Earnings Summary
Dollar amounts in thousands of US dollars,
Except amounts per share 2001 2000
THREE MONTHS ENDED DECEMBER 31:
Revenue $51,026 $68,472
Net earnings (loss) $(8,881) $2,069
Net earnings (loss) attributable to common
shareholders $(13,466) $(2,012)
Earnings (loss) per share $(0.10) $(0.01)
Weighted average common shares outstanding 140,607,145 140,607,145
YEAR ENDED DECEMBER 31:
Revenue $237,684 $280,976
Net earnings (loss) $(5,678) $18,561
Net earnings (loss) attributable to common
shareholders $(22,985) $3,164
Earnings (loss) per share $(0.16) $0.02
Weighted average common shares outstanding 140,607,145 140,607,145
EDMONTON, Alberta, Feb. 13 /PRNewswire-FirstCall/ --
Echo Bay Mines Ltd. (Toronto; Amex: ECO) today reported a fourth quarter net
loss of $8.9 million, reflecting lower gold sales and a write-down of
$4.4 million related to its Kettle River operation, compared with fourth
quarter 2000 earnings of $2.1 million. For the quarter, the loss per share
was $0.10 compared with a loss of $0.01 in 2000. The per share amount
includes the equity portion of the interest on the company's capital
securities, $4.6 million ($0.03 per share) in the current quarter and
$4.1 million ($0.03 per share) in 2000.
For full year 2001 the net loss was $5.7 million compared with net
earnings of $18.6 million for 2000. The loss per share in 2001 was
$0.16 compared with earnings of $0.02 per share in 2000. Each year includes
accrued but unpaid interest on the company's capital securities, $17.3 million
($0.12 per share) in 2001 and $15.4 million ($0.11 per share) in 2000.
During the fourth quarter, the company continued development of the K2
East Veins at Kettle River. At year end, the work completed was not extensive
enough to categorize this resource within proven and provable reserves and, as
a result, the company has decided to take a non-cash write-down of
$4.4 million. Work will continue in the spring to further delineate and
define the resource.
Total gold production in the fourth quarter was 136,497 ounces, lower than
2000 production due to the lower grades encountered. Silver production in the
quarter decreased to 1.4 million ounces as the production at McCoy/Cove came
primarily from low-grade stockpiles. Quarterly cash operating costs increased
to $250 per ounce from $219 per ounce in 2000 reflecting the lower production
level.
Total gold production for the year was 657,784 ounces compared with
694,663 ounces in 2000. Silver production from McCoy/Cove was 6.5 million
ounces, significantly lower than the 12.3 million ounces produced in 2000. On
a gold equivalent basis, metal production was slightly better than had been
forecast.
With the decrease in production along with higher fuel and energy costs,
2001 consolidated cash operating costs rose to $223 per ounce compared to
$193 per ounce in 2000. Although able to contain cash costs at the operating
sites, the company sustained a net loss from operations. This is attributable
to the continued low gold price, which averaged $271 per ounce in 2001.
With the completion of stockpile processing at McCoy/Cove by the end of
the first quarter of 2002 and lower grades at Kettle River, the target for
company-wide production in 2002 is 535,000 ounces of gold and 1.3 million
ounces of silver at a consolidated cash operating cost of $225 per ounce of
gold produced.
Revenues decrease
Revenue in 2001 decreased to $237.7 million dollars compared with 2000
revenue of $281.0 million. The decrease was primarily due to lower realized
gold prices ($305 per ounce in 2001 compared with $319 per ounce in 2000),
lower realized silver prices ($4.70 per ounce compared with $5.28 per ounce in
2000), slightly lower gold sales (667,015 ounces compared with 676,439 ounces
in 2000), and lower silver sales (7.2 million ounces compared with
12.3 million ounces in 2000).
The company realized an average cash price of $281 per ounce of gold
compared with the average spot price of $271 per ounce in 2001. The company's
current gold forward sales position is significantly smaller than in previous
years, as the low spot gold prices and interest rates encountered during the
year provided little opportunity to add forward contracts. At December 31,
2001, the company has gold forward contracts of 60,000 ounces for delivery
during 2002 at a minimum price of $293 per ounce. In addition, call options
on 120,000 ounces of gold were sold at an average strike of $298 per ounce.
Debt and liquidity
The company ended 2001 with $12.4 million in cash and cash equivalents.
During 2001, total debt repayments were $9.5 million. At December 31, 2001,
current debt was $17 million.
On October 5, 2001, a new $17 million revolving credit and $4 million
letter of credit facility was established with HSBC Bank USA, one of the
company's syndicated bankers. The new facility has been guaranteed by an
affiliate of Franco-Nevada Mining Corporation Limited, which holds
approximately 67.4 percent of the company's capital securities. The company
has drawn on the revolving credit to repay bank debt of $17 million and has
replaced the $4.0 million letter of credit issued under the syndicated
facility. The principal amount of the new credit facility matures on
September 30, 2002 and interest is payable quarterly.
Proposed conversion of capital securities
On September 5, 2001, the company announced that it proposed to issue up
to approximately 361.5 million common shares in exchange for $100 million in
principal amount of its capital securities plus accrued and unpaid interest.
The capital securities were issued in early 1997 and interest may be deferred
for ten consecutive semi-annual periods. The company first elected in
March 1998 to defer, which has had the result of building up an interest
obligation that must be met on March 31, 2003. At December 31, 2001, the
principal plus accrued unpaid interest amounted to $164.2 million.
The company has entered into support and lock-up agreements with the
holders of 98 percent of the capital securities. Each holder has agreed to
exchange all capital securities owned by it on the basis of a ratio which
would require the company to issue up to approximately 361.5 million common
shares in addition to the approximate 140.6 million presently issued and
outstanding, assuming all holders of capital securities elect to exchange. If
all holders of capital securities elect to exchange, the ratio between the
respective aggregate ownership interest of capital security holders and
present shareholders will be 72:28.
The share issuance will be presented to shareholders for their
consideration at a special general meeting that has been called for
March 25, 2002. Proxy materials are being mailed to shareholders, who are
being asked to consider and approve the transaction. If shareholders approve,
the exchange of capital securities for common shares is expected to be
completed promptly after the shareholders vote.
Ore reserves at year end
In estimating year-end 2001 gold reserves, a long-term gold price
assumption of $300 per ounce was used. A full year of mining at the company's
producing mines depleted reserves by nearly one million ounces of gold, and a
portion of this was replaced through exploration and development. Year-end
proven and probable gold reserves for 2001 amounted to 3.8 million ounces,
compared with 4.5 million ounces in 2000.
Silver reserves at McCoy/Cove were 1.1 million ounces at year-end 2001,
down from 10.9 million ounces at the beginning of the year, after production
is taken into account.
Round Mountain mine: another annual production record
The company has a 50 percent ownership interest in, and is the operator
of, the Round Mountain mine in Nevada. The mine had an excellent year with
record gold production of 746,950 ounces (Echo Bay's share: 373,475 ounces)
compared with 640,128 ounces in 2000, at a cash operating cost of $190 per
ounce. This is the highest production level ever reached at Round Mountain
and is mainly attributable to an increase in re-usable pad grades, an increase
in mill feed and the dual processing of high grade oxide material. Dual
processing means the material is first leached on the reusable pad and then
processed through the mill allowing coarse gold to be recovered and increasing
the ultimate recovery.
At year-end 2001, the company's portion of Round Mountain's gold reserves
comprised 2.2 million ounces. If no new gold reserves are discovered, which
the company believes is unlikely, the current mine plan sees production
continuing for approximately seven years.
During the year, drilling continued at the Gold Hill property located
approximately four miles north of the current mining and processing
facilities. Results were encouraging and additional drilling will continue in
2002 to delineate the potential.
Round Mountain's production target for 2002 is 700,000 ounces of gold
(Echo Bay's share: 350,000 ounces). The target for cash operating costs is
$200 per ounce.
Lupin mine: completion of winze, grade lower than anticipated.
Lupin produced 139,327 ounces of gold for the year compared with
117,729 during the nine months of 2000 in which it was in operation. Lupin,
which had been shut down at the end of 1997, was recommissioned during the
first quarter of 2000. Grades were lower than in 2000 and cash operating
costs per ounce were $246 compared with $213 per ounce in 2000. The cash cost
per ounce included a $15 per ounce benefit during the first three quarters in
2001 and in all quarters of 2000. This benefit, which was a result of a
$6.0 million gain realized on closing out certain Canadian dollars contracts
for Lupin expenditures in 1997, has now been fully amortized.
An underground hoisting system called a winze was completed in April 2001
and provides a more cost effective method of transporting ore to the bottom of
the existing shaft from lower levels of the mine as well as allowing for
development and mining of the orebody which has been defined down to
approximately 200 metres below the winze bottom. The ore body is continuous
at depth and exploration targets will be investigated.
With a full year of production experience in 2001, Lupin's production
target for 2002 is 140,000 ounces at cash operating costs of $250 per ounce.
In January 2002, the company was informed it has been selected as the 2002
recipient of the Prospectors and Developers Association of Canada's
Environmental Award. This award recognizes the company's environmental
stewardship of the Lupin mine.
McCoy/Cove mine: processing of low grade stockpiles; moving into
reclamation phase
At McCoy/Cove in Nevada, gold production was 94,633 ounces, compared with
162,784 ounces in 2000, and silver production amounted to 6.5 million ounces,
compared with 12.3 million ounces in the prior year, as a result of lower
grades and fewer tons milled. Cash operating costs were $252 per ounce
compared with $179 in 2000, reflecting the decrease in gold and silver
production.
As previously reported, lower grade stockpiles will be processed through
the first quarter of 2002. Accordingly, production will decrease
significantly and will be completed in March 2002. The production target for
McCoy/Cove in 2002 is 10,000 ounces of gold and 1.3 million ounces of silver,
with all production anticipated in the first half of the year. Cash operating
costs are expected be approximately $270 per ounce reflecting the lower
production. Reclamation and mine closure spending in 2001 amounted to
$1.7 million and approximately $2.7 million is anticipated to be spent in
2002.
Effective February 13, 2002 the Company entered into an agreement with
Newmont Mining Corporation providing for the sale to Newmont of the entire
McCoy/Cove Complex. This agreement, which is subject to the completion of due
diligence by Newmont by July 31, 2002, calls for a payment to Echo Bay of
US$6 million and the assumption by Newmont of all reclamation and closure
obligations at McCoy/Cove. Pending completion of the transaction, Echo Bay
will continue to operate McCoy/Cove for its own account.
Kettle River mine: write-down of $4.4 million, exploration continues to
extend K-2.
Production at the Kettle River operations located in north-east Washington
state was 50,349 ounces, down from 94,086 ounces in 2000. Processing fewer
tons resulted in a decrease in production and an increase in cash operating
costs per ounce to $288 from $218 in 2000.
Future production will be from existing stockpiles and the K-2 deposit.
As mining continues deeper and the haulage distance gets longer, unit costs
rise and production decreases. These factors will contribute to production
for 2002 decreasing to approximately 35,000 ounces, with cash operating costs
forecast to be $270 per ounce.
During the year, work continued to define an extension to the northeast of
the K-2 deposit. These efforts, however, did not progress sufficiently to
enable classification of the resource into proven and probable reserves. The
company could not appropriately capitalize these development costs and,
accordingly, during the fourth quarter 2001 took a non-cash write down of
$4.4 million. If the company is unsuccessful in extending the K-2 deposit,
the current identified resource would be mined out by the end of 2002.
Exploration and development projects
During the year, $3.5 million was spent on exploration and development
activities, with a continued focus on projects located principally in North
America in areas where the company 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. The company
also continues to review other exploration projects in the western U.S. and
the Timmins, Ontario area that have the potential for short to intermediate
term success.
At the Aquarius project near Timmins, Ontario, 100 percent owned by the
company, as well as the Youga/Bitou project in Burkino Faso, West Africa,
50 percent owned by the company (Ashanti Goldfields Company Ltd. is the
operator), only care and maintenance activities were undertaken during 2001.
The company continues to evaluate its options for further development of these
properties. A gold price in excess of $300 per ounce would be required to
consider a construction decision.
Statistical information is available with this release at the press
release area of the company's web site, http://www.echobay.com .
Echo Bay mines gold and silver in North America. The primary markets for
its shares are the American and Toronto stock exchanges.
Contact: Lois-Ann L. Brodrick, Vice President and Secretary -
303-714-8838
"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; increasingly stringent reclamation requirements imposed by
regulatory authorities; the possibility that the exchange of the capital
securities for common shares will not be completed, and other factors detailed
in the company's filings with the Securities and Exchange Commission.
SOURCE Echo Bay Mines Ltd.
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Related links:
http://www.echobay.com
CONTACT:
Lois-Ann L. Brodrick, Vice President and
Secretary of Echo Bay Mines Ltd., +1-303-714-8838
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