ ----------- ------------
Net loss $ (.36) $ (.56) $ (1.73)
============ =========== ============
Weighted average shares of
common stock outstanding 21,905 21,875 18,971
============ =========== ============
See notes to consolidated financial statements
</TABLE>
22
<PAGE>
<TABLE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands except share amounts)
<CAPTION>
Retained Accumulated
Common Stock Additional Earnings Other
Outstanding Paid-in (Accumulated Comprehensive
Shares Amount Capital Deficit) Income (Loss)
<S> <C> <C> <C> <C> <C>
Balance - January 1, 1996 as
previously reported 15,838,408 $ 158 $ 58,137 $ 20,806 $ 282
Prior period adjustments (Notes 3
and 4) -- -- 1,246 (38,527) --
----------- ---------- ------------ ------------- ----------
Balance - January 1, 1996,
as restated 15,838,408 158 59,383 (17,721) 282
Net loss -- -- -- (32,850) --
Issuance of common stock 5,160,000 52 17,697 -- --
for cash (Note 10)
Conversion of loan into
common stock (Note 4) 840,000 8 2,091 -- --
Option activity (Note 10) -- -- 25 -- --
Foreign currency translation
adjustment -- -- -- -- (1)
Minimum pension liability (Note 7) -- -- -- -- (143)
----------- ---------- ------------ ------------- ----------
Balance - December 31, 1996 21,838,408 218 79,196 (50,571) 138
Net loss -- -- -- (12,312) --
Stock options exercised (Note 10) 67,080 1 150 -- --
Adjustment resulting from issuance
of securities by Pacific (Note 4) -- -- 2,185 -- --
Minimum pension liability (Note 7) -- -- -- -- (857)
----------- ---------- ------------ ------------- ----------
Balance - December 31, 1997 21,905,488 219 81,531 (62,883) (719)
Net loss -- -- -- (7,831) --
Compensation related to options
issued to non-employees -- -- 8 -- --
Minimum pension liability (Note 7) -- -- -- -- (166)
----------- ---------- ------------ ------------- ----------
Balance - December 31, 1998 21,905,488 $ 219 $ 81,539 $ (70,714) $ (885)
=========== ========== ============ ============= ===========
See notes to consolidated financial statements.
</TABLE>
23
<PAGE>
<TABLE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (7,831) $ (12,312) $ (32,850)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities:
Equity in net (earnings) loss of Pacific (38) 949 1,331
Provision for retirement benefits, net of payments (832) 479 817
Depreciation 35 21 21
Provision for impairment of assets 11 50 280
Loss from discontinued operations -- 271 27,174
Non-employee compensation expense 8 -- --
Change in assets and liabilities, excluding effects of dispositions,
discontinued operations and other non-cash items:
Accounts receivable - insurance claim 14,205 -- 1,500
Accounts receivable - Pacific (345) (669) (1,147)
Other accounts receivable -- -- (73)
Prepaid expenses 93 (3) 64
Accounts payable 378 16 (144)
Accrued expenses 61
(765) 330
Net cash used in discontinued operations -- (1,033) (4,785)
------------- ------------ ------------
Net cash provided by (used in) operating activities 4,919 (11,901) (7,751)
------------- ------------ ------------
INVESTING ACTIVITIES
Reduction in obligation under guarantee of loans payable by SRL (12,476) (3,089) (1,838)
Proceeds from sale of investment in Manatee 954 180 --
Proceeds from sale of short-term investments -- 2,376 --
Purchases of property and equipment (132) (44) --
Proceeds from sale of property and equipment -- -- 219
Decrease (increase) in other assets 290 (1,203) (1,177)
Proceeds from sale of discontinued operations -- 10,528 --
------------- ------------ ------------
Net cash provided by (used in) investing activities (11,364) 8,748 (2,796)
FINANCING ACTIVITIES
Issuance of common stock -- 151 17,773
Issuance of convertible loan -- -- 2,100
Restricted cash -- -- 231
------------- ------------ ------------
Net cash provided by financing activities -- 151 20,104
------------- ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,445) (3,002) 9,557
CASH AND CASH EQUIVALENTS - Beginning of year 12,581 15,583 6,026
------------- ------------ ------------
CASH AND CASH EQUIVALENTS - End of year $ 6,136 $ 12,581 $ 15,583
============= ============ ============
See notes to consolidated financial statements.
</TABLE>
24
<PAGE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
1. BACKGROUND AND BASIS OF PRESENTATION
The Company owns a 50% interest in Sierra Rutile Holdings Limited,
which through its ownership of Sierra Rutile Limited, owns a rutile
mine in Africa. The Company also owns a 28.5% interest in Nord Pacific
Limited ("Pacific"), a publicly owned mining and exploration company
engaged in the production of copper in Australia and the exploration
for gold, copper, nickel, cobalt and other minerals in Australia,
Papua New Guinea, North America and Mexico.
Investment In and Advances to SRL and its Subsidiaries and Affiliates
The Company owns a 50% interest in Sierra Rutile Holdings
Limited, which in turn owns 100% of Sierra Rutile Limited and Sierra
Rutile America and a 50% interest in Sierra Rutile Services Limited,
Titanium Minerals Marketing International and Titanium Minerals
Marketing International, USA (collectively, "SRL"). SRL produces and
markets rutile and ilmenite (titanium dioxide). These products are
sold primarily to the paint pigment industry in the United States,
Europe and the Far East. Production facilities and raw material
supplies for the rutile operation are located in Sierra Leone, West
Africa. As Sierra Leone is a third-world country, the operations are
subject, at any time, to the potentially volatile effects of political
instability and economic uncertainty often present in such countries.
In January 1995, rebel forces attacked SRL's mining operation in
Sierra Leone, which had been in operation since 1978. As a result,
SRL was forced to suspend mining operations and subsequently
terminated all nonessential personnel. In April 1996, SRL regained
control of the mine site. Maintenance personnel, protected by a
security force, have since resumed activities at the mine. In May
1997, a military coup ousted the democratically elected government.
Although the democratically elected government of Sierra Leone was
restored to power in February 1998, rebel activity in the country has
continued.
The resumption of operations at the mine is dependent upon a
number of conditions including (1) a sustainable acceptable political
environment in Sierra Leone within which to operate, (2) adequate
levels of security in and around the minesite area, (3) the successful
renegotiation of operating agreements between SRL and the government
of Sierra Leone, (4) the existence of a suitable marketing environment
and (5) the receipt of adequate financing on acceptable terms to cover
the costs of resuming operations. These costs include repair or
replacement of assets which have incurred damage and deterioration
during the period of suspension of operations and costs to re-
establish and train a workforce, replenish supplies and restore and
recommission the facilities. SRL is not able to determine when
operations will resume at the mine.
When the political environment in Sierra Leone stabilizes, SRL
intends to continue discussions with its current lenders to determine
if funds are available to refinance SRL's existing loans, to finance
the rehabilitation program at the mine and to finance the completion
of an expansion program. If these lenders do not provide the
necessary funds to SRL to refinance SRL's existing loans and to resume
operations, SRL intends to pursue other sources of financing. There
can be no assurance that SRL will be able to obtain sufficient
financing to refinance its existing loans and to resume operations on
acceptable terms, if at all.
The ability of SRL to continue operating as a going concern until
such financing can be obtained and the mine resumes operations is
dependent on receiving additional advances or contributions from its
shareholders to fund its ongoing operations and obligations as they
come due, or SRL's ability to access other sources of financing. As
25
<PAGE>
described in Note 3, SRL is in default of its loan agreements. The
ability of SRL to continue operating as a going concern is also
dependent on its ability to renegotiate the terms of or refinance its
existing loans.
The Company has guaranteed its share of SRL's loans outstanding
amounting to $6,055,000 as of December 31, 1998. As described in Note
3, SRL is in violation of its loan agreements as of December 31, 1998.
As a result, the lenders could demand repayment of the loans, although
they have not done so as of March 23, 1999. Should the lenders demand
repayment of the loans, SRL does not have sufficient funds to repay
the amounts due. Consequently, the Company may be required to fulfill
a portion or all of its obligation under its guarantee. In that
event, it may be required to liquidate certain of its assets. The
consolidated financial statements do not include any adjustments
relating to the value of recorded asset amounts should the Company be
required to liquidate certain of its assets to fulfill its obligation
under the guarantee.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Nord
Resources Corporation and its subsidiaries (collectively, the
"Company"). All significant intercompany transactions and balances are
eliminated in consolidation.
Investments in 20% to 50%-owned affiliates and joint ventures and
in affiliates or joint ventures in which the Company's investment may
temporarily be in excess of 50% are accounted for using the equity
method. Changes in the Company's proportionate share of the
underlying equity of an equity method investee, which result from the
issuance of additional securities by such equity investee, are
recognized as increases to or reductions of additional paid-in capital
in the consolidated statements of stockholders' equity.
Uses of Estimates
The preparation of these financial statements in conformity with
generally accepted accounting principles requires management of the
Company to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting period.
These estimates include losses related to discontinued operations and
rates of discounting and salary escalation and other actuarial
assumptions used to evaluate retirement benefits. Estimates of
mineral reserves are used as a basis for amortization of certain of
the Company's long-term assets.
Cash Equivalents
The Company considers all highly liquid investments with a
maturity of three months or less when purchased to be cash
equivalents.
26
<PAGE>
Property, Plant and Equipment
Equipment is depreciated using the straight-line method over the
estimated useful lives of the assets which range from two to five
years. Leasehold improvements are amortized over the five-year term
of the office lease.
Investments in Mining Companies
The Company evaluates the carrying value of its investments in
mining companies whenever events or changes in circumstances indicate
that carrying amount of the investment may not be recoverable. A loss
in the value of an investment that is other than a temporary decline
is recognized by recording a provision for impairment to reduce the
carrying value of the investment to its estimated fair value.
Accounting for Stock-Based Compensation
The Company measures compensation cost for stock options issued to
employees using the intrinsic value based method under Accounting
Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees".
Earnings Per Share
Basic earnings (loss) per common share is computed by dividing
net earnings (loss) by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is calculated
based on the weighted average number of common shares outstanding
adjusted for the dilutive effect, if any, effect of stock options and
warrants outstanding. Options to purchase 1,644,371, 1,529,371, and
1,659,361 shares of common stock for the years ended December 31,
1998, 1997 and 1996, respectively, are not included in the computation
of diluted income per share as the effect of the assumed exercise of
these options would be antidilutive.
Comprehensive Income (Loss)
In June 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income (Statement No. 130), effective for years
beginning after December 15, 1997. Statement No. 130 establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
Company adopted Statement No. 130 effective January 1, 1998 and,
accordingly, has reported accumulated other comprehensive loss as a
separate line item in the stockholders' equity section of its
consolidated balance sheets at December 31, 1998 and 1997. The
components of total comprehensive income (loss) for the periods
consist of net earnings (loss), foreign currency translation and
changes in the unfunded pension liability as follows:
27
<PAGE>
<TABLE>
<CAPTION>
Accumulated
Foreign Unfunded Other Net Total
Currency Pension Comprehensive Earnings Comprehensive
Translation Liability Income (Loss) (Loss) Income (Loss)
(In thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995 $ 282 $ -- $ 282 $ (17,721) $ (17,439)
1996 activity (1) (143) (144) (32,850) (32,994)
---------- --------- -------- ---------- ----------
Balance at December 31, 1996 281 (143) 138 (50,571) (50,433)
1997 activity -- (857) (857) (12,312) (13,169)
---------- --------- -------- ---------- ----------
Balance at December 31, 1997 281 (1,000) (719) (62,883) (63,602)
1998 activity -- (166) (166) (7,831) (7,997)
---------- --------- -------- ---------- ----------
Balance at December 31, 1998 $ 281 $ (1,166) $ (885) $ (70,714) $ (71,599)
========== ========== ======== ========== ==========
</TABLE>
Reclassifications
Certain reclassifications have been made in the 1997 and 1996
consolidated financial statements to conform to the classifications
used in 1998.
3. INVESTMENT IN AND ADVANCES TO SRL AND ITS SUBSIDIARIES AND
AFFILIATES
As a result of the initial rebel attack on SRL's mining
operations in Sierra Leone and the continuing uncertainty resulting
from the ongoing rebel activity in the country, significant
uncertainty exists as to the Company's ability to recover its
investment in SRL. Accordingly, the Company has recorded a provision
for impairment of its investment in SRL, including its estimate of
amounts it will be required to advance to SRL for the repayment of
loans payable by SRL which it has guaranteed. Since the uncertainty
arose as a result of the rebel attack in 1995, the provision for
impairment has been recorded as a prior period adjustment to retained
earnings in the Company's financial statements as of January 1, 1996.
The provision totals $49,866,000, including $32,463,000 to reduce the
investment to zero, and $17,403,000 recorded as obligation under
guarantee of loans payable by SRL.
During 1998, 1997 and 1996, the Company advanced to SRL
$17,477,000, $11,734,000 and $2,052,000, respectively, to fund its 50%
share of SRL's cash requirements, including debt service requirements,
vendor payments and ongoing operating expenses. Amounts advanced to
SRL which are used to reduce the principal amounts of loans
outstanding are recorded as a reduction of the obligation under
guarantee of loans payable by SRL. Other amounts are charged to
expense as they are advanced to SRL.
28
<PAGE>
The following summarized unaudited financial information has been
derived from SRL's combined financial statements.
Condensed Balance Sheet
December 31,
1998 1997
(In thousands)
Current assets $ 3,580 $ 4,168
Parts and supplies inventories 9,974 9,876
Property, plant and equipment, net 80,761 87,279
---------- ----------
$ 94,315 $ 101,323
========== ==========
Loans payable $ 12,109 $ 37,061
Other current liabilities 1,759 4,083
Long term liabilities 4,374 3,779
---------- ----------
Total liabilities 18,242 44,923
Combined stockholders' investment 76,073 56,400
---------- ----------
$ 94,315 $ 101,323
========== ==========
Condensed Statements of Operations
Year Ended December 31,
1998 1997 1996
(In thousands)
Rutile sales $ -- $ 1,585 $ 2,101
Marketing income 388 754 892
--------- ---------- ---------
Total revenues 388 2,339 2,993
--------- ---------- ---------
Cost of sales -- (1,153) (850)
Selling, general and administrative (13,005) (18,259) (14,582)
--------- ---------- ---------
Total operating costs and expenses (13,005) (19,412) (15,432)
--------- ---------- ---------
Operating loss (12,617) (17,073) (12,439)
Interest income 68 101 65
Insurance recovery -- -- 817
Interest expense (2,286) (7,529) (4,348)
--------- ---------- ---------
Total other expense (2,218) (7,428) (3,466)
--------- ---------- ---------
Loss before income tax expense (14,835) (24,501) (15,905)
Income tax expense (15) (48) (113)
--------- ---------- ---------
Net loss $(14,850) $ (24,549) $(16,018)
========== ========== ==========
29
<PAGE>
During and subsequent to the attack by rebel forces at the mine site
in January 1995, the buildings, vehicles and processing and other
equipment suffered significant damage. SRL personnel and third party
engineers completed an assessment of the damage in 1998. A provision
for impairment of the damaged assets of $25,623,000 was recorded by
SRL as a prior period adjustment in the combined financial statements
of SRL as of January 1, 1996.
Loans Payable-SRL
Loans payable by SRL at December 31, 1998 consist of $12,109,000
due under financing agreements with five institutions. On May 15,
1998, SRL's two shareholders advanced SRL $11,276,000 and on September
30, 1998 they advanced SRL $12,119,000 which was used to fund the
payment of principal and interest payments. Concurrent with the May
1998 payment, SRL's debt agreements were amended. The loans are
guaranteed on a pro rata basis by SRL's shareholders.
The amendments provided for a reduction in the interest rate to
6.875% and for an extension of the principal maturities. Prior to the
amendments, interest was payable at a variable rate. The amendments
also provided that the loans would be payable in two installments of
$3,028,000 in September 1999 and 2000, with the balance of $6,055,000
due in September 2001.
The amendments provided that the Company would comply with
certain financial covenants, including a covenant to maintain cash,
cash equivalents or marketable securities with a value equal to 150%
of its guaranteed portion of the outstanding loans. At December 31,
1998 the Company was in violation of this covenant. As a result, the
lenders could demand repayment of the loans, although as of March 23,
1999 they had not done so. Accordingly, the entire amount of the
loans outstanding have been classified as a current liability on SRL's
balance sheet.
Income Taxes - SRL
SRL's operations in Sierra Leone are subject to corporate income
tax at the rate of 37.5%, subject to a minimum tax of 3.5% of revenue.
SRL has carryforward losses and capital allowances of approximately
$27,300,000 which can be used to offset future taxable income. A
valuation allowance has been provided for the entire amount of the
related deferred tax asset.
Commitments and Contingencies - SRL
On or at any time after January 1, 2000, the Government of Sierra
Leone may, at its option, purchase 47% of the shares of SRL for
$57,400,000. Both shareholders of SRL would sell equal interests in
SRL if this purchase option is exercised. On March 17, 1997, SRL and
the Government of Sierra Leone signed a Memorandum Of Understanding
which contemplates among other things, that the Sierra Rutile Act of
1989 will be amended to provide that this option shall be released in
exchange for an increase in the royalties payable to the government
from 3.5% to 4.0% beginning January 1, 2001, and the payment of
$10,000,000, which amount is payable in six annual installments
commencing in the year 2005. The proposed amendments to the Sierra
Rutile Act of 1989 require ratification by the Parliament of Sierra
Leone.
Under the terms of its agreement with the Government of Sierra
Leone, SRL is required to spend up to $6,000,000 on government
projects as agreed to by both parties.
30
<PAGE>
Insurance Recovery
The Company had certain amounts of insurance to cover risk of loss
on its investment in SRL due to political violence and expropriation
of SRL's assets. Under an insurance policy provided by an agency of
the United States government, $15,705,000 of coverage was provided for
the Company's share of damage to property from political violence.
This policy expired on December 31, 1995 and the insurer elected not
to renew the coverage. The Company filed a claim under this policy
for its 50% share of damage to mine assets resulting from events which
began in January 1995. In September 1996, the Company received a
$1,500,000 provisional payment from the insurer under this policy. A
further claim for the full amount covered by the policy was filed in
February 1998, and the balance of $14,205,000 was received in May
1998. These amounts totaling $15,705,000 were recorded as prior
period adjustment to retained earnings in the Company's financial
statements as of January 1, 1996.
4. INVESTMENTS IN AND ADVANCES TO NORD PACIFIC LIMITED
On July 3, 1997, Pacific completed a public share offering in
Canada. The offering consisted of the sale of 2,460,000 units,
consisting of one common share and one-half of one purchase warrant.
Each whole purchase warrant entitled the holder to purchase one common
share at C$9.00. Pacific also issued warrants to purchase 225,000
shares at C$6.90 to the underwriter. Gross proceeds from the offering
totaled $12,300,000. Pacific received net proceeds of $10,684,000,
after the payment of commissions, certain legal fees and other related
costs. All of the warrants expired unexercised in 1998.
In 1997 and prior years, the Company advanced funds to Pacific
totaling $3,747,745. The advances were payable on demand with
interest at the prime rate plus 1%. In July and August 1997, Pacific
repaid $2,000,000 to the Company. Concurrent with the closing of the
offering, the Company converted the remaining $1,747,745 due from
Pacific into 349,549 units at $5.00 per unit.
As of December 31, 1998 the Company owns 3,697,561 shares of
Pacific. The aggregate market value of the Company's investment in
Pacific at December 31, 1998 was $2,427,000 based on the average of
the bid and asked price at December 31, 1998 of $.6563 per share.
In connection with the continuance of Pacific to the Province
of New Brunswick, Canada in 1998, Pacific has prepared its financial
statements in accordance with generally accepted accounting principles
in Canada (Canadian GAAP). The effects on its financial statements
of differences between these principles and those that are generally
accepted in the United States (U.S. GAAP) are disclosed in the notes
to Pacific's financial statements.
The following summarized financial information, prepared in
accordance with generally accepted accounting principles in the United
States, has been derived from Pacific's financial statements.
31
<PAGE>
Condensed Balance Sheets December 31,
1998 1997
(In thousands)
Current assets $ 3,646 $ 8,745
Property, plant and equipment 3,605 4,737
Deferred exploration, development
other costs 24,908 19,990
---------- ---------
$ 32,159 $ 33,472
========== =========
Current liabilities 4,949 8,684
Long-term debt 2,400 313
Payable on foreign currency contracts 1,144 --
Deferred income taxes 3,497 4,604
Retirement benefits 271 104
---------- ---------
Total liabilities 12,261 13,705
Shareholders' equity 19,898 19,767
---------- ---------
$ 32,159 $ 33,472
========== =========
Company's share of equity $ 5,773 $ 5,695
========== =========
Company's equity percentage 28.5% 28.5%
32
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31,
Condensed Statements of Operations 1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Sales $ 13,807 $ 16,328 $ 16,178
Costs and expenses (13,610) (16,431) (17,126)
------------ ------------ ------------
Operating earnings (loss) 197 (103) (948)
Forward currency transaction gains (losses) (589) 502 (114)
Foreign currency forward exchange contract
gains (losses) (606) (2,399) 497
Copper contracts gains (losses) -- 372 (304)
Other income and expenses, net (39) (14) (245)
------------ ------------ ------------
Income before income taxes (1,037) (1,642) (1,114)
Income tax benefit (provision) 1,110 (1,662) (2,774)
------------ ------------ ------------
Net earnings (loss) $ 73 $ (3,304) $ (3,888)
============ ============ ============
Company's share of earnings (loss) $ 38 $ (949) $ (1,331)
============ ============ ============
</TABLE>
In 1994, Pacific completed a public offering of its common shares
in Australia. The change in the Company's proportionate share of the
underlying equity of Pacific as a result of this offering of
$1,246,000 was not previously accounted for. The Company has recorded
a prior period adjustment to increase its investment in Pacific and
increase additional paid-in capital by this amount as of January 1,
1996.
In 1998, Pacific determined that for purposes of reconciling its
financial statements presented in accordance with Canadian GAAP to amounts
presented in accordance with U.S. GAAP, exploration costs should be
expensed as incurred under U.S. GAAP. The cumulative effect of
expensing such costs on the Company's investment in Pacific as of
January 1, 1996 of $4,366,000 has been recorded as a prior period
adjustment to reduce retained earnings and the investment in Pacific.
5. PROPERTY AND EQUIPMENT
December 31,
1998 1997
(In thousands)
Land $ 100 $ 100
Leasehold improvements 130 67
Equipment 530 461
------- -------
760 628
Less accumulated depreciation
and depletion (513) (478)
-------- --------
$ 247 $ 150
======== ========
33
<PAGE>
6. OTHER ASSETS
December 31,
1998 1997
(In thousands)
Non-qualified trusts designated for funding
of retirement benefits: (Note 7)
Cash surrender value of life insurance,
net of loans of $1,232,000 in 1998 and
$1,591,000 in 1997 $ 1,428 $2,843
Investments held in trust 4,231 2,965
Unamortized pension cost 71 90
Investment in Manatee Gateway, at cost -- 965
Other -- 252
--------- ---------
$ 5,730 $ 6,985
========= =========
The Company, through its wholly owned subsidiary, Nord Manatee
Ltd., owned a 42% interest in approximately 200 acres of undeveloped
real estate. In 1997, the venture sold this property for $2,769,000.
The venture received $500,000 at closing. The balance of the proceeds
were received in September 1998. The Company's share of the proceeds
was $954,000.
Interest on loans against the net cash surrender value of life
insurance policies of $117,000, $118,000 and $123,000 was paid in
1998, 1997 and 1996, respectively.
7. RETIREMENT BENEFITS
The Company has an unfunded non-contributory defined benefit plan
for certain of its executive officers and management personnel. The
Company has non-qualified trusts which were established in 1989
related to this plan, and the trusts hold assets valued at $5,659,000
and $5,808,000 at December 31, 1998 and 1997, respectively (Note 6).
Effective in 1995, the plan was amended to permit two officers to
elect upon their retirement to receive a discounted lump sum
distribution of their accumulated benefit obligation, limited to the
amounts held in the trusts, which are designated for these officers.
The Company has committed to contribute $250,000 in 1999, to the trust
designated for one of these officers.
In addition, the Company has a nonqualified retirement plan for
certain former members of the Board of Directors. The amounts accrued
under this plan were $163,000 and $151,000 at December 31, 1998 and
1997, respectively.
The following tables set forth the changes in the projected
benefit obligation for the years ended December 31, 1998, 1997 and
1996, and the funded status of the plan and the amounts recognized in
the Company's balance sheet at December 31, 1998 and 1997:
34
<PAGE>
Year Ended December 31,
1998 1997 1996
(In thousands)
Change in benefit obligation:
Benefit obligation, beginning of period $ 8,171 $ 7,523 $ 6,809
Service cost 16 115 133
Interest cost 539 544 525
Actuarial loss 166 204 56
Benefits paid (1,398) (214) --
--------- --------- ---------
Benefit obligation, end of period $ 7,494 $ 8,172 $ 7,523
========= ======== =========
December 31,
1998 1997
(In thousands)
Funded status
Benefit obligation $ (7,494) $ (8,172)
Unrecognized net loss 1,166 1,000
Unrecognized prior service cost 71 90
----------- ---------
Net amount recognized $ (6,257) $ (7,082)
=========== ==========
Amounts recognized in the balance sheet
consist of:
Retirement benefits liability (7,494) (8,172)
Unamortized pension cost 71 90
Accumulated other comprehensive income 1,166 1,000
----------- ---------
Net amount recognized $ (6,257) $ (7,082)
=========== ==========
The following tables set forth the components of net periodic benefit costs
for the years ended December 31, 1998, 1997 and 1996 and the assumptions:
December 31,
1998 1997 1996
(In thousands)
Components of Net Periodic Benefit Cost:
Service cost $ 16 $ 115 $ 133
Interest cost 539 544 525
Amortization of prior service cost 19 19 19
Recognized net actuarial loss -- 6 154
-------- ------- -------
Net periodic benefit cost $ 574 $ 684 $ 831
======== ======= =======
Assumptions:
Discount rate 6.75% 7.00% 7.25%
Rate of compensation increase 0.00% 0.00% 4.00%
35
<PAGE>
8. DISCONTINUED OPERATIONS
During 1996, the Company committed to a formal plan to dispose of
its 80% owned subsidiary, Nord Kaolin Company ("NKC"), which
represented the Company's kaolin segment. On April 23, 1997, the
Company consummated the sale of substantially all of the assets of NKC
(except cash and accounts receivable) for $20,000,000, less $735,000
relating to certain liabilities assumed by the purchaser. The
purchaser assumed certain lease obligations of NKC and NKC's
obligations under a non-contributory defined benefit plan covering
hourly employees of NKC. Proceeds in 1997 from this transaction
totaled $10,500,000 including collection of accounts receivable and
less payment of NKC's liabilities and other liabilities incurred as a
result of this transaction.
The results of operations of the discontinued kaolin segment have
been reported separately in the accompanying statement of operations
in 1996. A provision for loss on the disposal of the kaolin segment
of $21,412,000 was recorded in 1996, including a provision for
estimated losses to the disposal date of $2,500,000. The provision
included accruals for estimated severance costs of approximately
$800,000 and estimated legal and other termination costs of $811,000.
Such amounts were paid in 1997. The provision for loss on disposal in
1997 included $510,000 of additional severance costs for which the
Company was obligated as a result of the termination of additional
employees after the sale, offset by an adjustment of $239,000 to the
provision for estimated losses to the disposal date.
9. LEASES
The Company leases its office space and certain equipment under
operating leases. Certain of the leases contain renewal options and
escalation clauses. Minimum annual lease payments under non-
cancelable operating leases for the years ended December 31 are as
follows:
1999 $ 66,532
2000 65,943
2001 65,845
2002 63,873
Thereafter 141,217
----------
$ 403,410
==========
Total rent expense for 1998, 1997 and 1996 was $101,000,
$192,000 and $233,000, respectively.
36
<PAGE>
10. STOCKHOLDERS' EQUITY
Common Stock
In April and October 1996, the Company sold 3,160,000 and
2,000,000 shares of common stock for $7,900,000 ($2.50 per share) and
$10,000,000 ($5 per share) to a private investor. In April 1996, the
Company entered into a $2,100,000 convertible loan agreement with the
same investor. In June 1996, the loan was converted into 840,000
shares of common stock. As of December 31, 1998, this investor owned
approximately 31.3% of the Company's outstanding shares of common
stock.
Stock Options
The Company has granted incentive and non-qualified stock options
for its employees and directors under the terms of its various stock
option plans. The Company has also granted non-qualified, non-plan
options which have been authorized by the Company's Board of
Directors.
Options are granted at an exercise price equal to or in excess of
the quoted market price on the date of grant. Options are generally
exercisable beginning one year from date of grant and expire ten years
from date of grant. At December 31, 1998, 1,170,903 shares are
available for future option grants under the terms of the various
plans.
A summary of the status of the Company's outstanding stock options
as of December 31, 1998, 1997 and 1996 and changes during the years
then ended follows:
Weighted Average
Options Exercise Price
Outstanding at January 1, 1996 1,572,901 $ 6.37
Granted 190,980 3.05
Terminated (72,120) 6.50
Expired (32,400) 6.17
----------
Outstanding at December 31, 1996 1,659,361 5.99
Granted 1,290,773 5.11
Exercised (67,080) 2.25
Terminated (637,294) 5.86
Expired (716,389) 6.67
----------
Outstanding at December 31, 1997 1,529,371 5.14
Granted 264,300 4.31
Expired 149,300 5.70
----------
Outstanding at December 31, 1996 1,644,371 $ 4.15
==========
37
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
---------------------- ---------------------- -------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options Exercisable
at Year-End 1,374,371 $4.97 1,029,371 $5.19 1,463,481 $6.38
</TABLE>
The following table summarizes information about stock option plans and
non-plan options outstanding at December 31, 1998:
<TABLE>
<CAPTION>
Options Weighted Average Options
Exercise Prices Per Share Outstanding Contract Life Exercisable
<C> <C> <C> <C>
$1.38 45,000 9.08 --
2.00 50,000 9.08 25,000
2.25 52,500 7.06 52,500
3.25 200,000 8.39 200,000
4.00 250,000 4.40 250,000
4.13 41,400 8.05 41,400
4.63 15,000 7.86 15,000
4.88 33,750 1.82 33,750
5.00 231,000 3.77 231,000
5.13 126,100 3.78 126,100
5.50 6,840 3.61 6,840
5.61 35,500 1.08 35,550
6.00 200,000 3.40 --
6.13 30,000 7.42 30,000
6.63 11,500 .92 11,500
6.67 90,000 1.05 90,000
6.75 9,700 4.19 9,700
7.00 6,850 1.96 6,850
7.38 129,150 .83 129,150
7.75 24,600 2.39 24,600
8.00 45,000 .08 45,000
8.25 10,431 .99 10,431
$1.38-8.25 1,644,371 4.97 1,374,371
</TABLE>
Of the 1,644,371 options outstanding, 601,871 shares have been
issued under the terms of the Company's stock option plans. The
remaining 1,042,500 options are non-qualified, non-plan options.
The Company applies APB Opinion No. 25 in accounting for its stock
option plans. Therefore, no compensation expense under SFAS No. 123
has been recognized for options granted to employees. Had
compensation cost for the Company's option grants in 1995 and
38
<PAGE>
subsequent years been determined based on the fair value of the
options at the grant dates consistent with the provisions of SFAS No.
123, the Company's net loss and net loss per common share would have
been increased to the pro forma amounts indicated below:
Year Ended December 31,
1998 1997 1996
Net Loss:
As reported $ (7.831) $ (12,312) $ (32,850)
Pro forma $ (7,895) $ (12,404) $ (32,966)
Loss Per Share:
As reported $ (.36) $ (.56) $ (1.73)
Pro forma $ .36) $ (.57) $ (1.74)
The assumptions used in determining the fair value of options
granted during 1998, 1997 and 1996 are as follows:
Year Ended December 31,
1998 1997 1996
Expected Volatility 73% 66% 67%
Expected Life of Grant 5 Years 5 Years 4 Years
Risk-Free Interest Rate 5.05% 6.39% 5.03%
Expected Dividend Rate None None None
The weighted average fair value of options granted during the
years ended December 31, 1998, 1997 and 1996 was $4.91, $5.11 and
$2.99, respectively.
11. INCOME TAXES
Tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred tax
liabilities are as follows:
December 31
1998 1997
(In thousands)
Deferred tax assets:
Deferred compensation $ 2,680 $ 2,459
Net operating loss carryforwards 11,918 10,677
Tax credit carryforwards 1,578 1,578
Unearned revenue -- 510
Other 250 286
------------ ------------
16,426 15,510
Less valuation allowance (16,426) (15, 510)
------------- ------------
Net deferred tax assets $ -- $ --
============= ============
39
<PAGE>
The Company has provided a valuation allowance against its net
deferred tax assets, since it is unlikely that the benefits will be
realized.
Income tax expense differed from the amount computed by applying
the U.S. statutory income tax rate of 35% to income before income tax
expense as a result of the following:
Years Ended December 31,
1998 1997 1996
(In thousands)
Tax benefit at statutory rate $ (2,741) $(4,214) $(1,987)
Increase (decrease) in taxes
resulting from:
Foreign expenses not deductible for tax 1,750 3,026 475
Change in valuation allowance 916 1,243 1,870
Percentage depletion in excess of basis -- (47) (226)
Other 75 (8) (132)
--------- -------- --------
Income tax expense $ -- $ -- $ --
========= ======== ========
At December 31, 1998, the Company has net operating loss
carryforwards of approximately $34,051,000 which expire from 2012 to
2018. The Company has general business credit carryforwards of
$538,000, which expire from 2003 to 2016, available to reduce the
Company's future tax liability and alternative minimum tax (AMT)
credit carryforwards of approximately $1,040,000 which may be carried
forward indefinitely to reduce future federal regular taxes.
40
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
On April 27, 1998, the Company, with the approval of the audit
committee, terminated its relationship with Deloitte &Touche LLP
("D&T"), independent certified public accountants.
In the reports of D&T for the years ended December 31, 1997 and
1996, D&T disclaimed an opinion regarding the Company's financial
statements for those years, because of the possible material effects
of the Company's ability to continue as a going concern and the
inability of the auditors of Sierra Rutile Limited ("SRL"), the
Company's 50% owned subsidiary, to express an opinion on the
financial statements of SRL.
During the two-year period ended December 31, 1997, and the
interim period from that date to April 27, 1998, there were no
disagreements with D&T on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or
procedure, which disagreement, if not resolved to the satisfaction of
D&T, would have caused it to make reference in connection with its
report to the subject matter of the disagreement, except that during
the audit of the Company's financial statements for 1997, D&T had a
disagreement with management over the Company's accounting for its
investment in and advances to SRL. The Company had accounted for its
investment using the cost method for 1995, 1996 and the nine-month
period ended September 30, 1997. As a result of changes in the
political environment in Sierra Leone subsequent to September 30,
1997, D&T believed that the Company should change its method of
accounting for its investment in SRL from cost to the equity method,
which would require restatement of the Company's financial statements
for 1995 and 1996. The matter was reviewed by management and
discussed with the Audit Committee of the Board of Directors of the
Company and, as a result thereof, management conformed to the
position of D&T and recorded adjustments to the Company's financial
statements to account for the Company's investment in and advances to
SRL under the equity method and the disagreement was resolved to the
satisfaction of D&T.
41
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by the above Items 10-13 is
incorporated by reference to the Company's Proxy Statement
to be filed with the Securities and Exchange Commission on
or before April 30, 1999.
42
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements:
The following consolidated financial statements of
Nord Resources Corporation as of December 31, 1998 and 1997
and for each of the three years in the period ended December
31, 1998 are included in Part II, Item 8 of this Form 10-K.
Nord Resources Corporation:
Independent Auditors Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The following consolidated financial statement of
Nord Pacific Limited as of December 31, 1998 and
1997 and for each of the years in the three-year
period ended December 31, 1998, required by rule
3.09 of Regulation S-X, are included as an exhibit
to this Form 10-K.
Nord Pacific Limited:
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Shareholder' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Independent Auditors' Report
Schedule II - Valuation and qualifying accounts
(b) Reports on Form 8-K:
There were no Form 8-K's filed in the fourth quarter of
1998.
(c) Exhibits: See INDEX TO EXHIBITS
43
<PAGE>
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.
NORD RESOURCES CORPORATION
BY: /s/ EDGAR F. CRUFT
EDGAR F. CRUFT
CHAIRMAN OF THE BOARD
April 15, 1999
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.
/s/ W. PIERCE CARSON
W. PIERCE CARSON MARC FRANKLIN
CHIEF EXECUTIVE OFFICER, DIRECTOR
PRESIDENT AND DIRECTOR APRIL 15, 1999
APRIL 15, 1999
/s/ RAY W. JENNER
RAY W. JENNER JAMES ASKEW
VICE PRESIDENT FINANCE DIRECTOR
AND CHIEF ACCOUNTING OFFICER APRIL 15, 1999
APRIL 15, 1999
/s/ TERENCE H. LANG
TERENCE H. LANG
DIRECTOR
APRIL 15, 1999
FRANK J. WALDRON
DIRECTOR
APRIL 15, 1999
/s/ LEONARD LICHTER
LEONARD LICHTER
DIRECTOR
APRIL 15, 1999
44
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Nord Resources Corporation:
Under date of April 13, 1999, we have reported on the consolidated
balance sheets of Nord Resources Corporation and subsidiaries as of
December 31, 1998 and 1997, and the related consolidated statements of
operations, stockholder's equity, and cash flows for each of the years
in the three-year period ended December 31, 1998, which are included
in the Company's annual report on Form 10-K. In connection with our
audits of the aforementioned consolidated financial statements, we
also audited the related consolidated financial statement schedule II
- - Valuation and Qualifying Accounts. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a
whole, present fairly, in all material respects, the information set
forth therein.
KPMG LLP
Denver, Colorado
April 13, 1999
45
<PAGE>
<TABLE>
NORD RESOURCES CORPORATION AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (In thousands)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Balance
Beginning Costs and At End
Description of Period Expenses Deductions of Period
<S> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Estimated loss on disposal, including provision
for estimated operating losses to disposal date $ 21,412 $ 271 $ 21,683 $ --
========== ========== ========== ============
Investment valuation allowance - Manatee Gateway $ 2,394 $ -- $ 2,394 $ --
========== ========== ========== ============
Investment valuation allowance-SRL $ 32,463 $ -- $ -- $ 32,463
========== ========== ========== ============
Obligation under guarantee of loans payable by SRL $ 12,476 $ -- $ 12,476 $ --
========== ========== ========== ============
YEAR ENDED DECEMBER 31, 1997
Estimated loss on disposal, including provision
for estimated operating losses to disposal date $ -- $ 21,412 $ -- $ 21,412
========== ========== ========== ============
Investment valuation allowance - Manatee Gateway $ 2,394 $ -- $ -- $ 2,394
========== ========== ========== ============
Provision for impairment - ilmenite equipment $ 855 $ 280 $ 1,135 1 $ --
========== ========== ========== ============
Investment valuation allowance-SRL $ 32,463 $ -- $ -- $ 32,463
========== ========== ========== ============
Obligation under guarantee of loans payable by SRL $ 15,565 $ -- $ 3,089 $ 12,476
========== ========== ========== ============
YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts $ 145 $ -- $ 145 $ --
========== ========== ========== ============
Investment valuation allowance - Manatee Gateway $ 2,219 $ 175 $ -- $ 2,394
========== ========== ========== ============
Provision for impairment - ilmenite equipment $ 855 $ -- $ -- $ 855
========== ========== ========== ============
Investment valuation allowance-SRL $ 32,463 $ -- $ -- $ 32,463
========== ========== ========== ============
Obligation under guarantee of loans payable by SRL $ 17,403 $ -- $ 1,838 $ 15,565
========== ========== ========== ============
1 - Equipment written off against the provision for impairment
</TABLE>
46
<PAGE>
Independent Auditors' Report
The Board of Directors
Nord Pacific Limited:
We have audited the accompanying consolidated balance sheet of Nord
Pacific Limited and subsidiaries as of December 31, 1998, and the
related consolidated statements of operations, shareholders' equity,
and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures 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. We
believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position
of Nord Pacific Limited and subsidiaries as of December 31, 1998, and
the results of their operations and their cash flows for the year then
ended in conformity with generally accepted accounting principles in
Canada.
Accounting principles generally accepted in Canada vary in certain
significant 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, 1998 and shareholders' equity as of December 31, 1998 and
1997, to the extent summarized in Note N to the consolidated financial
statements.
KPMG LLP
Denver, Colorado
March 24, 1999
47
<PAGE>
Independent Auditor's Report
Board of Directors and Shareholders
Nord Pacific Limited
We have audited the accompanying consolidated balance sheet of Nord
Pacific Limited and subsidiaries (the "Company") as of December 31,
1997 and 1996, and the related consolidated statements of operations,
shareholders' equity, and cash flows for the two years in the period
ended December 31, 1997 (all expressed in U.S. dollars). These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States of America. Those standards
require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free
of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the
consolidated 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. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly,
in all material respects, the financial position of the Company at
December 31, 1997 and the results of its operations and its cash flows
for each of the two years then ended in conformity with accounting
principles generally accepted in Canada
DELOITTE & TOUCHE
Chartered Accountants
Hamilton, Bermuda
March 20, 1998
48
<PAGE>
<TABLE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1998 AND 1997
(In thousands of U.S. Dollars)
<CAPTION>
ASSETS 1998 1997
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 1,416 $ 3,351
Accounts receivable
Trade 1,384 1,313
Subscriptions receivable (Note I) -- 2,700
Other, including joint venture partner 402 143
Inventories
Copper metal 191 137
Supplies 166 204
Premium on copper put option contracts (Note F) -- 760
Prepaid expenses 87 137
--------- ---------
TOTAL CURRENT ASSETS 3,646 8,745
DEFERRED COSTS ASSOCIATED WITH ORE UNDER LEACH, net of
accumulated amortization of $16,192 in 1998 and
$11,518 in 1997 (Note B) 9,413 8,970
PROPERTY, PLANT AND EQUIPMENT at cost
less accumulated depreciation (Note C) 3,605 4,737
DEFERRED EXPLORATION AND DEVELOPMENT COSTS
Girilambone, net of accumulated amortization
of $2,917 in 1998 and $1,883 in 1997 (Note B) 3,527 4,335
Exploration and development prospects (Note D) 19,141 13,492
OTHER ASSETS 71 118
--------- ----------
$ 39,403 $ 40,397
========= ==========
See notes to consolidated financial statements.
</TABLE>
49
<PAGE>
<TABLE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1998 AND 1997
(In thousands of U.S. Dollars)
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY 1998 1997
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable
Trade $ 1,715 $ 975
Affiliates 594 168
Accrued expenses 484 1,484
Payable on copper put option contracts (Note F) -- 760
Current maturities of long-term debt (Note E) 600 2,548
Payable on foreign currency contracts (Note F) 1,556 2,099
Obligation under purchase agreement (Note D) -- 650
----------- -------------
TOTAL CURRENT LIABILITIES 4,949 8,684
LONG-TERM LIABILITIES
Long-term debt (Note E) 2,400 313
Payable on foreign currency contracts (Note F) 1,144 --
Deferred income tax liability (Note K) 5,300 6,040
Retirement benefits (Note L) 271 104
----------- -------------
TOTAL LONG-TERM LIABILITIES 9,115 6,457
COMMITMENTS AND CONTINGENCIES
(Notes H, M and O)
SHAREHOLDERS' EQUITY (Notes G and I)
Common shares, no par value in 1998, $.05 per
share in 1997; unlimited authorized shares
in 1998, 20,000,000 authorized in 1997.
Issued and outstanding 12,960,803 shares in
1998 and 12,360,803 shares in 1997 47,375 618
Common shares subscribed (Note I) -- 2,700
Additional paid-in capital -- 43,999
Accumulated deficit (22,834) (22,859)
Foreign currency translation adjustment 798 798
----------- -------------
TOTAL SHAREHOLDERS' EQUITY 25,339 25,256
----------- -------------
$ 39,403 $ 40,397
=========== =============
See notes to consolidated financial statements.
</TABLE>
50
<PAGE>
<TABLE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands of U.S. Dollars, except per share amount)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
SALES (Note J) $ 13,807 $ 16,328 $ 16,178
COSTS AND EXPENSES
Cost of sales (Note B) 10,251 8,696 8,969
Abandoned and impaired properties (Note D) 96 14,293 191
General and administrative
Nord Resources Corporation (Note G) -- 566 415
Other 2,941 3,261 3,200
--------- ----------- ----------
Total costs and expenses 13,288 26,816 12,775
--------- ----------- ----------
OPERATING EARNINGS (LOSS) 519 (10,488) 3,403
OTHER INCOME (EXPENSE)
Interest and other income 233 357 161
Interest and debt issuance costs (272) (371) (406)
Foreign currency forward exchange contract
gains (losses) (Note F) (606) (2,399) 497
Foreign currency transaction gains (losses) (589) 502 (114)
Copper contracts gains (losses) (Note F) -- 372 (304)
--------- ----------- ----------
TOTAL OTHER INCOME (EXPENSE) (1,234) (1,539) (166)
--------- ----------- ----------
EARNINGS (LOSS) BEFORE INCOME TAXES (715) (12,027) 3,237
INCOME TAXES (Note K) (740) 2,300 2,620
--------- ----------- ----------
NET EARNINGS (LOSS) $ 25 $ (14,327) $ 617
--------- ----------- ----------
EARNINGS (LOSS) PER COMMON SHARE
BASIC $ -- $ (1.31) $ .06
========== ============ ==========
DILUTED $ -- $ (1.31) $ .06
=========== ============ ==========
See notes to consolidated financial statements.
</TABLE>
51
<PAGE>
<TABLE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands of U.S. Dollars, except shares)
<CAPTION>
Common Additional
Common Stock Shares Paid-in Accumulated
Share Amount Subscribed Capital Deficit
<S> <C> <C> <C> <C> <C>
BALANCE - December 31, 1995 9,492,254 $ 475 $ -- $ 31,336 $ (9,149)
Net earnings -- -- -- -- 617
Compensation relating to options
issued to non-employees -- -- -- 45 --
Exercise of options 23,400 1 -- 86 --
--------- ----------- ---------- --------- ----------
BALANCE - December 31, 1996 9,515,654 476 -- 31,467 (8,532)
Net loss -- -- -- -- (14,327)
Exercise of options 35,600 2 -- 153 --
Common shares issued in
public offering, net of offering costs 2,460,000 123 -- 10,561 --
Compensation relating to options
issued to non-employees -- -- -- 110 --
Conversion of debt to common shares 349,549 17 -- 1,731 --
Common shares subscribed -- -- 2,700 -- --
Compensation relating to options issued -- -- -- (23) --
---------- ----------- ---------- --------- ----------
BALANCE - December 31, 1997 12,360,803 618 2,700 43,999 (22,859)
Net earnings -- -- -- -- 25
Issuance of common shares subscribed 600,000 30 (2,700) 2,670 --
Costs related to common shares subscribed -- -- -- (4) --
Compensation relating to options issued
to non-employees -- -- -- 62 --
Change in par value of common shares from
$.05 per share to no par value -- 46,727 -- (46,727) --
---------- ----------- ---------- --------- ----------
BALANCE - December 31, 1998 12,960,803 $ 47,375 $ -- $ -- $ (22,834)
========== =========== ========== ========= ==========
See notes to consolidated financial statements.
</TABLE>
52
<PAGE>
<TABLE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(In thousands of U.S Dollars)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ 25 $ (14,327) $ 617
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation 1,573 1,148 1,278
Amortization 6,619 3,565 3,259
Abandoned and impaired properties 96 14,293 191
Compensation relating to stock options 62 110 45
Unrealized loss on foreign currency contracts 606 2,399 988
Foreign currency transaction (gain) loss -- (502) 114
Deferred income taxes (740) 2,300 2,620
Provision for retirement benefits 167 104 --
Derivative financial instruments -- (372) 304
Change in assets and liabilities:
Accounts receivable (330) 146 (764)
Inventories (16) (9) (45)
Prepaid expenses 50 (42) 80
Accounts payable 823 (319) 158
Accrued expenses and other liabilities (1,760) 374 339
----------- ----------- ----------
Net cash provided by operating activities 7,175 8,868 9,184
----------- ----------- ----------
INVESTING ACTIVITIES
Capital expenditures (440) (473) (771)
Deferred exploration and development costs (6,726) (10,720) (8,154)
Deferred costs associated with ore under leach (5,117) (4,023) (4,992)
----------- ----------- ----------
Net cash used in investing activities (12,283) (15,216) (13,917)
----------- ----------- ----------
FINANCING ACTIVITIES
Borrowing of long-term debt 1,521 2,981 789
Repayments of long-term debt (1,383) (5,153) (1,185)
Billings from Nord Resources Corporation, net 343 669 947
Restricted cash -- -- 1,080
Issuance of common shares for cash 2,700 12,300 --
Costs associated with issuance of common shares (4) (1,735) (265)
Stock options exercised -- 155 87
----------- ----------- ----------
Net cash provided by financing activities 3,177 9,217 1,453
----------- ----------- ----------
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND
CASH EQUIVALENTS (4) 43 63
----------- ----------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,935) 2,912 (3,217)
CASH AND CASH EQUIVALENTS - beginning of year 3,351 439 3,656
----------- ----------- ----------
CASH AND CASH EQUIVALENTS - end of year $ 1,416 $ 3,351 $ 439
=========== =========== ==========
CASH PAID FOR INTEREST $ 241 $ 371 $ 384
=========== =========== ==========
NON-CASH TRANSACTIONS
Purchase of derivative financial instruments $ -- $ -- $ 311
=========== =========== ==========
Conversion of long-term debt due to Nord Resources
Corporation into common stock (Note G) $ -- $ 1,748 $ --
=========== =========== ==========
Common stock subscribed $ -- $ 2,700 $ --
=========== =========== ==========
See notes to consolidated financial statements.
</TABLE>
53
<PAGE>
NORD PACIFIC LIMITED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31,1998, 1997 AND 1996
A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Company Description and Basis of Presentation
Nord Pacific Limited and its subsidiaries (collectively, the
"Company") are engaged in the production of copper and in the
exploration for gold, copper, nickel cobalt and other minerals in
Australia, Papua New Guinea (PNG"), North America and Mexico.
In June 1998, the Company's shareholders approved the
discontinuance of the Company from Bermuda and approved its
continuance into the Province of New Brunswick, Canada, effective
September 30, 1998. As a Canadian Company, the Company is required to
report its financial statements in accordance with generally accepted
accounting principles in Canada. These principles differ in certain
respects from those in the United States as described in Note N.
Principles of Consolidation
The consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, and its 40% interest in the
Girilambone copper property in Australia and its 50% interest in the
Girilambone North Project (collectively "Girilambone"). The financial
statements include the Company's proportionate share of the assets,
liabilities and operations of Girilambone. All significant
intercompany accounts and transactions are eliminated at
consolidation.
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 at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Cash and Cash Equivalents
The Company considers all investments with an original maturity
of three months or less to be cash equivalents. The carrying amount
of cash and cash equivalents approximates fair value.
Inventories
Inventories are valued at the lower of cost (first-in, first-out
method) or market.
Deferred Costs Associated with Ore Under Leach
Costs at Girilambone incurred with respect to ore under leach are
deferred and amortized using the units of production method over the
remaining estimated reserves. The Company continually evaluates and
refines estimates used to determine the amortization and carrying
amount of deferred costs associated with ore under leach based upon
actual copper recoveries and mine operating plans.
54
<PAGE>
Property, Plant and Equipment
Plant, mining and milling equipment at Girilambone is depreciated
using the units-of-production method over the estimated remaining
reserves. Furniture and fixtures are depreciated using the straight-
line method over the estimated useful lives of the assets which range
from two to five years.
Deferred Exploration and Development Costs
All costs directly attributable to exploration and development
are deferred. Costs related to producing properties are amortized
using the units-of-production method over the estimated recoverable
reserves. Deferred costs are carried at cost, not in excess of
anticipated future recoverable value, and are expensed when a project
is no longer considered commercially viable.
Impairment of Mining Properties and Projects
Mining projects and properties are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount of these assets may not be recoverable. Events or
circumstances that may indicate that the carrying amount may not be
recoverable include a significant decrease in current or forward
commodity prices, a significant reduction in estimates of proven and
probable reserves, and significant increases in operating costs,
capital requirements or reclamation costs. If estimated future cash
flows expected to result from the use of the mining project or
property and its eventual disposition are less than the carrying
amount of the mining project or property, an impairment is recorded to
reduce the carrying amount of the mining project or property to its
estimated net recoverable amount.
Impairments are generally assessed for each individual mining
project, except where it is not practical to separately identify the
net recoverable amount of related properties which are operated on a
combined basis.
Debt Issuance Costs
Professional fees and other costs relating to the issuance of
debt are capitalized and amortized over the term of the related
borrowings.
Foreign Currency Translation
The functional currency for operations conducted in Australia is
the U.S. dollar. Adjustments to monetary assets and liabilities
denominated in Australian dollars as a result of changes in the
exchange rate between U.S. dollars and Australian dollars are
recognized currently in the statement of operations as foreign
currency transaction gains and losses.
Financial Instruments
Gains and losses related to qualifying hedges of anticipated
copper sales are deferred and recognized in the statement of
operations as a component of sales at the settlement date. Option
premiums incurred are deferred until the date of settlement or
expiration of the option.
55
<PAGE>
Realized and unrealized gains and losses on foreign currency
forward exchange contracts and other derivative financial instruments
that do not qualify as hedges are recognized currently in the
statement of operations. Unrealized gains or losses are included as
assets or liabilities in the balance sheet.
Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is computed by dividing
net earnings (loss) by the weighted average number of common shares
outstanding during the year. Diluted earnings per share is calculated
based on the weighted average number of common shares outstanding
adjusted for the dilutive effect of stock options and warrants
outstanding.
The following sets forth the calculation of basic and diluted earnings
per share:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 (1) 1997 (2) 1996 (3)
(In thousands)
<S> <C> <C> <C>
Earnings (loss) available to common shareholders $ 25 $ (14,327) $ 617
=========== =========== ==========
Weighted average common shares outstanding
during the period 12,961 10,935 10,053
Add dilutive effect of stock options -- -- 1,634
----------- ----------- ----------
Weighted average common shares outstanding
during the period including the effects of
dilutive securities 12,961 10,935 11,687
=========== =========== ==========
Basic earnings (loss) per share $ -- $ (1.31) $ .06
=========== =========== ==========
Diluted earnings (loss) per share $ -- $ (1.31) $ .05
=========== =========== ==========
</TABLE>
(1) At December 31, 1998, options to purchase 2,299,998 common shares
at prices ranging from $2.41 to $5.69 per share were outstanding, but
were not included in the computation of diluted income per share for
the year ended December 31, 1998. The effect of the assumed exercise
of these options was antidilutive.
(2) At December 31, 1997, options to purchase 1,924,678 common shares
at prices ranging from $2.54 to $5.69 per share and warrants to
purchase 1,404,775 common shares at $6.50 per share were not included
in the computation of diluted loss per share at December 31, 1997.
The effect of the assumed exercise of these options and warrants was
antidilutive. The options expire at various dates from 1999 to 2008.
The warrants expired in 1998.
(3) At December 31, 1996, options to purchase 1,664,200 common shares
at prices ranging from $2.54 to $4.50 were included in the calculation
of diluted earnings per share at December 31, 1996. These options
expire at various dates from 1999 to 2004.
Reclassifications
Certain reclassifications have been made in the 1997 and 1996
consolidated financial statements to conform to the classifications
used in 1998.
56
<PAGE>
B. GIRILAMBONE
The Company is a 40% joint venturer in the Girilambone Copper
Property and a 50% joint venturer in the Girilambone North Copper
Property in Australia. In 1996, mining commenced in the Girilambone
North Project area and the ore from this property is being processed
through the existing Girilambone plant. Following is a condensed
balance sheet of Girilambone and the corresponding amounts included in
the Company's financial statements:
<TABLE>
<CAPTION>
Amounts Included
Total Girilambone In Accompanying
Joint Ventures Financial Statements
Balance Sheet Data December 31 December 31
(In thousands) 1998 1997 1998 1997
<S> <C> <C> <C> <C>
Current assets $ 3,132 $ 1,638 $ 1,290 $ 658
Deferred costs associated with ore under
leach, net 19,290 19,934 9,413 8,970
Property, plant and equipment, net 7,356 10,541 2,981 4,244
Deferred exploration and development
costs, net 19,685 16,602 3,527 4,335
----------- ----------- ------------ ---------
Total assets 49,463 48,715 17,211 18,207
Current liabilities (4,071) (2,230) (1,749) (948)
----------- ----------- ------------ ---------
Partners' equity $ 45,392 $ 46,485 $ 15,462 $ 17,259
=========== =========== ============ ==========
Company's share of equity $ 16,916 $ 18,846
Less elimination (1,454) (1,587)
--------- ----------
Net assets recorded by the Company $ 15,462 $ 17,259
========== ===========
</TABLE>
The difference between the net assets of Girilambone and the
Company's investment in Girilambone is being amortized using the units-
of-production method as a reduction of depletion expense.
57
<PAGE>
Debt incurred related to Girilambone is the separate responsibility of
each venturer and is not included in the joint venture's financial
statements. Copper production is distributed to each venturer based
on their respective ownership interest. The sale of copper produced
is the responsibility of each venturer. Cost and expense data related
to the operation of the mine is as follows:
<TABLE>
Year Ended December 31,
<CAPTION>
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Cost of copper sales:
Total Girilambone $24,563 $21,048 $21,993
Included in financial statements 10,251 8,696 8,969
General and administrative:
Total Girilambone $ 398 $ 538 $ 569
Included in financial statements 182 242 257
</TABLE>
C. PROPERTY, PLANT AND EQUIPMENT
December 31,
1998 1997
(In thousands)
Land $ 362 $ 302
Plant, mining and milling equipment 9,439 9,211
Furniture and fixtures 708 712
--------- -----------
10,508 10,225
Less accumulated depreciation (6,904) (5,488)
--------- -----------
$ 3,605 $ 4,737
========= ===========
D. DEFERRED EXPLORATION AND DEVELOPMENT COSTS
Deferred exploration and development costs by prospect
are as follows:
December 31,
1998 1997
(In thousands)
Ramu $ 9,519 $ 4,263
Tabar Islands 4,355 4,275
Girilambone exploration area (including Tritton) 5,006 3,978
Other 261 976
-------- --------
$19,141 $ 13,492
======== ==========
58
<PAGE>
Ramu
The Company has a 35% interest in the Ramu Joint Venture ("Ramu")
which was formed to explore for nickel and cobalt in PNG. A
feasibility study conducted in 1998 projects that commercial
production of nickel and cobalt is economically feasible at Ramu.
However, the Company does not have sufficient resources to fund its
share of the estimated $838,000,000 of development costs and is
seeking additional funding for these costs.
The government of PNG has the right to acquire an interest of up
to 30% in Ramu for an amount equal to its pro-rata share of the
accumulated exploration expenditures at the time a development
decision is made. If it exercises this right, the government is
required to contribute to further exploration and development
expenditures in proportion to its interest in the project. Each joint
venture partner's interest in Ramu would be reduced proportionately if
the government exercises this right.
Another party may elect within 180 days of receiving details of
any proposed commercial development of Ramu, to participate in such
development up to a 10% interest by paying its share of those
development costs. This party was provided these details in January
1999 and has until June 1999 to elect to participate. Each joint
venture partner's interest in Ramu would be reduced proportionately in
the event that this company elects to participate.
Tabar Islands
The Company owns a 100% interest in a gold exploration project in
the Tabar Islands ("Tabar"), north of PNG. On December 3, 1996, the
Company was granted a mining lease to develop and operate a gold mine
on Simberi Island. While the government of PNG will have no
participating interest, if production commences, a royalty of 2% of
sales will be payable to the government.
At December 31, 1997, the Company owed one of Tabar's former
owners $650,000 upon the issuance of a Special Mining Lease by the
Government of PNG. In 1998, it was determined that a Special Mining
Lease would not be issued. Accordingly, the Company eliminated the
note payable with a corresponding credit to deferred exploration and
development costs.
Tabar's former owners have an option to reacquire 50% of the
project if feasibility studies indicate that the project could produce
150,000 ounces or more of gold annually. If the option is exercised,
the former owners would be required to pay to the Company 250% of its
cumulative expenditures for mine development from July, 1994 to the
date the option is exercised. Expenditures from July, 1994 through
December 31, 1998, total approximately $12,057,000.
Due to the precipitous decline in gold prices during the fourth
quarter of 1997, the Company reviewed the carrying costs of and
anticipated cash flows from the project to determine if it was
impaired. The Company determined that future cash flows, based on
estimated resources, were insufficient at projected gold prices to
support the $17,656,000 carrying value of the project. The Company
therefore recorded a provision for impairment of $13,381,000 at
December 31, 1997 to reduce the carrying value of the project to its
estimated net recoverable amount of $4,275,000.
Girilambone Exploration Area
The Company has a 50% interest in an exploration joint venture
formed to explore areas adjacent to its Girilambone copper mine.
59
<PAGE>
Under the terms of the joint venture agreement the Company is required
to fund its 50% share of exploration costs. Exploration efforts are
continuing in the Girilambone exploration area to identify additional
mineable reserves.
The Company is seeking additional funding to develop its
properties. The Company cannot predict the availability of funds to
develop these properties and thus whether the deferred exploration and
development costs will ultimately be recovered.
E. LONG TERM DEBT
December 31,
1998 1997
(In thousands)
Girilambone financing agreement $ 3,000 $ 2,861
Less current maturities (600) (2,548)
Long-term debt $ 2,400 $ 313
The long-term debt matures as follows:
1999 $ 600
2000 2,400
$ 3,000
Girilambone Financing Agreement
In December 1998, the Company restructured its Girilambone
financing agreement with the lender. The borrowing limit was
increased to $3,000,000 at December 31, 1998 and will be increased to
a maximum of $3,600,000 in 1999. The loan bears interest at Singapore
Interbank Offered Rates ("SIBOR") plus 1-1/2%. Principal payments are
payable quarterly beginning September 30, 1999 at the greater of 50%
of available cash flow, as defined, for the quarter ending on the
relevant repayment date or the amount required to reduce the amount
outstanding to $3,400,000 on September 30, 1999, $2,400,000 on
December 31, 1999, $1,100,000 on March 31, 2000 and to zero on June
30, 2000. The agreement also contains certain debt coverage ratio
requirements. As collateral on the loan, the lender has a security
interest in the Australian assets of the Company including the
Company's share of assets of and production from Girilambone.
Under the agreement, all cash proceeds generated from Girilambone
operations are required to be deposited with the lender to be used to
pay any costs and expenses related to the project, bank fees, interest
and principal and to fund a reserve account with the lender. Any
remaining proceeds are available, at the lender's discretion, for use
by the Company.
The estimated fair value of the Company's outstanding debt at
December 31, 1998 and 1997 approximates its carrying amount.
60
<PAGE>
F. FINANCIAL INSTRUMENTS
The Company utilizes certain financial instruments, primarily
copper hedging agreements and foreign currency forward exchange
contracts, to reduce the risk associated with the volatility of
commodity prices and fluctuations in foreign currency exchange rates,
particularly the Australian dollar.
Copper Agreements
The Company's strategy has been to enter into put options and
swap agreements which are designated as hedges of future copper
production.
In November 1996, the Company purchased put options at a cost of
$.08 per pound of copper covering 4,000,000 pounds of copper. In
1997, the Company purchased put options for an additional 11,900,000
pounds of copper at a cost of $.05 per pound of copper. These put
options matured ratably each month from January 1998 through December
1998. This hedging program assured that the Company received a
minimum gross price of $.90 per pound of copper, and benefited from
any increases in the copper price above $.90 per pound.
The Company entered into swap and call option agreements with a
single counterparty covering a total of 13,200,000 pounds of copper
which settled each month during 1997. The swap agreements locked in a
fixed forward price as a floor, and the call options permitted the
Company to benefit from an increase in copper price above the call
price. Under this combination swap and call option arrangement, at
the settlement date for each copper contract during 1997, the Company
received $l.02 per pound plus the excess, if any, of the market price
of copper (as quoted on the London Metals Exchange) over $1.11 per
pound. The copper swap agreements equal to the anticipated level of
copper sales were designated as hedges, with gains and losses
reflected as the hedged copper was sold. The swap agreements in
excess of the anticipated copper sales and the call options did not
qualify as hedges and were marked to market with unrealized and
realized gains or losses included in operations.
Sales for the years ended December 3l, 1998, 1997 and 1996,
include gains of $1,616,000, losses of $54,000 and gains of
$1,058,000, respectively, that were realized in settlement of copper
hedging contracts.
The Company has entered into swap agreements covering a total of
11,905,000 pounds of copper at a fixed cost of $.75 per pound,
representing approximately 75% of the Company's share of budgeted
production for 1999. Contracts totaling 992,000 pounds of copper are
settled monthly. Upon settlement, the Company receives the difference
between the fixed price and the current price of copper if the current
price is lower, or the Company pays the difference if the current
price is higher. As a result, the Company is assured of receiving a
price of $.75 per pound for this hedged production.
The following table summarizes the market value of the copper
contracts determined based upon price quotes received from the
counterparty to the agreements.
Strike Price Fair Value -
Notional Amount Per Pound Asset
At December 31, 1998:
Swap contracts 11,905,000 pounds $.75 $ 737,200
At December 31, 1997:
Purchased put
options 15,873,000 pounds $.90 $1,524,600
61
<PAGE>
Foreign Currency Forward Exchange Contracts
The Company has entered into foreign currency forward exchange
contracts to protect against Australian currency fluctuations related
to payment of a portion of the expected operating costs of
Girilambone. Realized and unrealized gains and losses on these
contracts are included currently in the results of operations. For
the year ended December 31, 1998, the Company recognized a loss of
$606,000 compared to a loss of $2,399,000 in 1997 and a gain of
$497,000 in 1996 on these contracts. Outstanding contracts at
December 31, 1998, total $15,750,000 and mature in monthly
installments of $750,000 at an average exchange rate of A$1.00 = U.S.
$.742.
Counterparty Risk
The Company is exposed to credit risks in the event of
nonperformance by the counterparties to the various agreements
described above. The Company anticipates, however, that the
counterparties will be able to fully satisfy their obligations under
the agreements. The Company does not obtain collateral or other
security to support financial instruments subject to credit risk.
G. NORD RESOURCES CORPORATION
Nord Resources Corporation ("Resources") owned approximately
28.5% of the outstanding common stock of the Company as of December
31, 1998 and 1997.
In October 1996, the Board of Directors of Resources unanimously
agreed to make available to the Company, at Resources' discretion, an
operating loan payable on demand and bearing interest at the prime
rate plus 1%. In June 1997, advances made to the Company by
Resources, net of repayments, totaled $3,747,745. In July and August
1997, the Company repaid $2,000,000 of the amount outstanding.
Concurrent with the closing of the Company's Canadian offering on July
3, 1997, Resources converted the remaining amount outstanding into
349,549 Units at $5.00 per unit. Each Unit consisted of one share of
common stock and one-half of one purchase warrant. The purchase
warrants expired unexercised in 1998. Interest expense paid to
Resources totaled $114,000 for the year ended December 31, 1997.
In December 1997, the Company closed its office in Dayton, Ohio
and moved its administrative functions to Albuquerque, New Mexico. In
January 1998, under the terms of a cost sharing agreement, it began
sharing office space, administrative personnel and expenses with
Resources on a 50/50 basis.
In 1997 and 1996, Resources provided certain services to the
Company under a management agreement. Under the terms of the
management agreement, Resources was paid a monthly fee of $7,000 and
was reimbursed for all direct expenses incurred on behalf of the
Company. Management believes that the costs that would have been
incurred had the Company obtained such services on a stand-alone basis
would have approximated the amounts paid to Resources. Total amounts
paid to Resources were $566,000 and $415,000 for the years ended
December 31, 1997 and 1996, respectively.
62
<PAGE>
H. OPERATING LEASES
The Company leases its office space and certain equipment under
operating leases. Certain of the leases contain renewal options and
escalation clauses. Minimum annual lease payments under non-
cancelable operating leases for the years ended December 31 are as
follows:
1999 $ 132,100
2000 135,112
2001 135,953
2002 136,798
Thereafter 226,296
$ 766,259
Rent expense for operating leases was $112,433, $125,885 and
$206,000 for the years ended December 31, 1998, 1997 and 1996,
respectively.
I. SHAREHOLDERS' EQUITY
Canadian Offering
On July 3, 1997, the Company closed its public stock offering in
Canada. The offering consisted of the sale of 2,460,000 units,
consisting of one common share and one-half of one purchase warrant.
Each whole purchase warrant entitled the holder to purchase one share
of common stock at C$9.00. The Company also issued 225,000 warrants
to the underwriter. Each warrant entitled the underwriter to purchase
one share of common stock at C$6.90 prior to July 3, 1998. All of
these warrants expired unexercised on July 3, 1998. Gross proceeds
from the offering totaled US$12,300,000 (C$16,974,000). The Company
received net proceeds of US$10,684,000 (C$14,574,000) after payment of
commissions, certain legal fees, and other related costs.
Private Placement to Mineral Resources Development Company Pty,
Limited ("MRDC")
On December 12, 1997, the Company completed the sale of 600,000
common shares to MRDC, a corporation wholly owned by the Government of
Papua New Guinea. These shares were sold at a price of US$4.50
(C$6.40) per share and gross proceeds totaled US$2,700,000
(C$3,840,000). After payment of certain legal and issuance costs, net
proceeds were US$2,677,000.
Stock Option Plans and Other Option Grants
The Company has established three incentive stock option plans,
the 1989 Stock Option Plan, the 1991 Stock Option Plan and the 1995
Stock Option Plan (the "Plans") for the benefit of employees and
directors of the Company. During 1998, 1997 and 1996, options
outstanding not governed by the terms of the Plans (the "Non-Plan
Options") totaling 385,000, 150,000 and 224,000 shares, respectively,
have been granted to officers and directors of the Company. During
1998, 1997 and 1996, Non-Plan Options totaling 49,000, 53,000 and
33,600 shares, respectively, were issued to certain consultants to the
Company.
63
<PAGE>
Options are granted at an exercise price equal to or in excess of
the quoted market price on the date of the grant. Options are
generally exercisable beginning six months to three years from date of
grant and expire over a five to ten year period from date of grant.
At December 31, 1998, 104,080 shares are available for future option
grants under the terms of the Plans.
A summary of the status of the Company's outstanding stock
options as of December 31, 1998, 1997 and 1996 and changes during the
years then ended follows:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at Beginning of
Year 1,924,678 $ 4.26 1,664,200 $ 4.05 1,342,400 $3.95
Granted 499,000 2.68 296,078 5.47 347,200 4.50
Exercised -- -- (35,600) 4.34 (23,400) 3.75
Forfeited (123,680) 4.38 -- -- (2,000) 4.40
--------- --------- ----------
Outstanding at End of Year 2,299,998 3.92 1,924,678 4.26 1,664,200 4.05
========= ====== ========= ======= ==========
Options Exercisable at Year-End 1,923,998 $ 4.04 1,574,800 $ 4.10 1,161,600 $ 3.95
</TABLE>
The following table summarizes information about stock options
outstanding at December 31, 1998:
Weighted
Average
Exercise Prices Options Contract Life Options
Per Share Outstanding (Years) Exercisable
$2.41 100,000 4.42 --
2.54 216,000 3.00 216,000
2.75 383,000 5.94 198,000
3.91 36,000 3.25 36,000
4.00 362,000 1.12 362,000
4.26 272,800 4.95 272,800
4.38 84,000 5.26 84,000
4.45 264,000 .26 264,000
4.50 309,120 3.10 309,120
4.80 12,000 5.03 12,000
5.25 111,078 6.72 70,078
5.69 150,000 2.75 100,000
$2.41-5.69 2,299,998 4.04 1,923,998
Stock Bonus Plan
The 1990 Stock Bonus Plan provides for the issuance of up to
80,000 common shares as incentive bonuses. At December 31, 1998,
76,193 shares have been awarded and 3,807 shares are available for
future awards.
64
<PAGE>
J. SIGNIFICANT CUSTOMERS
Sales in 1998 included copper sales to two customers of
$8,026,000 and $3,051,000. Sales in 1997 included copper sales to
three customers of $8,277,000, $2,991,000 and $2,507,000. Sales in
1996 included copper sales to two customers of $11,309,000 and
$2,521,000. Management does not believe that the loss of any of these
customers would have a material adverse effect on the Company.
K. INCOME TAXES
Income tax expense consists entirely of future income taxes
payable in Australia. These amounts differ from the amounts computed
by applying the U.S. statutory income tax rate of 35% to consolidated
income before income tax expense as a result of the following:
<TABLE>
<CAPTION>
Year Ended December 31,
1998 1997 1996
<S> <C> <C> <C>
Income taxes at statutory rate $ (250) $ (4,060) $ 1,101
Foreign income taxes at effective rates in
excess of the statutory rate 14 (98) 121
Change in the valuation allowance for
deferred tax assets (176) 4,266 196
Non-deductible losses of subsidiaries 233 1,832 1,000
Adjustment of deferred taxes provided
for in prior years in Australia (1,250) -- --
Other 689 360 202
----------- ----------- ----------
Total $ (740) $ 2,300 $ 2,620
=========== =========== ==========
</TABLE>
65
<PAGE>
The tax effects of temporary differences that give rise to future
income tax assets and future income tax liabilities for Australia, the
United States, Papua New Guinea and Mexico are as follows:
<TABLE>
<CAPTION>
December 31,
1998 1997
(In thousands)
<S> <C> <C>
Australia:
Future income tax assets:
Development cost carryforwards $ -- $ 682
Other -- 867
------------- ------------
-- 1,549
Future income tax liabilities:
Deferred leach costs (3,389) (3,229)
Exploration and development costs (245) (3,004)
Plant, property and equipment (1,626) (648)
Other (40) (708)
------------- ------------
(5,300) (7,589)
------------- ------------
Total Australia $ (5,300) $ (6,040)
============= =============
United States:
Future income tax asset:
Net operating loss carryforwards $ 1,518 $ 1,466
Other -- 37
------------- ------------
1,518 1,503
Valuation allowance (1,518) (1,503)
------------- -------------
Total United States $ -- $ --
============= =============
Papua New Guinea:
Future income tax asset:
Exploration cost carryforwards $ 5,802 $ 5,995
Valuation allowance (5,802) (5,995)
------------- ------------
Total Papua New Guinea $ -- $ --
============= =============
Mexico:
Future income tax asset-net operating loss
carryforwards $ 725 $ 723
Valuation allowance (725) (723)
------------- ------------
Total Mexico $ -- $ --
============= =============
A valuation allowance has been provided for all of the Company's
net future income tax assets in the United States, Papua New Guinea
and Mexico based on the history of operating losses for the Company in
these countries and limitations on the use of the carryforwards. The
Company's operations in Canada in 1998 are insignificant.
66
<PAGE>
L. PENSION PLANS
The Company has a defined contribution pension plan covering
certain employees of its Australian operations. Under the terms of
the plan, the Company contributes an amount equal to 10% of the
employee's wages. Pension costs were $38,000, $48,000 and $47,000 for
the years ended December 31, 1998, 1997 and 1996 respectively.
The Company has an unfunded non-contributory defined benefit
program for two of its executive officers. Under the terms of the
program for one of the executive officers, the Company is obligated to
pay a lump sum benefit that matches the difference, if any, between
the present value of the executive's retirement benefit and the cash
surrender value of an insurance policy owned by the executive at age
62. At December 31, 1998 and 1997, the cash surrender value of the
policy of $275,265 and $223,016, respectively, has been offset against
the accrued retirement benefits liability.
The following tables set forth the changes in the projected
benefit obligation for the years ended December 31, 1998, 1997 and
1996 and the funded status of the plan and amounts recognized in the
Company's balance sheet at December 31, 1998 and 1997:
December 31,
1998 1997 1996
(In thousands)
Change in projected benefit obligation
Benefit obligation, beginning of period $ 350 $ 501 $ 413
Service cost 23 -- 42
Interest cost 15 -- --
Actuarial (gain) loss (117) (151) 46
Benefit obligation, end of period $ 271 $ 350 $ 501
December 31,
1998 1997
Funded status:
Projected benefit obligation unrecognized $ (271) $ (350)
Unrecognized net loss 9 246
Unrecognized prior service cost 103 --
Net amount recognized $ (159) $ (104)
Amounts recognized in the balance sheet:
Accrued benefit liability $ (271) $ (104)
Intangible asset 112 --
Net amount recognized $ (159) $ (104)
67
<PAGE>
The following tables set forth the components of net periodic
benefit costs for the years ended December 31, 1998, 1997 and 1996:
</TABLE>
<TABLE>
<CAPTION>
Year Ending December 31,
1998 1997 1996
(In thousands)
<S> <C> <C> <C>
Components of net periodic benefit cost:
Service cost $ 23 $ -- $ 42
Interest cost 15 -- --
Recognized net actuarial gain (14) -- --
Net periodic benefit cost $ 24 $ -- $ 42
Assumptions:
Discount rate 6.75% 7.25% 7.00%
Expected return on plan assets NA NA NA
Rate of compensation increase 0.00% 0.00% 5.00%
</TABLE>
M. EMPLOYMENT AGREEMENTS
The Company has agreements with two of its officers which contain
change in control provisions which would entitle one officer to
receive 50% of his salary and the other officer to receive 200% of his
salary in the event of a change in control of the Company and a change
in certain conditions of their employment. The maximum contingent
liability under these agreements is approximately $470,000 at December
31, 1998.
N. DIFFERENCE BETWEEN CANADIAN AND U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in Canada
("Canadian GAAP"), which differ in certain respects from those
principles and practices that the Company would have followed had its
consolidated financial statements been prepared in accordance with
accounting principles generally accepted in the United States ("U.S.
GAAP").
Canadian accounting principles provide for the deferral of
exploration expenditures until such time as the property is put into
production or the property is abandoned or disposed of through sale,
or when it is no longer considered to be commercially viable. For
U.S. GAAP purposes, the Company has elected to expense all exploration
costs until such time as the Company establishes, generally by
completing a detailed feasability study, that a commercially minable
deposit exists.
Statement of Financial Accounting Standards No. 130, Reporting
Comprehensive Income, requires that a company classify items of other
comprehensive income by their nature in a financial statement and
display the accumulated balance of other comprehensive income
separately from retained earnings and additional paid-in capital in
the equity section of the balance sheet. Under U.S. GAAP, the
accumulated other comprehensive income at both December 31, 1998 and
1997, is $798,000, representing cumulative foreign currency
translation adjustments. Since there was no change in this amount in
1998, 1997 or 1996 comprehensive income under U.S. GAAP is equal to
the net loss under U.S. GAAP for those periods presented below.
68
<PAGE>
Other differences between Canadian GAAP and U.S. GAAP as they
relate to these financial statements are not significant.
The application of U.S. GAAP would have had the following effect
on the Company's balance sheets:
December 31,
1998 1997
(In thousands)
Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP
Deferred exploration and
development costs $ 19,141 $12,167 $ 13,492 $ 6,570
Deferred tax liability $ 5,300 $ 3,498 $ 6,040 $ 4,608
Shareholders' equity $ 25,339 $20,167 $ 25,256 $19,766
The application of U.S. GAAP would have had the following effect on
the Company's statements of operations:
Year ended December 31,
1998 1997 1996
(In thousands)
Net earnings (loss) - Canadian GAAP $ 25 $(14,327) $ 617
Accounting for exploration costs (322) 10,385 (4,351)
Income tax effect 370 638 (154)
Net loss - U.S. GAAP $ (73) $ (3,304) $ (3,888)
Loss per share - U.S. GAAP $ -- $ (.30) $ (.39)
69
<PAGE>
Additional Disclosures Required Under U.S. GAAP - Stock Compensation
For U.S. GAAP purposes, the Company has elected to measure
compensation cost for stock options issued to employees using the
intrinsic value based method under Accounting Principles Board ("APB")
Opinion No. 25, "Accounting for Stock Issued to Employees." Had
compensation cost for the Company's option grants in 1995 and
subsequent years been determined based on the fair value of the
options at the grant dates consistent with the provisions of SFAS No.
123, the Company's net loss and loss per share under U.S. GAAP would
have been reduced to the pro forma amounts indicated below:
Year Ended December 31,
1998 1997 1996
(In thousands)
Net loss - U.S. GAAP As reported $ (73) $ (3,304) $ (3,888)
Pro forma (614) (3,770) (4,504)
Loss per share - U.S.
GAAP As reported $ -- $ (.30) (.39)
Pro forma (.05) (.34) (.45)
The assumptions used in determining the fair value of options granted
during 1998, 1997 and 1996 are as follows:
1998 1997 1996
Expected volatility 73% 55% 55%
Expected life of grant 3 years 2.5 years 3 years
Risk-free interest rate 5.567% 6.05% 5.03%
Expected dividend rate None None None
The weighted average fair value of options granted during the
years ended December 31, 1998, 1997 and 1996 was $1.14, $2.06 and
$1.87, respectively.
New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board (the "FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 133 establishes standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, and for
hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in its balance sheet and
measure those instruments at fair value. This statement is effective
for all fiscal quarters of fiscal years beginning after June 15, 1999.
The Company has not yet determined the effect of SFAS No. 133 on its
financial statements prepared under U.S. GAAP.
The Accounting Standards Executive Committee ("AcSEC") of the AICPA
has issued Statement of Position ("SOP") 98-5, "Reporting on the Costs
of Start-Up Activities" effective for financial statements for fiscal
years beginning after December 31, 1998. SOP 98-5 requires that the
costs of start-up activities, including organization costs, be
expensed as incurred. The Company does not believe that the adoption
of SOP 98-5 will have any effect on its current financial statements
prepared under U.S.GAAP.
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O. ENVIRONMENTAL CONTINGENCIES
At December 31, 1998, the Company had reserves of approximately
$115,000 for remediation of certain Australian and Papua New Guinea
sites and other environmental costs in accordance with its policy to
record liabilities for environmental expenditures when it is probable
that obligations have been incurred and the costs can reasonably be
estimated.
The amounts of these liabilities are very difficult to estimate
due to such factors as the unknown extent of the remedial actions that
may be required and, in the case of sites not owned by the Company,
the unknown extent of the Company's probable liability in proportion
to the probable liability of other parties.
71
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INDEX TO EXHIBITS
PAGE
NUMBER
2. PLAN OF ACQUISITION, REORGANIZATION,
ARRANGEMENT, LIQUIDATION OR SUCCESSION
2.1 Stock Purchase Agreement dated March 11, 1993 by
and among Nord Kaolin Corporation ("NK Corp"),
Registrant, Norplex, Inc. ("Norplex") and Kemira
Holdings, Inc. ("Kemira"). Reference is made to
Exhibit 2.1 of Registrant's Current Report on
Form 8-K dated March 11, 1993, which exhibit is
incorporated herein by reference. **
2.2 Stock Purchase Agreement dated June 28, 1993 by
and between Registrant and Consolidated Rutile
Limited. Reference is made to Exhibit 2.2 of
Registrant's Report on Form 8-K dated June 28,
1993, which exhibit is incorporated herein by
reference. **
3. ARTICLES OF INCORPORATION AND BY-LAWS
3.1 Certificate of Incorporation (as amended) of
Registrant. Reference is made to Exhibit 3.1 of
Registrant's Report on Form 10-K for the year
ended December 31,1987, which exhibit is
incorporated herein by reference. **
3.2 Certificate of Amendment of Certificate of
Incorporation of Registrant. **
3.3 Certificate of Amendment of Certificate of
Incorporation of Registrant. Reference is made
to Exhibit 3:3 of Registrants Form 10-K for the
year-ended December 31, 1997, which exhibit is
incorporated by reference. **
3.4 Amended and Restated Bylaws of Registrant.
Reference is made to Exhibit 3.2 of Registrant's
Report on Form 10-K for the year ended December
31, 1994, which exhibit is incorporated herein
by reference. **
72
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NUMBER
3.5 Amendment No. 1 to Amended and Restated Bylaws
of Registrant. **
10. MATERIAL CONTRACTS
10.1 Loan Agreement between Development Authority of
the City of Jeffersonville and of Twiggs County
and Nord Kaolin Company, dated as of June 1,
1994. Reference is made to Exhibit 10.1 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.2 Shareholders Agreement dated March 11, 1993 by
and among Norplex, Kemira, NK Corp. and
Registrant. Reference is made to Exhibit 10.1
of Registrant's Report on Form 8-K dated March
11, 1993, which exhibit is incorporated herein
by reference. **
10.3 Lease Agreement dated May 15, 1988 between ATEL
Financial Corporation and Nord Kaolin Company.
Reference is made to Exhibit 10.31 of
Registrant's Report on Form 10-K for the year
ended December 31, 1988, which exhibit is
incorporated herein by reference. **
10.4 Guaranty of Lease dated May 15, 1988 given by
Registrant to ATEL Financial Corporation.
Reference is made to Exhibit 10.32 of
Registrant's Report on Form 10-K for the year
ended December 31, 1988, which exhibit is
incorporated herein by reference. **
10.5 Amendment and Waivers dated August 1991 of
Guaranty of Lease dated May 15, 1988 given by
Registrant to ATEL Financial Corporation.
Reference is made to Exhibit 19.6 of
Registrant's Report on Form 10-Q for the period
ended September 30, 1991, which exhibit is
incorporated herein by reference. **
73
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NUMBER
10.6 Amendments and Waivers dated November 1991 of
Guaranty of Lease dated May 15, 1988 given by
Registrant to ATEL Financial Corporation.
Reference is made to Exhibit 10.75 of
Registrant's Report on Form 10-K for the year
ended December 31, 1991, which exhibit is
incorporated herein by reference. **
10.7 Waiver, Consent and Agreement made March 11,1993
by and between Nord Kaolin Company and entities
under ATEL Financial Corporation Lease
Agreement. Reference is made to Exhibit 10.12
of Registrant's Report on Form 10-K for the year
ended December 31, 1993, which exhibit is
incorporated herein by reference. **
10.8 License for Proprietary Pigment Technologies
dated September 1, 1986 between Nord Kaolin
Company and Industrial Progress, Inc. Reference
is made to Exhibit 10.33 of Registrant's Report
on Form 10-K for the year ended December 31,
1988, which exhibit is incorporated herein by
reference. **
10.9 Addendum to License for Proprietary Pigment
Technologies dated December 1987. Reference is
made to Exhibit 10.34 of Registrant's Report on
Form 10-K for the year ended December 31, 1988,
which exhibit is incorporated herein by
reference. **
10.10 Stock Option Agreement and Second Addendum to
License for Proprietary Pigment Technologies
between Nord Kaolin Company and Industrial
Progress, Inc., dated February 1, 1990.
Reference is made to Exhibit 10.53 of
Registrant's Report on Form 10-K for the year
ended December 31, 1990, which exhibit is
incorporated herein by reference. **
10.11 Second Stock Option Agreement and Third Addendum
to License for Proprietary Pigment Technology
dated as of July 9, 1992 by and between Nord
Kaolin Company and Industrial Progress, Inc.
Reference is made to Exhibit 10.94 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
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NUMBER
10.12 Joint Venture Agreement between Nord Southern
Dolomite Company and Istria, N.V. forming
Manatee Gateway No. I. Reference is made to
Exhibit (10)(d) (i) of Registrant's Registration
Statement on Form S-2 (No. 33-00961), which
exhibit is incorporated herein by reference. **
10.13 Nord Resources Corporation Non-Qualified Stock
Option Plan. Reference is made to Exhibit 10.16
to Registrant's Registration Statement on Forms
S-3/S-8 (No. 2-92415), which exhibit is
incorporated herein by reference. **
10.14 Nord Resources Corporation 1982 Nord Incentive
Stock Option Plan. Reference is made to Exhibit
10.17 to Registrant's Registration Statement on
Forms S-3/S-8 (No. 2-92415), which exhibit is
incorporated herein by reference. **
10.15 Amendment No. 1 to Nord Resources Corporation
1982 Nord Incentive Stock Option Plan. Reference
is made to Exhibit 10.32 of Registrant's Report
on Form 10-K for the year ended December 31,
1987, which exhibit is incorporated herein by
reference. **
10.16 Amendment No. 2 to Nord Resources Corporation
1982 Nord Incentive Stock Option Plan.
Reference is made to Exhibit 10.17 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.17 Amendment No. 3 to Nord Resources Corporation
1982 Nord Incentive Stock Option Plan.
Reference is made to Exhibit 10.18 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.18 Amendment No. 4 to Nord Resources Corporation
1982 Nord Incentive Stock Option Plan.
Reference is made to Exhibit 10.19 of
Registrant's Report on Form 10-K for the year
ended December 31, 1995, which exhibit is
incorporated herein by reference. **
75
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NUMBER
10.19 Nord Resources Corporation 1987 Nord Incentive
Stock Option Plan. Reference is made to Exhibit
10.33 of Registrant's Report on Form 10-K for
the year ended December 31, 1987, which exhibit
is incorporated herein by reference. **
10.20 Amendment No. 1 to Nord Resources Corporation
1987 Nord Incentive Stock Option Plan.
Reference is made to Exhibit 10.20 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.21 Amendment No. 2 to Nord Resources Corporation
1987 Nord Incentive Stock Option Plan. Reference
is made to Exhibit 10.22 of Registrant's Report
on Form 10-K for the year ended December 31,
1995, which exhibit is incorporated herein by
reference. **
10.22 Nord Resources Corporation 1989 Stock Option
Plan. Reference is made to Exhibit 10.33 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
10.23 Amendment No. 1 to Nord Resources Corporation
1989 Stock Option Plan. Reference is made to
Exhibit 10.55 of Registrant's Report on Form 10-
K for the year ended December 31, 1990, which
exhibit is incorporated herein by reference. **
10.24 Amendment No. 2 to Nord Resources Corporation
1989 Stock Option Plan. Reference is made to
Exhibit 10.23 of Registrant's Report on Form 10-
K for the year ended December 31, 1994, which
exhibit is incorporated herein by reference. **
10.25 Amendment No. 3 to Nord Resources Corporation
1989 Stock Option Plan. Reference is made to
Exhibit 10.26 of Registrant's Report on Form 10-
K for the year ended December 31, 1995, which
exhibit is incorporated herein by reference. **
10.26 Nord Resources Corporation 1991 Stock Option
Plan. Reference is made to Exhibit 10.24 of
Registrant's Report on Form 10-K for the year
ended December 31, 1993, which exhibit is
incorporated herein by reference. **
76
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NUMBER
10.27 Amendment No. 1 to Nord Resources
Corporation 1991 Stock Option Plan. Reference is
made to Exhibit 10.25 of Registrant's Report on
Form 10-K for the year ended December 31, 1994,
which exhibit is incorporated herein by
reference. **
10.28 Amendment No. 2 to Nord Resources Corporation
1991 Stock Option Plan. Reference is made to
Exhibit 10.29 of Registrant's Report on Form 10-
K for the year ended December 31, 1995, which
exhibit is incorporated herein by reference. **
10.29 Restated Deferred Compensation Agreement dated
May 10, 1989 between Registrant and Terence H.
Lang. Reference is made to Exhibit 10.9 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated by reference. **
10.30 Amendment No. 1 to the Restated Deferred
Compensation Agreement between Registrant and
Terence H. Lang, dated November 3, 1995. Reference
is made to Exhibit 10.31 of Registrant's Report on
Form 10-K for the year ended December 31, 1995, which
exhibit is incorporated herein by reference. **
10.31 Restated Deferred Compensation Agreement dated
May 10, 1989 between Registrant and Edgar F.
Cruft. Reference is made to Exhibit 10.11 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
10.32 Amendment No. 1 to the Restated Deferred
Compensation Agreement between Registrant and
Edgar F. Cruft, dated July 7, 1995. Reference
is made to Exhibit 10.34 of Registrant's Report
on Form 10-K for the year ended December 31,
1995, which exhibit is incorporated herein by
reference. **
10.33 Nord Resources Corporation Trust Agreement for
Key Executives as Restated, dated July 7, 1995.
Reference is made to Exhibit 10.35 of
Registrant's Report on Form 10-K for the year
ended December 31, 1995, which exhibit is
incorporated herein by reference. **
77
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PAGE
NUMBER
10.34 Amendment No. 1 to Trust Agreement for Key
Executives as Restated, dated December 1, 1995.
Reference is made to Exhibit 10.36 of
Registrant's Report on Form 10-K for the year
ended December 31, 1995, which exhibit is
incorporated herein by reference. **
10.35 Split-Dollar Life Insurance and Supplemental
Compensation agreement between Karl A. Frydryk
and Registrant dated July 22, 1988. Reference
is made to Exhibit 10.29 of Registrant's Report
on Form 10-K for the year ended December 31,
1988, which exhibit is incorporated herein by
reference. **
10.36 Nord Resources Corporation Split-Dollar Life
Insurance and Supplemental Compensation Plan
Trust Agreement, December 5, 1988. Reference is
made to Exhibit 10.35 of Registrant's Report on
Form 10-K for the year ended December 31, 1988,
which exhibit is incorporated herein by
reference. **
10.37 Change of Control Letter Agreement between
Registrant and Edgar F. Cruft, dated May 10,
1989. Reference is made to Exhibit 10.27 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
10.38 Amendment No. 2 dated December 1, 1995 to Change
of Control Agreement between Registrant and
Edgar F. Cruft. Reference is made to Exhibit
10.40 of Registrant's Report on Form 10-K for
the year ended December 31, 1995, which exhibit
is incorporated herein by reference. **
10.39 Change of Control Letter Agreement between
Registrant and Terence H. Lang, dated May 10,
1989. Reference is made to Exhibit 10.29 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
78
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NUMBER
10.40 Amendment No. 2 dated December 1, 1995 to Change
of Control Agreement between Registrant and
Terence H. Lang. Reference is made to Exhibit
10.42 of Registrant's Report on Form 10-K for
the year ended December 31, 1995, which exhibit
is incorporated herein by reference. **
10.41 Nord Resources Corporation Trust Agreement for
Executive Severance Agreements, dated May 10,
1989. Reference is made to Exhibit 10.30 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
10.42 Change of Control Letter Agreement between
Registrant and Karl A. Frydryk, dated May 10,
1989. Reference is made to Exhibit 10.32 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
10.43 Amendment No. 2 dated December 1, 1995 to Change
of Control Agreement between Registrant and Karl
A. Frydryk. Reference is made to Exhibit 10.45
of Registrant's Report on Form 10-K for the year
ended December 31, 1995, which exhibit is
incorporated herein by reference. **
10.44 Change of Control Letter Agreement between
Registrant and William W. Wilcox, dated March 9,
1990. Reference is made to Exhibit 10.57 of
Registrant's Report on Form 10-K for the year
ended December 31, 1990, which exhibit is
incorporated herein by reference. **
10.45 Amendment No. 2 dated December 1, 1995 to Change
of Control Agreement between Registrant and
William W. Wilcox. Reference is made to Exhibit
10.47 of Registrant's Report on Form 10-K for
the year ended December 31, 1995, which exhibit
is incorporated herein by reference. **
79
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NUMBER
10.46 Change of Control Letter Agreement between
Registrant and James T. Booth, dated June 8,
1994. Reference is made to Exhibit 10.38 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.47 Amendment No. 2 dated December 1, 1995 to Change
of Control Agreement between Registrant and
James T. Booth. Reference is made to Exhibit
10.49 of Registrant's Report on Form 10-K for
the year ended December 31, 1995, which exhibit
is incorporated herein by reference. **
10.48 Executive Loan Agreement dated September 10,
1987 between Terence H. Lang and Registrant.
Reference is made to Exhibit 10.40 of
Registrant's Report on Form 10-K for the year
ended December 31, 1987, which exhibit is
incorporated herein by reference. **
10.49 Executive Loan Agreement dated August 8, 1988
between Edgar F. Cruft and Registrant.
Reference is made to Exhibit 10.26 of
Registrant's Report on Form 10-K for the year
ended December 31, 1988, which exhibit is
incorporated herein by reference. **
10.50 Executive Loan Agreement dated December 31, 1988
between Terence H. Lang and Registrant.
Reference is made to Exhibit 10.27 of
Registrant's Report on Form 10-K for the year
ended December 31, 1988, which exhibit is
incorporated herein by reference. **
10.51 Executive Loan Agreement dated September 19,
1989 between Edgar F. Cruft and Registrant.
Reference is made to Exhibit 10.17 of
Registrant's Report on Form 10-K for the year
ended December 31, 1989, which exhibit is
incorporated herein by reference. **
10.52 Agreement between The Government of the Republic
of Sierra Leone and Sierra Rutile Limited
("SRL"), dated November 3, 1989. Reference is
made to Exhibit 10.4 of Registrant's Report on
Form 10-K for the year ended December 31, 1989,
which exhibit is incorporated herein by
reference. **
80
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NUMBER
10.53 Agreement dated November 17, 1992 amending Fifth
Amendment to and Restatement of the Financing
Agreement and Second Amendment and Restatement
of Credit between SRL and Export-Import Bank of
the United States ("ExImbank"). Reference is
made to Exhibit 10.5 of Registrant's Report on
Form 10-K for the year ended December 31, 1992,
which exhibit is incorporated herein by
reference. **
10.54 Fifth Amendment to and Restatement of the
Financing Agreement dated as of November 24,
1986 between SRL and ExImbank. Reference is
made to Exhibit 4.14 of Registrant's Report on
Form 10-K for the year ended December 31, 1988,
which exhibit is incorporated herein by
reference. **
10.55 Second Amendment and Restatement of Credit
Agreement dated as of December 1, 1982 between
SRL and ExImbank. Reference is made to Exhibit
10(e)B(v) of Registrant's Registration Statement
on Form S-2 (33-00961), which exhibit is
incorporated herein by reference. **
10.56 Letter Agreement dated October 12, 1993 between
SRL and ExImbank. Reference is made to Exhibit
10.10 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated
herein by reference. **
10.57 Letter Agreement dated November 17, 1993 between
SRL and ExImbank. Reference is made to Exhibit
10.11 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated
herein by reference. **
10.58 Loan Agreement dated August 6, 1992 between DEG-
Deutsche Investitions-Und Entwicklungsgesell
Schaft MBH ("DEG") and SRL. Reference is made
to Exhibit 10.73 of Registrant's Report on Form
10-K for the year ended December 31, 1992, which
exhibit is incorporated herein by reference. **
81
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NUMBER
10.59 First Amendment dated November 20, 1992 to the
Loan Agreement between DEG and SRL. Reference
in made to Exhibit 10.74 of Registrant's Report
on Form 10-K for the year ended December 31,
1992, which exhibit is incorporated herein by
reference. **
10.60 Amendatory Agreement dated November 17, 1993
between SRL and DEG. Reference is made to
Exhibit 10.12 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.61 Investment Agreement dated June 30, 1992 between
SRL and International Finance Corporation
("IFC"). Reference is made to Exhibit 10.75 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.62 Amendment No. 1 dated November 18, 1992 to
Investment Agreement between SRL and IFC.
Reference is made to Exhibit 10.76 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.63 Amendatory Agreement dated November 17, 1993
between SRL and IFC. Reference is made to
Exhibit 10.9 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.64 Loan Agreement dated January 24, 1992 between
SRL and Commonwealth Development Corporation
("CDC"). Reference is made to Exhibit 10.77 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.65 Amendment dated November 17, 1992 of the Loan
Agreement between SRL and CDC. Reference is
made to Exhibit 10.78 of Registrant's Report on
Form 10-K for the year ended December 31, 1992,
which exhibit is incorporated herein by
reference. **
82
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NUMBER
10.66 Amendatory Agreement dated November 5, 1993
between SRL and CDC. Reference is made to
Exhibit 10.13 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.67 Waiver Letter dated October 22, 1993 from CDC to
SRL. Reference is made to Exhibit 10.14 of
Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein
by reference. **
10.68 Finance Agreement dated August 11, 1992 between
SRL and Overseas Private Investment Corporation
("OPIC"). Reference is made to Exhibit 10.79 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.69 First Amendment dated November 24, 1992 to
Finance Agreement between SRL and OPIC.
Reference is made to Exhibit 10.80 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.70 Agreement of Wavier and Second Amendment to
Finance Agreement dated as of September 21, 1993
between SRL and OPIC. Reference is made to
Exhibit 10.6 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.71 Third Amendment to Finance Agreement dated as of
November 17, 1993 between SRL and OPIC.
Reference is made to Exhibit 10.7 of
Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein
by reference. **
10.72 Funding Agreement dated February 16, 1993 among
SRL, OPIC and PNC Bank, National Association
("PNC"). Reference is made to Exhibit 10.70 of
Registrant's Report on Form 10-K for the year
ended December 31, 1993, which exhibit is
incorporated herein by reference. **
83
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NUMBER
10.73 First Amendment to Funding Agreement dated
November 12, 1993 among SRL, OPIC and PNC.
Reference is made to Exhibit 10.8 of
Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein
by reference. **
10.74 Debenture dated November 17, 1992 made by SRL in
favor of CDC, DEG, ExImbank, IFC and OPIC.
Reference is made to Exhibit 10.81 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.75 Debenture dated November 17, 1992 made by SRL in
favor of DEG, ExImbank, IFC, OPIC and CDC.
Reference is made to Exhibit 10.85 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.76 First Amendment and Restatement of Project Funds
Agreement dated as of November 17, 1993 among
Registrant, CRL, Holdings, SRL, CDC, DEG, ExImbank,
IFC and OPIC. Reference is made to Exhibit 10.17
of Registrant's Report on Form 8-K dated November 17,
1993, which exhibit is incorporated herein by reference. **
10.77 Share Retention Agreement dated November 17,
1992 among CDC, DEG, ExImbank, IFC and OPIC and
Registrant, Nord Rutile Company and SRL.
Reference is made to Exhibit 10.83 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.78 First Amendment to Share Retention Agreement
dated as of November 17, 1993 among Registrant,
NR Company, CRL, Holdings, CDC, DEG, IFC, OPIC
and ExImbank. Reference is made to Exhibit
10.18 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated
herein by reference. **
84
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NUMBER
10.79 Pledge Agreement dated November 17, 1992 between
SRL and DEG, ExImbank, IFC, OPIC and CDC.
Reference is made to Exhibit 10.84 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.80 Cash Collateral Charge dated November 17, 1992
made by SRL in favor of DEG, ExImbank, IFC, OPIC
and CDC. Reference is made to Exhibit 10.86 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.81 Trust Deed between Standard Chartered Bank
Sierra Leone Limited, Financing Institutions and
SRL. Reference is made to Exhibit 10.87 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.82 Security Sharing and Intercreditor Agreement
dated November 17, 1992 among DEG, ExImbank,
IFC, OPIC and CDC. Reference is made to Exhibit
10.88 of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which exhibit
is incorporated herein by reference. **
10.83 Security Agreement dated November 17, 1992 among
SRL and DEG, ExImbank, IFC, OPIC and CDC.
Reference is made to Exhibit 10.90 of
Registrant's Report on Form 10-K for the year
ended December 31, 1992, which exhibit is
incorporated herein by reference. **
10.84 Subordination Agreement dated November 17, 1992
among DEG, ExImbank, IFC, OPIC and CDC and
Registrant, Nord Rutile Corporation, Nord Rutile
Company and SRL. Reference is made to Exhibit
10.89 of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which exhibit
is incorporated herein by reference. **
85
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NUMBER
10.85 First Amendment to Subordination Agreement dated
as of November 17, 1993 among Registrant, NR
Company, CRL, Holdings, CDC, DEG, IFC, OPIC and
ExImbank. Reference is made to Exhibit 10.19 of
Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein
by reference. **
10.86 Arm's Length Agreement dated as of November 17,
1993 between CRL and SRL. Reference is made to
Exhibit 10.15 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit is
incorporated herein by reference. **
10.87 First Amendment to Arm's Length Agreement dated
as of November 17, 1993 between Registrant and
SRL. Reference is made to Exhibit 10.16 of
Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein
by reference. **
10.88 Joint Venture Agreement dated as of November 17,
1993 among CRL, Registrant, NR Company and
Holdings. Reference is made to Exhibit 10.1 of
Registrant's Report on Form 8-K dated November
17, 1993, which exhibit is incorporated herein
by reference. **
10.89 Marketing Agreement dated as of November 17,
1993 among CRL, Registrant, NR Company, SRL,
Holdings and TMMI. Reference is made to Exhibit
10.2 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated
herein by reference. **
10.90 U.S. Marketing Agreement dated as of November
17, 1993 among CRL, Registrant, NR Company, SRL,
Holdings and U.S. Partnership. Reference is
made to Exhibit 10.3 of Registrant's Report on
Form 8-K dated November 17, 1993, which exhibit
is incorporated herein by reference. **
86
<PAGE>
PAGE
NUMBER
10.91 General Partnership Agreement dated as of
November 17, 1993 among CRL, CRL Delaware and
Registrant. Reference is made to Exhibit 10.4
of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated
herein by reference. **
10.92 Amendment to Mining Lease dated September 17,
1991 from the Ministry of Mines of the
Government of Sierra Leone. Reference is made
to Exhibit 10.12 of Amendment No. 2 to
Registrant's Report on Form S-3 dated July 20,
1993, which exhibit is incorporated herein by
reference. **
10.93 Agreement between Sierra Rutile Limited and the
Government of Sierra Leone dated 3 January 1995.
Reference is made to Exhibit 10.86 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.94 Letter dated February 22, 1995 regarding Sierra
Rutile Limited Development Bank Financing.
Reference is made to Exhibit 10.92 of
Registrant's Report on Form 10-K for the year
ended December 31, 1994, which exhibit is
incorporated herein by reference. **
10.95 Agreement and Fourth Amending Agreement dated
March 24, 1995 between Consolidated Rutile
Limited and Registrant. Reference is made to
Exhibit 10.93 of Registrant's Report on Form 10-
K for the year ended December 31, 1994, which
exhibit is incorporated herein by reference. **
10.96 Letter Agreement signed by Registrant,
Consolidated Rutile limited and, SRL related to
CDC, DEG, ExImbank, IFC and OPIC dated December
15, 1995. Reference is made to Exhibit 10.100
of Registrant's Report on Form 10-K for the year
ended December 31, 1995, which exhibit is
incorporated herein by reference. **
87
<PAGE>
PAGE
NUMBER
10.97 Guaranty among Registrant and DCD, DEG,
ExImbank, IFC and OPIC dated February 28, 1996.
Reference is made to Exhibit 10.101 of
Registrant's Report on Form 10-K for the year
ended December 31, 1995, which exhibit is
incorporated herein by reference. **
10.98 Pledge, Assignment and Security Agreement among
Registrant and CDC, DEG, ExImbank, IFC and OPIC
dated February 28, 1996. Reference is made to
Exhibit 10.102 of Registrant's Report on Form 10-
K for the year ended December 31, 1995, which
exhibit is incorporated herein by reference. **
10.99 Letter Agreement dated December 19, 1996 between
Registrant, SRL, Consolidated Rutile Limited and
CDC, DEG, ExImbank, IFC and OPIC. Reference is
made to Exhibit 10.99 of Registrant's Form 10-K
for the year-ended December 31, 1996 which
exhibit is incorporated herein by reference. **
10.100Loan and Security Agreement by and between
Congress Financial Corporation (Central) and
Nord Kaolin Company, dated July 10, 1996.
Reference is made to Exhibit 10.100 of
Registrant's Form 10-K for the year-ended
December 31, 1996, which exhibit is incorporated
herein by reference. **
10.101 Promissory note between Registrant (payee) and
Nord Pacific Limited (maker) dated October 24,
1996. Reference is made to Exhibit 10.101 of
Registrant's Form 10-K for the year-ended
December 31, 1996, which exhibit is incorporated
herein by reference. **
10.102 Letter Agreement dated December 30, 1997 between
Registrant, SRL, Consolidated Rutile Limited and
CDC, DEG, ExImbank, IFC and OPIC. Reference is
made to Exhibit 10.102 of Registrant's Form 10-K for
the year-ended December 31, 1997, which exhibit is
incorporated herein by reference. **
10.103 Asset Purchase Agreement between Registrant and
Dry Branch Kaolin dated March 5, 1997. Reference
is made to Exhibit 10.103 of Registrant's Form 10-K
for the year-ended December 31, 1997, which
exhibit is incorporated herein by reference. **
88
<PAGE>
PAGE
NUMBER
10.104 Bill of Sale and Assignment between Registrant
and Dry Branch Kaolin dated April 23, 1997.
Reference is made to Exhibit 10.104 of Registrant's
Form 10-K for the year-ended December 31, 1997,
which exhibit is incorporated herein by reference. **
10.105 Assumption Agreement between Registrant and Dry Branch
Kaolin dated April 23, 1997. Reference is made to
Exhibit 10.105 of Registrant's Form 10-K for the
year-ended December 31, 1997, which exhibit is
incorporated herein by reference. **
10.106 Employment Agreement dated May 27, 1997, between
the Registrant and W. Pierce Carson. Reference is
made to Exhibit 10.106 of Registrant's Form 10-K for
the year-ended December 31, 1997, which
exhibit is incorporated herein by reference. **
10.107 Continuation of Employment Agreement dated May 27,
1997, between the Registrant and Edgar F. Cruft.
Reference is made to Exhibit 10.107 of Registrant's
Form 10-K for the year-ended December 31, 1997,
which exhibit is incorporated herein by reference. **
10.108 Amendment to Continuation of Employment Agreement
dated May 27, 1997, between the Registrant and
Edgar F. Cruft. Reference is made to Exhibit 10.108
of Registrant's Form 10-K for the year-ended
December 31, 1997, which exhibit is incorporated
herein by reference. **
10.109 Continuation of Employment Agreement dated May 27, 1997,
between Registrant and Terence H. Lang. Reference is
made to Exhibit 10.109 of Registrant's Form 10-K for
the year-ended December 31, 1997, which exhibit is
incorporated herein by reference. **
10.110 Employment Agreement dated May 27, 1997 May 27,
1997, between the Registrant and MIL (Investment)
S.A., Nord Resources, Edgar F. Cruft, Terence H. Lang
and W. Pierce Carson. Reference is made to Exhibit
10.110 of Registrant's Form 10-K K for the year-ended
December 31, 1997, which exhibit is incorporated herein
by reference. **
89
<PAGE>
PAGE
NUMBER
10.111 Subscription Agreement between Registrant and
Nord Pacific Limited dated July 3, 1997. Reference
is made to Exhibit 10.111 of Registrant's Form 10-K
for the year-ended December 31, 1997, which
exhibit is incorporated herein by reference. **
10.112 Contract For Sale and Purchase dated March 29,
1996 between the Registrant and Severson Enterprises,
Inc. Reference is made to Exhibit 10.112 of Registrant's
Form 10-K for the year-ended December 31, 1997, which
exhibit is incorporated herein by reference. **
10.113 Letter Agreement dated March 31, 1998, between
Registrant, SRL, Consolidated Rutile Limited and
CDC, DEG, ExImbank, IFC and OPIC. Reference is made
to Exhibit 10.113 of Registrant's Form 10-K for the
year-ended December 31, 1997, which exhibit is
incorporated herein by reference. **
10.114 Letter dated April 28, 1998 from Deloitte & Touche
LLC to the Securities and Exchange Commission.
Reference is made to Exhibit 10.114 of Registrant's
Form 8-K dated April 30, 1998, which exhibit is
incorporated herein by reference. **
10.115 CDC Amendment Agreement dated 5/15/98. Reference
is made to Exhibit 10.115 of Registrant's Form 8-K
dated May 15, 1998, which exhibit is incorporated
herein by Reference. **
10.116 DEG Amendment Agreement dated 5/15/98. Reference
is made to Exhibit 10.116 of Registrant's Form 8-K
dated May 15, 1998, which exhibit is incorporated
herein by Reference. **
10.117 ExIm Bank Amendment Agreement dated 5/15/98.
Reference is made to Exhibit 10.117 of Registrant's
Form 8-K Dated May 15, 1998, which exhibit is
incorporated herein by Reference. **
10.118 IFC Amendment Agreement dated 5/15/98.
Reference is made to Exhibit 10.118 of
Registrant's Form 8-K dated May 15, 1998, which
exhibit is incorporated herein by Reference. **
90
<PAGE>
PAGE
NUMBER
10.119 OPIC Amendment Agreement dated 5/15/98.
Reference is made to Exhibit 10.119 of
Registrant's Form 8-K dated May 15, 1998, which
exhibit is incorporated herein by Reference. **
10.120 Account Security and Control Agreement (with
exhibits) dated 5/15/98. Reference is made to
Exhibit 10.120 of Registrant's Form 8-K
dated May 15, 1998, which exhibit is incorporated
herein by Reference. **
10.121 SRL Share Pledge Agreement dated 5/15/98.
Reference is made to Exhibit 10.121 of
Registrant's Form 8-K dated May 15, 1998, which
exhibit is incorporated herein by Reference. **
10.122 Collateral Agent Agreement, dated 5/15/98.
Reference is made to Exhibit 10.122 of
Registrant's Form 8-K dated May 15, 1998, which
exhibit is incorporated herein by Reference. **
21. Subsidiaries of Registrant
Jurisdiction in
Name of Subsidiary Which Incorporated
Sierra Rutile Limited Sierra Leone,
West Africa
23.1 Consent of KPMG
27 Financial Data Schedule
** Indicates that the exhibit is incorporated by reference in this Annual
Report on Form 10-K from a previous filing with the Commission.
91
Exhibit 23.1
Independent Auditors' Consent
We consent to the incorporation by reference in (i) the Registration
Statement No. 33-34196 on Form S-8, (ii) the Registration Statement
No. 33-25569 on Form S-8/S-3, and (iii) the Registration Statement No.
33-54600 on Form S-8 of Nord Resources Corporation of our report dated
April 13, 1999 on the consolidated balance sheets of Nord Resources
Corporation as of December 31, 1998 and 1997, and the related
statements of operations, stockholders' equity and cash flows for each
of the years in the three-year period ended December 31, 1998, which
report appears in the December 31, 1998 Annual Report on Form 10-K of
Nord Resources Corporation.
KPMG LLP
Denver, Colorado
April 13, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Nord
Resources Corporation Form 10-K for the year ended December 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 6136
<SECURITIES> 0
<RECEIVABLES> 29
<ALLOWANCES> 0
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<CURRENT-ASSETS> 6681
<PP&E> 760
<DEPRECIATION> 513
<TOTAL-ASSETS> 18391
<CURRENT-LIABILITIES> 575
<BONDS> 0
0
0
<COMMON> 219
<OTHER-SE> 9940
<TOTAL-LIABILITY-AND-EQUITY> 18391
<SALES> 0
<TOTAL-REVENUES> 71
<CGS> 0
<TOTAL-COSTS> 3630
<OTHER-EXPENSES> 0
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