Echo Bay Announces Series of Actions to Improve Cash Flow By $30-35 Million In Response to 18-Year Lows In Gold Price

Search Blogs that Mention this News Release
Click this link to view linked Bookmarking Services
Click this link to view linked Blogging Services
Echo Bay Announces Series of Actions to Improve Cash Flow By $30-35 Million In Response to 18-Year Lows In Gold Price
    ENGLEWOOD, Colo., Jan. 6 /PRNewswire/ -- Echo Bay Mines Ltd.
(Amex: ECO; Toronto) announced today a series of actions designed to improve
cash flow by an estimated $30-35 million in 1998 in response to 18-year lows
in the gold price.
    The company is temporarily suspending operations at its Lupin gold mine in
the Northwest Territories, and is scaling back operations at its McCoy/Cove
mine in Nevada, until the gold price improves.  Echo Bay will also reduce its
1998 new-project expenditures budget to $3 million from $21 million and its
exploration budget to $6 million from $11 million, pending an increase in gold
prices.  In addition, the company is reducing the number of executive,
administrative and clerical staff based in the Denver corporate office by
approximately 40% to a total of 37 persons.
    Taken together, these actions are expected to reduce the company's 1998
cash expenditures by an estimated total of $30-35 million.  With the company's
current gold hedge position, Echo Bay will realize a minimum average of $338
per ounce for its entire planned 1998 gold production.
    The current cash value of the company's gold and silver hedge position is
$51 million ($24 million for 1998 and $27 million for the years 1999-2002),
including $22 million for an interest rate swap that approximately halves the
interest rate paid by the company on its $100 million capital securities
through March 2002.
    The company will take an estimated $14 million charge in the fourth
quarter of 1997 for the total cost of these overall reductions, including
severance and related costs.
    Lupin and McCoy/Cove are the company's two highest-cost mines.  Both have
operated at a loss for some time.  In the first nine months of 1997, cash
operating costs were $294 and $291 per ounce of gold produced at Lupin and
McCoy/Cove respectively.  The market price of gold sank to an 18-year low of
$280.45 today.  Cash operating costs are considerably lower at the company's
other two gold mines, Round Mountain in Nevada and Kettle River in Washington
State ($205 and $217 per ounce respectively for the first nine months of
1997).
    The temporary mothballing of Lupin and scale-back of operations at
McCoy/Cove is expected to reduce Echo Bay's 1998 cash operating costs to $240-
250 per ounce of gold produced, compared with the company's full-year 1997
target of $265-275 per ounce.  The company's total gold production is expected
to be reduced by approximately 25%, or 175,000 ounces of gold per year, until
gold prices improve.  In the first nine months of 1997, Lupin produced 121,278
ounces and McCoy/Cove produced 143,900 ounces of Echo Bay's total 551,227
ounces of gold production.
    With the actions announced today, Echo Bay's 1998 production targets are
500-525,000 ounces of gold and 7-8 million ounces of silver.
    The Lupin mine is being placed on "care and maintenance" to maintain the
integrity of the mine and enable it to reopen when gold prices improve.
Approximately 500 employees are affected.  The underground mine is located 56
miles south of the Arctic Circle.  It is the northernmost gold mine in the
world outside of Russia.  Annual care and maintenance costs are anticipated to
be about $3 million.
    At the McCoy/Cove mine, operations are being scaled back and costs will be
reduced significantly by implementation of a variety of actions until gold
prices improve.  Mining activities will be limited to the higher-grade
portions of the Cove open pit.  Mining is being discontinued in the smaller,
higher-cost McCoy pit.  Remediation work on the Cove pit wall is being
postponed at least until the second half of 1998, pending an improvement in
the gold price.  There will be a reduction of approximately 20% of the 450
employees at the site.  Other cost-saving measures will also be implemented.
    The outstanding success that has been achieved at these two mines in the
past is due in large measure to the contributions of the highly skilled and
dedicated employees at those locations.  Echo Bay recognizes these
contributions and will provide a compensation package to all affected
employees.
    Echo Bay mines gold and silver in Canada and the United States.  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,
which could render projects uneconomic; differences in ore grades, recovery
rates, and tons mined from those expected; changes in mining and milling rates
from currently planned rates; the results of future exploration activities and
new opportunities; changes in project parameters as plans continue to be
refined; and other factors detailed in the company's filings with the
Securities and Exchange Commission.
SOURCE Echo Bay Mines Ltd.
http://www.echobay.com CONTACT:
Robbin Lee of Echo Bay Mines Ltd.,
303-714-8829
CNOC: http://www.prnewswire.com or fax, 800-758-5804, ext.
269609