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NORD PACIFIC LIMITED
10-Q, 2000-12-15
METAL MINING

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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 September 30, 2000

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)

 

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          NO    X  

The number of shares of Common Stock outstanding as of November 30, 2000 was 12,960,803.

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NORD PACIFIC LIMITED

INDEX

 

 

 

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PART I.       FINANCIAL INFORMATION

ITEM 1.     Condensed Consolidated Financial Statements

NORD PACIFIC LIMITED
BALANCE SHEETS
ASSETS
(Unaudited)
(In Thousands of U.S. Dollars)

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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NORD PACIFIC LIMITED
BALANCE SHEETS (Continued)
LIABILITIES AND
STOCKHOLDERS' EQUITY
(Unaudited)
(In Thousands of U.S. Dollars)

 

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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NORD PACIFIC LIMITED
STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands of U.S. Dollars, except per share amounts)

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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NORD PACIFIC LIMITED
STATEMENTS OF OPERATIONS
(Unaudited)
(In Thousands of U.S. Dollars, except per share amounts)

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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NORD PACIFIC LIMITED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In Thousands of U.S. Dollars)

 

SEE NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

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NORD PACIFIC LIMITED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
QUARTERS ENDED SEPTEMBER 30, 2000 AND 1999

 

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 third quarter of 2000 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, 1999.

B.     GIRILAMBONE

The Company is a 40% joint venturer in the Girilambone Copper Property and a 50% joint venturer in the Girilambone North Copper Property (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:

		September 30, 2000		December 31, 1999
		(In Thousands of U.S. Dollars)
Current assets		$     1,842		$     3,625
Deferred costs associated with ore under leach, net		10,034		16,456
Property, plant and equipment, net		2,577		4,450
Deferred exploration and development costs, net		5,156		5,751
Total assets		19,609		30,282
Current liabilities		(1,229)		(2,983)
Partners' equity		$   18,380		$   27,299
Company's share of equity		8,587		13,682
Less: Eliminations		(1,182)		(1,284)
Net assets recorded by the Company		$     7,405		$   12,398

 

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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:

 

C.   LONG-TERM DEBT

Long-term debt consists of the following:

The Tritton financing agreement provides for four installment payments of principal and interest totaling US$1,444,000 beginning December 1, 2000. An additional A$3 million is payable in six equal annual installments beginning twelve months after commencement of copper production. These amounts are payable in Australian dollars.

 

D.     NORD RESOURCES CORPORATION

Nord Resources Corporation ("Resources") owns approximately 28.5% of the outstanding common stock of the Company. Under the term of a cost sharing agreement, the Company shares office space, administrative personnel and expenses with Resources on a 50/50 basis.

 

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ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
                  RESULTS OF OPERATIONS

Results of Operations

Safe Harbor Statement under the Private Securities Litigation Act of 1995: The statements contained in this Form 10-Q 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 to differ materially from those expressed in such forward looking statements. These factors include, without limitation, the risk factors disclosed in the Company's annual report on Form 10-K and the Company's other Securities Exchange Act filings with the SEC.

The Company recorded a net loss of $273,000 and $975,000 for the three and nine months ended September 30, 2000 compared to a net loss of $914,000 and $1,780,000 for the same periods in 1999, as improved copper revenues were offset by higher noncash production costs and by losses related to foreign currency forward exchange contracts. The Company's share of copper sold in the three and nine months ended September 30, 2000 totaled 2,936,000 and 11,705,000 pounds, respectively, compared to 3,266,000 and 10,936,000 pounds sold in the same period of 1999. Copper revenue, including the effect of copper hedging contracts, decreased by $55,000 and increased by $1,473,000 for the three and nine months ended September 30, 2000 compared to the same periods in 1999. During the nine months ended September 30, 2000, the Company received a net price of $0.76 per pound of copper sold compared to $0.69 received for the same period in 1999. The Company's copper hedging programs increased copper sales by $638,000 for the nine months ended September 30, 2000 compared to an increase of $551,000, for the same period in 1999. Including the effect of the hedging programs, the realized net average sales price was $0.82 per pound of copper sold for the nine months ended September 30, 2000 compared to $0.74 per pound for the same period in 1999.

Copper cost of sales decreased to $0.76 per pound for the nine months ended September 30, 2000 compared to $0.83 per pound for the same period in 1999. The decrease is primarily due to fixed costs being spread over higher copper production from the Girilambone North ore bodies resulting in lower per pound costs.

General and administrative expenses of $518,000 and $1,735,000 increased by $3,000 and $17,000 for the three and nine months ended September 30, 2000 compared to 1999. The changes were principally due to changes in the costs of temporary contractors and professional services.

Interest income decreased by $19,000 and $16,000 for the three and nine months ended September 30, 2000 compared to the same periods in 1999 due to decreased funds available for investment. Interest expense and amortization of debt issuance costs decreased by $27,000 and $11,000 for the three and nine months ended September 30, 2000 compared to 1999 due to a decrease in the amount of debt outstanding. Fluctuations in gains and losses in the foreign currency forward exchange contracts and from foreign currency transactions are primarily a result of fluctuations in the exchange rate between the Australian dollar and the U.S. dollar. The Company recorded a loss of $214,000 and $845,000 on foreign currency forward exchange contracts for the three and nine months ended September 30, 2000 compared to a loss of $182,000 and a gain of $986,000 for the same periods in 1999 and gains on foreign currency transactions of $248,000 and $399,000 for the three and nine month periods compared to losses of $48,000 and $330,000 for the same periods in 1999.

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The Company will adopt Financial Accounting Standards Board Statement No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133) beginning January 1, 2001. The Company currently has foreign currency forward exchange contracts and swap agreements on future copper production. The copper swap agreements do not extend beyond December 31, 2000. The foreign currency contracts are marked to market. Therefore, the Company does not anticipate there to be any impact on its financial statements from the adoption of FAS 133.

Liquidity and Capital Resources

Cash provided by operations totaled $1,804,000 for the nine months ended September 30, 2000 compared to cash provided by operations of $3,546,000 for the same period in 1999. Cash provided by operating activities for the nine months ended September 30, 2000 includes a $2,563,000 net use of cash for changes in non-cash working capital, while the corresponding period in 1999 included a net source of cash of $724,000 for changes in non-cash working capital. Cash used in investing activities for the nine months ended September 30, 2000 included $3,369,000 for the purchase of the remaining 50% interest in the Tritton Copper project, offset by proceeds from the sale of Ramu of $5,250,000.

Cash used by financing activities of $1,603,000 for the nine months ended September 30, 2000 includes a $2,400,000 repayment under a long-term bank financing agreement and a $750,000 repayment of advances from Resources. In the nine months ended September 30, 2000, cash provided from financing activities included $1,444,000 borrowed under a long-term financing agreement to purchase the Tritton property, and a cash advance on future copper cathode sales of $103,000.

At September 30, 2000 the Company had a working capital deficit of $1,126,000 compared to a working capital deficit of $6,343,000 at December 31, 1999. Continuing operations should generate sufficient cash to meet the current working capital requirements during the next year. The foreign currency contracts of $1,096,000 are due December 31, 2000. The company is currently re-negotiating the payment schedule of these contracts to be made during the next calendar year.

In order to develop Tritton as a long-term project, the company will require additional long-term financing. The debt being considered consists of a number of debt and credit support instruments, including cash advance facilities for up to A$35 million (US$19 million at September 30, 2000). The financing is contingent on a number of factors, including a technical review by the banks external independent engineer, syndication with other banks and completion of formal documentation. There can be no assurance that the financing will be obtained.

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PART II.     OTHER INFORMATION

          ITEMS 1.-3.     NOT APPLICABLE

          ITEM 4.            SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDER

The Annual General Meeting of the stockholders was held on September 8, 2000. The following matters were acted upon and passed at the meeting.

                              A proxy was sent out August 7, 2000 to do the following:

1. Election of seven Directors
2. Ratify the appointment of independent auditors and authorize the board to set their compensation  

Three previous directors of Nord Pacific Limited, namely Edgar F. Cruft, Terence H. Lang and Leonard Lichter, resigned from the Board of Directors and did not stand for re-election at the annual meeting of shareholders. As described in the management information circular to shareholders, their resignations were a condition of a settlement of a shareholder derivative lawsuit filed April 26, 2000 on behalf of Nord Resources Corporation, a 28.5% owner of the Company. Their resignations from the boards of both the Company and Nord Resources Corporation became effective September 7, 2000 upon Court approval of a Settlement Agreement. The Company was not named in the lawsuit but was a party to the Settlement Agreement.

 

     ITEM 6.     EXHIBITS AND REPORTS ON FORM 8-K

A Form 8-K was filed on July 17, 2000 related to the purchase of the remaining 50% interest in the Tritton  Copper Project.

                    EXHIBIT 27. FINANCIAL DATA SCHEDULE - filed herewith as part of this Report on Form 10-Q.

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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

 

 

December 14, 2000	By:/s/	W. Pierce Carson
		W. Pierce Carson
		President & CEO
		Acting Chief Financial Officer

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