Earnings Summary
Dollar amounts in thousands of
US dollars except amounts per share 2000 1999
THREE MONTHS ENDED MARCH 31:
Revenue $51,797 $48,782
Net loss $(2,673) $(5,101)
Net loss attributable
to common shareholders $(6,298) $(8,326)
Loss per share $(0.04) $(0.06)
Weighted average common
shares outstanding 140,607,154 140,607,145
ENGLEWOOD, Colo., May 3 /PRNewswire/ -- Echo Bay Mines Ltd.
(Amex: ECO; Toronto) today reported a first quarter 2000 net loss of
$2.7 million ($0.04 per share). This compares with a 1999 first quarter net
loss of $5.1 million ($0.06 per share). The loss per share for each quarter
includes the equity portion of the interest on the company's capital
securities, $3.6 million ($0.02 per share) in 2000 compared with $3.2 million
($0.02 per share) in 1999.
Total gold production for the quarter was 140,170 ounces, 18 percent
higher than 1999 first quarter production of 118,764 ounces. Silver
production from McCoy/Cove was 3.8 million ounces, 44 percent higher than the
2.7 million ounces produced in 1999.
With the higher level of production, consolidated cash operating costs for
the quarter decreased by $45 per ounce to $171 from $216 in 1999.
During the quarter, revenues increased by 6 percent, primarily due to
higher gold and silver sales (116,794 gold ounces, against 109,711 ounces in
1999 and 2,488,000 silver ounces, against 2,393,100 ounces in 1999). The
company realized lower average gold prices ($320 per ounce in 2000; $324 per
ounce in 1999), but better average silver prices ($5.80 per ounce against
$5.52 per ounce in 1999). The major difference in expenses is the Lupin
start-up cost of $4.8 million incurred during the first quarter of 2000
compared with holding costs of $1.1 in 1999. These one-time expenses are
treated as development costs.
Round Mountain: mining more ore tons
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 quarter,
which is attributable to mining of more ore rather than waste tons when
compared to the prior year. This resulted in 57 percent more tons being
placed on leach pads this quarter, compared with the same period last year.
Round Mountain completed an area of high stripping at the end of the third
quarter 1999 and has now returned to the life-of-mine average strip ratio.
The company's share of mine production was 71,954 ounces for the quarter
compared with 59,685 ounces in 1999. With the higher production, cash
operating cost per ounce performance for the quarter was $185 compared with
$221 in 1999.
During the quarter, a $1 million exploration program began which includes
further drilling, target identification and other activity in the large area
of mutual interest surrounding Round Mountain. This will allow a better
understanding of the geological structures underlying these targets and their
ability to support gold mineralization.
McCoy/Cove: higher grades and continued progress on underground targets
At McCoy/Cove in Nevada, gold production was 43,146 ounces for the quarter
compared with 32,114 ounces in 1999 and silver production amounted to
3.8 million ounces compared with 2.7 million ounces in the prior year. In
1999, McCoy/Cove completed removal of the waste rock associated with the
portion of the Cove pit wall that collapsed in 1996, allowing access to higher
grades. Gold grades were 74 percent higher and silver grades 62 percent
higher than during the same quarter in 1999. With the higher production, cash
operating costs for the quarter were $149 per ounce, down $60 from 1999.
Underground development of the northern portion of Cove South Deep upper
zone was completed in the first quarter. This target was identified in
1999 when underground development of the Cove East zone began. Extraction
from the northern portion of the Cove South Deep upper zone was underway at
quarter end. Development continues to the southern extension of this zone
with mining scheduled for completion by the end of this year.
The underground workings now encircle a large section of the Cove Pit
providing a good exploration platform. Exploration drilling from underground
commenced during the quarter. Drilling from development drifts and drill
stations will test targets down fault of Cove South Deep.
Kettle River: lower production
Production for the quarter was 25,070 ounces, down from 26,965 ounces in
1999 reflecting a reduction in tonnage brought to the mill. At Kettle River,
a series of deposits are mined with the ore feeding a central mill. As mining
continues deeper within these deposits the haulage distance gets longer,
contributing to lower gold production. Despite the decrease in production,
cash operating costs per ounce were $227, similar to the year before.
Exploration continued to test zones to the northeast of the K-2 deposit.
Initial drilling is being done from the decline driven off the K-2 access
drift to determine the extent of the mineralization.
Lupin: re-commencement activities complete
In November 1999, the company announced its decision to reopen the Lupin
mine, located in Nunavut, Canada. During February and March, necessary fuel,
supplies and other bulk inventory were delivered over the winter ice road.
Re-commissioning activities are now complete and have been accomplished on
time and on budget. An investment of $7.2 million in inventory and other
capital was made during the quarter and initial startup costs of $4.8 million
were expensed as development costs. The first gold pour occurred mid-April
and total gold production is on target for 100,000 - 110,000 ounces in
2000. Based on reserves of 518,000 ounces and other mineralization of
268,000 ounces, the current mine plan estimates production through 2004 at an
average annual rate of 150,000 ounces of gold. Drilling indicates additional
mineralization at depth, and confirmation drilling will begin during the
latter part of 2000. The Ulu satellite deposit, located approximately
160 kilometres north of Lupin, represents the potential for additional mill
feed for the site.
Debt and liquidity
The company ended the quarter with $2.4 million in cash and cash
equivalents. During the first quarter, total debt increased by approximately
$7 million, reflecting the working capital investment and startup costs for
Lupin.
At March 31, 2000, the company had a $10 million undrawn balance under its
revolving credit line. Based on the trailing 90-day average spot price of
$290 per ounce gold, the company currently has no restrictions on borrowing
capacity under this $50 million credit facility. Assuming current spot prices
of gold and silver and the anticipated production from the mines for the rest
of 2000, the company expects to be cash positive for the second half of the
year.
During the quarter, the company elected to exercise its option to defer
the April 2000 interest payment on the $100 million capital securities.
During the period of deferral, interest is accruing at a rate of 12 percent
per annum, compounded semiannually.
The company's current gold forward sales position, representing 32 percent
of remaining 2000 planned gold production, will realize a price of $314 per
ounce. In addition, the company has added downside protection with the
purchase of 187,500 ounces of gold put options, at an average strike price of
$270 per ounce. Approximately 3.4 million ounces, or 46% of the remaining
2000 planned silver production, is also hedged at an average of $5.61 per
ounce.
On March 29, 2000 Handy & Harman Refining Group, Inc., which operated a
facility used by the company for the refinement of dore bars, filed for
protection under Chapter 11 of the U.S. Bankruptcy Code. The outcome of these
proceedings is uncertain at this time. The company has gold and silver with
an estimated market value of approximately $2.4 million for its account at
this refining facility.
The company has been advised by The American Stock Exchange that the
company's listing eligibility is under review. The review has been undertaken
because the company has fallen below two of the Exchange's continued listing
guidelines: -- the company has sustained net losses in its five most recent
fiscal years and, in the Exchange's view, the company's shareholders' equity
is inadequate. The company is addressing the Exchange's concerns but the
outcome of the review is uncertain.
Exploration and development projects
With the ongoing low gold price environment, the company continues its
focused approach to exploration and development activities primarily in the
Western United States and in the Timmins area of Ontario.
Feasibility studies are in progress on two projects. The results of the
study on the Youga/Bitou property in Burkina Faso, West Africa, (a 50/50 joint
venture with Ashanti Goldfields as the operator) are being evaluated and the
company expects the next steps in the program will be determined by the end of
the second quarter. On the company's 100 percent owned Aquarius project,
located near Timmins, a revised feasibility report will be available by the
end of the second quarter. This independent study will incorporate the use of
certain mill equipment acquired by the company at the end of last year as well
as the potential represented by the company's land holdings in the region.
Aquarius is a near-term opportunity in an improving gold market.
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
http://www.echobay.com
"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 in startup of the Lupin mine 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 2000 1999
Financial Data
Revenue (millions) $51.8 $48.8
Net loss (millions) $(2.7) $(5.1)
Gold ounces sold 116,794 109,711
Silver ounces sold 2,488,007 2,393,095
Average price realized
- revenue basis: (1)
Per ounce of gold sold $320 $324
Per ounce of silver sold $5.80 $5.52
Average price realized
- cash basis: (2)
Per ounce of gold sold $301 $351
Per ounce of silver sold $5.67 $5.34
Cash operating costs:
Per ounce of gold produced $171 $216
Per ounce of silver produced $2.67 $3.85
% of revenue from gold 72% 73%
% of revenue form silver 28% 27%
Production and Reserves
Production (ounces):
Gold 140,170 118,764
Silver 3,842,946 2,664,838
Reserves (ounces): (3)
Gold 5,296,000 6,799,000
Silver 28,243,000 38,809,000
Per Share Data
Net Loss $(0.04) $(0.06)
Shares outstanding (millions):
Weighted average 140.6 140.6
Period end 140.6 140.6
(1) 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.
(2) Prices reported are the cash amounts received per ounce of gold and
silver sold during each period.
(3) Proven and probable reserves at the beginning of the year.
ECHO BAY MINES
Production and Costs
Three months
ended March 31
2000 1999
Gold Production (ounces)
Round Mountain (50%) 71,954 59,685
McCoy/Cove 43,146 32,114
Kettle River 25,070 26,965
Total gold 140,170 118,764
Silver Production (ounces)
McCoy/Cove 3,842,946 2,664,838
Total silver 3,842,946 2,664,838
Cash Operating Costs (U.S. dollars
per ounce of gold produced)
Round Mountain (50%) $185 $221
McCoy/Cove 149 209
Kettle River 227 228
Company average $171 $216
Consolidated Costs (U.S. dollars
per ounce of gold produced)
Cash operating cost $171 $216
Royalties 7 10
Production taxes 3 1
Total cash cost $181 $227
Depreciation 38 59
Amortization 22 21
Reclamation 11 9
Total production cost $252 $316
ECHO BAY MINES
Consolidated Statement of Operations
(Unaudited)
Three months
Thousands of U.S. dollars, ended March 31
except for per share data 2000 1999
Revenue $51,797 $48,782
Expenses:
Operating costs 30,209 32,413
Royalties 1,562 1,748
Production taxes 525 86
Depreciation and amortization 11,698 12,801
Reclamation and mine closure 2,269 1,816
General and administrative 1,586 1,873
Exploration and development (1) 6,023 2,117
Interest and other 2,023 954
55,895 53,808
Loss before income taxes (4,098) (5,026)
Income tax expense (recovery):
Current 75 75
Deferred (1,500) --
(1,425) 75
Net loss $(2,673) $(5,101)
Net loss attributable
to common shareholders $(6,298) $(8,326)
Loss per share (2) $(0.04) $(0.06)
Weighted average number
of shares outstanding 140,607,145 140,607,145
(1) Includes Lupin start-up costs of $4.8 million in 2000 and Lupin
holding costs of $1.1 million in 1999.
(2) 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 $3.6 million for the
three months ended March 31, 2000 and $3.2 million in the same period
in 1999.
ECHO BAY MINES
Consolidated Balance Sheet
(Unaudited)
March 31 December 31 March 31
Thousands of U.S. dollars 2000 1999 1999
Assets
Current assets:
Cash and cash equivalents $2,397 $3,401 $3,430
Short-term investments 2,027 2,042 3,396
Interest and accounts
receivable 3,020 2,942 4,278
Inventories 51,940 37,204 40,919
Prepaid expenses and
other assets 16,194 15,621 7,755
75,578 61,210 59,778
Plant and equipment 159,380 167,438 188,413
Mining properties 80,040 81,959 94,338
Long-term investments
and other assets 25,037 29,255 26,079
$340,035 $339,862 $368,608
Liabilities and shareholders equity
Current liabilities:
Accounts payable and
accrued liabilities $32,783 $29,961 $33,677
Income and mining
taxes payable 3,496 3,004 2,956
Gold and other financings 14,375 13,750 11,085
Deferred income 11,282 10,525 21,993
61,936 57,240 69,711
Gold and other financings 49,156 42,919 45,982
Deferred income 75,177 83,374 65,995
Other long term obligations 49,634 47,847 48,997
Deferred income taxes 5,825 7,381 7,641
Common shareholders' equity:
Common shares 713,343 713,343 713,343
Capital securities 128,416 124,616 114,244
Deficit (721,142) (714,844) (672,201)
Foreign currency
translation (22,310) (22,014) (25,104)
98,307 101,101 130,282
$340,035 $339,862 $368,608
ECHO BAY MINES
Consolidated Statement of Cash Flow
(Unaudited)
Three months
Thousands of U.S. dollars, ended March 31
except for per share data 2000 1999
Cash Provided from (Used in):
Operating Activities
Net loss $(2,673) $(5,101)
Add (deduct):
Depreciation and amortization 11,698 12,801
Deferred income included
in revenue (3,780) (1,469)
Deferral of gains on restructuring
of hedge commitments 123 3,782
Deferred income taxes (1,500) --
Net gain on sale of other assets (15) (463)
Other 209 1,442
Change in cash invested in
operating assets and liabilities:
Interest and accounts receivable (79) (604)
Inventories (13,814) (1,745)
Prepaid expenses and other assets 12 (141)
Accounts payable and other
liabilities 5,192 (3,022)
Income and mining taxes payable 494 7
(4,133) 5,487
Investing Activities
Mining properties,
plant and equipment (4,662) (8,089)
Long-term investments
and other assets (395) (4,999)
Proceeds on repurchase
of gold forward sales -- 1,500
Short-term investments -- 485
Proceeds on sale of plant
and equipment 44 68
Other 1,267 (622)
(3,746) (11,657)
Financing Activities
Currency borrowings 10,000 8,000
Debt repayments (3,125) (4,998)
Other -- (1,389)
6,875 1,613
Net decrease in cash and
cash equivalents (1,004) (4,557)
Cash and cash equivalents,
beginning of period 3,401 7,987
Cash and cash equivalents,
end of period $2,397 $3,430
ECHO BAY MINES
Mine Operating Data
Three months
U.S. dollars, ended March 31
except where indicated 2000 1999
Round Mountain (50% owned)
Gold produced (ounces):
Heap leached - reusable pad (50%) 17,768 19,338
Heap leached - dedicated pad (50%) 32,373 25,235
Milled (50%) 19,878 15,112
Other (50%) 1,935 --
Total (50%) 71,954 59,685
Mining cost/ton of ore and waste $0.83 $0.74
Heap leaching cost/ton of ore $0.57 $0.73
Milling cost/ton of ore $2.90 $3.32
Production cost per ounce
of gold produced:
Direct mining expense $215 $236
Deferred stripping costs (19) (30)
Inventory movements and other (11) 15
Cash operating costs 185 221
Royalties 11 20
Production taxes 1 1
Total cash costs 197 242
Depreciation 46 49
Amortization 18 18
Reclamation and mine closure 9 9
Total production costs $270 $318
Heap leached on reusable leach pads:
Ore processed (tons/day) (100%) 27,938 18,803
Tons ore processed (000 tons) (100%) 2,542 1,711
Grade (ounce/ton) 0.026 0.036
Recovery rate (%) 58.5 77.6
Heap leached on dedicated leach pads:
Ore processed (tons/day) (100%) 145,275 91,648
Tons ore processed (000 tons) (100%) 13,220 8,340
Grade (ounce/ton) 0.011 0.010
Recovery rate (1)
Milled:
Ore processed (tons/day) (100%) 8,063 7,275
Tons ore processed (000 tons) (100%) 734 662
Grade (ounce/ton) 0.046 0.086
Recovery rate (%) 84.4 86.0
(1) Estimated at 50%. Actual recoveries will not be known until leaching
is complete.
ECHO BAY MINES
Mine Operating Data (continued)
Three months
U.S. dollars, ended March 31
except where indicated 2000 1999
McCoy/Cove (100% owned)
Gold produced (ounces):
Milled 28,698 20,657
Heap leached 14,448 11,457
Total gold 43,146 32,114
Silver produced (ounces):
Milled 3,615,276 2,584,340
Heap leached 227,670 80,498
Total silver 3,842,946 2,664,838
Mining cost/ton of ore and waste $0.73 $0.72
Milling cost/ton of ore $6.79 $6.74
Heap leaching cost/ton of ore $1.72 $1.71
Production cost per ounce
of gold produced:
Direct mining expense $166 $190
Deferred stripping costs (11) 2
Inventory movement and other (6) 17
Cash operating costs 149 209
Royalties 4 3
Production taxes 3 --
Total cash cost 156 212
Depreciation 24 47
Amortization 28 27
Reclamation 11 11
Total production cost $219 $297
Average gold-to-silver price ratio (1) 55.8:1 54.3:1
Milled:
Ore processed (tons/day) 11,200 11,516
Tons ore processed (000 tons) 1,019 1,048
Gold grade (ounce/ton) 0.061 0.035
Silver grade (ounce/ton) 5.10 3.15
Gold recovery rate (%) 55.7 44.8
Silver recovery rate (%) 72.3 66.3
Heap leached:
Ore processed (tons/day) 10,874 11,589
Tons ore processed (000 tons) 990 1,055
Gold grade (ounce/ton) 0.027 0.026
Silver grade (ounce/ton) 1.07 0.23
Recovery rates (2)
(1) To convert cost per ounce of gold into comparable costs per ounce of
co-product silver, divide the production cost per ounce of gold by
the period's average gold-to-silver price ratio.
(2) Dedicated leach pads are used at this site. Recovery rates can only
be estimated, as actual recovery rates will not be known until
leaching is complete. The ultimate recovery rate is estimated to be
about 68% for crushed and 48% for uncrushed gold and 35% for crushed
and 10% for uncrushed silver.
ECHO BAY MINES
Mine Operating Data (continued)
Three months
U.S. dollars, ended March 31
except where indicated 2000 1999
Kettle River (100% owned)
Gold produced (ounces) 25,070 26,965
Mining cost/ton of ore $22.01 $24.19
Milling cost/ton of ore $11.84 $11.11
Production cost per ounce
of gold produced:
Direct mining expense $239 $231
Inventory movement and other (12) (3)
Cash operating costs 227 $228
Royalties 14 13
Production taxes 1 1
Total cash cost 242 242
Depreciation 10 67
Amortization 8 8
Reclamation 15 15
Total production cost $275 $332
Milled:
Ore processed (tons/day) 1,508 1,658
Tons ore processed (000 tons) 137 151
Grade (ounce/ton) 0.219 0.207
Recovery rate (%) 83.3 86.3
Gold Hedge Position
At April 28, 2000
Strike
Forward Price Put options price
sales per purchased per
(ounces) ounce (ounces) ounce
2Q00 87,084 $312 62,500 $270
3Q00 43,750 317 62,500 270
4Q00 43,750 317 62,500 270
2000 174,584 314 187,500 270
2001 105,000 315 -- --
2002 60,000 315 -- --
2003 60,000 315 -- --
2004 60,000 315 -- --
2005 15,000 315 -- --
474,584 $315 187,500 $270
Average
price Deferred
Total per revenue(1)
(ounces) ounce (millions)
2Q00 149,584 $294 $4.3
3Q00 106,250 289 4.4
4Q00 106,250 289 6.4
2000 362,084 291 15.1
2001 105,000 315 17.3
2002 60,000 315 31.1
2003 60,000 315 (2.3)
2004 60,000 315 (6.8)
2005 15,000 315 (0.8)
662,084 $302 $53.6
(1) Gains (losses) on the repurchase or restructuring of gold hedge
positions are recognized in revenue in the period in which the gold
was originally scheduled for delivery. Amounts also include gold
option premiums to be recognized.
Strike Strike
Call options price Call options price
sold per purchased(2) per
(ounces) ounce (ounces) ounce
2Q00 62,500 $360 50,417 $340
3Q00 62,500 360 33,750 349
4Q00 62,500 360 33,750 349
2000 187,500 360 117,917 345
2001 -- -- 105,000 351
2002 -- -- 60,000 360
2003 -- -- 60,000 360
2004 -- -- 60,000 360
2005 105,000 340 120,000 395
292,500 $353 522,917 $363
(2) Call options were purchased to reduce margin exposure and to allow
Echo Bay to participate in spot prices above the call option strike
price.
Silver Hedge Position
At April 28, 2000
Forward Put options Strike
sales(1) Price purchased price
(000 per (000 per
ounces) ounce ounces) ounce
2Q00 860 $5.59 500 $6.00
3Q00 900 5.46 250 6.00
4Q00 900 5.46 250 6.00
2000 2,660 5.50 1,000 6.00
2001 1,800 5.79 1,000 6.00
4,460 $5.62 2,000 $6.00
Average
Total price Deferred
(000 per revenue(2)
ounces) ounce (millions)
2Q00 1,360 $5.74 $0.3
3Q00 1,150 5.58 $0.2
4Q00 1,150 5.58 $0.1
2000 3,660 5.64 $0.9
2001 2,800 5.87 $(0.5)
6,460 $5.74 $0.4
(1) 2.7 million ounces of forward sales at $5.46 are contingent on the
London silver fixing being above $4.85. The actual number of ounces
delivered will be based on the ratio of days the London silver fixing
is at, or above $4.85 compared to the total number of London silver
fixings.
(2) Gains (losses) on the repurchase or restructuring of silver hedge
positions are recognized in revenue in the period in which the silver
was originally scheduled for delivery. Amounts also include silver
option premiums to be recognized.
Put options Strike Call options Strike
sold(1) price purchased(2) price
(000 per (000 per
ounces) ounce ounces) ounce
2Q00 250 $4.75 -- $--
3Q00 250 4.75 -- --
4Q00 250 4.75 -- --
2000 750 4.75 -- --
2001 2,500 4.75 1,500 6.60
3,250 $4.75 3,000 $6.60
(1) Put options were sold to finance the call options described in
footnote 3 and could result in Echo Bay receiving less than the full
forward price if silver's spot price falls below $4.75 per ounce.
(2) Call options were purchased to reduce margin exposure and to allow
Echo Bay to participate in spot prices above the call option strike
price.
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., 303-714-8838
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