<PAGE> 1
===============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
---------------------
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the period ended June 30, 1999
or
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the transition period from to
------ ------
---------------------
Commission file number 1-11887
CANYON RESOURCES CORPORATION
(a Delaware Corporation)
I.R.S. Employer Identification Number 84-0800747
14142 Denver West Parkway, Suite 250
Golden, CO 80401
(303) 278-8464
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 the number of shares outstanding of each of the issuers
classes of common stock, as of the latest practicable date: 46,459,253
shares of the Company's Common Stock were outstanding as of August 1,
1999.
===============================================================================
<PAGE> 2
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following consolidated financial statements have been prepared by
Canyon Resources Corporation ("the Company") pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations.
These consolidated financial statements should be read in conjunction
with the financial statements and accompanying notes included in the Company's
Form 10-K for the year ended December 31, 1998.
<TABLE>
<S> <C>
Consolidated Balance Sheets...................................Page 3
Consolidated Statements of Operations ........................Page 4
Consolidated Statements of Cash Flows.........................Page 5-6
Notes to Interim Consolidated Financial Statements............Page 7-16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ......................Page 17-21
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK ..............................................Page 21-22
</TABLE>
2
<PAGE> 3
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 413,900 $ 1,985,700
Restricted cash 2,380,500 4,887,200
Accounts receivable 30,900 173,800
Inventories 6,402,600 5,372,200
Prepaid and other assets 802,200 1,165,000
------------ ------------
Total current assets 10,030,100 13,583,900
------------ ------------
Property and equipment, at cost
Mining claims and leases 24,595,000 24,508,100
Producing properties 51,194,300 51,124,700
Other 994,200 994,200
------------ ------------
76,783,500 76,627,000
Accumulated depreciation and depletion (14,949,400) (11,639,500)
------------ ------------
Net property and equipment 61,834,100 64,987,500
------------ ------------
Other Assets 2,666,500 3,300,300
------------ ------------
Total Assets 74,530,700 $ 81,871,700
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 2,273,300 $ 3,134,300
Notes payable - current 26,800 18,708,400
Accrued taxes, other than payroll and income 38,800 60,800
Accrued reclamation costs 964,000 964,000
Deferred income 7,221,200 4,090,700
Other accrued liabilities 805,300 961,700
------------ ------------
Total current liabilities 11,329,400 27,919,900
Notes payable - long term 5,220,100 --
Accrued reclamation costs 2,488,300 2,704,900
Deferred income 7,250,400 4,489,500
Other noncurrent liabilities 1,427,100 1,458,500
------------ ------------
Total Liabilities 27,715,300 36,572,800
------------ ------------
Commitments and contingencies (Notes 9 and 10)
Common stock ($.01 par value) 100,000,000 shares authorized;
issued and outstanding: 46,459,300 at June 30, 1999, and
46,107,100 at December 31, 1998 464,600 461,400
Capital in excess of par value 95,414,100 95,293,500
Deficit (49,063,300) (50,456,000)
------------ ------------
Total Stockholders' Equity 46,815,400 45,298,900
------------ ------------
Total Liabilities and Stockholders' Equity $ 74,530,700 $ 81,871,700
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
<PAGE> 4
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
1999 1998 1999 1998
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE
Sales $ 7,362,700 $ 10,146,600 $ 14,698,400 $ 17,538,200
------------ ------------ ------------ ------------
EXPENSES
Cost of sales 6,173,500 7,910,900 12,054,100 12,796,500
Depreciation, depletion, and amortization 1,683,500 2,032,500 3,301,000 3,299,700
Selling, general and administrative 314,300 931,800 666,700 1,685,200
Exploration costs 39,400 88,100 72,300 306,200
------------ ------------ ------------ ------------
8,210,700 10,963,300 16,094,100 18,087,600
------------ ------------ ------------ ------------
OTHER INCOME (EXPENSE)
Interest income 32,300 58,700 77,600 112,500
Interest expense (156,500) (402,900) (351,000) (936,600)
Gain on partial prepayment of gold loan 2,768,900 -- 3,108,200 --
Gain (loss) on asset disposals (12,600) (42,100) (39,400) 17,700
Other (10,500) (4,500) (7,000) (22,100)
------------ ------------ ------------ ------------
2,621,600 (390,800) 2,788,400 (828,500)
------------ ------------ ------------ ------------
Income (loss) before extraordinary item and
cumulative effect of changes in accounting
principles $ 1,773,600 $ (1,207,500) $ 1,392,700 $ (1,377,900)
Extraordinary loss on debt prepayments -- (281,500) -- (281,500)
Cumulative effect of changes in accounting
principles -- -- -- (8,928,100)
------------ ------------ ------------ ------------
Net income (loss) $ 1,773,600 $ (1,489,000) $ 1,392,700 $(10,587,500)
============ ============ ============ ============
Basic and diluted income (loss) per share:
Income (loss) before extraordinary item
and cumulative effect of changes in
accounting principles $ 0.04 ($ 0.02) $ 0.03 ($ 0.03)
Extraordinary loss on debt prepayments -- ($ 0.01) -- ($ 0.01)
Cumulative effect of changes in accounting
principles -- -- -- ($ 0.19)
------------ ------------ ------------ ------------
Net income (loss) $ 0.04 ($ 0.03) $ 0.03 ($ 0.23)
============ ============ ============ ============
Weighted average shares outstanding - basis eps 46,254,500 46,107,100 46,198,300 46,107,100
Weighted average shares outstanding - diluted eps 46,269,800 46,107,100 46,262,200 46,107,100
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
1999 1998
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,392,700 $(10,587,500)
------------ ------------
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Extraordinary loss on debt prepayments -- 281,500
Cumulative effect of changes in accounting principles -- 8,928,100
Depreciation, depletion, and amortization 3,301,000 3,299,700
Amortization of financing costs 89,000 404,000
(Gain) loss on asset disposals 39,400 (17,700)
Other -- 25,100
Changes in assets and liabilities,
(Increase) decrease in receivables 142,900 (491,700)
(Increase) decrease in inventories (1,030,400) 451,800
(Increase) decrease in prepaid and other assets 805,600 (783,000)
Decrease in accounts payable and accrued liabilities (712,500) (1,042,400)
Increase in deferred income 3,363,400 11,202,400
(Decrease) increase in other liabilities (216,600) 371,100
(Increase) decrease in restricted cash 106,700 (3,407,700)
------------ ------------
Total adjustments 5,888,500 19,221,200
------------ ------------
Net cash provided by operating activities 7,281,200 8,633,700
------------ ------------
Cash flows from investing activities:
Purchases of property and equipment (200,200) (3,117,400)
Proceeds on asset dispositions 22,200 113,800
------------ ------------
Net cash used in investing activities (178,000) (3,003,600)
------------ ------------
Cash flows from financing activities:
Issuance of stock, net 56,200 2,192,500
Proceeds from loans -- 500,000
Restricted cash utilized for debt payments 2,400,000 --
Payments on debt (10,992,700) (10,425,000)
Payments on capital lease obligations (138,500) (71,700)
------------ ------------
Net cash used in financing activities (8,675,000) (7,804,200)
------------ ------------
Net decrease in cash and cash equivalents (1,571,800) (2,174,100)
Cash and cash equivalents, beginning of year 1,985,700 3,111,000
------------ ------------
Cash and cash equivalents, end of period $ 413,900 $ 936,900
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
CANYON RESOURCES CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Supplemental disclosures of cash flow information:
1. The Company paid $263,600 of interest during the first half of 1999, and
$908,800 during the corresponding period of 1998. There was no capitalized
interest for either period.
2. The Company paid no income taxes during the first half of 1999 nor the
corresponding period of 1998.
Supplemental schedule of noncash investing and financing activities:
1. The Company converted a commodity based loan with a carrying amount of
$7,727,200 to a cash loan during the first half of 1999. The carrying
amount was reduced by $2,528,000 at the time of conversion to adjust the
monetized amount of the loan to fair market value.
2. The Company financed an equipment lease buy-out in the amount of $59,200
in 1999.
3. The Company acquired equipment with a fair market value of $53,000 by
exchange of certain assets in 1999.
4. The Company issued 307,200 shares of common stock with a fair market value
of $67,600 to certain creditors as payment for accounts payable in 1999.
5. The Company acquired $1,139,000 in equipment through capital leases during
the first half of 1998.
The accompanying notes are an integral part of these consolidated financial
statements.
6
<PAGE> 7
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
1. BASIS OF PRESENTATION:
During interim periods, Canyon Resources (the Company) follows the
accounting policies set forth in its Annual Report to Stockholders and
its Report on Form 10-K filed with the Securities and Exchange
Commission. Users of financial information produced for interim
periods are encouraged to refer to the footnotes contained in the
Annual Report to Stockholders when reviewing interim financial
results.
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and
settlement of liabilities and commitments in the ordinary course of
business. The Company's liquidity, however, has been adversely
impacted by a sustained period of low gold prices and high debt
service requirements. Although the Company has significantly improved
its working capital position since year-end by restructuring the
Briggs Mine loan facility (See Note 7), substantially all of the
Company's forward sales contracts were liquidated and used to pay-down
debt in connection with the restructuring. The ability to generate
cash flow on a going-forward basis will be dependent on the Briggs
Mine producing gold at cash costs below the prevailing market price.
In addition, in March 1999, the Company received a demand notice for
an increase in collateral of approximately $1.2 million from the
Sureties who issued certain bonds for reclamation obligations at the
Briggs Mine, Kendall Mine and McDonald Gold Project. The Company is in
continuing discussions with the Sureties on this matter; however,
there can be no assurances that a satisfactory resolution can be
achieved nor that the Sureties will not exercise any remedies
available to them during the intervening period. All of these matters
raise substantial doubt about the Company's ability to continue as a
going concern. The Company has curtailed all discretionary
expenditures and is (i) evaluating alternative mine plans at the
Briggs Mine, (ii) attempting to sell its African properties, and (iii)
evaluating potential merger or other alliance opportunities. There can
be no assurances, however, that the Company will be successful in this
regard.
In June 1998, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 133 Accounting for
Derivative Instruments and Hedging Activities (SFAS 133). SFAS 133
requires that all derivatives be recognized as assets or liabilities
and be measured at fair value. Gains or losses resulting from changes
in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge
accounting as either a fair value hedge or a cash flow hedge. The key
criterion for hedge accounting is that the hedging relationship must
be highly effective in achieving offsetting changes in fair value or
cash flows of the hedging instruments and the hedged items. SFAS 133
is effective for the Company beginning on January 1, 2001 but earlier
adoption is permitted. There are many complexities to this new
standard and the Company is currently evaluating the impact that SFAS
133 will have
7
<PAGE> 8
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
1. BASIS OF PRESENTATION: (CONTINUED)
on its reported operating results and financial position and has not
yet determined whether it will adopt SFAS 133 earlier than January 1,
2001.
In the opinion of management, the accompanying interim financial
statements contain all material adjustments, consisting only of normal
recurring adjustments necessary to present fairly the financial
position, the results of operations, and the cash flows of Canyon
Resources and its consolidated subsidiaries for interim periods.
Certain prior period items have been reclassified to conform with the
current period presentation.
2. PRIOR YEAR CHANGES IN ACCOUNTING PRINCIPLES:
In the second quarter of 1998, the Company changed its method of
accounting for exploration costs on unproven properties from
capitalizing all expenditures to expensing all costs, other than
acquisition costs, prior to the establishment of proven and probable
reserves. This brought the Company's accounting method in accordance
with the predominant practice in the US mining industry and better
reflects operating income and cash flow. The $5,625,400 cumulative
effect of the change on prior years is included in the loss for the
six months ended June 30, 1998.
In the fourth quarter of 1998, the Company elected early adoption of
Statement of Position No. 98-5, Reporting on the Costs of Start-Up
Activities (SOP 98-5). SOP 98-5 was otherwise effective for financial
statements for fiscal years beginning after December 15, 1998 and
requires costs of start-up activities and organization costs to be
expensed as incurred. The $3,302,700 cumulative effect of the change
on prior years is included in the loss for the six months ended June
30, 1998. The effect of the change on the second quarter of 1998 was
to decrease the loss before extraordinary item and cumulative effect
of changes in accounting principles by $226,200, or $0.01 per share.
The effect of the change on the six months ended June 30, 1998 was to
decrease the loss before extraordinary item and cumulative effect of
changes in accounting principles by $360,500, or $0.01 per share.
8
<PAGE> 9
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
2. PRIOR YEAR CHANGES IN ACCOUNTING PRINCIPLES: (CONTINUED)
The following table summarizes the effect of the accounting changes on
previously reported results for the three and six months ended June
30, 1998:
<TABLE>
<CAPTION>
============================================================================================================
Three Months Ended Six Months Ended
June 30, 1998 June 30, 1998
-------------------------- --------------------------
$ Amounts Per Share $ Amounts Per Share
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Loss before extraordinary item and
cumulative effect of changes in accounting
principles as originally reported $(1,433,700) $(0.03) (1,738,400) $(0.04)
Effect of start-up costs accounting change 226,200 0.01 360,500 0.01
----------- ------ ------------ ------
Loss before extraordinary item and
cumulative effect of changes in accounting
principles as restated (1,207,500) $(0.02) (1,377,900) $(0.03)
Extraordinary loss on debt prepayments (281,500) $(0.01) (281,500) $(0.01)
Cumulative effect on prior years -- -- (8,928,100) $(0.19)
----------- ------ ------------- ------
Net loss as restated $(1,489,000) $(0.03) $(10,587,500) $(0.23)
=========== ====== ============= ======
============================================================================================================
</TABLE>
3. INTERIM RESULTS:
The foregoing interim results are not necessarily indicative of the
results of operations for the full year ending December 31, 1999.
4. 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.
9
<PAGE> 10
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
5. RESTRICTED CASH:
Restricted cash consisted of the following:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
<S> <C> <C>
Collateral for Letter of Credit (a) $2,118,000 $2,118,000
Proceeds from asset sales reserved for debt
payments (b) -- 2,400,000
Unexpended proceeds from gold sales (c) 262,500 369,200
---------- ----------
$2,380,500 $4,887,200
========== ==========
- -----------------------------------------------------------------------
</TABLE>
(a) In connection with the issuance of certain bonds for the
performance of reclamation obligations at the Kendall Mine,
Briggs Mine, and McDonald Gold Project, a bank Letter of
Credit has been provided in favor of the Sureties as partial
collateral for such bond obligations. The Letter of Credit is
fully collateralized with cash and will expire no earlier
than December 31, 1999. At the bank's option, the Letter of
Credit may be renewed for successive one-year periods.
(b) In connection with the sale of the Company's industrial
minerals assets on December 31, 1998, certain proceeds were
required to be utilized for debt reduction on the Briggs Mine
loan facility. (See Note 7).
(c) The Briggs Mine loan facility requires all proceeds from gold
sales to be held in trust and disbursed from the collected
credit balance in certain orders of priority.
6. INVENTORIES:
Inventories consisted of the following at:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
---------- -----------
<S> <C> <C>
Gold-in-process (a) $5,989,100 $4,962,200
Materials and supplies 413,500 410,000
---------- ----------
$6,402,600 $5,372,200
========== ==========
- -----------------------------------------------------------------------
</TABLE>
(a) Includes all direct and indirect costs of mining, crushing,
processing, and site overhead expenses.
10
<PAGE> 11
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
7. NOTES PAYABLE:
Notes payable consisted of the following at:
<TABLE>
<CAPTION>
-----------------------------------------------------
JUNE 30, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Briggs Facility (a)
o Gold Loan $ -- $18,058,400
o Cash Loan 5,199,200 --
o Credit Line -- 650,000
Caterpillar Finance (b) 47,700 --
---------- -----------
$5,246,900 $18,708,400
Current portion (1) 26,800 18,708,400
---------- -----------
Notes Payable - Noncurrent $5,220,100 $ --
========== ===========
-----------------------------------------------------
</TABLE>
(1) At December 31, 1998, the Company was not in compliance with
certain covenants of the Briggs loan facility. The covenant
violations constituted events of default and the lenders
could, by notice to the Company, terminate the commitment and
declare all amounts immediately due and payable. Accordingly,
the Company classified all of the debt as current on its
Balance Sheet at December 31, 1998. In June 1999, the Company
reached an agreement with the lenders to restructure the
facility, the terms of which included (i) waivers for all
outstanding covenant violations, (ii) the liquidation of
125,000 ounces of forward gold contracts which netted $5.5
million, (iii) utilizing the forward liquidation proceeds to
reduce the gold loan debt by 20,506 ounces, (iv) rescheduling
remaining principal payments to 2001 and 2002 on a quarterly
basis, and (v) allowing the Company access to the first $1.6
million of net cash flow from the Briggs Mine (as defined)
and 50% thereafter (the remaining 50% to be applied to the
loan balance) during the remainder of 1999 and 2000.
(a) On December 6, 1995, the Company's wholly owned subsidiary,
CR Briggs Corporation, obtained a $34.0 million loan facility
to finance the capital requirements of mine construction and
working capital for its Briggs Mine in California. Drawings
on the facility include $25.0 million principal in the form
of a gold loan and $9.0 million principal as dollar loans.
The gold loan portion was monetized at $388.05 per ounce, or
64,425 ounces. The weighted average interest rate on the gold
loan during the three months ended June 30, 1999 was 2.3%.
For the comparable period in 1998, weighted average interest
rates on the gold loan and dollar loans were 3.6% and 10.2%,
respectively. For the six months ended
11
<PAGE> 12
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
7. NOTES PAYABLE: (CONTINUED)
June 30, 1999, weighted average interest rates on the gold
and dollar loans were 2.5% and 8.0%, respectively. For the
comparable period of 1998, weighted average interest rates
were 3.7% and 10.5%, respectively. Interest payments of
$80,500 and $390,100 were made during the three months ended
June 30, 1999 and 1998, respectively. For the six month
period, interest payments of $196,900 and $811,500 were made
during 1999 and 1998, respectively. During the first quarter
of 1999, the Company utilized $1,650,000 of proceeds from the
December 1998 sale of its industrial minerals assets to (i)
pay off a credit line amount of $650,000, and (ii) purchase
3,451 ounces of gold at a market price of $289.75 per ounce
which was applied to the gold loan. As a result of the
partial prepayment on the gold loan, the Company recognized a
gain of $339,300 (3,451 ounces of principal repaid by open
market purchase at $289.75 per ounce with corresponding
reduction in debt at $388.05 per ounce). During the second
quarter of 1999, the Company utilized $750,000 of proceeds
from the 1998 sale of its industrial minerals assets to
purchase 2,666 ounces of gold at a market price of $281.30
which was applied to the gold loan. As a result of the
partial prepayment of the gold loan, the Company recognized a
gain of $284,600 (2,666 ounces of principal repaid by open
market purchase at $281.30 per ounce with corresponding
reduction in debt at $388.05 per ounce). Additionally, in
connection with the June 1999 restructuring of the loan
facility as previously described, the Company recognized a
gain of $2,484,300 as a result of a partial prepayment on the
gold loan (20,506 ounces of principal repaid by open market
purchase at $266.90 per ounce with corresponding reduction in
debt at $388.05 per ounce.) The gains associated with the
partial prepayments are shown as an other income item on the
Statement of Operations for the three and six months ended
June 30, 1999. On June 30, 1999, the Company converted its
then remaining gold loan debt of 19,913 ounces to a cash
loan. As a result of the conversion, the Company reduced its
carrying value of the debt from the monetized price of
$388.05 per ounce to fair market value of $261.10 per ounce.
The gain of $2,528,000 [19,913 ounces x ($388.05 - $261.10)]
associated with the conversion will be deferred and
recognized in operations over the loan repayment schedule, as
restructured.
(b) In March 1999, the Company arranged to finance an equipment
lease buy-out with Caterpillar Finance in the amount of
$59,200. Terms of the financing require equal monthly
payments over two years at an interest rate of 8.5%. For the
three months ended June 30, 1999, principal and interest
payments of $11,500 and $1,900, respectively, were made.
12
<PAGE> 13
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
8. SITE RESTORATION COSTS:
Reclamation spending at the Kendall Mine for the three months ended
June 30, 1999 was $264,200. For the comparable period of 1998,
spending totaled $327,100. For the six months ended June 30, 1999,
spending totaled $456,300 as compared to $529,200 for the prior
period.
9. CONTINGENT LIABILITY:
On September 25, 1997, the Company, together with its wholly owned
subsidiary, CR Montana Corporation (CR Montana), purchased a 72.25%
participating interest and underlying assets in the Seven-Up Pete
Venture (Venture) from CR Montana's partner in the Venture, Phelps
Dodge Corporation (Phelps Dodge). The Company and its wholly owned
subsidiary now own 100% of the Venture. The Venture includes the
McDonald Gold Project near Lincoln, Montana.
The Company made an initial payment of $5 million as part of a total
purchase price which will be no less than $100 million and no more
than $150 million, assuming all applicable permits for the McDonald
Gold Project are obtained. The largest part of the purchase price, $30
per mineable reserve ounce attributable to the Phelps Dodge ownership
is to be paid after all permits for mine development are obtained. Due
to the contingent nature of the transaction, the Company has recorded
only the initial payment of $5 million as additions to mining claims
and leases during 1997.
10. OTHER CONTINGENT MATTERS:
On September 24, 1998, the Montana Department of Natural Resources
(DNRC), the entity that administers state mineral leases, unilaterally
decided to cancel the permitting extension of the 10-year lease term
of the state leases that pertain to the McDonald Gold Project. This
was provoked by Canyon's inability to continue permitting at McDonald
due to the anti-cyanide initiative, I-137, and would require the
Company, after a period of approximately seventeen months, to commence
paying a delay rental of $150,000 per month in order to maintain the
leases. The Company has challenged the DNRC's action in Montana
District Court and believes it will prevail in this matter.
In September 1998, the Montana Department of Environmental Quality
(DEQ) filed a complaint in District Court alleging violations of the
Montana Water Quality Act for unpermitted discharges at the Kendall
Mine. The DEQ initially proposed a civil penalty in the amount of
$330,000, which was subsequently modified to $302,000, in connection
with the complaint. The Company has prepared a response to the
complaint and believes the penalty as currently assessed is without
substantial merit.
13
<PAGE> 14
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
10. OTHER CONTINGENT MATTERS: (CONTINUED)
In November 1998, the Montana electorate passed an anti-cyanide mining
initiative (I-137) by a vote of 52% to 48%. I-137 bans development of
new gold and silver mines and expansions to existing mines which use
open-pit mining and cyanide in the treatment and recovery process. For
most of the campaign period, mining companies were prevented from
campaigning due to a previously passed initiative (I-125) which
prohibited campaign- expenditures by "for-profit" entities. Ten days
prior to the election, a federal judge declared the prohibition
"unconstitutional". The mining community has filed lawsuits against
I-137, based on (i) having been denied the opportunity to campaign due
to the effectiveness of I-125 until the last few days prior to the
election, and (ii) due process considerations, in that I-137 results
in a taking of property without any compelling public policy interest,
since environmental safety concerns are well protected and monitored
with existing laws and regulations. The Company's legal counsel
believes that it is likely that I-137 will be declared
unconstitutional, or at a minimum, be overturned.
In March 1999, the Company received a demand notice for an increase in
collateral of approximately $1.2 million from the Sureties who issued
certain bonds for reclamation obligations at the Briggs Mine, Kendall
Mine and McDonald Gold Project. The Company has not been able to honor
the demand due to its financial position and is unsure what remedies,
if any, the Sureties may seek for resolution on the matter.
11. CONTINGENT SALE OF EXPLORATION PROPERTY:
The Company executed an agreement during the third quarter of 1997 to
sell the Aeropuerto property in Chubut Province, Argentina for $2.0
million, payable over a sixty month period. At any time, the buyer,
upon proper notice, may terminate the agreement and its then remaining
obligations, and relinquish its interest in the property. Due to the
contingent nature of the transaction, gain will be recognized only
upon receipt of cash in excess of basis over the sixty month period.
Accordingly, the Company recorded a gain of $22,200 during the first
six months of 1999 and $59,800 during the comparable period in 1998.
12. DEFERRED INCOME:
In May, 1998, the Company liquidated a gold hedge position consisting
of forward contracts on 105,900 ounces which resulted in proceeds of
$11.1 million. The gain on the liquidation was initially deferred and
is being recognized in operations based on the original settlement
dates of the forward contracts. For the three months ended June 30,
14
<PAGE> 15
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
12. DEFERRED INCOME: (CONTINUED)
1999, $0.9 million of the gain was recognized in operations. For the
six months ended June 30, 1999, $2.1 million of the gain was
recognized in operations.
In June, 1999, the Company liquidated a gold hedge position consisting
of forward contracts on 125,000 ounces which resulted in proceeds of
$5.5 million. The gain on the liquidation has been deferred and will
be recognized in operations based on the original expected settlement
dates of the forward contracts. No gains from the liquidation have
been recognized in the accompanying financial statements.
On June 30, 1999, the Company converted its Briggs Mine gold loan to a
cash loan. In connection with the conversion, the Company reduced the
monetized amount of the debt to fair value, resulting in a gain of
$2,528,000. The gain will be deferred and recognized in operations
over the scheduled repayment dates in 2001 and 2002.
The Company's deferred gains will be recognized in operations as
follows:
<TABLE>
<CAPTION>
==========================================
$MM
------------------------------------------
<S> <C>
Balance of 1999 3.3
2000 8.4
2001 1.5
2002 1.3
----
TOTAL 14.5
==========================================
</TABLE>
13. INCOME TAXES:
No current provision for income taxes was recorded as the Company does
not expect taxable income for the year. No deferred tax benefit was
recorded as the Company applies a full valuation allowance to its
gross deferred tax assets, except to the extent of offsetting
reversals of expected deferred tax liabilities.
15
<PAGE> 16
CANYON RESOURCES CORPORATION
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(Unaudited)
14. EARNINGS PER SHARE (EPS):
The Company computes EPS by applying the provisions of Financial
Accounting Standards No. 128, Earnings per Share. The following table
provides a reconciliation of the amounts used in the calculation of
the Company's basic and diluted EPS before extraordinary item and
cumulative effect of changes in accounting principles.
<TABLE>
<CAPTION>
===================================================================================================
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
1999 1998 1999 1998
---- ---- ---- ----
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BASIC EPS
Income (loss) before extraordinary
item and accounting changes 1,773,600 ($ 1,433,700) $ 1,392,700 ($ 1,738,400)
============ ============= ============ ============
Weighted average shares
outstanding 46,254,500 46,107,100 46,198,300 46,107,100
============ ============= ============ ============
Per share amount $ 0.04 ($ 0.03) $ 0.03 ($ 0.04)
============ ============= ============ ============
DILUTED EPS
Income (loss) before extraordinary
item and accounting changes 1,773,600 ($ 1,433,700) $ 1,392,700 ($ 1,738,400)
============ ============= ============ ============
Weighted average shares
outstanding 46,254,500 46,107,100 46,198,300 46,107,100
Add: effect of dilutive options 15,300 (A) 3,900 (A)
------------ ------------- ------------ ------------
Weighted average shares
outstanding, as adjusted 46,269,800 46,107,100 46,262,200 46,107,100
============ ============= ============ ============
Per share amount $ 0.04 ($ 0.03) $ 0.03 ($ 0.04)
============ ============= ============ ============
====================================================================================================
</TABLE>
(A) Effect would be antidilutive due to a loss before extraordinary item and
accounting changes.
At June 30, 1998, options and warrants to purchase 2,150,200 shares of
common stock were outstanding that were not included in the current
period calculations of EPS because their exercise price was greater than
the average market price of the Company's common shares. Options and
warrants to purchase 4,917,000 shares of common stock were outstanding
at June 30, 1998 that were not included in the prior period calculations
of diluted EPS as the effect would be antidilutive.
16
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995.
The matters discussed in this report on Form 10-Q, when not historical
matters, are forward-looking statements that involve a number of risks and
uncertainties that could cause actual results to differ materially from
projected results. Such factors include, among others, the speculative nature
of mineral exploration, commodity prices, production and reserve estimates,
environmental and government regulations, availability of financing, force
majeure events, and other risk factors as described from time to time in the
Company's filings with the Securities and Exchange Commission. Many of these
factors are beyond the Company's ability to control or predict. The Company
disclaims any intent or obligation to update its forward-looking statements,
whether as a result of receiving new information, the occurrence of future
events, or otherwise.
RESULTS OF OPERATIONS
The Company recorded net income of $1,773,600, or $0.04 per share on
revenues of $7,362,700 for the second quarter of 1999. For the six months ended
June 30, 1999, the Company recorded net income of $1,392,700, or $0.03 per
share on revenues of $14,698,400. This compares to a loss before extraordinary
item of $1,207,500, or $0.02 per share and a net loss of $1,489,000, or $0.03
per share, on revenues of $10,146,600 for the second quarter of 1998 and a loss
before extraordinary item and cumulative effect of changes in accounting
principles of $1,377,900 or $0.03 per share and a net loss of $10,587,500, or
$0.23 per share on revenues of $17,538,200 during the first six months of 1998.
In June 1999, the Company restructured its Briggs Mine loan facility,
the terms of which included, amongst others, the liquidation of 125,000 ounces
of forward gold contracts which netted $5.5 million. The proceeds were used to
reduce the Briggs Mine gold loan by 20,506 ounces which resulted in a gain of
$2,484,300 (20,506 ounces of principal repaid by open market purchase at
$266.90 per ounce with corresponding reduction in debt at $388.05 per ounce).
During the second quarter of 1999, the Company utilized $750,000 of
proceeds from the 1998 sale of its industrial minerals assets to purchase 2,666
ounces of gold at a market price of $281.30 which was applied to the gold loan.
As a result of the partial prepayment of the gold loan, the Company recognized
a gain of $284,600 (2,666 ounces of principal repaid by open market purchase at
$281.30 per ounce with corresponding reduction in debt at $388.05 per ounce).
During the first quarter of 1999, the Company utilized $1,000,000 of
proceeds from the December 1998 sale of its industrial minerals assets to
purchase 3,451 ounces of gold at a market price of $289.75 per ounce which was
applied to the gold loan. As a result of the partial prepayment on the gold
loan, the Company recognized a gain of $339,300 (3,451 ounces of principal
repaid by open market purchase at $289.75 per ounce with corresponding
reduction in debt at $388.05 per ounce).
17
<PAGE> 18
During the three months ended June 30, 1999, the Company sold 20,864
ounces of gold at an average price of $353 per equivalent gold ounce. For the
comparable period of 1998, the Company sold 23,879 ounces of gold and 7,000
ounces of silver at an average realized price of $361 per equivalent gold
ounce. For the first half of 1999, 40,764 ounces of gold and 3,900 ounces of
silver were sold at an average realized price of $361 per equivalent gold
ounce. For the comparable period in 1998, 38,058 ounces of gold and 10,500
ounces of silver were sold at an average realized price of $384 per equivalent
gold ounce. The New York Commodity Exchange (COMEX) gold price averaged $274
and $280 per ounce, respectively, for the three and six months ended June 30,
1999. For the comparable periods of 1998, the COMEX gold price averaged $300
and $297 per ounce.
Cost of sales was $6.2 million for the three months ended June 30,
1999, as compared to $7.9 million in the prior period. For the six months ended
June 30, 1999, cost of sales was $12.1 million as compared to $12.8 million in
the prior period.
Per ounce cost of gold sold at the Briggs Mine, as computed under the
Gold Institute's Production Cost Standard, was as follows:
CR BRIGGS MINE
COST PER OUNCE OF GOLD SOLD
<TABLE>
<CAPTION>
============================================================================================
Three months ended June 30, Six months ended June 30,
1999 1998 1999 1998
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash operating (1) $284 $281 $284 $278
Total cash costs (2) $290 $287 $290 $284
Total production costs (3) $376 $382 $376 $379
============================================================================================
</TABLE>
(1) All direct and indirect costs of the operation, excluding
royalties and accruals for site restoration. Includes inventory
changes and adjustments for deferred stripping.
(2) Cash operating costs plus royalties
(3) Total cash costs plus depreciation, depletion, amortization and
accruals for site restoration.
Unit costs were marginally higher in the current period due to lower
grades of ore mined.
Depreciation, depletion and amortization was lower in the current
quarter due to lower gold sales and not materially different for the six month
period.
Interest expense was significantly lower in the current periods due to
lower debt balances. Interest income was lower in the current periods due to
lower cash balances.
18
<PAGE> 19
LIQUIDITY & CAPITAL RESOURCES
The Company's financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and settlement of
liabilities and commitments in the ordinary course of business. The Company's
liquidity, however, has been adversely impacted by a sustained period of low
gold prices and high debt service requirements. Although the Company has
significantly improved its working capital position since year-end by
restructuring the Briggs Mine loan facility (see discussion below),
substantially all of the Company's forward sales contracts were liquidated and
used to pay-down debt in connection with the restructuring. The ability to
generate cash flow on a going-forward basis will be dependent on the Briggs
Mine producing gold at cash costs below the prevailing market price. In
addition, in March 1999, the Company received a demand notice for an increase
in collateral of approximately $1.2 million from the Sureties who issued
certain bonds for reclamation obligations at the Briggs Mine, Kendall Mine and
McDonald Gold Project. The Company is in continuing discussions with the
Sureties on this matter; however, there can be no assurances that a
satisfactory resolution can be achieved nor that the Sureties will not exercise
any remedies available to them during the intervening period. All of these
matters raise substantial doubt about the Company's ability to continue as a
going concern. The Company has curtailed all discretionary expenditures and is
(i) evaluating alternative mine plans at the Briggs Mine, (ii) attempting to
sell its African properties, and (iii) evaluating potential merger or other
alliance opportunities. There can be no assurances, however, that the Company
will be successful in this regard.
Net cash provided by operating activities during the six months ended
June 30, 1999 was $7.3 million and was principally due to the liquidation of a
hedge position. The Company spent a nominal $0.2 million on capital programs
for the period.
During the first quarter of 1999, the Company utilized $1,650,000 of
proceeds from the December 1998 sale of its industrial minerals assets to (i)
pay off a credit line amount of $650,000, and (ii) purchase 3,451 ounces of
gold at a market price of $289.75 per ounce which was applied to the gold loan.
During the second quarter of 1999, the Company utilized $750,000 of proceeds
from the 1998 sales of its industrial minerals assets to purchase 2,666 ounces
of gold at a market price of $281.30 which was applied to the gold loan.
In June 1999, the Company restructured the Briggs Mine loan facility,
the terms of which included (i) waivers for all covenant violations existing
since December 31, 1998, (ii) the liquidation of 125,000 ounces of forward gold
contracts which netted $5.5 million, (iii) utilizing the forward liquidation
proceeds to reduce the gold loan debt by 20,506 ounces, (iv) rescheduling
remaining principal payments to 2001 and 2002 on a quarterly basis, and (v)
allowing the Company access to the first $1.6 million of net cash flow from the
Briggs Mine (as defined) and 50% thereafter (the remaining 50% to be applied to
the loan balance) during the remainder of 1999 and 2000.
On June 30, 1999, the Company converted its then remaining gold loan
debt of 19,913 ounces to a cash loan. As a result of the conversion, the
Company reduced its carrying value of the debt from the monetized price of
$388.05 per ounce to fair market value of $261.10 per ounce, or $5,199,200.
19
<PAGE> 20
OTHER MATTERS
McDonald Gold Project, Anti-Cyanide Mining Initiative
In November, 1998, the Montana electorate passed an anti-cyanide
mining initiative (I-137) by a vote of 52% to 48%. I-137 bans development of
new gold and silver mines and expansions to existing mines which use open-pit
mining and cyanide in the treatment and recovery process. For most of the
campaign period, mining companies were prevented from campaigning due to a
previously passed initiative (I-125) which prohibited campaign-expenditures by
"for-profit" entities. Ten days prior to the election, a federal judge declared
the prohibition "unconstitutional". The mining community has filed lawsuits
against I-137, based on (i) having been denied the opportunity to campaign due
to the effectiveness of I-125 until the last few days, and (ii) due process
considerations, in that I-137 results in a taking of property without any
compelling public policy interest, since environmental safety concerns are well
protected and monitored with existing laws and regulations. The Company's legal
counsel believes that it is likely that I-137 will be declared
unconstitutional, or at a minimum, be overturned by the courts.
Environmental Regulation
In September, 1998, the DEQ filed a complaint in District Court
alleging violations of the Montana Water Quality Act for unpermitted discharges
at the Kendall Mine. The DEQ initially proposed a civil penalty in the amount
of $330,000, which was subsequently modified to $302,000, in connection with
the complaint. The Company has prepared a response to the complaint and
believes the penalty as currently assessed is without substantial merit.
Year 2000 Issue
Many computer programs utilize a two digit format to identify the
applicable year. Without modification, any date sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in a system failure or miscalculations causing, among other
things, disruptions to operations and inability to process financial
transactions.
The Company has completed its inventory of systems which utilize
information technology. Noncompliant software at the Briggs Mine is expected to
be upgraded or replaced prior to September 30, 1999. Certain financial
reporting software and voice communications systems at the Company's corporate
headquarters are not year 2000 compliant and are expected to be upgraded or
replaced in the third quarter of 1999 as well. The associated costs are not
expected to be material for either location. The Company has completed a review
of equipment used in its operations and believes it is not at material risk for
embedded chip failures.
The Company relies on third parties to supply certain materials,
utilities, transportation, and other services necessary for its business
operations. During the first quarter of 1999, the Company initiated a process
to ascertain their stage of year 2000 readiness through questionnaires,
interviews and other means. The Company has completed its third party
assessment and believes it is not at material risk for such failures. As part
of the Company's contingency planning,
20
<PAGE> 21
alternate suppliers, where practical, are in the process of being identified to
reduce the risks of interruption if third party failures do occur.
Although the Company believes it has adequate resources and personnel
to complete its remediation efforts prior to December 31, 1999, the Company
remains at risk with respect to its ability to complete its own program and/or
to a failure by one or more of its third party suppliers to achieve year 2000
compliance within the required time frame.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Commodity Prices
The Company's earnings and cash flow are significantly impacted by
changes in the market price of gold. Gold prices can fluctuate widely and are
affected by numerous factors, such as demand, production levels, economic
policies of central banks, and producer hedging. During the last five years,
the average annual market price has fluctuated between $294 per ounce and $388
per ounce. Recently, gold prices declined to their lowest level in two decades
and have remained at or near that level.
The Company currently utilizes short dated forward gold contracts to
protect the selling price of a portion of its anticipated production. At June
30, 1999, contracts totaling 28,700 ounces were in place at an average price of
approximately $294 per ounce, or approximately $31 per ounce more than the
market price of gold. Based on the Company's current hedge position, a $10
change in the price of gold would have an impact on annual profitability and
cash flow of approximately $0.6 million. The Company expects to implement
additional hedging strategies in order to be 100% hedged for its anticipated
production for the following year.
There are certain market risks associated with commodity instruments.
If the Company's counterparties fail to honor their contractual obligation to
purchase gold at agreed-upon prices, the Company may be exposed to market price
risk by having to sell gold in the open market at prevailing prices. Similarly,
if the Company fails to produce sufficient quantities of gold to meet its
forward commitments, the Company would have to purchase the shortfall in the
open market at prevailing prices.
In May 1998, the Company liquidated a forward position that was
originally established in December 1995, resulting in proceeds of $11.1
million. As of December 31, 1998, $8.6 million of the gain had not been
recognized in operations. During the first six months of 1999, $2.1 million of
the gain was recognized. For the remainder of 1999, $2.0 million of the gain
will be recognized with the balance of $4.5 million recognized in 2000.
In June 1999, the Company liquidated a forward position that was
initially established in 1998, resulting in proceeds of $5.5 million. The gain
will be recognized as follows; (i) $1.3 million during the remainder of 1999,
(ii) $3.9 million in 2000, and (iii) $0.3 million in 2001.
21
<PAGE> 22
On June 30, 1999, the Company converted a commodity based loan to a
cash loan. In connection with the conversion, the monetized amount of the debt
was reduced to fair value, resulting in a gain of $2,528,000. The gain will be
recognized in operations over the scheduled repayments in 2001 and 2002.
At June 30, 1999, the mark to market value of the Company's forward
contracts was approximately $0.9 million.
Interest Rates
At June 30, 1999, the Company's debt primarily consisted of a cash
loan for the Briggs Mine bearing interest at approximately 7.6%. The Company is
required to have the rate periodically reset for periods that it may choose
which range in duration from one to six months. The Company is not exposed to
significant interest rate risk, as a change of 100 basis points in the rate
would have an impact on annual earnings and cash flow of approximately $0.052
million, based on the June 30, 1999 outstanding loan amount of $5.2 million.
Foreign Currency
The price of gold is denominated in US dollars, and the Company's gold
production operations are in the United States. The Company conducts only a
minor amount of exploration activity in foreign countries and has minimal
foreign currency exposure.
22
<PAGE> 23
PART II OTHER INFORMATION
<TABLE>
<S> <C> <C>
ITEM 1. LEGAL PROCEEDINGS:......................................... None
ITEM 2. CHANGES IN SECURITIES:
In June 1999, the Company issued 307,179 shares of its $0.01 par
value common stock to five creditors as consideration for
extinguishment of certain payables aggregating $67,600. The
shares were issued pursuant to the exemption from registration
provided by Section 4(2) of the Securities Act of 1933, as
amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:........................... None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS:
On June 10, 1999, the Company held its Annual Meeting of
Shareholders. The following two items of business were voted upon
by shareholders at the meeting:
Proposal I was the election of a Director of the Company: Richard
F. Mauro. The proposal electing the Director passed with votes of
38,072,065 shares "For" and 719,776 "Withheld".
Proposal II was to ratify the appointment of
PricewaterhouseCoopers LLP (formerly Coopers & Lybrand L.L.P.) as
the Company's independent public accountants for 1999. The
proposal passed with votes of 38,221,662 "For"; 91,697 "Against";
and 478,482 "Abstaining".
ITEM 5. OTHER INFORMATION:
In May 1999, the American Stock Exchange (AMEX) advised the
Company that it had fallen below certain of AMEX's continued
listing guidelines and, as a result, was undertaking a review of
the Company's listing eligibility. In July 1999, AMEX notified the
Company that it has conditionally continued Canyon's listing and
will monitor the Company's financial progress in satisfying AMEX's
guidelines for continued listing. AMEX has expressed a concern
about the Company's low share price and has made continued listing
dependent, among other factors, on the share price being above
$1.00 per share. Accordingly, the Board of Directors of the
Company approved a resolution to place a 1 for 10 reverse split of
common shares to a vote of shareholders. The Company will be
submitting a proxy for such a shareholder vote to the Securities
and Exchange Commission for its approval prior to its submission
to shareholders.
ITEM 6(a) EXHIBITS:
No. 27 - Financial Data Schedule
ITEM 6(b) REPORTS ON FORM 8-K:....................................... None
</TABLE>
23
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CANYON RESOURCES CORPORATION
Date: August 12, 1999 /s/ Gary C. Huber
--------------------------------------------
Gary C. Huber
Chief Financial Officer
Date: August 12, 1999 /s/ Richard T. Phillips
--------------------------------------------
Richard T. Phillips
Treasurer
24
<PAGE> 25
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. EXHIBIT DESCRIPTION
- -------- -------------------
<S> <C>
27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 2,794,400
<SECURITIES> 0
<RECEIVABLES> 30,900
<ALLOWANCES> 0
<INVENTORY> 6,402,600
<CURRENT-ASSETS> 10,030,100
<PP&E> 76,783,500
<DEPRECIATION> 14,949,400
<TOTAL-ASSETS> 74,530,700
<CURRENT-LIABILITIES> 11,329,400
<BONDS> 5,220,100
0
0
<COMMON> 464,600
<OTHER-SE> 95,414,100
<TOTAL-LIABILITY-AND-EQUITY> 74,530,700
<SALES> 14,698,400
<TOTAL-REVENUES> 14,698,400
<CGS> 12,054,100
<TOTAL-COSTS> 12,054,100
<OTHER-EXPENSES> 3,373,300
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 351,000
<INCOME-PRETAX> 1,392,700
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,392,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,392,700
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
