UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file No. 0-6202-2
NORD RESOURCES CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 85-0212139
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
201 3rd St NW, Suite 1750, Albuquerque, NM 87102
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (505) 766-9955
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
Common Stock, par New York Stock Exchange
value $.01 per share
Securities registered pursuant to Section 12 (g) of the Act: None
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
Aggregate market value of voting stock held by non-affiliates,
based on the closing price of $.2188 as of April 6, 2000, was
$3,601,657.
The number of shares of Common Stock outstanding as of April 6,
2000 was 16,501,288.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement to be dated on or about April 30, 2000 (Part
III)PART I
ITEM 1. BUSINESS
General
Nord Resources Corporation (the Company) owns the Johnson Camp
copper mine in Arizona, which is currently being redeveloped, and
a 28.5% interest in Nord Pacific Limited (Pacific), a company
engaged in the production of copper and in the exploration for
gold, copper, and other minerals in Australia, Papua New Guinea
and North America. The Company sold its 50% interest in the
Sierra Rutile titanium dioxide project in Sierra Leone, West
Africa, in September 1999. As used herein the term "Company",
unless the context indicates otherwise, includes all subsidiaries
and investees.
Johnson Camp Copper Mine
Purchase from Arimetco
In June 1999, Nord Copper Corporation acquired a copper mine and
related assets (Johnson Camp Mine) in Arizona, from Arimetco,
Inc. At the time of the acquisition, Summo USA Corporation had
entered into a purchase agreement to acquire the Johnson Camp
Mine from Arimetco. The Company paid Arimetco $310,000 and
issued a promissory note payable to them in the amount of
$1,550,000. The note is payable in installments of $500,000,
$500,000 and $550,000, due on June 8, 2000, June 8, 2001 and June
8, 2002, respectively, together with interest at the rate of 8%
per annum payable quarterly. The note is secured by a lien on
the Johnson Camp Mine. The Company also agreed to pay Arimetco
up to an additional $1,000,000 from revenues from the Johnson
Camp Mine, at a rate of $0.02 per pound for all copper sold, but
only if the market price is in excess of $1.00 per pound. In
connection with the acquisition, the Company also issued
1,600,000 shares of its common stock to Summo.
Under an arrangement with Pacific, which was instrumental in
identifying and assessing the Johnson Camp Mine opportunity,
Pacific will participate in management of the Johnson Camp Mine
and will be entitled to 20% of cash flow after the Company has
fully recovered its past and future investment in the property.
Operating History
Johnson Camp was operated by Arimetco from 1991 to 1997, and by
Cyprus Copper before Arimetco. Since 1975 the mine has produced
over 150 million pounds of cathode copper from open pit mining,
heap leaching and solvent extraction-electrowinning (SX-EW)
processing of oxide ores. Significant reserves remain and the
leach pads and SX-EW operation remain active, currently producing
approximately 1.3 million pounds of copper cathode annually from
limited rinsing of the heaps while the operation remains on care
and maintenance status.
Feasibility Study and Ore Reserves
In November 1999 the Company and NCC commissioned The Winters
Company (Winters) of Tucson, Arizona, an independent engineering
and consulting company, to prepare a feasibility study for the
resumption of full production at Johnson Camp. Winters completed
the feasibility study in March 2000. NCC intends to resume
mining and leaching operations to produce copper cathode at an
average annual rate of 19 to 20 million pounds, assuming
financing can be arranged.
Large disseminated copper deposits occur on the Johnson Camp
property. Two of these deposits, the Burro and the Copper Chief,
are targeted for production by NCC. The copper mineralization
consists of malachite, chrysocolla, copper in limonite,
chalcocite and small amounts of native copper. Cyprus produced
approximately 15 million tons of ore grading 0.6% copper from the
Burro deposit between 1975 and 1986. Arimetco mined an
additional 16 million tons from Burro, plus a small tonnage from
the Copper Chief, at an average grade of 0.35% copper. Current
ore reserves for Johnson Camp, as estimated by
Winters, total 32 million tons grading 0.416% copper. The
overall stripping ratio is 0.7:1, for a total of 53.5 million
tons of material to be mined. Significant additional copper
resources could be converted to reserves in the future at copper
prices above current market levels.
Existing Facility
Johnson Camp is located 65 miles east of Tucson, between Benson
and Wilcox on IH-10. The property consists of 64 patented lode
mining claims (872 acres), 88 unpatented claims (1,340 acres),
and fee simple lands (511 acres), totaling 2,723 acres. No
material issues of conflict regarding NCC's land position are
known to exist.
The copper production facility includes a 4,000 gpm solvent
extraction plant and tank farm, a 52,000 lb/day capacity
electrowinning plant with 74 cells, 8 million gallons of solution
storage and other related equipment. With the planned
refurbishment, the facility will be capable of producing 19 to 20
million pounds of copper cathode annually. The SX-EW facility
was installed by Arimetco in 1991, and expanded in 1996.
The Company continues to circulate leaching solutions through the
heaps while the operation is on care and maintenance status, and
has produced and sold a small amount of copper while seeking
financing for the expansion plan. In 1999, Johnson Camp sold
672,000 pounds of copper at a realized price of $0.76 per pound,
or $510,000 while incurring cost of sales of $1,537,000 and
general and administrative costs of $165,000, resulting in a loss
from operations of $1,192,000. The operating costs at Johnson
Camp are relatively high as a result of the startup costs
incurred since purchasing the facility and ongoing care and
maintenance requirements.
Expanded Operations
Ore would be crushed to minus 1 inch. The crushed ore would be
treated with a sulfuric acid solution and agglomerated before
being transported to the leach pads. Ore would be placed on the
existing heaps in the first year of operation and on new pads
thereafter using conveyor stacking techniques, although the
existing heaps will continue to be leached for residual copper
recovery.
In order to reach a production rate of 19 to 20 million pounds
per year, part of the SX-EW facility will require rehabilitation.
Some new leach pads and new solution ponds to accompany the new
pads will also be required. The expanded, refurbished operation
would have a mine life of approximately 12 years. Mining would
be carried out by a contractor, and the Company is currently
seeking bids for mining with the assistance of Winters. The
future operating cost is heavily dependent upon the costs of
mining, electric power and sulfuric acid.
Approximately $13 million in capital is required to carry out the
refurbishment. The major components of the capital plan are to
rehabilitate solution ponds, the SX-EW plant and other
facilities, purchase and install crushing and conveying equipment
and construct new heap leach pads. The entire refurbishment
would require approximately 12 months to complete construction
and commission the new facilities.
Consent Order
Effective with the acquisition of the Johnson Camp mine, the
Company agreed to a Consent Order with the Arizona Department of
Environmental Quality (ADEQ). The Consent Order specifies
actions the Company must take to remediate conditions at the mine
that are not in compliance with current Arizona laws, including
modifications to the current facilities that will be required to
qualify for an aquifer protection permit (APP). The Consent
Order also sets forth a schedule under which the Company has
agreed to file an application for an APP. The ADEQ may impose
financial penalties on the Company for failure to meet the
requirements of the Consent Order. The Company plans to meet its
obligations under the Consent Order in the course of
rehabilitating the mine and returning it to full production.
Investment in Pacific
The Company owns 28.5% of Nord Pacific Limited (Pacific) (OTCBB:
NORPF - Toronto Stock Exchange: NPF), a company engaged in the
production of copper and the exploration for gold, copper, and
other minerals in Australia, Papua New Guinea, and North America.
Pacific owns a 40% interest in the Girilambone Copper mine which
has been in production since May 1993, and a 50% interest in the
Girilambone North Copper mine which has been in production since
July 1996. Pacific also owns a 50% interest in the Tritton
Copper Project, a 100% interest in the Tabar Islands Gold Project
and various interests in other exploration properties.
Feasibility studies have been completed on the Tritton Copper
Project and the Tabar Islands Gold Project and Pacific is seeking
the financing necessary to develop these projects. Pacific sold
its 31.5% interest in the Ramu nickel-cobalt project on March 10,
2000.
Pacific owns a 50% interest in the Tritton Copper Project, a
sulfide copper deposit discovered in 1996. This project has
identified a massive medium-to-high grade pyrite-chalcopyrite
sulfide ore deposit about fourteen miles southwest of the present
Girilambone copper operations. This deposit has an estimated
diluted resource of approximately 9,230,000 tonnes at a grade of
2.63% copper. The identified resource is also projected to
contain gold and silver. A feasibility study has examined the
economics of developing Tritton by underground mining methods
using ramp access to develop the deposit based on mining ore
reserves of 4,610,000 tonnes at 3.14% copper. Ore would be mined
at a rate of 660,000 tonnes per annum (tpa) by retreat uphole
benching and room and pillar methods. Ore would be trucked to
the surface, crushed, milled in a grinding circuit and processed
in flotation cells for the recovery of a marketable concentrate.
Concentrates would be shipped to a smelter for sale.
Pacific also owns 100% of the Tabar Island Gold Project in Papua
New Guinea, at which current exploration has identified oxide
gold mineralization on Simberi Island as well as identifying
promising drilling results in other areas of the project.
In May 1998, revised resource estimates for Simberi were
calculated as follows:
Total Simberi Oxide and sulfide resources
Resource Million Gold grade
Mineralization category tonnes (grams/tonne)
Measured and
Oxide indicated 10.7 1.25
Oxide Inferred 9.0 1.1
Sulfide Inferred 9.3 2.5
Total 29.0 1.6
====== ====
A feasibility study on the development of the oxide resources was
updated in 1998 to include additional oxide resources identified
by a 21,000 meter drilling program completed in early 1998. The
feasibility study estimates gold production of approximately
40,000 ounces per year at an average operating cost of $173 per
ounce over a mine life in excess of six years. Pacific has been
granted a mining lease over these deposits by the government of
Papua New Guinea and has received all necessary operating
permits.
Sale of Ramu Nickel Project
Pacific agreed to sell its 31.5% interest in the Ramu Nickel-
Cobalt Project (Ramu) in November 1999, and closed the sale on
March 10, 2000. Pacific received $5.0 million from Orogen
Minerals Limited on closing, and is entitled to two additional
payments of $0.25 million upon the completion of financing and
upon achieving commercial production. Pacific incurred a loss on
the sale of $4.7 million which was recognized in the fourth
quarter of 1999.
Pacific also has interests in other properties, which will
require additional exploration in order to determine the
existence of commercial mineral deposits.
Sale of Sierra Rutile
On September 30, 1999 the Company sold its 50% ownership interest
in Sierra Rutile Limited and its related entities (SRL) to an
entity controlled by MIL (INVESTMENTS) S.A.R.L. (MIL), the
largest shareholder of the Company. The Company's interest in
SRL was sold to MIL pursuant to a Purchase and Sale Agreement
executed by the parties on June 16, 1999 (Purchase and Sale
Agreement). The total consideration paid to the Company by MIL
was (a) a cash payment of $1,250,000, (b) a 5% carried interest
in the acquiring entity, (c) the release of the Company from a
guaranty obligation of approximately $6,000,000 to the
development bank lenders to SRL, and (d) the redemption and
cancellation of MIL's 7,004,200 shares in the Company, which
shares represented approximately 29.8% of the issued and
outstanding shares of the Company.
SRL's primary asset is a titanium dioxide mining facility located
in Sierra Leone, West Africa. At that facility, SRL was
principally engaged in the mining and processing of rutile and
ilmenite, both industrial minerals, and was the largest producer
of natural rutile in the world until the mine was shut down in
1995 when it was overrun by rebel militia forces. The mine has
remained shut down since 1995. The Company engaged NM Rothschild
& Sons (Washington) LLC (Rothschild) to evaluate the fairness,
from a financial point of view, to the shareholders of the
consideration to be paid by MIL pursuant to the Purchase and Sale
Agreement. Rothschild is one of the world's leading independent
merchant banking organizations with substantial experience in
advising clients on mergers and acquisitions, divestitures,
project finance, equity offerings and other capital market
operations. In an opinion letter dated June 21, 1999, Rothschild
concluded that: "[T]he consideration to be paid by Buyer
pursuant to the Agreement in respect of the transaction is fair,
from a financial point of view, to the shareholders of Seller."
Under various agreements between the Corporation and MIL that
terminated upon the closing of the sale of SRL to MIL, MIL had
the right to nominate three persons to the Board, while the Board
(excluding the MIL nominees) retained the right to designate the
remaining four nominees. MIL was obligated to vote its shares
for the four Board nominees. In addition, the size of the Board
could not be increased or decreased without the approval of at
least two MIL nominees.
Discontinued Operations
On April 23, 1997, the Company sold for cash substantially all of
the assets (except for cash and accounts receivable) of its 80%-
owned kaolin and Norplexr operations (Nord Kaolin Company - NKC).
The purchaser has assumed certain reclamation and lease
obligations of NKC, while the Company settled NKC's remaining
liabilities. The financial statements of the Company reflect the
accounts of NKC as discontinued operations.
ITEM 2. PROPERTIES
Reference is made to Item 1 of this Form 10-K for information
concerning the nature and location of the properties of the
Company and its investees.
ITEM 3. LEGAL PROCEEDINGS
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders
during the fourth quarter of 1999.
PART II
ITEM 5.MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's common stock was traded on the New York Stock
Exchange until November 18, 1999. Thereafter, it has been traded
on the NASDAQ OTC Bulletin Board. The following table sets
forth, for the calendar periods indicated, the high and low
closing sale price of the Company's Common Stock on the New York
Stock Exchange Composite Tape (through November 18, 1999) and
thereafter on the NASDAQ OTC Bulletin Board;
1999 1998
High Low High Low
First Quarter 1 3/16 9/16 2 5/8 1 3/16
Second Quarter 3/4 5/16 2 7/8 1 3/4_
Third Quarter 9/16 1/4 2 5/16 1 1/16
Fourth Quarter 7/16 1/8 2 1/4 15/16
The approximate number of equity security holders at December 31,
1999 of the Company's Common Stock was 2,400.
The Company has never paid cash dividends on its Common Stock and
does not expect to do so in the immediate future.
ITEM 6. SELECTED FINANCIAL DATA
For the years ended December 31,
1999 1998 1997 1996 1995
(In thousands except per share amounts)
Summary of
Operations
Revenue $ 510 - - - -
Loss from continuing (3,867) (7,831) (12,041) (5,676) (52,203)
operations
Loss from
discontinued kaolin - - (271) (27,174 (3,295)
operations
Net loss $ (3,867) (7,831) (12,312) (32,850) (56,813)
Basic loss per
common share
From continuing $ (.18) (.36) (.55) (.30) (3.30)
operations
From discontinued - - (.01) (1.43) (.29)
operations
Net loss per $ (.18) (.36) (.56) (1.73) (3.59)
common share
Year ended December 31,
1999 1998 1997 1996 1995
(In thousands except per share amounts)
Balance Sheet Data
Working capital $ 2,074 6,106 26,117 42,834 21,396
Total assets 14,203 18,391 39,090 54,722 69,222
Stockholders' 5,149 10,159 18,148 28,981 42,102
equity
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Act
of 1995. The statements contained in this report which are not
historical fact are "forward looking statements" that involve
various important risks, uncertainties, and other factors which
could cause the Company's actual results for 1999 and beyond to
differ materially from those expressed in such forward looking
statements. These important factors include, without limitation,
the risks and factors set forth below in "Economic Outlook" as
well as other risks previously disclosed in the Company's
securities filings.
Results of Operations
The Company incurred a loss from continuing operations for the
year ended December 31, 1999 of $3,867,000, compared to losses of
$7,831,000 in 1998 and $12,312,000 in 1997. Selling, general and
administrative expenses (SG&A) fell slightly for the year ended
December 31, 1999 compared to 1998, as decreases in accounting
expenses, professional fees, public relations costs and
recognition of bad debt offset increases in deferred compensation
costs. Contributing to the increase in SG&A from 1997 to 1998
were non-recurring moving costs related to the Company's move of
its corporate office and employees to Albuquerque, New Mexico and
costs associated with the preparation of the SRL insurance claim.
Interest income decreased to $267,000 for the year ended December
31, 1999 compared to $782,000 in 1998 and $1,223,000 in 1997 due
to reduced funds available for investment in 1999 compared to
1998 and 1997. The Company's losses related to its investment in
SRL were $523,000 for the year ended December 31, 1999, compared
to a loss of $5,001,000 in 1998 and a loss of $8,645,000 in 1997.
The Company was engaged in attempting to restart the mine in
1997, significantly increasing expenses and the loss incurred by
SRL. This activity was curtailed in 1998 with increased rebel
activity in Sierra Leone. Equity in the net loss from Pacific
was $3,065,000 for the year ended December 31, 1999 compared to
equity in net earnings of $38,000 in 1998 and equity in net loss
of $949,000 in 1997. Pacific's earnings in 1999 were affected by
a decline in both copper prices and copper production, while the
loss in 1997 included the impairment of a gold project in
development.
Liquidity and Capital Resources
The Company's independent accountants have included in their
opinion on the Company's financial statements an explanatory
paragraph discussing the uncertainty regarding the Company's
ability to continue as a going concern.
During 1999 the Company acquired the Johnson Camp Mine and
commenced activities to resume mining operations there.
Currently the Company is producing copper from ore stacked on the
leach pads prior to the Company's acquisition of the property.
The Company is currently updating a study to determine the
feasibility of resuming mining operations and is attempting to
obtain financing for the project. The ability of the Company to
resume mining operations is dependent on obtaining sufficient
financing for the project, of which there can be no assurance.
Revenue from the mine is currently not sufficient to cover the
costs of operating the mine and the Company's overhead costs. If
the Company is unable to resume mining operations and achieve
profitability, it will be required to seek other sources of
revenue or additional capital to fund its operations.
The Company's financial statements have been prepared assuming
that the Company will continue as a going concern. The Company
has suffered recurring losses from its operations which raises
substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any
adjustments that might result from the outcome of this
uncertainty.
The Company's operating activities used cash of $5,312,000 for
the year ended December 31, 1999, compared to cash provided by
operations of $4,919,000 in 1998 and cash used in operations of
$11,901,000 in 1997. Cash used by operations included advances
to Pacific of $935,000 in 1999, $345,000 in 1998 and $98,000 in
1997. Cash used by operations in 1999 also included $862,000 in
expenses at Johnson Camp, net of sales of copper. Cash provided
by operations in 1998 included the receipt of a $14,205,000
insurance claim for damage caused by the rebel incursion at SRL.
Cash used in operations in 1997 included cash used in
discontinued operations of $1,033,000. Cash used in operating
activities included advances to SRL of $5,001,000 in 1998 and
$8,645,000 in 1997, which were amounts used to fund SRL's
operations and interest payments due on its loans.
Cash provided by investing activities in 1999 included $1,075,000
in net proceeds from the sale of SRL. Cash used in investing
activities in 1999 included $452,000 related to the purchase of
Johnson Camp and for operating equipment. Cash used in investing
activities included reductions in loan obligations to RL's
lenders of $12,476,000 in 1998 and $3,089,000 in 1997. Capital
expenditures for leasehold improvements and furniture and
equipment were $132,000 in 1998 and $44,000 in 1997, primarily
incurred in opening the Company's office in Albuquerque. Net
proceeds from the April 1997 sale of the assets of Nord Kaolin
Company were $10,528,000. In connection with this sale,
previously restricted investments became unrestricted, and were
subsequently sold for $2,376,000 in 1997. Cash used in investing
activities also included increases in other assets of $1,203,000
in 1997, primarily representing funds deposited in non-qualified
trusts designated for funding of retirement benefits.
Cash provided by financing activities includes $151,000 in 1997
arising from the exercise of stock options.
As a result of the sale of the Company's interest in SRL, the
Company's assets currently consist of the Johnson Camp mine and a
28.5% interest in Pacific. At December 31, 1999 the Company had
working capital of $2,074,000, compared to $6,106,000 at December
31, 1998. The Company will need to raise capital to fund its
administrative and operating activities for the next year, either
from the sale of its interest in Pacific or from other sources.
The Company's ability to raise the capital required to develop
Johnson Camp is highly uncertain, and is very dependent on the
price of copper and the availability of capital to junior mining
companies, such as the Company.
New Accounting Pronouncements
In June 1998, the FASB issued SFAS No. 133, Accounting for
Derivative Instruments and Hedging Activities. SFAS No. 133
establishes standards for derivative instruments, including
certain derivative instruments imbedded in other contracts, and
for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of
financial position and measure those instruments at fair value.
This statement is effective for all fiscal quarters of fiscal
years beginning after June 15, 1999. Since the Company does not
participate in hedging activities, SFAS 133 will have no effect
on the Company's financial statements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements as of December 31, 1999 and 1998 and for
each of the years in the three-year period ended December 31,
1999 follow.
Independent Auditors' Report
The Board of Directors
Nord Resources Corporation:
We have audited the accompanying balance sheets of Nord Resources
Corporation and subsidiaries as of December 31, 1999 and 1998,
and the related statements of operations, stockholders' equity,
and cash flows for each of the years in the three-year period
ended December 31, 1999. These consolidated financial statements
are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Nord Resources Corporation and subsidiaries as of December 31,
1999 and 1998 and the results of their operations and their cash
flows for each of the years in the three-year period ended
December 31, 1999, in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed
in note 1, the Company has suffered recurring losses from
operations which raises substantial doubt about its ability to
continue as a going concern. Management's plans in regards to
this matter are also described in note 1. The financial
statements do not include any adjustments that might result from
the outcome of this uncertainty.
KPMG LLP
Denver, Colorado
April 5, 2000
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands)
Assets 1999 1998
Current assets:
Cash and cash equivalents $ 1,491 6,136
Trade accounts receivable 76 0
Receivable from Nord Pacific Limited (Pacific) (note 4) 1,378 443
Other accounts receivable 41 29
Inventories 68 0
Prepaid expenses 54 73
Total current assets 3,108 6,681
Investment in Pacific (note 4) 2,668 5,733
Property and equipment, at cost less accumulated
depreciation (note 5) 2,741 247
Other assets (note 6) 5,686 5,730
$ 14,203 18,391
Liabilities and Stockholders' Equity
Current liabilities:
Current portion of long-term debt (note 2) $ 500 0
Accounts payable 148 471
Accrued expenses 386 104
Total current liabilities 1,034 575
Long-term debt (note 2) 1,050 0
Retirement benefit obligations (note 7) 6,970 7,657
Stockholders' equity (notes 4, 7 and 9):
Common stock, par value $.01 per share. Authorized
50,000,000 shares; issued and outstanding 16,501,288
shares in 1999 and 21,905,488 shares in 1998 165 219
Additional paid-in capital 79,667 81,539
Accumulated deficit (74,581) (70,714)
Accumulated other comprehensive loss (note 1) (102) (885)
5,149 10,159
Commitments (notes 2, 7 and 11)
$ 14,203 18,391
See accompanying notes to consolidated financial statements.
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1999 , 1998 and 1997
(In thousands)
1999 1998 1997
Sales $ 510 0 0
Costs and expenses:
Cost of sales (1,537) 0 0
Selling, general and administrative (3,235) (3,630) (3,548)
Total costs and expenses (4,772) (3,630) (3,548)
Operating loss (4,262) (3,630) (3,548)
Other income (expense):
Interest and other income 351 853 1,269
Interest expense (70) (91) (168)
Gain on sale of SRL (note 3) 3,702 0 0
Losses relating to investment in SRL (note 3) (523) (5,001) (8,645)
Equity in earnings (loss) of Pacific, including
cumulative effect of change in accounting
of $1,242,000 in 1999 (note 4) (3,065) 38 (949)
Total other income (expense) 395 (4,201) (8,493)
Loss from continuing operations (3,867) (7,831) (12,041)
Loss from discontinued operations (note 10) 0 0 (271)
Net loss $ (3,867) (7,831) (12,312)
Loss per share:
From continuing operations $ (0.18) (0.36) (0.55)
From discontinued operations 0.00 0.00 (0.01)
Net loss $ (0.18) (0.36) (0.56)
Weighted average shares of common stock
outstanding 21,028 21,905 21,875
See accompanying notes to consolidated financial statements.
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999, 1998 and 1997
(In thousands)
Retained Accumulated
Common stock Additional earnings other
outstanding paid-in (accumulated comprehensive
Shares Amount capital deficit) income (loss)
Balance, December 31, 1996 21,838,408 $ 218 79,196 (50,571) 138
Net loss 0 0 0 (12,312) 0
Stock options exercised (note 9) 67,080 1 150 0 0
Adjustment resulting from issuance of
securities by Pacific (note 4) 0 0 2,185 0 0
Minimum pension liability (note 7) 0 0 0 0 (857)
Balance, December 31, 1997 21,905,488 219 81,531 (62,883) (719)
Net loss 0 0 0 (7,831) 0
Compensation related to options issued
to non-employees 0 0 8 0 0
Minimum pension liability (note 7) 0 0 0 0 (166)
Balance, December 31, 1998 21,905,488 219 81,539 (70,714) (885)
Net loss 0 0 0 (3,867) 0
Common shares issued for Johnson Camp
acquisition (note 2) 1,600,000 16 684 0 0
Common shares reacquired and canceled (note 3) (7,004,200) (70) (2,556) 0 0
Minimum pension liability (note 7) 0 0 0 0 783
Balance, December 31, 1999 16,501,288 $ 165 79,667 (74,581) (102)
See accompanying notes to consolidated financial statements.
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(In thousands)
1999 1998 1997
Operating activities:
Net loss $ (3,867) (7,831) (12,312)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Gain on sale of SRL (3,702) 0 0
Equity in net loss (earnings) of Pacific 3,065 (38) 949
Provision for retirement benefits, net of payments 96 (832) 479
Depreciation 209 35 21
Provision for impairment of assets 0 11 50
Compensation expense for options issued to non-employees 0 8 0
Loss from discontinued operations 0 0 271
Change in assets and liabilities, excluding effects of acquisitions,
dispositions, discontinued operations and other non-cash items:
Accounts receivable - insurance claim 0 14,205 0
Receivable from Pacific (935) (345) (669)
Other accounts receivable (87) 0 0
Inventories (68) 0 0
Prepaid expenses 18 93 (3)
Accounts payable (323) 378 16
Accrued expenses 282 (765) 330
Net cash used in discontinued operations 0 0 (1,033)
Net cash provided by (used in) operating activities (5,312) 4,919 (11,901)
Investing activities:
Proceeds from sale of SRL, net 1,075 0 0
Reduction in obligation under guarantee of loans payable by SRL 0 (12,476) (3,089)
Proceeds from sale of investment in Manatee 0 954 180
Proceeds from sale of short-term investments 0 0 2,376
Purchases of property and equipment (452) (132) (44)
Decrease (increase) in other assets 44 290 (1,203)
Proceeds from sale of discontinued operations, net 0 0 10,528
Net cash provided by (used in) investing activities 667 (11,364) 8,748
Financing activities -
issuance of common stock for options exercised 0 0 151
Net cash provided by financing activities 0 0 151
Decrease in cash and cash equivalents (4,645) (6,445) (3,002)
Cash and cash equivalents - beginning of year 6,136 12,581 15,583
Cash and cash equivalents - end of year $ 1,491 6,136 12,581
Non-cash transactions:
Issuance of common stock and notes payable for mining property $ 2,251 0 0
Common stock received on sale of SRL 2,627 0 0
See accompanying notes to consolidated financial statements.
(1) Summary of Significant Accounting Policies
(a)Company Description and Basis of Presentation
The Company owns a 28.5% interest in Nord Pacific Limited
(Pacific), a publicly owned mining and exploration
company engaged in the production of copper in Australia
and the exploration for gold, copper, and other minerals
in Australia, Papua New Guinea and North America. The
Company also owns a 100% interest in Nord Copper
Corporation which owns a copper mine in Arizona. The
Company's 50% interest in Sierra Rutile Holdings Limited
was disposed of during 1999.
The consolidated financial statements include the
accounts of Nord Resources Corporation and its
subsidiaries (collectively, the Company). All significant
intercompany transactions and balances are eliminated in
consolidation.
Investments in 20% to 50%-owned affiliates and joint
ventures are accounted for using the equity method.
Changes in the Company's proportionate share of the
underlying equity of an equity method investee, which
result from the issuance of additional securities by such
equity investee, are recognized as increases to or
reductions of additional paid-in capital in the
consolidated statements of stockholders' equity.
(b) Liquidity and Future Operations
During 1999 the Company acquired the Johnson Camp Mine
(see note 2) and commenced activities to resume mining
operations there. Currently the Company is producing
copper from ore stacked on the leach pads prior to the
Company's acquisition of the property. The Company is
currently updating a study to determine the feasibility
of resuming mining operations and is attempting to obtain
financing for the project. The ability of the Company to
resume mining operations is dependent on obtaining
sufficient financing for the project, of which there can
be no assurance.
Revenue from the mine is currently not sufficient to
cover the costs of operating the mine and the Company's
overhead costs. If the Company is unable to resume
mining operations and achieve profitability, it will be
required to seek other sources of revenue or additional
capital to fund its operations.
These financial statements have been prepared assuming
that the Company will continue as a going concern. The
Company has suffered recurring losses from its operations
which raises substantial doubt about the Company's
ability to continue as a going concern. The financial
statements do not include any adjustments that might
result from the outcome of this uncertainty.
(c)Uses of Estimates
The preparation of these financial statements in
conformity with generally accepted accounting principles
requires management of the Company to make estimates and
assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the
reporting period. These estimates include losses related
to discontinued operations and rates of discounting and
salary escalation and other actuarial assumptions used to
evaluate retirement benefits. Estimates of mineral
reserves are used as a basis for amortization of certain
of the Company's long-lived assets.
(d)Cash Equivalents
The Company considers all highly liquid investments with
a maturity of three months or less when purchased to be
cash equivalents.
(e)Investments in Mining Companies
The Company evaluates the carrying value of its
investments in mining companies whenever events or
changes in circumstances indicate that carrying amount of
the investment may not be recoverable. A loss in the
value of an investment that is other than a temporary
decline is recognized by recording a provision for
impairment to reduce the carrying value of the investment
to its estimated fair value.
(f)Property, Plant and Equipment
Equipment is depreciated using the straight-line method
over the estimated useful lives of the assets which range
from two to five years. Leasehold improvements are
amortized over the five-year term of the office lease.
Mineral properties are amortized over the life of the
mine using the units of production method. Buildings and
mining equipment are depreciated over the shorter of
their estimated useful lives, or over the life of the
mine using the units of production method.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of
The Company accounts for long-lived assets in accordance
with the provisions of SFAS No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of. This Statement requires that long-
lived assets and certain identifiable intangibles be
reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an
asset may not be recoverable. Recoverability of assets
to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be
recognized is measured by the amount by which the
carrying amount of the assets exceed the fair value of
the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to
sell.
(h)Accounting for Stock-Based Compensation
The Company measures compensation cost for stock options
issued to employees using the intrinsic value based
method under Accounting Principles Board (APB) Opinion
No. 25, Accounting for Stock Issued to Employees.
(i)Earnings (Loss) Per Share
Basic earnings (loss) per common share is computed by
dividing net earnings (loss) by the weighted average
number of common shares outstanding during the year.
Diluted earnings (loss) per share is calculated based on
the weighted average number of common shares outstanding
adjusted for the dilutive effect, if any, of stock
options and warrants outstanding. Outstanding options to
purchase 1,425,800, 1,644,371, and 1,529,371 shares of
common stock for the years ended December 31, 1999, 1998
and 1997, respectively, are not included in the
computation of diluted loss per share as the effect of
the assumed exercise of these options would be
antidilutive.
(j)Comprehensive Income (Loss)
The components of total comprehensive income (loss) for
the years ended December 31, 1997, 1998 and 1999 consist
of net earnings (loss), foreign currency translation and
changes in the unfunded pension liability as follows:
Accumulated Total
Foreign Unfunded other Net comprehensive
currency pension comprehen- earnings income
translation liablility sive
income(loss) (loss) (loss)
Balance at $281 (143) 138 (50,571) (50,433)
December 31, 1996
1997 activity - (857) (857) (12,312) (13,169)
Balance at 281 (1,000) (719) (62,883) (63,602)
December 31, 1997
1998 activity - (166) (166) (7,831) (7,997)
Balance at 281 (1,166) (885) (70,714) (71,599)
December 31, 1998
1999 activity - 783 783 (3,867) (3,084)
Balance at $281 (383) (102) (74,581) (74,683)
December 31, 1999
(k)Reclassifications
Certain reclassifications have been made in the 1998 and
1997 consolidated financial statements to conform to the
classifications used in 1999.
(2)
Acquisition of Johnson Camp Mine
In June 1999, Nord Copper Corporation acquired a copper mine
and related assets (Johnson Camp Mine) in Arizona, from
Arimetco, Inc. At the time of the acquisition, Summo USA
Corporation had entered into a purchase agreement to acquire
the Johnson Camp Mine from Arimetco. The Company paid
Arimetco $310,000 and issued a promissory note payable to
them in the amount of $1,550,000. The note is payable in
installments of $500,000, $500,000 and $550,000, due on June
8, 2000, June 8, 2001 and June 8, 2002, respectively,
together with interest at the rate of 8% per annum payable
quarterly. The note is secured by a lien on the Johnson Camp
Mine. The Company also agreed to pay Arimetco up to an
additional $1,000,000 from revenues from the Johnson Camp
Mine, at a rate of $0.02 per pound for all copper sold, but
only if the market price is in excess of $1.00 per pound. In
connection with the acquisition, the Company also issued
1,600,000 shares of its common stock to Summo. The shares
were valued based on the quoted market price of the Company's
common stock.
Under an agreement with Pacific, the Company has agreed to
pay Pacific 20% of the cash flow after the Company has
recovered its investment in the Johnson Camp mine as
consideration for assisting in identifying and assessing the
opportunity and participating in the management of the mine.
Also in connection with the acquisition, the Company entered
into a consent decree with the Arizona Department of
Environmental Quality. The Company has agreed to upgrade and
improve certain of the facilities and complete certain
remediation activities at the property by September 2000.
The estimated cost to complete the upgrades and improvements
and to perform the remediation activities is approximately
$1,500,000. The Company is subject to fines if it fails to
comply with the terms of the consent decree.
(3) Sale of SRL and its Subsidiaries and Affiliates
The Company owned a 50% interest in Sierra Rutile Holdings
Limited, which in turn owned 100% of Sierra Rutile Limited
and Sierra Rutile America, and 50% interests in Sierra Rutile
Services Limited, Titanium Minerals Marketing International
and Titanium Minerals Marketing International, USA
(collectively, SRL). SRL produced and marketed rutile and
ilmenite (titanium dioxide) from its rutile operation located
in Sierra Leone, West Africa. These products were sold
primarily to the paint pigment industry in the United States,
Europe and the Far East. In January 1995, rebel forces
attacked SRL's mining operation in Sierra Leone, which had
been in operation since 1978. As a result, SRL was forced to
suspend mining operations and subsequently terminated all
nonessential personnel.
On September 30, 1999, the Company completed the sale of SRL
to MIL (Investments) S.A.R.L. (MIL), then a shareholder of
the Company. The Company's shareholders voted to approve the
sale on September 8, 1999. As consideration for the sale,
the Company received $1,250,000; 7,004,200 shares of its
common stock, representing all of the common shares owned by
MIL; and a release of the Company's guarantee of
approximately $6,000,000 of Sierra Rutile bank debt. The
Company also retained a 5% carried interest in the mine. The
shares of common stock received were valued based on the
quoted market price of the Company's common shares on
September 30, 1999. The shares received were subsequently
cancelled.
As a result of the initial rebel attack on SRL's mining
operations in Sierra Leone and the continuing uncertainty
resulting from the ongoing rebel activity in the country,
significant uncertainty existed as to the Company's ability
to recover its investment in SRL. Accordingly, the Company
previously recorded a provision for impairment of its
investment in SRL, including a provision for amounts it was
required to advance to SRL for the repayment of loans payable
by SRL which it had guaranteed. During 1999, 1998 and 1997,
the Company advanced to SRL $523,000, $17,477,000, and
$11,734,000, respectively, to fund its 50% share of SRL's
cash requirements, including debt service requirements,
vendor payments and ongoing operating expenses. Amounts
advanced to SRL which were used to reduce the principal
amounts of loans outstanding were recorded as a reduction of
the obligation under guarantee of loans payable by SRL.
Other amounts were charged to expense as they were advanced
to SRL.
The Company had certain amounts of insurance to cover risk of
loss on its investment in SRL due to political violence and
expropriation of SRL's assets. Under an insurance policy
provided by an agency of the United States government,
$15,705,000 of coverage was provided for the Company's share
of losses from political violence. The Company filed a claim
under this policy for its 50% share of losses resulting from
events which began in January 1995. In September 1996, the
Company received a $1,500,000 provisional payment from the
insurer under this policy. A further claim for the full
amount covered by the policy was filed in February 1998, and
the balance of $14,205,000 was received in May 1998. These
amounts totaling $15,705,000 were recorded as prior period
adjustment to the 1995 financial statements.
(4) Investment in Nord Pacific Limited
As of December 31, 1999 and 1998 the Company owns 3,697,561
shares of Pacific. The aggregate market value of the
Company's investment in Pacific at December 31, 1999 was
approximately $1,850,000 based on the average of the bid and
asked price at December 31, 1999 of $0.50 per share.
Accounts receivable from Pacific at December 31, 1999
includes a note receivable of $750,000 due September 30, 2000
with interest payable at 10%. Interest income on the note
for 1999 was $18,000. Subsequent to December 31, 1999, the
note was repaid in full. The remaining amounts receivable
from Pacific are on open account and do not bear interest.
These amounts represent amounts due under an agreement
entered into with Pacific in 1998 to share office space,
administrative personnel and other expenses on a 50/50 basis.
In 1997, the Company provided certain services to Pacific
under a management agreement. Under the terms of the
agreement, the Company received a monthly fee of $7,000 and
was reimbursed for all direct expenses incurred on behalf of
Pacific. The Company received $566,000 from Pacific under
this agreement in 1997.
On July 3, 1997, Pacific completed a public share offering in
Canada. The offering consisted of the sale of 2,460,000
units, consisting of one common share and one-half of one
purchase warrant. Each whole purchase warrant entitled the
holder to purchase one common share at C$9.00. Pacific also
issued warrants to purchase 225,000 shares at C$6.90 to the
underwriter. Gross proceeds from the
offering totaled $12,300,000. Pacific received net proceeds
of $10,684,000, after the payment of commissions, certain
legal fees and other related costs. All of the warrants
expired unexercised in 1998.
In 1997 and prior years, the Company advanced funds to
Pacific totaling $3,747,745. The advances were payable on
demand with interest at the prime rate plus 1%. In July and
August 1997, Pacific repaid $2,000,000 to the Company.
Concurrent with the closing of the offering, the Company
converted the remaining $1,747,745 due from Pacific into
349,549 units at $5.00 per unit.
In connection with the continuance of Pacific to the Province
of New Brunswick, Canada in 1998, Pacific has prepared its
financial statements in accordance with generally accepted
accounting principles in Canada (Canadian GAAP). The effects
on its financial statements of differences between these
principles and those that are generally accepted in the
United States (U.S. GAAP) are disclosed in the notes to
Pacific's financial statements. The following summarized
financial information, prepared in accordance with generally
accepted accounting principles in the United States, has been
derived from Pacific's financial statements.
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
Notes to Consolidated Finanical Statements
Years ended December 31, 1999, 1998 and 1997
Condensed Balance Sheets
December 31,
1999 1998
(In thousands)
Current assets $ 1,712 3,646
Property, plant and equipment 2,282 3,605
Deferred exploration, development other costs 15,626 24,908
$ 19,620 32,159
Current liabilities $ 8,055 4,949
Long-term debt 0 2,400
Payable on foreign currency contracts 0 1,144
Deferred income taxes 2,129 3,497
Retirement benefits 270 271
Total liabilities 10,454 12,261
Shareholders' equity 9,166 19,898
$ 19,620 32,159
Company's share of equity $ 2,668 5,733
Condensed Statements of Operations
Year ended December 31,
1999 1998 1997
(In thousands)
Sales $ 10,752 13,807 16,328
Costs and expenses (18,624) (13,610) (16,431)
Operating earnings (loss) (7,872) 197 (103)
Forward currency transaction gains (losses) (323) (589) 502
Foreign currency forward exchange contract
gains (losses) 901 (606) (2,399)
Copper contracts gains (losses) 0 0 372
Other income and expenses, net (451) (39) (14)
Income before income taxes (7,745) (1,037) (1,642)
Income tax benefit (provision) 1,368 1,110 (1,662)
Earnings (loss), before cumulative effect
of change in method of accounting (6,377) 73 (3,304)
Cumulative effect of change in method of
accounting for development costs (4,355) 0 0
Net earnings (loss) $ (10,732) 73 (3,304)
Company's share of net earnings (loss) $ (3,065) 38 (949)
(5) Property and Equipment
December 31,
1999 1998
(In thousands)
Land $ 187 100
Mineral properties 42 -
Building 789 -
Mining equipment 1,684 -
Other equipment 625 530
Leasehold improvements 130 130
3,457 760
Less accumulated depreciation and (716) (513)
depletion
$ 2,741 247
(6) Other Assets
December 31,
1999 1998
(In thousands)
Non-qualified trusts designated for
funding of retirement benefits
(note 7):
Investments held in trust $ 5,634 4,231
Cash surrender value of life
insurance, net of loans of - 1,428
$1,232,000 in 1998
Unamortized pension cost 52 71
$ 5,686 5,730
The Company, through its wholly owned subsidiary, Nord
Manatee Ltd., owned a 42% interest in approximately 200 acres
of undeveloped real estate. In 1997, the venture sold this
property for $2,769,000. The venture received $500,000 at
closing. The balance of the proceeds were received in
September 1998. The Company's share of the proceeds was
$954,000.
Interest on loans against the net cash surrender value of
life insurance policies of $117,000 and $118,000 was paid in
1998 and 1997, respectively.
(7) Retirement Benefits
The Company has an unfunded non-contributory defined benefit
plan for certain of its executive officers and management
personnel. The Company has non-qualified trusts which were
established in 1989 related to this plan, and the trusts hold
assets valued at $5,634,000 and $5,659,000 at
December 31, 1999 and 1998, respectively (see note 6).
Effective in 1995, the plan was amended to permit two
officers to elect upon their retirement to receive a
discounted lump sum distribution of their accumulated benefit
obligation, limited to the amounts held in the trusts, which
are designated for these officers. The Company contributed
$250,000 in 1999 to the trust designated for one of these
officers.
The following tables set forth the changes in the projected
benefit obligation for the years ended December 31, 1999,
1998 and 1997, and the funded status of the plan and the
amounts recognized in the Company's balance sheet at December
31, 1999 and 1998:
Year ended December 31,
1999 1998 1997
(In thousands)
Change in benefit
obligation:
Benefit obligation,
beginning of period $ 7,494 8,172 7,523
Service cost 16 16 115
Interest cost 490 539 544
Actuarial loss (gain) (713) 166 204
Benefits paid (474) (1,399) (214)
Benefit obligation, end of $ 6,813 7,494 8,172
period
December 31,
1999 1998
(In thousands)
Funded status:
Benefit obligation $ (6,813) (7,494)
Unrecognized net loss 383 1,166
Unrecognized prior service cost 52 71
Net amount recognized $ (6,378) (6,257)
Amounts recognized in the balance
sheet consist of:
Retirement benefits liability $ (6,813) (7,494)
Unamortized pension cost 52 71
Accumulated other comprehensive 383 1,166
income
Net amount recognized $ (6,378) (6,257)
The following tables set forth the components of net periodic
benefit costs and the actuarial assumptions used for the
years ended December 31, 1999, 1998 and 1997:
Year ended December 31,
1999 1998 1997
(In thousands)
Components of net periodic
benefit cost:
Service cost $ 16 16 115
Interest cost 490 539 544
Amortization of prior 19 19 19
service cost
Recognized net actuarial 70 - 6
loss
Net periodic $ 595 574 684
benefit cost
Assumptions:
Discount rate 7.75% 6.75% 7.00%
Rate of compensation - - -
increase
In addition, the Company has a nonqualified retirement plan
for certain former members of the Board of Directors. The
amounts accrued under this plan were $157,000 and $163,000 at
December 31, 1999 and 1998, respectively.
(8) Income Taxes
Tax effects of temporary differences that give rise to
significant portions of the deferred tax assets and deferred
tax liabilities are as follows:
December 31,
1999 1998
(In thousands)
Deferred tax assets:
Deferred compensation $ 2,439 2,680
Net operating loss carryforwards 13,243 11,918
Tax credit carryforwards 1,578 1,578
Capital loss carryforward 10,212 -
Other 48 250
27,520 16,426
Less valuation allowance (27,520) (16,426)
Net deferred tax assets $ - -
The Company has provided a valuation allowance against its
net deferred tax assets, since it is unlikely that the
benefits will be realized.
Income tax expense differed from the amount computed by
applying the U.S. statutory income tax rate of 35% to income
before income tax expense as a result of the following:
Year ended December 31,
1999 1998 1997
(In thousands)
Tax benefit at statutory rate $ (754) (2,741) (4,214)
Increase (decrease in taxes
resulting from:
Change in valuation 11,094 916 1,243
allowance
Foreign expenses not - 1,750 3,026
deductible for tax
Percentage depletion in - - (47)
excess of basis
Capital loss on sale of SRL
for tax purposes (10,212) - -
Other (128) 75 (8)
Income tax expense $ - - -
At December 31, 1999, the Company has net operating loss
carryforwards of approximately $37,800,000 which expire from
2012 to 2019. The Company has general business credit
carryforwards of $538,000, which expire from 2003 to 2016,
available to reduce the Company's future tax liability and
alternative minimum tax (AMT) credit carryforwards of
approximately $1,040,000 which may be carried forward
indefinitely to reduce future federal regular taxes.
(9) Stock Options
The Company has granted incentive and non-qualified stock
options for its employees and directors under the terms of
its various stock option plans. The Company has also granted
non-qualified, non-plan options which have been authorized by
the Company's Board of Directors.
Options are granted at an exercise price equal to or in
excess of the quoted market price on the date of grant.
Options are generally exercisable beginning one year from
date of grant and expire ten years from date of grant. At
December 31, 1999, 1,469,474 shares are available for future
option grants under the terms of the various plans.
A summary of the status of the Company's outstanding stock
options as of December 31, 1999, 1998 and 1997 and changes
during the years then ended follows:
Weighted
average
exercise
Options price
Outstanding at December 31, 1996 1,659,361 $ 5.99
Granted 1,290,773 5.11
Exercised (67,080) 2.25
Terminated (637,294) 5.86
Expired (716,389) 6.67
Outstanding at December 31, 1997 1,529,371 5.14
Granted 264,300 4.31
Expired 149,300 5.70
Outstanding at December 31, 1998 1,644,37 4.15
Granted 200,000 6.06
Terminated (5,000) 1.38
Expired (413,571 6.14
Outstanding at December 31, 1999 1,425,800 $ 4.78
1999 1998 1997
Weighted Weighted Weighted
average average average
Shares exercise Shares exercise Shares exercise
price price price
Options
exercisable
at year- 1,358,300 $ 4.73 1,374,371 $ 4.97 1,029,371 $ 5.19
end
The following table summarizes information about stock option
plans and non-plan options outstanding at December 31, 1999:
Exercise Weighted
prices Options average Options
per outstanding contract exercisable
share life
$ 1.38 40,000 8.08 22,500
1.75 50,000 9.42 -
2.00 50,000 8.08 50,000
2.25 15,000 5.85 15,000
3.25 200,000 7.39 200,000
4.00 250,000 3.40 250,000
4.13 1,500 7.05 1,500
4.63 15,000 6.86 15,000
4.88 33,750 .82 33,750
5.00 200,000 2.40 200,000
5.13 65,000 2.42 65,000
5.61 35,550 .08 35,550
6.00 200,000 2.40 200,000
6.13 30,000 6.42 30,000
6.67 90,000 .05 90,000
7.38 120,000 1.83 120,000
8.00 30,000 1.08 30,000
$ 1.38-8.00 1,425,800 4.93 1,358,300
Of the 1,425,800 options outstanding at December 31, 1999,
303,300 shares have been issued under the terms of the
Company's stock option plans. The remaining 1,122,500
options are non-qualified, non-plan options.
The Company applies APB Opinion No. 25 in accounting for its
stock option plans. Therefore, no compensation expense under
SFAS No. 123 has been recognized for options granted to
employees. Had compensation cost for the Company's option
grants in 1995 and subsequent years been determined based on
the fair value of the options at the grant dates consistent
with the provisions of SFAS No. 123, the Company's net loss
and net loss per common share would have been increased to
the pro forma amounts indicated below:
Year ended December 31,
1999 1998 1997
Net loss:
As reported $ (3,867) (7,831) (12,312)
Pro forma (3,883) (7,895) (12,404)
Loss per share:
As reported (.18) (.36) (.56)
Pro forma (.18) (.36) (.57)
The assumptions used in determining the fair value of options
granted during 1999, 1998 and 1997 are as follows:
Year ended December 31,
1999 1998 1997
Expected volatility $ 81% 73% 66%
Expected life of grant 5 years 5 years 5 years
Risk-free interest rate 6.50% 5.05% 6.39%
Expected dividend rate None None None
The weighted average fair value of options granted during the
years ended December 31, 1999, 1998 and 1997 was $6.06, $4.91
and $5.11, respectively.
(10) Discontinued Operations
During 1996, the Company committed to a formal plan to
dispose of its 80% owned subsidiary, Nord Kaolin Company
(NKC), which represented the Company's kaolin segment. On
April 23, 1997, the Company consummated the sale of
substantially all of the assets of NKC (except cash and
accounts receivable) for $20,000,000, less $735,000 relating
to certain liabilities assumed by the purchaser.
The purchaser assumed certain lease obligations of NKC and
NKC's obligations under a non-contributory defined benefit
plan covering hourly employees of NKC. Proceeds in 1997 from
this transaction totaled $10,500,000 including collection of
accounts receivable and less payment of NKC's liabilities and
other liabilities incurred as a result of this transaction.
A provision for loss on the disposal of the kaolin segment
was recorded in 1996, including a provision for estimated
losses to the disposal date. The provision included accruals
for estimated severance costs of approximately $800,000 and
estimated legal and other termination costs of $811,000.
Such amounts were paid in 1997. The provision for loss on
disposal in 1997 included $510,000 of additional severance
costs for which the Company was obligated as a result of the
termination of additional employees after the sale, offset by
an adjustment of $239,000 to the provision for estimated
losses to the disposal date.
(11) Commitments
The Company leases its office space and certain equipment
under operating leases. Certain of the leases contain
renewal options and escalation clauses. Minimum annual lease
payments under non-cancelable operating leases for the years
ended December 31 are as follows:
2000 $ 65,943
2001 65,845
2002 63,873
Thereafter 141,217
$ 336,878
Total rent expense for 1999, 1998 and 1997 was $101,000,
$101,000 and $192,000, respectively.
ITEM 9. CHANGES IN AND DISAGREEMENTS
WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
Not Applicable
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
ITEM 11. EXECUTIVE COMPENSATION
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by the above Items 10-13 is incorporated
by reference to the Company's Proxy Statement to be filed with
the Securities and Exchange Commission on or before April 30,
2000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) 1. Financial Statements:
The following consolidated financial statements of Nord
Resources Corporation as of December 31, 1999 and 1998 and
for each of the years in the three-year period ended
December 31, 1999 are included in Part II, Item 8 of this
Form 10-K:
Nord Resources Corporation:
Independent Auditors Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
The following consolidated financial statement of Nord
Pacific Limited as of December 31, 1999 and 1998 and for
each of the years in the three-year period ended December
31, 1999, required by rule 3.09 of Regulation S-X, are
included as an exhibit to this Form 10-K.
Nord Pacific Limited:
Independent Auditors' Report
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders' Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Independent Auditors' Report
Schedule II - Valuation and qualifying accounts
(b) Reports on Form 8-K:
A Form 8-K was filed on October 12, 1999, related to the sale
of SRL.
(c) Exhibits: See INDEX TO EXHIBITS
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORD RESOURCES CORPORATION
/s/ Edgar F. Cruft
Edgar F. Cruft
Chairman of the Board
April 12, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
/s/ W. Pierce Carson
W. Pierce Carson
Chief Executive Officer,
President and Director
/s/ John P. Griffith
John P. Griffith
Acting Chief Financial
Officer
April 12, 2000
/s/ Terence H. Lang
Terence H. Lang
Director
Frank J. Waldron
Director
/s/ Leonard Lichter
Leonard Lichter
Director
James Askew
Director
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
NORD RESOURCES CORPORATION
Edgar F. Cruft
Chairman of the Board
April 12, 2000
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
W. Pierce Carson
Chief Executive Officer,
President and Director
John P. Griffith
Acting Chief Financial
Officer
April 12, 2000
Terence H. Lang
Director
Frank J. Waldron
Director
Leonard Lichter
Director
James Askew
Director
Independent Auditors' Report
The Board of Directors and Stockholders
Nord Resources Corporation:
Under date of April 5, 2000, we have reported on the consolidated
balance sheets of Nord Resources Corporation and subsidiaries as
of December 31, 1999 and 1998, and the related consolidated
statements of operations, stockholder's equity, and cash flows
for each of the years in the three-year period ended December 31,
1999, which are included in the Company's annual report on Form
10-K. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related
consolidated financial statement schedule II - Valuation and
Qualifying Accounts. This financial statement schedule is the
responsibility of the Company's management. Our responsibility
is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material
respects, the information set forth therein.
KPMG LLP
Denver, Colorado
April 5, 1999
Schedule II
NORD RESOURCES CORPORATION
AND SUBSIDIARIES
Valuation and Qualifying Accounts
(In thousands)
Column A Column B Column C Column D Column E
Additions
Balance at charge to Balance
beginning costs and at end
Description of period expenses Deductions of period
Year ended December 31, 1999
Investment valuation allowance - SRL $ 32,463 0 (32,463) 0
Year ended December 31, 1998
Estimated loss on disposal, including
provision for estimated operating
losses to disposal date $ 21,412 271 21,683 0
Investment valuation allowance -
Manatee Gateway $ 2,394 0 2,394 0
Investment valuation allowance - SRL $ 32,463 0 0 32,463
Obligation under guarantee of loans
payable by SRL $ 12,476 0 12,476 0
Year ended December 31, 1997
Estimated loss on disposal, including
provision for estimated operating
losses to disposal date $ 0 21,412 0 21,412
Investment valuation allowance -
Manatee Gateway $ 2,394 0 0 2,394
Investment valuation allowance -
ilenite equipment $ 855 280 1,135 0
Investment valuation allowance - SRL $ 32,463 0 0 32,463
Obligation under guarantee of loans
payable by SRL $ 15,565 0 3,089 12,476
1 - Equipment written off against the provision for impairment
Independent Auditors' Report
The Board of Directors
Nord Pacific Limited:
We have audited the accompanying consolidated balance sheets of
Nord Pacific Limited and subsidiaries as of December 31, 1999 and
1998, and the related consolidated statements of operations,
stockholders' equity, and cash flows for the years then ended.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial
position of Nord Pacific Limited and subsidiaries as of December
31, 1999 and 1998, and the results of their operations and their
cash flows for the years then ended in conformity with generally
accepted accounting principles in Canada.
Accounting principles generally accepted in Canada vary in
certain significant respects from accounting principles generally
accepted in the United States. Application of accounting
principles generally accepted in the United States would have
affected results of operations for the years ended December 31,
1999 and 1998 and stockholders' equity as of December 31, 1999
and 1998, to the extent summarized in note 14 to the consolidated
financial statements.
KPMG LLP
Denver, Colorado
April 5, 2000
Independent Auditor's Report
Board of Directors and Shareholders
Nord Pacific Limited:
We have audited the accompanying consolidated statements of
operations, shareholders' equity, and cash flows of Nord Pacific
Limited and subsidiaries (the Company) for the year ended
December 31, 1997 (all expressed in U.S. dollars). These
consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our
audit.
We conducted our audit in accordance with auditing standards
generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated statements of operations,
shareholders' equity and cash flows present fairly, in all
material respects, the results of the operations and cash flows
of the Company for the year ended December 31, 1997 in conformity
with accounting principles generally accepted in Canada.
DELOITTE & TOUCHE
Chartered Accountants
Hamilton, Bermuda
March 20, 1998
NORD PACIFIC LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands of U.S. Dollars)
Assets 1999 1998
Current assets:
Cash and cash equivalents $ 102 1,416
Accounts receivable:
Trade 950 1,384
Other, including joint venture partner 146 402
Inventories:
Copper metal 260 191
Supplies 175 166
Prepaid expenses 79 87
Total current assets 1,712 3,646
Deferred costs associated with ore under leach, net of accumulated
amortization of $22,740 in 1999 and $16,192 in 1998 (note 2) 8,228 9,413
Property, plant and equipment at cost less
accumulated depreciation (note 3) 2,282 3,605
Deferred exploration and development costs:
Girilambone, net of accumulated amortization of $4,434 in
1999 and $2,917 in 1998 (note 2) 2,045 3,527
Exploration and development prospects (note 4) 15,591 19,141
Other assets 103 71
$ 29,961 39,403
See accompanying notes to consolidated financial statements.
NORD PACIFIC LIMITED
AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1999 and 1998
(In thousands of U.S. Dollars)
Liabilities and Stockholders' Equity 1999 1998
Current liabilities:
Accounts payable:
Trade $ 1,356 1,715
Affiliates 2,091 594
Accrued expenses 1,058 484
Current maturities of long-term debt (note 5) 2,400 600
Payable on foreign currency contracts (note 6) 1,150 1,556
Total current liabilities 8,055 4,949
Long-term liabilities:
Long-term debt (note 5) 0 2,400
Payable on foreign currency contracts (note 6) 0 1,144
Deferred income tax liability (note 11) 4,019 5,300
Retirement benefits (note 12) 270 271
Total long-term liabilities 4,289 9,115
Stockholders' equity (notes 7 and 9):
Common shares, no par value; unlimited authorized shares.
Issued and outstanding 12,960,803 shares in 1999 and 1998 47,375 47,375
Accumulated deficit (30,556) (22,834)
Foreign currency translation adjustment 798 798
Total stockholders' equity 17,617 25,339
Commitments and contingent liabilities (notes 8, 12, 13 and 15)
$ 29,961 39,403
See accompanying notes to consolidated financial statements.
NORD PACIFIC LIMITED
AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997
(In thousands of U.S. dollars, except share and per share amounts)
1999 1998 1997
Sales (note 10) $ 10,752 13,807 16,328
Costs and expenses:
Cost of sales (note 2) 12,827 10,251 8,696
Abandoned and impaired properties (note 4) 4,750 96 14,293
General and administrative:
Nord Resources Corporation (note 7) 0 0 566
Other 2,305 2,941 3,261
Total costs and expenses 19,882 13,288 26,816
Operating earnings (loss) (9,130) 519 (10,488)
Other income (expense):
Interest and other income (expense), net (149) 233 357
Interest expense and amortization of debt
issuance costs (302) (272) (371)
Foreign currency forward exchange contract
gains (losses) (note 6) 901 (606) (2,399)
Foreign currency transaction gains (losses) (323) (589) 502
Copper contracts gains (losses) (note 6) 0 0 372
Total other income (expense) 127 (1,234) (1,539)
Earnings (loss) before income taxes (9,003) (715) (12,027)
Income taxes (note 11) (1,281) (740) 2,300
Net earnings (loss) $ (7,722) 25 (14,327)
Earnings (loss) per common share $ (0.60) -* (1.31)
Weighted average common shares outstanding 12,961,000 12,961,000 10,935,000
* Less than $.01 per share
See accompanying notes to consolidated financial statements.
NORD PACIFIC LIMITED
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended December 31, 1999, 1998 and 1997
(In thousands of U.S. dollars, except shares)
Common stock Common Additional
outstanding shares paid-in Accumulated
Shares Amount subscribed capital deficit
Balance, December 31, 1996 9,515,654 $ 476 0 31,467 (8,532)
Net loss 0 0 0 0 (14,327)
Exercise of options 35,600 2 0 153 0
Common shares issued in public offering, net of offering costs 2,460,000 123 0 10,561 0
Compensation relating to options issued to non-employees 0 0 0 110 0
Conversion of debt to common shares 349,549 17 0 1,731 0
Common shares subscribed 0 0 2,700 0 0
Compensation relating to options issued 0 0 0 (23) 0
Balance, December 31, 1997 12,360,803 618 2,700 43,999 (22,859)
Net earnings 0 0 0 0 25
Issuance of common shares subscribed 600,000 30 (2,700) 2,670 0
Costs related to common shares subscribed 0 0 0 (4) 0
Compensation relating to options issued to non-employees 0 0 0 62 0
Change in par value of common shares from $.05 per share
to no par value 0 46,727 0 (46,727) 0
Balance, December 31, 1998 12,960,803 47,375 0 0 (22,834)
Net loss 0 0 0 0 (7,722)
Balance, December 31, 1999 12,960,803 $ 47,375 0 0 (30,556)
See accompanying notes to consolidated financial statements.
NORD PACIFIC LIMITED
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
(In thousands of U.S. dollars)
1999 1998 1997
Operating activities:
Net earnings (loss) $ (7,722) 25 (14,327)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Depreciation 1,328 1,573 1,148
Amortization 8,106 6,619 3,565
Abandoned and impaired properties 4,750 96 14,293
Compensation relating to stock options issued 0 62 110
Unrealized loss (gain) on foreign currency contracts (1,550) 606 2,399
Foreign currency transaction gain 0 0 (502)
Deferred income taxes (1,281) (740) 2,300
Provision (credit) for retirement benefits (1) 167 104
Derivative financial instruments 0 0 (372)
Change in assets and liabilities:
Accounts receivable 690 (330) 146
Inventories (78) (16) (9)
Other assets (73) 0 0
Prepaid expenses 8 50 (42)
Accounts payable 203 823 (319)
Accrued expenses and other liabilities 524 (1,760) 374
Net cash provided by operating activities 4,904 7,175 8,868
Investing activities:
Capital expenditures (5) (440) (473)
Deferred exploration and development costs (1,235) (6,726) (10,720)
Deferred costs associated with ore under leach (5,363) (5,117) (4,023)
Net cash used in investing activities (6,603) (12,283) (15,216)
Financing activities:
Borrowing of long-term debt 400 1,521 2,981
Repayments of long-term debt (1,000) (1,383) (5,153)
Advances on copper sales 50 0 0
Advances from Nord Resources Corporation, net 935 343 669
Issuance of common shares for cash 0 2,700 12,300
Costs associated with issuance of common shares 0 (4) (1,735)
Stock options exercised 0 0 155
Net cash provided by financing activities 385 3,177 9,217
Effect of exchange rate changes on cash and cash equivalents 0 (4) 43
Increase (decrease) in cash and cash equivalents (1,314) (1,935) 2,912
Cash and cash equivalents - beginning of year 1,416 3,351 439
Cash and cash equivalents - end of year $ 102 1,416 3,351
Cash paid for interest $ 53 241 371
Non-cash transactions:
Conversion of long-term debt due to Nord Resources
Corporation into common stock (note 7) $ 0 0 1,748
Common stock subscribed $ 0 0 2,700
See accompanying notes to consolidated financial statements.
(1) Summary of Significant Accounting Policies
(a) Company Description and Basis of Presentation
Nord Pacific Limited and its subsidiaries (collectively,
the Company) are engaged in the production of copper and
in the exploration for gold, copper, and other minerals
in Australia, Papua New Guinea (PNG), and North America.
In June 1998, the Company's shareholders approved the
discontinuance of the Company from Bermuda and approved
its continuance into the Province of New Brunswick,
Canada, effective September 30, 1998. As a Canadian
Company, the Company is required to report its financial
statements in accordance with generally accepted
accounting principles in Canada. These principles differ
in certain respects from those in the United States as
described in Note 14.
(b) Principles of Consolidation
The consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries,
and its 40% interest in the Girilambone copper property
in Australia and its 50% interest in the Girilambone
North Project (collectively Girilambone). The financial
statements include the Company's proportionate share of
the assets, liabilities and operations of Girilambone.
All significant intercompany accounts and transactions
are eliminated at consolidation.
(c) 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.
(d) Cash and Cash Equivalents
The Company considers all investments with an original
maturity of three months or less to be cash equivalents.
The carrying amount of cash and cash equivalents
approximates fair value.
(e) Inventories
Inventories are valued at the lower of cost (first-in,
first-out method) or market.
(f) Deferred Costs Associated with Ore Under Leach
Costs at Girilambone incurred with respect to ore under
leach are deferred and amortized using the units of
production method over the remaining estimated reserves.
The Company continually evaluates and refines estimates
used to determine the amortization and carrying amount of
deferred costs associated with ore under leach based upon
actual copper recoveries and mine operating plans.
(g) Property, Plant and Equipment
Plant, mining and milling equipment at Girilambone is
depreciated using the units-of-production method over the
estimated remaining reserves. Furniture and fixtures are
depreciated using the straight-line method over the
estimated useful lives of the assets which range from two
to five years.
(h) Deferred Exploration and Development Costs
All costs directly attributable to exploration and
development are deferred. Costs related to producing
properties are amortized using the units-of-production
method over the estimated recoverable reserves. Deferred
costs are carried at cost, not in excess of anticipated
future recoverable value, and are expensed when a project
is no longer considered commercially viable.
(i) Impairment of Mining Properties and Projects
Mining projects and properties are reviewed for
impairment whenever events or changes in circumstances
indicate that the carrying amount of these assets may not
be recoverable. Events or circumstances that may
indicate that the carrying amount may not be recoverable
include a significant decrease in current or forward
commodity prices, a significant reduction in estimates of
proven and probable reserves, and significant increases
in operating costs, capital requirements or reclamation
costs. If estimated future cash flows expected to result
from the use of the mining project or property and its
eventual disposition are less than the carrying amount of
the mining project or property, an impairment is recorded
to reduce the carrying amount of the mining project or
property to its estimated net recoverable amount.
Impairments are generally assessed for each individual
mining project, except where it is not practical to
separately identify the net recoverable amount of related
properties which are operated on a combined basis.
(j) Debt Issuance Costs
Professional fees and other costs relating to the
issuance of debt are capitalized and amortized over the
term of the related borrowings.
(k) Foreign Currency Translation
The functional currency for operations conducted in
Australia is the U.S. dollar. Adjustments to monetary
assets and liabilities denominated in Australian dollars
as a result of changes in the exchange rate between U.S.
dollars and Australian dollars are recognized currently
in the statement of operations as foreign currency
transaction gains and losses.
(l) Financial Instruments
Gains and losses related to qualifying hedges of
anticipated copper sales are deferred and recognized in
the statement of operations as a component of sales at
the settlement date. Option premiums paid are deferred
until the date of settlement or expiration of the option.
Realized and unrealized gains and losses on foreign
currency forward exchange contracts and other derivative
financial instruments that do not qualify as hedges are
recognized currently in the statement of operations.
Unrealized gains or losses are included as assets or
liabilities in the balance sheet.
(m) Earnings (Loss) Per Common Share
Basic earnings (loss) per common share is computed by
dividing net earnings (loss) by the weighted average
number of common shares outstanding during the year.
Diluted earnings per share is calculated based on the
weighted average number of common shares outstanding
adjusted for the dilutive effect of stock options and
warrants outstanding. For the years ended December 31,
1999, 1998 and 1997, the assumed exercise of options and
warrants was antidilutive and therefore not included in
the weighted average shares computation.
(2) Girilambone
The Company is a 40% joint venturer in the Girilambone Copper
Property and a 50% joint venturer in the Girilambone North
Copper Property in Australia. In 1996, mining commenced in
the Girilambone North Project area and the ore from this
property is being processed through the existing Girilambone
plant. Following is a condensed balance sheet of Girilambone
and the corresponding amounts included in the Company's
financial statements:
Amounts included in
Total Girilambone accompanying
Joint Ventures financial statements
December 31 December 31
1999 1998 1999 1998
Current assets $ 3,625 3,132 1,506 1,290
Deferred costs associated with 16,456 19,290 8,228 9,413
ore under leach, net
Property, plant and equipment, 4,450 7,356 1,816 2,981
net
Deferred exploration and 5,751 9,673 2,045 3,527
development costs, net
Total assets 30,282 39,451 13,595 17,211
Current liabilities (2,983) (4,071) (1,197) (1,749)
Partners' equity $ 27,299 35,380 12,398 15,462
Company's share of equity $ 13,682 16,916
Less elimination (1,284) (1,454)
Net assets recorded by the $ 12,398 15,462
Company
The difference between the net assets of Girilambone and the
Company's investment in Girilambone is being amortized using
the units-of-production method as a reduction of depletion
expense.
Debt incurred related to Girilambone is the separate
responsibility of each venturer and is not included in the
joint venture's financial statements. Copper production is
distributed to each venturer based on their respective
ownership interest. The sale of copper produced is the
responsibility of each venturer. Cost and expense data
related to the operation of the mine is as follows:
Year ended December 31,
1999 1998 1997
(In thousands)
Cost of copper sales:
Total Girilambone $ 27,173 24,563 21,048
Included in financial 12,827 10,251 8,696
statements
General and
administrative:
Total Girilambone $ 416 398 538
Included in financial 190 182 242
statements
(3) Property, Plant and Equipment
December 31,
1999 1998
(In thousands)
Land $ 362 362
Plant, mining and milling 9,373 9,439
equipment
Furniture and fixtures 722 708
10,457 10,508
Less accumulated depreciation (8,175) (6,904)
-------- -------
$ 2,282 3,605
(4) Deferred Exploration and Development Costs
Deferred exploration and development costs by prospect are as
follows:
December 31,
1999 1998
(In thousands)
Ramu $ 5,250 9,519
Tabar Islands 4,886 4,355
Girilambone exploration area 5,249 5,006
(including Tritton)
Other 206 261
------- ------
$15,591 19,141
(a) Ramu
Through December 31, 1998 the Company owned a 35%
interest in the Ramu Joint Venture (Ramu) which was
formed to explore for nickel and cobalt in PNG. A
feasibility study conducted in 1998 found that commercial
production of nickel and cobalt would be economically
feasible at Ramu.
During 1999, a third party exercised its right to acquire
a 10% interest in the project by agreeing to fund its
share of future development costs. Each of the joint
venture partners' original interests were reduced
proportionately.
In November 1999, the Company reached an agreement to
sell its 31.5% interest in Ramu to an unrelated third
party for $5,250,000. The Company is also entitled to
two additional payments of $250,000 upon the completion
of financing and upon achievement of commercial
production. Upon execution of the agreement, the Company
recognized an impairment charge of $4,750,000 to reduce
the carrying value of the property to the sales price.
The sale closed in March 2000.
(b) Tabar Islands
The Company owns a 100% interest in a gold exploration
project in the Tabar Islands (Tabar), north of PNG. On
December 3, 1996, the Company was granted a mining lease
to develop and operate a gold mine on Simberi Island.
While the government of PNG will have no participating
interest, if production commences, a royalty of 2% of
sales will be payable to the government.
At December 31, 1997, the Company owed one of Tabar's
former owners $650,000 upon the issuance of a Special
Mining Lease by the Government of PNG. In 1998, it was
determined that a Special Mining Lease would not be
issued. Accordingly, the Company eliminated the note
payable with a corresponding credit to deferred
exploration and development costs.
Tabar's former owners have an option to reacquire 50% of
the project if feasibility studies indicate that the
project could produce 150,000 ounces or more of gold
annually. If the option is exercised, the former owners
would be required to pay to the Company 250% of its
cumulative expenditures for mine development from July
1994 to the date the option is exercised.
Due to the precipitous decline in gold prices during the
fourth quarter of 1997, the Company reviewed the carrying
costs of and anticipated cash flows from the project to
determine if it was impaired. The Company determined
that future cash flows, based on estimated resources,
were insufficient at projected gold prices to support the
$17,656,000 carrying value of the project. The Company
therefore recorded a provision for impairment of
$13,381,000 at December 31, 1997 to reduce the carrying
value of the project to its estimated net recoverable
amount of $4,275,000.
(c) Girilambone Exploration Area
The Company has a 50% interest in an exploration joint
venture formed to explore areas adjacent to its
Girilambone copper mine. Under the terms of the joint
venture agreement the Company is required to fund its 50%
share of exploration costs. Exploration efforts are
continuing in the Girilambone exploration area to
identify additional mineable reserves.
The Company is seeking additional financing to develop its
properties. The Company cannot predict whether financing
will be available to develop these properties and thus
whether the deferred exploration and development costs will
ultimately be recovered.
(5) Long-Term Debt
December 31,
1999 1998
(In thousands)
Girilambone financing agreement $ 2,400 3,000
Less current maturities (2,400) (600)
--------- ------
Long-term debt $ - 2,400
The Girilambone financing agreement provided for borrowings
of up to $3,600,000. The loan bears interest at Singapore
Interbank Offered Rates (SIBOR) plus 1-1/2% (7.52% at
December 31, 1999). Principal payments are payable quarterly
at the greater of 50% of available cash flow, as defined, for
the quarter ending on the relevant repayment date or the
amount required to reduce the amount outstanding to
$1,100,000 on March 31, 2000 and to zero on June 30, 2000.
The agreement also contains certain debt coverage ratio
requirements. As collateral for the loan, the lender has a
security interest in the Australian assets of the Company,
including the Company's share of assets of and production
from Girilambone.
Under the agreement, all cash proceeds generated from
Girilambone operations are required to be deposited with the
lender to be used to pay any costs and expenses related to
the project, bank fees, interest and principal and to fund a
reserve account with the lender. Any remaining proceeds are
available, at the lender's discretion, for use by the
Company.
The estimated fair value of the Company's outstanding debt at
December 31, 1999 and 1998 approximates its carrying amount.
(6) Financial Instruments
The Company utilizes certain financial instruments, primarily
copper hedging agreements and foreign currency forward
exchange contracts, to reduce the risk associated with the
volatility of commodity prices and fluctuations in foreign
currency exchange rates, particularly the Australian dollar.
(a) Copper Agreements
The Company's strategy has been to enter into put options
and swap agreements which are designated as hedges of
future copper production.
At December 31, 1999, the Company had entered into swap
agreements covering a total of 11,905,000 pounds of
copper at a fixed price of $.75 per pound. Contracts
totaling 992,000 pounds of copper settled each month
during 1999. Upon settlement the Company received the
difference between the fixed price and the current price
of copper if the current price was lower, or the Company
paid the difference if the current price was higher. As
a result, the Company was assured of receiving a price of
$.75 per pound for this hedged production.
In November 1996, the Company purchased put options at a
cost of $.08 per pound of copper covering 4,000,000
pounds of copper. In 1997, the Company purchased put
options for an additional 11,900,000 pounds of copper at
a cost of $.05 per pound of copper. These put options
matured ratably each month from January 1998 through
December 1998. This hedging program assured that the
Company received a minimum gross price of $.90 per pound
of copper, and benefited from any increases in the copper
price above $.90 per pound.
The Company entered into swap and call option agreements
with a single counterparty covering a total of 13,200,000
pounds of copper which settled each month during 1997.
The swap agreements locked in a fixed forward price as a
floor, and the call options permitted the Company to
benefit from an increase in copper price above the call
price. Under this combination swap and call option
arrangement, at the settlement date for each copper
contract during 1997, the Company received $l.02 per
pound plus the excess, if any, of the market price of
copper (as quoted on the London Metals Exchange) over
$1.11 per pound. The copper swap agreements equal to the
anticipated level of copper sales were designated as
hedges, with gains and losses reflected as the hedged
copper was sold. The swap agreements in excess of the
anticipated copper sales and the call options did not
qualify as hedges and were marked to market with
unrealized and realized gains or losses included in
earnings.
Sales for the years ended December 3l, 1999, 1998 and
1997, include gains of $403,000, gains of $1,616,000 and
losses of $54,000, respectively, that were realized in
settlement of copper hedging contracts.
The Company has entered into swap agreements covering a
total of 3,960,000 pounds of copper at a fixed price of
$.80 per pound, representing approximately 30% of the
Company's share of budgeted production for 2000.
Contracts totaling 330,000 pounds of copper are settled
monthly. Upon settlement, the Company receives the
difference between the fixed price and the current price
of copper if the current price is lower, or the Company
pays the difference if the current price is higher. As a
result, the Company is assured of receiving a price of
$.80 per pound for this hedged production.
The following table summarizes the market value of the
copper contracts determined based upon price quotes
received from the counterparty to the agreements.
Notional Strike Fair
amount price value -
per asset
pound
(in thousands)
At December 31, 1999:
Swap 3,960,000 $ .80 (295)
contracts pounds
At December 31, 1998:
Swap 11,905,000 .75 737
contracts pounds
(b) Foreign Currency Forward Exchange Contracts
The Company has entered into foreign currency forward exchange
contracts to protect against Australian currency fluctuations
related to payment of a portion of the expected operating costs
of Girilambone. Since these contracts are not specifically
identified with anticipated transactions, realized and unrealized
gains and losses on these contracts are included currently in the
results of operations. For the year ended December 31, 1999, the
Company recorded realized and unrealized gains of $901,000
compared to losses of $606,000 and $2,399,000 in 1998 and 1997,
respectively. Outstanding contracts at December 31, 1999 totaled
$9,450,000 at an average exchange rate of A$1.00 = US$0.742. The
amounts maturing in 2000 are as follows: January, $1,949,575;
February, $750,000; March, $750,000; April, $750,000; May,
$750,000; June, $750,000; July, $750,000; August, $750,000;
September, $1,500,000; and October, $750,000.
(c) Counterparty Risk
The Company is exposed to credit risks in the event of
nonperformance by the counterparties to the various
agreements described above. The Company anticipates,
however, that the counterparties will be able to fully
satisfy their obligations under the agreements. The
Company does not obtain collateral or other security to
support financial instruments subject to credit risk.
(7) Nord Resources Corporation
Nord Resources Corporation (Resources) owned approximately
28.5% of the outstanding common stock of the Company as of
December 31, 1999 and 1998.
Accounts payable to affiliates includes amounts payable to
Resources of $1,378,000 and $443,000 at December 31, 1999 and
1998, respectively. The balance at December 31, 1999
includes a note payable in the amount of $750,000 due
September 30, 2000 with interest payable at 10%. The
remaining amounts payable to Resources are on open account
and do not bear interest. These amounts represent amounts
due under an agreement entered into with Resources in 1998 to
share office space, administrative personnel and other
expenses on a 50/50 basis. Subsequent to December 31, 1999
the note was repaid in full. Interest expense on the note
for 1999 was $18,000. Accounts payable to affiliates also
include amounts payable to the Company's joint venture
partner in Girilambone for operating costs of the mine.
In 1997, Resources provided certain services to the Company
under a management agreement. Under the terms of the
agreement, Resources was paid a monthly fee of $7,000 and was
reimbursed for all direct expenses incurred on behalf of the
Company. Management believes that the costs that would have
been incurred had the Company obtained such services on a
stand-alone basis would have approximated the amounts paid to
Resources. The total amount paid to Resources was $566,000
for the year ended December 31, 1997.
In October 1996, the Board of Directors of Resources
unanimously agreed to make available to the Company, at
Resources' discretion, an operating loan payable on demand
and bearing interest at the prime rate plus 1%. In June
1997, advances made to the Company by Resources, net of
repayments, totaled $3,747,745. In July and August 1997, the
Company repaid $2,000,000 of the amount outstanding.
Concurrent with the closing of the Company's Canadian
offering on July 3, 1997, Resources converted the remaining
amount outstanding into 349,549 Units at $5.00 per unit.
Each Unit consisted of one share of common stock and one-half
of one purchase warrant. The purchase warrants expired
unexercised in 1998. Interest expense paid to Resources
totaled $114,000 for the year ended December 31, 1997.
(8) Operating Leases
The Company leases its office space and certain equipment
under operating leases. Certain of the leases contain
renewal options and escalation clauses. Minimum annual lease
payments under non-cancelable operating leases for the years
ended December 31 are as follows (in thousands):
2000 $ 140
2001 141
2002 142
2003 143
2004 79
Thereafter 11
-------
$ 656
Rent expense for operating leases was $144,082, $112,433 and
$125,885 for the years ended December 31, 1999, 1998 and
1997, respectively.
(9) Shareholders' Equity
(a) Canadian Offering
On July 3, 1997, the Company closed its public stock
offering in Canada. The offering consisted of the sale
of 2,460,000 units, consisting of one common share and
one-half of one purchase warrant. Each whole purchase
warrant entitled the holder to purchase one share of
common stock at C$9.00. The Company also issued 225,000
warrants to the underwriter. Each warrant entitled the
underwriter to purchase one share of common stock at
C$6.90 prior to July 3, 1998. All of these warrants
expired unexercised on July 3, 1998. Gross proceeds from
the offering totaled US$12,300,000 (C$16,974,000). The
Company received net proceeds of US$10,684,000
(C$14,574,000) after payment of commissions, certain
legal fees, and other related costs.
(b) Private Placement to Mineral Resources Development
Company Pty, Limited (MRDC)
On December 12, 1997, the Company completed the sale of
600,000 common shares to MRDC, a corporation wholly owned
by the Government of Papua New Guinea. These shares were
sold at a price of US$4.50 (C$6.40) per share and gross
proceeds totaled US$2,700,000 (C$3,840,000). After
payment of certain legal and issuance costs, net proceeds
were US$2,677,000.
(c) Stock Option Plans and Other Option Grants
The Company has established three incentive stock option
plans, the 1989 Stock Option Plan, the 1991 Stock Option
Plan and the 1995 Stock Option Plan (the Plans) for the
benefit of employees and directors of the Company. The
Company has also granted options which are not governed
by the terms of the Plans (the Non-Plan Options). At
December 31, 1999, Non-Plan Options covering 787,000
shares have been granted to officers and Directors of the
Company and are outstanding. During 1998 and 1997, Non-
Plan Options covering 49,000 and 53,000 shares,
respectively, were issued to certain consultants to the
Company.
Options are granted at an exercise price equal to or in
excess of the quoted market price on the date of the
grant. Options are generally exercisable beginning six
months to three years from date of grant and expire over
a five to ten year period from date of grant. At
December 31, 1999, 104,080 shares are available for
future option grants under the terms of the Plans.
A summary of the status of the Company's outstanding
stock options as of December 31, 1999, 1998 and 1997 and
changes during the years then ended follows:
1999 1998 1997
Weighted Weighted Weighted
average average average
exercise exercise exercise
Options price Options price Shares price
Outstanding at
beginning of 2,299,998 $3.92 1,924,678 $ 4.26 1,664,200 $ 4.05
year
Granted - - 499,000 2.68 296,078 5.47
Exercised - - - - (35,600) 4.34
Forfeited (276,000) 4.38 (123,680) 4.38 - -
Outstanding at
end of year 2,023,998 3.86 2,299,998 3.92 1,924,678 4.26
Options
exercisable at 1,888,998 3.95 1,923,998 4.04 1,574,800 4.10
year-end
The following table summarizes information about stock options outstanding
at December 31, 1999:
Exercise Weighted
prices Options average Options
per share outstanding contract exercisable
life
(years)
$ 2.41 100,000 3.42 50,000
2.54 216,000 1.02 216,000
2.75 383,000 4.99 292,000
3.91 36,000 2.25 36,000
4.00 362,000 0.12 362,000
4.26 272,800 3.95 272,800
4.38 84,000 4.26 84,000
4.50 309,120 1.09 309,120
4.80 12,000 4.03 12,000
5.25 111,078 5.72 111,078
5.69 150,000 1.75 150,000
$ 2.41-5.69 2,035,998 3.85 1,894,998
(d) Stock Bonus Plan
The 1990 Stock Bonus Plan provides for the issuance of up
to 80,000 common shares as incentive bonuses. At
December 31, 1999, 76,193 shares have been awarded and
3,807 shares are available for future awards.
(10) Significant Customers
Sales in 1999 included copper sales to two customers of
$7,246,000 and $1,551,000. Sales in 1998 included copper
sales to two customers of $8,026,000 and $3,051,000. Sales
in 1997 included copper sales to three customers of
$8,277,000, $2,991,000 and $2,507,000. Management does not
believe that the loss of any of these customers would have a
material adverse effect on the Company.
(11) Income Taxes
Income tax expense (benefit) consists entirely of future
income taxes payable in Australia. These amounts differ from
the amounts computed by applying the U.S. statutory income
tax rate of 35% to consolidated income (loss) before income
tax expense as a result of the following:
Year ended December 31,
1999 1998 1997
Income taxes (benefit) at $ (3,151) (250) (4,060)
statutory rate
Foreign income taxes at
effective rates
in excess of the U.S. 112 14 (98)
statutory rate
Change in the valuation
allowance for
deferred tax assets 718 (176) 4,266
Non-deductible losses of 113 233 1,832
subsidiaries
Expiration of exploration
cost carryforwards in Papua 750 - -
New Guinea
Adjustment of deferred
taxes provided
for in prior years in - (1,250) -
Australia
Other 177 689 360
Total $ (1,281) (740) 2,300
The tax effects of temporary differences that give rise to
future income tax assets and future income tax liabilities
for Australia, the United States, Papua New Guinea and Mexico
are as follows:
December 31,
1999 1998
(In thousands)
Australia:
Future income tax liabilities:
Deferred leach costs $ (2,962) (3,389)
Exploration and development costs (977) (1,626)
Plant, property and equipment (52) (245)
Other (28) (40)
Total Australia $ (4,019) 5,300
United States:
Future income tax asset -
net operating loss carryforwards 1,492 1,518
Valuation allowance (1,492) (1,518)
Total United States $ - -
Papua New Guinea:
Future income tax assets:
Net operating loss carryforwards $ 1,438 -
Exploration cost carryforwards 5,058 5,802
Valuation allowance (6,496) (5,802)
Total Papua New Guinea $ - -
Mexico:
Future income tax asset -
net operating loss carryforwards $ 775 725
Valuation allowance (775) (725)
Total Mexico $ - -
A valuation allowance has been provided for all of the
Company's net future income tax assets in the United States,
Papua New Guinea and Mexico based on the history of operating
losses for the Company in these countries and limitations on
the use of the carryforwards. The Company's operations in
Canada are not significant.
(12) Pension Plans
The Company has a defined contribution pension plan covering
certain employees of its Australian operations. Under the
terms of the plan, the Company contributes an amount equal to
10% of the employee's wages. Pension costs were $41,000,
$38,000 and $48,000 for the years ended December 31, 1999,
1998 and 1997 respectively.
The Company has an unfunded non-contributory defined benefit
program for two of its executive officers. Under the terms
of the program for one of the executive officers, the Company
is obligated to pay a lump sum benefit that matches the
difference, if any, between the present value of the
executive's retirement benefit and the cash surrender value
of an insurance policy owned by the executive at age 62. At
December 31, 1999 and 1998, the cash surrender value of the
policy of $319,670 and $275,265, respectively, has been
offset against the accrued retirement benefit liability.
The following tables set forth the changes in the projected
benefit obligation for the years ended December 31, 1999,
1998 and 1997 and the funded status of the plan and amounts
recognized in the Company's balance sheet at December 31,
1999 and 1998:
December 31,
1999 1998 1997
(In thousands)
Change in projected
benefit obligation
Benefit obligation, $ 271 350 501
beginning of period
Service cost 25 23 -
Interest cost 18 15 -
Actuarial gain (44) (117) (151)
Benefit obligation, end $ 270 271 350
of period
December 31,
1999 1998
(In thousands)
Funded status:
Projected benefit obligation $ (270) (271)
Unrecognized net loss (gain) (36) 9
Unrecognized prior service cost 86 103
Net amount recognized $ (220) (159)
Amounts recognized in the balance sheet:
Accrued benefit liability $ (270) (271)
Intangible asset 50 112
Net amount recognized $ (220) (159)
The following tables set forth the components of net periodic
benefit costs for the years ended December 31, 1999, 1998 and
1997:
Year ending December 31,
1999 1998 1997
(In thousands)
Components of net
periodic benefit cost:
Service cost $ 25 23 -
Interest cost 18 15 -
Amortization of prior 17 17 -
service cost
Net periodic $ 60 55 -
benefit cost
Assumptions:
Discount rate 7.75% 6.75% 7.25%
Expected return on N/A NA NA
plan assets
Rate of compensation - - -
increase
(13) Employment Agreements
The Company has agreements with two of its officers which
contain change in control provisions which would entitle one
officer to receive 50% of his salary and the other officer to
receive 200% of his salary in the event of a change in
control of the Company and a change in certain conditions of
their employment. The maximum contingent liability under
these agreements is approximately $470,000 at December 31,
1999.
(14) Difference Between Canadian and U.S. Generally Accepted
Accounting Principles
The consolidated financial statements have been prepared in
accordance with accounting principles generally accepted in
Canada (Canadian GAAP), which differ in certain respects from
those principles and practices that the Company would have
followed had its consolidated financial statements been
prepared in accordance with accounting principles generally
accepted in the United States (U.S. GAAP).
Canadian accounting principles provide for the deferral of
exploration expenditures until such time as the property is
put into production or the property is abandoned or disposed
of through sale, or when it is no longer considered to be
commercially viable. For U.S. GAAP purposes, the Company has
expensed all exploration costs until such time as the Company
establishes, generally by completing a detailed feasibility
study, that a commercially mineable deposit exists. During
1999, the Company changed its method of accounting for
completing detailed feasibility studies on its properties to
expense those costs as incurred. The cumulative effect of
this change, calculated as of January 1, 1999 was $4,355,000,
which amount was charged to operations in 1999 as the
cumulative effect of a change in accounting principle for
U.S. GAAP purposes. Management believes the newly adopted
accounting method is preferable because it is the more
predominant method used in the mining industry and it will
better reflect operating income and cash flow.
Statement of Financial Accounting Standards No. 130,
Reporting Comprehensive Income, requires that a company
classify items of other comprehensive income by their nature
in a financial statement and display the accumulated balance
of other comprehensive income separately from retained
earnings and additional paid-in capital in the equity section
of the balance sheet. Under U.S. GAAP, the accumulated other
comprehensive income at both December 31, 1999 and 1998, is
$798,000, representing cumulative foreign currency
translation adjustments. Since there was no change in this
amount in 1999, 1998 or 1997 comprehensive income under U.S.
GAAP is equal to the net loss under U.S. GAAP for those
periods presented below.
Other differences between Canadian GAAP and U.S. GAAP as they
relate to these financial statements are not significant.
The application of U.S. GAAP would have had the following
effect on the Company's balance sheets:
December 31,
1999 1998
Canadian U.S. Canadian U.S.
GAAP GAAP GAAP GAAP
(In thousands)
Deferred
exploration and $ 15,591 5,250 19,141 11,897
development
costs
Deferred tax $ 4,019 2,129 5,300 3,498
liability
Shareholders' $ 17,617 9,166 25,339 19,898
equity
The application of U.S. GAAP would have had the following
effect on the Company's statements of operations:
Year ended December 31,
1999 1998 1997
(In thousands)
Net earnings (loss) - $ (7,722) 25 (14,327)
Canadian GAAP
Accounting for 1,258 (322) 10,385
exploration costs
Income tax effect 87 370 638
Earnings (loss) before
cumulative effect of
change in method of (6,377) 73 (3,304)
accounting - U.S. GAAP
Cumulative effect of
change in method of (4,355) - -
accounting
Net earnings (loss)- $ (10,732) 73 (3,304)
U.S. GAAP
Year ended December 31,
1999 1998 1997
(In thousands)
Loss per share before
cumulative effect of
change in method of $ (.49) - (.30)
accounting - U.S. GAAP
Change in method of
accounting - U.S. GAAP $ (.34) - -
Loss per share - U.S. $ (.83) - (.30)
GAAP
(a) Additional Disclosures Required Under U.S. GAAP - Stock
Compensation
For U.S. GAAP purposes, the Company has elected to
measure compensation cost for stock options issued to
employees using the intrinsic value based method under
Accounting Principles Board (APB) Opinion No. 25,
Accounting for Stock Issued to Employees, which is
consistent with the method used for Canadian GAAP. Had
compensation cost for the Company's option grants in 1995
and subsequent years been determined based on the fair
value of the options at the grant dates consistent with
the provisions of SFAS No. 123, the Company's net loss
and loss per share under U.S. GAAP would have been
reduced to the pro forma amounts indicated below:
Year ended December 31,
1999 1998 1997
(In thousands)
Net loss - As $ (10,732) (73) (3,304)
U.S. GAAP reported
Pro forma (10,848) (614) (3,770)
Loss per
share -
U.S. GAAP As (.83) - (.30)
reported
Pro forma (.84) (.05) (.34)
No options were granted during 1999. The assumptions
used in determining the fair value of options granted
during 1998 and 1997 are as follows:
1998 1997
Expected volatility 73% 55%
Expected life of grant 3 years 2.5 years
Risk-free interest rate 5.567% 6.05%
Expected dividend rate None None
The weighted average fair value of options granted during
the years ended December 31, 1998 and 1997 was $1.14 and
$2.06, respectively.
(b) New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board
(the FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133, Accounting for Derivative
Instruments and Hedging Activities. SFAS No. 133
establishes standards for derivative instruments,
including certain derivative instruments imbedded in
other contracts, and for hedging activities. It requires
that an entity recognize all derivatives as either assets
or liabilities in its balance sheet and measure those
instruments at fair value. This statement is effective
for all fiscal quarters of fiscal years beginning after
June 15, 2000. The Company has not yet determined the
effect of SFAS No. 133 on its financial statements
prepared under U.S. GAAP and does not believe that such a
determination will be meaningful until closer to the date
of initial adoption.
(15) Environmental Contingencies
At December 31, 1999, the Company had reserves of
approximately $133,000 for remediation of certain Australian
and Papua New Guinea sites and other environmental costs
which have been provided for in accordance with the Company's
policy to record liabilities for environmental expenditures
when it is probable that obligations have been incurred and
the costs can reasonably be estimated.
The amounts of these liabilities are very difficult to
estimate due to such factors as the unknown extent of the
remedial actions that may be required and, in the case of
sites not owned by the Company, the unknown extent of the
Company's probable liability in proportion to the probable
liability of other parties.
2. Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession
2.1 Stock Purchase Agreement dated March 11,
1993 by and among Nord Kaolin
Corporation (NK Corp), Registrant,
Norplex, Inc. (Norplex) and Kemira
Holdings, Inc. (Kemira). Reference is
made to Exhibit 2.1 of Registrant's
Current Report on Form 8-K dated March
11, 1993, which exhibit is incorporated
herein by reference. **
2.2 Stock Purchase Agreement dated June 28,
1993 by and between Registrant and
Consolidated Rutile Limited. Reference
is made to Exhibit 2.2 of Registrant's
Report on Form 8-K dated June 28, 1993,
which exhibit is incorporated herein by
reference. **
3. Articles of Incorporation and By-Laws
3.1 Certificate of Incorporation (as
amended) of Registrant. Reference is
made to Exhibit 3.1 of Registrant's
Report on Form 10-K for the year ended
December 31,1987, which exhibit is
incorporated herein by reference. **
3.2 Certificate of Amendment of Certificate
of Incorporation of Registrant. **
3.3 Certificate of Amendment of Certificate
of Incorporation of Registrant.
Reference is made to Exhibit 3:3 of
Registrants Form 10-K for the year-ended
December 31, 1997, which exhibit is
incorporated by reference. **
3.4 Amended and Restated Bylaws of
Registrant. Reference is made to
Exhibit 3.2 of Registrant's Report on
Form 10-K for the year ended December
31, 1994, which exhibit is incorporated
herein by reference. **
3.5 Amendment No. 1 to Amended and Restated
Bylaws of Registrant. **
10. Material Contracts
10.1 Loan Agreement between Development
Authority of the City of Jeffersonville
and of Twiggs County and Nord Kaolin
Company, dated as of June 1, 1994.
Reference is made to Exhibit 10.1 of
Registrant's Report on Form 10-K for the
year ended December 31, 1994, which
exhibit is incorporated herein by
reference. **
10.2 Shareholders Agreement dated March 11,
1993 by and among Norplex, Kemira, NK
Corp. and Registrant. Reference is made
to Exhibit 10.1 of Registrant's Report
on Form 8-K dated March 11, 1993, which
exhibit is incorporated herein by
reference. **
10.3 Lease Agreement dated May 15, 1988
between ATEL Financial Corporation and
Nord Kaolin Company. Reference is made
to Exhibit 10.31 of Registrant's Report
on Form 10-K for the year ended December
31, 1988, which exhibit is incorporated
herein by reference. **
10.4 Guaranty of Lease dated May 15, 1988
given by Registrant to ATEL Financial
Corporation. Reference is made to
Exhibit 10.32 of Registrant's Report on
Form 10-K for the year ended
December 31, 1988, which exhibit is
incorporated herein by reference. **
10.5 Amendment and Waivers dated August 1991
of Guaranty of Lease dated May 15, 1988
given by Registrant to ATEL Financial
Corporation. Reference is made to
Exhibit 19.6 of Registrant's Report on
Form 10-Q for the period ended September
30, 1991, which exhibit is incorporated
herein by reference. **
10.6 Amendments and Waivers dated November
1991 of Guaranty of Lease dated May 15,
1988 given by Registrant to ATEL
Financial Corporation. Reference is
made to Exhibit 10.75 of Registrant's
Report on Form 10-K for the year ended
December 31, 1991, which exhibit is
incorporated herein by reference. **
10.7 Waiver, Consent and Agreement made March
11,1993 by and between Nord Kaolin
Company and entities under ATEL
Financial Corporation Lease Agreement.
Reference is made to Exhibit 10.12 of
Registrant's Report on Form 10-K for the
year ended December 31, 1993, which
exhibit is incorporated herein by
reference. **
10.8 License for Proprietary Pigment
Technologies dated September 1, 1986
between Nord Kaolin Company and
Industrial Progress, Inc. Reference is
made to Exhibit 10.33 of Registrant's
Report on Form 10-K for the year ended
December 31, 1988, which exhibit is
incorporated herein by reference. **
10.9 Addendum to License for Proprietary
Pigment Technologies dated December
1987. Reference is made to Exhibit
10.34 of Registrant's Report on Form 10-
K for the year ended December 31, 1988,
which exhibit is incorporated herein by
reference. **
10.10 Stock Option Agreement and Second
Addendum to License for Proprietary
Pigment Technologies between Nord Kaolin
Company and Industrial Progress, Inc.,
dated February 1, 1990. Reference is
made to Exhibit 10.53 of Registrant's
Report on Form 10-K for the year ended
December 31, 1990, which exhibit is
incorporated herein by reference. **
10.11 Second Stock Option Agreement and Third
Addendum to License for Proprietary
Pigment Technology dated as of July 9,
1992 by and between Nord Kaolin Company
and Industrial Progress, Inc. Reference
is made to Exhibit 10.94 of Registrant's
Report on Form 10-K for the year ended
December 31, 1992, which exhibit is
incorporated herein by reference. **
10.12 Joint Venture Agreement between Nord
Southern Dolomite Company and Istria,
N.V. forming Manatee Gateway No. I.
Reference is made to Exhibit (10)(d) (i)
of Registrant's Registration Statement
on Form S-2 (No. 33-00961), which
exhibit is incorporated herein by
reference. **
10.13 Nord Resources Corporation Non-Qualified
Stock Option Plan. Reference is made to
Exhibit 10.16 to Registrant's
Registration Statement on Forms S-3/S-8
(No. 2-92415), which exhibit is
incorporated herein by reference. **
10.14 Nord Resources Corporation 1982 Nord
Incentive Stock Option Plan. Reference
is made to Exhibit 10.17 to Registrant's
Registration Statement on Forms S-3/S-8
(No. 2-92415), which exhibit is
incorporated herein by reference. **
10.15 Amendment No. 1 to Nord Resources
Corporation 1982 Nord Incentive Stock
Option Plan. Reference is made to
Exhibit 10.32 of Registrant's Report on
Form 10-K for the year ended
December 31, 1987, which exhibit is
incorporated herein by reference. **
10.16 Amendment No. 2 to Nord Resources
Corporation 1982 Nord Incentive Stock
Option Plan. Reference is made to
Exhibit 10.17 of Registrant's Report on
Form 10-K for the year ended
December 31, 1994, which exhibit is
incorporated herein by reference. **
10.17 Amendment No. 3 to Nord Resources
Corporation 1982 Nord Incentive Stock
Option Plan. Reference is made to
Exhibit 10.18 of Registrant's Report on
Form 10-K for the year ended
December 31, 1994, which exhibit is
incorporated herein by reference. **
10.18 Amendment No. 4 to Nord Resources
Corporation 1982 Nord Incentive Stock
Option Plan. Reference is made to
Exhibit 10.19 of Registrant's Report on
Form 10-K for the year ended
December 31, 1995, which exhibit is
incorporated herein by reference. **
10.19 Nord Resources Corporation 1987 Nord
Incentive Stock Option Plan. Reference
is made to Exhibit 10.33 of Registrant's
Report on Form 10-K for the year ended
December 31, 1987, which exhibit is
incorporated herein by reference. **
10.20 Amendment No. 1 to Nord Resources
Corporation 1987 Nord Incentive Stock
Option Plan. Reference is made to
Exhibit 10.20 of Registrant's Report on
Form 10-K for the year ended December
31, 1994, which exhibit is incorporated
herein by reference. **
10.21 Amendment No. 2 to Nord Resources
Corporation 1987 Nord Incentive Stock
Option Plan. Reference is made to
Exhibit 10.22 of Registrant's Report on
Form 10-K for the year ended
December 31, 1995, which exhibit is
incorporated herein by reference. **
10.22 Nord Resources Corporation 1989 Stock
Option Plan. Reference is made to
Exhibit 10.33 of Registrant's Report on
Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
herein by reference. **
10.23 Amendment No. 1 to Nord Resources
Corporation 1989 Stock Option Plan.
Reference is made to Exhibit 10.55 of
Registrant's Report on Form 10-K for the
year ended December 31, 1990, which
exhibit is incorporated herein by
reference. **
10.24 Amendment No. 2 to Nord Resources
Corporation 1989 Stock Option Plan.
Reference is made to Exhibit 10.23 of
Registrant's Report on Form 10-K for the
year ended December 31, 1994, which
exhibit is incorporated herein by
reference. **
10.25 Amendment No. 3 to Nord Resources
Corporation 1989 Stock Option Plan.
Reference is made to Exhibit 10.26 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.26 Nord Resources Corporation 1991 Stock
Option Plan. Reference is made to
Exhibit 10.24 of Registrant's Report on
Form 10-K for the year ended December
31, 1993, which exhibit is incorporated
herein by reference. **
10.27 Amendment No. 1 to Nord Resources
Corporation1991 Stock Option Plan.
Reference is made to Exhibit 10.25 of
Registrant's Report on Form 10-K for the
year ended December 31, 1994, which
exhibit is incorporated herein by
reference. **
10.28 Amendment No. 2 to Nord Resources
Corporation 1991 Stock Option Plan.
Reference is made to Exhibit 10.29 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.29 Restated Deferred Compensation Agreement
dated May 10, 1989 between Registrant
and Terence H. Lang. Reference is made
to Exhibit 10.9 of Registrant's Report
on Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
by reference. **
10.30 Amendment No. 1 to the Restated Deferred Compensation
Agreement between Registrant and Terence H. Lang, dated November
3, 1995. Reference is made to Exhibit 10.31 of Registrant's
Report on Form 10-K for the year ended December 31, 1995, which
exhibit is incorporated herein by reference. **
10.31 Restated Deferred Compensation Agreement
dated May 10, 1989 between Registrant
and Edgar F. Cruft. Reference is made
to Exhibit 10.11 of Registrant's Report
on Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
herein by reference. **
10.32 Amendment No. 1 to the Restated Deferred
Compensation Agreement between
Registrant and Edgar F. Cruft, dated
July 7, 1995. Reference is made to
Exhibit 10.34 of Registrant's Report on
Form 10-K for the year ended December
31, 1995, which exhibit is incorporated
herein by reference. **
10.33 Nord Resources Corporation Trust
Agreement for Key Executives as
Restated, dated July 7, 1995. Reference
is made to Exhibit 10.35 of Registrant's
Report on Form 10-K for the year ended
December 31, 1995, which exhibit is
incorporated herein by reference. **
10.34 Amendment No. 1 to Trust Agreement for
Key Executives as Restated, dated
December 1, 1995. Reference is made to
Exhibit 10.36 of Registrant's Report on
Form 10-K for the year ended December
31, 1995, which exhibit is incorporated
herein by reference. **
10.35 Split-Dollar Life Insurance and
Supplemental Compensation agreement
between Karl A. Frydryk and Registrant
dated July 22, 1988. Reference is made
to Exhibit 10.29 of Registrant's Report
on Form 10-K for the year ended
December 31, 1988, which exhibit is
incorporated herein by reference. **
10.36 Nord Resources Corporation Split-Dollar
Life Insurance and Supplemental
Compensation Plan Trust Agreement,
December 5, 1988. Reference is made to
Exhibit 10.35 of Registrant's Report on
Form 10-K for the year ended
December 31, 1988, which exhibit is
incorporated herein by reference. **
10.37 Change of Control Letter Agreement
between Registrant and Edgar F. Cruft,
dated May 10, 1989. Reference is made
to Exhibit 10.27 of Registrant's Report
on Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
herein by reference. **
10.38 Amendment No. 2 dated December 1, 1995
to Change of Control Agreement between
Registrant and Edgar F. Cruft.
Reference is made to Exhibit 10.40 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.39 Change of Control Letter Agreement
between Registrant and Terence H. Lang,
dated May 10, 1989. Reference is made
to Exhibit 10.29 of Registrant's Report
on Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
herein by reference. **
10.40 Amendment No. 2 dated December 1, 1995
to Change of Control Agreement between
Registrant and Terence H. Lang.
Reference is made to Exhibit 10.42 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.41 Nord Resources Corporation Trust
Agreement for Executive Severance
Agreements, dated May 10, 1989.
Reference is made to Exhibit 10.30 of
Registrant's Report on Form 10-K for the
year ended December 31, 1989, which
exhibit is incorporated herein by
reference. **
10.42 Change of Control Letter Agreement
between Registrant and Karl A. Frydryk,
dated May 10, 1989. Reference is made
to Exhibit 10.32 of Registrant's Report
on Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
herein by reference. **
10.43 Amendment No. 2 dated December 1, 1995
to Change of Control Agreement between
Registrant and Karl A. Frydryk.
Reference is made to Exhibit 10.45 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.44 Change of Control Letter Agreement
between Registrant and William W.
Wilcox, dated March 9, 1990. Reference
is made to Exhibit 10.57 of Registrant's
Report on Form 10-K for the year ended
December 31, 1990, which exhibit is
incorporated herein by reference. **
10.45 Amendment No. 2 dated December 1, 1995
to Change of Control Agreement between
Registrant and William W. Wilcox.
Reference is made to Exhibit 10.47 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.46 Change of Control Letter Agreement
between Registrant and James T. Booth,
dated June 8, 1994. Reference is made
to Exhibit 10.38 of Registrant's Report
on Form 10-K for the year ended December
31, 1994, which exhibit is incorporated
herein by reference. **
10.47 Amendment No. 2 dated December 1, 1995
to Change of Control Agreement between
Registrant and James T. Booth.
Reference is made to Exhibit 10.49 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.48 Executive Loan Agreement dated September
10, 1987 between Terence H. Lang and
Registrant. Reference is made to
Exhibit 10.40 of Registrant's Report on
Form 10-K for the year ended December
31, 1987, which exhibit is incorporated
herein by reference. **
10.49 Executive Loan Agreement dated August 8,
1988 between Edgar F. Cruft and
Registrant. Reference is made to
Exhibit 10.26 of Registrant's Report on
Form 10-K for the year ended
December 31, 1988, which exhibit is
incorporated herein by reference. **
10.50 Executive Loan Agreement dated December
31, 1988 between Terence H. Lang and
Registrant. Reference is made to Exhibit
10.27 of Registrant's Report on Form 10-
K for the year ended December 31, 1988,
which exhibit is incorporated herein by
reference. **
10.51 Executive Loan Agreement dated September
19, 1989 between Edgar F. Cruft and
Registrant. Reference is made to
Exhibit 10.17 of Registrant's Report on
Form 10-K for the year ended December
31, 1989, which exhibit is incorporated
herein by reference. **
10.52 Agreement between The Government of the
Republic of Sierra Leone and Sierra
Rutile Limited (SRL), dated November 3,
1989. Reference is made to Exhibit 10.4
of Registrant's Report on Form 10-K for
the year ended December 31, 1989, which
exhibit is incorporated herein by
reference. **
10.53 Agreement dated November 17, 1992
amending Fifth Amendment to and
Restatement of the Financing Agreement
and Second Amendment and Restatement of
Credit between SRL and Export-Import
Bank of the United States (ExImbank).
Reference is made to Exhibit 10.5 of
Registrant's Report on Form 10-K for the
year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.54 Fifth Amendment to and Restatement of
the Financing Agreement dated as of
November 24, 1986 between SRL and
ExImbank. Reference is made to Exhibit
4.14 of Registrant's Report on Form 10-K
for the year ended December 31, 1988,
which exhibit is incorporated herein by
reference. **
10.55 Second Amendment and Restatement of
Credit Agreement dated as of December 1,
1982 between SRL and ExImbank.
Reference is made to Exhibit 10(e)B(v)
of Registrant's Registration Statement
on Form S-2 (33-00961), which exhibit is
incorporated herein by reference. **
10.56 Letter Agreement dated October 12, 1993
between SRL and ExImbank. Reference is
made to Exhibit 10.10 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.57 Letter Agreement dated November 17, 1993
between SRL and ExImbank. Reference is
made to Exhibit 10.11 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.58 Loan Agreement dated August 6, 1992
between DEG-Deutsche Investitions-Und
Entwicklungsgesell Schaft MBH (DEG) and
SRL. Reference is made to Exhibit 10.73
of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.59 First Amendment dated November 20, 1992
to the Loan Agreement between DEG and
SRL. Reference in made to Exhibit 10.74
of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.60 Amendatory Agreement dated November 17,
1993 between SRL and DEG. Reference is
made to Exhibit 10.12 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.61 Investment Agreement dated June 30, 1992
between SRL and International Finance
Corporation (IFC). Reference is made to
Exhibit 10.75 of Registrant's Report on
Form 10-K for the year ended December
31, 1992, which exhibit is incorporated
herein by reference. **
10.62 Amendment No. 1 dated November 18, 1992
to Investment Agreement between SRL and
IFC. Reference is made to Exhibit 10.76
of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.63 Amendatory Agreement dated November 17,
1993 between SRL and IFC. Reference is
made to Exhibit 10.9 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.64 Loan Agreement dated January 24, 1992
between SRL and Commonwealth Development
Corporation (CDC). Reference is made to
Exhibit 10.77 of Registrant's Report on
Form 10-K for the year ended December
31, 1992, which exhibit is incorporated
herein by reference. **
10.65 Amendment dated November 17, 1992 of the
Loan Agreement between SRL and CDC.
Reference is made to Exhibit 10.78 of
Registrant's Report on Form 10-K for the
year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.66 Amendatory Agreement dated November 5,
1993 between SRL and CDC. Reference is
made to Exhibit 10.13 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.67 Waiver Letter dated October 22, 1993
from CDC to SRL. Reference is made to
Exhibit 10.14 of Registrant's Report on
Form 8-K dated November 17, 1993, which
exhibit is incorporated herein by
reference. **
10.68 Finance Agreement dated August 11, 1992
between SRL and Overseas Private
Investment Corporation (OPIC).
Reference is made to Exhibit 10.79 of
Registrant's Report on Form 10-K for the
year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.69 First Amendment dated November 24, 1992
to Finance Agreement between SRL and
OPIC. Reference is made to Exhibit
10.80 of Registrant's Report on Form 10-
K for the year ended December 31, 1992,
which exhibit is incorporated herein by
reference. **
10.70 Agreement of Wavier and Second Amendment
to Finance Agreement dated as of
September 21, 1993 between SRL and OPIC.
Reference is made to Exhibit 10.6 of
Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is
incorporated herein by reference. **
10.71 Third Amendment to Finance Agreement
dated as of November 17, 1993 between
SRL and OPIC. Reference is made to
Exhibit 10.7 of Registrant's Report on
Form 8-K dated November 17, 1993, which
exhibit is incorporated herein by
reference. **
10.72 Funding Agreement dated February 16,
1993 among SRL, OPIC and PNC Bank,
National Association (PNC). Reference
is made to Exhibit 10.70 of Registrant's
Report on Form 10-K for the year ended
December 31, 1993, which exhibit is
incorporated herein by reference. **
10.73 First Amendment to Funding Agreement
dated November 12, 1993 among SRL, OPIC
and PNC. Reference is made to Exhibit
10.8 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit
is incorporated herein by reference. **
10.74 Debenture dated November 17, 1992 made
by SRL in favor of CDC, DEG, ExImbank,
IFC and OPIC. Reference is made to
Exhibit 10.81 of Registrant's Report on
Form 10-K for the year ended December
31, 1992, which exhibit is incorporated
herein by reference. **
10.75 Debenture dated November 17, 1992 made
by SRL in favor of DEG, ExImbank, IFC,
OPIC and CDC. Reference is made to
Exhibit 10.85 of Registrant's Report on
Form 10-K for the year ended December
31, 1992, which exhibit is incorporated
herein by reference. **
10.76 First Amendment and Restatement of Project Funds
Agreement dated as of November 17, 1993 among Registrant, CRL,
Holdings, SRL, CDC, DEG, ExImbank, IFC and OPIC. Reference is
made to Exhibit 10.17 of Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is incorporated herein by
reference. **
10.77 Share Retention Agreement dated November
17, 1992 among CDC, DEG, ExImbank, IFC
and OPIC and Registrant, Nord Rutile
Company and SRL. Reference is made to
Exhibit 10.83 of Registrant's Report on
Form 10-K for the year ended
December 31, 1992, which exhibit is
incorporated herein by reference. **
10.78 First Amendment to Share Retention
Agreement dated as of November 17, 1993
among Registrant, NR Company, CRL,
Holdings, CDC, DEG, IFC, OPIC and
ExImbank. Reference is made to Exhibit
10.18 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit
is incorporated herein by reference. **
10.79 Pledge Agreement dated November 17, 1992
between SRL and DEG, ExImbank, IFC, OPIC
and CDC. Reference is made to Exhibit
10.84 of Registrant's Report on Form 10-
K for the year ended December 31, 1992,
which exhibit is incorporated herein by
reference. **
10.80 Cash Collateral Charge dated November
17, 1992 made by SRL in favor of DEG,
ExImbank, IFC, OPIC and CDC. Reference
is made to Exhibit 10.86 of Registrant's
Report on Form 10-K for the year ended
December 31, 1992, which exhibit is
incorporated herein by reference. **
10.81 Trust Deed between Standard Chartered
Bank Sierra Leone Limited, Financing
Institutions and SRL. Reference is made
to Exhibit 10.87 of Registrant's Report
on Form 10-K for the year ended December
31, 1992, which exhibit is incorporated
herein by reference. **
10.82 Security Sharing and Intercreditor
Agreement dated November 17, 1992 among
DEG, ExImbank, IFC, OPIC and CDC.
Reference is made to Exhibit 10.88 of
Registrant's Report on Form 10-K for the
year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.83 Security Agreement dated November 17,
1992 among SRL and DEG, ExImbank, IFC,
OPIC and CDC. Reference is made to
Exhibit 10.90 of Registrant's Report on
Form 10-K for the year ended December
31, 1992, which exhibit is incorporated
herein by reference. **
10.84 Subordination Agreement dated November
17, 1992 among DEG, ExImbank, IFC, OPIC
and CDC and Registrant, Nord Rutile
Corporation, Nord Rutile Company and
SRL. Reference is made to Exhibit 10.89
of Registrant's Report on Form 10-K for
the year ended December 31, 1992, which
exhibit is incorporated herein by
reference. **
10.85 First Amendment to Subordination
Agreement dated as of November 17, 1993
among Registrant, NR Company, CRL,
Holdings, CDC, DEG, IFC, OPIC and
ExImbank. Reference is made to Exhibit
10.19 of Registrant's Report on Form 8-K
dated November 17, 1993, which exhibit
is incorporated herein by reference. **
10.86 Arm's Length Agreement dated as of
November 17, 1993 between CRL and SRL.
Reference is made to Exhibit 10.15 of
Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is
incorporated herein by reference. **
10.87 First Amendment to Arm's Length
Agreement dated as of November 17, 1993
between Registrant and SRL. Reference
is made to Exhibit 10.16 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.88 Joint Venture Agreement dated as of
November 17, 1993 among CRL, Registrant,
NR Company and Holdings. Reference is
made to Exhibit 10.1 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.89 Marketing Agreement dated as of November
17, 1993 among CRL, Registrant, NR
Company, SRL, Holdings and TMMI.
Reference is made to Exhibit 10.2 of
Registrant's Report on Form 8-K dated
November 17, 1993, which exhibit is
incorporated herein by reference. **
10.90 U.S. Marketing Agreement dated as of
November 17, 1993 among CRL, Registrant,
NR Company, SRL, Holdings and U.S.
Partnership. Reference is made to
Exhibit 10.3 of Registrant's Report on
Form 8-K dated November 17, 1993, which
exhibit is incorporated herein by
reference. **
10.91 General Partnership Agreement dated as
of November 17, 1993 among CRL, CRL
Delaware and Registrant. Reference is
made to Exhibit 10.4 of Registrant's
Report on Form 8-K dated November 17,
1993, which exhibit is incorporated
herein by reference. **
10.92 Amendment to Mining Lease dated
September 17, 1991 from the Ministry of
Mines of the Government of Sierra Leone.
Reference is made to Exhibit 10.12 of
Amendment No. 2 to Registrant's Report
on Form S-3 dated July 20, 1993, which
exhibit is incorporated herein by
reference. **
10.93 Agreement between Sierra Rutile Limited
and the Government of Sierra Leone dated
3 January 1995. Reference is made to
Exhibit 10.86 of Registrant's Report on
Form 10-K for the year ended December
31, 1994, which exhibit is incorporated
herein by reference. **
10.94 Letter dated February 22, 1995 regarding
Sierra Rutile Limited Development Bank
Financing. Reference is made to Exhibit
10.92 of Registrant's Report on Form 10-
K for the year ended December 31, 1994,
which exhibit is incorporated herein by
reference. **
10.95 Agreement and Fourth Amending Agreement
dated March 24, 1995 between
Consolidated Rutile Limited and
Registrant. Reference is made to
Exhibit 10.93 of Registrant's Report on
Form 10-K for the year ended December
31, 1994, which exhibit is incorporated
herein by reference. **
10.96 Letter Agreement signed by Registrant,
Consolidated Rutile limited and, SRL
related to CDC, DEG, ExImbank, IFC and
OPIC dated December 15, 1995. Reference
is made to Exhibit 10.100 of
Registrant's Report on Form 10-K for the
year ended December 31, 1995, which
exhibit is incorporated herein by
reference. **
10.97 Guaranty among Registrant and DCD, DEG,
ExImbank, IFC and OPIC dated February
28, 1996. Reference is made to Exhibit
10.101 of Registrant's Report on Form 10-
K for the year ended December 31, 1995,
which exhibit is incorporated herein by
reference. **
10.98 Pledge, Assignment and Security
Agreement among Registrant and CDC, DEG,
ExImbank, IFC and OPIC dated February
28, 1996. Reference is made to Exhibit
10.102 of Registrant's Report on Form 10-
K for the year ended December 31, 1995,
which exhibit is incorporated herein by
reference. **
10.99 Letter Agreement dated December 19, 1996
between Registrant, SRL, Consolidated
Rutile Limited and CDC, DEG, ExImbank,
IFC and OPIC. Reference is made to
Exhibit 10.99 of Registrant's Form 10-K
for the year-ended December 31, 1996
which exhibit is incorporated herein by
reference. **
10.100Loan and Security Agreement by and
between Congress Financial Corporation
(Central) and Nord Kaolin Company, dated
July 10, 1996. Reference is made to
Exhibit 10.100 of Registrant's Form 10-K
for the year-ended December 31, 1996,
which exhibit is incorporated herein by
reference. **
10.101Promissory note between Registrant
(payee) and Nord Pacific Limited (maker)
dated October 24, 1996. Reference is
made to Exhibit 10.101 of Registrant's
Form 10-K for the year-ended December
31, 1996, which exhibit is incorporated
herein by reference. **
10.102 Letter Agreement dated December 30, 1997 between
Registrant, SRL, Consolidated Rutile Limited and CDC, DEG,
ExImbank, IFC and OPIC. Reference is made to Exhibit 10.102 of
Registrant's Form 10-K for the year-ended December 31, 1997,
which exhibit is incorporated herein by reference. **
10.103 Asset Purchase Agreement between Registrant and Dry
Branch Kaolin dated March 5, 1997. Reference is made to Exhibit
10.103 of Registrant's Form 10-K for the year-ended December 31,
1997, which exhibit is incorporated herein by reference. **
10.104 Bill of Sale and Assignment between Registrant and Dry
Branch Kaolin dated April 23, 1997. Reference is made to Exhibit
10.104 of Registrant's Form 10-K for the year-ended December 31,
1997, which exhibit is incorporated herein by reference. **
10.105 Assumption Agreement between Registrant and Dry Branch
Kaolin dated April 23, 1997. Reference is made to Exhibit 10.105
of Registrant's Form 10-K for the year-ended December 31, 1997,
which exhibit is incorporated herein by reference. **
10.106 Employment Agreement dated May 27, 1997, between the
Registrant and W. Pierce Carson. Reference is made to Exhibit
10.106 of Registrant's Form 10-K for the year-ended December 31,
1997, which exhibit is incorporated herein by reference. **
10.107 Continuation of Employment Agreement dated May 27,
1997, between the Registrant and Edgar F. Cruft. Reference is
made to Exhibit 10.107 of Registrant's Form 10-K for the year-
ended December 31, 1997, which exhibit is incorporated herein by
reference. **
10.108 Amendment to Continuation of Employment Agreement dated
May 27, 1997, between the Registrant and Edgar F. Cruft.
Reference is made to Exhibit 10.108 of Registrant's Form 10-K for
the year-ended December 31, 1997, which exhibit is incorporated
herein by reference. **
10.109
Continuation of Employment Agreement dated May 27, 1997, between
Registrant and Terence H. Lang. Reference is made to Exhibit
10.109 of Registrant's Form 10-K for the year-ended December 31,
1997, which exhibit is incorporated herein by reference. **
10.110 Employment Agreement dated May 27, 1997 May 27, 1997,
between the Registrant and MIL (Investment) S.A., Nord Resources,
Edgar F. Cruft, Terence H. Lang and W. Pierce Carson. Reference
is made to Exhibit 10.110 of Registrant's Form 10-K K for the
year-ended December 31, 1997, which exhibit is incorporated
herein by reference. **
10.111 Subscription Agreement between Registrant and Nord
Pacific Limited dated July 3, 1997. Reference is made to Exhibit
10.111 of Registrant's Form 10-K for the year-ended December 31,
1997, which exhibit is incorporated herein by reference. **
10.112 Contract For Sale and Purchase dated March 29, 1996
between the Registrant and Severson Enterprises, Inc. Reference
is made to Exhibit 10.112 of Registrant's Form 10-K for the year-
ended December 31, 1997, which exhibit is incorporated herein by
reference. **
10.113 Letter Agreement dated March 31, 1998, between
Registrant, SRL, Consolidated Rutile Limited and CDC, DEG,
ExImbank, IFC and OPIC. Reference is made to Exhibit 10.113 of
Registrant's Form 10-K for the year-ended December 31, 1997,
which exhibit is incorporated herein by reference. **
10.114 Letter dated April 28, 1998 from Deloitte & Touche LLC
to the Securities and Exchange Commission. Reference is made to
Exhibit 10.114 of Registrant's Form 8-K dated April 30, 1998,
which exhibit is incorporated herein by reference. **
10.115 CDC Amendment Agreement dated 5/15/98. Reference is
made to Exhibit 10.115 of Registrant's Form 8-K dated May 15,
1998, which exhibit is incorporated herein by Reference. **
10.116 DEG Amendment Agreement dated 5/15/98. Reference is
made to Exhibit 10.116 of Registrant's Form 8-K dated May 15,
1998, which exhibit is incorporated herein by Reference. **
10.117 ExImbank Amendment Agreement dated 5/15/98. Reference
is made to Exhibit 10.117 of Registrant's Form 8-K Dated May 15,
1998, which exhibit is incorporated herein by Reference. **
10.118IFC Amendment Agreement dated 5/15/98.
Reference is made to Exhibit 10.118 of
Registrant's Form 8-K dated May 15,
1998, which exhibit is incorporated
herein by Reference. **
10.119OPIC Amendment Agreement dated 5/15/98.
Reference is made to Exhibit 10.119 of
Registrant's Form 8-K dated May 15,
1998, which exhibit is incorporated
herein by Reference. **
10.120 Account Security and Control Agreement (with exhibits)
dated 5/15/98. Reference is made to Exhibit 10.120 of
Registrant's Form 8-K dated May 15, 1998, which exhibit is
incorporated herein by Reference. **
10.121SRL Share Pledge Agreement dated
5/15/98. Reference is made to Exhibit
10.121 of Registrant's Form 8-K dated
May 15, 1998, which exhibit is
incorporated herein by Reference. **
10.122Collateral Agent Agreement, dated
5/15/98. Reference is made to Exhibit
10.122 of Registrant's Form 8-K dated
May 15, 1998, which exhibit is
incorporated herein by Reference. **
10.123Sale and Purchase Agreement (Johnson
Camp Mine) dated September 15, 1998
between Arimetco, Inc., as Seller and
Summo USA Corporation, as Purchaser.
Reference is made to Exhibit 10.123 of
Registrant's Form 8-K dated June 23,
1999, which exhibit is incorporated herein
by Reference. **
10.124Amendment of Sale and Purchase Agreement
(Johnson Camp Mine) dated January 19,
1999 between Arimetco, Inc., as Seller
and Summo USA Corporation, as Purchaser.
Reference is made to Exhibit 10.124 of
Registrant's Form 8-K dated June 23,
1999, which exhibit is incorporated herein
by Reference. **
10.125Second Amendment of Sale and Purchase
Agreement (Johnson Camp Mine) dated May
26, 1999 between Arimetco, Inc., as
Seller and Summo USA Corporation, as
Purchaser. Reference is made to Exhibit
10.125 of Registrant's Form 8-K dated
June 23, 1999, which exhibit is
incorporated herein by Reference. **
10.126Acquisition Agreement dated June 4, 1999
among Nord Resources Corporation, Nord
Copper Corporation and Summo USA
Corporation. Reference is made to
Exhibit 10.126 of Registrant's Form 8-K
dated June 23, 1999, which exhibit is
incorporated herein by Reference. **
10.127Promissory note dated June 8, 1999 from
Nord Copper Corporation to Arimetco,
Inc. Reference is made to Exhibit 10.127
of Registrant's Form 8-K dated June 23,
1999, which exhibit is incorporated herein
by Reference. **
10.128Unconditional Guarantee of Payment dated
June 8, 1999 from Nord Resources
Corporation in favor of Arimetco, Inc.
Reference is made to Exhibit 10.128 of
Registrant's Form 8-K dated June 23,
1999, which exhibit is incorporated herein
by Reference. **
10.129Deed of Trust, Assignment of Rents,
Security Agreement and Fixture Filing
dated June 8, 1999 between Nord Copper
Corporation and Arimetco, Inc.
Reference is made to Exhibit 10.129 of
Registrant's Form 8-K dated June 23,
1999, which exhibit is incorporated herein
by Reference. **
10.130Grant of Production Payment (Johnson
Camp Mine) effective as of June 8, 1999
from Nord Copper Corporation to
Arimetco, Inc. Reference is made to
Exhibit 10.130 of Registrant's Form 8-K
dated June 23, 1999, which exhibit is
incorporated herein by Reference. **
10.131Sale and Purchase Agreement dated June
16, 1999 between Nord Resources
Corporation, MIL (Investments) S.A.R.L.,
and SRL Acquisition No. 1 Limited.
Reference is made to Exhibit 10.131 of
Registrant's Form 8-K dated October 12,
1999, which exhibit is incorporated herein
by Reference. **
10.132Shareholders Agreement dated September
30, 1999 between Nord Resources
Corporation, MIL (Investments) S.A.R.L.,
SRL Acquisition No. 1 Limited, and SRL
Holding GmbH. Reference is made to
Exhibit 10.132 of Registrant's Form 8-K
dated October 12, 1999, which exhibit is
incorporated herein by Reference. **
10.133Guaranty dated September 30, 1999
between MIL (Investments) S.A.R.L., as
Guarantor, and Nord Resources
Corporation. Reference is made to
Exhibit 10.133 of Registrant's Form 8-K
dated October 12, 1999, which exhibit is
incorporated herein by Reference. **
10.134Valuation Report and Fairness Opinion
dated June 21, 1999 issued by NM
Rothschild & Sons (Washington) LLC.
Reference is made to Exhibit 10.134 of
Registrant's Form 8-K dated October 12,
1999, which exhibit is incorporated herein
by Reference. **
10.135Form of Memorandum and Articles of
Association of SRL Acquisition No. 1
Limited, a British Virgin Islands
corporation. Reference is made to
Exhibit 10.135 of Registrant's Form 8-K
dated October 12, 1999, which exhibit is
incorporated herein by Reference. **
21. Subsidiaries of Registrant
Name of Jurisdiction in
subsidiary which incorporated
Nord Copper Delaware
Corporation
23.1 Consent of KPMG LLP
27. Financial Data Schedule
** Indicates that the exhibit is incorporated by reference
in this Annual Report on Form 10-K from a previous
filing with the Commission.