<PAGE>
UNITED STATES
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 June 30, 1998
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 offices) (Zip Code)
Registrant's telephone number, including area code (441) 292-2363
--------------
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 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 August 13, 1998 was
12,925,203.
<PAGE>
NORD PACIFIC LIMITED
INDEX
<TABLE>
<CAPTION>
Page
Number
PART I. FINANCIAL INFORMATION:
<S> <C>
ITEM 1. Condensed Consolidated Financial Statements:
Balance Sheets - June 30, 1998
and December 31, 1997 3-4
Statements of Operations - Three and six
months ended June 30, 1998 and 1997 5
Statements of Cash Flows - Six months
ended June 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7-10
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11-13
PART II. OTHER INFORMATION:
ITEM 1-3. Not Applicable
ITEM 4 Submission of Matters to a Vote of Security Holders 14
ITEM 5 Not Applicable
ITEM 6. Exhibits and Reports on Form 8-K 15
</TABLE>
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
---------------------------------------------------
NORD PACIFIC LIMITED
BALANCE SHEETS
ASSETS
(Unaudited)
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 881 $ 3,351
Accounts receivable:
Trade 1,199 1,313
Affiliates 37 53
Subscribed shares receivable -- 2,700
Other 31 90
------- -------
1,267 4,156
Inventories:
Copper 222 137
Supplies 158 204
------- -------
380 341
Premium on copper contracts 304 760
Prepaid expenses 78 137
------- -------
382 897
------- -------
TOTAL CURRENT ASSETS 2,910 8,745
DEFERRED COSTS ASSOCIATED WITH ORE UNDER
LEACH, net of accumulated amortization of $13,886
in 1998 and $11,518 in 1997 8,649 8,970
PROPERTY, PLANT AND EQUIPMENT -
at cost less accumulated depreciation of $6,185 in
1998 and $5,488 in 1997 4,011 4,737
DEFERRED EXPLORATION AND DEVELOPMENT
COSTS: Girilambone, net of accumulated amortization
of $2,335 in 1998 and $1,883 in 1997 4,464 4,335
Other projects 16,522 13,492
OTHER ASSETS 116 118
------- -------
$36,672 $40,397
------- -------
------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3
<PAGE>
NORD PACIFIC LIMITED
BALANCE SHEETS (Continued)
LIABILITIES AND
SHAREHOLDERS' EQUITY
(Unaudited)
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
----------- ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable:
Trade $ 753 $ 975
Affiliates 294 168
-------- --------
1,047 1,143
Accrued expenses 624 1,484
Income taxes payable 1,200 1,200
Payable on copper contracts 304 760
Forward currency exchange contracts 2,811 2,099
Current maturities of long-term debt 1,479 2,548
Obligation under purchase agreement -- 650
-------- --------
6,418 8,741
-------- --------
TOTAL CURRENT LIABILITIES 7,465 9,884
LONG-TERM LIABILITIES:
Long-term debt -- 313
Deferred income tax liability 4,840 4,840
Retirement benefits 121 104
-------- --------
4,961 5,257
SHAREHOLDERS' EQUITY:
Common stock 647 618
Common stock subscribed -- 2,677
Additional paid-in capital 46,728 44,022
Accumulated deficit (23,927) (22,859)
Foreign currency translation adjustment 798 798
-------- --------
TOTAL SHAREHOLDERS' EQUITY 24,246 25,256
-------- --------
$ 36,672 $ 40,397
-------- --------
-------- --------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
4
<PAGE>
NORD PACIFIC LIMITED
STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands of U.S. Dollars, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- ------------------
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $ 3,392 $ 4,189 $ 6,644 $ 8,125
COSTS AND EXPENSES:
Cost of sales 2,576 2,246 5,104 4,233
Abandoned projects 95 199 95 396
General and administrative 755 1,046 1,439 2,123
-------- -------- -------- --------
TOTAL COSTS AND EXPENSES 3,426 3,491 6,638 6,752
-------- -------- -------- --------
OPERATING EARNINGS (LOSS) (34) 698 6 1,373
OTHER INCOME (EXPENSE):
Interest and other income 53 30 135 67
Interest and debt issuance costs (59) (176) (120) (324)
Loss on forward currency exchange
contracts (985) (409) (830) (579)
Gain on copper contracts -- 150 -- 382
Foreign currency transaction
gain (loss) 70 57 (259) 88
-------- -------- -------- --------
TOTAL OTHER INCOME (EXPENSE) (921) (348) (1,074) (366)
-------- -------- -------- --------
EARNINGS (LOSS) BEFORE INCOME
TAXES (955) 350 (1,068) 1,007
PROVISION FOR INCOME TAXES -- (700) -- (1,400)
-------- -------- -------- --------
NET LOSS $ (955) $ (350) $ (1,068) $ (393)
-------- -------- -------- --------
-------- -------- -------- --------
BASIC LOSS PER
COMMON SHARE $ (.07) $ (.04) $ (.08) $ (.04)
-------- -------- -------- --------
-------- -------- -------- --------
WEIGHTED AVERAGE COMMON
SHARES (In thousands) 12,925 9,518 12,627 9,517
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
5
<PAGE>
NORD PACIFIC LIMITED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands of U.S. Dollars)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1998 1997
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(1,068) $ (393)
Adjustment for non-cash items except
depreciation and amortization 2,968 2,509
Depreciation and amortization 3,593 2,271
------- -------
Net cash provided by operating activities 5,493 4,387
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (26) (280)
Deferred exploration and development costs (4,348) (3,945)
Deferred costs associated with ore under leach (2,047) (2,016)
------- -------
Net cash used in investing activities (6,421) (6,241)
CASH FLOWS FROM FINANCING ACTIVITIES:
Addition to long-term debt -- 3,071
Debt payments (1,383) (3,324)
Net borrowings from Nord Resources Corporation -- 2,320
Costs associated with issuance
of common stock (4) (356)
------- -------
Net cash provided by (used in) financing activities (1,387) 1,711
EFFECT OF EXCHANGE RATE CHANGES ON CASH
AND CASH EQUIVALENTS (155) (2)
------- -------
(DECREASE) IN CASH AND CASH EQUIVALENTS (2,470) (145)
CASH AND CASH EQUIVALENTS - beginning of period 3,351 439
------- -------
CASH AND CASH EQUIVALENTS - end of period $ 881 $ 294
------- -------
------- -------
CASH PAID FOR INTEREST $ 120 $ 214
------- -------
------- -------
NON-CASH TRANSACTIONS:
Purchase of Derivative Financial Instruments $ -- $ 448
------- -------
------- -------
</TABLE>
SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6
<PAGE>
NORD PACIFIC LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997
A. FINANCIAL STATEMENTS OF NORD PACIFIC LIMITED (the "Company")
These interim consolidated financial statements are unaudited. In the opinion
of management, all adjustments, which consist of normal recurring accruals,
necessary to present fairly the financial position and results of operations
for the interim periods presented have been made. The results shown for the
three and six month period ended June 30, 1998 are not necessarily indicative
of the results that may be expected for the entire year.
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 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. The Company has not yet determined the effect of SFAS No.
133 on its 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 not yet
determined the effect of SOP 98-5 on its financial statements.
The Company has adopted SFAS No. 129, "Disclosure of Information about Capital
Structure", which was effective for financial statements for periods ending
after December 15, 1997 and established standards for disclosing information
about an entity's capital structure. The adoption of SFAS No. 129 had no
significant effect on the Company's disclosures about its capital structure.
The Company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
was effective for financial statements for periods beginning after December 15,
1997 and established standards for reporting and display of comprehensive income
and its components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. The adoption of SFAS No. 130 has not had a
material impact on the Company's financial statement presentation or related
disclosures.
The Company has adopted SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", which was effective for fiscal years
beginning after December 15, 1997 and established standards for the way that
public business enterprises report information about operating segments in
annual financial statements and requires that those enterprises report selected
information about operating segments in interim financial reports issued to
shareholders. It also establishes standards for related disclosures about
products and services, geographic areas and major customers. The Company
operates in one business segment and the Company's adoption of FASB No. 131 has
not had a material impact on its financial statement presentation or related
disclosures.
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, 1997.
Certain reclassifications have been made in the 1997 financial statements to
conform to the classification used in 1998. These reclassifications had no
effect on results of operations or shareholders' equity as previously reported.
7
<PAGE>
B. TAXATION
Under current Bermuda law, the Company is not required to pay 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.
The provision for deferred income taxes represents estimated taxes due on 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 (collectively
"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 combined balance sheet
information for Girilambone:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(In Thousands of U.S. Dollars)
<S> <C> <C>
Current assets $ 1,929 $ 1,638
Deferred costs associated with ore under leach, net 18,450 19,934
Property, plant and equipment, net 9,021 10,541
Deferred exploration and development costs, net 20,715 16,602
----------- -----------
Total assets 50,115 48,715
Current liabilities 2,817 2,230
----------- -----------
Partners' equity $ 47,298 $ 46,485
----------- -----------
----------- -----------
Company's share of equity 17,866 18,846
Less: Eliminations (1,523) (1,587)
----------- -----------
Net assets recorded by Company $ 16,343 $ 17,259
----------- -----------
----------- -----------
</TABLE>
8
<PAGE>
Debt incurred related to Girilambone is the separate responsibility of each
venturer and is not included in the joint ventures' financial statements. 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 the operations of the mine is as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
---------------------------- -----------------------------
1998 1997 1998 1997
------------ ------------ ------------ ------------
(In Thousands of U.S. Dollars)
<S> <C> <C> <C> <C>
Cost of copper sales $ 6,192 $ 5,453 $ 12,303 $ 10,355
General and administrative expenses $ 88 $ 118 $ 186 $ 243
</TABLE>
D. INDEBTEDNESS
The Company has a financing agreement with an Australian commercial bank which
is secured by the Company's Girilambone assets. The amount due under this
agreement bears interest at Singapore Interbank Offered Rates ("SIBOR") plus
1-1/2 %. Principal payments are made quarterly at the greater of $425,000 or 50%
of available cash flow. The agreement also contains certain debt coverage ratio
requirements.
During the period the loan is outstanding, the Company is maintaining a reserve
account with the lender sufficient to meet the next quarterly principal
repayment. 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. As collateral for the loan, the lender
holds a security interest in the Australian assets of the Company including the
Company's share of assets of and production from Girilambone. The balance due at
June 30, 1998 totaled $1,479,000 and is due and payable on or before March 31,
1999.
E. FINANCIAL INSTRUMENTS
The Company utilizes certain financial instruments, primarily put option
contracts and forward currency exchange contracts. These financial instruments
are utilized to reduce the risk associated with the volatility of commodity
prices and fluctuations in foreign currency exchange rates, particularly the
Australian dollar. The Company does not hold or issue financial instruments for
trading purposes.
Copper Agreements
In November 1996, the Company purchased put options at a cost of $.08 per pound
of copper for 4.0 million pounds of copper maturing ratably each month from
January through March 1998. In April 1997, the Company purchased put options at
a cost of $.05 per pound of copper for an additional 11.9 million pounds of
copper maturing ratably each month from April through December 1998. This
hedging program is intended to mitigate the effect of price changes on
substantially all of the Company's expected copper sales through December 31,
1998 and guarantees that the Company will receive a minimum gross price of $.90
per pound. The premiums are payable upon the expiration of each contract.
Sales for the three and six months ended June 30, 1998 include gains of $257,000
and $456,000 respectively and sales for the same periods ended June 30,1997
include losses of $271,000 and $527,000 respectively, realized in settlement of
copper hedging contracts.
9
<PAGE>
Forward Currency Exchange Contracts
The Company has entered into 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 in the results of operations. Outstanding contracts
at June 30, 1998 total $12 million and mature in monthly installments of
$800,000 at an average exchange rate of A$1.00 = US$0.8031.
The Company is exposed to copper price fluctuations and currency 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.
F. NORD RESOURCES CORPORATION
Nord Resources Corporation ("Resources") owns approximately 28.6% of the
outstanding common stock of the Company. In 1997, Resources provided certain
services to the Company under a management agreement. Resources was reimbursed
for all direct expenses and its overhead associated with the operations of the
Company at approximately $7,000 per month as per the management agreement.
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. In December 1997, Resources closed its office in
Dayton, Ohio and moved its administrative functions to Albuquerque, New Mexico.
The Company currently shares office space, administrative personnel and other
related expenses with Resources on a 50/50 basis.
G. DIFFERENCE BETWEEN U.S. AND CANADIAN GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES.
The condensed consolidated financial statements have been prepared in accordance
with accounting principles generally accepted in the United States ("U.S.
GAAP"). Under U.S. GAAP, SFAS No. 123 requires options issued to non-employees
to be accounted for at their estimated fair value with a corresponding expense
recorded in the financial statements. Canadian GAAP has no similar requirement.
As a result, under Canadian GAAP, earnings before income taxes and net earnings
would be increased for the six months ended June 30, 1998 and 1997, by $62,000
and $29,000 respectively, and general and administrative expense would be
reduced by the same amount.
H. CONTINUANCE INTO CANADA.
On June 25, 1998 the Company's shareholders approved the discontinuance of the
Company in Bermuda and the continuance in the Province of New Brunswick, Canada.
10
<PAGE>
ITEM 2. 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 1998 and beyond
to differ materially from those expressed in such forward looking statements.
These factors include, without limitation, the risks and factors set forth below
as well as other risks previously disclosed in the Company's securities filings.
Results of Operations
Nord Pacific Limited (the "Company") recorded a net loss of $1,068,000 for the
six months ended June 30, 1998 compared to a net loss of $393,000 for the same
period in 1997. Operating earnings for the six months ended June 30, 1998
totaled $6,000 compared to $1,373,000 for the comparable period in 1997. The
Company's share of copper sold for the six months ended June 30, 1998 totaled
7,752,000 pounds compared to 7,512,000 for the same period in 1997. During 1998,
the Company received $.80 per pound of copper sold compared to $1.15 per pound
received for the comparable period in 1997. The copper hedging programs
established by the Company resulted in an increase in sales of $456,000 for the
six months ended June 30, 1998 compared to a decrease in sales of $527,000 for
the same period in 1997. Including the impact of the copper hedging programs,
the Company realized a net average selling price per pound of $.86 for the first
six months of 1998 compared to $1.05 for the same period in 1997.
Cost of sales per pound of copper was $.66 for the six months ended June 30,
1998 as compared to $.56 per pound for the same period in 1997 and cost of sales
as a percentage of sales increased to 77% as compared to 52% for the same period
in 1997 due primarily to lower sales revenues due to the drop in copper prices
and to increased depletion, depreciation and amortization.
The Company wrote off costs totaling $95,000 associated with abandoned
properties for the six months ended June 30, 1998 compared to costs totaling
$396,000 for the same period in 1997.
General and administrative costs ("G & A") decreased $684,000 to $1,439,000 for
the six months ended June 30, 1998 compared to $2,123,000 for the six months
ended June 30, 1997. Salaries and related payroll tax and benefit costs were
reduced due to the closing of the Dayton office, as were rent and utilities.
Reductions in professional fees and public relations costs also contributed to
the decrease in G & A costs.
Interest and other income increased for the six months ended June 30, 1998
compared to the same period in 1997 due to additional funds available for
investment in early 1998. Interest expense and amortization of debt issuance
costs decreased for the six months ended June 30, 1998 compared to the same
period in 1997 due to smaller debt balances outstanding in 1998 due to debt
paydowns in 1997 and 1998. Fluctuations in gains and losses in the foreign
currency exchange contracts and in foreign currency transactions are primarily a
result of changes in the relative strength of the Australian dollar ("A$")
compared to the U.S. dollar ("US$"). Due to the strong US$, the company recorded
an $830,000 loss on forward currency exchange contracts for the first six months
of 1998 compared to a loss of $579,000 for the same period in 1997 and a loss of
$259,000 on foreign currency transactions for the six months ended June 30, 1998
compared to a gain of $88,000 for the same period in 1997. The Company recorded
a gain of $382,000 for the six months ended June 30, 1997 on marking its copper
swap and call option contracts to market. Since the Company had no copper swap
contracts outstanding in 1998, no such gain was recorded.
The results of operations for the six months ended June 30, 1997 included a
$1,400,000 provision for income
11
<PAGE>
taxes in Australia. Due to significantly lower copper prices and increased
operating expenses at the Girilambone mine in Australia, no provision was
recorded for the six months ended June 30, 1998.
The Company recorded a net loss of $955,000 for the three months ended June 30,
1998 compared to a net loss of $350,000 for the same period in 1997. The
operating loss for the three months ended June 30, 1998 totaled $34,000 compared
to operating earnings of $698,000 for the comparable period in 1997. The
Company's share of copper sold for the three months ended June 30, 1998 totaled
3,901,000 pounds compared to 3,776,000 for the same period in 1997. During 1998,
the Company received $.80 per pound of copper sold compared to $1.15 per pound
received for the comparable period in 1997. The copper hedging programs
established by the Company resulted in an increase in sales of $257,000 for the
three months ended June 30, 1998 compared to a decrease in sales of $271,000 for
the same period in 1997. Including the impact of the copper hedging programs,
the Company realized a net average selling price per pound of $.86 for the three
months ended June 30, 1998 compared to $1.11 for the same period in 1997.
Cost of sales per pound of copper was $.66 for the three months ended June 30,
1998 as compared to $.59 per pound for the same period in 1997 and cost of sales
as a percentage of sales increased to 76% as compared to 54% for the same period
in 1997 due primarily to lower sales revenues due to the drop in copper prices
and to increased depletion, depreciation and amortization.
The Company wrote off costs totaling $95,000 associated with abandoned
properties for the three months ended June 30, 1998 compared to costs totaling
$199,000 for the same period in 1997.
G & A decreased $291,000 to $755,000 for the three months ended June 30, 1998
compared to $1,046,000 for the three months ended June 30, 1997. Salaries and
related payroll tax and benefit costs were reduced due to the closing of the
Dayton office, as were rent and utilities. Reduction in professional fees and
public relations costs also contributed to the decrease in G & A costs.
Interest and other income increased for the three months ended June 30, 1998
compared to the same period in 1997 due to additional funds available for
investment in 1998. Interest expense and amortization of debt issuance costs
decreased for the three months ended June 30, 1998 compared to the same period
in 1997 due to smaller debt balances outstanding in 1998 due to debt paydowns in
1997 and 1998. Fluctuations in gains and losses in the foreign currency exchange
contracts and in foreign currency transactions are primarily a result of changes
in the relative strength of the Australian dollar ("A$") compared to the U.S.
dollar ("US$"). Due to the strong US$, the Company recorded a loss of $985,000
on forward currency exchange contracts for the three months ended June 30, 1998
compared to a loss of $409,000 for the same period in 1997. The Company recorded
a gain of $150,000 for the three months ended June 30, 1997 on marking its
copper swap and call option contracts to market. Since the Company had no copper
swap contracts outstanding in 1998, no such gain was recorded.
The results of operations for the three months ended June 30, 1997 included a
$700,000 provision for income taxes in Australia. Due to significantly lower
copper prices and increased operating expenses at the Girilambone mine in
Australia, no provision was recorded for the three months ended June 30, 1998.
Liquidity and Capital Resources
Cash at June 30, 1998 was $881,000 compared to $3,351,000 at December 31,
1997. Cash of $5,493,000 was provided during the six months ended June 30,
1998, by the Company's operating activities compared to $4,387,000 for the
same period in 1997. During the six months ended June 30, 1998, the Company
expended cash to fund exploration and development activities totaling
$4,348,000 compared to $3,945,000 for the same period in 1997 of which
$580,000 related to properties near Girilambone, $568,000 related to the
Tabar gold project, $2,910,000 related to the Ramu project, with the
remaining $290,000 expended for other projects. The
12
<PAGE>
Company expended $2,047,000 for its share of deferred costs associated with
ore under leach at Girilambone for the six months ended June 30, 1998
compared to $2,016,000 in 1997. The Company made principal payments totaling
$1,383,000 during the six months ended June 30, 1998 under the Girilambone
financing agreement compared to $2,444,000 in 1997 and paid $880,000 against
a general credit line in 1997.
The Company is in the exploration phase of all its projects except Girilambone.
Additional efforts on all exploration projects will be required to determine the
extent to which they will be commercially viable and whether the deferred
exploration costs ultimately will be realized. If commercially viable resources
are identified, the Company will have to seek external sources of financing to
fund development of these resources.
13
<PAGE>
PART II. OTHER INFORMATION
ITEM 1-3. NOT APPLICABLE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual General Meeting of the stockholders was
held on June 25, 1998. The Following matters were
acted upon and passed at the meeting.
1. Election of eight Directors.
2. Discontinuance of the Corporation in Bermuda and
continuation of the Corporation in New
Brunswick, Canada.
3. Approve share options granted to directors,
officers and consultants of the Corporation.
4. Ratify the appointment of independent auditors
and authorize the Board to set their
compensation.
<TABLE>
<CAPTION>
VOTE TABULATION
------------------
FOR AGAINST ABSTAIN
---------- ------- -------
<S> <C> <C> <C>
1. Directors
Edgar F. Cruft 10,234,787 20,714
W. Pierce Carson 10,235,287 20,214
Ray W. Jenner 10,235,287 20,214
Terence H. Lang 10,235,287 20,214
Leonard Lichter 10,235,287 20,214
Michel J. Drew 10,235,287 20,214
Lucile Lansing 10,235,287 20,214
John B. Roberts 10,235,287 20,214
2. Discontinuance in
Bermuda and continuance
into Canada 6,782,979 21,106 47,359
3. Approve share
options 1,585,270 1,169,428 59,185
4. Ratify auditors 10,236,813 12,448 6,240
</TABLE>
14
<PAGE>
ITEM 5. NOT APPLICABLE
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required by Item 601 of Regulation S-K.
Exhibit No. Description
----------- ----------------------------
27 Financial Data Schedule
(b) The Company filed a report on Form 8-K dated April 27, 1998
reporting the termination of its former auditors. It filed
a second report on Form 8-K dated May 11, 1998 reporting
the appointment of its current auditors.
15
<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
August 14, 1998 By: /s/ Ray W. Jenner
--------------------
Ray W. Jenner
Vice President Finance
and Authorized Officer
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NORD PACIFIC
LIMITED FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 881
<SECURITIES> 0
<RECEIVABLES> 1,199
<ALLOWANCES> 0
<INVENTORY> 380
<CURRENT-ASSETS> 2,910
<PP&E> 10,196
<DEPRECIATION> 6,185
<TOTAL-ASSETS> 36,672
<CURRENT-LIABILITIES> 7,465
<BONDS> 0
0
0
<COMMON> 647
<OTHER-SE> 23,599
<TOTAL-LIABILITY-AND-EQUITY> 36,672
<SALES> 6,644
<TOTAL-REVENUES> 6,644
<CGS> 5,104
<TOTAL-COSTS> 5,104
<OTHER-EXPENSES> 95
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> (1,068)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,068)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,068)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> 0
</TABLE>
