<PAGE>   1


                                    FORM 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                FOR THE QUARTERLY PERIOD ENDED DECEMBER 31, 1998

                                       OR

            [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934


                         COMMISSION FILE NUMBER 0-20430

                                AZCO MINING INC.

                            (A DELAWARE CORPORATION)

                  IRS EMPLOYER IDENTIFICATION NUMBER 84-1094315

                     2068 Main Street Suite C, P.O. Box 1895
                               Ferndale, WA 98248
                                 (360) 380-4467


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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: 25,252,121 shares of the
Company's Common Stock were outstanding as of February 11, 1999.



<PAGE>   2

                           AZCO MINING INC. (DELAWARE)


Statements contained in the quarterly report that are not historical facts are
forward-looking statements as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risks and uncertainties, which could cause actual results to differ materially
from the estimated results. Such risks and uncertainties are detailed in filings
with the Securities and Exchange Commission.



                                PART I. FINANCIAL INFORMATION



ITEM 1. FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                           PAGE
                                                           ----
<S>                                                        <C>
Consolidated Balance Sheets                                 3

Consolidated Statements of Operations                       4

Consolidated Statements of Cash Flows                       5

Consolidated Statement of Stockholders' Equity              6

Notes to Interim Consolidated Financial Statements          7 - 9
</TABLE>



                                       2
<PAGE>   3

AZCO MINING INC.  (DELAWARE)
CONSOLIDATED BALANCE SHEETS (UNAUDITED)

<TABLE>
<CAPTION>
                                  ASSETS                                  DEC., 31              JUNE, 30
                                                                             1998                  1998
<S>                                                                      <C>                    <C>
Current assets:
     Cash and cash equivalents                                           $ 15,071,504           $ 18,320,882
     Restricted cash                                                           16,165                 16,165
     Prepaids and other                                                       170,900                201,061
     Income tax receivable                                                    782,000                782,000
                                                                         ------------           ------------
          Total current assets                                             16,040,569             19,320,108
                                                                         ------------           ------------
Property and equipment:
  Furniture and equipment                                                      97,925                 90,440
  Less accumulated depreciation                                               (74,088)               (66,382)
                                                                         ------------           ------------
                                                                               23,837                 24,058
                                                                         ------------           ------------
Investments and advances                                                    1,195,262                134,778
Other assets                                                                    7,725                  7,725
                                                                         ------------           ------------
                                                                         $ 17,267,393           $ 19,486,669
                                                                         ------------           ------------

                    LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Accounts payable and accrued liabilities                               $     43,215           $    299,061
                                                                         ------------           ------------

     Total current liabilities                                                 43,215                299,061
                                                                         ------------           ------------

Commitments and contingencies

Stockholders' equity
  Common stock: $.002 par value, 100,000,000 shares authorized:
  25,252,121 and 25,680,497 shares outstanding as
  of December 31, 1998 and June 30,1998, respectively                          50,504                 51,361
  Additional paid-in capital                                               25,767,591             25,999,733
  Deficit                                                                  (8,593,917)            (6,863,486)
                                                                         ------------           ------------
                                                                           17,224,178             19,187,608
                                                                         ------------           ------------

        Total liabilities and stockholders' equity                       $ 17,267,393           $ 19,486,669
                                                                         ============           ============
</TABLE>


The accompanying notes are an integral part of these financial statements.



                                       3
<PAGE>   4


AZCO MINING INC. 
(DELAWARE)
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
                                                          THREE MONTHS ENDED                       SIX MONTHS ENDED DECEMBER
                                                             DECEMBER  31,                                 DECEMBER  31,
                                                -----------------------------------           -----------------------------------
                                                    1998                   1997                   1998                   1997
<S>                                             <C>                    <C>                    <C>                    <C>
INCOME:
    Interest income                             $    241,853           $    264,871           $    503,817           $    545,014
                                                ------------           ------------           ------------           ------------

                                                     241,853                264,871                503,817                545,014
                                                ------------           ------------           ------------           ------------

EXPENSES:
     Salaries                                        244,900                238,314                440,705                417,392
     General and administrative                      283,436                328,566                481,042                609,646
     Exploration                                     657,469                576,357              1,227,881              1,424,015
     Accounting and legal                             53,693                157,934                 76,913                229,466
     Amortization and depreciation                     3,626                  4,666                  7,707                 10,913
     Legal settlement costs                                                 400,000                                       400,000
                                                ------------           ------------           ------------           ------------

                                                   1,243,124              1,705,837              2,234,248              3,091,432
                                                ------------           ------------           ------------           ------------

Loss before income taxes                          (1,001,271)            (1,440,966)            (1,730,431)            (2,546,418)

     Income Taxes                                                        (1,628,237)                                   (1,715,237)
                                                ------------           ------------           ------------           ------------

NET INCOME (LOSS)                               $ (1,001,271)          $    187,271           $ (1,730,431)          $   (831,181)
                                                ============           ============           ============           ============


BASIC INCOME (LOSS) PER COMMON SHARE            $      (0.04)          $       0.01           $      (0.07)          $      (0.03)
                                                ============           ============           ============           ============

DILUTED INCOME (LOSS) PER COMMON SHARE          $      (0.04)          $       0.01           $      (0.07)          $      (0.03)
                                                ============           ============           ============           ============


WEIGHTED AVERAGE COMMON SHARES                    25,438,745             25,627,392             25,547,939             25,608,343
                                                ============           ============           ============           ============
</TABLE>



   The accompanying notes are an integral part of these financial statements.



                                       4
<PAGE>   5


AZCO MINING INC. (DELAWARE)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

<TABLE>
<CAPTION>
                                                                 SIX MONTHS ENDED DECEMBER 31,
                                                              -----------------------------------
                                                                    1998                  1997
<S>                                                           <C>                    <C>          
Cash flows from operating activities:
     Net loss                                                 $ (1,730,431)          $   (831,181)
     Adjustments to reconcile net loss to net cash
     Used in operations:
           Stock issued for mineral properties                     234,375                 50,000
           Depreciation and amortization                             7,706                 10,913
     Changes in assets and liabilities, net:
           Prepaid and other assets                                 30,161               (136,671)
           Deposit                                                                      4,000,000
           Accounts payable and accrued liabilities               (255,846)               254,746
           Income tax refund                                                           (1,715,237)
                                                              ------------           ------------
Net cash provided by (used for) operating activities            (1,714,035)             1,632,570
                                                              ------------           ------------

Cash flows from investing activities:
     Advances from Indonesian projects                                                    244,750
     Investments and advances                                   (1,060,484)
     Purchases of furniture and equipment                           (7,485)                (2,900)
     Proceeds from sale of furniture and equipment                                          5,101
                                                              ------------           ------------
Net cash provided by (used for) investing activities            (1,067,969)               246,951
                                                              ------------           ------------

Cash flows from financing activities:
      Proceeds from sale of common stock                                                   35,658
      Purchase of treasury stock                                  (467,374)
                                                              ------------           ------------
Net cash provided by (used for) financing activity:               (467,374)                35,658
                                                              ------------           ------------

Net increase (decrease) in cash and cash equivalents            (3,249,378)             1,915,179

Cash and cash equivalents at beginning of period                18,320,882             17,080,260
                                                              ------------           ------------

Cash and cash equivalents at end of period                    $ 15,071,504           $ 18,995,439
                                                              ============           ============
</TABLE>



    The accompanying notes are an integral part of these financial statements



                                       5
<PAGE>   6

AZCO MINING INC.
(DELAWARE)
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(UNAUDITED)



<TABLE>
<CAPTION>
                                              COMMON STOCK                     ADDITIONAL PAID-IN
                                   -----------------------------------          
                                       Shares                Amount                 Capital                Deficit
<S>                                <C>                    <C>                    <C>                    <C>          
Balance, June 30,1998                25,680,497           $     51,361           $ 25,999,733           $ (6,863,486)

  Shares issued:
    Property payments                   375,000                    750                233,625
  Shares purchased:
    Treasury stock                     (803,376)                (1,607)              (465,767)

Net Loss                                                                                                  (1,730,431)
                                   ------------           ------------           ------------           ------------


Balance December 31, 1998            25,252,121           $     50,504           $ 25,767,591           $ (8,593,917)
                                   ============           ============           ============           ============
</TABLE>



    The accompanying notes are an integral part of the financial statements.



                                       6
<PAGE>   7

AZCO MINING INC. (DELAWARE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1. BASIS OF PRESENTATION

In the opinion of management, the accompanying interim financial statements
contain all material adjustments consisting only of normal recurring adjustments
necessary to present fairly the financial position, the results of operations
and the cash flows of the Company and its consolidated subsidiaries for the
interim period. Users of financial information produced for interim periods are
encouraged to refer to the footnotes contained in the Annual Report on Form 10-K
when reviewing interim financial results.

AZCO Mining Inc. (Delaware) (the "Company") was formed on July 13, 1988 to
acquire mining properties and either develop or sell them. The Company will
consider properties of merit in almost any geographical location.

NOTE 2. PIEDRAS VERDES PROJECT (MEXICO)

The Company recently received a pre-feasibility study on the Piedras Verdes
project from its 70% project partner Phelps Dodge Corporation. The study,
assuming a copper price of $1.00/lb. estimates project operating costs below
$0.50 per pound, over a 10-year life with annual copper production of 130
million pounds. A $3.6 million work budget advancing the project towards a
bankable feasibility study over the next 18 months has been approved and is
being initiated by Phelps Dodge Corporation.

NOTE 3. MALI PROJECT (NORTHWESTERN AFRICA)

During the six month period ended December 31, 1998 the Company expensed
$379,983 against its Mali Project. Included in project operating costs was
$234,375 that represented 375,000 shares of the Company's stock issued under the
terms of the Lines Overseas Management Agreement of April 6, 1998. The operating
costs are included in exploration costs in the accompanying statement of
operations. The Company, as of December 31, 1998, had advanced to the Mali
Project a total of $5,215,971.

Effective August 5, 1998 the Company signed a Heads of Agreement with Randgold
Resources Limited ("Randgold") whereby Randgold acquired the right to earn up to
75% of the Company's interest in West Africa Gold and Exploration S.A. ("WAG").
To earn this consideration Randgold has agreed, over the next 36 months, to
conduct exploration on the WAG concessions at a minimum cost of $2 million, with
the aim of establishing whether there is a viable economic gold deposit, as
defined in the heads of agreement, of at least one million ounces. Thereafter
Randgold shall prepare a Bankable Feasibility Study on any such deposit for WAG
within a further 12 months in order to earn its interest therein.



                                       7
<PAGE>   8

AZCO MINING INC. (DELAWARE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)

NOTE 4. PONGKOR PROJECT (INDONESIA)

The Company has completed a geologic evaluation of the Pongkor properties and
has compiled an extensive report that is currently being disseminated to a
number of companies, which have expressed an interest in joint-venturing the
properties.

NOTE 5. BENITOITE PROJECT (SAN BENITO COUNTY, CALIFORNIA)

On December 5, 1997 the Company announced that it had acquired the option to
purchase a Benitoite Gem Mine in San Benito County, California. The Company paid
$20,000 to have the exclusive right to evaluate the property until February 1,
1999. The Company has since received an extension through March 1, 1999. On or
before this date the Company may elect to purchase the Project outright for
$1,500,000, unencumbered by royalty. The Company may elect to relinquish the
option to purchase the Project with no further obligations at any time prior
thereto.

The Company is currently evaluating the results of its due diligence on the
project and its Benitoite market feasibility study. The Company is also in
negotiations with potential joint-venture partners interested in participating
in the Benitoite project.

NOTE 6. LA ADELITA PROPERTY (MEXICO)

On July 21, 1998, the Company entered into an option agreement with Minera
Cortez whereby the Company was granted an option to earn up to a 70% interest in
the La Adelita property in Sonora, Mexico under the following terms:

i.       by subscribing for 100,000 common shares of Cortez at Cdn. $0.25 per
         share;
ii.      by making option payments and paying finder's fees on behalf of Cortez
         totaling $165,000 over the next five years; and
iii.     by incurring exploration expenditures on the property totaling $500,000
         over the next three years.



                                       8
<PAGE>   9

AZCO MINING INC. (DELAWARE)
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(CONTINUED)

NOTE 7. SHARE REPURCHASE

On August 6, 1998 the Company approved the repurchase of up to 1,284,024 shares
of its issued and outstanding common stock on the American Stock Exchange
commencing August 13, 1998 and continuing up until August 13, 1999. The maximum
authorized repurchase price is $1.50 per common share. The Company repurchased
803,376 shares through December 31, 1998.


NOTE 8. INVESTMENTS AND ADVANCES

On May 22, 1998 the Company entered into an agreement to purchase a $1,500,000
convertible debenture of Oro Argentina Limited (OAL) for the purpose of
financing the first phase of the Chiqua White Bentonite Project. At December 30,
1998, $1,123,711 has been drawn against the debenture by OAL.

The debenture draws interest at 12% per annum and is due on September 1, 2000.
During this term, the Company can convert the debenture into shares of OAL at
$0.50 per unit, where each unit consists of one common share and one warrant,
convertible into common shares within two years of issue at $0.60 per share.

The ultimate recovery of the debenture is dependent on the ability of OAL to
realize its exploration and development assets, which are subject to the
measurement uncertainty inherent in such assets.

NOTE 9. OUTSTANDING OPTIONS

At December 31, 1998 the Company had 2,589,500 options outstanding which are
exercisable between $0.52 and $3.00 per common share at varying dates through
2003.



                                       9
<PAGE>   10

AZCO MINING INC. (DELAWARE)

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

RESULTS OF OPERATIONS

GENERAL

The Company was formed on July 13, 1988. On December 21, 1995 the Company
announced that it had completed the sale of its Sanchez Project and a 70%
interest in its Mexican Project, the Piedras Verdes, to Phelps Dodge Corporation
for $40 million. All material revenues since the sale have been a result of
interest earned on the proceeds of the sale of assets to Phelps Dodge
Corporation.

The Company is currently evaluating a number of opportunities in the mining
industry for the purpose of merger, joint venture or project acquisition.

SIX MONTHS ENDED DECEMBER 31, 1998 COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1997.

The net loss for the six months ended December 31, 1998 was $1,730,431 compared
to a net loss of $831,181 for the six months ended December 31, 1997. The
increase in the current period net loss is the result of the accrual of a
$1,715,237 federal income tax refund during the six months ended December 31,
1997 off set by legal settlement costs of $400,000 for the same period.

Accounting and legal expense was $76,913 for the six months ended December 31,
1998 compared to $229,466 for the six months ended December 31, 1997. The
decrease in accounting and legal expense as well as legal settlement costs was
the result of the full and final settlement of all matters and claims with AIOC
Corporation.

THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO THREE MONTHS ENDED DECEMBER 31,
1997.

Net loss for the three months ended December 31, 1998 was $1,001,271 compared to
a gain of $187,271 for the three months ended December 31, 1997. The increase in
the current period net loss is the result of the accrual of a $1,628,237 federal
income tax refund during the three months ended December 31, 1997 off set by
legal settlement costs of $400,000 for the same period.



                                       10
<PAGE>   11

AZCO MINING INC. (DELAWARE)
RESULTS OF OPERATIONS 
(CONTINUED)

Accounting and legal expense was $53,693 for the three months ended December 31,
1998 compared to $157,934 for the six months ended December 31, 1997. The
decrease in accounting and legal expense as well as legal settlement costs was
the result of the full and final settlement of all matters and claims with AIOC
Corporation.

During the three month period ended December 31, 1998 the Company advanced an
additional $83,526 against the OAL debenture. Through December 31, 1998 the
Company has advanced $1,123,711 to OAL under the May 22, 1998 debenture
agreement.

FINANCIAL CONDITION

As of December 30, 1998 the Company had cash and cash equivalents of
$15,071,504.

The Company believes that for the current fiscal year ended June 30, 1999 all
capital requirements will be funded with present cash and cash equivalents.


ITEM 3:    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
    Not applicable.

PART II.   OTHER INFORMATION

ITEM 1:        LEGAL PROCEEDINGS
               None.

ITEMS 2-4: NOT APPLICABLE

ITEM 5:    OTHER INFORMATION
               None.

ITEM 6:    EXHIBITS AND REPORTS ON FORM 8-K

(a) EXHIBITS:
    None.

(b) REPORTS ON FORM 8-K None.



                                       11
<PAGE>   12

                           AZCO MINING INC. (DELAWARE)




                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunder duly authorized.



Date:   February 12, 1999                   BY:    /s/ Alan P. Lindsay
                                               ---------------------------------
                                                   Alan P. Lindsay
                                                   CEO, President and Chairman


Date:   February 12, 1999                   BY:    /s/ Ryan A. Modesto
                                               ---------------------------------
                                                   Ryan A. Modesto
                                                   Vice President of Finance



                                       12