ENGLEWOOD, Colo., Feb. 17 /PRNewswire/ -_ Echo Bay Mines Ltd.
(Amex: ECO; Toronto) today reported a 1997 net loss of $57.8 million ($0.46
per share) before a non-recurring provision for impaired assets and other
charges of $362.7 million ($2.60 per share). Including the special charges,
the loss for the year totaled $420.5 million ($3.06 per share).
The charges consisted of three previously reported provisions and one
announced today. The new one is a year-end 1997 non-cash provision of
$36.2 million to write off Echo Bay's entire remaining investment in Santa
Elina Mines Corporation. Echo Bay has been attempting since midyear 1997 to
sell part or all of the company's non-strategic 58% interest in this gold
exploration and development company in Brazil. The market value of this
investment dropped precipitously in the wake of the decline in value of many
junior exploration companies and the decline in world gold prices to 18-year
lows.
The previously reported provisions for 1997 consisted of $309.8 million in
the third quarter to write down impaired assets as part of a major asset
reevaluation and downsizing program undertaken by the company in response to
gold market conditions, plus provisions totaling $16.6 million for severance
costs.
A year ago, Echo Bay had a net loss of $176.7 million ($1.31 per share),
including non-recurring charges of $77.1 million to write off the Alaska-
Juneau development project and $30.0 million to provide for waste rock
stabilization at the McCoy/Cove mine in Nevada.
Results of Operations
Echo Bay's gold production fell and silver production rose in 1997, as
expected, reflecting the planned processing of carbonaceous ores leaner in
gold but richer in silver at the McCoy/Cove mine. Echo Bay produced 721,075
ounces of gold in 1997, meeting its gold production target of 700-725,000
ounces. Silver production was 11.0 million ounces, better than the company's
target range of 9-10 million ounces. Consolidated cash operating costs were
$249 per ounce of gold produced, down from $254 a year ago. This was better
than the company's 1997 target of $265-275 per ounce, reflecting a series of
company-wide cost reduction programs.
Echo Bay's revenues fell 9% to $305.4 million in 1997 from $337.3 million
in 1996, reflecting the decline in gold prices to 18-year lows. The average
price realized by Echo Bay fell by $22 per ounce of gold sold, to $362 per
ounce in 1997 from $384 in 1996. Echo Bay's $362 realized price was $30
better than the $332 average spot price per ounce of gold on world markets
during 1997, a result of the company's hedging programs.
Significantly Improved Fourth Quarter Results Before Special Charges
Echo Bay reported significantly improved fourth quarter results, as the
company's downsizing program and cost-cutting efforts reduced its net loss to
$8.1 million ($0.07 per share) from the year-ago $26.4 million ($0.19 per
share) before the special provisions, even though the gold price fell by $67
per ounce to a quarterly average of $309 from $376 a year ago.
Quarterly cash operating costs were cut to $231 per ounce of gold in 1997
from $279 per ounce a year earlier, despite an 8% reduction in gold production
due to the planned processing of lower-grade ores (169,848 ounces vs. 184,029
ounces). Silver production rose 55% to 3.4 million ounces.
Sharply Reduced Costs
In the fourth quarter, the company halved its general and administrative
expenses at the corporate consolidated level to $2 million, down from
$4 million a year earlier. For the full year 1997, these G&A expenses were
reduced to $11 million, down from $14 million in 1996. Additional staff
reductions and other cost-saving programs implemented in late 1997 are
expected to further reduce Echo Bay's consolidated G&A expenses to
$9-10 million in 1998.
In addition, the company reduced by $5 million in 1997 the total cost of
corporate technical services, computer systems and other support services
provided by the company's corporate office to the producing mines and charged
to those mines. These cost savings are reflected in the mines' operating
costs per ounce of gold produced. In 1998, additional cost reductions are
expected to total about $6 million.
Depreciation and amortization expenses decreased to $18 million in the
fourth quarter from $23 million a year earlier, primarily a result of the
company's write-down of carrying values at three mines in the third quarter of
1997. For the full year, depreciation and amortization totaled $79 million in
1997, down from $86 million in 1996. In 1998, the company expects
depreciation and amortization expenses to be in the range of $65-70 million,
reflecting lower planned production levels and the 1997 reduction in carrying
values.
Protection Against Further Gold Price Declines
With the company's current gold hedge position, Echo Bay will realize a
minimum average price of $340 per ounce for its entire planned 1998 gold
production, regardless of the spot price of gold. In addition, the company
has hedged 298,000 ounces of gold in 1999 at a minimum average price of $370
per ounce.
The company's 1998 gold hedge position consists of 300,000 ounces of put
options at $310 per ounce, 150,000 ounces of put options at $345 per ounce,
and 138,000 ounces of gold production hedged at an average price of $387 per
ounce through a combination of gold loans and forward sales. Echo Bay paid
for its put options largely by selling call options on 150,000 ounces of gold
at $399 per ounce and call options on four million ounces of silver at $5.74
per ounce. (Echo Bay's put options give it the right, but not the obligation,
to deliver or "put" gold to the options' seller at a predetermined price on a
predetermined date. The call options give the holders the right, but not the
obligation, to buy or "call" the precious metal from Echo Bay at a
predetermined price on a predetermined date.)
This combination covers a total of 588,000 ounces of gold. Of these,
530,000 ounces are designated for 1998 in order to cover the company's entire
planned production of 500-520,000 ounces, guaranteeing a minimum average
selling price of $340 per ounce for the year. The remaining 58,000 ounces are
scheduled to be rolled forward into the 1999 hedge position as the 1998 put
options expire. The 1999 hedge position also includes 240,000 ounces of gold
hedged at $382 per ounce through a combination of gold loans and forward
sales, guaranteeing Echo Bay a minimum average selling price of $370 per ounce
for a total of 298,000 ounces of gold.
One-quarter of the company's $310 put options expire in each quarter of
1998. Half of its $345 put options and half of its gold call options expire
in each of the first two quarters of 1998. The silver call options expire in
the fourth quarters of 1998 and 1999.
Cash and Debt
The price of gold on world markets was $289 per ounce on Dec. 31, 1997.
At that price, the cash value of the company's gold and silver hedge position
was approximately $40 million. The lower the gold price, the more the hedges
are worth. In January 1998, Echo Bay harvested $9 million in cash from its
hedge position by repurchasing 250,000 ounces of gold forward sales and
eliminating 225,000 ounces of contingent gold forwards. The company has no
current plans to cash in any more of its hedge position.
During 1997, Echo Bay reduced its total debt to $67 million, down by
$116 million from $183 million a year earlier. At Dec. 31, 1997, the
company's current debt was $15 million and its long-term debt was $52 million.
Long-term debt includes the present value, $4.2 million, of the Canadian gold
mining company's capital securities principal amount, in accordance with
Canadian generally accepted accounting principles. The present value of the
future interest payments, $95.8 million, is a separate component of
shareholders' equity. The $100.0 million of 11% capital securities are due in
2027.
The company is current in the repayment of all of its debt. The company
also expects to have sufficient cash flow to meet its 1998 debt repayment
obligations as they come due, regardless of how low the gold price might fall,
since the company's hedge position guarantees it a minimum average price of
$340 per ounce for its entire planned 1998 gold production.
Depressed gold prices limit the company's ability to borrow under its
revolving credit facility, which is measured at the end of each quarter. For
this reason, the company and its lenders are in discussions aimed at
restructuring the terms of its existing credit facilities. If these terms are
not renewed satisfactorily, and gold prices fall below current levels, it is
possible that the company would not be eligible for additional borrowing under
the existing facilities and could be required to reduce its outstanding
borrowings.
Refocused Exploration Program
Echo Bay has refocused its exploration effort, narrowing it to those
projects believed to represent the most promising near-term prospects in the
company's portfolio, principally those located in the Americas where Echo Bay
already has extensive gold mining infrastructure. Particular emphasis is
placed on those prospects located near the company's operating mines and
development projects, located in Canada, the United States and Mexico _
especially Nevada, home of the company's two largest mines.
To further this strategy, during the year Echo Bay significantly reduced
its exploration activities outside the Americas. In the fourth quarter of
1997, exploration and development expenses totaled $7 million, down from
$14 million a year earlier. For the full year 1997, exploration and
development expenses were $35 million, down from $64 million in 1996.
With depressed gold prices continuing near 18-year lows, the company has
further reduced its 1998 exploration budget to $7 million. The budget will be
reviewed if gold prices improve.
Ore Reserves at Year's End
Echo Bay began the year 1997 with 8,573,000 ounces of gold in proven and
probable reserves, based on a gold price assumption of $375 per ounce. Year-
end 1997 reserves were estimated at a long-term gold price assumption of $350
instead, which reduced ore reserves by an estimated 1% (88,000 ounces). A
full year of mining at the company's four producing mines depleted reserves by
880,000 ounces of gold. Ore reserves were reduced by 585,000 ounces by the
previously reported adoption of a new mining plan at Round Mountain, which
eliminated the mining of large quantities of lower-grade, higher-cost
material. The company added 459,000 ounces of gold to reserves through the
discovery of additional ore, the upgrading of material from other
mineralization, and other minor changes. The net effect was year-end proven
and probable reserves of 7,479,000 ounces of gold.
Silver reserves were 46,525,000 ounces at year-end 1997, down from
53,858,000 ounces at the beginning of the year, after producing 11,021,708
ounces of silver, in large part from stockpiles that contained significantly
more silver than had been estimated in reserve calculations.
The company's other mineralization (called "possible reserves" in Canada)
totaled 5,429,000 ounces of gold at the beginning of 1997, based on a gold
price assumption of $375 per ounce. The decisions to write off the Kingking
project and Santa Elina Mines during 1997 removed 3,510,000 ounces of gold
from this category. The company added approximately 300,000 ounces from the
discovery of new mineralization during the year. Reducing the gold price
assumption to $350 at year-end 1997, along with other modeling changes,
reduced other mineralization by another 204,000 ounces. The net effect was
year-end other mineralization of 2,015,000 ounces. A detailed breakdown of
year-end 1997 ore reserves and other mineralization is given in the table on
page 18.
Round Mountain Mine: New Mining Plan Improves Profitability and Cash Flow
The 50%-owned Round Mountain mine in Nevada is Echo Bay's largest and
lowest-cost gold producer. Echo Bay's share of gold production rose 13% to
54,928 ounces in the fourth quarter of 1997 from 48,739 ounces a year ago.
Quarterly cash operating costs were reduced to $213 from $238 per ounce of
gold produced.
For the full year, Echo Bay's 50% share of Round Mountain production rose
16% to 238,840 ounces from 205,487 ounces in 1996. Cash operating costs were
reduced to $207 for the full year from $221 in 1996.
During 1997, Round Mountain adopted a new mining plan that significantly
increases cash flow, profitability, and the net present value of the project.
The new, optimized open pit design eliminates the mining of more than 250
million tons of waste rock and low-grade, high-cost material over the life of
the mine, reducing the up-front waste stripping by approximately 40% and
enhancing the economics significantly. Reduced waste stripping brings more
ounces into production earlier and decreases cash operating costs, future
capital requirements for equipment replacement, and ultimate reclamation costs
over the life of the mine.
The optimized open pit design reduced the mine's year-end 1997 ore
reserves by 1,170,000 ounces of gold (Echo Bay's 50% share, 585,000 ounces).
This revision will result in planned mining being completed in nine years,
with ore processing continuing from stockpiles for another four years,
compared with the previous plan of 14 years of mining plus seven years of
stockpile processing. However, this life-of-mine plan is based on no more
gold being discovered at Round Mountain (which is unlikely, given the growth
in reserves seen at the site over the last 12 years).
During 1997, Round Mountain produced its four millionth ounce of gold
since Echo Bay became the operator. The mine had less than half that much
gold in total ore reserves _ only 1.8 million ounces _ when Echo Bay acquired
its interest in 1985. With total ore reserves of 7.0 million ounces at year-
end 1997, Round Mountain has almost twice as much gold remaining in the ground
as the total amount mined in the past 12 years.
In 1997, Round Mountain completed a new mill to process large quantities
of nonoxide ore. Late in the fourth quarter, the mill achieved its design
throughput levels of 8,000 tons/day. Efforts are currently focused on fine-
tuning mill operations to achieve targeted recovery levels of as much as 80-
85% of the contained gold, roughly double the recovery rates that could be
achieved by heap leaching nonoxidized ores.
Round Mountain's production target for 1998 is 460-480,000 ounces of gold
(Echo Bay's 50% share, 230-240,000 ounces).
McCoy/Cove Mine: Carbonaceous Ores Leaner In Gold, Richer In Silver
At McCoy/Cove in Nevada, gold production fell and silver production rose,
as expected, reflecting the planned processing of carbonaceous ores leaner in
gold but richer in silver. Carbonaceous ore types require more complex
processing and have lower gold recovery rates. McCoy/Cove produced 43,134
ounces of gold in the fourth quarter of 1997 as a result, down 36% from 67,513
ounces in the fourth quarter of 1996 and down 31% for the full year 1997 to
187,034 ounces from 271,731 ounces in 1996.
However, silver grades were significantly higher in 1997 than a year
earlier, and silver production rose 55% to 3,379,030 ounces in the fourth
quarter of 1997 from 2,185,142 ounces a year ago. For the full year, silver
output increased 55% to 11,021,708 ounces from 7,102,348 ounces in 1996.
Cash operating costs were trimmed to $221 per ounce in the fourth quarter
of 1997 from $294 a year earlier. Significant cost savings components include
a reduction in labor costs, lower mill reagent consumption, and reductions in
a number of services and supplies. For the full year, cash operating costs
were $271 per ounce in both years.
During the year, the McCoy/Cove team was awarded the 1996 Sentinels of
Safety Award for operating the safest large surface mine in the United States.
Presented annually since 1925, this award is one of mining's most prestigious
safety awards. To qualify, a mine must have at least 30,000 injury-free hours
of work. The McCoy/Cove team far exceeded that requirement, having worked
more than 800,000 employee-hours without a single lost-time injury.
In January 1998, in response to 18-year lows in the gold price, Echo Bay
announced that it is scaling back operations at McCoy/Cove until the gold
price improves. Beginning in the first quarter of 1998, costs are expected to
be reduced from the full-year 1997 level by implementation of a variety of
actions. The 450-person workforce is being reduced by approximately 20%.
Mining activities are being refocused on the higher-margin mill ounces from
the Cove pit. Remediation work on the Cove pit wall is being postponed until
the second half of 1998, subject to an improvement in precious metals prices
and other factors. Mining was discontinued in the smaller McCoy pit in
December 1997, pending completion of optimization studies aimed at reducing
costs. Based on a reengineered McCoy pit design, mining is scheduled to
resume at the McCoy pit near the end of the first quarter at a lower cost.
These actions are expected to reduce McCoy/Cove's 1998 cash operating
costs to $260-270 per ounce of gold produced. The mine's production targets
for 1998 are 160-170,000 ounces of gold and 7-8 million ounces of silver.
Lupin Mine: Preserving the Asset for A Better Gold Price
Production was up and costs were down at Lupin in the Northwest
Territories in the fourth quarter from a year earlier, principally due to the
non-sustainable processing of higher-grade ore at higher mill throughput
rates. Gold production rose 19% to 44,057 ounces from 36,938 ounces.
Quarterly cash operating costs were $255 per ounce of gold produced, compared
with $343 a year ago.
For the full year, production totaled 165,335 ounces in 1997, compared
with 166,791 ounces in 1996. Cash operating costs were $284 and $299
respectively per ounce of gold produced.
In January 1998, in response to 18-year lows in the gold price and
impending increases in production costs at Lupin, Echo Bay announced that it
was temporarily suspending operations at Lupin until the gold price improves.
The mine is being placed on "care and maintenance" to maintain its integrity
and enable it to reopen when gold prices permit. While operations are
temporarily suspended, the company plans to examine opportunities for reducing
costs by optimizing Lupin's mining methods and operating procedures. About
500 employees are affected. Annual care and maintenance expenses are
anticipated to be about $3 million. The action preserves the resource so that
Lupin can be mined profitably when the gold price recovers. The mine has
543,000 ounces of gold in proven and probable reserves, and significant other
mineralization with the potential to be upgraded to ore reserves.
Kettle River Mine: More Tons Processed, Full-Year Gold Production Rises
The Kettle River mine in Washington State produced 27,729 ounces of gold
in the fourth quarter, compared with 30,839 ounces a year ago. For the full
year, gold production totaled 129,866 ounces, up from 124,910 ounces in 1996.
Kettle River processed significantly increased tonnages in the fourth quarter
and the full year 1997, helping to offset lower ore grades processed.
Kettle River mines a series of deposits to feed a central mill. The fifth
and sixth deposits, Lamefoot and K-2, are now in concurrent production at a
ratio of about 3:1. As expected, cash operating costs rose to $264 per ounce
of gold produced in the fourth quarter from $217 a year ago, reflecting higher
mining costs and lower grades, along with the increased number of tons mined
and milled. Cash operating costs are expected to decline in the first half of
this year from the last quarter of 1997 as higher-grade areas of the ore
bodies are mined. For the full year 1997, cash operating costs rose to $227
from $201 in 1996.
Kettle River's production target for 1998 is 100-110,000 ounces of gold.
Exploration is under way on both the northern extension of the Lamefoot
deposit and a new target identified as Zone 7. Additional work is also being
done to investigate extensions of the K-2 deposit to the north and south. The
potential remains good to add minable ounces at Kettle River in 1998 and
beyond.
1998 Production and Cost Targets
With the temporary suspension of operations at Lupin and scaled-back
operations at McCoy/Cove, Echo Bay's 1998 company-wide production and cost
targets are 500-520,000 ounces of gold and 7-8 million ounces of silver at a
cash operating cost of $245-255 per ounce of gold produced.
Aquarius: Construction Completed on Underground "Freeze Wall"
In 1997, Echo Bay began construction on Aquarius, the company's newest
gold mine-to-be, located in the Timmins mining district of Canada. In the
fourth quarter, construction was nearly completed on the underground "freeze
wall" system designed to keep groundwater out of the open pit. In response to
the significant decline in gold prices during the year, the development pace
of Aquarius was slowed and further construction is currently being delayed
until gold prices improve.
During 1997, about $40 million was invested in the freeze wall and
acquisition of the necessary land rights and permits for Aquarius. When gold
prices improve, freezing can be in process while the mill facilities are being
built. This will allow the mine to start producing gold more quickly.
Echo Bay mines gold in North America. The primary markets for its shares
are the American and Toronto stock exchanges.
Statistical Tables Follow
"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
and/or production costs, which could render projects uneconomic; ability to
access financing; 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
exploration 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.
ECHO BAY MINES
1998 Targets
1998 Targets 1997 Actuals 1996 Actuals
Production and Costs:
Gold production:
Round Mountain (50%) 230-240,000 oz. 238,840 oz. 205,487 oz.
McCoy/Cove 160-170,000 oz. 187,034 oz. 271,731 oz.
Lupin --- 165,335 oz. 166,791 oz.
Kettle River 100-110,000 oz. 129,866 oz. 124,910 oz.
500-520,000 oz. 721,075 oz. 768,919 oz.
Silver production 7-8 million oz. 11.0 million oz. 7.1 million oz.
Cash operating costs $245-255 per oz. $249 per oz. $254 per oz.
Significant Expenses:
Depreciation and
amortization $65-70 million $79 million $86 million
Exploration and
development $7 million $35 million $64 million
General and
administrative $9-10 million $11 million $14 million
Royalties $8-9 million $8 million $10 million
Reclamation and
mine closure $8-9 million $9 million $6 million
Production taxes $1 million $1 million $2 million
Please note "Safe Harbor" Statement.
ECHO BAY MINES
Highlights
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars 1997 1996 1997 1996
Financial Data
Revenue (millions) $ 81.3 $79.5 $305.4 $ 337.3
Net loss (millions):
Before special charges (a) $ (8.1) $ (26.4) $ (57.8) $ (69.6)
After special charges (a) $ (55.5) $ (103.5) $ (420.5) $ (176.7)
Gold ounces sold (b) 183,239 187,753 698,337 777,512
Silver ounces sold (b) 3,285,505 2,353,973 10,037,753 7,098,417
Average price realized:
Per ounce of gold sold $ 349 $ 359 $ 362 $ 384
Per ounce of silver sold $ 5.31 $ 5.16 $ 5.26 $ 5.41
Cash operating costs:
Per ounce of gold produced $ 231 $ 279 $ 249 $ 254
Per ounce of silver produced $ 3.76 $ 3.80 $ 4.04 $ 3.60
% of revenue from gold 79% 85% 83% 89%
% of revenue from silver 21% 15% 17% 11%
Production and Reserves
Production (ounces): (b)
Gold 169,848 184,029 721,075 768,919
Silver 3,379,030 2,185,142 11,021,708 7,102,348
Reserves (ounces): (c)
Gold 7,479,000 8,573,000
Silver 46,525,000 53,858,000
Per Share Data
Net loss:
Before special charges (a) $(0.07) $(0.19) $(0.46) $(0.52)
After special charges (a) $(0.41) $(0.74) $(3.06) $(1.31)
Shares outstanding (millions):
Weighted average(d) 139.4 139.4 139.4 134.4
Period end 139.4 139.4 139.4 139.4
(a) These charges include provisions of $11.2 million in the fourth
quarter of 1997 and $5.4 million in the first three quarters of 1997 for
severance costs, $309.8 million in the third quarter of 1997 for impaired
assets, $36.2 million in the fourth quarter of 1997 to write off the
company's investment in Santa Elina Mines Corporation, $77.1 million in
the fourth quarter of 1996 to write off the Alaska-Juneau development
project, and $30.0 million in the third quarter of 1996 for pit wall
stabilization at the McCoy/Cove mine.
(b) Amounts sold differ from amounts produced due to inventory
changes.
(c) Proven and probable reserves at the end the year.
(d) In July 1996, Echo Bay issued 8.8 million common shares in order
to increase the company's interest in Santa Elina Mines Corporation to
50% from 7%.
ECHO BAY MINES
Production and Costs
Three months Twelve months
ended Dec. 31 ended Dec. 31
1997 1996 1997 1996
Gold Production (ounces)
Round Mountain (50%) 54,928 48,739 238,840 205,487
McCoy/Cove 43,134 67,513 187,034 271,731
Lupin 44,057 36,938 165,335 166,791
Kettle River 27,729 30,839 129,866 124,910
Total gold 169,848 184,029 721,075 768,919
Silver Production (ounces)
McCoy/Cove 3,379,030 2,185,142 11,021,708 7,102,348
Total silver 3,379,030 2,185,142 11,021,708 7,102,348
Cash Operating Costs (U.S. dollars per ounce of gold produced)
Round Mountain $213 $238 $207 $221
McCoy/Cove (a) 221 294 271 271
Lupin 255 343 284 299
Kettle River 264 217 227 201
Company average $231 $279 $249 $254
Consolidated Costs (U.S. dollars per ounce of gold produced)
Cash operating costs $231 $279 $249 $254
Royalties 7 11 9 11
Production taxes (1) 3 1 3
Total cash costs 237 293 259 268
Depreciation 49 66 58 64
Amortization 25 37 32 34
Reclamation and
mine closure 10 8 10 7
Total production costs $321 $404 $359 $373
(a) In 1997, cash operating costs per ounce of silver produced at
McCoy/Cove were $3.76 and $4.04 for the three-month and twelve-month
periods respectively, based on average gold-to-silver price ratios of
58.8:1 and 67.1:1 respectively. In 1996, cash operating costs per ounce
of silver produced at McCoy/Cove were $3.80 and $3.60 for the three-month
and twelve-month periods respectively, based on average respective price
ratios of 77.4:1 and 75.2:1.
ECHO BAY MINES
Consolidated Earnings Statement
(Unaudited)
Thousands of U.S. dollars, Three months Twelve months
except for per share data 1997 1996 1997 1996
ended Dec. 31 ended Dec. 31
Revenue $ 81,326 $ 79,544 $ 305,429 $ 337,316
Expenses:
Operating costs 55,115 60,662 213,120 221,126
Royalties 1,651 2,372 8,304 9,625
Production taxes (288) 691 865 2,440
Depreciation and amortization 17,767 22,511 79,316 86,491
Reclamation and mine closure 2,220 1,730 8,819 6,298
General and administrative 2,005 3,845 10,948 13,577
Exploration and development 7,352 14,413 4,927 63,619
Interest and other (a) 3,566 (159) 5,191 3,090
Provision for impaired assets
and other charges (b) 47,410 77,134 362,665 107,134
136,798 183,277 724,155 513,400
Loss before income taxes (55,472) (103,733) (418,726) (176,084)
Income tax expense (recovery):
Current 1,811 (454) 2,118 313
Deferred (1,793) 249 (336) 305
18 (205) 1,782 618
Net loss $(55,490) $(103,528) $(420,508) $(176,702)
Loss per share (c) $(0.41) $(0.74) $(3.06) $(1.31)
Weighted average number
of shares
outstanding (d) 139,370,031 139,351,704 139,366,794134,434,054
(a) Certain prior-period items have been reclassified to conform with the
current presentation. A total of $5.4 million of severance costs, which had
been recorded in "Interest and other" in the first three quarters of 1997,
were reclassified to "Provision for impaired assets and other charges" in the
fourth quarter.
(b) Includes provisions of $11.2 million in the fourth quarter of 1997
and $5.4 million in the first three quarters of 1997 for severance costs,
$309.8 million in the third quarter of 1997 for impaired assets, $36.2 million
in the fourth quarter of 1997 to write off the company's investment in Santa
Elina Mines Corporation, $77.1 million in the fourth quarter of 1996 to write
off the Alaska-Juneau development project, and $30.0 million in the third
quarter of 1996 for pit wall stabilization at the McCoy/Cove mine.
(c) 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 interest on the $100 million
capital securities in the period (an amount which 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 $1.6 million and
$5.7 million for the three months and twelve months ended Dec. 31, 1997
respectively.
(d) In July 1996, Echo Bay issued 8.8 million shares in order to increase
the company's interest in Santa Elina Mines Corporation to 50% from 7%.
ECHO BAY MINES
Consolidated Balance Sheet
(Unaudited)
Dec. 31 Dec. 31
Thousands of U.S. dollars 1997 1996
Assets
Current assets:
Cash and cash equivalents $ 16,953 $103,196
Short_term investments 10,325 -_
Interest and accounts receivable 5,927 9,739
Inventories 41,168 33,941
Prepaid expenses and other assets 5,068 6,573
79,441 153,449
Plant and equipment 238,948 233,984
Mining properties 107,820 405,011
Long-term investments and other assets 6,558 39,701
$432,767 $832,145
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 82,371 $ 72,421
Income and mining taxes payable 3,494 3,651
Current portion of gold and other financings (a) 14,779 129,445
Current portion of deferred income 7,461 876
108,105 206,393
Long-term gold and other financings (a) 51,745 53,478
Long-term deferred income 54,708 1,581
Other long-term obligations 56,607 69,992
Deferred income taxes 7,941 8,392
Common shareholders' equity:
Common shares 709,593 709,534
Capital securities 95,753 -_
Deficit (631,320) (201,931)
Foreign currency translation (20,365) (15,294)
153,661 492,309
$432,767 $832,145
(a) Total gold and other financings were $66.5 million at Dec. 31, 1997
(including current portion of $14.8 million), down $116.4 million from
$182.9 million at Dec. 31, 1996 (including current portion of $129.4 million).
ECHO BAY MINES
Consolidated Statement Of Cash Flow
(Unaudited)
Three months Twelve months
ended Dec. 31 ended Dec. 31
Thousands of U.S. dollars 1997 1996 1997 1996
Cash Provided by (Used in):
Operating Activities
Net loss $(55,490) $(103,528) $(420,508) $(176,702)
Add (deduct):
Depreciation and amortization 17,767 22,511 79,316 86,491
Non-cash portion of exploration
and development expense -_ 201 436 7,035
Deferred income taxes (1,793) 249 (336) 305
Gain on sale of assets (7,734) (2,086) (8,847) (4,469)
Non-cash portion of provision
for impaired assets and
other unusual charges 45,982 77,134 355,782 107,134
Other 5,465 4,457 (6,316) 5,970
Change in cash invested in
operating assets and liabilities:
Interest and accounts receivable12,034 (1,796) 2,178 (184)
Inventories 6,354 6,464 (5,753) 1,368
Prepaid expenses and other assets 546 607 2,812 (361)
Accounts payable and
other liabilities (4,457) 11,029 (8,824) 3,245
Income and mining taxes payable 1,066 (577) 856 69
19,740 14,665 (9,204) 29,901
Financing Activities
Currency borrowings 15,538 _- 15,538 34,714
Debt repayments (4,164) (29,294) (131,749) (38,179)
Equity portion of interest
on capital securities (4,270) -_ (4,270) -_
Capital securities issued,
net of issuance costs -_ -_ 96,700 -_
Common share dividends _- (5,225) -_ (10,120)
Common shares issued on
acquisition of Santa Elina,
net of issuance costs -_ -_ -_ 85,801
Common share issues,
net of issuance costs -_ 23 59 4,768
Other (112) _- (296) _-
6,992 (34,496) (24,018) 76,984
Investing Activities
Mining properties,
plant and equipment (20,455) (28,184) (112,001) (103,667)
Proceeds on repurchase of the company's:
Gold and silver forward sales -_ _- 54,963 _-
Gold swap _- _- 8,107 _-
Foreign exchange contracts -_ _- 5,995 _-
Cost of Santa Elina acquisition -_ (6,000) -_ (97,069)
Short-term investments 3,089 _- 3,089 -_
Long-term investments and
other assets 1,640 3,818 (21,626) (3,499)
Proceeds on sale of
long-term investments -_ 8,259 7,894 13,809
Other 37 95 558 894
(15,689) (22,012) (53,021) (189,532)
Net increase (decrease) in
cash and cash equivalents 11,043 (41,843) (86,243) (82,647)
Cash and cash equivalents,
beginning of period 5,910 145,039 103,196 185,843
Cash and cash equivalents,
end of period $ 16,953 $ 103,196 $ 16,953 $ 103,196
ECHO BAY MINES
Mine Operating Data
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars, except
where indicated 1997 1996 1997 1996
Round Mountain Mine (50% owned)
Gold produced (ounces):
Reusable heap leach pad (50%) 29,607 25,067 134,259 115,710
Dedicated heap leach pad (50%) 21,159 22,137 97,779 83,502
Milling (50%) 3,205 _- 3,205 _-
Other (50%) 957 1,535 3,597 6,275
Total (50%) 54,928 48,739 238,840 205,487
Ore and waste mined
(tons) (100%) 17,162,000 17,167,000 70,787,000 58,035,226
Mining cost/ton of
ore and waste $0.60 $0.64 $0.65 $0.69
Heap leaching cost/ton of ore $0.57 $0.84 $0.61 $0.80
Milling cost/ton of ore $4.38 -_ $4.38 -_
Production cost per ounce
of gold produced:
Direct mining expense $230 $242 $208 $228
Deferred stripping cost (9) (11) 2 (2)
Inventory movements and other (8) 7 (3) (5)
Cash operating cost 213 238 207 221
Royalties 17 30 22 32
Production taxes 3 4 4 4
Total cash cost 233 272 233 257
Depreciation 40 53 39 51
Amortization 18 18 18 18
Reclamation and mine closure 7 5 7 5
Total production cost $298 $348 $297 $331
Milled:
Ore processed (tons/day)(100%) 3,108 _- n.a. -_
Gold grade (ounce/ton) 0.041 _- 0.041 -_
Gold recovery rate (%) 60.0 _- 60.0 -_
Reusable heap leach pad:
Ore processed
(tons/day) (100%) 24,956 27,475 26,608 27,737
Grade (ounce/ton) 0.039 0.034 0.036 0.036
Recovery rate (%) 71.3 62.8 74.9 66.1
Dedicated heap leach pad:
Ore processed
(tons/day) (100%) 131,318 71,497 107,716 87,706
Grade (ounce/ton) 0.010 0.010 0.010 0.011
Recovery rate (a)
McCoy/Cove Mine (100% owned)
Gold produced (ounces):
Milled 26,199 49,500 131,905 204,897
Heap leached 16,935 18,013 55,129 66,834
Total gold 43,134 67,513 187,034 271,731
Silver produced (ounces):
Milled 3,271,128 2,055,354 10,624,780 6,589,121
Heap leached 107,902 129,788 396,928 513,227
Total silver 3,379,030 2,185,142 11,021,708 7,102,348
Ore and waste mined (tons) 11,294,410 14,437,255 53,998,672 63,255,253
Mining cost/ton of
ore and waste $0.78 $0.78 $0.74 $0.72
Milling cost/ton of ore $8.26 $8.80 $8.82 $9.50
Heap leaching cost/ton of ore $1.81 $1.80 $1.70 $1.68
Production cost per ounce
of gold produced: (b)
Direct mining expense $221 $272 $276 $286
Deferred stripping cost (3) (5) (10) (16)
Inventory movements and other 3 27 5 1
Cash operating cost 221 294 271 271
Royalties 3 5 3 5
Production taxes (5) 4 (1) 4
Total cash cost 219 303 273 280
Depreciation 51 67 66 71
Amortization 40 46 44 46
Reclamation and mine closure 9 10 10 8
Total production cost $319 $426 $393 $405
Average gold-to-silver price ratio (b) 58.8:1 77.4:1 67.1:1 75.2:1
Milled:
Ore processed (tons/day) 9,288 9,859 9,315 9,031
Gold grade (ounce/ton) 0.056 0.056 0.061 0.086
Silver grade (ounce/ton) 5.48 2.44 4.54 3.14
Gold recovery rate (%) 54.8 73.1 64.3 79.5
Silver recovery rate (%) 66.7 73.2 69.7 73.5
Heap leached:
Ore processed (tons/day) 15,631 16,972 17,840 16,671
Gold grade (ounce/ton) 0.022 0.013 0.018 0.018
Silver grade (ounce/ton) 0.40 0.20 0.29 0.27
Recovery rates (a)
Lupin Mine (100% owned)
Gold produced (ounces) 44,057 36,938 165,335 166,791
Tons of ore mined and milled 193,738 175,440 788,704 768,276
Mining cost/ton of ore (Cdn dollars) C$44.05 C$48.10 C$46.09 C$44.08
Milling cost/ton of ore (Cdn dollars) C$11.34 C$12.52 C$11.77 C$12.39
Production cost per ounce
of gold produced:
Direct mining expense (Cdn dollars) C$358 C$464 C$381 C$411
Deferred mine development
cost (Cdn dollars) -_ (2) 13 (4)
Inventory movements
and other (Cdn dollars) -_ 1 (1) 1
Cash operating cost (Cdn dollars) C$358 C$463 C$393 C$408
Cash operating cost (U.S. dollars) US$255 US$343 US$284 US$299
Royalties -_ -_ -_ _-
Production taxes -_ -_ -_ -_
Total cash cost 255 343 284 299
Depreciation 64 81 71 71
Amortization 12 29 24 21
Reclamation and mine closure 14 8 14 8
Total production cost US$345 US$461 US$393 US$399
Milled:
Ore processed (tons/day) 2,129 1,928 2,167 2,111
Total tons milled 193,738 175,440 788,704 768,276
Grade (ounce/ton) 0.244 0.228 0.226 0.235
Recovery rate (%) 93.2 92.3 92.6 92.5
Kettle River Mine (100% owned)
Gold produced (ounces) 27,729 30,839 129,866 124,910
Tons of ore mined and milled 189,556 171,212 771,002 601,468
Mining cost/ton of ore $22.25 $20.79 $21.53 $21.12
Milling cost/ton of ore $10.82 $10.65 $10.58 $11.96
Production cost per ounce of gold produced:
Direct mining expense $267 $185 $231 $190
Deferred mine development cost _- -_ _- _-
Inventory movements and other (3) 32 (4) 11
Cash operating cost 264 217 227 201
Royalties 13 15 14 10
Production taxes 1 2 2 2
Total cash cost 278 234 243 213
Depreciation 38 60 54 59
Amortization 5 45 36 45
Reclamation and mine closure 12 8 12 8
Total production cost $333 $347 $345 $325
Milled:
Ore processed (tons/day) 2,083 1,881 2,118 1,652
Total tons milled 189,556 171,212 771,002 601,468
Grade (ounce/ton) 0.177 0.207 0.197 0.240
Recovery rate (%) 82.9 87.2 85.4 86.5
(a) Recovery rates on dedicated pads can only be estimated, as actual
recoveries will not be known until leaching is complete. 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. At the Round Mountain
mine, the gold recovery rate on the dedicated heap leach pad is estimated at
50%.
(b) 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.
ECHO BAY MINES
Ore Reserves and Other Mineralization
PROVEN AND PROBABLE RESERVES(a) 1997 1996
Tons(b)Grade(c)Content(d) Tons(b)Grade(c)Content(d)
(000)(oz/ton) (000 oz) (000) (oz/ton) (000 oz)
Gold
Producing Mines:
Round Mountain (50%)200,663 0.018 3,519 238,255 0.019 4,525
McCoy/Cove 24,737 0.037 915 35,379 0.033 1,183
Lupin 2,018 0.269 543 1,576 0.281 443
Kettle River 1,734 0.196 339 1,987 0.186 370
5,316 6,521
Development Properties Owned:(e)
Aquarius 19,977 0.064 1,274 21,730 0.059 1,277
Paredones
Amarillos (60%) 28,196 0.032 889 23,972 0.032 775
2,163 2,052
Total gold 7,479 8,573
Silver
Producing Mines:
McCoy/Cove 24,737 1.88 46,525 35,379 1.52 53,858
Total silver 46,525 53,858
OTHER MINERALIZATION(a) 1997
Measured and Indicated
Tons(b) Grade(c) Content(d)
(000) (oz/ton) (000 oz)
Gold
Producing Mines:
Round Mountain (50%) 22,439 0.018 398
McCoy/Cove --
Lupin 485 0.345 167
Kettle River --
565
Development Properties:(e)
Aquarius --
Paredones Amarillos (60%) --
Ulu --
Chapada (50%)(f) --
Kingking (75%)(f) --
--
Total gold 565
Silver
Producing Mines:
McCoy/Cove --
Total silver --
Inferred 1996
Total Total
Tons(b) Grade(c)Content(d) Content(d)Content(d)
(000) (oz/ton) (000 oz) (000 oz) (000 oz)
Gold
Producing Mines:
Round Mountain (50%) 48,693 0.015 731 1,129 782
McCoy/Cove 635 0.025 16 16 42
Lupin 200 0.269 54 221 434
Kettle River 149 0.174 26 26 51
827 1,392 1,309
Development Properties:(e)
Aquarius 826 0.062 51 51 --
Paredones Amarillos (60%) 399 0.018 7 7 --
Ulu 1,509 0.374 565 565 610
Chapada (50%)(f) -- -- 660
Kingking (75%)(f) -- -- 2,850
623 623 3,510
Total gold 1,450 2,015 5,429
Silver
Producing Mines:
McCoy/Cove 635 0.986 626 626 2,001
Total silver 626 626 2,001
(a) Echo Bay's share, estimated at year-end. Estimates for 1997 are
based on a long-term gold price assumption of $350 per ounce and long-term
silver price assumption of $5.00 per ounce. Estimates for 1996 were based on
a $375 gold price assumption and $5.00 silver price assumption. If 1997
estimates were to be based on a $375 gold price assumption (with no change in
the silver price), Echo Bay believes that ore reserves would be approximately
3% higher. If 1997 estimates were to be based on a gold price assumption as
low as $300 per ounce (with no change in the silver price), Echo Bay believes
that ore reserves would be approximately 16% lower.
(b) To convert from tons to tonnes, multiply by 0.90718. To convert from
tonnes to tons, divide by 0.90718.
(c) To convert grade from ounces/ton to grams/tonne, multiply by 34.2857.
To convert grade from grams/tonne to ounces/ton, multiply by 0.029167.
(d) To convert content from ounces to tonnes, divide by 32,150.8. To
convert content from tonnes to ounces, multiply by 32,150.8.
(e) Assumes successful completion of permitting and financing for each
property.
(f) Echo Bay wrote off its investments in Chapada and Kingking in 1997.
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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