ENGLEWOOD, Colo., Feb. 11 /PRNewswire/ -- Echo Bay Mines Ltd.
(Amex: ECO; Toronto) today reported a 1998 net loss of $20.1 million
($0.23 per share). This compares with a 1997 net loss of $57.8 million
($0.46 per share) before a provision for impaired assets and other charges of
$362.7 million ($2.60 per share). Including the special charges, the loss for
1997 totaled $420.5 million ($3.06 per share). Both years' loss per share
includes interest on the company's capital securities, issued in March 1997,
$12.4 million ($0.09 per share) in 1998 compared with $5.7 million ($0.04 per
share) in 1997.
During 1998, despite a 24% decrease in revenues, the company lowered its
loss by focusing on operational improvements and continuing to reduce
spending. Revenue in 1998 dropped to $232.2 million from $305.4 million in
1997, as a result of two major factors. First, fewer gold ounces were sold
(553,130 ounces compared with 698,337 ounces), primarily due to the absence of
production from the Lupin mine, where operations were temporarily suspended in
January 1998 (165,335 ounces in 1997). Second, the average gold price
realized was lower than in 1997 ($333 per ounce compared with $362 in 1997),
reflecting a year in which spot prices for gold averaged only $294 per ounce.
Consolidated cash operating costs were reduced to $208 per ounce in
1998 from $249 in 1997. This reduction was the result of operational
improvements at McCoy/Cove, higher production at Round Mountain and the
absence of high-cost production from Lupin.
Lowered Expenses
During 1998, the company continued its efforts to control costs and cut
expenses. Exploration and development expense was reduced by $22.9 million,
to $12.0 million, including $4.6 million in costs associated with the care and
maintenance of Lupin, down from $34.9 million in 1997. In addition, general
and administrative expense in 1998 was reduced by $2.9 million, to
$8.0 million from $10.9 million in 1997.
Depreciation and amortization expense decreased by $16.0 million in
1998 compared with 1997. This was primarily the result of the absence of
production from Lupin and a full year of benefit from the company's write-down
of carrying values in the third quarter of 1997. Reclamation and closure
accruals, which are charged to earnings on a per-unit-of-production basis,
were down by $2.5 million, reflecting 1998's lower production.
Benefit of Hedging 1998 and Into 1999
Echo Bay realized significant benefit from its hedging program in
1998 -- averaging a cash price per ounce of gold sold of $340 ($333 per ounce
on a revenue basis), compared to the average spot price for the year of
$294 per ounce. The company not only used hedging to manage its revenues but
also to raise cash. A repurchase of 250,000 ounces of gold forward sales in
early 1998 generated $8.7 million in cash. The company also took advantage of
high silver prices early in the year to hedge 19 million ounces of silver
production from the McCoy/Cove property for 1998-2001 at an average price of
$6.01 per ounce. The revenues that will be generated by this hedging helps
ensure the profitability of mining the gold and silver ounces located at the
bottom of the Cove open pit.
With the company's current gold hedge position, Echo Bay will realize a
minimum average price of $349 per ounce for approximately 429,000 ounces in
1999 -- over 90% of 1999's planned gold production. Of this, over 35% is in
the form of put options, allowing for participation in gold price rallies
above the strike prices (ranging between $300 and $311 per ounce).
Approximately 5.2 million ounces of the 1999 planned silver production is also
currently hedged and will realize $5.76 per ounce.
Cash and Debt
Echo Bay ended 1998 with $8.0 million in cash and cash equivalents.
During 1998, Echo Bay reduced its total debt by $13.7 million. At December
31, 1998, the company's current debt was $11.7 million and its long-term debt
was $41.1 million. Long-term debt includes the present value, $4.9 million,
of the company's $100.0 million capital securities due in 2027. The present
value of the future interest payable on this security is reported as a
separate component of shareholders' equity, in accordance with Canadian GAAP,
the standard under which the company reports. The shareholders' equity
component, $110.9 million at December 31, 1998, also includes the interest
that is currently being deferred, as provided by the terms of the security.
Interest during the period of deferral is accruing at a rate of 12% per annum,
compounding semiannually.
During 1998, Echo Bay borrowed no additional funds on its revolving line
of credit, leaving the outstanding balance at $15.0 million. Because the
covenants of the facility are tied to the gold price, only a limited portion
of the $100.0 million revolving facility has been available to the company.
Based on the company's significantly reduced borrowing needs and the cost of
paying standby fees for borrowing capacity not available, Echo Bay elected to
reduce the amount of this revolving facility to $50.0 million. The company
currently has no restrictions on the borrowing capacity of this line based on
the trailing 90-day average spot price of $294 per ounce.
Exploration and Development Projects
Late in 1997, Echo Bay placed two development projects on
care-and-maintenance status: Aquarius in the Timmins mining district of
Ontario, Canada, and Paredones Amarillos in Baja California Sur, Mexico. The
cost incurred to hold these projects, as well as Lupin, totaled $5.5 million
in 1998 and was expensed. Echo Bay will continue to hold these projects in
1999 as they represent growth opportunities for the company at the right gold
prices.
During 1998, the company advanced the Kuranakh gold project, an existing
mining and milling operation located in the Sakha Republic in the Russian Far
East. Negotiations are ongoing with the Russian government on a production
sharing and gold sales agreement which will establish a framework for the
company to do business in Russia, including a life-of-project defined tax
structure and the right to export gold. Echo Bay believes that when it takes
over management of the property, changes in the operations, including the
introduction of Western heap leach and related process technology, will allow
the company and its partners to realize an attractive economic return. The
company has a 50% interest in the property's heap leach operations and
exploration rights. Work on a bankable feasibility study will begin after the
agreement is completed and in effect, currently anticipated during 1999.
Echo Bay's exploration spending in 1998 was focused on projects located
principally in North America in areas where Echo Bay already has existing gold
mining infrastructure. Expanding the ore reserves at or near these projects
represents the greatest potential to realize a near-term return with the
limited exploration dollars available in today's gold market.
During the year, $1.9 million (Echo Bay's share, $1.3 million) was spent
on exploration at the company's three operating mines and Lupin. Of this,
approximately $1.2 million (Echo Bay's share, $600,000) was spent on Round
Mountain. McCoy/Cove continues to investigate mineralization located just
outside the planned pit bottom that may be accessible by underground mining
methods. In addition, limited drilling was done on the McPherson Zone at
Lupin, discovered in 1997.
During 1998, Echo Bay used joint ventures to advance a number of
exploration projects while dealing with the budgetary limitations resulting
from the low gold price. Through these arrangements, an exploration company
that is interested in one of Echo Bay's projects can earn an equity interest
in that property by spending a predetermined number of dollars advancing
exploration and development. Both the Odgen property, located near the
Aquarius project, and the Kilgore project, located in Idaho, are examples of
this type of arrangement. In other cases, such as the Youga/Bitou property in
Burkina Faso, West Africa, Echo Bay is a non-operating partner, sharing the
costs with Ashanti Goldfields Company Ltd., a large West African gold mining
company. Advancement of this project has been slowed by the limited funding
currently available for exploration, but initial results are encouraging.
With the gold price continuing near 18-year lows, Echo Bay's 1999
exploration budget will continue to reflect the realities of today's gold
price. The company is budgeting $10-12 million in 1999 for exploration and
development activities, including $5 million in holding costs. This budget
will be reviewed if the gold price improves.
Ore Reserves at Year End
In estimating year-end 1998 gold reserves, a long-term gold price
assumption of $325 per ounce was used. The lowering of this year's price from
last year's $350 level resulted in a less than 1% reduction of reserves. The
effect of the lower price assumption was largely offset by the significant
improvements the sites accomplished on their operating costs during the year.
A full year of mining at the company's three producing mines depleted reserves
by 774,000 ounces of gold. The year-end proven and probable gold reserve for
1998 was 6.8 million ounces, compared with 7.5 million ounces in 1997.
Silver reserves were 38.8 million ounces at year-end 1998, down from
46.5 million ounces at the beginning of the year, after producing 9.4 million
ounces of silver during the year.
A detailed breakdown of year-end 1998 ore reserves and other
mineralization is given in the table on page 18.
Lupin Mine: Re-engineered and Ready
Early in 1998, operations were temporarily suspended at Lupin in the
Northwest Territories of Canada in response to 18-year lows in the gold price
and high operating costs. Since then, the company has taken the opportunity
to re-evaluate every aspect of operations at Lupin with the goal of
determining where costs could be lowered and productivity improved without
compromising safety or the environment. The initial re-engineering was
completed at the end of the third quarter of 1998. The study indicates that
under the new cost structure, Lupin can accomplish a life-of-mine average cash
operating cost of $245 to $255 per ounce in current dollars. This is based on
annual gold production of 150,000 ounces and uses a conservative Canadian/U.S.
exchange rate of 0.71:1.
The decision to restart Lupin will depend on the gold price and access to
the site over the ice road, built to transport equipment and supplies the
360 miles from Yellowknife.
Limited drilling was done at Lupin in 1998. It was aimed at better
understanding the McPherson Zone, discovered in 1997, and proved that the
mineralized zone has vertical continuity. The McPherson Zone is expected to
add to reserves. The additional drilling necessary to establish this as an
ore reserve will be much more cost-effective to carry out once the project is
back in operation.
Round Mountain Mine: Record Annual Gold Production
Echo Bay's 50%-owned Round Mountain mine in Nevada had an excellent year
with record gold production of 255,252 ounces, up 16,400 ounces from 1997
(Echo Bay's share), at a cash operating cost of $198 per ounce. This is the
highest production level ever reached at Round Mountain and is partially
attributable to production from the site's new mill. The lower cost per ounce
was a result of the higher production level and the benefit of a full year of
operation under a new mining plan, introduced in 1997.
In the fourth quarter, Echo Bay's share of production fell to
47,022 ounces from 54,928 ounces in the same period of the previous year.
This was the result of the mine entering a period of higher waste removal.
Round Mountain's life-of-mine average strip ratio, the amount of waste mined
per ton of gold containing ore, is a low 0.8:1. Starting in the third quarter
of 1998 and continuing through most of 1999, the site entered a period when
the ratio will exceed the average. For 1999, it will more than double to
2.0:1. As a result of removing more waste during this period, fewer ore tons
will be available to be placed under leach -- leading to somewhat lower
production and higher costs per ounce. The fourth quarter reflected this,
with 14% lower production and 11% higher cash operating costs than the same
period of the previous year.
During its first full year in operation, the new mill at Round Mountain
processed approximately 2.9 million tons of ore and produced 97,686 ounces of
gold (Echo Bay's 50% share, 48,843 ounces). Completed late in 1997, the mill
was built to treat large quantities of non-oxidized ore that exist within the
deposit. Heap leaching this same material would have resulted in gold
recovery rates considerably lower than the 83% averaged by the mill in the
fourth quarter.
Operations in 1998 saw the benefit of the new mining plan implemented in
late 1997. The optimized open pit design means that fewer tons of waste and
low-grade non-oxidized material will be mined over the life of the mine. By
lowering the amount of waste removal, the overall economics of the project
improved.
At year-end 1998, Echo Bay's portion of Round Mountain's gold reserves
stood at 3.2 million ounces, down from 1997 due to mining. Under the current
mine plan, if no new gold reserves are discovered, which is highly unlikely,
production will continue for approximately 12 more years. Echo Bay and its
partners believe in the potential of the geological region around Round
Mountain. In 1998, over $1.2 million (100%) was spent on target
identification and exploration in the large surrounding "area of mutual
interest" defined by the partners. This work identified a number of targets,
three of which were drilled during the year. The goal of this drilling was to
better understand the underlying geological structures of these targets and
their ability to support gold mineralization. In 1999, the $1.0 million
exploration program (100%) will include further drilling.
Round Mountain's production target for 1999 is 470-490,000 ounces of gold
(Echo Bay's 50% share, 235-245,000 ounces). Cash operating costs are targeted
to be $215 to $225 per ounce, slightly higher than 1998 due to the lower
production for the reasons outlined above. The year 2000 sees the strip ratio
returning to the life-of-mine average with production up and costs down.
McCoy/Cove Mine: Operational Improvements Significantly Lower Costs
At McCoy/Cove in Nevada, a number of innovative programs resulted in a
reduction of cash operating costs by 25%, or $68 per ounce, in 1998 compared
with 1997. This was accomplished despite a 10% reduction in the amount of
gold produced (167,494 ounces compared with 187,034 ounces) and a 15%
reduction in the amount of silver produced (9.4 million ounces compared with
11.0 million ounces), reflecting lower ore grades.
During 1998, the ore treated at the McCoy/Cove mill had a 25% lower gold
grade and 35% lower silver grade. The lower grades are attributable to where
mining is occurring in the deposit. To compensate, the site increased the
number of tons milled -- actually exceeding the mill's rated capacity by over
15% -- by screening out material larger than 3/8 inch after the first stage of
grinding. This was done because testing determined that the gold contained in
this larger material had insufficient economic value at today's gold prices to
warrant additional processing. By eliminating further processing of this
material, more material can be treated, thus increasing the production.
During 1998, McCoy/Cove excelled in controlling costs. Milling costs per
ton of ore were significantly reduced ($6.09 compared with $8.82) by
screening, which allowed for more tons to be processed and lowered reagent
usage. Mining efficiencies were realized by using waste material from mining
to construct access roads into the McCoy pit, lowering the stripping required
and shortening the haul distance. This decision not only lowered costs but
also had environmental benefits. Maintenance and outside contract service
costs were lowered despite a 20% reduction in manpower.
In addition to its cost-control efforts, McCoy/Cove benefited from the
Cove deposit's large component of silver and the high prices realized on
silver during much of the year. The gold-to-silver market value equivalency
ratio declined to 53.8:1 in 1998 from 67.1:1 in 1997. While silver production
was actually down by 15%, it had more value when its price was compared to
gold, and the more favorable ratio resulted in a 7% increase in gold
equivalent silver production which is used in the denominator for calculating
cost per ounce. Operating costs also benefited from the write-down of
deferred mining costs in the third quarter of 1997.
McCoy/Cove continues to remove the waste rock associated with a portion of
the Cove pit wall that became unstable in 1996. During 1998, over 12.9
million tons were removed, with the work slated to continue through the second
quarter of 1999. Completion of the waste removal will allow access to
approximately 400,000 ounces of contained gold and 22 million ounces of
contained silver located directly below this area. The material mined from
this portion of the deposit in the second half of 1999 is expected to be
mostly low-grade heap leach material. Starting in early 2000, the grade of
the material mined is expected to increase significantly, resulting in higher
production and lower costs per ounce for that year.
Exploration work in 1998 identified a small pod of higher-grade
mineralization located off the side of the Cove pit. An engineering study has
been completed that confirms the economics of using underground methods to
mine the 10-15,000 ounces of contained gold and 0.5-1.0 million ounces of
contained silver within this pod. Production will occur in 1999 and is
reflected in the stated targets.
The production target for McCoy/Cove in 1999 is 120-130,000 ounces of gold
and 7-8 million ounces of silver. The largest factor contributing to lower
gold production is an expected 40% drop in the mill grade. The lower
production and lower grades will contribute to a temporary rise in the cash
operating costs to $245-255 per ounce in 1999.
Kettle River Mine: Fewer Tons, Lower Grade
The 1998 results at Kettle River, located in Washington State, reflect the
challenges faced by maturing mines. Lower production and higher costs
resulted from 5% lower grades milled and 5% fewer tons processed. Production
was 113,692 ounces, down from 129,866 ounce in 1997. Cash operating costs per
ounce rose to $244 from $227 the year before.
At Kettle River, a series of deposits are mined with the ore feeding a
central mill. Ore production in 1998 came from Lamefoot and K-2, the fifth
and sixth deposits to be developed. As mining continues deeper within these
deposits and the haulage distance gets longer, unit costs rise and production
tons decrease. In tandem with this, the ore grades have declined with depth.
As these factors continue, Kettle River's gold production for 1999 is targeted
at 90-100,000 ounces at a cash operating cost of $255-265 per ounce.
Further exploration at Kettle River added 22,000 ounces to reserves in
1998 before giving consideration to depletion by mining in 1998. Exploration
of a northern extension of the Lamefoot deposit found gold but not of
sufficient grade or quantity for development at today's gold prices.
Exploration during 1999 will be directed at the K-2 deposit, testing zones to
the east and south. The company continues to evaluate opportunities within
the region for extending the life of the project. If these efforts are not
successful, production at Kettle River will be completed in 2001.
In 1998, Kettle River was recognized by the Washington State Department of
Natural Resources for outstanding surface mine reclamation. The Good Neighbor
Award goes beyond the site's reclamation efforts, recognizing their
comprehensive reclamation planning program and proactive community
involvement. Each year, Kettle River contributes to the community through its
sponsorship, along with federal, state and local government agencies, to
create an Arbor Day-related learning experience for hundreds of local school
children.
1999 Production and Cost Targets
Echo Bay's operations faced the challenges of 1998 and came through with
higher than anticipated production at a cost considerably below the company's
original projection of $245-255 per ounce. The challenges continue as the
gold price languishes below $300 per ounce. The higher waste removal at Round
Mountain and lower grades at McCoy/Cove and Kettle River are the factors
contributing to Echo Bay's lower 1999 company-wide production target of
455-475,000 ounces of gold and 7-8 million ounces of silver at a consolidated
cash operating cost of $235-245 per ounce of gold produced.
In 2000, when Round Mountain's strip ratio normalizes and McCoy/Cove has
access to higher-grade ores, production is anticipated to return to better
than 500,000 ounces, with per-ounce costs returning to around 1998's level.
If gold prices rise sufficiently to warrant restarting Lupin, restart
activities would begin late in the fourth quarter of 1999 with production
beginning in the first quarter of 2000. Lupin would add approximately
140,000 ounces to 2000's anticipated production.
Echo Bay mines gold and silver in North America. The primary markets for
its shares are the American and Toronto stock exchanges.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements herein that are not historical facts are
forward-looking statements. They involve risks and uncertainties that could
cause actual results to differ materially from targeted results. These risks
and uncertainties include, but are not limited to, future changes in gold
prices (including derivatives) and/or production costs, which could render
projects uneconomic; ability to access financing; availability of hedging
opportunities; differences in ore grades, recovery rates and tons mined from
those expected; changes in mining and milling/heap leaching rates from
currently planned rates; the results of future exploration activities and new
exploration opportunities; changes in project parameters as plans continue to
be refined; success at startup; success in negotiations with the Russian
government; and other factors detailed in the company's filings with the
Securities and Exchange Commission.
ECHO BAY MINES
1999 Targets
1999 Targets 1998 Actuals 1997 Actuals
Production and Costs:
Gold production:
Round Mountain (50%) 235-245,000 oz. 255,252 oz. 238,840 oz.
McCoy/Cove 120-130,000 oz. 167,494 oz. 187,034 oz.
Kettle River 90-100,000 oz. 113,692 oz. 129,866 oz.
Lupin -- -- 165,335 oz.
455-475,000 oz. 536,438 oz. 721,075 oz.
Silver production 7-8 million oz. 9.4 million oz. 11.0 million oz.
Cash operating costs $235-245 per oz. $208 per oz. $249 per oz.
Significant Expenses:
Depreciation and
amortization $55-60 million $63 million $79 million
Exploration and
development(a) $10-12 million $12 million $35 million
General and
administrative $7-8 million $8 million $11 million
Royalties $7-8 million $8 million $8 million
Reclamation and
mine closure $5-6 million $6 million $9 million
Production taxes $1-2 million $2 million $1 million
(a) 1998 includes holding costs of $5.5 million for Lupin, Aquarius and
Paredones Amarillos. 1999's target includes an estimated $5.0 million of
holding costs.
Please note "Safe Harbor" Statement.
ECHO BAY MINES
Highlights
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars 1998 1997 1998 1997
Financial Data
Revenue (millions) $58.4 $81.3 $232.2 $305.4
Net loss (millions):
Before special
charges(a) $(8.5) $(8.1) $(20.1) $(57.8)
After special
charges(a) $(8.5) $(55.5) $(20.1) $(420.5)
Gold ounces sold(b) 137,215 183,239 553,130 698,337
Silver ounces
sold(b) 2,317,081 3,285,505 8,198,867 10,037,753
Average price realized
- revenue basis:(c)
Per ounce of
gold sold $334 $349 $333 $362
Per ounce of
silver sold $5.38 $5.31 $5.88 $5.26
Average price realized
- cash basis:(d)
Per ounce of
gold sold $333 $345 $340 $345
Per ounce of
silver sold $5.06 $5.13 $5.36 $4.99
Cash operating costs:
Per ounce of gold
produced $214 $231 $208 $249
Per ounce of silver
produced $3.23 $3.76 $3.77 $4.04
% of revenue from gold 79% 79% 79% 83%
% of revenue from silver 21% 21% 21% 17%
Production and Reserves
Production (ounces):(b)
Gold 114,512 169,848 536,438 721,075
Silver 3,107,053 3,379,030 9,412,823 11,021,708
Reserves (ounces):(e)
Gold -- -- 6,799,000 7,479,000
Silver -- -- 38,809,000 46,525,000
Per Share Data
Net loss:
Before special
charges(a) $(0.08) $(0.07) $(0.23) $(0.46)
After special
charges(a) $(0.08) $(0.41) $(0.23) $(3.06)
Shares outstanding
(millions):
Weighted average 140.6 139.4 140.1 139.4
Period end 140.6 139.4 140.6 139.4
(a) These charges include provisions of $11.2 million in the fourth
quarter of 1997 and $5.4 million in the first three quarters of 1997
for severance costs, $309.8 million in the third quarter of 1997 for
impaired assets and $36.2 million in the fourth quarter of 1997 to
write off the company's investment in Santa Elina Mines Corporation.
(b) Amounts sold differ from amounts produced due to inventory changes.
(c) Includes non-cash items affecting gold and silver revenues, such as
the recognition of deferred income or deferral of revenue to future
periods for hedge accounting purposes.
(d) Prices reported are the cash amounts received per ounce of gold and
silver sold during each period.
(e) Proven and probable reserves at the end the year.
ECHO BAY MINES
Production and Costs
Three months Twelve months
ended Dec. 31 ended Dec. 31
1998 1997 1998 1997
Gold Production (ounces)
Round Mountain (50%) 47,022 54,928 255,252 238,840
McCoy/Cove 41,993 43,134 167,494 187,034
Kettle River 25,497 27,729 113,692 129,866
Lupin(a) -- 44,057 -- 165,335
Total gold 114,512 169,848 536,438 721,075
Silver Production
(ounces)
McCoy/Cove 3,107,053 3,379,030 9,412,823 11,021,708
Total silver 3,107,053 3,379,030 9,412,823 11,021,708
Cash Operating Costs
(U.S. dollars per ounce
of gold produced)
Round Mountain $236 $213 $198 $207
McCoy/Cove(b) 192 221 203 271
Kettle River 257 264 244 227
Lupin(a) -- 255 -- 284
Company average $214 $231 $208 $249
Consolidated Costs
(U.S. dollars per ounce
of gold produced)
Cash operating costs $214 $231 $208 $249
Royalties 10 7 11 9
Production taxes 3 (1) 2 1
Total cash costs 227 237 221 259
Depreciation 68 49 62 58
Amortization 23 25 25 32
Reclamation and
mine closure 9 10 9 10
Total production costs $327 $321 $317 $359
(a) In January 1998, operations at Lupin were temporarily suspended in
response to 18-year lows in the gold price.
(b) In 1998, cash operating costs per ounce of silver produced at
McCoy/Cove were $3.23 and $3.77 for the three-month and twelve-month
periods respectively, based on average gold-to-silver price ratios of
59.5:1 and 53.8:1 respectively. In 1997, cash operating costs per
ounce of silver produced at McCoy/Cove were $3.76 and $4.04 for the
three-month and twelve-month periods respectively, based on average
respective price ratios of 58.8:1 and 67.1:1.
ECHO BAY MINES
Consolidated Earnings Statement
(Unaudited)
Three months Twelve months
ended Dec. 31 ended Dec. 31
1998 1997 1998 1997
Thousands of U.S. dollars,
except for per share data
Revenue $58,367 $81,326 $232,181 $305,429
Expenses:
Operating costs 38,382 55,115 148,769 213,120
Royalties 1,648 1,651 7,547 8,304
Production taxes 566 (288) 1,618 865
Depreciation and
amortization 17,175 17,767 63,286 79,316
Reclamation and
mine closure 1,492 2,220 6,295 8,819
General and
administrative 1,776 2,005 8,027 10,948
Exploration and
development 3,766 7,352 12,010 34,927
Interest and other 2,027 3,566 4,398 5,191
Provision for
impaired assets
and other charges(a) -- 47,410 -- 362,665
66,832 136,798 251,950 724,155
Loss before
income taxes (8,465) (55,472) (19,769) (418,726)
Income tax expense
(recovery):
Current 75 1,811 354 2,118
Deferred (20) (1,793) -- (336)
55 18 354 1,782
Net loss $(8,520) $(55,490) $(20,123) $(420,508)
Net loss attributable
to common
shareholders $(11,749) $(57,073) $(32,555) $(426,222)
Loss per share(b) $(0.08) $(0.41) $(0.23) $(3.06)
Weighted average
number of shares
outstanding 140,607,145 139,370,031 140,083,751 139,366,794
(a) Includes provisions of $11.2 million in thefourth quarter of 1997
and $5.4 million in the first three quarters of 1997 for severance
costs, $309.8 million in the third quarter of 1997 for impaired
assets and $36.2 million in the fourth quarter of 1997 to write off
the company's investment in Santa Elina Mines Corporation.
(b) Echo Bay's financial statements are prepared in accordance with
accounting principles generally accepted in Canada. Earnings (loss)
per share equals the net earnings (loss) attributable to common
shareholders divided by the weighted average number of shares
outstanding during the period. The net earnings (loss) attributable
to common shareholders includes the interest on the $100 million
capital securities for the period, a portion of which is charged
directly to the deficit in common shareholders' equity, rather than
to interest expense on the consolidated earnings statement. The
capital securities were issued in March 1997; interest on these
securities that was charged to the deficit was $3.2 million and $12.4
million for the three months and twelve months ended Dec. 31, 1998
respectively, and $1.6 million and $5.7 million in the same periods
in 1997 respectively.
ECHO BAY MINES
Consolidated Balance Sheet
(Unaudited)
Dec. 31 Dec. 31
Thousands of U.S. dollars 1998 1997
Assets
Current assets:
Cash and cash equivalents $7,987 $16,953
Short-term investments 3,336 10,325
Interest and accounts receivable 3,585 5,927
Inventories 37,929 41,168
Prepaid expenses and other assets 6,635 5,068
59,472 79,441
Plant and equipment 196,670 238,948
Mining properties 95,738 107,820
Long-term investments and other assets 16,196 6,558
$368,076 $432,767
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $45,336 $82,371
Income and mining taxes payable 2,941 3,494
Current portion of gold and other financings(a) 11,652 14,779
Current portion of deferred income 13,455 7,461
73,384 108,105
Long-term gold and other financings(a) 41,119 51,745
Long-term deferred income 52,588 54,708
Other long-term obligations 59,718 56,607
Deferred income taxes 7,513 7,941
Common shareholders' equity:
Common shares 713,343 709,593
Capital securities 110,862 95,753
Deficit (663,875) (631,320)
Foreign currency translation (26,576) (20,365)
133,754 153,661
$368,076 $432,767
(a) Total gold and other financings were $52.8 million at Dec. 31, 1998
(including current portion of $11.7 million), down $13.7 million from
$66.5 million at Dec. 31, 1997 (including current portion of $14.8
million).
ECHO BAY MINES
Consolidated Statement of Cash Flow
(Unaudited)
Three months Twelve months
ended Dec. 31 ended Dec. 31
1998 1997 1998 1997
Thousands of U.S. dollars
Cash Provided from (Used in):
Operating Activities
Net loss $(8,520) $(55,490) $(20,123) $(420,508)
Add (deduct):
Depreciation and
amortization 17,175 17,767 63,286 79,316
Net gain on sale
of assets (373) (7,734) (7,942) (8,847)
Unrealized losses on
share investments 200 6,643 3,013 6,643
Non-cash portion of
provision for impaired
assets and other charges -- 45,982 -- 355,782
Deferred income
included in revenue (1,792) (1,340) (5,381) (14,079)
Deferral of gains on
restructuring of
hedge commitments 1,577 -- 5,236 --
Other (560) (1,631) (90) 1,220
Change in cash invested
in operating assets and
liabilities:
Interest and accounts
receivable (523) 12,034 1,898 2,178
Inventories 3,068 6,354 3,743 (5,753)
Prepaid expenses
and other assets (576) 546 (2,309) 2,812
Accounts payable and
other liabilities (1,276) (4,457) (26,748) (8,824)
Income and mining
taxes payable 394 1,066 (512) 856
8,794 19,740 14,071 (9,204)
Investing Activities
Mining properties,
plant and equipment (10,044) (20,455) (26,971) (112,001)
Proceeds on repurchase
of the company's:
Gold and silver
forward sales -- -- 8,673 54,963
Gold swap -- -- -- 8,107
Foreign exchange
contracts -- -- -- 5,995
Long-term investments
and other assets 36 1,640 (534) (21,626)
Proceeds on sale of
short-term investments -- 3,089 3,018 3,089
Proceeds on sale of
investment in Santa Elina -- -- 6,252 --
Proceeds on sale of
plant and equipment 579 -- 3,763 1,920
Proceeds on sale
of mining properties -- -- 1,195 --
Proceeds on sale of
long-term investments -- -- -- 7,894
Other 399 37 342 (1,362)
(9,030) (15,689) (4,262) (53,021)
Financing Activities
Currency borrowings -- 15,538 -- 15,538
Debt repayments (5,000) (4,164) (18,327) (131,749)
Equity portion of interest
on capital securities -- (4,270) -- (4,270)
Capital securities issued,
net of issuance costs -- -- -- 96,700
Common share issues,
net of issuance costs -- -- -- 59
Other (110) (112) (448) (296)
(5,110) 6,992 (18,775) (24,018)
Net increase (decrease)
in cash and cash
equivalents (5,346) 11,043 (8,966) (86,243)
Cash and cash
equivalents,
beginning of period 13,333 5,910 16,953 103,196
Cash and cash equivalents,
end of period $7,987 $16,953 $7,987 $16,953
ECHO BAY MINES
Mine Operating Data
Three months Twelve months
U.S. dollars, ended Dec. 31 ended Dec. 31
except where indicated 1998 1997 1998 1997
Round Mountain Mine (50% owned)
Gold produced (ounces):
Reusable heap
leach pad (50%) 14,144 29,604 91,189 134,259
Dedicated heap
leach pad (50%) 20,416 21,161 110,698 97,779
Milling (50%) 11,241 3,205 48,843 3,205
Other (50%) 1,221 958 4,522 3,597
Total (50%) 47,022 54,928 255,252 238,840
Ore and waste mined
(tons) (100%) 18,541,000 17,162,000 70,622,000 70,787,000
Mining cost/ton of
ore and waste $0.69 $0.60 $0.66 $0.65
Heap leaching cost/ton
of ore $0.88 $0.57 $0.74 $0.61
Milling cost/ton
of ore $3.18 $4.38 $3.36 $4.38
Production cost per
ounce of gold produced:
Direct mining expense $289 $230 $209 $208
Deferred stripping cost (51) (9) (7) 2
Inventory movements
and other (2) (8) (4) (3)
Cash operating cost 236 213 198 207
Royalties 21 17 20 22
Production taxes 7 3 3 4
Total cash cost 264 233 221 233
Depreciation 65 40 46 39
Amortization 20 18 18 18
Reclamation and
mine closure 7 7 7 7
Total production cost $356 $298 $292 $297
Reusable heap leach pad:
Ore processed
(tons/day) (100%) 13,218 24,956 18,953 26,608
Grade (ounce/ton) 0.029 0.039 0.036 0.036
Recovery rate (%) 76.7 71.3 70.6 74.9
Dedicated heap leach pad:
Ore processed
(tons/day) (100%) 81,614 131,318 101,892 107,716
Grade (ounce/ton) 0.010 0.010 0.010 0.010
Recovery rate(a)
Milled:
Ore processed
(tons/day)(100%) 8,296 3,108 7,993 --
Gold grade
(ounce/ton) 0.042 0.041 0.045 0.041
Gold recovery rate (%) 83.4 60.0 77.9 60.0
McCoy/Cove Mine (100% owned)
Gold produced (ounces):
Milled 30,013 26,199 114,398 131,905
Heap leached 11,980 16,935 53,096 55,129
Total gold 41,993 43,134 167,494 187,034
Silver produced (ounces):
Milled 3,026,189 3,271,128 9,014,817 10,624,780
Heap leached 80,864 107,902 398,006 396,928
Total silver 3,107,053 3,379,030 9,412,823 11,021,708
Ore and waste
mined (tons) 13,216,969 11,294,410 43,926,603 53,998,672
Mining cost/ton of
ore and waste $0.75 $0.78 $0.71 $0.74
Milling cost/ton
of ore $6.54 $8.26 $6.09 $8.82
Heap leaching cost/ton
of ore $1.98 $1.81 $1.74 $1.70
ECHO BAY MINES
Mine Operating Data (continued)
Three months Twelve months
U.S. dollars, ended Dec. 31 ended Dec. 31
except where indicated 1998 1997 1998 1997
McCoy/Cove Mine (continued)
Production cost per
ounce of gold produced:(b)
Direct mining expense $172 $221 $200 $276
Deferred stripping cost 20 (3) (1) (10)
Inventory movements
and other -- 3 4 5
Cash operating cost 192 221 203 271
Royalties 3 3 3 3
Production taxes 2 (5) 2 (1)
Total cash cost 197 219 208 273
Depreciation 46 51 52 66
Amortization 29 40 37 44
Reclamation and
mine closure 9 9 9 10
Total production cost $281 $319 $306 $393
Average gold-to-silver
price ratio(b) 59.5:1 58.8:1 53.8:1 67.1:1
Milled:
Ore processed
(tons/day) 11,519 9,288 11,829 9,315
Gold grade
(ounce/ton) 0.052 0.056 0.046 0.061
Silver grade
(ounce/ton) 2.95 5.48 2.95 4.54
Gold recovery rate (%) 58.6 54.8 57.8 64.3
Silver recovery rate (%) 68.9 66.7 69.8 69.7
Heap leached:
Ore processed
(tons/day) 9,846 15,631 11,296 17,840
Gold grade
(ounce/ton) 0.023 0.022 0.021 0.018
Silver grade
(ounce/ton) 0.21 0.40 0.26 0.29
Recovery rates(a)
Kettle River Mine (100% owned)
Gold produced (ounces) 25,497 27,729 113,692 129,866
Tons of ore mined 141,588 190,517 679,030 778,414
Mining cost/ton of ore $20.99 $22.25 $21.65 $21.53
Milling cost/ton of ore $11.01 $10.82 $10.71 $10.58
Production cost per
ounce of gold produced:
Direct mining expense $241 $267 $238 $231
Inventory movements
and other 16 (3) 6 (4)
Cash operating cost 257 264 244 227
Royalties 13 13 12 14
Production taxes 1 1 1 2
Total cash cost 271 278 257 243
Depreciation 90 38 77 54
Amortization 5 5 5 36
Reclamation and
mine closure 12 12 12 12
Total production cost $378 $333 $351 $345
Milled:
Ore processed
(tons/day) 2,003 2,083 2,017 2,118
Total tons milled 182,246 189,556 734,053 771,002
Grade (ounce/ton) 0.169 0.177 0.187 0.197
Recovery rate (%) 82.7 82.9 82.8 85.4
ECHO BAY MINES
Mine Operating Data (continued)
Three months Twelve months
U.S. dollars, ended Dec. 31 ended Dec. 31
except where indicated 1998 1997 1998 1997
Lupin Mine (100% owned)(c)
Gold produced (ounces) -- 44,057 -- 165,335
Tons of ore mined -- 193,738 -- 788,704
Mining cost/ton of ore
(Cdn dollars) -- C$44.05 -- C$46.09
Milling cost/ton of ore
(Cdn dollars) -- C$11.34 -- C$11.77
Production cost per ounce
of gold produced:
Direct mining expense
(Cdn dollars) -- C$358 -- C$381
Deferred mine development
cost (Cdn dollars) -- -- -- 13
Inventory movements and
other (Cdn dollars) -- -- -- (1)
Cash operating cost
(Cdn dollars) -- C$358 -- C$393
Cash operating cost
(U.S. dollars) -- US$255 -- US$284
Royalties -- -- -- --
Production taxes -- -- -- --
Total cash cost -- 255 -- 284
Depreciation -- 64 -- 71
Amortization -- 12 -- 24
Reclamation and
mine closure -- 14 -- 14
Total production cost -- US$345 -- US$393
Milled:
Ore processed (tons/day) -- 2,129 -- 2,167
Total tons milled -- 193,738 -- 788,704
Grade (ounce/ton) -- 0.244 -- 0.226
Recovery rate (%) -- 93.2 -- 92.6
(a) Recovery rates on dedicated pads can only be estimated, as actual
recoveries will not be known until leaching is complete. At the
Round Mountain mine, the gold recovery rate on the dedicated heap
leach pad is estimated at 50%. At the McCoy/Cove mine, the gold
recovery rate is estimated at 68% for crushed ore and 48% for
uncrushed, run-of-mine ore, and the silver recovery rate is estimated
at 35% for crushed ore and 10% for uncrushed, run-of-mine ore.
(b) To convert costs per ounce of gold into comparable costs per ounce of
co-product silver, divide by the period's average gold-to-silver
price ratio.
(c) In January 1998, operations at Lupin were temporarily suspended until
gold prices improve.
ECHO BAY MINES
Ore Reserves and Other Mineralization
PROVEN AND PROBABLE RESERVES(a) 1998
Tons(b) Grade(c) Content(d)
(000) (oz/ton) (000 oz)
Gold
Producing Mines:
Round Mountain (50%) 179,299 0.018 3,188
McCoy/Cove 21,684 0.032 699
Kettle River 1,171 0.202 237
Non-Producing Mines:
Lupin(e) 2,018 0.269 543
-- -- 4,667
Development Properties:(f)
Aquarius 19,159 0.066 1,263
Paredones Amarillos (60%) 26,830 0.032 869
-- -- 2,132
Total gold -- -- 6,799
Silver
Producing Mines:
McCoy/Cove 21,684 1.790 38,809
Total silver -- -- 38,809
PROVEN AND PROBABLE RESERVES(a) 1997
Tons(b) Grade(c) Content(d)
(000) (oz/ton) (000 oz)
Gold
Producing Mines:
Round Mountain (50%) 200,663 0.018 3,519
McCoy/Cove 24,737 0.037 915
Kettle River 1,734 0.196 339
Non-Producing Mines:
Lupin(e) 2,018 0.269 543
-- -- 5,316
Development Properties:(f)
Aquarius 19,977 0.064 1,274
Paredones Amarillos (60%) 28,196 0.032 889
-- -- 2,163
Total gold -- -- 7,479
Silver
Producing Mines:
McCoy/Cove 24,737 1.881 46,525
Total silver -- -- 46,525
OTHER MINERALIZATION(a) 1998
Measured and Indicated Inferred
Tons(b) Grade(c) Content(d) Tons(b) Grade(c)Content(d)
(000) (oz/ton) (000 oz) (000) (oz/ton) (000 oz)
Gold
Producing Mines:
Round Mountain
(50%) 14,254 0.020 285 39,890 0.013 517
McCoy/Cove 125 0.120 15 300 0.157 47
Kettle River 188 0.223 42 -- -- --
Non-Producing Mines:
Lupin(e) 485 0.345 167 200 0.269 54
-- -- 509 -- -- 618
Development Properties:(f)
Aquarius -- -- -- 785 0.064 50
Paredones Amarillos
(60%) -- -- -- 205 0.020 4
Ulu(e) -- -- -- 1,509 0.374 565
-- -- -- -- -- 619
Total gold -- -- 509 -- -- 1,237
Silver
Producing Mines:
McCoy/Cove 125 12.352 1,544 300 3.567 1,070
Total silver -- -- 1,544 -- -- 1,070
OTHER MINERALIZATION(a) 1998 1997
Total Total
Content(d) Content(d)
(000 oz) (000 oz)
Gold
Producing Mines:
Round Mountain (50%) 802 1,129
McCoy/Cove 62 16
Kettle River 42 26
Non-Producing Mines:
Lupin(e) 221 221
1,127 1,392
Development Properties:(f)
Aquarius 50 51
Paredones Amarillos (60%) 4 7
Ulu(e) 565 565
619 623
Total gold 1,746 2,015
Silver
Producing Mines:
McCoy/Cove 2,614 626
Total silver 2,614 626
(a) Echo Bay's share, estimated at year-end. Estimates for 1998 are
based on a long-term gold price assumption of $325 per ounce and
long-term silver price assumption of $5.75 per ounce with the
exception of Lupin and Ulu, see note 5. Estimates for 1997 were
based on a $350 gold price and $5.00 silver price assumption. If
1998 estimates were to be based on a $350 gold price assumption, Echo
Bay believes that ore reserves at producing mines would be
approximately 4% higher. If 1998 estimates were to be based on a
gold price assumption of $300 per ounce, Echo Bay believes that ore
reserves at producing mines would be approximately 12% lower.
(b) To convert from tons to tonnes, multiply by 0.90718. To convert from
tonnes to tons, divide by 0.90718.
(c) To convert grade from ounces/ton to grams/tonne, multiply by 34.2857.
To convert grade from grams/tonne to ounces/ton, multiply by
0.029167.
(d) To convert content from ounces to tonnes, divide by 32,150.8. To
convert content from tonnes to ounces, multiply by 32,150.8.
(e) Lupin was placed on care and maintenance in January 1998. Ore
reserves for both Lupin and Ulu were left unchanged from the 1997
calculation at a $350 per ounce gold price because it was determined
that any impact from the lower gold price was more than offset by the
favorable change in the Cdn/US dollar exchange rate (1998, 0.66:1;
1997, 0.73:1).
(f) Assumes successful completion of permitting and financing for each
property.
SOURCE Echo Bay Mines Ltd.
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Related links:
http://www.echobay.com
CONTACT:
Robbin Lee of Echo Bay Mines Ltd.,
303-714-8829
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