EDMONTON, Alberta, Nov. 7 /PRNewswire-FirstCall/ --
Echo Bay Mines Ltd. (Toronto; Amex: ECO) today reported net earnings of
$3.7 million for the third quarter of 2002 compared with a net loss of
$0.2 million in the third quarter of 2001. On a per share basis, net earnings
were $0.01 for the quarter compared to a net loss of $0.03 in 2001. The loss
per share in 2001 included $4.1 million representing the equity portion of the
interest on the company's capital securities. All dollar amounts are
expressed in U.S. dollars.
Total gold production for the quarter was 139,088 ounces compared with
third quarter 2001 production of 171,533 ounces. The lower production
resulted from lower tonnage at Lupin and Kettle River and no production from
McCoy/Cove, which has been in full reclamation mode since March 31, 2002.
Consolidated cash operating costs for the quarter were $222 per ounce compared
with $217 in the same period in 2001.
Revenue was down this quarter compared with a year ago ($52.0 million
compared with $58.5 million) as a result of fewer gold, and no silver, ounces
sold. The lower sales were partially offset by higher deferred revenue
recognized in 2002 ($6.7 million compared to $3.2 million in 2001) and higher
realized gold prices. The deferred revenue relates to gains on hedging
contracts that were closed in prior years.
Nine Months Results
Net earnings for the nine months ended September 30, 2002 were
$7.7 million compared with net earnings of $3.2 million in the same period in
2001. The exchange of the company's capital securities in the second quarter
and interest on these securities in the first quarter resulted in a total
charge of $136.9 million which affected earnings per share. On a per share
basis, the loss for the nine months was $0.33 compared with a loss of $0.07 in
2001 (which included $12.7 million representing the equity portion of interest
on the capital securities).
Total gold production for the nine months ended September 30, 2002 was
418,006 ounces compared with production of 521,287 ounces in the same period
in 2001. The lower production resulted from mining lower grades and fewer
tons at Lupin and Kettle River, and completion of production at McCoy/Cove in
March 2002. Consolidated cash operating costs for the nine-month period were
$220 per ounce compared with $216 in the same period in 2001.
Revenue was down for the nine months ended September 30, 2002 compared
with a year ago ($161.7 million compared to $186.7 million) as a result of
fewer gold and silver ounces sold. The lower sales were partially offset by
higher deferred revenue recognized in the first nine months of this year
($23.0 million) than recognized in the same period in 2001 ($10.6 million).
In addition, the company realized higher gold prices as the average market
price of gold was $306 per ounce for the first nine months of 2002 compared to
$269 per ounce for the same period in 2001.
Revision Of Six Months Loss Per Share
The loss per share for the six months ended June 30, 2002 previously
reported as $0.31 has been revised to a loss per share of $0.42 due to an
incorrect determination of the average number of shares outstanding for the
six month period. The loss for the three months ended June 30, 2002 remains
unchanged.
Debt And Liquidity
The company ended the third quarter with $20.9 million in cash and cash
equivalents and no debt. As at September 30, 2002, the company's remaining
gold forward sales position consisted of 15,000 ounces at a price of $293 per
ounce and 75,000 gold call options sold at an average strike price of $294 per
ounce with delivery against this position scheduled for the fourth quarter of
this year. The company satisfied its hedging contracts in October 2002 by
delivering 15,000 ounces of gold into forward contracts and 15,000 ounces of
gold into call options. The remaining 60,000 ounces of gold call options were
settled at a cost of $1.1 million. The company's production is now completely
unhedged.
Operations
At Round Mountain, the company's share of mine production for the quarter
was 100,063 ounces compared with 102,883 ounces in the same period of the
prior year. Cash operating costs for the quarter were $191 per ounce, the
same as the previous year. During the quarter, work on the Gold Hill
property, located four miles north of the current mining and processing
facilities, continued to focus on shallow mineralization to assess the
economics of a small starter pit. Gold Hill displays Round Mountain style
mineralization over an area that presently measures approximately 2,000 by
4,000 feet. While the extent of the mineralization has not been fully
defined, an internal study is being conducted to determine the preliminary
economics of the shallow mineralization. Results of this study are expected
by year end.
At Lupin, gold production for the quarter was 31,118 ounces compared to
33,000 ounces in the same quarter of 2001. Cash operating costs for the
quarter were $307 per ounce compared with $241 per ounce in 2001.
The significant increase in cash operating costs is attributable to higher
development spending and lower production. During the quarter, activity was
focused on increasing development and production stopes to provide additional
ore sources. The company is assessing the feasibility of recommencing
exploration activities at the Ulu project (125 km north of Lupin). Repair and
maintenance of the Ulu camp facilities were completed during the quarter.
At Kettle River, gold production for the quarter was 7,907 ounces, down
from 12,200 ounces in 2001, reflecting the lower tonnage available from the
K-2 mine and ore stockpiles. With the lower production, cash operating costs
per ounce in the quarter were $281 per ounce compared with $278 per ounce in
the same quarter of 2001. The higher costs per ounce resulted only from the
lower production, as actual spending was 22 percent less than in 2001.
The company anticipates that the last ore from the K-2 mine and stockpiles
will be consumed in November. The mill facility will then be put on care and
maintenance awaiting results from exploration at the adjacent Emanuel Creek
property, which continue to be encouraging. Data from surface drilling
conducted over the past two years is being supplemented by an underground
exploration and development program which began in June 2002. Results from
this program should be available early in 2003.
At McCoy/Cove in Nevada, gold production was completed on March 31, 2002
and the property is now in full reclamation mode. On June 9, 2002, two
subsidiaries of the company entered into an asset purchase agreement with a
subsidiary of Newmont Mining Corporation providing for the conveyance of the
McCoy/Cove complex to this Newmont subsidiary. In consideration for the
acquisition of such assets, the Newmont subsidiary has agreed to assume all
liabilities and other obligations relating to the reclamation and remediation
required for the McCoy/Cove complex. The closing of the transaction is
subject to, among other conditions, completion of the combination of Kinross
Gold Corporation, TVX Gold Inc. and the company. Pending completion of the
transaction, Echo Bay will continue to operate McCoy/Cove for its own account.
Proposed Combination
On June 10, 2002, the company, Kinross and TVX announced that they had
entered into an agreement providing for the proposed combination of the
companies. In a concurrent transaction, TVX agreed to acquire from Newmont
Mining Corporation the interest in the TVX Newmont Americas joint venture that
it does not already own. The combination of the companies is conditional upon
the completion of this purchase.
Shareholders of Echo Bay (other than Kinross) would receive 0.52 of a
Kinross common share for each Echo Bay common share. At a Kinross special
meeting, the shareholders of Kinross are expected to consider a one-for-three
share consolidation which, if approved, would result in an exchange ratio
change from 0.52 to 0.1733 of a Kinross common share for each Echo Bay common
share. The Kinross share consolidation would not affect the percentage
ownership interest of the Echo Bay shareholders in Kinross.
As a result of the U.S. Securities and Exchange Commission's ongoing
review of the preliminary proxy statement filed with the Commission on
September 17, 2002, the company will not be able to finalize and mail the
proxy statement in time for the company to hold its special meeting for the
purpose of considering the combination in advance of November 30, 2002, the
termination date specified in the combination agreement. The parties are
discussing amending the combination agreement to extend the termination date,
with a view to holding special meetings late in the fourth quarter 2002 or
early in 2003.
Statistical information is available with this release at the press
release area of the company's web site, http://www.echobaymines.ca .
Echo Bay mines gold in North America. The primary markets for its shares
are the American Stock Exchange and The Toronto Stock Exchange.
"Safe Harbor" Statement under the U.S. 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, the possibility that the
combination of Kinross, TVX and the company may not be completed; 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; and other factors detailed in the company's filings
with the Securities and Exchange Commission.
On September 17, 2002, the company filed with the Securities and Exchange
Commission a preliminary proxy statement regarding the proposed business
combination transaction referred to in the foregoing information.
In addition, the company will prepare and file with the Commission a
definitive proxy statement and other documents regarding the proposed
transaction. Investors and security holders are urged to read the definitive
proxy statement, when it becomes available, because it will contain important
information. The definitive proxy statement will be sent to shareholders of
the company to seek their approval of the proposed transaction. Investors and
security holders may obtain a free copy of the definitive proxy statement,
when it is available, and other documents filed with the Commission by the
company at the Commission's web site at http://www.sec.gov . The definitive proxy
statement, when it is available, and these other documents may also be
obtained for free from the company by directing a request to
Lois-Ann L. Brodrick, Vice President and Secretary, 780-496-9704,
investor_relations@echobaymines.ca .
Certain information concerning participants
The names, affiliations and interests of participants in the solicitation
of proxies of the company's shareholders to approve the combination are
included in the preliminary proxy statement.
SOURCE Echo Bay Mines Ltd.
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Related links:
http://www.echobaymines.ca
CONTACT:
Lois-Ann L. Brodrick, Vice President and
Secretary of Echo Bay Mines Ltd., +1-780-496-9704
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