-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrQZTGC+Q416VZjK/lzUtCFoUMb4o1SiDrKR+76ScDaiFxFIr9m/mnsqrI8Ripcv XBQ39dkCXy/HLa9Hv3Ie1A== 0000950123-00-003004.txt : 20000331 0000950123-00-003004.hdr.sgml : 20000331 ACCESSION NUMBER: 0000950123-00-003004 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMPBELL RESOURCES INC /NEW/ CENTRAL INDEX KEY: 0000718053 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] IRS NUMBER: 980098690 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-08488 FILM NUMBER: 586124 BUSINESS ADDRESS: STREET 1: 120 ADELAIDE ST W STREET 2: STE 1910 CITY: TORONTO ONTARIO CANA STATE: A6 BUSINESS PHONE: 4163665201 MAIL ADDRESS: STREET 1: 120 ADELAIDE ST W STREET 2: STE 1910 CITY: TORONTO ONTARIO CANA STATE: A6 10-K405 1 CAMPBELL RESOURCES INC. 1 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 For the fiscal year ended DECEMBER 31, 1999 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 1-8488 CAMPBELL RESOURCES INC. - ------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter)
Canada Not Applicable ------ -------------- (State or other jurisdiction of incorporation (I.R.S. Employer Identification No.) or organization) 120 Adelaide Street West, Suite 1910, Toronto, Ontario M5H 1T1 Not Applicable - -------------------------------------------------------------- -------------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (416) 366-5201 --------------
Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered - ------------------- ----------------------------------------- Common Shares New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None 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] At March 27, 2000, the registrant had outstanding 157,152,288 common shares, without nominal or par value, the only class of registrant's stock outstanding. The aggregate market value of the voting and non-voting common equity held by non-affiliates at such date was US$36,716,803 (based on the closing price of such common share of US$0.234 on such date as reported on the New York Stock Exchange, Inc. composite listings.) 2 DOCUMENTS INCORPORATED BY REFERENCE Certain portions of registrant's Proxy Circular relating to an Annual and Special Meeting of Shareholders scheduled to be held on May 19, 2000 are incorporated by reference into Part III of this report and certain portions of the 1999 Annual Report to shareholders are incorporated herein by reference into Parts I, II, and IV of this report. These portions of such Proxy Circular and Annual Report are filed as exhibits to this Form 10-K. 3 CAMPBELL RESOURCES INC. Index Annual Report on Form 10-K for Year Ended December 31, 1999
Page PART I Items 1. and 2. Business and Properties...........................................................................2 Item 3. Legal Proceedings................................................................................24 Item 4. Submission of Matters to a Vote of Security Holders.................................................................................24 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.......................... .......................................25 Item 6. Selected Financial Data..........................................................................25 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................................25 Item 7A. Quantitative and Qualitative Disclosures about Market Risk..................................... 26 Item 8. Financial Statements and Supplementary Data.............................................................................................27 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.............................................................................27 PART III Item 10. Directors and Executive Officers of the Registrant................................................................................27 Item 11. Executive Compensation...........................................................................28 Item 12. Security Ownership of Certain Beneficial Owners and Management............................................................................28 Item 13. Certain Relationships and Related Transactions...................................................28 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K..........................................................................29
4 CURRENCY AND METRIC EQUIVALENTS Unless otherwise indicated, all dollar amounts herein are expressed in Canadian dollars. Amounts expressed in United States dollars are preceded by the symbol "US$". The following table sets forth, for each of the years indicated, certain information concerning the exchange rate for translating Canadian dollars into United States dollars based upon the noon buying rate in the City of New York for cable transfers in Canadian dollars and certified for customs purposes by the Federal Reserve Bank of New York.
Rate at Average December 31 Rate (1) High Low ----------- ---- ---- --- 1995 0.7323 0.7286 0.7431 0.7076 1996 0.7301 0.7332 0.7513 0.7235 1997 0.6999 0.7198 0.7487 0.6961 1998 0.6447 0.6746 0.7105 0.6343 1999 0.6929 0.6728 0.6929 0.6446
(1) The average rate means the average of the exchange rates on the last day of each month during the year. On March 27, 2000, the noon buying rate for Cdn. $1.00 was US$0.6847 TONNAGES referred to in this report are to either short tons equal to 2,000 pounds, referred to herein as tons, or to metric tonnes, equal to 2,204.6 pounds and referred to herein as tonnes or metric tonnes. A reference herein to OUNCES means a troy ounce which is equal to 31.103 grams. To convert grams per tonne to ounces per ton, multiply grams per tonne by 0.029. DISTANCES are referred to either as miles, equal to 1.6093 kilometres; feet, equal to 0.305 metres; kilometres, equal to 0.621 miles; or metres, equal to 3.28 feet. ACREAGE is referred to as acres, which represents 0.4046 hectares; hectares, equal to 2.471 acres; or square miles equal to 640 acres or 258.99 hectares. As used throughout this report, the term "PROVEN (MEASURED) RESERVES" means reserves for which (a) quantities are computed from dimensions revealed in outcrops, trenches, workings or drill holes; (b) grade and/or quality are computed from the results of detailed sampling and (c) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth, and mineral content of reserves are well-established. The term "PROBABLE (INDICATED) RESERVES" means reserves for which quantity and grade and/or quality are computed from information similar to that used for proven (measured) reserves, but the sites for inspection, sampling and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for proven (measured) reserves, is high enough to assume continuity between points of observation. 5 Cautionary "Safe Harbor" Statement Under the Private Securities Litigation Reform Act of 1995. This report contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe-harbor created by such section. Such forward-looking statements concern the Corporation's operations, economic performance and financial condition. Such statements involve known and unknown risks, uncertainties and other factors, including those identified under the "Risk Factors" section in Item 1 and 2 and elsewhere in this report, that may cause the actual results, performance or achievements of the Corporation, or industry results, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, but are not limited to: differences between estimated and actual ore reserves and recovery rates; failure of plant, equipment or processes to operate in accordance with expectations and specifications; changes to exploration, development and mining plans due to prudent reaction of management to ongoing exploration results, engineering and financial concerns; environmental costs; and fluctuations in gold price which affect the profitability and ore reserves of the Corporation. These risks and uncertainties are the normal risks involved in mining. Readers are cautioned not to put undue reliance on forward-looking statements. See "Risk Factors", and elsewhere in Item 1 and 2, and "Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7". The forward-looking statements are made as of the date of this report, and the Corporation assumes no obligation to update the forward-looking statements or to update the reasons why actual results could differ from those projected in the forward-looking statements. 6 PART I ITEMS 1 AND 2 - BUSINESS AND PROPERTIES GENERAL Campbell Resources Inc. ("Campbell" or the "Corporation") was incorporated in June 1950 under the laws of British Columbia. On September 8, 1982, the Corporation was continued under the Canada Business Corporations Act and on June 8, 1983, in connection with an amalgamation of three other companies, the name of the Corporation was changed from GM Resources Limited to Campbell Resources Inc. At the annual meeting of shareholders scheduled to be held on May 19, 2000, shareholders will be asked to approve, by special resolution, a consolidation (reverse split) of the Corporation's common shares on the basis of one post-consolidation common share for every ten pre- consolidation common shares (or such lesser number as the directors in their discretion may determine). The Corporation is a gold mining and natural resource company whose principal assets are the Joe Mann gold mine (the "Joe Mann Mine") located in the Chibougamau area of northwestern Quebec, the Santa Gertrudis gold mine (the "Santa Gertrudis Mine") located in the State of Sonora, Mexico and the Cerro Quema gold property (the "Cerro Quema Property") located in the southern Azuero Peninsula in the Los Santos province of Panama. Segmented financial information with respect to the Corporation's domestic and foreign operations is set out in Note 10 to the Corporation's consolidated financial statements for the year ended December 31, 1999. Such financial statements are filed as a part of Item 14 of this report. The Joe Mann Mine, an underground gold mine owned by Meston Resources Inc., a wholly-owned subsidiary of the Corporation, is located near the town of Chibougamau which is approximately 350 miles north of Montreal, Quebec. The Joe Mann Mine was brought into production by Campbell in 1987. During 1999, as production moved to lower levels, operations were significantly affected by ground control problems and excessive dilution. The resulting higher cash operating costs resulted in the temporary suspension of development and mining operations to permit re-evaluation of the economic viability of the Joe Mann Mine and development of a new Long Term Mine Plan ( the "Mine Plan"). This Mine Plan, which provides for a change in the mining method from shrinkage and longhole to cut-and-fill, was adopted in November, 1999 and production is to resume in April, 2000. (See " New Long Term Mine Plan, Mine Development and Exploration" on page 7). In July 1994, the Corporation acquired the Santa Gertrudis Mine from Phelps Dodge Corporation. The Santa Gertrudis Mine, an open pit heap leach gold mine located near the town of Magdalena, Sonora, Mexico, approximately 150 miles south of Tucson, Arizona, was brought into production in 1991 by its previous owner. The Corporation holds its interests in Mexico through its wholly-owned subsidiary, Oro de Sotula, S.A. de C.V. ("Sotula"). In December, 1997, mining operations were temporarily suspended due to low gold prices and insufficient developed ore reserves. Leaching operations continued until the end of 1998. 2 7 In mid 1999, Sotula acquired the adjoining Roca Roja mining property. This property hosted a former producing gold mine and was the focus of the 1999 exploration program. Following successful initial exploration efforts, limited mining operations, at levels expected to be sufficient to cover most of the ongoing planned exploration costs, resumed in the fourth quarter of 1999. There can be no assurance that sufficient ore reserves will be discovered and developed or that gold prices will rise to a level, that will make it economic to continue limited mining operations or to increase production to historical levels. In March 1996, the Corporation acquired all of the shares of Minera Cerro Quema, S.A., a Panamanian corporation ("Minera"), whose primary asset is the Cerro Quema Property. In November 1996, a positive feasibility study, at an assumed gold price of US$400 per ounce, was completed and presented to the Board of Directors. Following completion of some additional test work and receipt of required permitting and exploitation concessions, final approval for the project was given in February 1997. In December 1997, as a consequence of sustained lower gold prices, the Corporation decided to defer further development of Cerro Quema until the gold price reaches a level that will ensure economic viability of the project. There can be no assurance that such gold prices will be attained. The Corporation continues to have, as one of its primary business objectives, the acquisition of additional sources of gold production through the acquisition of producing mines or developed properties. The Corporation has and is continuing to evaluate a number of such investment opportunities in North and South America. The Corporation sells metals on international markets at prices which fluctuate daily based on world market supply and demand and is in competition with other mining companies, insofar as they produce the same product, in a market where price and quality advantages can not be claimed by any of the market participants. Factors which allow producers to remain competitive in the market over the long-term are the quality (grade, metallurgy, etc.), and size of the orebody, cost of production and the proximity to market. In all these factors the Corporation is competitive to greater or lesser degrees; but because of the number of companies and variables involved, no individual or group of producers can be pointed to as being in direct competition with Campbell. Except as otherwise noted herein, there have been no recent changes with respect to properties which the Corporation owns, or in which it has significant interests, which have materially affected operating profits. Except as herein noted, to the knowledge of the Corporation, it and its subsidiaries are in compliance with all environmental laws and regulations in effect in all jurisdictions in which operations are being conducted. Campbell and its wholly-owned subsidiaries employed approximately 231 persons as of December 31, 1999, of which 79 were covered by collective bargaining agreements. The relationship of Campbell and its subsidiaries with their employees and contractors is considered by Campbell to be satisfactory. During 1999 and 1998, there were no material strikes or walkouts at either of the Corporation's operating mines. 3 8 In September 1996, the collective bargaining unit at the Joe Mann Mine, represented by Le Syndicat des Travailleurs-euses de la Mine Meston ("CSN"), consisting of 145 employees, approved a collective bargaining agreement covering a three year period. In February 1999, CSN agreed to a two year extension of current agreements with an annual wage increase of $0.25 per hour and a gold price participation formula. Also in February 1999, a three year contract, on the same terms as to wage increase and gold price participation, was approved by the Metallurgistes Unis d'Amerique covering workers at the Camchib Mill. With the decision to suspend development and mining operations in September, 1999, approximately 140 employees were placed on temporary layoff. The recall of these employees started in November, 1999 once the new Mine Plan was approved and development work commenced in preparation of the change of mining method and is expected to be complete by the end of the first quarter of 2000. See "Employees" on page 11. In December, 1997, the Corporation concluded an agreement with the National Union of Miners, Metallurgists and Similar Workers of the Mexican Republic, which represented the 143 hourly employees at the Santa Gertrudis Mine, with respect to the cessation of mining operations and termination of all employees covered by the agreement. With the resumption of limited mining operations, the Corporation has entered into renewable three month contracts with approximately 67 employees. On resumption of full scale mining activities, a new union contract will be negotiated. Intercorporate Relationships The following chart illustrates the principal subsidiaries of the Corporation, together with the jurisdiction of incorporation of each company and the significant properties held by each company: CAMPBELL RESOURCES INC. (Canada) | | | | | | | | SOTULA GOLD CORP. | | MESTON RESOURCES INC. (Canada) --100%--------- --100%-- (Quebec) | | Joe Mann Mine | | Chibougamau Exploration Properties | | | | | | 100%------------ 100% | | | | ORO DE SOTULA, S.A. de C.V. MINERA CERRO QUEMA, S.A. (Mexico) (Panama) Santa Gertrudis Mine Cerro Quema Property Exploration Properties 4 9 THE JOE MANN MINE HISTORY The Joe Mann property was acquired in July 1980 by Meston Lake Resources Inc. ("Meston Lake"), a predecessor of Meston Resources Inc. ("Meston"), a wholly-owned subsidiary of the Corporation. The original deposit was discovered in 1950. A three compartment exploration shaft was sunk and some 859,000 tons of ore grading 0.176 oz/ton of gold had been mined and milled until June 1975 when rising costs coupled with poor recoveries prohibited further mining. Subsequently, Meston Lake acquired the mine and the shaft was dewatered in 1980 before financial problems put a halt to the operation. Campbell became involved in the Joe Mann property in 1983 when it acquired a minority position in Meston Lake and entered into a management agreement under which it designed and implemented an exploration programme and aided in the financing of this programme with the objective of determining the commercial viability of the project. The mine was dewatered in early 1985 and in June of that year, an underground exploration programme began. The exploration programme resulted in the discovery of 800,000 tons of ore reserves and prompted the decision to re-start production. Commercial production began on April 2, 1987 with proven and probable mineable reserves of 910,000 tons grading 0.22 ounces of gold per ton at December 31, 1986. During 1987, Campbell also increased its ownership in the mine to 100%. The mine has been in continuous operation since 1987. As part of an expansion plan in 1989, a new shaft, the No. 2 shaft, was sunk to a depth of 2,050 feet. During 1992, the No. 2 shaft was deepened to a depth of 2,676 feet. This deepening project opened up four new levels between the 1825 and 2350 levels. To date, the deposit has been mined along a 3,000 foot strike length to a depth of 2,350 feet and remains open at depth. During 1997 and 1998, the No. 2 shaft was further deepened by 1,081 feet to a depth of 3,757 feet to permit six new levels to be mined. This project was completed in July 1998 at a cost of $13.1 million, approximately $1.4 million less than budget. The No. 2 production shaft is constructed to permit future deepening without interruption of production. During 1999, as production moved to the lower levels, operations were significantly affected by ground control problems and excessive dilution. Resulting higher cash operating costs compelled management to temporarily suspend development and mining operations to permit re-evaluation of the economic viability of the Joe Mann Mine and development of a new Mine Plan which has since been approved. (See "New Long Term Mine Plan, Mine Development and Exploration" on page 7). At the Joe Mann Mine, the Corporation's subsidiary Meston holds a number of mining concessions and a mining lease along with 25 mining claims surrounding the concessions. Under Quebec mining law, the Corporation's interest in the mining concessions and lease is maintained in good standing by payment of an annual rental fee of $25.00 per hectare or by the completion of $25.00 of exploration and development work annually per hectare. As to mining claims, a fee of $22.00 per claim must be paid and $500 of exploration work incurred every two years. 5 10 Exploration expenses may be carried forward to future years and may be applied to claims within a 3.2 square kilometre block distance. Current work credits will entitle the Corporation to retain currently held mining claims for in excess of twenty years. Under the exploration agreements with SOQUEM described under "Mineral Exploration Properties--Chibougamau Exploration Properties" on pages 19 and 20, SOQUEM pays the annual fees and incurs the expenditures necessary to keep the applicable mining claims in good standing. LOCATION AND ACCESS The Joe Mann Mine is located approximately 40 miles south of Chibougamau, Quebec which is approximately 350 miles north of Montreal. The property consists of mining concessions covering 90 hectares, a mining lease covering 14.8 hectares and 25 mining claims covering approximately 400 hectares. In addition, Meston holds 197 mining claims covering approximately 3,150 hectares outside of the Joe Mann Mine area. The property is accessed from Chibougamau by road. Highway 167 leads to the gravel mine access road, which is approximately 12 miles in length and is serviced by Meston. GEOLOGY The deposit represents a classic Archean vein-type deposit with gold-copper mineralization hosted by quartz veining within three laterally continuous shear systems. In the mine area, the rocks consist predominantly of mafic lavas intruded by gabbro sills and feldspar porphyry dykes. The intrusives appear to have been introduced along a prominent east-west break structure. The gabbro sills which are moderately magnetic are traceable over widths of 400 to 600 feet and for at least thirty miles along strike. Many late diabase dykes of varying thicknesses crosscut the sequence and strike northeast. Two principal veins account for approximately 100% of the known reserves and 100% of the 1999 and planned 2000 production. The Main Vein is located north of the shaft and has an east-west strike length of approximately 3,000 feet with an 80 degree dip to the north. The Main Vein contains about 87% of the reserves. The South Vein accounts for 13% of reserves and is located about 350 feet south of the Main Vein between the No. 1 shaft and the No. 2 production shaft. The South Vein has a strike length of about 3,000 feet in an east-west direction and a north dip and appears to weaken below the 2750 level. Exploration on the 2575 level, initiated in the fall of 1998, encountered positive results approximately 1000 feet east of the shaft and led to the discovery of a new zone situated north of the Main Vein. At present, it is thought that the mineralization of the new ore zone is spatially and genetically related to a large quartz-feldspar porphyry dyke. There are two limbs of high-grade ore mineralization which occur at the northern and southern contacts between the porpphyry dyke and a sheared gabbro. During 1999, definition drilling confirmed a stoping unit containing 118,000 tons grading 0.317 ounces per ton on the 2575 level that will start to be mined in 2000. In addition, definition drilling appears to confirm the extension of the zone in the hanging wall of the Main Zone between the 2750 and 3100 levels. Definition drilling is continuing in order to confirm grade and potentially wider zones in this area. 6 11 MINEABLE RESERVES Mineable reserves at the Joe Mann Mine are continually updated by management to reflect operations and exploration activity and are periodically reviewed by independent consultants. The following table summarizes diluted mineable reserves estimated by management and calculated as at December 31, 1999 on the basis of a gold price of US$300 per ounce, and as at December 31, 1998 and December 1997, on the basis of gold prices of US$325 and US$375 per ounce respectively.
Proven and Probable Mineable Reserves December 31, 1999 December 31, 1998 December 31, 1997 Grade Grade Grade Tons (oz/ton) Tons (oz/ton) Tons (oz/ton) Proven 179,924 0.269 397,305 0.231 489,931 0.239 Probable 121,945 0.295 119,285 0.224 63,486 0.232 ------- ----- ------- ----- ------- ----- Total 301,869 0.280 516,590 0.229 553,417 0.238 ======= ===== ======= ===== ======= =====
The total estimated diluted proven and probable mineable reserves at the Joe Mann Mine decreased by 214,721 tons from 516,590 tons at December 31, 1998 to 301,869 tons at December 31, 1999. After taking into account production during 1999 of 261,382 tons grading 0.211 ounces per ton, the total diluted proven and probable mineable reserves increased on a net basis during this period by 46,661 tons. Reserves decreased during 1999 because access to the mineralization below the 2350 level can only be achieved on completion of the development. The decrease in tonnage and increase in grade at December 31, 1999 also reflects the assumption of five foot mining widths compared to six foot mining widths in the prior years and the reduction in the assumed gold price from US$325 to US$300 per ounce. With this development work now under way on the six mining levels below the 2350 level, reserves should return to historical levels. NEW LONG-TERM MINE PLAN, MINE DEVELOPMENT AND EXPLORATION During 1999, as production moved to the lower levels, operations were significantly affected by ground control problems and excessive dilution. Resulting higher cash operating costs compelled management to make significant changes at the Joe Mann Mine. Despite the positive impact of the discovery of a new zone in 1998, discussed above under "Geology" on page 6 and the introduction of a new work schedule which materially increased the number of working days per year, as described below under "Employees" on page 11, the excessive dilution resulted in the temporary suspension of development and mining operations to permit re-evaluation of the economic viability of the Joe Mann Mine and development of a new Mine Plan. This Mine Plan, which provides for a change in the mining method from shrinkage and long hole to cut and fill, was adopted in November, 1999. Under this Mine Plan, production of 7 12 approximately 63,500 ounces is expected in 2000 with annual production over the following three year period to average 90,000 ounces at an estimated average cash operating cost of US$220. The Mine Plan assumes a gold price of US$300 per ounce. Significant improvements are expected in the recovery of ore with lower dilution due to selective mining at narrower widths. Development to enable the Mine Plan to be implemented was started in December, 1999 and production is to resume in April, 2000. There can be no assurance that the foregoing expectations will be realized. In light of the difficulties and changes described above, all development and diamond drilling ceased in September, 1999. During 1999, 15,908 feet of lateral development and 75,107 feet of diamond drilling were completed at cost of approximately $4,300,000 net of deferred revenue from development ore. This compares to 17,361 feet of lateral development and 101,438 feet of diamond drilling in 1998, completed at a net cost of approximately $4,552,000. Continuity of gold mineralization has been confirmed to a depth of 3,700 feet, 1,125 feet below the current deepest production level of the mine and mineralization remains open at depth. Exploration in 2000 will be focussed on delineating additional reserves within parallel shears to permit production to continue beyond mid 2004 as currently provided for in the Mine Plan. In addition, initial drilling has suggested the presence of wider, high grade zones of ore between the 2350 and 3450 levels. Should the recent drill results continue, an increase in both gold and copper grades and a reduction in cash operating costs is possible. WEST ZONE In addition to ore from the Main and South Veins, which are situated east of the production shaft, the prior mine plan had included some initial production from the West Zone between the 1650 and 1825 levels of the mine. By mid-1999, results from the West Zone were disappointing with the grade being inconsistent and lower than expected. As a consequence, development in the West Zone was suspended for the time being and only limited mining is being carried out. CHANGE TO CUT-AND-FILL MINING METHOD Until mid-1999, mining was predominantly carried out using the shrinkage stope mining method. In 1999, approximately 50% of the ore came from the shrinkage stopes, 31% from longhole stoping, and 19% from development and recovery muck. As mining moved to lower levels, ground control problems were experienced particularly in the upper portions of certain shrinkage stopes. In order to control these problems and reduce dilution, the Mine Plan incorporates the use of cut-and-fill mining methods that will replace the previously used mining methods. It is expected that the ground stability problems, which led to dilution and related increased costs experienced in 1999, will be controlled. This method is well suited to mine steeply dipping vein deposits, such as those found at the Joe Mann Mine. With this method, a series of haulage drifts are driven in the footwall from the shaft parallel to the orebody. Cross-cuts are tunnels perpendicular to the haulage drifts that are excavated from the haulage drifts to intersect the orebody at regular intervals. Service and ventilation raises, which provide access and air flow to the working area, and ore passes, which 8 13 are used to deliver ore to a collection point, are excavated from the cross-cut. As a result of this development, the orebody is divided into convenient blocks or stopes that are ready to be mined. The ore will be mined in a series of horizontal slices or sequences starting from the bottom of the stope, working upwards. Ore will be drilled using jackleg drills, blasted and removed from the stopes through ore passes. It will then be loaded on five-ton electric trams and hauled to the loading pocket at the bottom of the shaft where it is hoisted to the surface for processing. After a complete sequence has been extracted, part of the resulting void will be filled with fill material which is fed by gravity from the surface. At the Joe Mann Mine, Campbell will back fill with sand deposits that are found in close proximity to the mine and cap the fill with cement floors. This fill provides support for the sidewall of the excavation as well as the floor from which the next sequence can be mined. A pillar will also be left above and below each cross-cut to provide additional support and stability. As the stope progresses upwards, the service and ventilation raises and ore passes are maintained within the filled stope. Cut-and fill mining has many advantages compared to other underground mining methods. Usually cut-and-fill mining requires lower development expenditures when compared with shrinkage and long-hole mining methods. It also generally provides more stability in areas with poor ground conditions and results in less dilution and greater ore recovery. The problem of dilution caused by stope wall failure is more controlled with stability provided by the fill. When blasting occurs, there is less risk of waste from the walls being added to the ore. A mined out stope that is back filled may provide support to adjacent work areas. At Joe Mann, this additional stability is expected to enable mining widths to decrease from six feet to five feet. Since the ore veins are typically less than five feet, miners will not be extracting the additional one foot of waste rock. This results in an effective increase in the grade of the ore, and lessens costs as anticipated in the long-term mine plan. Another advantage of cut-and-fill mining is that it allows miners to be more selective giving rise to excellent grade control. Areas of uneconomic waste rock may be left in place. With shrinkage and long-hole mining these waste blocks would have to be mined, thereby lowering the mill head grade. An additional important advantage of cut-and-fill mining deals with the continuity of operations and speed of ore recovery. With shrinkage and long-hole mining methods, approximately 60% of the ore remains in the stope until it is completely drilled and blasted. In addition to the cash flow from individual stopes being delayed because the ore is not immediately hauled to the surface, several mining problems can result. Additional dilution following blasting can occur as loose rock on the walls of the stope may fall into broken ore. Ore may also become trapped within a particular stope as the walls converge because of the stresses of the overlying rock. With cut-and-fill mining, ore is removed from the stope through the ore pass and hauled to the shaft on a daily basis, thereby reducing the risk of these potential problems. 9 14 MINING The production capacity of the No. 2 shaft system is estimated to be 2,000 tons per day assuming 12 hours of hoisting per day. During 1999, the No. 1 shaft was withdrawn from service. Mucked ore is passed through a rock breaker then hoisted to the surface. All production and development ore is hoisted from the No. 2 production shaft to the surface. The equipment used in the mining operations is regularly maintained and is in good working order. The following table sets out production from the Joe Mann Mine for the past three years: JOE MANN MINE PRODUCTION SUMMARY Year ended December 31 ----------------------
1999 (1) 1998 1997 -------- ---- ---- Tons Milled 267,000 299,000 266,000 Gold Grade (oz./ton) 0.204 0.252 0.299 Copper Grade (%) 0.22 0.243 0.28 Gold Produced (ounces) 51,300 70,100 73,500 Copper Produced (000's lbs) 1,065 1,316 1,367 Cash Operating Costs (2) (US$ $292 $257 $264 per oz. of gold)
(1) Mining operations, other than ore recovery, were temporarily suspended in September, 1999. Milling ceased in November, 1999. (2) Operating costs include all on-site mining, processing and administrative costs, net of copper and silver by-product credits. MILLING Ore from the Joe Mann Mine is transported approximately 40 miles by truck to the Corporation's Camchib Mill for processing. The Camchib Mill was commissioned in 1955 and is regularly maintained and is in good working order. During 1999, the gold recovery rate at the Camchib Mill which processed ore from the Joe Mann Mine was 94.2% and the copper recovery rate was 95.4% compared to 94.3% and 94.2% respectively in 1998. The mill process includes three separate circuits; a gravity circuit, a flotation circuit and a cyanide circuit. Original design capacity at the Camchib Mill was 3,500 tons per day as a flotation mill. The Camchib Mill was modified to include a cyanide circuit. Gold recovered from the gravity and cyanide circuits is formed into dore bars on site and is shipped to the Royal Canadian Mint for refining. The flotation circuit uses standard technology to produce a copper-gold concentrate. The copper-gold concentrate is shipped by rail to Noranda Inc.'s Horne Smelter in Rouyn/Noranda, Quebec for smelting and refining. 10 15 EMPLOYEES At the Joe Mann Mine, 108 persons were employed as of December 31, 1999, compared to 228 persons as of December 31, 1998 of whom 77 mine workers were covered by a collective bargaining agreement with Le Syndicat des Travailleurs-euses de la Mine Meston (CSN), one mill worker was covered by a collective bargaining agreement with Les Metallurgistes Unis d'Amerique (the United Steelworkers of America) and one nurse was covered by a collective bargaining agreement with La Federation des Infirmiers et Infirmieres du Quebec (FIIQ). With resumption of operations at the end of the first quarter of 2000, the level of employees during the remainder of 2000 is expected to return to usual levels. During 1999 and 1998, there were no material strikes or walkouts at the Joe Mann Mine. In September, 1996, the collective bargaining unit at the Joe Mann Mine, represented by CSN, approved a collective bargaining agreement covering a three year period with wage increases of 0.73% in the first year and 1.22% and in the second and third years. The new long-term mine plan continues the seven-day per week mining schedule, which was introduced in 1999, as compared to the previous five-day per week schedule and the elimination of the two-week summer shut down. In February 1999, CSN, the union representing the hourly mine workers, supported the implementation of the new work schedule and agreed to a two year extension to the current labour agreement. Also in February, 1999, a new three year contract was agreed to with Les Metallurgistes Unis d'Amerique (the United Steel Workers of America), the union representing the hourly mill workers, on the same terms regarding wages and gold price participation as were approved by the CSN. The collective agreement with FIIQ has comparable terms to the other two collective agreements. The agreements provide for an annual increase of $0.25 per hour for the mine and mill workers amounting to an annual cost of $120,000. In addition, a gold price participation formula has also been approved. For a gold price ranging between $525 and $625 per ounce, the employees would be entitled to a maximum of an additional $0.80 per hour. With the decision in September, 1999 to suspend development and mining operations, approximately 140 employees were laid off in accordance with the Quebec employment standards legislation and the provisions of the collective agreements. The recall of these employees started in November, 1999 once the Mine Plan was approved and development work commenced in preparation of the change of mining methods. The recall is expected to be complete by the end of the first quarter of 2000 and the resumption of mining operations. NET SMELTER ROYALTY In May, 1993, Meston sold a graduated net smelter return royalty to Repadre Capital Corporation, a subsidiary of Dundee Bancorp Inc., for $3 million cash. The royalty, based on production from the Joe Mann Mine, is 1.8% at gold prices up to $512 per ounce increasing to 3.6% at gold prices of $625 per ounce and greater. A 2% royalty is also payable on copper production in excess of 5 million pounds per year and silver production in excess of one million ounces per year. For the year ended December 31, 1999, $366,000 was paid to Repadre under this agreement compared to $548,000 paid for the year ended December 31, 1998. 11 16 THE SANTA GERTRUDIS MINE HISTORY The previous owner of the Santa Gertrudis Mine, Phelps Dodge Corporation, through its Mexican exploration subsidiary, began to explore the Santa Gertrudis district in 1984. The district was recognized to have potential for sediment-hosted gold in fine-grained chemiclastic rocks similar to the gold deposits of the Carlin trend in Nevada. A preliminary feasibility study was completed in 1987 and the final feasibility study completed in October 1988. In 1989, Compania Minera Santa Gertrudis was formed for the purpose of holding the concessions where deposits had been identified and for the eventual mining of the deposits. The decision to begin production was made in 1989 and facility construction started in May, 1990. See also page 2 for "History of Santa Gertrudis". The first shipment of gold precipitate from the initial 2,000 metric tonne of ore per day heap leach facility was made in June, 1991. The initial capital investment was US$28.4 million. In 1992, an expansion was completed increasing mine production to 3,000 metric tonnes of ore per day. This level of production continued until December, 1997 when mining operations ceased due to a lack of ore. Leaching of the ore pads continued through to December, 1998. Limited mining operations resumed in the fourth quarter of 1999. LOCATION, ACCESS AND INFRASTRUCTURE The Santa Gertrudis Mine is located mid-way between Tucson, Arizona and Hermosillo, Sonora, Mexico, 80 miles south of the United States-Mexico border. The property is accessible by road which is paved except for the last 20 miles. The town of Magdalena is located about an hour drive from the site. The Santa Gertrudis Mine consists of a heap leach facility, a processing plant and associated facilities. In September, 1995 the Santa Gertrudis Mine property was expanded by 28.2 square miles. Approximately half of the new property was acquired through staking with the other half acquired through option agreements that allow the Corporation to earn a 100% interest through staged payments aggregating a maximum of US$1,000,000 over a five year period. As work was carried out on the property, certain claims have been reduced or dropped and new claims acquired. During 1999, the neighbouring Roca Roja property, comprising nineteen claims covering an area of 4,500 hectares was acquired. The current property consists of 61 claims comprising 23,893 hectares or 92.2 square miles. The Corporation's subsidiary, Sotula holds both the exploration and exploitation concessions. To maintain these concessions, Sotula was required either to incur exploration or development work or to have production revenues in 1999 amounting to approximately US$1.4 million or US$52.00 per hectare. Exploration and development expenditures and production revenues for 1999 were considerably in excess of this requirement. The excess from 1999 and prior years can be carried-forward and should be sufficient to cover requirements for the foreseeable future on all of the strategic claims. Some claims may be dropped or reduced in size 12 17 in the future if additional work fails to indicate potential for economic mineralization. However, prior years' work plus planned exploration expenditures exceed estimated work requirements for the foreseeable future on all claims. In addition, an aggregate of US$146,000 was paid for property taxes during 1999. The mine site includes a diesel power plant, four-bay maintenance shop, warehouse, modern office and telecommunications network, medical building, and recovery plant. As a cost cutting measure, mine site camp facilities were closed during 1999 and workers are now transported to and from the neighbouring town of Magdalena. GEOLOGY The gold deposits are generally located within a nine mile by two mile belt of sedimentary rocks that trends northwesterly along the southern range front of Cerro Azul. Mineralization occurs throughout the stratigraphic section; however, economically significant deposits are preferentially hosted by limey siltstone and carbonate rocks. The Santa Gertrudis deposits have strong geological similarities to the deposits in the Carlin trend in Nevada. Mineralized zones are usually completely oxidized and other Carlin features such as siliceous alteration, jasperoid zones, carbonaceous material and low angle thrusting are also present at Santa Gertrudis. Fifty gold deposits and occurrences, including the recent discoveries of El Toro Norte, Mirador and the Escondida Northwest Splay, have been identified in the District. Additional prospects are in the early stages of exploration. MINEABLE RESERVES The following table summarizes mineable reserves estimated by management on the basis of a gold price of US$300 per ounce:
PROVEN MINEABLE RESERVES December 31, 1999 December 31, 1998 December 31, 1997 Grade Grade Grade Tonnes g/tonne Tonnes g/tonne Tonnes g/tonnes ------ ------- ------ ------- ------ -------- Proven 416,000 2.33 Nil Nil Nil Nil
Following cessation of mining activities in December, 1997, approximately 732,900 tonnes of proven and probable material grading approximately 1.69 grams per tonne remained. Due to lower gold prices and because the quantity of material in these areas of the property is insufficient to support costs, this material no longer met the definition of ore reserves and was reclassified as possible mineralized material. Exploration work is continuing in an effort to identify additional material which could lead to this material becoming economic and being again classified as ore reserves and would permit the level of operations to increase and production to continue beyond 2000. OPERATIONS Limited mining operations resumed in November, 1999. There can be no assurance that sufficient ore reserves will be discovered and developed or that gold prices will rise to a level, that 13 18 will make it economic to continue limited mining operations or to increase production to historical levels. Until December, 1997, mining had been carried out on a continuous, round-the-clock basis with hydraulic shovels, front-end loaders, drills and a fleet of twelve 50-tonne and two 85-tonne haulage trucks. The average mining rate during 1997 was approximately 22,000 tonnes per day of which approximately 3,000 tonnes was ore representing a strip ratio of 6.3:1. Since November, 1999 and through 2000, limited mining is being carried out at a planned mining rate of 7,500 tonnes per day of which approximately 1,130 tonnes is ore representing an average strip ratio of 5.6:1. The ore is oxidized and processing utilises conventional heap leach technology. In general, approximately 70% of the ore is crushed to minus three inches before delivery to the leach pads and the remaining 30%, representing fines, is amenable to direct delivery to the leach pads. Sodium cyanide solutions are dripped over the ore piles on the leach pads and the gold-enriched solutions are collected in solution ponds. Extraction of the gold from the gold-enriched leach solutions is accomplished by pumping the solutions through a series of carbon columns. The gold is adsorbed onto the carbon that is subsequently transported to the plant for stripping using a hot caustic solution. Zinc dust is added to the gold-laden strip solution to facilitate precipitation of the gold. A filter system collects the gold-rich zinc precipitate which was then dried. The zinc precipitate containing 75 to 90% gold and approximately 5% silver is shipped to the United States for final refining. Subsequent to the acquisition of the Santa Gertrudis Mine in July, 1994, based on the ore placed on the leach pads and the gold recovered, a recovery rate of approximately 77% was experienced. The Phase IV leach pad, completed in mid 1997 to the east of the existing Phase I pad provides an additional 1.23 million tonne capacity. The following table sets out production from the Santa Gertrudis Mine for the past three years: SANTA GERTRUDIS MINE - PRODUCTION STATISTICS
Year ended December 31 1999 1998 1997 ---- ----- ---- Tonnes ore mined 98,000 - 1,021,000 Gold Grade (g/tonne) 2.24 - 1.71 Gold Recovery (%) n/a - 69.5 Gold Produced (ounces) 2,400 12,300 39,200 Cash Operating Costs $n/a(1) $242(2) $333(3) (US$ per ounce of gold)
(1) Limited mining operations resumed in November, 1999. (2) 1998 cash operating costs include overhead costs associated with keeping the mine infrastructure in place while the exploration work continues. (3) 1997 operating costs include all on-site mining, plant, administration and transportation costs. 14 19 EXPLORATION Exploration expenditures for 1999 were $2.3 million compared to $2.3 million in 1998. During 1999, exploration efforts at Santa Gertrudis were focussed on evaluating the adjoining Roca Roja property acquired during the year. US$1,500,000 has been budgeted for exploration in 2000. In the second half of 1999, efforts were primarily focussed on the La Peque-Escondida Shear Zone. This Shear Zone is a primary exploration target situated approximately three kilometres north of the mine infrastructure. This east-west trending structure is 2.6 kilometres in length and has 10 distinct zones of mineralization many of which have been mapped and sampled and are the focus of advanced drilling. In addition to the El Toro Norte deposit mined in late 1999 and the Mirador deposits which contains 316,000 tonnes of ore grading 2.29 grams per tonne, a third deposit know as the Escondida Northwest Splay was discovered in 1999. Situated close to the mine infrastructure, it will be ready for production once necessary infill drilling has been completed. To date the Escondida Northwest Splay has been tested with 13 reverse circulation drill holes totalling approximately 1,130 metres and contains proven mineable reserves of 99,000 tonnes averaging 2.44 grams per tonne gold. The Mirador and Escondida Northwest Splay are included in the mineable reserves table under Ore Reserves on page 13. The Escondida West, Escondida Central and Escondida Northwest Zones are situated close to the Escondida Northwest Splay deposit. Each has significant potential to boost resources and potential reserves because of its proximity to that deposit. The Escondida Central Zone, located approximately 275 metres east of the Northwest Splay deposit, was the first zone drilled on the La Peque-Escondida structure. In 1999, a total of 16 holes were drilled with many reporting multi-gram values over widths of up to 21 metres. Some of the better intersections from the 1999 program were 3.631 grams per tonne gold over 21.0 metres, 1.834 grams per tonne gold over 13.5 metres. Recently, several trenches completed on the Central Zone in 1999 were deepened or extended to better expose the mineralization and check assay results. Many of the results were in fact better than previously reported leading to additional drilling of the zone. Two drill holes have since been completed with the first hole intersecting 17.786 grams per tonne gold over 5.98 metres, while a second hole intersected 3.26 grams per tonne gold over 14.15 metres or 3.95 grams per tonne gold over 11.0 metres. Once new resource calculations have been completed, it may be possible to mine this zone economically in conjunction with the Northwest Splay deposit. Exploration to further evaluate other zones of the Escondida portion of the La Peque-Escondida Structure is now underway. The nearby Escondida Northwest Zone is approximately 600 metres northeast of the deposit and the Escondida West Zone is found 50 metres southeast of the deposit. The Esco Zone, situated approximately 1.5 kilometres west of the Escondida Northwest Splay, consists of four structures, only one of which is currently being explored. The structure is defined by a series of old pits and shallow shafts which have yielded values of up to 1.166 grams per tonne gold and greater than 500 grams per tonne silver over 1.2 metres. The old workings suggest that the target may have a width of approximately 10 metres. The structure is associated with a 300 metre long gold soil geochemical anomaly with values in excess of 0.2 grams per tonne gold. The presence of the old workings and the extent of the sampling indicate the structure has a strike length of 80 metres; however, a channel sample that returned a value of 3.668 15 20 grams per tonne gold over 0.7 metres taken along strike suggest the potential strike length for the structure is in excess of 200 metres. Since many of the open pit deposits are related to fault or shear structures with geochemical anomalies, reconnaissance exploration has been focussed on these type of targets. Two target areas being explored are the Viviana Fault and the San Enrique geochemical anomaly. Additional exploration has been completed along the La Vivana Fault. This east-west trending structure extends from the Maracias Fault to the west and is approximately 3.8 kilometres long. The La Vivana Fault is a significant structure because it is thought to be the upper portion of the structure that hosted the past producing Amelia Mine on the Roca Roja property. As such it has excellent potential to host the upper portion of that deposit. Initial investigations have been focussed on a small portion of the fault in an area of previous workings. To date three reverse circulation drill holes totalling 444 metres have been completed to test the structure. One hole, drilled to test a surface sample from a strongly altered fault zone that yielded 3.924 grams per tonne gold, returned a value of 1.589 grams per tonne gold over 4.5 metres. Additional mapping and sampling will be completed to define additional drill targets. Ongoing regional exploration conducted in 1998 led to the discovery of the San Enrique anomaly, a large soil geochemical anomaly with great potential situated approximately seven kilometres south of the mine district. Further exploration on the anomaly has been delayed because of difficulties in concluding an agreement with the surface rights owner. As a result the Corporation filed an application for temporary occupation from the Government of Mexico. The Corporation has been advised that Temporary Occupation Resolution was granted on March 17, 1999. This Resolution entitles the Corporation to explore and exploit its claims, which underlie the property of the surface rights owner, for five years and requires an annual payment of approximately US$50,000. This amount was established by the Government of Mexico and is adjusted annually for inflation. Despite the granting of the Temporary Occupation Resolutions, and ongoing negotiations, the surface rights owner has continued to deny access to the area. The Corporation is continuing negotiations with the surface rights owner and the Mexican Federal and State Government authorities to allow the company access to the ground so that a comprehensive program can begin. In addition, in 1997 Campbell started to investigate the potential for deeper gold-bearing sulphide mineralization. A report by independent mineral consultants concluded that the property has potential for a deep Carlin-type target and that the geology, structure, geochemistry, geophysics and mineralization are similar to the Post-Betze deposit located in Nevada's Carlin Trend. Results of Campbell's exploration efforts and the independent report supporting the similarities between Santa Gertrudis and the Carlin Trend prompted management to seek a joint venture partner in order to undertake a systematic exploration program to evaluate the deep sulphide potential. Several senior mining companies with experience in exploring for and mining Carlin-type orebodies have visited the property and concurred that there appears to be excellent potential for the property hosting Carlin-type orebodies. However, the current prevailing low gold prices have resulted in exploration budgets being drastically cut within the gold mining industry making it difficult to consummate a joint venture exploration program at this time. 16 21 EMPLOYEES In December, 1997, the Corporation concluded an agreement with the National Union of Miners, Metallurgists and Similar Workers of the Mexican Republic ("Union") pursuant to which mining operations were suspended and 143 employees covered by the collective bargaining agreement were terminated. With the resumption of limited mining operations, the Corporation has entered into renewable three month contracts with approximately 67 employees. On resumption of full scale mining activities, a new union contract will be negotiated. An additional 55 employees not covered by the collective agreement were also terminated. At December 31, 1999, there were 107 employees and contract workers of whom 67 were under three month renewable contracts and 18 were engaged in exploration activities. THE CERRO QUEMA PROPERTY HISTORY The Cerro Quema Property was acquired on March 4, 1996. The history of the Property is described above in Items 1 and 2 "Business and Properties" under the caption "General". LOCATION, ACCESS AND INFRASTRUCTURE The Cerro Quema Property is located approximately 250 km southwest of Panama City, on the southern Azuero Peninsula of Panama. The property is accessible by road and close to hydroelectric power. The regional city of Chitre is approximately 50 km north of the property. Chitre has a population of 35,000 and is served by an airport which has two regular daily flights from Panama City. At the Cerro Quema Property, the Corporation's subsidiary, Minera Cerro Quema, S.A. held exploration concessions covering approximately 20,000 hectares which comprise the Cerro Quema Property. These exploration concessions were converted to three extraction concessions totalling 15,000 hectares in February, 1997. Pre-extraction activities, which must commence within one year of the date of the extraction concession, commenced in December, 1996. The mining law permits a reduction or cessation of activities if prevailing economic conditions hinder continuing activities. See "Mine Feasibility and Development" on page 18. Under Panamanian mining law, a 2% net smelter return royalty is payable on production. In addition, an annual surface tax of approximately US$1.00 per hectare is also payable. GEOLOGY The geology at the Cerro Quema Property consists of host volcanic rocks which originally contained pyrite and very low-grade gold. These rocks have been highly weathered to result in a concentration of gold near the surface. The highest grade ore is at the surface, with the grade gradually declining with depth down to the lower limit of the oxidation boundary. Three near-surface oxide deposits, the La Pava, Quema West and Quemita, currently comprise the project, of which the La Pava deposit is the largest. The Quema West and Quemita deposits are adjacent to each other and approximately 2.5 to 3.0 kilometres from the La Pava deposit. 17 22 The local topography consists of steep canyons and narrow ridges with little or no extended flat or gently sloping areas. Below the steeper ridge crests and canyons that form the core of the project area, the topography, although still mountainous, is not as extreme and some wider canyons or valleys and rolling hills are present. MINE FEASIBILITY AND DEVELOPMENT In November, 1996, a positive feasibility study was completed based on an assumed gold price of US$400 per ounce, and presented to the Board of Directors on the basis of which approval was given to proceed with pre-production development including road construction and preparation of construction tender documents. Following completion of some additional test work and receipt of required permitting and exploitation concessions, final approval for the project was given in February, 1997. In preparing the feasibility study, the Corporation carried out a detailed review of the data produced by a previous owner on the property and completed some confirmation drilling and test work. It is believed that approximately US$8.5 million was spent on the property prior to acquisition by the Corporation, including 17,000 metres of reverse circulation drilling and 4,500 metres of diamond drilling. In the feasibility study which was prepared on the basis of a gold price of US$400 per ounce, a probable mineable reserve of 8.8 million tonnes at a grade of 1.16 grams per tonne was estimated by the Corporation. Given current gold prices, this reserve is no longer economic and is now categorized as mineralized material. Based on a review of the metallurgy of the mineralized material and proposed mining plans and methods and on test work performed on representative samples taken from the property, the feasibility study assumes a stripping ratio of 0.64:1 and gold recoveries of 86% can be achieved in an open pit heap leach operation. The oxidized nature of the gold mineralization accounts for the favourable indicated recoveries. The feasibility study estimates the capital cost to develop an open pit heap leach mine capable of producing 50,000 ounces of gold annually at US$32.8 million which includes provisions for contingencies. The capital costs were to be funded from available cash and through debt financing, if necessary. Based on existing mineralization the feasibility study indicates an estimated minimum mine life of six years. At such time as production may commence, the Cerro Quema Mine is expected to have approximately 170 employees. Construction and upgrading of the access road commenced in late 1996 with main construction activities being commenced in early 1997, including the start of the La Pava haul road, earthmoving and levelling of the general plant site area, and initial construction of leach pad pond stability dams and the camp infrastructure. Total construction and equipment cost incurred to December 31, 1997 was US$13.4 million. The fleet of mining equipment, acquired for the Cerro Quema gold project, was sold in October, 1998 for US$2 million. In June, 1997 construction at the Cerro Quema gold project was temporarily suspended by government order following heavy rainfalls which created high levels of sedimentation in the local rivers. The Corporation, working in conjunction with the Panamanian authorities, resolved the problem by completing a program of sedimentation control and revegetation. As a result of these environmental efforts, a resolution was passed lifting restrictions on the project's development. 18 23 In December 1997, as a consequence of sustained lower gold prices, the Corporation decided to defer further development of Cerro Quema until the gold price reaches a level that will ensure economic viability of the project. The project has been placed on a care and maintenance basis during 1999 and for 2000. EXPLORATION POTENTIAL A large portion of the 75 square mile property has only been covered by reconnaissance exploration, usually including stream sediment sampling and rock sampling on exposed ridges. An exploration programme will be initiated when economics permit the project to proceed and once access and infrastructure are in place. MINERAL EXPLORATION PROPERTIES The Corporation has interests in precious and base metal properties in the Chibougamau region of northwestern Quebec. CHIBOUGAMAU EXPLORATION PROPERTIES Meston owns extensive exploration properties in the Chibougamau area, including mining claims and several former producing mines. These former producing mines include the S-3, Lac Chib, Kokko Creek, Quebec Chibougamau and the Main Mine. In June, 1992, Meston entered into two agreements with the Societe quebecoise d'exploration miniere ("SOQUEM") under which SOQUEM could expend up to $7 million towards exploration programmes on the Meston and Chibougamau properties. During 1995, these agreements were amended to extend their term and increase the expenditures. In July, 1997, these agreements were further amended to provide that, SOQUEM can earn a 50% interest in the Meston property which comprises 148 claims and one mining concession (and excludes the Joe Mann Mine), in exchange for spending $1.6 million in the five year period ending June 1, 2002 and a 50% interest in the Chibougamau properties, which comprises 198 claims and three mining concessions, by spending $750,000 in the five year period ending June 1, 2002. During 1997, four claims located northwest of the Joe Mann Mine were added to the Meston property agreement, excluding the lateral and at depth extension of the Main Vein of the Joe Mann Mine protected by a 500 foot wide corridor north of the Main Vein. A separate third agreement was also entered into with SOQUEM covering four claims and one mining concession located northeast of the Joe Mann Mine, excluding the lateral and at depth extension of the Main Vein of the Joe Mann Mine protected by a 500 foot wide corridor north of the Main Vein, pursuant to which SOQUEM can earn a 3.5% net smelter return by expending $400,000 over the five year period ending June 1, 2002. Meston has the right to repurchase the net smelter return, if earned, for $600,000 on or before June 1, 2002 or $1,000,000 on or before June 1, 2007. Amounts expended under this agreement shall also be credited against the spending requirements under the Meston property agreement. As additional consideration for the 1997 amendments, SOQUEM agreed to fund $100,000 of underground drilling on a north zone of the Joe Mann Mine. This amount was credited to the $1.6 million of required expenditures on the Meston property Should SOQUEM not spend the amounts set out above, SOQUEM will earn no interest in the properties. Meston has retained the right of first refusal to treat any ore produced from these 19 24 properties at its Camchib Mill. If either party fails to fund its pro rata share of expenditures once SOQUEM has earned its 50% interest, the defaulting party will have its interest diluted. If either party's interest is diluted to 15% or lower, such party's interest will automatically revert to a 3% net smelter return. From the inception of the programme in 1992 to December 31, 1997, SOQUEM had spent approximately $2,548,000 on the Meston property and $2,431,000 on the Chibougamau properties. To December 31, 1999, SOQUEM had incurred additional expenditures under the amendments of $196,000 on the Meston properties and $145,000 on the Chibougamau properties since the effective date of the 1997 amendments. The Corporation is not responsible for sharing expenditures with respect to the referenced properties. During 1999, SOQUEM carried out an induced potential survey and minor trenching on the Chibougamau properties. A diamond drilling programme is planned for 2000. On the Meston property, only claim renewal costs were incurred in 1999. Some surface exploration work is scheduled for 2000. CAMPBELL FINANCINGS In July, 1994, concurrent with the acquisition of Santa Gertrudis, the Corporation entered into an underwriting agreement with First Marathon Securities Limited pursuant to which the Corporation sold US$11,005,000 aggregate principal amount of 7 1/2% Convertible Subordinated Debentures (Unsecured) (the "7 1/2% Debentures"). The 7 1/2% Debentures will mature on July 21, 2004, the tenth anniversary of their date of issue. The 7 1/2% Debentures are convertible at the option of the holder into Common Shares at any time prior to maturity at a conversion price of US$0.50 per Common Share. The 7 1/2% Debentures are redeemable for cash at any time after the fifth anniversary of the date of issue and, at the Corporation's option, may be redeemed in Common Shares on the basis of one Common Share for each US$0.50 of 7 1/2% Debenture principal being redeemed. The right of the Corporation to redeem the 7 1/2% Debentures for cash or Common Shares is conditional on the average price of the Common Shares exceeding US$0.50 during a period of 20 consecutive days prior to notice of redemption. The Corporation may, at its option, repay the 7 1/2% Debentures at maturity by issuing Common Shares of the Corporation at the conversion price of US$0.50 per Common Share. To March 27, 2000, debenture holders had converted US$8,429,000 of debenture principal into 16,858,000 Common Shares. Debentures in the amount of US$2,576,000 remain outstanding as of March 27, 2000. MESTON DEBENTURES AND PREFERENCE SHARES During 1991, a predecessor of Meston entered into a corporate restructuring and financing arrangement (the "Financing") in which it issued to a group of Canadian financial institutions $38,000,000 of Guaranteed Subordinate Debentures and Notes (the "Guaranteed Debentures") and $12,000,000 of Guaranteed Non-Cumulative Redeemable Retractable Preferred Shares (the "Preferred Shares") and renounced Canadian development expenses. The Guaranteed Debentures bear interest at varying rates and are repayable upon maturity in 2007. The Preferred Shares are retractable in 2007. In order to secure the obligations in respect of the Guaranteed Debentures and the Preferred Shares, a subsidiary of the Corporation entered into an Interest Rate and Currency Exchange Swap Agreement (the "Swap Agreement") with a major international bank and irrevocably assigned all amounts receivable under the Swap Agreement directly to the 20 25 investors. The proceeds of the Swap Agreement will be used to make all interest payments, repay the Guaranteed Debentures upon maturity and retract the Preferred Shares. Accordingly, such bank is primary obligor under the Financing. The Guaranteed Debentures are subordinate to all current non-trade and future senior indebtedness of the Corporation and its subsidiary. ENVIRONMENTAL MATTERS The Corporation believes that it and its subsidiaries are currently complying in all material respects with applicable environmental legislation. During 1995, proposed amendments to the Quebec Mining Act relating particularly to rehabilitation and restoration plans came into force. This legislation required that a rehabilitation and restoration plan be submitted for approval within one year of the legislation coming into force and that a financial guarantee be furnished with respect to such plan. The Corporation filed preliminary rehabilitation and restoration plans on March 9, 1996, and has filed additional information required thereunder within the extensions granted by Quebec mining authorities. Annual financial guarantees are required to be filed in connection with the rehabilitation and restoration plan within 15 days of approval of the plan. The plan for the Joe Mann Mine site was recently approved and the first financial guarantee in the amount of $22,050 was posted on March 3, 2000. The plan for the Camchib Mill site is pending approval. The appropriate method of re-mediating acid spots which have appeared on fifty hectares of previously re-vegetated tailings is currently being reviewed. Two alternate methods are being considered which involve costs ranging from $10,000 to $30,000 per hectare. The Corporation currently estimates that the maximum annual financial guarantees will range from $154,000 in the first year to $1,071,000 in the fourth year for an aggregate of $2,450,000. The Corporation currently accrues for the estimated site restoration costs at the Joe Mann Mine over the estimated life of the mine. The total cost of completing the work contemplated under the rehabilitation plans for both the Joe Mann Mine site and the Camchib Mill site is currently estimated at between $2,500,000 and $3,500,000. It is expected that this cost will be partially offset by the salvage value of plant and equipment. A significant portion of this work is to be completed over the life of the mine and as a consequence is not anticipated to have a material effect on the Corporation's financial condition. At the Santa Gertrudis Mine in Mexico, based on general regulatory guidelines, total reclamation costs are currently estimated at US$1,055,000 which has been accrued in the Corporation's books. This estimated cost will be more than exceeded by the salvage value of plant and equipment. Only limited reclamation will be carried out while the exploration programme and mining operations continue. On an ongoing basis, environmental compliance costs are not material at the Joe Mann Mine or the Santa Gertrudis operation. At the Cerro Quema Property in Panama, the feasibility study indicates that, should the project be built, rehabilitation costs of up to US$2,000,000 which will be covered by the salvage value of the plant and equipment. Three environmental studies were filed. A Preliminary Evaluation and an Environmental Reconnaissance study were filed by the previous owner and an Environmental Viability study was filed by the Corporation and was approved in December, 1996. Based on current legislation and the recent experience of other mining projects, the Corporation believes that environmental compliance can be achieved without material impact on the economics of the Project. See "Mine Feasibility Development" on page 18 for a discussion of stop work 21 26 orders issued by Panamanian authorities in June, 1997 as a consequence of heavy rainfall and sedimentation problems. RISK FACTORS MINING RISKS The Corporation is subject to the risks typical in the mining business including uncertainty of success in exploration and development; operational risks including unusual and unexpected geological formations, rock bursts, particularly as mining moves into deeper levels, cave-ins, flooding and other conditions involved in the drilling and removal of material as well as environmental damage and other hazards; risks that intended production schedules or estimated costs will not be achieved; and risks of fluctuations in the price of gold and currency exchange rates. Gold prices are subject to volatile price movements over short periods of time and are affected by numerous factors, all of which are beyond the Corporation's control, including expectations for inflation, levels of interest rates, sales of gold by central banks, the demand for gold, global or regional political, economic and banking crises and production rates in major gold producing regions. The aggregate effect of these factors is impossible to predict with any degree of certainty. Although the Corporation does engage in some limited hedging from time to time to protect against a portion of the volatility (as described in Management's Discussion and Analysis and the notes to the consolidated financial statements included in Exhibit 13.1 of this report), a significant portion of the price movements in gold is not protected. The Company's hedging and other activities involving financial instruments may be subject to margin requirements. Although the Company has not been required to post margin to date, significant changes in the factors affecting the pricing of the financial instrument such as the price of gold, gold lending rates, option volatility and foreign exchange rates, could result in the amount of margin to be posted being material. The Corporation is primarily dependent on production from one operation, the Joe Mann Mine, as the source of its cash flow. The cash flows from the limited mining at the Santa Gertrudis Mine are expected to be fully utilized on exploration at that mine. At the Joe Mann Mine, the new mine plan is based on a gold price of US$300 per ounce and anticipates cash production costs of US$225 per ounce in 2000 decreasing to US$220 per ounce in 2001. The ability of the Corporation to achieve the cash costs is largely based on the successful adoption of cut-and-fill mining and expected improved ground conditions. While the Corporation has undertaken studies and engaged consultants to confirm the suitability and beneficial impact of cut-and-fill mining on the ground conditions, the actual results will not be known until mining resumes. Should gold prices decrease significantly or the cash cost be higher than projected, the ability of the mine to generate cash flow will be impaired. The figures for ore reserves presented herein are estimates and no assurance can be given that the anticipated tonnages and grades will be achieved or the indicated level of recovery realized. In addition, no assurance can be given that the gold price estimates on which the reserve 22 27 calculations are based can be achieved. See "Mineable Reserves" on pages 7 and 13. As well, lead times required for underground stope and open pit preparation and development in mining operations can affect production decisions and schedules. Gold price fluctuations may render ore reserves containing relatively lower grades of gold mineralization uneconomic. Moreover, short-term operating factors relating to the ore reserves, such as the need for orderly development of ore bodies or the processing of new or different ore grades, may cause the Corporation to be unprofitable in any particular accounting period. The Corporation carries insurance to protect against certain risks in such amounts as it considers adequate. Risks not insured against include political risk, environmental pollution, mine flooding, landslides or other natural hazards relating to climate or topography as well as other hazards which cannot be insured against or which the Corporation may elect not to insure against. The Cerro Quema Property is a low grade open pit heap leach project located in a region of steep topography which experiences seasonally heavy rainfall. While the rainfall has been taken into account in preparing the feasibility study, and the Corporation believes that its impact on the project can be managed, given the difficulties experienced during 1997 (see "Mine Feasibility and Development" on pages 18 and 19), there can be no assurance that excessive rainfall will not have an unforeseen negative impact on the construction schedule, operating conditions, recovery rates or environmental compliance. While the feasibility study for the Cerro Quema project was carefully prepared by experienced engineers and advisors, no assurance can be given that gold prices will improve to a level that the Cerro Quema Project can proceed or that it can be completed as contemplated in the feasibility study for the estimated costs or within the estimated time schedule. Also no assurance can be given that the intended production schedule or estimated operating costs can be achieved. While appropriate testing has been carried out by the Corporation and its independent mining experts, there can be no assurance that recovery rates achieved in small scale laboratory tests will be achieved under onsite conditions or in production scale leaching. COMPETITION The Corporation competes with other mining companies in connection with the acquisition of mining claims and leases on gold and other precious metals prospects and in connection with the recruitment and retention of qualified employees. There is significant competition for the limited number of gold acquisition opportunities in North and South America. As a result of this competition, some of which is with companies with greater financial resources than the Corporation, the Corporation may be unable to continue to acquire attractive gold mining properties on terms it considers acceptable. Since there is a world market for gold, the Corporation believes that no single company has sufficient market power to materially affect the price or supply of gold in the world market. 23 28 RISKS OF FOREIGN OPERATIONS The operations at Santa Gertrudis and Cerro Quema are subject to the federal, state and local laws of Mexico and Panama, respectively, including laws and regulations relating to mining operations, environmental protection and reclamation, labour relations and safety, land acquisition and mineral tenure, expropriation of property and taxation and repatriation of profits. Future changes in these laws or regulations or in their application are beyond the control of the Corporation and may adversely affect its operations. The Corporation believes the present attitude of the Mexican government toward foreign investment and the mining industry is favourable. However, in view of upcoming elections and other economic factors, investors should consider the risks associated with projects in Mexico. Over the last few years, Panama has modified its laws relating to mining and the taxation of mining operations to stimulate foreign and local investment in the mining sector. These include provisions that permit the duty-free importation of all equipment, spare parts and materials required for mining operations and the duty-free export of all minerals produced. The Corporation views these legislative changes as reflecting an increasingly supportive regulatory climate for mining investment in Panama. ITEM 3. LEGAL PROCEEDINGS During 1996, the Corporation's Mexican subsidiary received import duty assessments claiming the subsidiary's interest in certain pieces of machinery and equipment with an approximate value of US$2,200,000 and levying taxes, penalties, interest and inflationary adjustments for a further Mexican pesos 9,200,000. The claim against the subsidiary's assets and the additional amount payable arose as a result of the subsidiary not presenting certain import documentation to tax authorities by a prescribed date in connection with their audit of imports of the claimed machinery and equipment during 1990 and 1991 when the mine was not owned by the Corporation. The Corporation, which has all of the required documentation, has not provided for these amounts in its financial statements on the basis of professional advice received indicating the basis for these assessments to be weak and accordingly appealed the assessments on March 5, 1997 before the Local Tax Legal Administration for Revenues in Nogales, Sonora. On May 26th, 1997, the Corporation was advised that it was successful in its appeal and that Mexican pesos 9,200,000 was not payable. While the local tax authority was requested by the federal tax authorities to issue a re-assessment which must take into account the basis of the appeal, on May 6, 1998, the tax authorities issued a tax assessment identical to that issued in 1996 except that the amounts claimed have increased to Mexican pesos 18,000,000 as a result of inflation and additional interest. The Corporation has been advised by its Mexican counsel that this assessment is improper as it completely ignores the earlier ruling. Accordingly the Corporation has filed a new appeal before the Federal Tax Court to nullify the assessment. No provision has been made in the financial statements for the amounts assessed on the basis of the earlier ruling and the legal advice received. The charge against certain pieces of machinery and equipment will be released when the final tax assessment is issued. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of the Corporation's fiscal year covered by this report, no matters were submitted to the shareholders for approval through the solicitation of proxies or otherwise. 24 29 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS MARKET PRICE RANGES FOR COMMON SHARES Information relating to the market prices for the Common Shares appears on page 35 of the 1999 Annual Report to Shareholders which information is incorporated herein by reference and is filed as Exhibit 13.1 to this report. On March 27, 2000 the closing price of the Common Shares on The Toronto Stock Exchange was $0.36 and on the New York Stock Exchange composite transactions was US $0.2344 as reported by the Globe and Mail. At the annual meeting of shareholders scheduled to be held on May 19, 2000, shareholders will be asked to approve, by special resolution, a consolidation (reverse split) of the Corporation's common shares on the basis of 1 post-consolidation common share for every ten pre-consolidation common shares (or such lesser number as the directors in their discretion may determine). SHAREHOLDERS As of March 27, 2000, Campbell had 12,594 common shareholders of record. DIVIDEND RECORD AND POLICY The Corporation has not paid a dividend on its common shares since 1984. The Corporation's present policy is to retain earnings to finance future growth. Dividends on the common shares paid to non residents of Canada will generally be subject to withholding tax under the Income Tax Act (Canada) at the rate of 25%. Such rate may be subject to reduction under the provisions of a tax treaty between Canada and the country in which the recipient is resident. The Canada-U.S. Income Tax Convention (1980) provides for a general reduction in the rate of withholding tax to 15% on dividends paid on shares of a corporation resident in Canada (such as the Corporation) to a resident of the United States, and also provides for a further reduction to 5% where the beneficial owner of the dividend is a corporation, resident in the United States, which owns at least 10% of the voting shares of the corporation paying the dividend. ITEM 6. SELECTED FINANCIAL DATA Information relating to this item appears under the caption "Five Year Comparative Summary of Selected Financial Data" on page 34 of the 1999 Annual Report to Shareholders which information is incorporated herein by reference and is filed as Exhibit 13.1 to this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information relating to this item appears on pages 17 through 20 of the 1999 Annual Report to Shareholders which information is incorporated herein by reference and is filed as Exhibit 13.1 to this report. 25 30 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK See notes to the consolidated financial statements and "Management's Discussion and Analysis" for additional information. Gold Risk Disclosures The results of the Company's operations are affected significantly by the market price of gold. Gold prices are influenced by numerous factors over which the Company has no control, including expectations with respect to the rate of inflation, the relative strength of the United States dollar and certain other currencies, interest rates, global or regional political or economic crises, demand for jewellery and certain industrial products, and sales by central banks, other holders of gold and gold producers. To reduce the impact of negative changes in the gold price the Company may attempt to fix the future price at which the Company's gold production is sold through the use of fixed forward sale contracts, spot deferred gold sale contracts or through the use of various derivative instruments such as puts and calls. Campbell's general policy is to hedge a maximum of 50% of its gold production for up to two years, dependent on market conditions and planned capital expenditure commitments. The following table provides information as of December 31, 1999 with respect to the Company's gold forward and option contracts:
Expected Year of Maturity Fair Value ------------------------- ---------- ($000's) 2000 2001 2002 2003 2004 Thereafter ----------------------------------------------------------- Forward sales contracts: $nil Ounces 10,000 Average price (US$ per o/z) $290 Call options written (1) $(1,750) Ounces 33,200 20,000 Average price (US$ per o/z) $350 $350
(1) The calls are subject to floating gold lease rates against which an allowance of 1.50% is provided. The calls are also subject to margin calls should the mark-to-market liability exceed US$3.5 million. Foreign Currency Risk Disclosures The Company's reporting currency is Canadian dollars. The sales price of gold (represents approximately 95% of total metal sales) and copper (represents approximately 5% of total metal sales) is denominated in United States dollars. The Company's Joe Mann Mine is in Canada and the Santa Gertrudis Mine operations are located in Mexico. The Company's future profitability is impacted by fluctuations in the United States dollar and Mexican Peso relative to the Canadian dollar. To reduce the impact of the fluctuations in the relative exchange rates on the Company's operations the Company may enter into fixed forward contracts to sell United States dollars and buy either Canadian dollars or Mexican Pesos. At December 31, 1999 the Company had no forward contracts to sell United States dollars. 26 31 Other Financial Instrument Risk Disclosures At December 31, 1999 the Company had US$2,492,000 of short-term deposits maturing in the first quarter of 2000 and US$2,576,000 of 7.5% convertible debentures outstanding that mature in 2004. As the Company's financial statements are recorded in Canadian dollars the amount of the liability recorded for the convertible debentures on the balance sheet will fluctuate with changes in the United States to Canadian dollar exchange rates. At December 31, 1999 the estimated fair value of the convertible debentures and short-term deposits was US$2,492,000 and US$1,924,000, respectively. Money market instruments are denominated in Canadian dollars and are invested in investment grade instruments. The fair value of the money market instruments approximates their carrying values as, at December 31, 1999, they have maturities of less than 60 days. ITEM 8. FINANCIAL STATEMENTS AND QUALITATIVE DISCLOSURES ABOUT MARKET Information relating to this item appears on pages 21 through 33, and under the caption "Selected Quarterly Financial Data (unaudited)" on page 34, of the 1999 Annual Report to Shareholders which information is incorporated herein by reference and is filed as Exhibit 13.1 to this report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There are no disagreements on accounting and financial disclosure that require mention in this Form 10-K. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Certain information relating to the Directors of Campbell is set out in the Election of Directors section of the Proxy Circular in connection with the 2000 Annual and Special Meeting of Shareholders scheduled for May 19, 2000 which information is incorporated herein by reference and is filed as Exhibit 20.1 to this report. EXECUTIVE OFFICERS OF REGISTRANT The executive officers of the Corporation, together with the offices of the Corporation held by them, their ages and their experience since January 1, 1994, is set out below:
Years in Other Positions and Name Office Office Business Experience Age - ---- ------ ------ ------------------- ----- John O. Kachmar President and 9 Certified Management 63 Chief Executive Accountant. Officer of the Corporation Lorna D. Vice President, 12 Lawyer. 48 MacGillivray Secretary and General Counsel Paul J. Ireland Vice President, 5 Chartered Accountant. 42 Finance and Chief Financial Officer
27 32 There are no family relationships existing among any of the executive officers, directors, or nominees for same of the Corporation. As a foreign private issuer pursuant to Rule 3a12-3 under the Securities Exchange Act of 1934 ("Exchange Act"), the registrant is not subject to Section 16 of the Exchange Act. ITEM 11. EXECUTIVE COMPENSATION Information required under this item is set out in the Proxy Circular in connection with the 2000 Annual and Special Meeting of Shareholders scheduled for May 19, 2000 which is incorporated herein by reference and is filed as Exhibit 20.1 to this report. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information required under this item not set out below is set out in the Proxy Circular, in connection with the 2000 Annual and Special Meeting of Shareholders scheduled for May 19, 2000 which is incorporated herein by reference and is filed as Exhibit 20.1 to this report. The following table lists the number of Common Shares beneficially owned by each executive officer listed in the table under the caption "Executive Compensation" in the Proxy Circular. The percentage ownership calculation for each owner has been made on the basis that there are outstanding 157,152,288 Common Shares.
Name Number of Shares % of Class ---- ---------------- ---------- John O. Kachmar ........ 190,000(1) (less than) 1% Lorna D. MacGillivray .. 99,000(2) (less than) 1% Paul J. Ireland ........ 16,638(3) (less than) 1% Three executive officers as a group ............. 305,638(4) (less than) 1%
(1) Excludes 1,350,000 Common Shares subject to option, of which 1,000,000 are currently exercisable or exercisable within the next 60 days. (2) Excludes 400,000 Common Shares subject to option, of which 250,000 are currently exercisable or exercisable within the next 60 days. (3) Excludes 375,000 Common Shares subject to option of which 225,000 are currently exercisable or exercisable within the next 60 days. (4) Excludes 2,125,000 Common Shares subject to option of which 1,475,000 are currently exercisable or exercisable within the next 60 days. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS No reportable transactions or relationships involving the registrant and any of its directors or officers existed during the last fiscal year. 28 33 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) DOCUMENTS FILED AS PART OF THIS REPORT: 1. Financial Statements Auditors' Report Consolidated Balance Sheets as at December 31, 1999 and 1998 Consolidated Statements of Operations Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Retained Earnings (Deficit) - Years Ended December 31, 1999, 1998 and 1997 Consolidated Statements of Cash Flows - Years Ended December 31, 1999, 1998 and 1997 Notes to the Consolidated Financial Statements 2. Financial Statement Schedules All financial Statement Schedules filed as a part of this report are included in Item 8 of this report and reference is made thereto. 3. Exhibits (A) refers to documentation previously filed as an exhibit to Campbell's Annual Report on Form 10-K for the year ended December 31, 1987 and incorporated herein by reference. (B) refers to documents previously filed as an exhibit to Campbell's Annual Report on Form 10-K for the year ended December 31, 1994 (Commission file number 1-8488) and incorporated herein by reference. (C) refers to documents previously filed as an exhibit to Campbell's Annual Report on Form 10-K for the year ended December 31, 1993 (Commission file number 1-8488) and incorporated herein by reference. (D) refers to documents previously filed as an exhibit to Campbell's Current Report on Form 8-K dated March 28, 1996 (Commission file number 1-8488) and incorporated herein by reference. 29 34 (E) refers to documents previously filed as an exhibit to Campbell's Annual Report on Form 10-K for the year ended December 31, 1996 dated March 26, 1997 (Commission file number 1-8488) and incorporated herein by reference. (F) refers to documents previously filed as an exhibit to Campbell's registration statement on Form S-8 (Registration No. 333-93063) and incorporated herein by reference. Exhibits in parentheses are references to the Exhibit No. of the filing indicated. 3 Articles of Incorporation and By-Laws 3.1 Restated Articles of Incorporation dated August 9, 1999 (Exhibit 4.(a)) 3.11 By-Law No. 1 as amended and as in effect on the date hereof (A) (Exhibit 3.12) 3.12 Amendment of By-Law No. 1 (A) (Exhibit 3.11) 4 Instruments Defining the Rights of Security Holders Including Indentures 4.1 Trust Indenture made as of July 21, 1994 between the Corporation and Montreal Trust Company of Canada regarding the 7 1/2% Convertible Subordinated Debentures (B) (Exhibit 4.1) 10 Material Contracts Management Contracts and Compensatory Plans and Arrangements 10.1 The Corporation's Employee Incentive Plan as amended (F) (Exhibit (99) 10.2 Amended Employment Agreement dated December 1, 1994 between the Corporation and John O. Kachmar (B) (Exhibit 10.2) 10.3 Amended Employment Agreement dated December 1, 1994 between the Corporation and Lorna D. MacGillivray (B) (Exhibit 10.3) 10.4 Amended Employment Agreement dated December 10, 1996 between the Corporation and Paul J. Ireland (E) (Exhibit 10.4) 10.5 Directors' Stock Option Plan (C) (Exhibit 10.8) Material Contracts 10.6 Royalty Agreement with Repadre Capital Corporation made as of April 23, 1993. (C) (Exhibit 10.14) 10.7 Stock Purchase Agreement dated July 6, 1994 between the Corporation, Sotula Gold Corp., Sonoran Mining Corporation and Compania Minera Zapata S. de R.L. de C.V. relating to the purchase of Santa Gertrudis (B) (Exhibit 10.11) 30 35 10.8 Purchase and Sale Agreement dated March 4, 1996 between Cyprus Exploration and Development Corporation, Campbell Resources Inc. and Compania de Exploracion Mineral, S.A. (D) (Exhibit 1.1) 13.1 Certain Portions of the Annual Report to the Shareholders for the year ended December 31, 1999 contained on pages 17 to 35 inclusive. [Note: Such Annual Report, except for those portions thereof which are expressly incorporated by reference in this Report on Form 10-K, is furnished for the information of the Securities and Exchange Commission and is not deemed "filed" as part of the filing of this Report on Form 10-K.] 20.1 Proxy Circular dated March 23, 2000 in connection with the 2000 Annual and Special Meeting of Shareholders scheduled to be held on May 19, 2000. 21.1 Significant subsidiaries. 23.1 Consent of KPMG LLP. 27.1 Financial Data Schedule (b) REPORTS ON FORM 8-K There were no reports on Form 8-K filed in the fourth quarter of 1999. (c) EXHIBITS Exhibits are listed under (a)3 above. (d) FINANCIAL STATEMENTS SCHEDULES REQUIRED BY REGULATION S-X WHICH ARE EXCLUDED FROM THE CORPORATION'S ANNUAL REPORT TO SHAREHOLDERS FOR THE YEAR ENDED DECEMBER 31, 1999. Not applicable 31 36 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. CAMPBELL RESOURCES INC. Dated: March 27, 2000 By:/s/JOHN O. KACHMAR ------------------------ John O. Kachmar President and Chief Executive Officer 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.
Signature Title Date - --------- ----- ---- /s/ JOHN O. KACHMAR Principal Executive Officer March 27, 2000 John O. Kachmar, President and and Director Chief Executive Officer /s/ PAUL J. IRELAND Principal Financial and March 27, 2000 - ----------------------- Paul J. Ireland, Vice President, Principal Accounting Finance and Chief Financial Officer Officer /s/ JAMES D. BEATTY March 27, 2000 - ----------------------- James D. Beatty Director /s/ GRAHAM G. CLOW March 27,2000 - ----------------------- Graham G. Clow Director /s/ ROD P. DOUGLAS March 27, 2000 - ----------------------- Rod P. Douglas Director /s/ JAMES C. McCARTNEY Chairman of the Board of March 27,2000 - ----------------------- James C. McCartney, Q.C. Directors and Director /s/ DONALD R. MURPHY March 27, 2000 - ----------------------- Donald R. Murphy Director - ----------------------- Francis S. O'Kelly Director /s/ G.E."KURT" PRALLE March 27,2000 - ----------------------- G.E."Kurt" Pralle Director /s/ JAMES D. RAYMOND March 27, 2000 - ----------------------- James D. Raymond Director
32 37 CAMPBELL RESOURCES INC. 1999 Form 10-K EXHIBIT INDEX 13.1 Annual Report to the Shareholders for the year ended December 31, 1999 [Note: Such Annual Report, except for those portions thereof which are expressly incorporated by reference in this Report on Form 10-K, is furnished for the information of the Securities and Exchange Commission and is not deemed "filed" as part of the filing of this Report on Form 10-K.] 20.1 Notice and Proxy Circular dated March 23, 2000 in connection with the 2000 Annual and Special Meeting of Shareholders scheduled to be held on May 19, 2000 and Form of Proxy 21.1 Significant subsidiaries 23.1 Consent of KPMG LLP 27.1 Financial Data Schedule EX-13.1 2 PORTIONS OF THE ANNUAL REPORT 1 [GRAPHIC OMITTED] [LOGO] Campbell Resources Inc. 1999 Annual Report 2 [MAP OMITTED] CORPORATE PROFILE Campbell Resources Inc. is a gold mining and exploration company with two producing operations and a development stage project. In 1999, Campbell produced 51,300 ounces of gold from its Joe Mann Mine in Quebec, Canada. Additional development is now being completed at Joe Mann and the next phase of low-cost, high-production mining is expected to begin shortly. Mining operations at the Santa Gertrudis Mine in Sonora, Mexico resumed in late 1999 and the operation is expected to produce approximately 22,500 ounces of gold in 2000. Exploration is continuing in order to define additional reserves. Campbell also owns the Cerro Quema development stage gold project in Panama that is currently awaiting higher gold prices before development resumes. The Company continues to maintain a strong balance sheet with working capital of $31.4 million and negligible debt and, with the resumption of production at both mines, is now positioned for growth. With gold prices recovering, Campbell will continue to selectively develop its assets and search out quality investment opportunities. Campbell's common shares are listed on the New York and Toronto stock exchanges, trading under the symbol "CCH". FORWARD LOOKING STATEMENTS Certain information contained in this report contains "Forward-Looking Statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and is subject to certain risks and uncertainties, including those "Risk Factors" set forth in the Company's current Annual Report on Form 10-K for the year ended December 31, 1999. Such factors include, but are not limited to: differences between estimated and actual ore reserves; changes to exploration, development and mining plans due to prudent reaction of management to ongoing exploration results, engineering and financial concerns; and fluctuations in the gold price which affect the profitability and ore reserves of the Company. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date hereof. The Company undertakes no obligation to release publicly any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect unanticipated events or developments. 3 - -------------------------------------------------------------------------------- - -------------- YEAR IN REVIEW - -------------- JOE MANN MINE - -------------------------------------------------------------------------------- o New long-term mine plan adopted to address ground conditions. Incorporates cut-and-fill mining that should allow mining at narrower widths with less dilution. Annual production is expected to average 90,000 ounces at a cash cost of US$220 per ounce o Delineation of a new ore zone parallel to the Main Ore Zone. Intersections up to 39 feet. Indications of similar zones at depth SANTA GERTRUDIS MINE - -------------------------------------------------------------------------------- o Acquired the adjacent Roca Roja mining property, a former gold producing operation o Exploration on the newly acquired property quickly proved up mineable reserves of 514,000 tonnes averaging 2.313 g/tonne gold o Restarted gold production at the Santa Gertrudis Mine
($ in thousands except per share amounts) 1999 1998 1997 - -------------------------------------------------------------------------------- Metal sales $ 22,465 36,388 52,635 Net loss $ (12,702) (20,848) (40,410) Cash flow from operations $ (9,435) 411 556 Exploration expenditures $ 2,422 2,803 4,659 - -------------------------------------------------------------------------------- Working capital $ 31,420 45,689 49,008 Cash and short-term deposits $ 18,219 41,493 13,638 Money market instruments $ 7,958 28,097 Total assets $ 87,134 102,777 123,882 Shareholders' equity $ 75,673 87,469 105,124 Shares outstanding (000s) 157,152 154,686 151,445 - -------------------------------------------------------------------------------- Per share - Loss $ (0.08) (0.14) (0.27) - Cash flow $ (0.06) - -------------------------------------------------------------------------------- Gold Production (ounces) - -------------------------------------------------------------------------------- Joe Mann 51,300 70,100 73,500 Santa Gertrudis 2,400 12,300 39,200 - -------------------------------------------------------------------------------- Total gold production 53,700 82,400 112,700 - -------------------------------------------------------------------------------- Cash operating cost per ounce (US$) $ 292 255 288 Gold revenue per ounce (US$) $ 276 304 336 - --------------------------------------------------------------------------------
In this report, unless otherwise indicated, all monetary amounts are stated in Canadian dollars. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 1 4 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] - ------------- REPORT TO THE SHAREHOLDERS - ------------- The global gold mining industry and Campbell Resources Inc. had a turbulent year in 1999. Gold prices fell to a 20-year low of US$253 per ounce in August, 1999, before spiking to a 2-year high of US$340 per ounce in October. During 1999, the spot gold price averaged US$279 per ounce, approximately US$15 per ounce lower than in 1998. This year however, there is reason for optimism because of market fundamentals. There is strong demand associated with an improving Asian economy and there are supply deficits resulting from limited central bank sales and lower global mine production due to lower exploration and development expenditures. Gold prices are expected to average US$300 per ounce in 2000 and to continue the upward trend in the foreseeable future. Campbell's financial performance is linked to the price of gold. During the past three years as the gold price has fallen from the US$400 per ounce level to the US$250 per ounce level, Campbell struggled. With gold now stabilizing and showing signs of strength, Campbell is completing key development and exploration programs that are expected to increase ore reserves and production. - ------------------------------- FINANCIAL AND OPERATING RESULTS - ------------------------------- In 1999, Campbell reported a loss of $12.7 million, or $0.08 per share, compared to a loss of $20.8 million or $0.14 per share in 1998. There was negative cash flow from operations before the net change in non-cash operating working capital of $9.4 million compared to positive $0.4 million a year earlier. Campbell produced approximately 53,700 ounces of gold in 1999 compared to 82,400 ounces of gold in 1998. The decrease resulted from lower production at the Joe Mann Mine and limited production from the Santa Gertrudis operation, that resumed mining during the fourth quarter of 1999. Cash operating costs in 1999 were US$292 per ounce compared with US$255 per ounce in 1998. - ------------------------------ JOE MANN MINE - QUEBEC, CANADA - ------------------------------ The Joe Mann Mine, situated in northwestern Quebec, has undergone a transformation over the course of the year. Early in 1999, the Company announced the discovery of a new zone of high grade gold mineralization below the 2350 level. This new zone lies approximately 100 feet north of, and is parallel to the Main Zone, and pinches and swells reaching a maximum known thickness of 39.2 feet on the 2550 level. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 2 5 - -------------------------------------------------------------------------------- Despite the positive benefits of the discovery, operating performance was significantly affected by ground condition problems and excessive dilution. Resulting higher cash operating costs compelled management to temporarily suspend development and mining operations and re-evaluate the viability of the Joe Mann Mine during the third quarter. These investigations indicated that by changing the mining method to cut-and-fill, ground stability problems could be controlled and reduced accordingly. A new mining plan was adopted in November 1999 under which production of approximately 63,500 ounces is expected in 2000 and annual production over the following 3-year period is expected to average 90,000 ounces annually. Cash operating costs over the four years are expected to average US$220 per ounce. Diamond drilling will be ongoing in an effort to delineate additional reserves to extend the mine life beyond mid-2004. Initial development is now being completed and mining operations are expected to resume at the end of the first quarter of 2000. Early ore definition drilling from the 2750 level for mine stope planning purposes is confirming the existence of the wider zones of mineralization identified during early exploration drilling from the 1650 and 2350 levels. The wider zones appear to be at considerably higher gold and copper grades than current ore reserve grades. While the majority of the tons of ore from these zones is included in the new long-term plan, the higher grades are not reflected. Although at an early stage, if these drill results are repeated in other previously identified wider ore zones, there could be a significant reduction in cash operating costs per ounce of gold. - ------------------------------------- SANTA GERTRUDIS MINE - SONORA, MEXICO - ------------------------------------- During 1999, exploration efforts were focused on highly prospective ground situated near the leach pads and existing processing infrastructure. These efforts were successful and mine operations resumed in the fourth quarter of 1999. Exploration was concentrated on the Roca Roja mining property, a former gold producing property adjacent to Santa Gertrudis, which was acquired during 1999. A detailed program of mapping, sampling, trenching and drilling began immediately thereafter. To date, three deposits have been delineated with mineable reserves of approximately 514,000 tonnes averaging 2.313 grams of gold per tonne. A fourth deposit has been identified and infill drilling is underway which should further increase mineable reserves. The Santa Gertrudis Mine is expected to produce 22,500 ounces at a cash operating cost of US$233 per ounce in 2000. Production at these levels should be sufficient to cover most of the exploration costs budgeted for the year of US$1.5 million. In addition to exploration north of the mine district, Campbell remains optimistic that it will be able to exercise its rights to resume exploration of the San Enrique soil geochemical anomaly that was delineated as part of an ongoing regional soil geochemical survey. The anomaly is 4 kilometres long by 2 kilometres wide and has excellent exploration potential. Campbell is continuing negotiations with Mexican Federal and State of Sonora government authorities and the surface rights owner to gain access to the ground so that a comprehensive exploration program can begin. - -------------------------------------------------------------------------------- 3 6 - -------------------------------------------------------------------------------- - ------------------- SHARE CONSOLIDATION - ------------------- On August 16, 1999, Campbell was advised of changes to the continued listing requirements of the New York Stock Exchange. These changes included the new requirement that shares trade above a price of US$1 per share over a consecutive 30-day trading period. Both the American Stock Exchange and NASDAQ have similar stock price requirements. The Board of Directors view the New York Stock Exchange listing as a valuable asset of the Company providing excellent liquidity and upside potential to the shareholders when there is an increase in the gold price. Following discussions with financial advisors and significant shareholders, and given the fact that a high percentage of Campbell's shares are held by United States residents, the Directors have determined that a consolidation to retain the New York Stock Exchange listing is in the best interest of its shareholders. Shareholders will be asked to approve the share consolidation at the upcoming annual meeting. - ------------------------------ PERSONNEL AND ACKNOWLEDGEMENTS - ------------------------------ We would like to thank all of Campbell's employees for their dedication and hard work and the Directors and Shareholders for their continued support. - ------- OUTLOOK - ------- Campbell's focus for the year 2000 will be on its existing operations while continuing to search for new opportunities. Implementing the new mining method at the Joe Mann Mine on time and budget is a priority. Once development in preparation for the change to cut-and-fill mining is completed at the end of the first quarter of 2000, the Mine should start to generate meaningful levels of cash flow. The Santa Gertrudis Mine commenced prodution in the fourth quarter and is expected to produce approximately 22,500 ounces of gold. We are confident that further exploration will continue to define additional reserves. /s/ James C. McCartney James C. McCartney Chairman of the Board /s/ John O. Kachmar John O. Kachmar President & Chief Executive Officer Toronto, Ontario March 14, 2000 [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 4 7 - -------------------------------------------------------------------------------- [MAP OMITTED] JOE MANN MINE ------------------------------------------- QUEBEC, CANADA [GRAPHIC OMITTED] - -------------------------------------------------------------------------------- 5 8 - -------------------------------------------------------------------------------- ------------------------------ JOE MANN MINE - QUEBEC, CANADA ------------------------------
================================================================================ Production Statistics 1999 1998 1997 ================================================================================ Tons Milled 267,000 299,000 266,000 Gold Grade (oz./ton) 0.204 0.252 0.299 Copper Grade (%) 0.220 0.243 0.280 Gold Recovery (%) 94.2 94.3 93.9 Copper Recovery (%) 95.4 94.2 96.3 Gold Production (oz.) 51,300 70,100 73,500 Copper Production (000's lbs) 1,065 1,316 1,367 Cash Operating Cost per Ounce Gold (US$) 292 257 264
Reserves and Resources(1) ================================================================================
Mineable Ore Reserves(2) - -------------------------------------------------------------------------------- Proven and Probable - tonnage 302,000 517,000 553,000 - gold grade (oz./ton) 0.280 0.229 0.238 - copper grade (%) 0.274 0.243 0.270 - contained oz. gold(3) 84,400 118,400 131,700 Possible(4) - tonnage 981,700 1,462,000 1,417,000 - gold grade (oz./ton) 0.340 0.255 0.267 - copper grade (%) 0.310 0.250 0.260 - contained oz. gold(3) 333,700 372,900 378,200
Diluted Geological Resources - -------------------------------------------------------------------------------- Measured and Indicated - tonnage 302,000 729,000 879,000 - gold grade (oz./ton) 0.280 0.210 0.225 - copper grade (%) 0.274 0.223 0.240 - contained oz. gold(3) 84,400 153,300 197,900 Inferred(4) - tonnage 1,703,000 2,520,000 2,461,000 - gold grade (oz./ton) 0.329 0.261 0.264 - copper grade (%) 0.286 0.240 0.250 - contained oz. gold(3) 561,600 657,800 649,600
1: Reserves and resources have been calculated based on an assumed 5-foot mining width following the change in mining method to cut-and-fill mining compared to a 6-foot mining width under the previous mining method for 1998 and 1997. 2: Mineable reserves at December 31, 1999 have been calculated based on a gold price of US$300 per ounce. Mineable reserves at December 31, 1998 and 1997 were based on a gold price of US$325 and $US375 per ounce respectively. 3: Actual recovered ounces will depend on metallurgical recovery rates. 4: The possible and inferred categories include material based largely on assumed continuity or repetition for which there are reasonable geological indications but for which there are limited samples and measurements. ================================================================================ The Joe Mann Mine is located approximately 350 miles north of Montreal, in the Province of Quebec, Canada. Since production began in 1987, this high-grade underground operation has produced more than 1 million ounces of gold. As of December 31, 1999, Joe Mann has mineable reserves of approximately 418,000 ounces. The Mine is situated in the eastern portion of the Abitibi greenstone belt, one of the world's premier gold producing regions, encompassing more than 250 active mines and past-producing operations. Joe Mann is an Archean vein-type deposit. Gold and copper mineralization is found in quartz veins within several laterally continuous shear zones. Mining was temporarily suspended in the fourth quarter of 1999, up to which time, ore had been mined along a 3000 foot strike length, to depths of up to 2350 feet below the surface. - ----------------- OPERATING RESULTS - ----------------- Operating results for the year were negatively impacted by mining dilution caused by worsening ground conditions and the subsequent temporary cessation of operations to study the problem. Cash operating costs rose by 14% to US$292 per ounce compared to US$257 per ounce in 1998, while gold production fell 27% from 70,100 ounces in 1998, to 51,300 ounces in 1999. The increased mine dilution lowered mill head grades to 0.204 ounces of gold per ton compared to 0.252 ounces of gold per ton a year earlier. Mill recoveries were 94.2% compared to 94.3% in 1998. Production of copper was also affected by dilution. Annual copper production fell from 1.3 million pounds in 1998, to 1.1 million pounds in 1999. [The following table was depicted as a bar chart in the printed material.]
Gold Production (thousands of ounces) 96 70.4 97 73.5 98 70.1 99 51.3
[The following table was depicted as a bar chart in the printed material.]
Gold Reserves (thousands of ounces) Proven Proven and Probable ------ ------------------- 96 617.4 97 509.9 98 491.3 99 418.1
[The following table was depicted as a bar chart in the printed material.]
Cash Operating Cost (US$ per ounce) 96 272 97 264 98 257 99 292
[LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 6 9 - -------------------------------------------------------------------------------- Longitudinal Section through the Main Zone [GRAPHIC OMITTED] 3-D Model showing the Resource and Reserve Potential of the Joe Mann Mine [GRAPHIC OMITTED] - ------------------- LONG-TERM MINE PLAN - ------------------- In response to the worsening ground conditions and dilution experienced by mining with shrinkage and long-hole methods, management suspended mining operations and reviewed alternative mining methods. As a result of these studies, it was concluded that given the nature of the orebody, cut-and-fill mining was the most practical alternative to cope with the excessive dilution problems experienced in 1999. A new 5-year mine plan was developed and evaluated by both management and independent mining and geotechnical consultants. - -------------------------------------------------------------------------------- 7 10 - -------------------------------------------------------------------------------- The new mine plan incorporates the use of cut-and-fill mining methods that will replace the previously used methods of extraction. It is expected that the ground stability problems, which led to dilution and related increased costs experienced in 1999, will be controlled. Once production resumes in April, Joe Mann is forecast to produce 63,500 ounces of gold in 2000 at a cash operating cost of US$225 per ounce. Gold production between 2001 and mid-2004 is expected to average approximately 90,000 ounces annually at an average cash operating cost of US$220 per ounce. With this projected cash cost, Campbell will resume the 6-year cost-cutting trend that started in 1993 when costs were US$336 per ounce. Total capital expenditures during 2000 are forecast at $5.3 million and include $3.6 million during the first quarter of 2000. In general, cut-and-fill mining requires lower development expenditures when compared with shrinkage and long-hole mining methods. Cut-and-Fill Mining The cut-and-fill method is well suited to mine steeply dipping vein deposits, such as those found at the Joe Mann Mine. With this method, a series of haulage drifts are driven in the footwall from the shaft parallel to the orebody. Cross-cuts are tunnels perpendicular to the haulage drift that are excavated from the haulage drift to intersect the orebody at regular intervals. Service and ventilation raises, which provide access and air flow to the working area, and ore passes, which are used to deliver ore to a collection point, are excavated from the cross-cut. As a result of this development, the orebody is divided into convenient blocks or stopes that are ready to be mined. The ore will be mined in a series of horizontal slices or sequences starting from the bottom of the stope, working upwards. Ore is drilled, blasted and removed from the stopes through ore passes. It is then loaded on trams and hauled to the loading pocket at the bottom of the shaft where it is hoisted to the surface for processing. After a complete sequence has been extracted, part of the resulting void is filled with fill material which is fed by gravity from the surface. At the Joe Mann Mine, Campbell will back fill with sand deposits that are found in close proximity to the mine and cap the fill with cement floors. This fill provides support for the sidewalls of the excavation as well as the floor from which the next sequence can be mined. A pillar is also left above and below each cross-cut to provide additional support and stability. As the stope progresses upwards, the service and ventilation raises and ore passes are maintained within the filled stope. [GRAPHIC OMITTED] Section showing typical cut-and-fill method [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 8 11 - -------------------------------------------------------------------------------- Cut-and-fill mining has many advantages compared to other underground mining methods. It generally provides more stability in areas with poor ground conditions and results in less dilution and greater ore recovery. The problem of dilution caused by stope wall failure is more controlled with the stability provided by the fill. When blasting occurs, there is less risk of waste from the walls being added to the ore. A mined out stope that is back filled may provide support to adjacent work areas. At Joe Mann, this additional stability is expected to enable mining widths to decrease from 6 feet to 5 feet. Since the ore veins are typically less than 5 feet, miners will not be extracting the additional 1 foot of waste rock. This results in an effective increase in the grade of the ore, and lessens costs as anticipated in the long-term mine plan. Another advantage of cut-and-fill mining is that it allows miners to be more selective giving rise to excellent grade control. Areas of uneconomic waste rock may be left in place. With shrinkage and long-hole mining these waste blocks would have to be mined, thereby lowering the mill head grade. A final key advantage of cut-and-fill mining deals with the continuity of operations and speed of ore recovery. With shrinkage and long-hole mining methods, approximately 60% of the ore remains in the slope until it is completely drilled and blasted. In addition to the cash flow from individual stopes being delayed because the ore is not immediately hauled to surface, several mining problems can result. Additional dilution following blasting can occur as loose rock on the walls of the stope may fall into the broken ore. Ore may also become trapped within a particular stope as the walls converge because of the stresses of the overlying rock. With cut-and-fill mining, ore is removed from the stope through the ore pass and hauled to the shaft on a daily basis, thereby reducing the risk of these potential problems. - ----------- EXPLORATION - ----------- Exploration completed in 1999 led to the delineation of a new ore zone which added approximately 137,000 tons averaging 0.328 oz./ton gold to the reserves. Based on current reserves, the long-term mine plan projects production continuing until mid-2004. Exploration is ongoing in order to delineate additional reserves. There appears to be wider, high-grade portions to the ore between the 2350 and 3450 levels. Some of the better intersections drilled previously and partially incorporated into the ore reserves include 0.304 oz./ton gold over 39.5 feet, 0.534 oz./ton gold over 67 feet, 0.437 oz./ton gold over 26.7 feet and 0.522 oz./ton gold over 19.3 feet. Recent drilling appears to show these wider zones to be at considerably higher gold and copper grades than the current ore reserve grades. While the majority of the tons of ore from these zones are included in the ore reserves and in the long-term plan, the higher grades are not reflected. Although at an early stage, should these drill results be repeated in other previously identified wider ore zones, this could result in a significant reduction in cash operating costs per ounce of gold. As development and production continue, exploration will be focused on finding additional reserves at depth as well as reserves within parallel shears. The potential for additional wide, high-grade intersections is considered to be good. - -------------------------------------------------------------------------------- 9 12 - -------------------------------------------------------------------------------- [MAP OMITTED] SANTA GERTRUDIS MINE [GRAPHIC OMITTED] --------------------------------------- SONORA, MEXICO - ------------------------------------- SANTA GERTRUDIS MINE - SONORA, MEXICO - ------------------------------------- The Santa Gertrudis Mine is an open pit heap leach mine situated in the Mexican State of Sonora approximately 240 kilometres south of Tucson, Arizona. The mine produced approximately 300,000 ounces of gold between 1991 and 1997 when production was temporarily suspended. Since Campbell acquired the property in mid-1994 Santa Gertrudis has produced approximately 180,000 ounces at an average cash operating cost of US$249 per ounce. Following the suspension of mining operations in late 1997, Campbell embarked on an aggressive exploration program to delineate additional reserves to enable mining operations to resume. In addition to exploring within the mine area and ground to the south of mining operations, Campbell focused exploration on the adjoining Roca Roja mine property, situated north of the Santa Gertrudis Mine area, that was acquired in 1999. Successful exploration north of the mine area led to the discovery of four deposits that are expected to provide modest production and cashflows that largely fund exploration and fixed costs at Santa Gertrudis. Exploration is ongoing with the expectation that additional reserves will be outlined allowing operations to continue beyond 2000. - -------------------------------------------------------------------------------- 10 13 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED]
Production Statistics 1999 1998 1997 ========================================================================================= Tonnes mined (ore+waste) 476,000 -- 7,432,000 Tonnes ore mined 98,000 -- 1,021,000 Strip Ratio 3.84 -- 6.28 Gold Grade (grams/metric tonne) 2.24 -- 1.71 (oz./ton) 0.07 -- 0.05 Gold Recovery (%) N/A -- 69.5 Gold Production (oz.) 2,400 12,300 39,200 Cash Operating Cost per Ounce Gold (US$) N/A 242 333 Mineable Ore Reserves ========================================================================================= Proven and Probable - ----------------------------------------------------------------------------------------- - tonnage (metric tonnes) 416,000 -- -- - gold grade (grams/metric tonne) 2.33 -- -- (oz./ton) 0.06 -- -- - indicated gold(2) (oz.) 31,000 -- -- Possible(1) - ----------------------------------------------------------------------------------------- - tonnage (metric tonnes) 1,301,000 1,992,000 2,422,000 - gold grade (grams/metric tonne) 1.95 2.08 2.00 (oz./ton) 0.06 0.06 0.06 - indicated gold(2) (oz.) 81,000 133,000 155,700
1: The possible category includes material based largely on assumed continuity or repetition for which there are reasonable geological indications but for which there are limited samples and measurements. 2: Actual recovered ounces will depend on metalurgical recovery rates. Ore deposits at Santa Gertrudis are found within silty carbonate rocks and are generally associated with structural breaks such as fault zones and shear zones. The gold mineralization at Santa Gertrudis is finely disseminated and ore grades usually average 2.0 grams of gold per tonne (g/t gold). The ore is oxidized, making it amenable to the low cost heap leach gold extraction method. The style of mineralization combined with the property's geological, geochemical and structural characteristics suggests that Santa Gertrudis has similarities to the prolific Carlin trend in Nevada which hosts many rich oxide and sulphide gold deposits. - -------------------------------------------------------------------------------- 11 14 - -------------------------------------------------------------------------------- - ---------- OPERATIONS - ---------- Exploration completed in 1999 led to the discovery of three mineable deposits, the El Toro Norte, Escondida Northwest Splay and Mirador. Ore from the El Toro Norte deposit was mined in the fourth quarter of 1999 and placed on the leach pads, and to December 31, 1999, produced approximately 2,400 ounces of gold. Production from the Mirador pit started shortly thereafter and is expected to continue until mid-2000. Production from the Escondida Northwest Splay will follow. As of December 31,1999, proven mineable ore reserves are 416,000 tonnes averaging 2.328 grams of gold per tonne (g/t gold) or approximately 31,000 ounces. In order to operate profitably at current gold prices, and at the reduced production levels contemplated during this initial phase of mining, management undertook a comprehensive review of the operation to determine where cost savings were possible. As a result, the minesite camp facilities have been eliminated and workers are transported to and from the site. The workforce has been reduced to levels that better match the scale of the current operation. - ----------- EXPLORATION - ----------- La Peque-Escondida Structure Exploration in 1999 was primarily focused on the La Peque-Escondida Shear Zone. This Shear Zone is a primary exploration target situated approximately 3 kilometres north of the mine infrastructure. This east-west trending structure is 2.6 kilometres in length and has 10 distinct zones of mineralization many of which have been mapped and sampled and are the focus of advanced drilling. The Escondida Northwest Splay In addition to the El Toro Norte and the Mirador deposits, a third deposit known as the Escondida Northwest Splay was discovered in 1999. Situated close to the mine infrastructure, it will be ready for production once necessary infill drilling has been completed. To date the Escondida Northwest Splay has been tested with 13 reverse circulation drill holes totalling approximately 1130 metres and contains proven mineable reserves of 99,000 tonnes averaging 2.44 g/t gold. Escondida West, Central and Northwest Zones The Escondida West, Escondida Central and Escondida Northwest Zones are situated close to the Escondida Northwest Splay deposit. Each has significant potential to boost resources and potential reserves because of its proximity to that deposit. The Escondida Central Zone, located approximately 275 metres east of the Northwest Splay deposit, was the first zone drilled on the La Peque-Escondida structure. In 1999, a total of 16 holes were drilled with many reporting multi-gram values over widths of up to 21 metres. Some of the better intersections from the 1999 program were 3.631 g/t gold over 21.0 metres, 1.834 g/t gold over 9.0 metres and 1.086 g/t gold over 13.5 metres. Recently, several trenches completed on the Central Zone in 1999 were deepened or extended to better expose the mineralization and check assay results. Many of the results were in fact better than previously reported leading to additional drilling of the zone. Two drill holes have since been completed with the first hole intersecting 17.786 g/t gold over 5.98 metres, while a second hole intersected 3.26 g/t gold over 14.15 metres or 3.95 g/t gold over 11.0 metres. Once new resource calculations have been completed, it may be possible to mine this zone economically in conjunction with the Northwest Splay deposit. Exploration to further evaluate other zones of the Escondida portion of the La Peque-Escondida Structure is now underway with the hope that other zones can be brought [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 12 15 - -------------------------------------------------------------------------------- [GRAPHIC OMITTED] Geology of Santa Gertrudis Mine District and Roca Roja Property Location Map [GRAPHIC OMITTED] into the resource category. The nearby Escondida Northwest Zone is approximately 600 metres northeast of the deposit and the Escondida West Zone is found 50 metres southeast of the deposit. Esco Zone The Esco Zone, situated approximately 1.5 kilometres west of the Escondida Northwest Splay, consists of four structures, only one of which is currently being explored. The structure is defined by a series of old pits and shallow shafts which have yielded values of up to 1.166 g/t gold and greater than 500 g/t silver over 1.2 metres. The old workings suggest that the target may have a width of approximately 10 metres. The structure is associated with a 300 metre long gold soil geochemical anomaly with values in excess of 0.2 g/t gold. The presence of the old workings and the extent of the sampling indicate the structure has a strike length of 80 metres; however, a channel sample that returned a value of 3.668 g/t gold over 0.7 metres taken along strike suggest the potential strike length for the structure is in excess of 200 metres. - -------------------------------------------------------------------------------- 13 16 - -------------------------------------------------------------------------------- Reconnaissance Exploration Since many of the open pit deposits are related to fault or shear structures with geochemical anomalies, reconnaissance exploration has been focused on these type of targets. Two key target areas being explored are the Viviana Fault and the San Enrique geochemical anomaly. La Viviana Fault Additional exploration has been completed along the La Viviana Fault. This east-west trending structure extends from the Maracias Fault to the west and is approximately 3.8 kilometres long. The La Viviana Fault is a significant structure because it is thought to be the upper portion of the structure that hosted the past producing Amelia Mine on the Roca Roja property. As such it has excellent potential to host the upper portion of that deposit. Initial investigations have been focused on a small portion of the fault in an area of previous workings. To date three reverse circulation drill holes totalling 444 metres have been completed to test the structure. One hole, drilled to test a surface sample from a strongly altered fault zone that yielded 3.924 g/t gold, returned a value of 1.589 g/t gold over 4.5 metres. Additional mapping and sampling will be completed to define additional drill targets. San Enrique Geochemical Anomaly The San Enrique gold-in-soil geochemical anomaly was defined as part of an ongoing soil geochemical survey conducted in 1998. The anomaly is situated approximately 8 kilometres south of the mine infrastructure and is approximately 4 kilometres by 2 kilometres. Exploration on the anomaly has been delayed because of difficulties in concluding an agreement with the surface rights owner. In 1999, Campbell was granted a temporary occupation order giving the Company the right to conduct exploration on the San Enrique soil geochemical anomaly for a period of five years. Campbell is continuing negotiations with the surface rights owner and the Mexican Federal and State Government authorities to allow the company access to the ground so that a comprehensive exploration program can begin. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 14 17 - -------------------------------------------------------------------------------- - ---------------------------------------- CERRO QUEMA PROJECT - LOS SANTOS, PANAMA - ---------------------------------------- The Cerro Quema project, situated 150 miles southwest of Panama City, Panama, is currently on care and maintenance awaiting higher gold prices before development resumes. A feasibility study completed by Campbell indicates the Cerro Quema has mineable reserves, based on a gold price of US$400 per ounce, of approximately 8,772,000 tonnes averaging 1.16 g/t gold, or approximately 330,000 ounces of gold. Cash operating costs are expected to be approximately US$180 per ounce and capital costs are expected to be an additional US$100 to US$110 per ounce. Should gold prices rise to the US$400 level, construction at Cerro Quema could recommence immediately, and once finished, the project would produce 50,000 ounces annually. - --------------- GROWTH STRATEGY - --------------- During the course of the year management continued to review business opportunities with respect to gold mining acquisitions and possible mergers. Extensive due diligence was carried out on several operations located in the Americas and elsewhere. To date, no transactions have been completed due to results from due diligence and the inability to reach a consensus on value. With the assistance of outside advisors, Campbell is continuing to search for a transaction that will provide growth and increase shareholder value. - -------------------------------------------------------------------------------- 15 18 Management's Discussion and Analysis 17 - 20 - -------------------------------------------------------------------------------- Management's Responsibility for Financial Reporting Auditors' Report 21 - -------------------------------------------------------------------------------- Consolidated Balance Sheets 22 - -------------------------------------------------------------------------------- Consolidated Statements of Operations Consolidated Statements of Retained Earnings (Deficit) 23 - -------------------------------------------------------------------------------- Consolidated Statements of Cash Flows 24 - -------------------------------------------------------------------------------- Notes to Consolidated Financial Statements 25-33 - -------------------------------------------------------------------------------- Five Year Comparative Summary Selected Quarterly Financial Data 34 - -------------------------------------------------------------------------------- Shareholder Information 35 - -------------------------------------------------------------------------------- Corporate Information 36 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 16 19 - -------------------------------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------- - -------- OVERVIEW - -------- The past year has been one of mixed results for Campbell Resources. Poor ground conditions at the Joe Mann Mine resulted in production being significantly lower than target and prior years with costs commensurately higher. When added to further deterioration in gold prices during the first nine months of the year, together with the start-up costs at the Santa Gertrudis Mine, this has resulted in a significant drain on the Company's cash resources instead of the expected positive cash flow. For the year ended December 31, 1999 there was negative cash flow from operations before the net change in non-cash operating working capital of $9.4 million compared to positive $0.4 million in 1998 and $0.6 million in 1997. Combined with sustaining capital expenditures at the Joe Mann Mine this has resulted in the Company's working capital at December 31, 1999 decreasing to $31.4 million compared to $45.7 million in 1998. Campbell recorded a loss in 1999 of $12.7 million, or $0.08 per share, compared to a loss of $20.8 million ($0.14 per share) in 1998 and $40.4 million ($0.27 per share) in 1997. There was a loss from operations of $14.4 million in 1999 compared to a loss of $10.1 million in 1998 and a loss of $12.2 million in 1997, before the writedown and loss on sale of mining interests in 1998 of $12.5 million and in 1997 of $31.7 million. The Joe Mann Mine started 1999 on a positive note operating at seven days a week compared to the previous five under a new mine plan following an agreement with the Unions. The discovery of a wide ore lens on the 2575 level further increased the optimism. Unfortunately ground conditions worsened as the year progressed resulting in unexpected dilution and consequently lower grades and higher costs. The West zone above the 2350 level was a disappointment as the grade in the stopes was inconsistent and lower than expected. Continuing lower gold production and negative operating cash flow resulted in mining operations above the 2350 level being put in a recovery mode in September while management addressed the dilution issue. As a result, a new mine plan incorporating the change to cut-and-fill mining from shrinkage and long-hole mining was approved by the Board of Directors in November. The plan is based on US$300 gold prices and is expected to result in significant improvements in recovery of ore with lower dilution due to selective mining at narrower widths. Development to enable the change in mining methods commenced in December 1999 and production is expected to resume in April 2000. Development costs during this period are forecast at $3.6 million and will be capitalized to mining interests. Production for the nine months to December 31, 2000 is forecast at 63,500 ounces of gold at a cash operating cost of US$225 per ounce. In Mexico, the Company completed the acquisition of the mining and exploration claims of Minera Roca Roja, a former gold producer, adjacent to the Company's Santa Gertrudis Mine at a total cost of $2.3 million. Gold reserves were quickly discovered following exploration and drilling on those claims. Gold production resumed at the Santa Gertrudis Mine from the acquired claims in the fourth quarter of 1999 and is expected to continue through 2000 and into 2001 at levels sufficient to substantially pay for the ongoing exploration effort. - ------- REVENUE - ------- Revenue from metal sales decreased in 1999 by 38% to $22.5 million compared to $36.4 million in 1998 and $52.6 million in 1997. The decrease in 1999 was attributable to a 9% reduction in the gold price realized during the year and a 35% decrease in gold production to 53,700 ounces compared to 82,400 ounces in 1998. The decrease in 1998 revenues relative to 1997 was due to lower gold prices and lower gold production, offset to an extent by the weakening of the Canadian dollar by approximately 7%.
Gold produced (ounces): 1999 1998 1997 ================================================================================ Joe Mann Mine 51,300 70,100 73,500 Santa Gertrudis Mine 2,400 12,300 39,200 - -------------------------------------------------------------------------------- 53,700 82,400 112,700 ================================================================================ Gold revenue per ounce US$276 US$304 US$336 Average market price US$279 US$294 US$331
[LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 17 20 - -------------------------------------------------------------------------------- The average gold price realized compared to the average market price is disclosed in the table above. The lower gold price realized in 1999 compared to the average market price for the year is due to the timing of gold production during the year. The difference between the price realized and the market price in prior years is primarily attributable to the Company's limited hedging activities. Campbell's general policy is to hedge a maximum of 50% of its gold production for up to two years, dependent on market conditions and planned capital expenditure commitments. The Company has 10,000 ounces of gold hedged for 2000 under fixed forward contracts at an average price of US$290 per ounce. These represent approximately 11% of anticipated production for the year. The Company also has 53,200 ounces of calls outstanding with maturities in 2001 and 2002 at a strike price of US$350 per ounce. The calls were sold in 1997 and are subject to floating gold lease rates against which the Company receives an allowance of 1.50%. The calls represent a maximum of one third of the anticipated gold production from the Joe Mann Mine in the respective years. The calls are marked-to-market and subject to margin calls if the liability exceeds US$3.5 million. The mark-to-market has not required the Company to post margin. It is currently the Company's intention to deliver gold from the Joe Mann Mine at the US$350 strike price if the calls are exercised. Revenues from copper production at the Joe Mann Mine accounted for 5.3% of total revenue in 1999 compared to 4.8% in 1998 and 3.6% in 1997. The increase results from the reduction in total revenues as a result of the decrease in gold production from the Santa Gertrudis Mine. Copper production decreased to 1.1 million pounds compared to 1.3 million pounds in 1998 and 1.4 million pounds in 1997 as a result of lower copper grades. - -------- EXPENSES - --------
Cash cost per ounce 1999 1998 1997 ================================================================================ Joe Mann Mine US$292 US$257 US$264 Santa Gertrudis Mine N/A US$242 US$333 - -------------------------------------------------------------------------------- Overall US$292 US$255 US$288 ================================================================================
Mining expense decreased to $25.6 million in 1999 compared to $33.4 million in 1998 and $46.7 million in 1997. The decrease in 1999 results from the effective cessation of mining operations, other than ore recovery in the upper levels, at the Joe Mann Mine in September. In addition, the mine ceased milling in November 1999 to begin the development necessary to start cut-and-fill mining in the second quarter of 2000. All costs at the mine for December were capitalized to mining interests. The decrease in 1998 compared to 1997 results from cessation of mining operations at the Santa Gertrudis Mine in December 1997. - ------------- Joe Mann Mine - ------------- Production from the Joe Mann Mine decreased by 26.8% to 51,300 ounces of gold in 1999 compared to 70,100 ounces in 1998 and 73,500 ounces in 1997. The decrease is primarily attributable to lower mill head grades of 0.204 ounces of gold per ton in 1999 compared to 0.252 in 1998 and 0.30 in 1997. Mill recoveries increased to 94.2% in 1999 compared to 94.3% in 1998 and 93.9% in 1997. The tons of ore milled decreased to 267,000 tons in 1999 compared to 299,000 tons in 1998 and 266,000 tons in 1997. As a result of the lower gold production the cash operating cost per ounce increased to US$292 from US$257 in 1998. The decrease in cash costs per ounce of gold produced in 1998 compared to 1997 was largely a result of the weaker Canadian dollar. - -------------------- Santa Gertrudis Mine - -------------------- The resumption of mining operations at the Santa Gertrudis Mine in the fourth quarter of 1999 resulted in 98,000 tonnes of ore being mined with a grade of 2.24 g/t and a strip ratio of 3.84:1. Leaching commenced in November and resulted in 1,700 ounces of gold being produced in the start-up period. The mine also produced 700 ounces of gold during the earlier part of the year when the heaps were being water washed. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 18 21 - -------------------------------------------------------------------------------- During 1998, the Santa Gertrudis Mine produced 12,300 ounces of gold as a result of the continued application of cyanide solutions to the heaps on the leach pads. The cash cost per ounce of US$242 per ounce of gold produced in 1998 is higher than it would otherwise be as it included all overhead costs associated with keeping the mine infrastructure in place while the exploration effort is ongoing. - ----------------------------- Depreciation and Amortization - ----------------------------- Depreciation and amortization expense was $4.7 million in 1999 and $8.2 million in 1998 and $14.6 million in 1997. The decrease in 1999 and 1998 relates to both the lower gold production from the Joe Mann Mine and the impact of the writedown in 1997 together with the cessation of mining activities at the Santa Gertrudis Mine from Decemeber 1997 to October 1999. - ----------- Exploration - ----------- Exploration expense was $2.3 million in 1999 compared to $2.2 million in 1998 and $0.3 million in 1997 and for 1999 and 1998 all relates to the Santa Gertrudis Mine. Prior to 1998 exploration expenditures at the Santa Gertrudis Mine were capitalized to mining interests and for 1997 amounted to $3.7 million. - ---------------------- OTHER INCOME (EXPENSE) - ---------------------- Other income was $0.8 million in 1999 compared to $2.4 million in 1998 and $2.1 million in 1997. The decrease in 1999 is primarily due to the mark-to-market loss of $0.8 million on the 53,200 ounce call position compared to a $0.4 million gain in 1998 as well as the decrease in interest income as a result of lower interest earning balances. Interest expense on the Company's convertible debentures was $0.4 million in 1999 compared to $0.5 million in 1998 and $0.6 million in 1997. The decrease is attributable to the continuing conversion of a portion of the debentures to common shares (see note 4 to Consolidated Financial Statements). - ----------------------- INCOME AND MINING TAXES - ----------------------- The Company recorded an income and mining tax recovery of $1.3 million in 1999 compared to expense of $0.1 million in 1998 and a recovery of $2 million in 1997. Reference should be made to note 6 to the Consolidated Financial Statements for additional information on the reported tax provisions. - ------------------------------- LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- At December 31, 1999, the Company's working capital decreased to $31.4 million compared to $45.7 million in 1998. Included in working capital is cash and short-term deposits of $18.2 million and money market instruments (matured in February 2000) of $8 million compared to cash and short-term deposits of $41.5 million in 1998. As discussed in note 7 to the financial statements, the Company adopted the new Canadian Institute of Chartered Accountants Handbook Section 1540 "Cash Flow Statements" in 1999. The Section requires that short-term deposits with initial maturities on acquisition of greater than 90 days not be classified as cash on the balance sheet. The Company periodically invests in money market instruments with maturities of up to 180 days to take advantage of interest rates and other factors. Accordingly, although these instruments are readily convertible into cash they are now classified as money market instruments with their acquisition and maturity included in investing activities in the Statements of Cash Flows. For the year ended December 31, 1999 there was negative cash flow from operations before the net change in non-cash operating working capital of $9.4 million compared to positive $0.4 million in 1998 and positive $0.6 million in 1997. The negative cash flow in 1999 compared to the positive cash flow in 1998 results from the decrease in gold production and increase in costs at the Joe Mann Mine, the lower average realized gold price and lower gold production from the Santa Gertrudis Mine. The main source of cash for the Company during 1998 was from the sale of surplus mining equipment and the Wildcat property in Nevada, which yielded $3.7 million, and the reduction in operating working capital. The main source of cash during 1997 was the early termination of various gold hedging instruments totalling 118,100 ounces, which resulted in cash proceeds of $9.7 million. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 19 22 - -------------------------------------------------------------------------------- - -------------------- Capital Expenditures - -------------------- Capital expenditures were as follows ($000's):
1999 1998 1997 ================================================================================ Joe Mann Mine: - - sustaining capital $2,286 $2,017 $2,360 - - shaft deepening 238 4,452 6,564 - - cut-and-fill development 975 - -------------------------------------------------------------------------------- 3,499 6,469 8,924 - -------------------------------------------------------------------------------- Santa Gertrudis Mine 6 82 3,091 Cerro Quema Project 1,580 15,129 Other 21 10 68 - -------------------------------------------------------------------------------- $3,526 $8,141 $27,212 ================================================================================
In addition to these capital expenditures, during 1999 the Company also acquired the mining and exploration claims of the former gold producer, Minera Roca Roja, SA. de C.V., for cash consideration of $1.6 million and the assumption of the associated environmental obligations estimated at $0.7 million. - --------- YEAR 2000 - --------- The Company has not experienced any computer system or operational issues, either internally or with its suppliers, with respect to the Year 2000 issue. - ------- OUTLOOK - ------- Campbell's focus for the year 2000 will be on its existing operations while continuing to search for new opportunities. Implementing the new mining method at the Joe Mann Mine on time and budget is a priority. Once development in preparation for the change to cut-and-fill mining is complete, expected at the end of the first quarter of 2000, the mine should start to generate meaningful levels of cash flow. Gold production is forecast at 63,500 ounces at a cash cost of US$225 per ounce in the nine operating months of 2000 increasing to approximately 90,000 ounces in 2001. Development and sustaining capital expenditures for 2000 is forecast at $5.3 million of which $3.6 million relates to the development period. The Santa Gertrudis Mine is expected to produce approximately 22,500 ounces of gold at a cash operating cost of US$233 per ounce during 2000, sufficient to fund the majority of the exploration effort, currently budgeted at US$1.5 million. At the Company's upcoming annual shareholders meeting, shareholders will be asked to vote on a special resolution to consolidate (reverse split) the issued and outstanding common shares. The resolution is in response to a new continuing listing rule of the New York Stock Exchange requiring listed companies stock price to be a minimum of US$1 per share. Both the American Stock Exchange and NASDAQ have similar stock price requirements. Given the high percentage of Campbell's shares held by United States residents, the Company believes it is in the best interests of all shareholders to maintain a listing in the United States. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 20 23 - -------------------------------------------------------------------------------- MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING To the Shareholders of Campbell Resources Inc.: The accompanying consolidated financial statements of the Company were prepared by management in accordance with accounting principles generally accepted in Canada, consistently applied and within the framework of the summary of significant accounting policies in these consolidated financial statements. Management is responsible for all information in the annual report. All financial and operating data in the annual report is consistent, where appropriate, with that contained in the consolidated financial statements. A system of internal accounting control is maintained in order to provide reasonable assurance that assets are safeguarded and that transactions are properly recorded and executed in accordance with management's authorization. This system includes established policies and procedures, the selection and training of qualified personnel and an organization providing for appropriate delegation of authority and segregation of responsibilities. The Board of Directors discharges its responsibilities for the consolidated financial statements primarily through the activities of its Audit Committee composed of three directors, none of whom are members of management. This Committee meets with management to assure that it is performing its responsibility to maintain financial controls and systems and to approve the annual consolidated financial statements of the Company. The Audit Committee also meets with the independent auditors to discuss the results of their audit and their audit report prior to submitting the consolidated financial statements to the Board of Directors for approval. The consolidated financial statements have been audited on behalf of the shareholders by the Company's independent auditors, KPMG LLP, in accordance with generally accepted auditing standards. The auditors' report outlines the scope of their examination and their opinion on the consolidated financial statements. /s/ John O. Kachmar /s/ Paul J. Ireland John O. Kachmar Paul J. Ireland President and Vice President, Finance and Chief Executive Officer Chief Financial Officer AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS We have audited the consolidated balance sheets of Campbell Resources Inc. as at December 31, 1999 and 1998 and the consolidated statements of operations, retained earnings (deficit) and cash flows for each of the years in the three-year period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosure 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. In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 1999 and 1998 and the results of its operations and the cash flows for each of the years in the three-year period ended December 31, 1999 in accordance with Canadian generally accepted accounting principles. Canadian generally accepted accounting principles vary in certain 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 each of the years in the three year period ended December 31, 1999 and shareholders' equity as at December 31, 1999 and 1998 to the extent summarized in note 12 to the consolidated financial statements. /s/ KPMG LLP Chartered Accountants Toronto, Canada February 25, 2000 [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 21 24 - -------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS as at December 31, (Expressed in thousands of Canadian dollars)
1999 1998 - ------------------------------------------------------------------------------ ASSETS Current assets Cash and short-term deposits $ 18,219 $ 41,493 Money market instruments 7,958 Receivables 1,999 2,653 Inventories (note 2) 4,891 4,538 Prepaids 460 474 - ------------------------------------------------------------------------------ Total current assets 33,527 49,158 - ------------------------------------------------------------------------------ Other assets 194 502 Mining Interests (note 3) 53,413 53,117 - ------------------------------------------------------------------------------ Total assets $ 87,134 $102,777 ============================================================================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Accounts payable $ 1,104 $ 2,254 Accrued liabilities 1,003 1,215 - ------------------------------------------------------------------------------ Total current liabilities 2,107 3,469 - ------------------------------------------------------------------------------ Accrued reclamation 2,169 1,652 Convertible debentures (note 4) 3,718 5,652 Deferred mining taxes 1,716 3,616 Other liabilities 1,751 919 Shareholders' equity Capital stock (note 5) 125,339 123,632 Foreign currency translation adjustment 593 1,394 Deficit (50,259) (37,557) - ------------------------------------------------------------------------------ Total shareholders equity 75,673 87,469 - ------------------------------------------------------------------------------ Total liabilities and shareholders equity $ 87,134 $102,777 ==============================================================================
Commitments and contingencies (note 8) Approved by the Board, /s/ James D. Beatty Director /s/ John O. Kachmar Director See accompanying notes to the consolidated financial statements. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 22 25 - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended December 31, (Expressed in thousands of Canadian dollars except per share amounts)
1999 1998 1997 - ------------------------------------------------------------------------------------------ Metal sales $ 22,465 $ 36,388 $ 52,635 - ------------------------------------------------------------------------------------------ Expenses Mining 25,646 33,449 46,681 General administration 2,875 2,648 3,203 Depreciation and amortization 4,699 8,191 14,585 Exploration 2,299 2,219 317 Care and maintenance 1,394 - ------------------------------------------------------------------------------------------ 36,913 46,507 64,786 - ------------------------------------------------------------------------------------------ Loss from operations before writedown and loss on sale of mining interests (14,448) (10,119) (12,151) Writedown and loss on sale of mining interests (note 3) 12,508 31,684 - ------------------------------------------------------------------------------------------ Loss from operations (14,448) (22,627) (43,835) - ------------------------------------------------------------------------------------------ Other income (expense) Other income 843 2,396 2,096 Convertible debenture interest expense (351) (526) (639) - ------------------------------------------------------------------------------------------ 492 1,870 1,457 - ------------------------------------------------------------------------------------------ Loss before taxes (13,956) (20,757) (42,378) Income and mining taxes recovery (expense) (note 6) 1,254 (91) 1,968 - ------------------------------------------------------------------------------------------ Net loss $(12,702) $(20,848) $(40,410) ========================================================================================== Loss per share (note 5) $ (0.08) $ (0.14) $ (0.27) ==========================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT) for the years ended December 31, (Expressed in thousands of Canadian dollars)
1999 1998 1997 - ------------------------------------------------------------------------------------------ Balance at beginning of year $(37,557) $(16,709) $ 23,701 Net loss (12,702) (20,848) (40,410) - ------------------------------------------------------------------------------------------ Balance at end of year $(50,259) $(37,557) $(16,709) ==========================================================================================
See accompanying notes to the consolidated financial statements. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 23 26 - -------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended December 31, (Expressed in thousands of Canadian dollars)
1999 1998 1997 - ------------------------------------------------------------------------------------------ Cash provided by (used in): Operating activities Net loss $(12,702) $(20,848) $(40,410) Items not involving cash Depreciation and amortization 4,699 8,191 14,585 Writedown and loss on sale of mining interests 12,508 30,239 Deferred mining taxes recovery (1,900) (582) (2,569) Other 468 1,142 (1,289) - ------------------------------------------------------------------------------------------ (9,435) 411 556 Net change in non-cash operating working capital (842) 2,551 2,945 - ------------------------------------------------------------------------------------------ (10,277) 2,962 3,501 - ------------------------------------------------------------------------------------------ Financing activities Issues of capital stock 65 177 138 - ------------------------------------------------------------------------------------------ 65 177 138 - ------------------------------------------------------------------------------------------ Investing activities Expenditures on mining interests (3,526) (8,141) (27,212) Purchase of Roca Roja claims (1,562) Proceeds on sale of assets 3,876 Termination of hedging contracts 9,679 Money market instruments (7,800) 28,097 21,330 Decrease in other assets 157 313 165 - ------------------------------------------------------------------------------------------ (12,731) 24,145 3,962 - ------------------------------------------------------------------------------------------ Effect of exchange rate change on cash and short-term deposits (331) 571 162 - ------------------------------------------------------------------------------------------ Increase (decrease) in cash and short-term deposits (23,274) 27,855 7,763 Cash and short-term deposits at beginning of year 41,493 13,638 5,875 - ------------------------------------------------------------------------------------------ Cash and short-term deposits at end of year $ 18,219 $ 41,493 $ 13,638 ========================================================================================== Changes in non-cash operating working capital Receivables $ 654 $ 2,152 $ 3,465 Inventories and prepaids (134) 2,707 1,638 Accounts payable (1,150) (1,735) (1,515) Accrued liabilities (212) (573) (643) - ------------------------------------------------------------------------------------------ $ (842) $ 2,551 $ 2,945 ==========================================================================================
See accompanying notes to the consolidated financial statements. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 24 27 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) - ----------------------------------------------- 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ----------------------------------------------- The consolidated financial statements are prepared by management in accordance with accounting principles generally accepted in Canada and, except as described in note 12, conform in all material respects with accounting principles generally accepted in the United States. The principal accounting policies followed by the Company, which have been consistently applied, are summarized as follows: Intercorporate Investments: The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany balances and transactions have been eliminated on consolidation. Cash and Short-Term Deposits, Money Market Instruments: Cash and short-term deposits consist of cash-on-hand, balances with banks and short-term money market instruments (maturity on acquisition of less than 90 days) and are carried at amortized cost, which approximates market. Money market instruments with maturity on acquisition of more than 90 days are carried at amortized cost, which approximates market. The Company's policy is to invest in highly rated instruments and to limit the amount of credit exposure to any one institution. Inventories: Mining and milling materials and supplies are valued at the lower of average cost and net replacement cost. Work-in-process is valued at the lower of average production cost or net realizable value. Production costs include direct labour, benefits, supplies and equipment operating costs and maintenance. Mining Interests: Plant and equipment are recorded at cost with depreciation generally provided either on the unit-of-production method over the estimated economic life of the mine to which they relate or on the straight-line method over their estimated useful lives. Mining properties and deferred mining expenditures are recorded at cost and are depleted on the unit-of-production method over the estimated economic life of the mine to which they relate. Development costs incurred to expand existing capacity, develop new ore bodies and develop property substantially in advance of production are capitalized. Exploration expenditures are charged to income in the period incurred except where these costs relate to specific properties for which economically recoverable reserves exist, in which case they are deferred. Significant property payments for active exploration properties are capitalized. If no mineable ore body is discovered, previously capitalized costs are expensed. Mining properties and deferred expenditures are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. If estimated future net cash flows expected to result from the use of the properties and their eventual disposition are less than the carrying amount, then these properties are written down to their estimated recoverable amount determined on a non-discounted basis. Stock-Based Compensation Plans: The Company has two stock-based compensation plans, which are described in note 5. No compensation expense is recognized for these plans when stock or stock options are issued to directors or employees unless stock appreciation rights ("SAR") accompany the options. When stock is issued on the exercise of a stock option under a SAR, the difference between the market price and the option price is recorded as compensation expense and credited to share capital. Any consideration paid by employees on the exercise of stock options or purchase of stock is credited to share capital. Site Restoration: Provisions are established for estimated future costs of site restoration of mining properties, including the removal of production facilities at the end of their useful lives. Costs are based upon estimates of the anticipated method and extent of site restoration to meet current legal and industry standards. These standards are continually changing and the estimated provision is reviewed annually. The estimated future costs are accrued over the estimated life of the underlying asset and the annual charge, determined on the same basis as the amortization of the underlying asset, is included in mining costs. Recognition of Metals Revenue: Gold and copper revenues are recognized at the time of production. Receivables include gold and gold concentrate settled subsequent to year end, which are recorded at estimated net realizable value. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 25 28 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) Commodity and Foreign Exchange Contracts: The Company uses forward and option contracts to hedge the effect of exchange rate changes on foreign currency exposures, and forward and option contracts to hedge the effect of price changes on a portion of the commodities it sells. Gains and losses on hedging instruments that effectively establish prices for future production are not recognized in income until reflected in sales revenue when the related production is delivered. From time to time, the Company has entered into options contracts for the sale of commodities not designated as hedges. These contracts are carried at quoted market values and included in other assets (liabilities) and gains and losses arising from the changes in the market values of these contracts are recognized in earnings in the period in which the changes occur. Currency Translation: The U.S. dollar is considered to be the functional currency of the Company's Mexican operations as most of those activities are conducted in U.S. dollars. Accordingly, the Mexican operations are translated from Mexican pesos into U.S. dollars using the temporal method whereby monetary assets and liabilities are translated at the year end rate of exchange and non-monetary assets and liabilities are translated at historical rates of exchange. Exchange gains or losses are included in the determination of earnings. The U.S. dollar financial statements of the Mexican operations are translated into Canadian dollars at the year end rate of exchange for the balance sheet and the average rate of exchange for the year for the statement of income. Exchange gains or losses are included as a separate component of shareholders' equity. The Panamanian operations are translated into Canadian dollars using the temporal method. 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 and the reported amounts of revenue and expense during the period. Actual results could differ from estimates. During the fiscal periods presented, management has made a number of significant estimates and valuation assumptions, including estimates of the net realizable value of accounts receivable, inventory, the useful lives of capital assets, the recoverability of mining interests, the future costs associated with environmental and site restoration matters, and the fair value of financial assets and liabilities. These estimates and valuation assumptions are based on current information and management's planned course of action, as well as assumptions about future business and economic conditions. Should the underlying valuation assumptions and estimates change, the recorded amounts could change by a material amount. Comparative Figures: Certain comparative figures have been reclassified to conform to the current financial statement presentation. - ---------------- 2 -- INVENTORIES - ----------------
1999 1998 - -------------------------------------------------------------------------------- Materials and supplies $ 4,369 $ 4,538 Work-in-Process 522 - -------------------------------------------------------------------------------- $ 4,891 $ 4,538 ================================================================================
- --------------------- 3 -- MINING INTERESTS - ---------------------
1999 1998 - --------------------------------------------------------------------------------------------------------------------- Accumulated Accumulated Depreciation and Depreciation and Cost Amortization Net Cost Amortization Net - --------------------------------------------------------------------------------------------------------------------- Property, plant and equipment $ 24,673 $16,697 $ 7,976 $ 24,850 $ 16,138 $ 8,712 Mining properties and deferred expenditures 152,890 108,428 44,462 149,016 104,611 44,405 Construction in progress 975 975 - --------------------------------------------------------------------------------------------------------------------- $178,538 $125,125 $53,413 $173,866 $120,749 $53,117 =====================================================================================================================
During 1999 the Company acquired mining claims and other assets in Mexico for $1,562,000 cash and the assumption of future environmental obligations with respect to the property, estimated at acquisition to be $716,000. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 26 29 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) During 1998, as part of its periodic evaluation of the carrying value of its mining interests, the Company wrote down the carrying value of its Cerro Quema project in Panama by $10,200,000. In 1997 the Company wrote down the value of the Joe Mann Mine by $28,000,000. During 1992, the Company entered into agreements under which the Societe Quebecoise d'Exploration Miniere ("Soquem") could earn a 50% interest in the Joe Mann property (excluding the Joe Mann Mine) and in the Company's other properties in the Chibougamau area by incurring specified amounts on exploration on those properties. To July 1, 1997, Soquem had incurred total qualifying expenditures under the previous agreements of $2,548,000 on the Joe Mann property and $2,431,000 on the Chibougamau property. Effective July 2, 1997, the agreements were modified to provide that Soquem spend an additional $1,600,000 on the Joe Mann property and an additional $750,000 on the Chibougamau property from the effective date until June 1, 2002 to earn a 50% interest in each of the properties. To December 31, 1999, Soquem had incurred total qualifying expenditures under the new amendment of approximately $196,000 on the Joe Mann property and $145,000 on the Chibougamau area property. - --------------------------- 4 -- CONVERTIBLE DEBENTURES - --------------------------- In July 1994, the Company issued US$11,005,000 of 7.5% Convertible Subordinated Debentures. The debentures are unsecured, bear interest at 7.5% payable in arrears on June 1 and December 1 each year and mature on July 21, 2004. The debentures are convertible at the option of the holder into common shares of the Company at any time prior to maturity at a conversion of US$0.50 per common share. The debentures are redeemable for cash at any time after the fifth anniversary of the date of issue or, at the Company's option, may be redeemed in common shares on the basis of one common share for each US$0.50 of debenture principal being redeemed. The right of the Company to redeem the debentures for cash or common shares is conditional on the average price of the Common Shares exceeding US$0.50 during a period of 20 consecutive days prior to notice of redemption. The Company may. at its option, repay the debenture at maturity by issuing common shares of the Company at the conversion price of US$0.50 per common share. During 1999, debenture holders converted US$1,117,000 (1998 - US$1,444,000; 1997 - - US$454,000) of debenture principal into 2,234,000 (1998 - 2,888,000; 1997 - 908,000) common shares of the Company resulting in a balance outstanding at December 31, 1999 of US$2,576,000 (1998 - US$3,693,000; 1997 - US$5,137,000). - ------------------ 5 -- CAPITAL STOCK - ------------------ a) Authorized shares Preference shares - unlimited, issuable in series, without par value Common shares - unlimited b) Issued and outstanding shares (in thousands)
1999 1998 1997 - --------------------------------------------------------------------------------------------------------------------- Shares Amount Shares Amount Shares Amount - --------------------------------------------------------------------------------------------------------------------- Common shares: Balance at beginning of year 154,686 $123,632 151,445 $121,425 148,588 $118,605 Issued: Conversion of convertible debentures 2,234 1,642 2,888 2,030 908 611 Issued as part consideration on acquisition of Minera Cerro Quema, SA. 1,770 2,071 Employee Incentive Plan and Directors' Stock Option Plan 232 65 353 177 179 138 - --------------------------------------------------------------------------------------------------------------------- 157,152 $125,339 154,686 $123,632 151,445 $121,425 =====================================================================================================================
[LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 27 30 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) c) Employee Incentive Plan and Directors' Stock Option Plan The Employee Incentive Plan comprises a Share Option Plan, a Share Purchase Plan, a Share Bonus Plan and a Share Loan Plan. The Share Purchase Plan calls for Company contributions of an amount equal to 50 per cent of the employees' contributions, which can amount to a maximum of 5 per cent of their basic annual salaries or wages. The common shares are issued on a quarterly basis at market value. Under the Share Bonus Plan, shares can be issued to full-time salaried employees as a bonus in recognition of services as determined by the Compensation Committee or the Board of Directors. The Share Loan Plan provides the Compensation Committee or the Board of Directors the discretion to make loans to full time employees to enable them to acquire shares in the Company. No loans are outstanding under this plan. Options granted under the Directors' and Employee Share Option Plans expire not later than five years from the date on which they were granted and all current options expire on or before August 10, 2004. Changes in the share option plans are as follows (in thousands except per share amounts):
1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------------- Shares Weighted Shares Weighted Shares Weighted Average Average Average Exercise Price Exercise Price Exercise Price - ---------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 7,025 $0.93 7,250 $1.15 7,175 $1.18 Granted 1,075 $0.43 2,325 $0.44 450 $0.92 Exercised (19) $0.57 Expired (1,375) $0.65 (2,550) $1.12 (356) $1.34 - ---------------------------------------------------------------------------------------------------------------------------- Outstanding at end of year 6,725 $0.91 7,025 $0.93 7,250 $1.15 ============================================================================================================================ Options exercisable at end of year 5,906 $0.97 5,994 $0.94 6,037 $1.12
The following summarizes information about stock options outstanding at December 31, 1999 (in thousands except per share amounts);
Options Outstanding Options Exercisable - ----------------------------------------------------------- ----------------------------------------------------------- Range of Exercise Number Outstanding Weighted Average Weighted Average Number Exercisable Weighted Average Price Remaining Exercise Price Exercise Price Contractual Life - ----------------------------------------------------------- ----------------------------------------------------------- $0.43 - $0.44 3,375 3.9 years $0.44 2,631 $0.44 $0.89 - $0.91 300 2.6 years $0.91 225 $0.91 $1.26 - $1.48 3,050 1.5 years $1.43 3,050 $1.43
d) Common share purchase warrants As part of a public offering of units consisting of common shares and warrants in February, 1996, the Company issued 9,000,000 warrants that entitled the holder to purchase one common share of the Company for US$1.50 on or before February 26, 1999. All of the warrants expired unexercised. e) Loss per share The weighted average number of common shares outstanding during the year ended December 31, 1999 used to calculate the loss per common share amounted to 156,949,000 (1998 - 153,532,000; 1997 - 150,548,000). Outstanding warrants and options were not dilutive to loss per share in any of the periods presented. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 28 31 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) - ---------------------------- 6 -- INCOME AND MINING TAXES - ---------------------------- a) Geographic components The geographic components of loss before taxes is as follows:
1999 1998 1997 - ------------------------------------------------------------------------------- Canada $ (9,001) $ (6,562) $ (32,729) Mexico (4,448) (3,855) (9,101) Panama (507) (10,340) (548) - ------------------------------------------------------------------------------- $ (13,956) $ (20,757) $ (42,378) ===============================================================================
The geographic components of income and mining taxes is as follows: Current income tax expense: Canada $ (79) $ (55) $ (220) Mexico (567) (618) (381) - ------------------------------------------------------------------------------- (646) (673) (601) Deferred mining tax recovery - Canada 1,900 582 2,569 - ------------------------------------------------------------------------------- $ 1,254 $ (91) $ 1,968 ===============================================================================
b) Deferred mining taxes The payment of certain mining taxes is deferred due to the recognition of amounts for tax purposes in different periods than for accounting purposes. The principal timing difference is depreciation and amortization. c) Loss carry forwards At December 31, 1999, the Company and its subsidiaries had operating losses for income tax purposes in Canada approximating $4,800,000 and in Mexico approximating $25,200,000 which are available to reduce taxes in future years and expire over the period to the year 2009. In addition, the Company and its subsidiaries had capital losses for income tax purposes in Canada of approximately $25,500,000 available to apply against future taxable capital gains. The Company's subsidiary has an additional $22,600,000 of capital loss carry forwards which have not been accepted by the tax authorities. The Company is objecting to the tax authorities' position. The Company also had unclaimed deductions for income tax purposes in excess of carrying values for financial statement purposes of approximately $53,000,000 in Canada and $13,000,000 in its foreign subsidiaries. The potential future benefit of these tax losses and deductions has not been recognized in these financial statements. d) Effective tax rate The recovery of (provision for) income taxes varies from the amounts that would be computed by applying the Canadian federal and provincial statutory tax rates of approximately 40% (1998 and 1997 - 40%) to income before taxes as follows:
1999 1998 1997 - ---------------------------------------------------------------------------------------------- Expected income tax recovery using statutory income tax rates $ 5,585 $ 8,289 $ 16,785 Resource allowance (274) 67 167 Mining taxes recovery 1,900 582 2,569 Tax benefit of losses not currently recognized (5,310) (7,495) (16,952) Non-deductible expenses (861) Other (647) (673) (601) - ---------------------------------------------------------------------------------------------- Income and mining tax recovery (provision) $ 1,254 $ (91) $ 1,968 ==============================================================================================
[LOGO] Campbell Resources Inc. ================================================================================ 29 32 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) - ----------------------------- 7 -- STATEMENTS OF CASH FLOWS - ----------------------------- During the first quarter of 1999 the Company adopted the provisions of the new Canadian Institute of Chartered Accountants Handbook Section 1540 "Cash Flow Statements". The Statements of Cash Flows for the years ended December 31, 1998 and 1997 have been restated to conform to the new requirements. Additional disclosures required with respect to the Statements of Cash Flows are as follows:
1999 1998 1997 - ------------------------------------------------------------------------------- Cash taxes paid $ 573 $ 770 $ 695 Cash interest paid $ 306 $ 502 $ 616
- ---------------------------------- 8 -- COMMITMENTS AND CONTINGENCIES - ---------------------------------- a) The Company has sold forward 10,000 ounces of gold for delivery in 2000 under forward contracts at an average of US$290 per ounce, and has outstanding calls for 33,200 ounces of gold in 2001 and 20,000 ounces of gold in 2002 at US$350 per ounce subject to floating gold lease rates. b) The Company's Joe Mann Mine is subject to a graduated net smelter return royalty increasing from 1.8% up to a gold price of Canadian $512 per ounce to 3.6% at a gold price of Canadian $625 per ounce. c) During 1996, the Company's Mexican subsidiary received import duty assessments following an audit claiming the subsidiary's interest in certain pieces of machinery and equipment with an approximate value of US$2,200,000 and levying taxes, penalties, interest and inflationary adjustments for a further Mexican pesos 9,200,000. On May 26, 1997, the Company received notice that it was successful in its appeal against the assessments and that the Mexican pesos 9,200,000 was not payable. The charge against the assets will be released when the final tax assessment covering this matter is issued in favour of the Company by the tax authorities. On May 6, 1998, the tax authorities issued a tax assessment identical to that issued in 1996 except that the amounts claimed have increased to Mexican pesos 18,000,000 as a result of inflation and additional interest. The Company was advised that this assessment was improper as it completely ignored the earlier ruling. Accordingly the Company filed a new appeal before the Federal Tax Court to nullify the assessment. The appeal is still awaiting consideration by the Tax Court. No provision has been made in the financial statements for the amounts assessed on the basis of the earlier ruling and the legal advice received. d) During 1991, a subsidiary of the Company entered into a corporate restructuring and financing arrangement ("Arrangement") in which it issued to a group of Canadian financial institutions $38,000,000 of Guaranteed Subordinate Debentures and Notes ("Debentures") and $12,000,000 of Guaranteed Non-Cumulative Redeemable Retractable Preferred Shares ("Preferred Shares"). The Debentures are unsecured, subordinate to all existing non-trade debt and future senior debt, bear interest at varying rates, are repayable upon maturity in 2007, and cannot be prepaid. The Preferred Shares are redeemable at any time at an amount of $240,000 per Preferred Share, rank equally and pari passu with the common shares for dividends when declared, and are retractable in 2007. In order to secure the performance of the Debentures and Preferred Shares the Company's subsidiary entered into an Interest Rate and Currency Exchange Swap Agreement ("Swap Agreement") with a major international bank. The Swap Agreement provides for the conversion of one floating rate interest basis to another and for differences in the timing of payments so as to match the interest payment requirements under the Debentures, repay the Debentures upon maturity and retract the Preferred Shares. All payments are denominated in Canadian dollars. The Company's subsidiary placed Canadian dollar deposits with the counter party to the Swap agreement which deposits have been charged to secure the performance under the Swap agreement. These deposits earn interest at Canadian Bankers Acceptance rates. The Swap Agreement was irrevocably assigned directly to the investors. Accordingly the bank is the primary obligor under the Arrangement. e) The Company is from time to time involved in various claims, legal proceedings and reassessments for income, mining and other taxes, arising in the ordinary course of business. The Company's current and proposed mining and exploration activities are subject to various laws and regulations governing the protection of the environment. These laws and regulations are continually changing and are generally becoming more restrictive. The Company conducts its operations so as to protect its employees, the general public and the environment and, to the best of its knowledge, believes its operations are in compliance with all applicable laws and regulations, in all material respects. The Company has made, and expects to make in the future, submissions [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 30 33 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) and expenditures to comply with such laws and regulations. Where estimated reclamation and closure costs are reasonably determinable, the Company has recorded a provision for environmental liabilities based on management's estimate of these costs. Such estimates are subject to adjustment based on changes in laws and regulations and as new information becomes available. - ----------------- 9 -- PENSION PLAN - ----------------- The Company maintains a defined benefit pension plan for certain employees which provides benefits based on length of service and remuneration. The most recent actuarial valuation of the plan was as at December 31, 1996. As at December 31, 1999, the estimated projected benefit obligation was approximately $2,864,000 (1998 - $2,754,000) and the market value of assets aggregated $3,515,000 (1998 - $3,508,000). - -------------------- 10 -- SEGMENTED DATA - -------------------- The Company's operations consist principally of the exploration, development, mining and processing of precious metals in Canada, Mexico and Panama. The following is a summary of the Company's revenue by geographic area:
1999 1998 1997 - ------------------------------------------------------------------------------- Canada $21,464 $31,030 $35,443 Mexico 1,001 5,358 17,192 - ------------------------------------------------------------------------------- $22,465 $36,388 $52,635 ===============================================================================
Revenues are attributed to countries based on the source of the production. During 1999 the Company sold approximately 39% (1998- 35%; 1997 - 28%) of its product to one smelter. The following is a summary of the Company's mining interests by geographic area:
1999 1998 1997 - ------------------------------------------------------------------------------- Canada $31,913 $33,054 $32,688 Mexico 12,419 10,963 12,182 Panama 9,081 9,100 22,632 Other 609 - ------------------------------------------------------------------------------- $53,413 $53,117 $68,111 ===============================================================================
- -------------------------------------------- 11 -- FAIR VALUE AND CREDIT RISK DISCLOSURES - -------------------------------------------- At December 31, 1999 the fair value of the Company's convertible debentures was estimated to be $2,777,000 (1998 - $5,840,000) compared to the carrying amount of $3,718,000 (1998 - $5,652,000) based on a quoted price. The carrying amount of cash and short-term deposits, money market instruments, receivables, accounts payable, accrued liabilities and other liabilities in the consolidated balance sheets approximates fair value based on their short-term maturities and/or quotes received. The Company had no foreign currency hedging contracts at December 31, 1999. The fair value of the Company's foreign currency hedging contracts at December 31, 1998 was a loss of approximately $576,000. The Company is exposed to credit-related losses in the event of non-performance by counter parties to financial instruments but does not expect any counter parties to fail to meet their obligations. The Company deals with only highly rated counter parties, normally major financial institutions including banks. The credit risk exposure of derivative instruments is represented by the fair value of contracts with a positive fair value at the reporting date. The credit risk represents the maximum amount that would be at risk if the counter parties failed completely to perform under the contracts. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 31 34 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) - ----------------------------------------------------------------------- 12 -- DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES - ----------------------------------------------------------------------- The reconciliation of net loss determined in accordance with generally accepted accounting principles in Canada to net loss determined under accounting principles which are generally accepted in the United States is as follows:
1999 1998 1997 - ------------------------------------------------------------------------------------------ Net loss for year as reported $(12,702) $(20,848) $(40,410) Depreciation and amortization (a) 926 (9,389) 19,061 Deferred income taxes (b) (1,031) 285 (6,083) Foreign exchange contracts (e) 576 (576) - ------------------------------------------------------------------------------------------ Net loss for the year in accordance with United States accounting principles $(12,231) $(30,528) $(27,432) - ------------------------------------------------------------------------------------------ Other comprehensive income (loss): Foreign currency translation adjustments (801) 986 656 - ------------------------------------------------------------------------------------------ Comprehensive loss for the year in accordance with United States accounting principles $(13,032) $(29,542) $(26,776) - ------------------------------------------------------------------------------------------ Loss per share for the year in accordance with United States accounting principles Basic and fully diluted $ (0.08) $ (0.20) $ (0.18) ==========================================================================================
Differences between Canadian and United States accounting principles as they affect the Company's financial statements are as follows; a) Depreciation and Amortization Under Canadian accounting principles, depreciation and amortization may be calculated on the unit-of-production method based upon the estimated mine life, whereas under United States accounting principles the calculations are made based upon proven and probable mineable reserves. Under Canadian accounting principles capital assets should be written down to the net recoverable amount if this exceeds the carrying amount, whereas under United States accounting principles if the future net cash flows is less than the carrying amount the capital asset should be written down to its fair value. b) Deferred Income Taxes Under Canadian accounting principles income and mining taxes may be accounted for under the deferral method. Under United States accounting principles the asset and liability method (FAS 109) is used, whereby deferred tax assets and liabilities are recognized for the deferred taxes attributable to differences between book value and the tax basis of the Company's assets and liabilities. Significant components of the Company's deferred tax assets and liabilities under United States accounting principles are as follows:
1999 1998 - ------------------------------------------------------------------------------- Noncurrent deferred tax assets: Mining interests $ 37,768 $ 37,956 Operating loss carry forwards 10,571 6,745 Capital loss carry forwards 10,168 10,380 Other 1,232 1,676 - ------------------------------------------------------------------------------- 59,739 56,757 Valuation allowance 57,740 55,661 - ------------------------------------------------------------------------------- 1,999 1,096 - ------------------------------------------------------------------------------- Current deferred tax liabilities: Inventory 1,179 987 Noncurrent deferred tax liabilities: Mining interests 869 Other 820 109 - ------------------------------------------------------------------------------- 1,999 1,965 - ------------------------------------------------------------------------------- Net deferred tax liabilities $ $ (869) ===============================================================================
[LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 32 35 - -------------------------------------------------------------------------------- NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Tabular amounts are expressed in thousands of Canadian dollars) The tax loss carry forwards disclosed in note 6(c) and other temporary differences giving rise to deferred taxes have been tax effected for purposes of the above disclosure at the tax rate effective in the applicable jurisdiction, that is, 40% for Canada, 34% for Mexico. c) Stock Options Beginning in 1996, United States accounting principles allow, but do not require companies to record compensation cost for stock option plans at fair value. The Company has chosen to continue to account for stock options using the intrinsic value method as permitted under Canadian and United States accounting principles. The United States accounting pronouncement does, however, require the disclosure of pro forma net income and earnings per share information as if the Company had accounted for its employee stock options issued in prior years under the fair value method. Accordingly, the fair value of these options has been estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions for each year; risk free interest rates for 1999 of 5.70% (1998 - 5.50%; 1997 - 5.15-6.30%); dividend yields of 0%; volatility factors of the expected market price of the Company's common shares of 100%; and a weighted average expected life of the options of four years. The weighted average grant date fair values of options issued in 1999, 1998 and 1997 were $0.31, $0.21 and $0.43, respectively. For purposes of pro forma disclosures, the estimated fair value of the options is expensed over the options' vesting period, which is three years in the case of employees and immediately in the case of Directors. For the year ended December 31, 1999, the Company's pro forma net loss and loss per share in accordance with United States accounting principles are a net loss of $12,816,000 (1998 - net loss $31,432,000; 1997 net loss of $27,951,000) and a loss of $0.08 (1998 loss of $0.20; 1997 loss of $0.19). d) Contingent Liability Under United States accounting principles the contingent liability disclosed in note 8 (d) would be reflected in the balance sheet. Accordingly, under United States accounting principles total assets and liabilities would increase by $50 million. The increase in assets represents investments (non-current) comprising Canadian dollar payments under the Swap agreement and Canadian dollar deposits with the counter party to the Swap agreement. The liabilities (non-current) represent the Guaranteed Subordinate Debentures and Notes of $38 million and the Guaranteed Non-Cumulative Redeemable Retractable Preferred Shares of $12 million which would be included outside of shareholders' equity. e) Foreign Exchange Contracts In accordance with Canadian accounting principles, certain long-term foreign exchange contracts are considered to be hedges of sales revenue denominated in foreign currencies or the cost of goods to be purchased in foreign currencies. Gains and losses related to changes in market values of such contracts are deferred and recognized when the contract is settled as part of sales revenue or the cost of purchased goods as appropriate. Under United States accounting principles, changes in the market value of the contracts would be included in current earnings. f) Balance Sheets The cumulative effect of the application of United States accounting principles, noted in (a) to (e) above, on the consolidated balance sheets of the Company as at December 31, 1999 and 1998 would be to decrease mining interests by $21,695,000 (1998 - $23,403,000), increase other liabilities by $nil (1998 - $576,000), increase long-term investments by $50,000,000 (1998 - $50,000,000), increase long-term liabilities by $38,000,000 (1998 - $38,000,000), increase deferred mining tax assets, non-current assets by $1,999,000 (1998 - $1,096,000), increase deferred mining tax, current assets by $1,179,000 (1998 - $987,000) and decrease deferred mining taxes, non-current liability by $896,000 (1998 - $2,638,000), increase preferred shares by $12,000,000 (1998- $12,000,000) and reduce shareholders equity by $20,761,000 (1998- $21,232,000). g) Other Recent Accounting Pronouncements In June 1998, the FASB issued SFAS No. 133 "Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133 establishes methods of accounting for derivative financial instruments and hedging activities related to those instruments as well as other hedging activities. The Company will be required to implement SFAS No. 133 for its fiscal year ending December 31, 2001. The Company has not yet determined the impact, if any, of the adoption of SFAS No. 133 on its reported financial position, results of operations or cash flows. [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 33 36 - -------------------------------------------------------------------------------- FIVE YEAR COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
Year Ended December 31 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------- Operating results (in thousands): - --------------------------------------------------------------------------------------------------- Metal sales $ 22,465 36,388 52,635 67,180 67,418 Net income (loss) $ (12,702) (20,848) (40,410) 9,012 10,461 Cash flow from operations (before change in non-cash operating working capital) $ (9,435) 411 556 21,439 18,703 Capital Expenditures $ 3,526 8,141 27,212 13,968 7,934 Financial position (in thousands): - --------------------------------------------------------------------------------------------------- Cash and short-term deposits $ 18,219 41,493 13,638 5,875 32,271 Money market instruments $ 7,958 28,097 49,427 Total assets $ 87,134 102,777 123,882 165,298 123,703 Long-term debt $ 3,718 5,652 7,341 7,657 10,782 Shareholders' equity $ 75,673 87,469 105,124 142,058 99,554 Per share data: - --------------------------------------------------------------------------------------------------- Net income (loss) per share $ (0.08) (0.14) (0.27) 0.06 0.09 Book value per share $ 0.48 0.57 0.69 0.96 0.80 Operational statistics: - --------------------------------------------------------------------------------------------------- Gold production-- ounces 53,700 82,400 112,700 124,800 120,100 Gold revenue per ounce-- US dollars $ 276 304 336 396 402 Cash cost per ounce-- US dollars $ 292 255 288 252 247 Shares outstanding (in thousands): - --------------------------------------------------------------------------------------------------- At year end 157,152 154,686 151,445 148,588 124,466 Weighted average during year 156,949 153,532 150,548 145,907 121,214 Foreign exchange rate-- US dollars: - --------------------------------------------------------------------------------------------------- Year end/average $ 0.69/0.67 0.65/0.67 0.70/0.73 0.73/0.73 0.73/0.73 High/low $ 0.69/0.65 0.71/0.63 0.75/0.69 0.75/0.72 0.75/0.70
SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED) (Expressed in thousands of Canadian dollars except per share amounts)
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter - --------------------------------------------------------------------------------------- Year ended December 31, 1999 - --------------------------------------------------------------------------------------- Metal sales $ 6,601 6,424 5,699 3,741 Loss from operations $ (3,939) (4,420) (3,631) (2,458) Net loss $ (3,048) (3,923) (5,677) (54) Net loss per share $ (0.02) (0.03) (0.04) (0.00) Year ended December 31, 1998 - --------------------------------------------------------------------------------------- Metal sales $ 10,281 9,241 8,847 8,019 Loss from operations $ (2,151) (2,551) (3,575) (14,350) Net loss $ (1,730) (2,003) (3,190) (13,925) Net loss per share $ (0.01) (0.01) (0.02) (0.09)
[LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 34 37 - -------------------------------------------------------------------------------- SHAREHOLDER INFORMATION Campbell Resources Inc. common shares are listed on the New York and Toronto stock exchanges and trade under the symbol "CCH" - ---------------------------- QUARTERLY TRADING STATISTICS - ---------------------------- Common Share Prices
- -------------------------------------------------------------------------------------------------------- Toronto Stock Exchange New York Stock Exchange (Cdn$) (US$) - -------------------------------------------------------------------------------------------------------- High Low Volume High Low Volume - -------------------------------------------------------------------------------------------------------- 1999 - -------------------------------------------------------------------------------------------------------- 4th Quarter 0.47 0.31 1,785,500 0.31 0.22 9,279,600 3rd Quarter 0.53 0.35 2,233,200 0.38 0.23 16,525,900 2nd Quarter 0.48 0.31 3,830,900 0.34 0.23 18,421,000 1st Quarter 0.50 0.22 2.865,000 0.34 0.16 35,018,700 - -------------------------------------------------------------------------------------------------------- 1998 - -------------------------------------------------------------------------------------------------------- 4th Quarter 0.65 0.34 1,416,133 0.47 0.22 18,271,600 3rd Quarter 0.56 0.35 1,171,353 0.41 0.25 16,252,500 2nd Quarter 0.70 0.46 2,599,624 0.50 0.31 21,353,109 1st Quarter 0.80 0.50 2,496,000 0.63 0.34 24,880,500 - --------------------------------------------------------------------------------------------------------
[GRAPHIC OMITTED] - -------------- TRANSFER AGENT - -------------- Montreal Trust Company 151 Front Street West 8th Floor Toronto, Ontario M5J 2N1 Shareholder Services Phone: (416) 981-9633 Toll free: 1-800-663-9097 Fax: (416) 981-9800 e-mail: saq@montrealtrust.com ChaseMellon Shareholder Services 85 Challenger Road Overpeck Center Ridgefield Park, New Jersey U.S.A. 07660 - ---------------------- FINANCIAL PUBLICATIONS - ---------------------- A copy of the Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission, or copies of the Annual Report and Quarterly Reports may be obtained without charge, upon request. - --------- INQUIRIES - --------- Inquiries regarding shareholder-related matters, including change of address notifications, can be directed to the Secretary or to the Transfer Agent. Questions regarding the Company's operating and financial performance may be directed to the Manager, Investor Relations at (416) 366-5201 or invest@campbellresources.com [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 35 38 - -------------------------------------------------------------------------------- CORPORATE INFORMATION - ------------------ BOARD OF DIRECTORS - ------------------ James D. Beatty (2,3) Chief Executive Officer Trinity Capital Corporation Graham G. Clow President & Chief Executive Officer Manhattan Minerals Corporation Rod P. Douglas (2) Mining Engineer John O. Kachmar(1) President & Chief Executive Officer Campbell Resources Inc. James C. McCartney, Q.C. (1,3) National Chairman, Law Firm of McCarthy Tetrault Donald R. Murphy (2) Consultant to Societe de developpement de la Baie James Francis S. O'Kelly Mining Engineer G.E. 'Kurt' Pralle (3) Mining Engineer James D. Raymond Private Investor (1) Member of Executive Committee (2) Member of Audit Committee (3) Member of Compensation Committee - ------------- LEGAL COUNSEL - ------------- McCarthy Tetrault Toronto, Ontario - -------- AUDITORS - -------- KPMG LLP Toronto, Ontario - ---------------------- PRINCIPAL SUBSIDIARIES - ---------------------- Meston Resources Inc. (Quebec, Canada) Oro de Sotula, S.A. de C.V. (Mexico) Minera Cerro Quema, S.A. (Panama) - ------------------------------ OFFICERS AND SENIOR MANAGEMENT - ------------------------------ James C. McCartney, Q.C. Chairman of the Board John O. Kachmar President & Chief Executive Officer Paul J. Ireland Vice President, Finance & Chief Financial Officer Lorna D. MacGillivray Vice President, Secretary & General Counsel William S. Hamilton Manager, Exploration Santa Gertrudis Steven Dawson Manager, Investor Relations - ---------- OPERATIONS - ---------- Meston Resources Inc. Joe Mann Mine Alain Coulombe, General Manager Phone: (418) 745-2537 Fax: (418) 745-3238 Oro de Sotula S.A. de C.V. Santa Gertrudis Mine Dave Loder, Vice President & General Manager Phone: (52-631) 76668 Fax: (52-631) 76668 William S. Hamilton, Vice President, Exploration Phone: (52-631) 76666 Minera Cerro Quema, S.A. Cerro Quema Project Phone: (507) 612-2289 Jorge Morales, Legal Representative - --------------------- CORPORATE HEAD OFFICE - --------------------- Campbell Resources Inc. 120 Adelaide Street West Suite 1910 Toronto, Ontario Canada M5H 1T1 Phone: (416) 366-5201 Fax: (416) 367-3294 e-mail: invest@campbellresources.com [LOGO] Campbell Resources Inc. =====================----------------------------------------------------------- 36 39 - -------------------------------------------------------------------------------- Campbell Resources Inc. 120 Adelaide Street West, Suite 1910 Toronto, Ontario, Canada M5H 1T1 Telephone: (416) 366-5201 Fax: (416) 367-3294 e-mail: invest@campbellresources.com EX-20.1 3 PROXY CIRCULAR 1 EXHIBIT 20.1 [LOGO] CAMPBELL RESOURCES INC. Suite 1910, 120 Adelaide Street West Toronto, Ontario M5H 1T1 NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS NOTICE is hereby given that the Annual and Special Meeting of Shareholders of Campbell Resources Inc. (the "Corporation") will be held at the Toronto Board of Trade, Room "Ketchum", 3rd floor, Adelaide Street Entrance, 1 First Canadian Place, Toronto, Ontario on Friday, May 19th, 2000 at 10:00 A.M. (Eastern Daylight Saving Time) for the following purposes: 1. to receive the Consolidated Financial Statements of the Corporation and Auditors' Report thereon for the fiscal year ended December 31, 1999; 2. to elect directors for the ensuing year; 3. to consider and, if deemed advisable, to approve by special resolution, an amendment to the Corporation's articles of incorporation to consolidate all issued and outstanding Common Shares on the basis of one (1) new post-consolidation common share for every ten (10) pre-consolidation common shares or such lesser number of pre-consolidation common shares as the directors in their sole discretion may determine; 4. to appoint auditors for the ensuing year and to authorize the Directors to fix their remuneration; and 5. to transact such other business as may properly come before the Meeting or any adjournment or adjournments thereof. The Board of Directors of the Corporation has fixed the close of business on March 31, 2000 as the record date for the determination of shareholders entitled to notice of and to vote at the Meeting and any adjournment thereof. If you do not expect to be present at the Meeting, please sign, date and fill in the enclosed form of proxy and return it by mail in the enclosed addressed envelope. All instruments appointing proxies to be used at the Meeting must be deposited with the Secretary of the Corporation at the Corporation's office in Toronto, or at the office of the Corporation's transfer agent, Montreal Trust Company, in Toronto not later than 5:00 p.m. (Eastern Daylight Saving Time) on Wednesday, May 17, 2000. Shares represented by instruments appointing proxies that are not so deposited will not be voted at the Meeting. By Order of the Board of Directors Lorna D. MacGillivray Vice President, Secretary and General Counsel Dated: March 23, 2000 2 CAMPBELL RESOURCES INC. PROXY CIRCULAR ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS THIS PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION BY THE MANAGEMENT AND BOARD OF DIRECTORS OF CAMPBELL RESOURCES INC. (THE "CORPORATION" OR "CAMPBELL") OF PROXIES TO BE VOTED AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS (THE "MEETING") TO BE HELD ON MAY 19, 2000 AT THE TORONTO BOARD OF TRADE, ROOM "KETCHUM", 3RD FLOOR, ADELAIDE STREET ENTRANCE, 1 FIRST CANADIAN PLACE, TORONTO, ONTARIO. The record date for determination of shareholders entitled to receive notice of the Meeting is March 31, 2000. If a person has acquired ownership of shares since that date he may, in accordance with the provisions of the Canada Business Corporations Act (the "Act"), produce properly endorsed share certificates or otherwise establish that he owns such shares and demand, not later than the close of business on May 9, 2000, to be included in the list of shareholders entitled to vote at the Meeting, in which case the transferee is entitled to vote his shares at the Meeting. EACH SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON, WHO NEED NOT BE A SHAREHOLDER, OTHER THAN THE PERSONS SPECIFIED IN THE ENCLOSED FORM OF PROXY TO ATTEND AND ACT FOR HIM AND ON HIS BEHALF AT THE MEETING. SUCH RIGHT MAY BE EXERCISED BY STRIKING OUT THE NAMES OF MANAGEMENT'S NOMINEES IN THE ENCLOSED FORM OF PROXY AND INSERTING THE NAME OF THE PERSON TO BE APPOINTED IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY, SIGNING THE FORM OF PROXY AND RETURNING IT IN THE REPLY ENVELOPE PROVIDED. Any person giving a proxy may revoke it by depositing an instrument in writing executed by him or by his attorney authorized in writing at the registered office of the Corporation at any time up to the close of business on the last business day preceding the Meeting or any adjournment thereof or with the Chairman at the Meeting or in any other manner permitted by law. ALL PROPERLY EXECUTED PROXIES, NOT THERETOFORE REVOKED, WILL BE VOTED ON ANY POLL TAKEN AT THE MEETING IN ACCORDANCE WITH THE INSTRUCTIONS CONTAINED THEREIN. IF NO INSTRUCTIONS ARE GIVEN WITH RESPECT TO ANY PARTICULAR MATTER, THE PROXY AUTHORIZES A VOTE IN FAVOUR OF SUCH MATTER AND IT WILL BY VOTED ACCORDINGLY. Proxies must be received by the Corporation not later than 5:00 p.m. (Eastern Daylight Saving Time) on Wednesday, May 17, 2000. All dollar amounts contained in this Proxy Circular are expressed in Canadian dollars unless specifically stated otherwise. As of March 23, 2000, the Noon Buying Rate in New York City for Canadian dollars was U.S.$0.6790. VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF As of March 23, 2000, the Corporation had outstanding 157,152,288 Common Shares entitled to be voted at the Meeting. Each Common Share is entitled to one vote. 1 3 To the knowledge of the Corporation, as of March 23, 2000, the following is the only party who beneficially owned or exercised control or direction over more than 5% of the Common Shares of the Corporation:
Name and Address Number of Common Shares Percentage of Class - ---------------- ----------------------- ------------------- David A. Rocker 14,117,500 (1) 9.0% Rocker Partners, L.P. Suite 1759, 45 Rockefeller Plaza New York, New York 10111
1. Based on U.S. Securities and Exchange Commission Schedule 13G filing dated February 10, 2000. Includes: (i) 10,662,300 shares of Campbell Resources Inc. common stock owned by Rocker Partners, L.P., a New York limited partnership and (ii) 3,455,200 shares of Campbell Resources Inc. common stock owned by Compass Holdings, Ltd., a corporation organized under the International Business Companies Ordinance of the British Virgin Islands. David A. Rocker has sole voting and dispositive power over such 14,117,500 shares by virtue of his position as the sole managing partner of Rocker Partners, L.P. and, as president of Rocker Offshore Management Company, Inc. the investment adviser to Compass Holdings, Ltd. ELECTION OF DIRECTORS (ITEM NO. 2 OF NOTICE OF MEETING) Shareholders will be asked to elect nine directors to serve, subject to the Corporation's by-laws, until the next annual meeting of shareholders or until their respective successors have been duly elected or appointed. IT IS THE INTENTION OF THE PERSONS NAMED IN THE ACCOMPANYING FORM OF PROXY TO VOTE AT THE MEETING FOR THE ELECTION AS DIRECTORS OF THE PERSONS NAMED BELOW. IF ANY SUCH NOMINEE SHOULD BE UNABLE TO SERVE, AN EVENT NOT CURRENTLY ANTICIPATED, PROXIES WILL BE VOTED FOR SUCH PERSON AS SHALL BE DESIGNATED BY THE BOARD OF DIRECTORS OF THE CORPORATION TO REPLACE SUCH NOMINEE. The following table sets forth certain information concerning the persons to be nominated for election as directors of the Corporation, including their beneficial ownership of Common Shares of the Corporation as of March 23, 2000. Unless otherwise indicated, each nominee holds sole voting and investment power over his shares.
Number of Name & Municipality of Principal Occupation Director Common Percent Residence and Business Experience Since Age Shares of Class - --------- ----------------------- ----- --- ------ -------- James D. Beatty Chief Executive Officer, Trinity 1983 55 2,500(1) * Toronto, Ontario Capital Corporation, Toronto, Ontario, investment company.
2 4
Number of Name & Municipality of Principal Occupation Director Common Percent Residence and Business Experience Since Age Shares of Class - --------- ----------------------- ----- --- ------ -------- Graham G. Clow Mining Engineer; President & Chief 1996 49 2,500(2) * North Vancouver, BC Executive Officer, Manhattan Minerals Corp., Vancouver, BC; prior to June, 1998, Senior Vice President, Operations, Breakwater Resources Ltd., President, CanZinco Ltd., Toronto, Ontario; prior to June, 1996, President, Granduc Mining Corporation; Toronto, Ontario, mining companies. Roderick P. Douglas Mining Engineer; Director of 1994 74 10,000(3) * Vancouver, BC Ashton Mining of Canada Inc., Vancouver, BC, mining company. John O. Kachmar President and Chief Executive 1992 63 190,000(4) * Toronto, Ontario Officer of the Corporation. James C. McCartney Q.C. Chairman of the Corporation; 1993 62 75,000(5) * Toronto, Ontario National Chairman, McCarthy Tetrault, Barristers & Solicitors, Toronto, Ontario; Director of Algoma Steel Inc., Sault Ste Marie, Ontario, steel company. Donald R. Murphy Consultant; prior to May, 1999, 1987 56 nil(1) - Rouyn/Noranda, Quebec President, Societe de developpement de la Baie James, Matagami, Quebec, government owned corporation; Director of MSV Resources Inc. and Maude Lake Exploration Limited, Montreal, Quebec; mining companies. Francis S. O'Kelly Mining Engineer. 1993 58 5,000(6) * Lima, Peru G. E. "Kurt" Pralle Mining and Metallurgical 1993 65 100,000(6) * Ramsey, New Jersey Consultant. James D. Raymond Private Investor and Director; 1979 74 10,000(7) * Montreal, Quebec Director of Canadian 88 Energy Corporation and Prize Energy Inc., Calgary, Alberta, oil and gas companies; and Denbridge Capital Corporation, Toronto, Ontario, manufacturers-radar and electronics.
Notes: (1) Excludes 500,000 Common Shares subject to option. (2) Excludes 250,000 Common Shares subject to option. 3 5 (3) Excludes 350,000 Common Shares subject to option. (4) Excludes 1,350,000 Common Shares subject to option. (5) Excludes 800,000 Common Shares subject to option. (6) Excludes 400,000 Common Shares subject to option. (7) Excludes 600,000 Common Shares subject to option. * Less than 1% of the outstanding Common Shares. As of March 23, 2000, the directors and officers of the Corporation as a group beneficially owned 510,638 Common Shares representing approximately 0.3% of the outstanding Common Shares of the Corporation excluding 5,825,000 Common Shares subject to option. The information as to Common Shares beneficially owned or over which control or direction is exercised, not being within the knowledge of the Corporation, has been furnished by the respective directors and officers individually. COMMITTEES OF THE BOARD OF DIRECTORS The Executive Committee of the Board of Directors consists of three directors, Messrs. Kachmar, McCartney and Raymond and has substantially all of the powers of the Board of Directors, except those required by law to be exercised by the Board of Directors. The Audit Committee of the Board of Directors consists of three directors, Messrs. Beatty, Douglas and Murphy. The Audit Committee reviews the Corporation's financial statements and audit procedures and reports thereon to the Board of Directors. The Compensation Committee consists of three directors, Messrs. Beatty, McCartney and Pralle. The Compensation Committee considers and approves compensation, remuneration and incentive arrangements for officers and senior employees of Campbell. The Corporation does not have a nominating committee. CORPORATE GOVERNANCE In December, 1994, The Toronto Stock Exchange (the "Exchange") Committee on corporate governance in Canada released a report (the "Report") containing guidelines for effective corporate governance for corporations listed on the Exchange. The Report has been adopted by the Exchange and corporations listed on the Exchange are required to disclose their corporate governance practices and to provide an explanation where those practices differ from the guidelines. The Corporation's Board of Directors (the "Board") is currently comprised of nine persons including seven directors who are not officers or employees of the Corporation and are unrelated to management. The Chairman and the President and Chief Executive Officer are the remaining members of the Board. As recommended by the Report, the positions of Chairman of the Board and Chief Executive Officer are separate. Accordingly, a majority of the Board is unrelated to management and is in a position to review and evaluate management's activities and to act independently of management. The Board is empowered by the Corporation's incorporating documents and by-laws to manage, or supervise the management of the affairs and business of the Corporation. The Board is not involved in the day-to-day activities of the Corporation. The Board performs its functions 4 6 through quarterly and special meetings and has delegated certain of its responsibilities to those committees described above under "Committees of the Board of Directors". The Report recommends that committees of the Board be comprised of persons who are not officers or employees of the Corporation. The Audit and Compensation Committees are comprised of non-management persons. However, the Board has determined that due to the technical nature of the Corporation's business, its Executive Committee would be more effective by having the President and Chief Executive Officer on that Committee. The non-executive Chairman is also on the Executive Committee. Unless specifically directed by the Board, the Executive Committee may not approve capital expenditures or dispositions or borrowing other than in the ordinary course of carrying out the Corporation's business, in excess of $3,000,000. In practice, the Executive Committee does not give final approval to transactions but rather makes its recommendations to the full Board. The Board itself has assumed general responsibility for development and monitoring of corporate governance issues. The Board is actively involved in establishing corporate strategies and monitoring achievement thereof including optimization of performance of the Corporation's current operations and achieving growth through acquisitions. The Board monitors the performance of current mining operations through receipt of monthly reports, the holding of quarterly meetings and its review and approval of an annual financial forecast presented by management. Consideration and approval of an acquisition of mining properties or other companies is carried out by the full Board. Outside consultants and professionals are engaged and report to the Board as required. The Board has identified the principal risks associated with the Corporation's business. These risks and the steps taken to minimize such risks are reviewed on an ongoing basis at the regularly scheduled quarterly meetings of the Board. In 1990, the Board adopted an Environmental Policy, as recommended by the Mining Association of Canada, which is administered at each site by an environmental committee comprised of the President and Chief Executive Officer, the General Manager and the environmental officer of the site. The President and Chief Executive Officer reports to the Board on a quarterly basis which enables the Board to monitor the effectiveness of compliance with environmental policy. The Board also approves a Treasury and Investment Policy which governs investment of the Corporation's cash and foreign exchange and currency hedging. Compliance with this policy is reviewed by the Board and the Audit Committee on a quarterly basis. The Board has delegated responsibility for communication with the public and the Corporation's shareholders to its Vice President, Secretary and General Counsel and its Manager of Investor Relations. Procedures are in place to ensure timely dissemination of information about the Corporation. Any significant shareholder concerns which may be communicated to the above persons are communicated to the Board at its regularly scheduled quarterly meetings. 5 7 The responsibility of monitoring the effectiveness of the Corporation's internal financial information systems has been delegated to the Vice President, Finance and Chief Financial Officer who reports to the Board and the Audit Committee on a quarterly basis. The Audit Committee meets each quarter and reviews and approves the Interim Report on Form 10Q and financial statements and Management's Discussion and Analysis contained therein prior to filing. In addition, the Audit Committee meets annually with the auditors of the Corporation to review the year-end financial statements. For a portion of that meeting, the Audit Committee meets with the auditors in the absence of management. The duty of monitoring the technical affairs of the Corporation falls to the President and Chief Executive Officer who is a member of the Board and of the environmental committees. A program for succession of management and training has not been adopted. Given the availability of trained mining industry personnel in Canada and the size of the Corporation, management personnel who are already trained are engaged as required to fill vacancies. The Corporation does not have a standing nominating committee for directors nor does it have an ongoing process for the training or evaluation of performance of directors, as recommended by the Report. The Corporation is a medium sized company which is still in a growth stage and accordingly, a variety of technical, legal and financial experience at the Board level is important. When it is determined that additional expertise is required on the Board, a number of candidates are considered and the full Board meets with a proposed nominee. The decision to nominate or appoint an additional director is taken by the Board as a whole. The performance of the management team is reviewed annually by the Compensation Committee in the context of the Corporation's success in meeting its objectives which are established as part of the review of the annual financial forecast. This Committee is comprised solely of non-management members being the Chairman and two independent directors. The philosophy of the Compensation Committee is stated below under "Report on Executive Compensation". In addition, the Compensation Committee periodically reviews the compensation paid to members of the Board and makes recommendations to the Board on compensation of directors. COMPENSATION OF DIRECTORS All directors of the Corporation receive an annual director's fee of $6,000 and an attendance fee of $750 per meeting and out-of-pocket expenses relating to attendance at a board or committee meeting. The Corporation paid aggregate remuneration of $125,250 to the 9 incumbent directors in their capacities as such during the fiscal period ended December 31, 1999. In 1999, the Corporation purchased directors' and officers' liability insurance with a liability limit of $20,000,000 for which the Corporation paid an annual premium of $67,800. The policy provides for a deductible payable by the Corporation of $100,000 other than for claims brought in the United States in which case the deductible is $250,000. In 1999, Mr. Francis S. O'Kelly, a director of the Corporation, provided consulting services to the Corporation for an aggregate of US$1,500. 6 8 In 1999, the Corporation continued to engage the law firm McCarthy Tetrault of which James C. McCartney, Q. C., a director and chairman of the Corporation, is a senior partner to provide legal advice to the Corporation. An aggregate of $41,831 was paid to McCarthy Tetrault for legal services in 1999. DIRECTORS' STOCK OPTION PLAN At December 31, 1999, options to acquire an aggregate of 3,900,000 Common Shares were outstanding under the Directors' Stock Option Plan. During 1999, options to acquire an aggregate of 550,000 common shares at $0.43 were granted, primarily to replace options to acquire 550,000 common shares which expired on August 10, 1999, in accordance with their terms. These options expire on August 10, 2004. No options were exercised by the Directors during 1999. EXECUTIVE COMPENSATION The following table (presented in accordance with the regulation (the "Regulation") made under the Securities Act (Ontario)) sets forth all annual and long-term compensation for services in all capacities to the Corporation and its subsidiaries for the fiscal years ended December 31, 1999, 1998 and 1997 (to the extent required by the Regulation) in respect of the individuals who were at December 31, 1999, the Chief Executive Officer and the other most highly compensated individuals who were serving as executive officers of the Corporation and whose total salary and bonus exceeded $100,000 (the" Named Executive Officers"): SUMMARY COMPENSATION TABLE
=================================================================================================================================== Annual Compensation Long-Term Compensation ------------------------------------- ------------------------------------- Awards Payouts --------------------------- -------- Securities Under Restricted Other Options/ Shares or Annual SARs Restricted LTIP All Other Name and Salary Bonus Compensation granted Share Units Payouts Compensation Principal Position Year ($) ($) ($)(2) (#) ($) ($) ($) - ----------------------------------------------------------------------------------------------------------------------------------- John O. Kachmar 1999 285,000 -- -- 200,000 Nil Nil 15,750(3) President & Chief 1998 285,000 -- -- 600,000 Nil Nil 17,250(3) Executive Officer 1997 285,000 70,000(1) -- -- Nil Nil 18,000(3) - ----------------------------------------------------------------------------------------------------------------------------------- Lorna D. MacGillivray 1999 130,000 -- -- 100,000 Nil Nil Nil Vice President, Secretary 1998 130,000 15,000 -- 150,000 Nil Nil Nil & General Counsel 1997 115,000 56,500 -- -- Nil Nil Nil - ----------------------------------------------------------------------------------------------------------------------------------- Paul J. Ireland 1999 130,000 -- -- 150,000 Nil Nil Nil Vice President, Finance 1998 130,000 15,000 -- 75,000 Nil Nil Nil & Chief Financial Officer 1997 115,000 56,500 -- -- Nil Nil Nil ===================================================================================================================================
Notes: (1) Of the $70,000 bonus paid to Mr. Kachmar, $15,000 was paid in cash, and $27,500 was paid through the issuance of 50,000 Common Shares issued net of tax. (2) Perquisites and other personal benefits for the Named Executive Officers did not exceed the lesser of $50,000 and 10% of total annual salary and bonus. (3) Represents director's fees. 7 9 OPTION/SAR GRANTS IN LAST FISCAL YEAR
==================================================================================================================================== % of Total Market Value of Options/SARs Securities Underlying Securities Under Granted to Exercise Options/SARs on Options/SARs Employees or Base Price Date of Grant Expiration Name Granted($)(1) in Fiscal Year ($/Security)(3) ($/Security) Date - ------------------------------------------------------------------------------------------------------------------------------------ John O. Kachmar 200,000(1)(2) 38.1% .43 .43 10/08/2004 President & CEO - ------------------------------------------------------------------------------------------------------------------------------------ Lorna D. MacGillivray 100,000(1) 19.0% .43 .43 10/08/2004 Vice President, Secretary & General Counsel - ------------------------------------------------------------------------------------------------------------------------------------ Paul J. Ireland 150,000(1) 28.6% .43 .43 10/08/2004 Vice President, Finance & Chief Financial Officer ====================================================================================================================================
Notes: (1) These options were granted on August 10, 1999, are for a term of 5 years and are accompanied by SARs. The options are exercisable as to 25% immediately with 25% becoming exercisable cumulatively on each of the first, second and third anniversary date of the grant. (2) Excludes options to acquire 100,000 Common Shares granted during 1999 under the Directors' Stock Option Plan which are also for a 5 year term and are fully exercisable at $0.43 per Common Share. (3) The exercise price represents the average of the closing prices of the Corporation's Common Shares on The Toronto Stock Exchange during the five days prior to the date of grant. The following table (presented in accordance with the Regulation) sets forth information concerning the exercise of stock options and SAR's by Named Executive Officers in 1999 and the number and the unrealized value of exercisable and unexercisable stock options held by Named Executive Officers at December 31, 1999. AGGREGATED OPTION/SAR EXERCISES DURING THE MOST RECENTLY COMPLETED FINANCIAL YEAR AND FINANCIAL YEAR-END OPTION/SAR VALUES
==================================================================================================================================== Securities, Aggregate Unexercised Acquired Value Options/SARs at Value of Unexercised in- on Exercise Realized FY-End (#) the-Money Options/SARs at FY- Name (#) ($) Exercisable/Unexercisable End ($) Exercisable/Unexercisable - ------------------------------------------------------------------------------------------------------------------------------------ John O. Kachmar Nil Nil 1,000,000(1)/350,000 NIL/NIL President & CEO - ------------------------------------------------------------------------------------------------------------------------------------ Lorna D. MacGillivray Nil Nil 250,000/150,000 NIL/NIL Vice President, Secretary & General Counsel - ------------------------------------------------------------------------------------------------------------------------------------ Paul J. Ireland Nil Nil 225,000/150,000 NIL/NIL Vice President, Finance & Chief Financial Officer ====================================================================================================================================
8 10 Note: (1) Includes options granted under the Directors' Stock Option Plan to acquire 100,000 Common Shares exercisable at $0.43 share, 200,000 Common Shares at $0.44 per share and 100,000 Common Shares at $1.48 per share. EMPLOYEE INCENTIVE PLAN The Corporation maintains an Employee Incentive Plan consisting of the Share Purchase Plan, the Share Option Plan, the Share Bonus Plan and the Share Loan Plan. Directors who are not officers do not participate in the Employee Incentive Plan. SHARE OPTION PLAN The Share Option Plan is intended to promote the interests of Campbell and its shareholders by making provisions for stock options as an additional incentive to attract, retain and motivate officers and salaried employees. Grants are made at the discretion of the Board of Directors or a committee of the board comprised of members, a majority of whom are not eligible to participate in the Plan (the "Compensation Committee"). The Board of Directors or the Compensation Committee may, in its discretion, determine which officers or employees will be granted options, the number of Common Shares to be the subject of each option, the purchase price of such shares and the duration of the options, which may not exceed five years. The Board of Directors or the Compensation Committee may also impose other terms and conditions respecting any option granted as it may consider appropriate or necessary. Freestanding "SARs" are not provided for under the Share Option Plan. The options may, at the discretion of the Board of Directors or the Compensation Committee, be accompanied by SARs which entitle the holder to elect to terminate his or her options, in whole or in part and, in lieu of receiving the Common Shares ("Option Shares") to which the terminated options relate, elect to receive that number of Common Shares, disregarding fractions, which have a total value equal to the product of the number of Option Shares times the difference between the fair value (at the date of such election) and the option price per share of the Option Shares, less any amount withheld on account of income taxes, which income taxes will be remitted on the employee's behalf by the Corporation. All currently outstanding options are accompanied by SARs. During 1999, options to purchase 450,000 Common Shares were granted under the Share Option Plan to Named Executive Officers and options to purchase 75,000 Common Shares were granted to employees who are not Named Executive Officers. These options were granted to replace options to acquire 525,000 Common Shares which expired on August 10, 1999, in accordance with their terms. These options are exercisable at $0.43 per share and are exercisable as to 25% immediately, with a further 25% becoming exercisable cumulatively on each of the first, second and third anniversary dates and are accompanied by SARs. All of the options were granted for a term of five years. As at December 31, 1999, a total of 2,825,000 Common Shares were issuable upon exercise of options under the Share Option Plan including 1,725,000 Common Shares issuable upon exercise of options held by the three Named Executive Officers. Such options are exercisable at exercise prices ranging from $0.43 to $1.48 per share. These options expire between August 15, 2001 and August 10, 2004. 9 11 SHARE PURCHASE PLAN The Share Purchase Plan is designed to encourage employees of Campbell to purchase Common Shares on a regular basis. Employees of Campbell who have been continuously employed by Campbell for at least one year, or less at the discretion of the Compensation Committee or the Board of Directors, are eligible each January 1 to participate in the Share Purchase Plan. Each eligible employee may contribute up to 5% of his or her basic salary to the Share Purchase Plan through monthly deductions. On a quarterly basis, Campbell will contribute an amount equal to 50% of the employee's contributions to such date and each participating employee will then be issued Common Shares having a value equal to the aggregate amounts contributed by such employee and Campbell. In 1999, 22,084 Common Shares were issued to Lorna D. MacGillivray in respect of which Campbell contributed $2,438 and 210,083 Common Shares were issued to employees who are not Named Executive Officers in respect of which Campbell contributed $24,524 pursuant to the Share Purchase Plan. Of these Common Shares, 82,920 were issued at June 30, 1999, 59,819 Common Shares were issued September 30, 1999 and, 89,428 Common Shares were issued December 31, 1999. The issue prices were $0.41, $0.44 and $0.23 respectively. SHARE BONUS PLAN The Share Bonus Plan is intended to promote the interests of Campbell and its shareholders by permitting the Board of Directors or the Compensation Committee, in its discretion, to issue Campbell Common Shares to full-time salaried employees of Campbell as a bonus in recognition of services provided to Campbell by such employee. The issue of Common Shares to such employee may be subject to such terms and conditions as are determined by the Board of Directors or the Compensation Committee. During 1999, no Common Shares were issued pursuant to the Share Bonus Plan. SHARE LOAN PLAN The Share Loan Plan is intended to provide an additional incentive to motivate full time officers who will make important contributions to the success of Campbell by assisting such persons to acquire shares of the Corporation. The Compensation Committee may in its discretion make loans to full time officers of the Corporation. Such loans shall be subject to such terms and conditions including rates of interest, if any, as the Compensation Committee may consider appropriate. During 1999, no loans were granted and no loans are outstanding under the Share Loan Plan. INDEBTEDNESS OF DIRECTORS AND OFFICERS No directors or officers of the Corporation are indebted to the Corporation. PENSION PLAN The Corporation has a defined benefit pension plan (the "Pension Plan") available on a voluntary basis to all employees of the Corporation and its subsidiaries other than those who are subject to the provisions of a collective agreement. The Pension Plan provides a pension equal to 2% of the average annual salary not including bonuses and other compensation during the three most highly paid years for each year of credited service subject to the maximum benefit limitation applicable to registered pension 10 12 plans under the Income Tax Act (Canada). Benefits under the Pension Plan vest after two years. Early retirement is permitted after age 55, subject to reductions. The Pension Plan also provides that certain members may be designated as "Class A" non-contributory members. Head office and certain senior employees have been designated as "Class A" non-contributory members. The following table sets forth the benefits calculated under the Pension Plan at various salary levels and years of employment on the assumption such benefits become payable upon retirement at age sixty-five. Benefits under the Pension Plan are not reduced by social security or other offset amounts. The payment of such benefits is subject to the maximum benefit limitation applicable to registered pension plans under the Income Tax Act (Canada) which currently is $1,722 for each year of service. PENSION PLAN TABLE
===================================================================================================================== Years of Service --------------------------------------------------------------------------------------------------- Remuneration 15 20 25 30 35 - --------------------------------------------------------------------------------------------------------------------- 125,000 37,500 50,000 62,500 75,000 87,500 150,000 45,000 60,000 75,000 90,000 105,000 175,000 52,500 70,000 87,500 105,000 122,500 200,000 60,000 80,000 100,000 120,000 140,000 225,000 67,500 90,000 112,500 135,000 157,500 250,000 75,000 100,000 125,000 150,000 175,000 300,000 90,000 120,000 120,000 180,000 210,000 400,000 120,000 160,000 200,000 240,000 280,000 =====================================================================================================================
Three Named Executive Officers participate in the Pension Plan. Mr. Kachmar had 9 years of credited services, Ms. MacGillivray had 6.4 years of credited service and Mr. Ireland had 3 years of credited service under the Pension Plan at December 31, 1999. EMPLOYMENT CONTRACTS On December 1, 1994, the Corporation entered into an employment agreement with Mr. Kachmar as President and Chief Executive Officer. The agreement stipulates, among other things, a base salary of $285,000 per annum effective January 1, 1997 and provides that in the event that Mr. Kachmar's employment is terminated, he will be entitled to be paid up to thirty-six months' salary and benefits. In the event of a change of control, as defined, Mr. Kachmar will be entitled to resign within six months thereof and be paid thirty-six months' salary and benefits. The agreement also provides that in the event of resignation or termination, options held by Mr. Kachmar will immediately become fully exercisable. Such options will expire ninety days after resignation or termination. On December 1, 1994, the Corporation entered into an employment agreement with Ms. MacGillivray as Vice President, Secretary and General Counsel. The agreement stipulates among other things, a base salary of $130,000 per annum effective January 1, 1997 and provides that in the event that Ms. MacGillivray's employment is terminated, she will be entitled to be paid up to twenty-four months' salary and benefits. In the event of a change of control, as defined, Ms. MacGillivray will be entitled to resign within six months thereof and be paid twenty- 11 13 four months' salary and benefits. The agreement also provides that in the event of resignation or termination, options held by Ms. MacGillivray will immediately become fully exercisable. Such options will expire ninety days after resignation or termination. On December 10, 1996, the Corporation entered into an employment agreement with Mr. Paul J. Ireland as Vice President, Finance and Chief Financial Officer. The agreement stipulates a base salary of $130,000 effective January 1, 1997 and provides that in the event that his employment is terminated, he will be entitled to be paid up to twenty-four months' salary and benefits. In the event of a change of control, as defined, Mr. Ireland will be entitled to resign within six months thereof and be paid twenty-four months' salary and benefits. The agreement also provides that in the event of resignation or termination, options held by Mr. Ireland will immediately become fully exercisable. Such options will expire ninety days after resignation or termination. COMPOSITION OF THE COMPENSATION COMMITTEE The Compensation Committee of the Board of Directors considers and approves compensation, remuneration and incentive arrangements for directors, officers and senior employees of the Corporation. The members of the Compensation Committee are James C. McCartney, Q.C. (Chairman), James D. Beatty and G. E. "Kurt" Pralle. Mr. McCartney is Chairman of the Corporation and he is also Chairman of the Compensation Committee. Mr. McCartney is a senior partner with the law firm McCarthy Tetrault which provides legal advice to the Corporation. Neither Mr. Beatty nor Mr. Pralle is, nor was, at any time, an officer or employee of the Corporation or any of its subsidiaries. In 1994, the Committee established an executive compensation philosophy and policy to be followed in its future consideration of executive compensation and incentive arrangements. EXECUTIVE COMPENSATION PHILOSOPHY AND POLICY The Corporation's Executive Compensation Policy is primarily based on a pay for performance philosophy. The main objective of the policy is the alignment of all financial reward systems with shareholder interests. The compensation structure must also reflect the Corporation's current financial position and the scope of its operations. As a consequence, a heavy emphasis is placed on the long-term business objectives of creating wealth, decreasing risk by expanding operations, and providing returns to the Corporation's shareholders. The particular elements of the executive compensation program for senior executives of the Corporation, designed to encourage, compensate and reward employees on the basis of individual and corporate performance, may be summarized as follows: - BASE SALARy The program is designed to attract and retain executive officers by delivering a competitive rate of base pay. Market competitive rates will be determined by comparison with average compensation levels of comparable mining companies. It is believed that the average pay of these companies is a reasonable reference point from which to target and manage base 12 14 pay, while recognizing the need for executive level experience and skills in the current phase which will further the Corporation's achievement of its growth objectives. - ANNUAL INCENTIVE COMPENSATIOn The Corporation currently does not offer a short-term variable pay or incentive plan but may in future implement an annual incentive plan. The Corporation's Employee Incentive Plan has a Share Bonus Plan component which may be used to provide annual incentive compensation. The use of this plan can combine both short and longer term incentives and, through increased share holding, would also align the interests of executive officers with those of the Corporation's shareholders. Grants of annual bonuses would be based on the employee's contribution towards the Corporation's success in meeting its goals. - STOCK OPTION PROGRAMS The Corporation strongly believes that by providing those persons who have substantial responsibility for the management and growth of the Corporation with an opportunity to acquire the Corporation's stock, the interests of shareholders and executives will be increasingly aligned. The number of stock options that will be granted to executive officers will be based on competitive practices of comparable mining companies and will reflect an emphasis on long-term performance awards. Options will generally become exercisable gradually over their term and will generally be for a five-year term. REPORT ON EXECUTIVE COMPENSATION In July, 1999, the Compensation Committee considered the long term incentive arrangements of the Corporation. The level of outstanding and expiring stock options under the Employee Incentive Plan were reviewed. The Committee considered the recommendation of the Chief Executive Officer that only replacement stock options be granted. In approving the grant of options, the Committee took into account the number, terms and pricing of previously outstanding options. Consideration was also given to the employee's level of responsibility and potential contribution to the Corporation achieving its long-term goals. The Committee also considered and determined to replace expiring options to directors under the Directors' Stock Option Plan at its July meeting. Given the historical low gold prices, it was determined that base salary and annual incentive compensation of senior executives should not be reviewed. Base salaries including that of the Chief Executive Officer were maintained at existing levels and no annual incentive awards were awarded to reflect the difficult circumstances facing the Corporation at sustained lower gold prices. Cash compensation of executive officers was maintained in the lower half of the peer group levels. March 23, 2000 COMPENSATION COMMITTEE James D. Beatty James C. McCartney, Q.C. G. E. "Kurt" Pralle 13 15 SHAREHOLDER RETURN PERFORMANCE GRAPH The chart below (as required by the Regulation) compares the yearly percentage change in the cumulative total shareholder return on the Corporation's Common Shares against the cumulative total shareholder return of The TSE 300 Stock Index and the TSE Gold and Precious Metals Index for the five fiscal year periods commencing December 31, 1994 and ending December 31, 1999. COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN* BETWEEN CAMPBELL RESOURCES INC., THE TSE 300 INDEX AND TSE GOLD AND PRECIOUS METALS INDEX
RATIO TO RATIO TO RATIO TO YEAR END DEC. 31, 1990 #VALUE! 0 DECEMBER 31 CLOSING PRICE CLOSING PRICE CLOSING PRICE - ----------- ------------- ------------- ------------- 1994 100.00 100.00 100.00 1995 171.43 109.43 114.53 1996 162.34 119.45 146.99 1997 68.83 67.90 169.01 1998 46.75 63.46 166.33 1999 29.87 52.68 219.08
*$100 INVESTED ON 12/31/94 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF DIVIDENDS. APPROVAL OF ARTICLES OF AMENDMENT - SHARE CONSOLIDATION (ITEM NO. 3 OF NOTICE OF MEETING) The New York Stock Exchange has adopted certain changes to its criteria for continued listing, which provides for de-listing if the average closing price of the Corporation's listed security is less than US$1.00 over a consecutive 30 trading day period. A listed company is also subject to de-listing procedures if both its global market capitalization and its total stockholders' equity are under US$50,000,000. The Board of Directors view the New York Stock Exchange listing as a valuable asset of the Corporation providing excellent liquidity and upside potential to shareholders when there is an increase in the price of gold. Following discussions with financial advisors and significant shareholders, the directors have determined that a consolidation of outstanding shares, in order to retain the New York Stock Exchange listing, is in the best interests of its shareholders. Based on the low share price and the Corporation's healthy balance sheet and cash position, the Board of Directors believe that the postconsolidation share price should not decline as a result of the consolidation. In the event that the 14 16 consolidation is not approved or the US$1.00 minimum share price is not achieved, while the Corporation's shares would continue to be listed on The Toronto Stock Exchange, the shares would trade in the United States only on the NASD pink sheets. Without a consolidation, an alternate listing would not be possible on either the American Stock Exchange or the Nasdaq SmallCap Market which have initial listing criteria requiring minimum stock prices of US$3.00 and US$4.00 respectively and continued listing criteria of US$1.00. Shareholders will be asked to pass a special resolution authorizing the Corporation to amend its Articles of Incorporation to consolidate all of the issued and outstanding Common Shares of the Corporation on the basis of one (1) new post-consolidation Common Share for every ten (10) preconsolidation Common Shares, or such lesser number of pre-consolidation Common Shares as the directors in their sole discretion may determine. TO THE EXTENT THAT THE DIRECTORS DETERMINE, BASED ON MARKET CONDITIONS AT THE TIME OF CONSOLIDATION, THAT THE MINIMUM SHARE PRICE REQUIREMENT OF THE NEW YORK STOCK EXCHANGE CAN BE ACHIEVED AND SUSTAINED THROUGH A CONSOLIDATION ON THE BASIS OF ONE (1) NEW POST-CONSOLIDATION COMMON SHARE FOR LESS THAN TEN (10) PRE-CONSOLIDATION COMMON SHARES, THE DIRECTORS WILL IMPLEMENT THE CONSOLIDATION ON SUCH LESSER BASIS. Fractional shares which result from the consolidation will not be issued since the administrative cost of issuing fractions or processing payment in lieu would far exceed the value of any fractions. Accordingly any fractional shares resulting from the consolidation will be cancelled without any repayment of capital or other compensation and the number of shares to be issued will be rounded down to the next lower whole number of shares. While the Corporation's stockholder equity at December 31, 1999 was in excess of US$50,000,000, there can be no assurance that this will be sustained particularly if the price of gold were to drop again to recent historical lows. Similarly, there can be no assurance that the post-consolidation stock price will not decline. In either case, the Corporation may be subject to de-listing by the New York Stock Exchange. A copy of the proposed special resolution is attached to this Proxy Circular as SCHEDULE "A". Management recommends that shareholders vote FOR the approval of this special resolution. In order to pass the resolution, at least two-thirds of the votes cast by holders of Common Shares, present in person or by proxy, must be voted in favour of the special resolution. If the special resolution is duly passed at the Meeting, management intends to file the Articles of Amendment with the Director under the Act to give effect to the changes described herein. The special resolution permits the directors to revoke the special resolution in whole or in part without further approval by the shareholders at any time prior to effecting the filing of the Articles of Amendment, if in their discretion, it is deemed desirable to do so. If the special resolution amending the Articles of Incorporation does not receive the requisite approval, the Articles will remain unchanged. UNLESS SUCH AUTHORIZATION IS WITHHELD, THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE AT THE MEETING FOR THE APPROVAL OF THE AMENDMENT OF THE ARTICLES OF INCORPORATION TO PROVIDE FOR A CONSOLIDATION OF THE COMMON SHARES OF THE CORPORATION. 15 17 ISSUE OF NEW SHARE CERTIFICATES Upon filing of the Articles of Amendment, the Common Shares of the Corporation will be consolidated into new Common Shares as set out above. In accordance with the rules of The Toronto Stock Exchange, a new CUSIP will be assigned and replacement share certificates will be issued. To obtain a new share certificate evidencing the Common Shares after the consolidation is effective, shareholders must tender the certificates evidencing pre-consolidation shares held by them. As soon as practicable after the filing of the Articles of Amendment effecting the consolidation, a letter of transmittal containing instructions with respect to the surrender of the share certificates will be sent to shareholders for use in exchanging their share certificates. Shareholders may obtain new share certificates by completing and returning the transmittal forms and share certificates, following announcement by the Corporation that the Articles of Amendment are effective. The aggregate cost basis of the post-consolidation common shares will be the same as the aggregate cost basis of the pre-consolidation common shares. APPOINTMENT OF AUDITORS (ITEM NO. 4 OF NOTICE OF MEETING) UNLESS SUCH AUTHORIZATION IS WITHHELD, THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE AT THE MEETING FOR THE RE-APPOINTMENT OF KPMG LLP, CHARTERED ACCOUNTANTS, AS AUDITORS OF THE CORPORATION TO HOLD OFFICE UNTIL THE NEXT ANNUAL MEETING OF SHAREHOLDERS AND TO AUTHORIZE THE BOARD OF DIRECTORS TO FIX THEIR REMUNERATION. Representatives of KPMG LLP are expected to be present at the Meeting and will have the opportunity to make statements if they so desire and will be available to respond to appropriate questions. OTHER MATTERS WHICH MAY COME BEFORE THE MEETING Management does not know of any matters to be presented to the Meeting other than those specifically set forth in the Notice of Annual and Special Meeting of Shareholders. IF ANY OTHER MATTERS PROPERLY COME BEFORE THE MEETING AND ARE SUBMITTED TO A VOTE, ALL PROXIES WILL BE VOTED IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSONS NAMED THEREIN. PROPOSALS BY SHAREHOLDERS Pursuant to the Act, resolutions intended to be presented by shareholders for action at the 2001 Annual Meeting must comply with the provisions of the Act and be deposited at the Corporation's head office not later than February 19, 2001 in order to be included in the Proxy Circular and form of proxy relating to such Meeting. SOLICITATION OF PROXIES The Corporation will bear the cost of this proxy solicitation. The Corporation will reimburse banks, brokerage firms and other custodians, nominees and fiduciaries for reasonable expenses incurred by them in sending proxy material to beneficial owners of Common Shares and requesting authority to 16 18 execute proxies. In addition to the use of the mails, proxies may be solicited by telephone or facsimile and in person, by the directors, officers and regular employees of the Corporation, none of whom will receive any extra compensation therefor. In addition, the Corporation has retained D.F. King & Co. Inc. to assist in the solicitation of proxies for a fee of US$4,000 plus reimbursement of reasonable out- of-pocket expenses. MISCELLANEOUS The Corporation files with the United States Securities and Exchange Commission an annual report on Form 10-K containing certain information with respect to the Corporation and its business and properties, including financial statements and related schedules. A copy of this Form 10-K will be filed with Canadian securities commissions in lieu of an Annual Information Form. Upon the written request of any beneficial owner of the Corporation's Common Shares, the Corporation will mail to such owner, without charge, a copy of its Form 10-K for the fiscal year ended December 31, 1999. Requests for copies of the Form 10-K should be addressed to: Manager, Investor Relations Campbell Resources Inc. 120 Adelaide Street West, Suite 1910 Toronto, Ontario, Canada M5H 1T1 APPROVAL BY DIRECTORS The Board of Directors of the Corporation has approved the contents of this Proxy Circular and has approved its being sent to shareholders. By Order of the Board of Directors Lorna D. MacGillivray Vice President, Secretary and General Counsel Dated: March 23, 2000 17 19 SCHEDULE "A" SPECIAL RESOLUTION OF SHAREHOLDERS AMENDMENT OF ARTICLES OF INCORPORATION BE , AND IT HEREBY IS RESOLVED as a special resolution of the Corporation that: 1. the Articles of the Corporation be amended to consolidate all of the issued and outstanding Common Shares of the Corporation on the basis of one (1) new post-consolidation Common Share for every ten (10) pre-consolidation Common Shares, or such lesser number of preconsolidation Common Shares as the directors in their sole discretion may determine; 2. no fractional shares will be issued as a result of the share consolidation. A fractional share will be disregarded and cancelled without any repayment of capital or other compensation. 3. the Corporation be and is hereby authorized and directed to make application pursuant to the Act for a Certificate of Amendment under the Act to give effect to this special resolution; 4. the proper officers of the Corporation be and they are hereby authorized to take all such actions and execute and deliver all such documents, including without limitation, Articles of Amendment in the form prescribed by the Act, which are necessary or desirable for the implementation of this special resolution; and 5. notwithstanding the foregoing provisions, the directors of the Corporation be and they hereby are authorized to revoke this resolution without any further approval of the shareholders at any time prior to the issuance of a Certificate of Amendment under the Act giving effect hereto. 18 20 FORM OF PROXY CAMPBELL RESOURCES INC. THIS PROXY IS SOLICITED ON BEHALF OF MANAGEMENT AND THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON FRIDAY, MAY 19 , 2000. The undersigned shareholder of CAMPBELL RESOURCES INC. (the "Corporation") hereby nominates, constitutes and appoints James C. McCartney or, failing him, John O. Kachmar, or failing him, Lorna D. MacGillivray, or, instead of any of them __________________________________________ lawful attorney and proxy of the undersigned, with full power of substitution to vote in respect of all common shares held by the undersigned at the above noted meeting or any and all adjournments thereof in the following manner: 1. FOR [ ] WITHHOLD FROM VOTING [ ] in respect of the election of the directors. 2. FOR [ ] AGAINST [ ] WITHHOLD FROM VOTING [ ] in respect of approval, by special resolution, of an amendment to the Corporation's Articles of Incorporation to consolidate all issued and outstanding Common Shares on the basis of one (1) new post-consolidation common share for every ten (10) pre-consolidation common shares or such lesser number of pre-consolidation common shares as the directors in their sole discretion may determine; 3. FOR [ ] WITHHOLD FROM VOTING [ ] in respect of the appointment of KPMGLLP as auditors for the coming year and authorizing the directors to fix remuneration. 4. Upon such other matters (none known at the time of solicitation of this proxy) as may properly be brought before the Meeting or any and all adjournments thereof. The shares represented by this proxy will be voted as directed by the shareholder. IF NO DIRECTIONS ARE GIVEN, THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL NOMINEES AS DIRECTORS, FOR THE APPROVAL, BY SPECIAL RESOLUTION, OF AN AMENDMENT TO THE CORPORATION'S ARTICLES OF INCORPORATION TO CONSOLIDATE ALL ISSUED AND OUTSTANDING COMMON SHARES ON THE BASIS OF ONE(1) NEW POST-CONSOLIDATION COMMON SHARE FOR EVERY TEN(10) PRE-CONSOLIDATION COMMON SHARES OR SUCH LESSER NUMBER OF PRE-CONSOLIDATION COMMON SHARES AS THE DIRECTORS IN THEIR SOLE DISCRETION MAY DETERMINE, AND FOR THE APPOINTMENT OF KPMGLLP AS AUDITORS. THE PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO AMENDMENTS OR VARIATIONS TO THE MATTERS IDENTIFIED IN THE NOTICE OF MEETING AND ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING. YOU HAVE THE RIGHT TO APPOINT ANY PERSON (WHO NEED NOT BE A SHAREHOLDER) TO ATTEND AND ACT ON YOUR BEHALF AT THE MEETING. IF YOU DESIRE TO EXERCISE SUCH RIGHT, STRIKE OUT THE NAMES OF THE BOARD'S NOMINEES AND INSERT THE NAME OF SUCH OTHER PERSON IN THE BLANK SPACE PROVIDED. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting and the Proxy Circular. Dated this day of , 2000. ______________________________________________________ Signature of Holder This form of proxy must be dated and signed exactly as your name appears herein. When signing in a fiduciary or representative capacity, please give full title as such. In the case of joint shareholders, each must sign. Proxies from a corporation must be signed under corporate seal by an officer thereof, or by an attorney thereof duly authorized in writing. If this proxy is not dated in the space above, it will be deemed to bear the date on which it is mailed by management. PRINTED IN CANADA EX-21.1 4 SIGNIFICANT SUBSIDIARIES 1 EXHIBIT 21.1 CAMPBELL RESOURCES INC. SIGNIFICANT SUBSIDIARIES December 31, 1999 The following significant subsidiaries are consolidated in the financial statements submitted as a part of this report:
Jurisdiction of Percentage of Incorporation Voting Securities Owned Controlled by Campbell Resources Inc.: Meston Resources Inc. Quebec 100% Sotula Gold Corp. Canada 100% Controlled by (i) Campbell Resources Inc. and Mexico 100% (ii) Sotula Gold Corp. Oro de Sotula, S.A. de C.V. Controlled by Meston Resources Inc. Minera Cerro Quema, S.A. Panama 100%
EX-23.1 5 CONSENT OF KPMG LLP 1 Exhibit 23.1 KPMG KPMG LLP Chartered Accountants Suite 3300 Commerce Court West Telephone (416) 777-8500 PO Box 31 Stn Commerce Court Telefax (416) 777-8818 Toronto ON M5L 1B2 www.kpmg.ca Securities and Exchange Commission 450 Fifth St., N.W. Washington, D.C. 20549 USA CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS We hereby consent to the inclusion in the Annual Report on Form 10-K of Campbell Resources Inc. (the "Corporation") for the year ended December 31, 1999 of our report dated February 25, 2000 which appears under Item 14 of the aforementioned Annual Report on Form 10-K. We also consent to the incorporation by reference of our report in the Registration Statements on Form S-8 (registration Nos. 33-28296 and 333-93063) pertaining to the Corporation's Employee Incentive Plan and Directors' Stock Option Plan. /s/ KPMG LLP Chartered Accountants March 30, 2000 Toronto, Canada EX-27.1 6 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows and is qualified in its entirety by reference to such statements. CANADIAN YEAR DEC-31-1999 JAN-01-1999 DEC-31-1999 0.6929 18,219 7,958 1,999 0 4,891 33,527 178,538 125,125 87,134 2,107 3,718 0 0 125,339 (49,666) 87,134 22,465 22,465 32,644 32,644 1,394 0 351 (13,956) (1,254) (12,702) 0 0 0 (12,702) (0.08) (0.08)
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