ENGLEWOOD, Colo., April 28 /PRNewswire/ -- Echo Bay Mines Ltd.
(Amex: ECO; Toronto) today reported a net loss of $5.1 million ($0.06 per
share) in the first quarter, compared with a net loss of $7.6 million
($0.07 per share) a year ago. Both quarters' loss per share includes the
equity portion of the interest on the company's capital securities,
$3.2 million in 1999 and $2.6 million in 1998.
The revenue reported for the period was $48.8 million, down from
$52.9 million the previous year. The average price realized on a cash basis
during the quarter increased to $351 per ounce of gold sold, compared with
$338 per ounce in the same quarter the previous year. Revenue was negatively
affected by lower production and the deferral of revenues to future periods in
accordance with hedge-related accounting rules. These deferrals lowered the
gold price realized on a revenue basis during the quarter to $324 per ounce of
gold, compared with $341 per ounce the same quarter in 1998. Silver revenue
for the quarter was lower on both a cash basis ($5.34 per ounce compared with
$5.76 the prior year) and a revenue basis ($5.52 per ounce compared with
$6.19 per ounce).
Gold production was 118,764 ounces compared with 133,165 ounces in the
same quarter the previous year. The lower production was the result of fewer
leach ounces recovered at Round Mountain and lower gold grades and recoveries
from the ore milled at McCoy/Cove. During the quarter, silver production rose
to 2,664,838 ounces, up 18% from the 1998 quarter's production of 2,258,456
ounces, due to higher silver grades processed at McCoy/Cove.
Cash operating costs were $216 per ounce of gold produced in the first
quarter compared with $208 per ounce a year ago. The mine sites continue to
focus on cost containment and these efforts helped mitigate the impact of the
lower production on unit costs.
Cash and Debt
During the first quarter Echo Bay generated $5.5 million from operating
activities. The company also invested $8.1 million, principally on
remediation of the Cove pit wall, and made a $5.0 million cash deposit to
secure bonding on the Sunnyside reclamation project. The company increased
its borrowings by $3.0 million from year-end balances, net of debt repayments
of $5.0 million. As a result, its cash balances were reduced by $4.6 million
during the quarter. Cash spending is expected to decrease in the remaining
three quarters of the year.
During the first quarter, the company lowered its borrowing capacity on
its revolving credit facility, thereby lowering total standby fees. At the
end of the first quarter, $23 million had been drawn on the facility. The
company has no restrictions on its borrowing capacity based on the 90-day
trailing average gold spot price.
Exploration and Development
With the ongoing low gold price environment, Echo Bay continues to work at
strengthening its portfolio of exploration and development projects while
limiting the cost and risk. The company's evaluation of market opportunities
is ongoing but work at existing projects is limited by the available funding.
While the development of the Aquarius project (Canada) remains on hold,
exploration work in the surrounding area advanced during the quarter. The
drilling that was done on the Currie Bowman project, located to 10 miles east
of Aquarius, intersected favorable alteration and anomalous gold values. The
1999 work program calls for more drilling there as well as at the Ogden
property, a joint venture project 25 miles southwest of Aquarius. The goal is
to find additional mineralization, which could add economic value to the
Aquarius project.
Alternatives are being evaluated for development of the Paredones
Amarillos project (Mexico), given today's low gold price. The existing mine
plan for the project, which is currently on hold, requires a $375 per ounce
average life-of-mine gold price to accomplish an acceptable rate of return for
the joint venture partners.
At Kuranakh, the company's 50%-owned gold project in Russia, the review of
the Production Sharing Agreement and related documents by Russian officials
continues. The company hopes to have all the necessary agreements signed in
1999 and advance the project to feasibility.
Exploration results on the Youga/Bitou (West Africa) joint venture between
Echo Bay and Ashanti Goldfields Company Ltd. continue to be encouraging. The
current work is focused on evaluating the results of the sampling and drilling
programs done late in 1998 and in January 1999. Early indications are that
satellite deposits exist in addition to the main area of mineralization.
Hedging Activities
In April 1999, Echo Bay entered into gold forward sales and purchased gold
put options on 610,000 ounces at an average price of approximately $335 per
ounce, scheduled for delivery in the five years from 2000 through 2004. The
company also sold 185,000 ounces of gold call options at $340 per ounce
expiring at various dates in 2004 and 2005. The additional hedging provides
flexibility for the company in its consideration of reopening the Lupin mine,
located in the new Nunavut Territory of Canada, which has been on care and
maintenance since early 1998.
Round Mountain: Higher Strip Ratio Affects Production
At the Round Mountain mine in Nevada, Echo Bay's 50% of production was
down from the same quarter the previous year (59,685 ounces compared with
66,067 ounces in 1998) but better than planned. Starting in late 1998, the
mine entered a period of higher waste stripping as it began work on a new
phase of the mine. Mining more waste tons during this period resulted in
fewer ore tons being available for processing and therefore lower production.
During the quarter, this was partially offset by the processing of
higher-grade ore through the mill.
The lower production resulted in cash operating costs rising to $221 per
ounce during the quarter from $194 per ounce in the same quarter the previous
year. Mining ore tons from the new phase will begin in the second quarter and
result in production increasing and cash costs decreasing.
Operations at Round Mountain's mill have continued to improve since its
completion in 1997. During the quarter, the mill produced a record 30,224
ounces of gold (Echo Bay's 50% share, 15,112 ounces), 23% better than the same
quarter the previous year. The increased production was accomplished as a
result of the processing of higher-grade ores and improved recoveries. In the
Round Mountain ore body, there are small, high-grade feeder structures, the
grades of which are hard to determine in advance of mining. Late in the first
quarter, and anticipated to continue into the second quarter, these structures
increased the grade of material available for processing at the mill.
The ore tons placed under leach were down by 30% on the reusable pad and
down by 15% on the dedicated pad from the prior year quarter. With less
higher-grade oxide ore tons available for loading on the reusable pad, the
company's share of production was down, 19,338 ounces during the quarter
compared with 30,407 ounces the same period the previous year. However, the
company's share of production for the quarter from the dedicated pads was up,
25,235 ounces compared with 22,638 the same quarter in 1998, due to the
continued processing of material placed on the pads in previous quarters.
In 1998, through extensive fieldwork, Round Mountain identified 11 targets
outside the area of known resource. More drilling is planned on two of the
three targets initially drilled in 1998 as well as two additional targets
identified as promising. This work continues to be aimed at identifying the
underlying geological structures and determining their potential to host gold
mineralization.
McCoy/Cove: Holds the Line on Costs
At McCoy/Cove in Nevada, lower gold grades processed through the mill
resulted in lower first quarter production than in 1998 (32,114 ounces
compared with 39,853 ounces a year ago). Silver grades processed through the
mill increased by 20% helping to increase production to 2,664,838 ounces of
silver, compared with 2,258,456 ounces a year ago. The lower equivalent
production resulted in cash operating cost per ounce increasing to $209 in the
first quarter of 1999, compared with $203 in the comparable 1998 quarter.
While McCoy/Cove has done an effective job of controlling costs despite lower
production, costs per ounce are expected to continue to rise over the
remaining quarters of 1999.
The remediation of the Cove pit wall failure is anticipated to be complete
by the middle of 1999. The first ore release from this area is expected to
occur in the third quarter but will be low grade leach ore. Higher-grade mill
ore is expected to become available beginning in early 2000.
During the quarter, the company began underground development of a small
pod of gold and silver mineralization located off the east side of the Cove
pit. Production of this material began early in the second quarter and will
continue into the fourth quarter. Though the extent of this mineralization is
limited (132,000 tons), it is relatively high-grade (0.15 ounces of gold per
ton and 9.8 ounces of silver per ton), making it economical to process using
underground mining methods. As mining advances, exploration drilling is being
done to look for extensions of this mineralization. In addition, another area
of mineralization located near the Cove pit is also being evaluated for
potential underground development.
In March, the men and women of McCoy/Cove achieved the milestone of
working over 1 million man-hours, or 17 months, without a lost time accident.
This is a significant accomplishment and reflects the commitment to safety of
the mine's workforce.
Kettle River: Production Steady, Costs Down
At the Kettle River mine in Washington State, quarterly gold production
remained relatively unchanged year over year (26,965 ounces in 1999 compared
with 27,245 ounces in 1998). The 21% reduction in the number of tons
processed was largely offset by better recoveries and the processing of
higher-grade ores. Cash operating costs were lower by $30 per ounce,
resulting from lower mill tonnage, only partially offset by higher mining
costs.
As mining gets deeper in the ore bodies and is therefore slower, and with
more of the ore tons coming from K-2 with its longer trucking distances, fewer
tons will be available for processing and costs per ton will be higher. The
majority of the higher-grade ore processed during the quarter was mined from
the K-2 deposit, and the increased grade was sufficient to more than offset
the higher mining costs.
Kettle River has had some success in identifying economic grades of
mineralization associated with extensions of the K-2 deposit to the east and
south. More work will be done in the coming months to quantify the extent of
this mineralization. Regional exploration opportunities continue to be
evaluated as potential ore sources for the Kettle River mill.
Echo Bay mines gold and silver in North America. The primary markets for
its shares are the American and Toronto stock exchanges.
Statistical Tables Attached
"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 significant declines in precious
metals prices and/or increases in production costs, which could render
projects uneconomic; ability to access financing; changes in project
parameters as plans continue to be refined; differences in ore grades,
recovery rates and tons mined from those expected; changes in mining, milling
and/or heap leaching rates from currently planned rates; the results of
current exploration activities and new opportunities; and other factors
detailed in the company's filings with the Securities and Exchange Commission.
ECHO BAY MINES
Highlights
Three months ended March 31
U.S. dollars 1999 1998
Financial Data
Revenue (millions) $48.8 $52.9
Net loss (millions) $(5.1) $(7.6)
Net loss attributable to
common shareholders (millions) $(8.3) $(10.3)
Gold ounces sold (1) 109,711 118,594
Silver ounces sold (1) 2,393,095 2,016,097
Average price realized
-- revenue basis: (2)
Per ounce of gold sold $324 $341
Per ounce of silver sold $5.52 $6.19
Average price realized
-- cash basis: (3)
Per ounce of gold sold $351 $338
Per ounce of silver sold $5.34 $5.76
Cash operating costs:
Per ounce of gold produced $216 $208
Per ounce of silver produced $3.85 $4.29
% of revenue from gold 73% 76%
% of revenue from silver 27% 24%
Production and Reserves
Production (ounces): (1)
Gold 118,764 133,165
Silver 2,664,838 2,258,456
Reserves (ounces): (4)
Gold 6,799,000 7,479,000
Silver 38,809,000 46,525,000
Per Share Data
Loss per share $(0.06) $(0.07)
Shares outstanding (millions):
Weighted average 140.6 139.4
Period end 140.6 139.4
(1) Ounces sold differ from ounces produced due to inventory changes.
(2) Includes non-cash items affecting gold and silver revenues, such as
the recognition of deferred income or deferral of revenue to future
periods in accordance with hedging-related accounting rules.
(3) Prices reported are the cash amounts received per ounce of gold and
silver sold during each period plus gold loan repayments valued at the
loan price.
(4) Proven and probable reserves at the beginning of the year.
ECHO BAY MINES
Production and Costs
Three months ended March 31
1999 1998
Gold Production (ounces)
Round Mountain (50%) 59,685 66,067
McCoy/Cove 32,114 39,853
Kettle River 26,965 27,245
Total gold 118,764 133,165
Silver Production (ounces)
McCoy/Cove 2,664,838 2,258,456
Total silver 2,664,838 2,258,456
Cash Operating Costs (U.S. dollars per ounce of gold produced)
Round Mountain $221 $194
McCoy/Cove (1) 209 203
Kettle River 228 258
Company average $216 $208
Consolidated Costs (U.S. dollars per ounce of gold produced)
Cash operating cost $216 $208
Royalties 10 9
Production taxes 1 2
Total cash cost 227 219
Depreciation 59 63
Amortization 21 26
Reclamation and mine closure 9 9
Total production cost $316 $317
(1) Cash operating costs per ounce of silver produced at McCoy/Cove were
$3.85 in 1999 and $4.29 in 1998, based on average gold-to-silver price
ratios of 54.3:1 and 47.3:1 respectively.
ECHO BAY MINES
Consolidated Earnings Statement
(Unaudited)
Three months ended March 31
1999 1998
Thousands of U.S. dollars,
except for per share data
Revenue $48,782 $52,855
Expenses:
Operating costs 32,413 33,305
Royalties 1,748 1,722
Production taxes 86 354
Depreciation and amortization 12,801 13,902
Reclamation and mine closure 1,816 1,651
General and administrative 1,873 2,257
Exploration and development 2,117 3,180
Interest and other 954 4,038
53,808 60,409
Loss before income taxes (5,026) (7,554)
Income tax expense:
Current 75 72
Deferred -- --
75 72
Net loss $(5,101) $(7,626)
Net loss attributable to
common shareholders $(8,326) $(10,259)
Loss per share (1) $(0.06) $(0.07)
Weighted average number of
shares outstanding 140,607,145 139,370,031
(1) Echo Bay's financial statements are prepared in accordance with
accounting principles generally accepted in Canada. Loss per share
equals the sum of the net loss for the period plus the equity portion
of the interest on the $100 million capital securities in the period
(a portion of the interest is charged directly to the deficit in
common shareholders' equity on the company's consolidated balance
sheet, rather than being charged to interest on the consolidated
earnings statement) divided by the weighted average number of common
shares outstanding during the period. The capital securities were
issued in March 1997; interest on these securities that was charged to
the deficit was $3.2 million in the first quarter of 1999 and $2.6
million in the first quarter of 1998.
ECHO BAY MINES
Consolidated Balance Sheet
(Unaudited)
March 31 Dec. 31 March 31
1999 1998 1998
Thousands of U.S. dollars
Assets
Current assets:
Cash and cash equivalents $3,430 $7,987 $6,227
Short-term investments 3,396 3,336 6,387
Interest and accounts
receivable 4,278 3,585 7,207
Inventories 40,919 37,929 44,753
Prepaid expenses and
other assets 7,755 6,635 4,935
59,778 59,472 69,509
Plant and equipment 188,413 196,670 228,286
Mining properties 94,338 95,738 105,392
Long-term investments and
other assets 26,079 16,196 13,071
$368,608 $368,076 $416,258
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and
accrued liabilities (1) $33,677 $43,609 $58,734
Income and mining
taxes payable 2,956 2,941 3,750
Current portion of gold
and other financings (2) 11,085 11,652 15,658
Current portion of
deferred income (1) 21,993 15,182 16,467
69,711 73,384 94,609
Long-term gold and
other financings (2) 45,982 41,119 48,002
Long-term deferred income (1) 65,995 64,363 62,220
Other long-term obligations (1) 48,997 47,943 53,168
Deferred income taxes 7,641 7,513 8,040
Common shareholders' equity:
Common shares 713,343 713,343 709,593
Capital securities 114,244 110,862 101,253
Deficit (672,201) (663,875) (641,579)
Foreign currency translation (25,104) (26,576) (19,048)
130,282 133,754 150,219
$368,608 $368,076 $416,258
(1) Certain prior-period items have been reclassified to conform with
current presentation.
(2) Total gold and other financings were $57.1 million at March 31, 1999
(including current portion of $11.1 million), down $6.6 million from
$63.7 million at March 31, 1998 (including current portion of $15.7
million).
ECHO BAY MINES
Consolidated Statement Of Cash Flow
(Unaudited)
Three months ended March 31
Thousands of U.S. dollars 1999 1998
Cash Provided from (Used in):
Operating Activities
Net loss $(5,101) $(7,626)
Add (deduct):
Depreciation and amortization 12,801 13,902
Deferred (income) loss
included in revenue (1,469) (861)
Deferral of gains on restructuring
of hedge commitments 3,782 --
Gain on sale of assets (463) (1,189)
Unrealized losses on
share investments -- 849
Other 1,442 (488)
Change in cash invested in
operating assets and liabilities:
Interest and accounts receivable (604) (1,318)
Inventories (1,745) (607)
Prepaid expenses and other assets (141) 591
Accounts payable and
other liabilities (3,022) (20,503)
Income and mining taxes payable 7 258
5,487 (16,992)
Investing Activities
Mining properties, plant
and equipment (8,089) (4,629)
Proceeds on repurchase of
gold forward sales 1,500 8,673
Short-term investments 485 2,414
Long-term investments
and other assets (4,999) 522
Proceeds on the sale of
plant and equipment 68 2,309
Proceeds on the sale of
mining properties -- 1,195
Other (622) 58
(11,657) 10,542
Financing Activities
Currency borrowings 8,000 --
Debt repayments (4,998) (4,164)
Other (1,389) (112)
1,613 (4,276)
Net decrease in cash and
cash equivalents (4,557) (10,726)
Cash and cash equivalents,
beginning of period 7,987 16,953
Cash and cash equivalents,
end of period $3,430 $6,227
ECHO BAY MINES
Mine Operating Data
Three months ended March 31
U.S. dollars 1999 1998
Round Mountain Mine (50% owned)
Gold produced (ounces):
Reusable heap leach pad (50%) 19,338 30,407
Dedicated heap leach pads (50%) 25,235 22,638
Milled (50%) 15,112 12,239
Other (50%) -- 783
Total (50%) 59,685 66,067
Ore and waste mined (tons) (100%) 18,913,000 16,110,000
Mining cost/ton of ore and waste $0.74 $0.65
Heap leaching cost/ton of ore $0.75 $0.68
Milling cost/ton of ore $3.32 $3.98
Production cost per ounce
of gold produced:
Direct mining expense $236 $194
Deferred stripping cost (30) 10
Inventory movements and other 15 (10)
Cash operating cost 221 194
Royalties 20 17
Production taxes 1 2
Total cash cost 242 213
Depreciation 49 40
Amortization 18 18
Reclamation and mine closure 9 7
Total production cost $318 $278
Reusable heap leach pad:
Ore processed (tons/day) (100%) 18,803 26,366
Grade (ounce/ton) 0.036 0.036
Recovery rate (%) 77.6 74.9
Dedicated heap leach pads:
Ore processed (tons/day) (100%) 91,648 108,297
Grade (ounce/ton) 0.010 0.010
Recovery rate (1)
Milled:
Ore processed (tons/day) (100%) 7,275 7,169
Gold grade (ounce/ton) 0.086 0.053
Gold recovery rate (%) 86.0 72.6
McCoy/Cove Mine (100% owned)
Gold produced (ounces):
Milled 20,657 25,422
Heap leached 11,457 14,431
Total gold 32,114 39,853
Silver produced (ounces):
Milled 2,584,340 2,136,149
Heap leached 80,498 122,307
Total silver 2,664,838 2,258,456
Ore and waste mined (tons) 11,785,514 7,601,618
Mining cost/ton of ore and waste $0.72 $0.74
Milling cost/ton of ore $6.74 $6.31
Heap leaching cost/ton of ore $1.71 $1.57
ECHO BAY MINES
Mine Operating Data (continued)
Three months ended March 31
U.S. dollars 1999 1998
McCoy/Cove Mine (continued)
Production cost per ounce
of gold produced: (2)
Direct mining expense $190 $196
Deferred stripping cost 2 (1)
Inventory movements and other 17 8
Cash operating cost 209 203
Royalties 3 3
Production taxes -- 2
Total cash cost 212 208
Depreciation 47 53
Amortization 27 38
Reclamation and mine closure 11 8
Total production cost $297 $307
Average gold-to-silver price ratio (2) 54.3:1 47.3:1
Milled:
Ore processed (tons/day) 11,516 10,916
Gold grade (ounce/ton) 0.035 0.041
Silver grade (ounce/ton) 3.15 2.62
Gold recovery rate (%) 44.8 55.8
Silver recovery rate (%) 66.3 74.2
Heap leached:
Ore processed (tons/day) 11,589 12,021
Gold grade (ounce/ton) 0.026 0.020
Silver grade (ounce/ton) 0.23 0.37
Recovery rates (1)
Kettle River Mine (100% owned)
Gold produced (ounces) 26,965 27,245
Tons of ore mined 154,378 193,453
Mining cost/ton of ore $24.19 $20.91
Milling cost/ton of ore $11.11 $9.76
Production cost per ounce
of gold produced:
Direct mining expense $231 $260
Inventory movements and other (3) (2)
Cash operating cost 228 258
Royalties 13 11
Production taxes 1 1
Total cash cost 242 270
Depreciation 67 72
Amortization 8 5
Reclamation and mine closure 15 12
Total production cost $332 $359
Milled:
Ore processed (tons/day) 1,658 2,107
Total tons milled 150,838 191,769
Grade (ounce/ton) 0.207 0.176
Recovery rate (%) 86.3 80.5
(1) 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.
(2) 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.
SOURCE Echo Bay Mines Ltd.
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Related links:
http://www.echobay.com
CONTACT:
Robbin Lee of Echo Bay Mines, 303-714-8829
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