<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - Q
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended
September 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 000-19182
Nord Pacific Limited
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Bermuda Not Applicable
- -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22 Church St.
Hamilton HM11 Bermuda N/A
- ----------------------------------------- ----------
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code (441) 292-2363
--------------
Not Applicable
- ------------------------------------------------------------------------------
(Former name, former address, and former fiscal
year, if changed since last report)
Indicated 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 twelve 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 ____
The number of shares of Common Stock outstanding as of November 8, 1996 was
47,578,270.
<PAGE>
NORD PACIFIC LIMITED
INDEX
Page
Number
------
PART I. FINANCIAL INFORMATION:
ITEM 1. Condensed Consolidated Financial Statements:
Balance Sheets - September 30, 1996
and December 31, 1995 2-3
Statements of Operations - Quarters
ended September 30, 1996 and 1995 and 4
Three Quarters ended September 30, 1996
and 1995
Statements of Cash Flows - Three 5
Quarters ended September 30, 1996 and
1995
Notes to Condensed Consolidated Financial 6-10
Statements
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11-13
PART II. OTHER INFORMATION:
ITEM 1-5. Not Applicable 14
ITEM 6. Exhibits and Reports on Form 8-K 14
1
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NORD PACIFIC LIMITED
BALANCE SHEETS
ASSETS
(In Thousands of U.S. Dollars)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
CURRENT ASSETS:
Cash and cash equivalents $ 159 $ 3,656
Accounts receivable:
Trade 1,616 1,172
Affiliates 121 40
Other 29 49
------- -------
1,766 1,261
Inventories:
Copper 203 88
Supplies 171 183
------- -------
374 271
Forward currency exchange contracts - 1,022
Premium on copper contracts 2,327 348
Prepaid expenses 103 172
------- -------
TOTAL CURRENT ASSETS 4,729 6,730
RESTRICTED CASH - 1,080
PREMIUM ON COPPER CONTRACTS 559 960
DEFERRED COSTS ASSOCIATED WITH ORE UNDER
LEACH, net of accumulated amortization
of $7,854 in 1996 and $5,867 in 1995 7,636 5,606
PROPERTY, PLANT AND EQUIPMENT -
at cost less accumulated depreciation 5,612 5,919
DEFERRED EXPLORATION AND DEVELOPMENT COSTS:
Girilambone, net of accumulated amortization
of $1,110 in 1996 and $799 in 1995 1,278 1,356
Other projects 18,733 12,956
OTHER 138 59
------- -------
$38,685 $34,666
------- -------
------- -------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2
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NORD PACIFIC LIMITED
BALANCE SHEETS
LIABILITIES AND
SHAREHOLDERS' EQUITY
(In Thousands of U.S. Dollars)
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
CURRENT LIABILITIES:
Accounts payable:
Trade $ 2,138 $ 1,613
Affiliates 390 32
------------- ------------
2,528 1,645
Loan payable 261 -
Accrued expenses 913 822
Deferred gain on copper contracts 2,691 393
Current maturities of long-term debt 3,870 3,930
------------- ------------
TOTAL CURRENT LIABILITIES 10,263 6,790
LONG-TERM LIABILITIES:
Long-term debt 375 1,500
Deferred gain on copper contracts 640 883
Deferred income tax liability 2,440 1,120
Obligation under purchase agreement 791 744
Retirement benefits 189 169
------------- ------------
4,435 4,416
SHAREHOLDERS' EQUITY:
Common Stock 476 475
Additional paid-in capital 31,522 31,336
Deficit (8,809) (9,149)
Foreign currency translation adjustment 798 798
------------- ------------
23,987 23,460
------------- ------------
$38,685 $34,666
------------- ------------
------------- ------------
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
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NORD PACIFIC LIMITED
STATEMENTS OF OPERATIONS
(In Thousands of U.S. Dollars, except share and per share amounts)
<TABLE>
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 4,362 $ 3,335 $11,441 $10,911
COSTS AND EXPENSES:
Cost of sales 2,491 1,779 6,745 5,924
Abandoned projects 113
General and administrative 904 713 2,672 2,177
------- ------- ------- -------
TOTAL COSTS AND EXPENSES 3,395 2,492 9,530 8,101
------- ------- ------- -------
OPERATING EARNINGS 967 843 1,911 2,810
OTHER INCOME (EXPENSE):
Interest and other income 20 95 116 372
Interest and debt issuance costs (83) (130) (325) (500)
Forward currency exchange contracts gain (loss) 24 685 403 (203)
Copper contracts gain (loss) (113) (378)
Foreign currency transaction gain (loss) (46) 161 (68) (325)
------- ------- ------- -------
TOTAL OTHER INCOME (EXPENSE) (198) 811 (252) (656)
------- ------- ------- -------
EARNINGS BEFORE INCOME TAXES 769 1,654 1,659 2,154
PROVISION FOR INCOME TAXES 485 659 1,320 753
------- ------- ------- -------
NET EARNINGS $ 284 $ 995 $ 339 $ 1,401
------- ------- ------- -------
------- ------- ------- -------
NET EARNINGS PER COMMON
AND COMMON EQUIVALENT SHARE $ .01 $ .02 $ .01 $ .03
------- ------- ------- -------
------- ------- ------- -------
AVERAGE COMMON AND COMMON
EQUIVALENT SHARES (In thousands) 50,703 47,861 50,170 47,791
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
NORD PACIFIC LIMITED
STATEMENTS OF CASH FLOWS
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
THREE QUARTERS ENDED SEPTEMBER 30,
----------------------------------
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings adjusted for non-cash items
except depreciation and amortization $ 4,059 $ 3,295
Depreciation and amortization 3,378 3,104
------- -------
Net cash provided by operating activities 7,437 6,399
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (714) (740)
Deferred exploration and development costs (6,263) (2,597)
Deferred costs associated with ore under leach (4,016) (2,873)
------- -------
Net cash (used in) investing activities (10,993) (6,210)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt (1,185) (3,893)
Dividend paid (468)
Stock option activity 87
Restricted cash 1,080 24
------- -------
Net cash (used in) financing activities (18) (4,337)
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 77 (288)
------- -------
(DECREASE) IN CASH AND CASH
EQUIVALENTS (3,497) (4,436)
CASH AND CASH EQUIVALENTS -
beginning of period 3,656 7,149
------- -------
CASH AND CASH EQUIVALENTS - end of period $ 159 $ 2,713
------- -------
------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
NORD PACIFIC LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
A. FINANCIAL STATEMENTS
The balance sheet at December 31, 1995 contains financial information taken
from the audited consolidated financial statements. The interim
consolidated financial statements are unaudited. In the opinion of
management, all adjustments, which consist of normal recurring adjustments,
necessary to present fairly the financial position and results of
operations for the interim periods presented have been made. The results
shown for the first three quarters of 1996 are not necessarily indicative
of the results that may be expected for the entire year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1995.
The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets To Be Disposed Of," which requires review for
impairment of long-lived assets whenever changes in circumstances indicate
that the carrying amount of the asset may not be recoverable. The adoption
of SFAS No. 121 has had no effect on the financial statements for the
period ended September 30, 1996.
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, "Accounting for Stock-Based Compensation," which is effective for the
Company beginning January 1, 1996. SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees and
encourages (but does not require) compensation cost to be measured based on
the fair value of the equity instrument awarded. Companies are permitted,
however, to continue to apply APB Opinion No. 25, which recognizes
compensation cost based on the intrinsic value of the equity instrument
awarded. The Company will continue to apply APB Opinion No. 25 to its
stock based compensation awards to employees and will disclose the required
pro forma effect on net income and earnings per share in its year end
financial statements as required by SFAS No. 123. The Company did record
expense related to valuation of options issued to non-employees during
1996.
Certain reclassifications have been made in the 1995 financial statements
to conform to the classification used in 1996. These reclassifications had
no effect on results of operations or shareholders' equity as previously
reported.
B. TAXATION
Under current Bermuda law, the Company is not required to pay any taxes in
Bermuda on either income or capital gains. The Company has received an
undertaking from the Minister of Finance in Bermuda that in the event of
any such taxes being imposed, the Company will be exempted from taxation
until the year 2016. Although the Company is not subject to income taxes,
it has subsidiaries which are subject to income taxes in their respective
foreign countries.
6
<PAGE>
A provision for deferred income taxes of $1,320,000 has been recorded in
the first three quarters of 1996 resulting from the profitable operations
of the Girilambone Copper Property in Australia. The effective tax rate
differs from the statutory tax rate primarily because losses in other
countries cannot be used to offset taxable earnings in Australia.
C. GIRILAMBONE
The Company is a 40% joint venturer in the Girilambone Copper Property and
a 50% joint venturer in the Girilambone North Copper Property
("Girilambone") in Australia. All costs incurred during mine development
have been capitalized and are being amortized using the units of production
method over the estimated reserves. Following is summarized balance sheet
information of 100% of Girilambone:
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
------------- ------------
<S> <C> <C>
Current assets $ 2,762 $ 817
Deferred costs associated with ore under leach, net 18,185 14,015
Property, plant and equipment, net 12,944 13,651
Deferred exploration and development costs, net 17,110 7,386
------- -------
Total assets 51,001 35,869
Current liabilities 6,080 2,437
------- -------
Partners' equity $44,921 $33,432
------- -------
------- -------
Company's share of equity $19,155 $13,373
Less: Eliminations (1,693) (1,599)
------- -------
Net assets recorded by Company $17,462 $11,774
------- -------
------- -------
</TABLE>
Debt incurred for the development and construction of Girilambone is the
separate responsibility of each venturer and is not included in the joint
venture's financial statements. At September 30, 1996, $4,245,000 remains
outstanding from borrowings by the Company for the construction and
development of the Girilambone mine and additional exploration.
Copper production is distributed to each venturer based on its respective
ownership interest. Sale of copper is the responsibility of each venturer.
Cost and expense information related to operation of the mine is as
follows:
7
<PAGE>
<TABLE>
<CAPTION>
QUARTER ENDED THREE QUARTERS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
(In Thousands of U.S. Dollars)
<S> <C> <C> <C> <C>
Cost of copper sales $5,972 $4,446 $16,607 $14,810
General and administrative expense $ 279 $ 57 $ 407 $ 191
</TABLE>
D. INDEBTEDNESS
The Company has $4,245,000 outstanding at September 30, 1996, under a
financing agreement to fund its share of the development and construction
of Girilambone and additional exploration. The interest rate at September
30, 1996 was 7.5% (LIBOR plus 1.85%). The lender has agreed to defer the
June 30, 1996 and September 30, 1996 principal payments of $2,370,000 until
December 31, 1996. In November 1996, the Company received a letter of
offer from the lender to restructure the financing agreement and to provide
additional financing for working capital, including payment of current
maturities of long-term debt, and for further exploration activity. Under
the terms of the offer, the restructured agreement would provide additional
financing of $2,555,000, which, if borrowed, would bring the total debt to
$6,800,000. Principal repayments would be made quarterly at the greater of
$425,000 or 70% of available cash flow (as defined by the lender), with
interest at LIBOR plus 1-1/2%. The restructured agreement also will
contain certain debt coverage ratio requirements. Finalization of the
restructuring is contingent upon completion of certain agreements and
documentation as required by the lender. While a letter of offer has been
received and accepted by the Company, there can be no assurances that a
final loan document will be completed.
Under the financing agreement, the Company is required to maintain a
reserve account with the lender. All cash proceeds generated from
Girilambone operations are required to be deposited with the lender, and
must be used to pay any project costs, bank fees, interest, principal, and
funding required in the reserve account before any cash is available to the
Company. The lender has waived the reserve account requirement pending
completion of the restructured financing.
An Australian lender has provided a $1,583,000 (A$2,000,000) loan facility
to the Company, denominated in Australian dollars, which is to be repaid by
January 31, 1997 or sooner, upon drawdown of any funds from the above
restructed financing agreement. Interest is payable monthly in arrears at
the lender's benchmark rate for commercial accounts plus 1%, currently
11.75% per annum.
E. FINANCIAL INSTRUMENTS
The Company utilizes certain financial instruments, primarily copper
hedging contracts, which are utilized to reduce the risk associated with
the volatility of commodity prices. The Company does not hold or issue
financial instruments for trading purposes.
8
<PAGE>
COPPER CONTRACTS
The Company has entered into combination swap (the "floor price contracts")
and call option contracts to establish a minimum price in connection with
the sale of its share of copper produced from Girilambone through December
1997. The contracts will enable the Company to realize (1) a minimum
copper price of $1.10 per pound in 1996 and $1.02 per pound in 1997
(utilizing floor price contracts) plus (2) the excess, if any, of the
market price of copper (as determined by the London Metals Exchange) over
$1.19 per pound in 1996 and $1.11 per pound in 1997 (utilizing option
contracts).
The contracts are for a total of 16.5 million pounds of copper and settle
ratably each month through December 1997. Under floor price contracts, for
an amount of copper equal to the Company's share of expected monthly sales
from Girilambone, gains or losses are deferred and recognized in sales as
each contract settles. Sales for the three quarters ended September 30,
1996 and September 30, 1995 include $635,000 in gains and $762,000 of
losses, respectively, realized in settlement of the floor price contracts.
At September 30, 1996, the balance sheet includes a premium on copper
contracts of $2,886,000 which represents the amount which the Company
would receive under the floor price contracts and call option contracts if
they were all settled at that date. Also included on the balance sheet in
deferred gain on copper contracts is $3,331,000 which represents the excess
of current market value at September 30, 1996, over the original market
value for each of the contracts.
To the extent that the number of pounds of copper contained in each floor
price contract presently exceeds the Company's share of expected copper
sales from Girilambone, gains and losses on this portion of the floor price
contracts are included in operations each period. Gains or losses under
the call option contracts are included in operations based on the fair
market value of each contract.
The Company is exposed to copper price fluctuations in the event of
nonperformance by the counterparties to the various agreements described
above but has no off-balance sheet risk of accounting loss. 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.
FORWARD CURRENCY EXCHANGE CONTRACTS
The Company entered into forward currency exchange contracts, which expired
in July 1996, to hedge against potential 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 in the results of operations.
F. NORD RESOURCES CORPORATION
In October 1996, Nord Resources Corporation ("Resources") agreed to make
available to the Company, at Resources' discretion, up to $1,000,000 in
the form of an operating loan and up to an additional $1,000,000 to satisfy
the requirements of the Company's debt service reserve account with the
Girilambone lender. The loans are payable upon demand and bear interest at
the prime rate plus 1%. If any unpaid balance remains outstanding at the
close of business on March 31, 1997, Resources has the option to convert
any or all of the unpaid principal at that date into shares of common stock
of the Company. The conversion price would equal the average of the high
and low
9
<PAGE>
sales prices of the Company's common stock (or equivalent average price of
American Depositary Receipts) as quoted on NASDAQ for a twenty day trading
period prior to and including March 31, 1997.
G. AMERICAN DEPOSITARY RECEIPTS ("ADRS")
The Company has established a program whereby The Bank of New York has
issued American Depositary Receipts ("ADRs") in exchange for the ordinary
shares of the Company's common stock. The exchange ratio is five ordinary
shares for each ADR. The ADRs commenced trading on the NASDAQ National
Market System on August 7, 1995. Effective September 25, 1995, the
Company's ordinary shares were no longer traded on NASDAQ. The Company's
ordinary shares continue to be listed and traded on the Australian Stock
Exchange. Holders of ordinary shares and holders of ADRs can freely
convert back and forth between both securities upon payment of a fee to The
Bank of New York and presentation of appropriate documentation. Per share
information converted to equivalent ADRs is as follows:
Supplemental Information Earnings Per ADR
Quarter Ended Three Quarters Ended
September 30, September 30,
---------------- --------------------
1996 1995 1996 1995
---- ---- ---- ----
Net earnings per ADR $ .03 $ .10 $ .03 $ .15
Average equivalent ADRs 10,141 9,572 10,034 9,558
(000's) (Assuming full
conversion of ordinary
shares to ADRs)
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Nord Pacific Limited (the "Company") recorded net earnings for the three
quarters ended September 30, 1996 of $339,000 compared to net earnings of
$1,401,000 for the same period of 1995. The Company recorded operating earnings
of $1,911,000 for the three quarters ended September 30, 1996, compared to
$2,810,000 for the same period of 1995. The Company's share of copper sold in
the first three quarters of 1996 totaled 10,096,993 pounds compared to 8,652,000
pounds sold in the same period in 1995. Copper production increased during 1996
due to the initiation of modifications to the heap leaching process. The
decline in operating earnings was primarily due to a decrease in the net average
selling price of copper received by the Company in 1996 compared to 1995.
During 1996, the Company received $1.07 per pound of copper sold compared to
$1.35 per pound received in 1995. The copper hedging programs established by
the Company resulted in an increase in revenue of $635,000 in 1996 and a
decrease of $762,000 in 1995 revenue. Including the impact of the copper
hedging programs, the Company realized a net average selling price per pound of
$1.13 in 1996 compared to $1.26 realized in 1995. Although the cost of sales
per pound of copper declined to $.67 in 1996 compared to $.69 in 1995, cost of
sales as a percentage of sales increased to 59.0% in 1996 compared to 54.3% in
1995, due to the lower sales price of copper realized. Adversely affecting
operating earnings in the first quarter of 1996 was the write-off of an
abandoned property of $113,000. Also contributing to lower operating earnings
was a 23% increase in general and administrative expense, largely due to an
increase in overall exploration activity and expense associated with stock
options issued to non-employees valued in accordance with SFAS No.123.
Results of operations during the first three quarters of 1996 include a gain
from forward currency exchange contracts of $403,000 due to the strengthening of
the Australian dollar in relation to the U.S. dollar compared to a loss of
$203,000 in the first three quarters of 1995. A loss of $378,000 was recorded
in the first three quarters of 1996 resulting from marking copper contracts to
market. Foreign currency transaction losses totalled $68,000 and $325,000,
respectively, for the first nine months of 1996 and 1995. Interest and other
income decreased in the first three quarters of 1996 compared to the first three
quarters of 1995 due to a decrease in cash available for investment. Interest
and debt issuance costs decreased in 1996 due to repayment of debt under the
Girilambone financing agreement. A provision for income taxes of $1,320,000 was
recorded in the first three quarters of 1996 resulting from profitable
operations at Girilambone. A provision for income taxes of $753,000 was
recorded in the same period of 1995 when the Company benefitted from the use of
net operating loss carryforwards which had previously been subject to a
valuation allowance.
The Company recorded net earnings of $284,000 during the third quarter of 1996
compared to net earnings of $995,000 for the same period in 1995. Operating
earnings during the third quarter of 1996 totaled $967,000 compared to $843,000
during the 1995 third quarter. The increase in operating earnings during the
third quarter of 1996 was due to the Company's record production during the
period totaling 4,130,000 pounds of copper, an increase of 61% over the same
period of 1995. Production at Girilambone has been enhanced by initiating some
modifications to the heap leaching process. These include techniques on
secondary sulphide ores which ensure the availability of oxygen and carbon
dioxide for the leaching process. In addition, leach solution application
methods and rates have been optimized. These improvements have been responsible
for overcoming production constraints experienced during the winter months in
the previous two years, and have been responsible for the record production that
has been achieved. Copper sold in the third quarter of 1996 totaled 3,977,000
pounds compared to 2,624,000 pounds in the third quarter of 1995, an increase
of 52%. Adversely affecting operating earnings in the third quarter of 1996 was
the decrease in the net average selling price of copper. During the third
quarter of 1996, the Company received
11
<PAGE>
$.92 per pound of copper sold compared to $1.39 per pound received in 1995.
The copper hedging programs resulted in a increase in revenue of $685,000 in
the third quarter of 1996 and a decrease of $313,000 in revenue in the third
quarter of 1995. Including the impact of the copper hedging programs, the
Company realized a net average selling price per pound of $1.10 in the third
quarter of 1996 compared to a $1.27 realized in the same period of 1995.
Cost of sales per pound of copper declined to $.63 in the third quarter of
1996 compared at $.68 in the third quarter of 1995. However, due to the low
price of copper realized, cost of sales as a percentage of sales increased to
57% in the third quarter of 1996 from 53% in the same quarter of 1995.
Results of operations during the third quarter of 1996 include a provision
for income taxes of $485,000 compared to $659,000 during the third quarter of
1995. A loss of $113,000 resulted from marking to market the copper
contracts in the third quarter of 1996. The gain on foreign currency
exchange contracts was $24,000 during the third quarter of 1996 compared to
$685,000 during the third quarter of 1995.
LIQUIDITY AND CAPITAL RESOURCES
Cash of $7,437,000 was provided during the three quarters ended September 30,
1996, by the Company's operating activities. During the first three
quarters of 1996, the Company expended cash to fund exploration and
development activity totaling $6,263,000, of which $2,500,000 related to
properties near Girilambone and $3,386,000 related to the Tabar gold project
with the remaining $377,000 expended for other projects. The Company
expended $4,016,000 for its share of deferred costs associated with ore under
leach at Girilambone, and paid $1,185,000 for principal payments under the
Girilambone financing agreement. Cash decreased during the period by
$3,497,000.
The Company is continuing exploration activities at the Tabar gold project
and the Tritton copper prospect near Girilambone. A detailed feasibility
study is nearing completion and application has been made for a mining lease
over the Simberi oxide reserves at the Tabar gold project. At the time a
project currently in the exploration stage evolves into construction and
eventual production, significant additional funding will be required from
equity or bank financing.
An Australian lender has provided a $1,583,000 (A$2,000,000) loan facility to
the Company, denominated in Australian dollars, which is to be repaid by
January 31, 1997, or sooner, upon drawdown of any funds under the
restructured financing agreement with the Girilambone lender. Interest is
payable monthly in arrears at the lender's benchmark rate for commercial
accounts plus 1%, currently 11.75% per annum. In November 1996, the Company
received a letter of offer to restructure the financing agreement with the
Girilambone lender and to provide additional financing for working capital,
including payment of current maturities of long-term debt, and for further
exploration activity. Under the terms of the offer, the restructured
agreement would provide additional financing of $2,555,000, which if
borrowed, would bring the total debt to $6,800,000. Interest will accrue at
LIBOR plus 1 1/2%. Principal repayments would be made quarterly at the
greater of $425,000 or 70% of available cash flow (as defined by the lender.)
The restructured agreement also will contain certain debt coverage ratio
requirements. Finalization of the restructuring is contingent upon
completion of certain agreements and documentation as required by the
lender. While a letter of offer has been received and accepted by the
Company, there can be no assurances that a final loan document will be
completed. However, the Company has no reason to believe that the
restructured financing agreement will not be finalized. Should the Company
not finalize the restructured financing agreement, it would not have
sufficient cash to meet its projected expenditures through the end of 1996.
As a result, the Company would be required to reduce its current level of
exploration activity or seek funding from another source.
In addition to the above financing arrangements, the Company is examining the
potential of funding from other sources.
12
<PAGE>
In October 1996, Nord Resources Corporation ("Resources") agreed to make
available to the Company, at Resources' discretion, up to $1,000,000 to the
Company in the form of an operating loan and up to an additional $1,000,000
to satisfy the requirements of the Company's debt service reserve account
with the Girilambone lender. The loans are payable upon demand and bear
interest at the prime rate plus 1%. If any unpaid balance remains
outstanding at the close of business on March 31, 1997, Resources has the
option to convert any or all of the unpaid principal at that date into shares
of common stock of the Company. The conversion price would equal the average
of the high and low sales prices of the Company's common stock (or equivalent
average price of American Depositary Receipts) as quoted on NASDAQ for a
twenty day trading period prior to and including March 31, 1997.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1-5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
No Reports on Form 8-K were filed during the quarter ended
September 30, 1996.
EXHIBIT 27. FINANCIAL DATA SCHEDULE - filed herewith as part of
this Report on Form 10-Q.
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NORD PACIFIC LIMITED
November 13, 1996 By:s/Terence H. Lang
-----------------
Terence H. Lang,
Treasurer, Principal
Financial Officer and
Authorized Officer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORD PACIFIC
LIMITED FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30,1996 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 159
<SECURITIES> 0
<RECEIVABLES> 1,766
<ALLOWANCES> 0
<INVENTORY> 374
<CURRENT-ASSETS> 4,729
<PP&E> 9,852
<DEPRECIATION> 4,240
<TOTAL-ASSETS> 38,685
<CURRENT-LIABILITIES> 10,263
<BONDS> 0
0
0
<COMMON> 476
<OTHER-SE> 23,511
<TOTAL-LIABILITY-AND-EQUITY> 38,685
<SALES> 11,441
<TOTAL-REVENUES> 11,441
<CGS> 6,745
<TOTAL-COSTS> 9,530
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 325
<INCOME-PRETAX> 1,659
<INCOME-TAX> 1,320
<INCOME-CONTINUING> 339
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 339
<EPS-PRIMARY> .01
<EPS-DILUTED> .00
</TABLE>
