DENVER, Feb. 12 /PRNewswire/ -- Echo Bay Mines Ltd. (AMEX and TSE: ECO)
today reported a 1996 net loss of $69.6 million, or $0.52 per share, before
special one-time charges of $107.1 million, or $0.79 per share. Including the
previously announced non-recurring charges, the total loss for the year was
$176.7 million, or $1.31 per share, compared with a loss of $50.1 million, or
$0.43 per share, for the year ended December 31, 1995.
The $107.1 million special charges include $77.1 million to write off the
Alaska-Juneau development project and $30.0 million for waste rock
stabilization at the McCoy/Cove mine in Nevada, as previously announced.
During the year, the company continued to invest heavily for the future
through its exploration and development programs. Approximately $63.6 million
was expensed and another $30.6 million capitalized in 1996 on these programs,
which are directed at acquiring, evaluating and advancing exploration and
development projects to the point of determining commercial viability. In
January, two of these projects received approval for construction: Aquarius in
Canada and Paredones Amarillos in Mexico. When in full commercial production,
anticipated for 1999, these projects together will add 240-250,000 ounces of
gold to the company's annual production.
In 1996, Echo Bay produced 768,919 ounces of gold, better than the
company's target of 725-750,000 ounces. Silver production was 7.1 million
ounces, better than the company's adjusted target of 7.0 million ounces.
Consolidated cash operating costs were $254 per ounce of gold produced. The
company's target was $245-$255 per ounce.
Gold production rose in 1996 over 1995. Silver production fell by 40% as
expected, reflecting the much lower silver grades in the deeper areas of the
Cove deposit at McCoy/Cove in Nevada, the company's largest producer. Cash
operating costs rose by 11%, also as expected, principally due to the
increased costs associated with declining grades and deeper mining at the Cove
deposit, the movement of more tons and higher leaching costs at Round
Mountain, and slower mining and more ground support at Lupin.
Revenues were $337.3 million, compared with $360.7 million a year ago.
The decrease in revenues was primarily due to the lower silver production,
only partially offset by the increased gold production. The average gold price
realized was $384 per ounce, compared with $388 per ounce in 1995.
The average number of shares outstanding during the year increased from
116.2 million to 134.4 million in 1996. The increase was due to the
conversion in late 1995 of a subsidiary company's preferred stock into common
shares and the issuance in July 1996 of 8.8 million common shares to increase
the company's interest in Santa Elina Gold Corporation, a gold exploration and
development firm with significant holdings in Brazil.
Cash and Debt
In January 1997, the company took advantage of the decline in precious
metals prices by closing out substantially all of its gold and silver forward
sales, realizing cash proceeds of $63.3 million. This amount will be added to
the company's cash balances, which stood at $103 million at December 31, 1996.
In total, the company closed out 872,000 ounces of gold that it had sold
forward earlier, with delivery dates ranging from 1997 to 2002, and 8.5
million ounces of silver with delivery dates ranging from 1997 to 1999. The
gains on these transactions are to be recognized in the periods in which the
gold and silver had been scheduled for delivery.
To protect against a potential future decrease in the gold price, the
company purchased 450,000 ounces of gold put options at an average price of
$345 per ounce. To pay for the put options, the company sold 300,000 ounces
of gold call options at an average price of $394 per ounce. The company also
owns 1,440,000 ounces of silver put options at $5.40 per ounce and has sold
1,440,000 ounces of silver call options at $6.43 per ounce.
Two New Mines to Be Built
In January, the company announced plans to bring two new gold mines into
production, Aquarius in Canada and Paredones Amarillos in Mexico. These two
new mines represent the first returns to the company's aggressive exploration
and development program of the last two years.
Aquarius is located in the Timmins gold district of Ontario. It is
expected to produce an average of 166,000 ounces of gold a year at an average
cash operating cost of $218 per ounce. Startup is expected in late 1998, with
full production in early 1999. Reserves are 1,277,000 ounces of gold at an
average grade of 0.059 ounces per ton. Exploration potential is high on the
associated 6,987 acres, with two identified targets to be investigated in
1997.
Capital costs for the project are expected to be $100 million. The
company plans to finance Aquarius with a new $75 million unsecured corporate
credit facility, with the remaining funds coming from cash on hand and
operating cash flow. The project is contingent on the arrangement of
satisfactory financing.
Paredones Amarillos is located in Mexico and is a joint venture with
Viceroy Resource Corporation (TSE: VOY). Echo Bay owns 60% and Viceroy 40%.
Construction is contingent on satisfactory arrangement of financing and on
Viceroy's participation and financing of its portion of the costs.
Annual production is expected to average 128,000 ounces of gold (Echo
Bay's 60% share, 77,000 ounces) at an average cash operating cost of $223 per
ounce. Startup is expected in late 1998, with full production in late 1998 or
early 1999. The project is expected to cost $111 million (Echo Bay's 60%
share, $67 million). Echo Bay and Viceroy plan to arrange non-recourse
project financing in the amount of $60 million, with the remaining funds to
come from cash on hand and operating cash flow.
Dividend Policy Change
In January, Echo Bay also announced that it was suspending payment of
dividends on its common shares. This will allow the $21 million that would
have been paid out over the next two years to be redirected towards mine
development, reducing the amount of financing required.
The company said it believes that shareholder interests are best served
by using its cash resources to build a foundation for sustained future value
rather than making short-term cash payments at this time.
Ore Reserves at Year's End
The decision to proceed with construction of Aquarius and Paredones
Amarillos resulted in 2,052,000 ounces of gold being added to the company's
proven and probable reserves. Write-off of the Alaska-Juneau project removed
3,442,000 ounces of gold from proven and probable reserves, and a full year of
mining at Echo Bay's four producing mines depleted year-end reserves by
1,115,000 ounces. The net effect was year-end proven and probable reserves of
8,573,000 ounces of gold.
Silver reserves were 53,858,000 ounces at year-end after mining during
the year.
The company's other mineralization (called "possible reserves" in Canada)
totaled 5,429,000 ounces of gold at year-end 1996. A total of 3,522,000
ounces were eliminated by writing off Alaska-Juneau (1,571,000 ounces) and by
upgrading Aquarius and Paredones Amarillos' ounces to proven and probable
reserves from other mineralization (1,951,000 ounces).
A detailed breakdown of year-end 1996 ore reserves and other
mineralization is given on pages 20-21.
The company completed extensive exploration and development work in 1996
that is expected to culminate in completion of feasibility studies in 1997 on
five projects around the world: Kingking in the Philippines and Chapada, Sao
Francisco, Fazenda Nova and Sao Vicente in Brazil. Completion of feasibility
studies is necessary to add gold to ore reserves and other mineralization.
Fourth Quarter Highlights of Growth-Related Projects
Echo Bay continues its aggressive exploration and development program;
acquiring, evaluating and advancing projects through its "pipeline" of growth-
related projects. Some of the highlights of the fourth quarter follow:
* At Kingking in the Philippines, Echo Bay and its joint venture
partner, TVI Pacific Inc. (TSE: TVI) completed 45,400 meters (150,000 feet) of
advanced exploration drilling in 1996. Based on drill results to date, the
joint venture expects the tonnage of the resource to increase when the
feasibility study is completed at the end of the first quarter of 1997.
* At Santa Elina Gold Corporation in Brazil, most but not all of the
work was completed in 1996 for feasibility studies on four projects: Chapada,
Sao Francisco, Fazenda Nova and Sao Vicente. The feasibility study on Chapada
is expected to be completed in the second quarter of 1997. The feasibility
studies for the other projects are expected to be completed in the third
quarter. Consideration is also being given to a hydropower plant proposed for
the Guapore River as a potential source of low-cost power for several of Santa
Elina's projects in Brazil. In the fourth quarter, Echo Bay's ownership in
Santa Elina increased to 51% from 50% through an additional cash contribution
of $6 million to Santa Elina.
* Echo Bay acquired an additional 880,000 shares of Minefinders
Corporation (VSE: MFL), as part of a strategic alliance through which Echo Bay
can acquire 60% of the Dolores gold exploration project in Mexico. This
acquisition increased Echo Bay's equity position in Minefinders to 15.0%. The
second phase of drilling is under way on the project, with more than 50 holes
planned, along with additional detailed mapping, sampling and metallurgical
test work.
* Visible gold was present in the drill core samples from a number of
the first 19 holes drilled on the A-2 target of the Youga exploration
concession in Burkina Faso. Between four contiguous concessions -- Youga,
Bitou, and Nangodi A and Nangodi B -- over 1300 square miles are being
investigated by the 50/50 joint venture between Echo Bay and Ashanti
Goldfields. The 1997 program will include continued drilling on this target
as well as several others that have been identified.
* Echo Bay acquired the remaining 49% interest in the Kilgore project,
located in Idaho, that it did not already own. Kilgore covers 11,460 acres.
With a geologic resource already defined on one target and at least seven
other targets to be investigated, the company believes the property has
excellent potential.
* Echo Bay entered into a joint venture on the Jessup gold prospect,
located in Nevada, with Americomm Resources Corp. (Nasdaq: AREC). Echo Bay
can earn a 51% interest by work expenditures of $2 million over a five-year
period and payments of $750,000.
* Echo Bay signed a joint venture with Quest International (TSE: QIX)
on the Zopilote property in Honduras. Echo Bay can earn a 60% interest by
spending $5.4 million over four years.
McCoy/Cove: Echo Bay's Largest Producer
McCoy/Cove in Nevada is the company's largest gold and silver producer.
It produced 67,513 ounces of gold in the fourth quarter of 1996, up 16% over
the 1995 level of 58,273 ounces. Fourth quarter silver production was 2.2
million ounces in 1996 and 2.4 million ounces a year ago.
The average ore grade processed at the mill during the quarter was 35%
lower than 1995 (0.056 versus 0.086 ounces per ton). This was compensated for
by a 31% increase in the tons processed through the mill and a 44% increase in
the tons heap leached.
Ore grades are progressively lower as deeper levels of the open pit are
mined. Because of the lower grades, more tons are treated to accomplish the
same level of production, and costs rise accordingly. In the fourth quarter,
cash operating costs were $294 per ounce in 1996 and $224 a year ago.
For the full year, McCoy/Cove produced 271,731 ounces of gold, down 12%
from 310,016 ounces in 1995. The decrease in production was consistent with
expectations as the deeper, lower-grade levels of the pit are mined. Cash
operating costs for the year were $271 per ounce of gold produced, compared
with $217 per ounce in 1995. Full-year silver output totaled 7.1 million
ounces in 1996 versus 11.9 million ounces in 1995, reflecting the reduced
grades. Silver accounted for 30% of McCoy/Cove's revenues in 1996 and 35% in
1995.
In 1997, gold production is expected to be approximately 15-20% lower
than in 1996, reflecting the lower ore grades encountered deeper in the pit.
Silver production is expected to be about the same in 1997 as in 1996 (see
"1997 Targets" on page 11).
Round Mountain: Almost 20% Increase in Production
At the 50%-owned Round Mountain mine in Nevada, Echo Bay's share of
fourth quarter production was 48,739 ounces, up 9% from 44,764 ounces a year
ago. This increase reflected the processing of 8% more ore on the reusable pad
as the leach time was shortened from 120 days to 90 days. Fourth quarter cash
operating costs rose 14% to $238 per ounce from $209 in 1995. Unit costs rose
because of an increase in total operating costs, reflecting the mining of
deeper levels in the open pit and the increased number of tons leached.
For the full year, Echo Bay's share of Round Mountain's gold production
was 205,487 ounces, up 19% from 172,217 ounces in 1995. During the year, 23%
more ore was treated on the reusable pad and 33% more ore on the dedicated
pad. The ore placed on the dedicated pad included reusable pad offloads and
existing low-grade ore stockpiles. Cash operating costs were $221 per ounce
of gold produced in 1996, up from $195 in 1995. The higher unit costs reflect
more tons of ore moved, along with higher mining and leaching costs.
Construction of the Round Mountain mill facilities began in March 1996.
The mill is expected to be completed in late 1997. The mill is designed to
process large quantities of nonoxidized ore, 2.5 million tons of which have
already been stockpiled. Planned initial capacity is 8,000 tons/day. Annual
production from the mill will be as much as 100,000 ounces in peak years,
(Echo Bay's 50% share, 50,000 ounces), offsetting lower production from
reduced quantities of oxide ores heap leached. This mill is expected to
recover as much as 80-85% of the contained gold in nonoxidized ore, while heap
leach recovery rates run considerably lower than 50% on this type of material.
At the end of 1996, Round Mountain's reserves were 9,050,000 ounces (Echo
Bay's 50% share, 4,525,000 ounces). In 1997, Round Mountain will evaluate
targets at depth and also initiate a new grassroots exploration effort on the
claim block.
In 1997, production from Round Mountain is anticipated to be about 5%
lower than in 1996 (see "1997 Targets" on page 11). The mining rate will
remain the same, but the mix of ores encountered will change. More nonoxide
mill tons will be mined and stockpiled, with fewer oxide tons available to be
placed on the leach pads. In addition, the oxide ores mined in this portion
of the ore body will be lower-grade.
Lupin: Production Decreases Due to Slower Mining
Echo Bay's mine at Lupin in the Northwest Territories produced 36,938
ounces of gold in the fourth quarter, down 32% from 54,093 ounces in the year-
ago period. The decrease resulted from 20% fewer tons to the mill for
processing, a 14% decrease in average grade treated, and higher dilution due
to changing ground conditions. Quarterly cash operating costs rose to $343
per ounce from $275 in 1995.
For the full year, production was 166,791 ounces, down slightly from
172,110 ounces in 1995. Cash operating costs for the full year rose
marginally, $299 per ounce compared with $296 per ounce. The full-year
results reflect more difficult mining conditions at depth and lower ore
grades.
In 1997, Lupin is expected to produce about the same amount of gold as in
1996 (see "1997 Targets" on page 11).
Development work is under way at the Ulu gold deposit, located about 100
miles from the Lupin mill. An underground adit has been driven into the
mineralization. Underground work is under way to confirm the resource
identified by the previous owner of 1.9 million tons of ore, containing
610,000 ounces of gold at an average grade of 0.32 ounce per ton. Bulk
samples of the Ulu ore have been transported to the Lupin lab for
metallurgical test work. The deposit is being developed as a source of
additional mill feed for Lupin in future years.
During the fourth quarter, Echo Bay signed a facility use agreement with
Lytton Minerals Limited (TSE: LTL). In exchange for access to and use of
certain Lupin facilities in connection with development of a nearby diamond
exploration project, Echo Bay receives a cash payment. If the project is
commercially viable, initial terms for a future arrangement have also been
agreed upon.
Kettle River: Production Up, Costs Down
At the Kettle River mine in northeastern Washington state, production in
the fourth quarter rose 16% to 30,839 ounces from 26,580 ounces a year
earlier. For the full year, Kettle River produced 124,910 ounces, up 24% from
100,419 ounces in 1995. The increased production levels were due to a 10%
increase in the tons processed and a 13% increase in the average grade
processed. The majority of the ores treated during the year were from the
Lamefoot deposit.
Cash operating costs increased during the fourth quarter, $217 per ounce
compared with $194 in 1995, due to more tons being processed from stockpiles
and more tons treated. For the 12-month period, cash operating costs
decreased to $201 per ounce from $230 the previous year, a direct result of
the higher grades mined at the Lamefoot deposit complemented by cost
improvement both in mining and milling.
During 1996, development work was completed on K-2, the sixth deposit at
the project to be brought into production. A reserve of 139,000 ounces was
identified at this deposit at year's end, and production started in January
1997. Because of its high clay content, K-2 ore will be blended with Lamefoot
ore on an approximate one-to-two ratio over the life of the project. This
will allow for the best mill treatment of the ores.
Permits were received and underground exploration began to evaluate a
northern extension of the structures currently being mined at the Lamefoot
deposit. A similar extension is being investigated at the K-2 deposit.
Several targets have been identified and are slated for further evaluation in
1997 as the project continues its search for the seventh deposit.
In 1997, Kettle River is expected to produce 5-10% more gold than in 1996
(see "1997 Targets" on page 11). The blending of the lower-grade Lamefoot ore
and K-2 ore is expected to result in lower millhead grades, but this will be
more than offset by the increased mill throughput rates.
Echo Bay is a major gold producer with mines in Canada and the United
States. The primary markets for its shares are the American and Toronto stock
exchanges. Its shares are also listed on stock exchanges in Switzerland,
France, Germany and Belgium.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The statements herein that are not historical facts are forward-
looking statements involving risks and uncertainties that could cause actual
results to vary materially from targeted results. Apart from the impact of
lower commodity prices, these include but are not limited to differences in
ore grades and tons mined from those expected, changes in project parameters
as plans continue to be refined, changes in mining and milling rates from
currently planned rates, the results of current exploration activities and new
exploration opportunities, and the conclusions of feasibility studies
currently under way. Please refer to a discussion of these and other factors
in the company's 10-K, 10-Q and other Securities and Exchange Commission
filings.
ECHO BAY MINES
1997 Targets
1997 1996
Targets Actuals
Production and Costs:
Gold production 700-725,000 oz. 768,919 oz.
Change from 1996
production levels:
McCoy/Cove About 15-20% less 271,731 oz.
Round Mountain About 5% less 205,487 oz.
Lupin About the same as 1996 166,791 oz.
Kettle River About 5-10% more 124,910 oz.
Silver production Approximately 7.1 million oz.
7 million oz.
Cash operating costs $265-275/oz. $254/oz.
1997 1996
Significant Expenses: Targets Actuals
Exploration expense1 (millions) $31 $47
Development properties expense2 (millions) -- $17
Depreciation and amortization $102/oz. $98*/oz.
General and administrative $16/oz. $16/oz.
Royalties $11/oz. $11/oz.
Reclamation and mine closure $11/oz. $7/oz.
Production taxes $3/oz. $3/oz.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995: The above forward-looking statements involve risks and uncertainties
that could cause actual results to vary materially from targeted results.
Apart from the impact of lower commodity prices, these include but are not
limited to differences in ore grades and tons mined from those expected,
changes in project parameters as plans continue to be refined, changes in
mining and milling rates from currently planned rates, the results of current
exploration activities and new exploration opportunities, and the conclusions
of feasibility studies currently under way. Please refer to a discussion of
these and other factors in the company's 10-K, 10-Q and other Securities and
Exchange Commission filings.
1 Including noncash portions of $1 million in 1997 and $3 million in 1996.
2 The Alaska-Juneau property was written off at year-end 1996.
ECHO BAY MINES
Highlights
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars 1996 1995 1996 1995
Financial Data
Revenue (millions) $79.5 $92.4 $337.3 $360.7
Net loss (millions):
Before special one-time
charges (1) $ (26.4) $(16.8) $ (69.6) $(50.1)
After special one-time
charges (1) $(103.5) $(16.8) $(176.7) $(50.1)
Exploration expense (millions) $11.0 $15.5 $46.6 $46.5
Development properties
expense (millions) $3.5 $5.8 $17.0 $23.3
Cash flow before exploration and
development properties
expenses (millions) (2) $13.2 $36.5 $82.3 $126.7
Cash flow after exploration and
development properties
expenses (millions) (2) $(1.1) $17.6 $25.8 $66.3
Gold ounces sold (3) 187,753 201,491 777,512 758,635
Silver ounces sold (3) 2,353,973 2,580,444 7,098,417 12,234,835
Average price realized
Per ounce of gold sold $359 $389 $384 $388
Per ounce of silver sold $5.16 $5.41 $5.41 $5.40
Cash operating costs
Per ounce of gold produced $279 $230 $254 $229
Per ounce of silver produced $3.80 $3.06 $3.60 $2.94
% of revenue from gold 85% 85% 89% 82%
% of revenue from silver 15% 15% 11% 18%
Production and Reserves
Production (ounces) (3)
Gold 184,029 183,710 768,919 754,762
Silver 2,185,142 2,440,665 7,102,348 11,905,806
Reserves (thousands of ounces) (4)
Gold -- -- 8,573 10,983
Silver -- -- 53,858 62,913
Per Share Data
Net loss:
Before special one-time
charges (1) $ (0.19) $ (0.13) $ (0.52) $ (0.43)
After special one-time
charges (1) $ (0.74) $ (0.13) $ (1.31) $ (0.43)
Cash flow (2) $ (0.01) $ 0.14 $ 0.19 $ 0.57
Gold production
(milliounces) (5) 1.3 1.5 5.7 6.5
Gold reserves (milliounces)
(4,5) 61.5 84.6
Shares outstanding (millions)
Weighted average 139.4 125.5 134.4 116.2
Period end 139.4 129.9 139.4 129.9
(1) Including $77.1 million in the fourth quarter of 1996 to write off the
Alaska-Juneau development property and $30.0 million in the third quarter of
1996 for waste rock stabilization at the McCoy/Cove mine.
(2) Working capital provided by operations.
(3) Amounts sold differ from amounts produced due to inventory changes.
ECHO BAY MINES
Production and Costs
Three months Twelve months
ended Dec. 31 ended Dec. 31
1996 1995 1996 1995
Gold Production (ounces)
McCoy/Cove 67,513 58,273 271,731 310,016
Round Mountain (50%) 48,739 44,764 205,487 172,217
Lupin 36,938 54,093 166,791 172,110
Kettle River 30,839 26,580 124,910 100,419
Total gold 184,029 183,710 768,919 754,762
Silver Production (ounces)
McCoy/Cove 2,185,142 2,440,665 7,102,348 11,905,806
Total silver 2,185,142 2,440,665 7,102,348 11,905,806
Cash Operating Costs (1)
(U.S. dollars per ounce
of gold produced)
McCoy/Cove (2) $294 $224 $271 $217
Round Mountain 238 209 221 195
Lupin 343 275 299 296
Kettle River 217 194 201 230
Company average $279 $230 $254 $229
Consolidated Costs (1) (U.S.
dollars per ounce of
gold produced)
Cash operating costs $279 $230 $254 $229
Royalties 11 9 11 9
Production taxes 3 -- 3 5
Total cash costs 293 239 268 243
Depreciation 66 65 64 61
Amortization 37 34 34 36
Reclamation 8 6 7 6
Total production costs 404 344 373 346
General and administrative 18 17 16 13
Exploration expense 52 71 54 51
Development properties expense 17 27 20 25
Interest expense (income) 3 (3) 2 (5)
Other expense (income) (3) 33 1 10
Income taxes (1) (18) 1 (4)
Breakeven (3) $490 $471 $467 $436
(1) Effective January 1, 1996, Echo Bay adopted the new Gold Production
Cost Standard developed by the Gold Institute as a means of facilitating
meaningful comparisons among companies through uniform presentation of all
cost data industry-wide. "Cash production costs" reported by Echo Bay in
prior periods have been converted into "cash operating costs" in accordance
with the new standard. In Echo Bay's case, there is no material difference
between the two.
(2) 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 gold-to-silver price ratios of 77.4:1 and
75.2:1 respectively. In 1995, cash operating costs per ounce of silver
produced at McCoy/Cove were $3.06 and $2.94 for the three-month and twelve-
month periods respectively, based on average respective price ratios of 73.2:1
and 73.8:1.
(3) Before special one-time charges and preferred stock dividends. The
entire issue of convertible preferred stock was converted or redeemed in late
1995.
ECHO BAY MINES
Consolidated Earnings Statement
Three months Twelve months
Thousands of U.S. dollars, ended Dec. 31 ended Dec. 31
except for per share data 1996 1995 1996 1995
Revenue $79,544 $92,430 $337,316 $360,730
Expenses:(1)
Operating costs 60,662 54,533 221,126 212,182
Royalties 2,372 1,814 9,625 8,434
Production taxes 691 92 2,440 4,322
Depreciation and amortization 22,511 23,438 86,491 89,403
Reclamation and mine closure 1,730 1,208 6,298 5,005
General and administrative 3,845 3,602 13,577 12,169
Exploration and development 14,491 21,262 63,619 69,796
Interest and other (159) 6,599 3,090 4,161
Provision for McCoy/Cove pit wall
stabilization -- -- 30,000 --
Provision for Alaska-Juneau
development property(2) 77,134 -- 77,134 --
183,277 112,548 513,400 405,472
Loss before income taxes (103,733) (20,118) (176,084) (44,742)
Income tax expense (recovery):
Current (454) (4,399) 313 (2,758)
Deferred 249 502 305 (448)
(205) (3,897) 618 (3,206)
After-tax loss before
preferred stock dividends(3)(103,528) (16,221) (176,702) (41,536)
Preferred stock dividends of
a subsidiary(3) -- 514 -- 8,524
Net loss $(103,528) $(16,735) $(176,702) $(50,060)
Loss per share $ (0.74) $ (0.13) $ (1.31) $ (0.43)
Weighted average number of
shares outstanding (millions) 139.4 125.5 134.4 116.2
(1) Effective January 1, 1996, Echo Bay adopted the new Gold Production
Cost Standard developed by the Gold Institute as a means of facilitating
meaningful comparisons among companies through uniform presentation of all
cost data industry-wide. Certain accounts in this statement have been
reclassified to reflect the change. The reclassification has no effect on
earnings (loss).
(2) Echo Bay wrote off $57.1 million, its entire remaining investment in
the Alaska-Juneau project, and established a reserve of $20.0 million to cover
estimated reclamation and closure responsibilities.
(3) The entire issue of convertible preferred stock of a subsidiary was
converted or redeemed in late 1995.
ECHO BAY MINES
Consolidated Balance Sheet
(Unaudited)
Dec. 31 Dec. 31
Thousands of U.S. dollars 1996 1995
Assets
Current assets:
Cash and cash equivalents $103,196 $185,843
Interest and accounts receivable 9,739 14,749
Inventories 33,941 34,173
Prepaid expenses and other assets 6,573 5,353
153,449 240,118
Plant and equipment 233,984 255,868
Mining properties 405,011 318,219
Long-term investments and other assets 39,701 56,956
$832,145 $871,161
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 72,421 $ 61,781
Income and mining taxes payable 3,651 2,547
Current portion of gold and
other financings (1) 129,445 41,135
Current portion of deferred income 876 25,053
206,393 130,516
Long-term gold and other financings (1) 53,478 111,679
Long-term deferred income 1,581 --
Other long-term obligations 69,992 32,018
Deferred income taxes 8,392 8,096
Common shareholders' equity:
Common shares 709,534 618,965
Deficit (201,931) (15,109)
Foreign currency translation (15,294) (15,004)
492,309 588,852
$832,145 $871,161
(1) Total gold and other financings were $182.9 million at December 31,
1996 (including current portion of $129.4 million), up $30.1 million from
$152.8 million at December 31, 1995 (including current portion of $41.1
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 1996 1995 1996 1995
Cash Provided by (Used in):
Operating Activities
Net loss $(103,528) $(16,735) $(176,702) $(50,060)
Add items not affecting
working capital:
Depreciation and amortization22,511 23,438 86,491 89,403
Dividends on preferred stock of
subsidiary net of interest rate
swap income -- 514 -- 8,524
Non-cash portion of exploration
and development expense 201 2,603 7,035 9,365
Deferred income taxes 249 502 305 (448)
Environmental expenses at non-
producing properties -- 7,000 -- 12,899
(Gain) loss on sale of assets (2,086) 98 (4,469) (5,506)
Provision for McCoy/Cove pit
wall stabilization -- -- 30,000 --
Provision for Alaska-Juneau
development property (1) 77,134 -- 77,134 --
Other 4,457 190 5,970 2,120
Working capital provided by
operations (1,062) 17,610 25,764 66,297
Change in cash invested in
working capital related
to operations:
Interest and accounts
receivable (1,796) (2,993) (184) (2,667)
Inventories 6,464 6,244 1,368 (3,563)
Prepaid expenses and other
assets 607 854 (361) (134)
Accounts payable and other
liabilities 11,029 10,899 3,245 6,695
Income and mining taxes
payable (577) (1,744) 69 701
14,665 30,870 29,901 67,329
Financing Activities
Currency borrowings -- 28,015 34,714 28,015
Debt repayments (29,294) (2,463) (38,179) (9,853)
Dividends on preferred stock
of subsidiary -- (514) -- (8,524)
Preferred share conversions
and redemptions -- (62,257) -- (136,505)
Common share dividends (5,225) (4,747) (10,120) (8,978)
Common shares issued on acquisition of
Santa Elina, net of
issuance costs -- -- 85,801 --
Common share issues, net of
issuance costs 23 62,006 4,768 135,904
(34,496) 20,040 76,984 59
Investing Activities
Mining properties, plant
and equipment (28,184) (53,394) (103,667) (81,538)
Cost of Santa Elina
acquisition (6,000) -- (97,069) --
Short-term investments -- 8,178 -- --
Long-term investments and
other assets 3,818 (9,210) (3,499) (47,557)
Proceeds on sale of mining
properties and
long-term investments 8,259 -- 13,809 44,655
Other 95 773 894 1,368
(22,012) (53,653) (189,532) (83,072)
Net decrease in cash and
cash equivalents (41,843) (2,743) (82,647) (15,684)
Cash and cash equivalents,
beginning of period 145,039 188,586 185,843 201,527
Cash and cash equivalents,
end of period $103,196 $185,843 $103,196 $185,843
(1) Echo Bay wrote off $57.1 million, its entire remaining investment in
the Alaska-Juneau project, and established a reserve of $20.0 million to cover
estimated reclamation and closure responsibilities.
ECHO BAY MINES
Mine Operating Data
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars, except where
indicated 1996 1995 1996 1995
McCoy/Cove Mine (100% owned)
Gold produced (ounces):
Milled 49,500 44,848 204,897 250,106
Heap leached 18,013 13,425 66,834 59,910
Total gold 67,513 58,273 271,731 310,016
Silver produced (ounces):
Milled 2,055,354 2,265,017 6,589,121 11,028,343
Heap leached 129,788 175,648 513,227 877,463
Total silver 2,185,142 2,440,665 7,102,348 11,905,806
Ore and waste mined (tons) 14,437,255 14,841,134 63,255,253 63,049,235
Mining cost/ton of ore and waste $0.78 $0.71 $0.72 $0.67
Milling cost/ton of ore $8.80 $9.05 $9.50 $10.67
Heap leaching cost/ton of ore $1.80 $2.17 $1.68 $2.32
Production cost per ounce of
gold produced: (1)
Direct mining expense $272 $248 $286 $206
Deferred stripping cost (5) (10) (16) 15
Inventory movement and other 27 (14) 1 (4)
Cash operating cost 294 224 271 217
Royalties 5 5 5 5
Production taxes 4 -- 4 7
Total cash cost 303 229 280 229
Depreciation 67 69 71 53
Amortization 46 45 46 46
Reclamation 10 5 8 5
Total production cost $426 $348 $405 $333
Average gold-to-silver price
ratio(2) 77.4:1 73.2:1 75.2:1 73.8:1
Milled:
Ore processed (tons/day) 9,859 7,552 9,031 7,275
Gold grade (ounce/ton) 0.056 0.086 0.086 0.113
Silver grade (ounce/ton) 2.44 4.22 3.14 5.27
Gold recovery rate (%) 73.1% 74.5% 79.5% 82.4%
Silver recovery rate (%) 73.2% 79.1% 73.5% 78.8%
Heap leached:
Ore processed (tons/day) 16,972 11,804 16,671 11,966
Gold grade (ounce/ton) 0.013 0.014 0.018 0.018
Silver grade (ounce/ton) 0.20 0.30 0.27 0.49
Recovery rates (3)
Round Mountain Mine (50% owned)
Gold produced (ounces):
Reusable heap leach pad (50%) 25,067 24,833 115,710 96,026
Dedicated heap leach pad (50%)22,137 18,650 83,502 69,350
Other (50%) 1,535 1,281 6,275 6,841
Total (50%) 48,739 44,764 205,487 172,217
ECHO BAY MINES
Mine Operating Data
(continued)
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars, except where
indicated 1996 1995 1996 1995
Round Mountain Mine (continued)
Ore and waste mined (tons)
(100%) 17,167,000 15,177,305 58,035,226 59,909,454
Mining cost/ton of ore
and waste $0.64 $0.66 $0.69 $0.61
Heap leaching cost/ton of ore$0.84 $0.63 $0.80 $0.65
Production cost per ounce of
gold produced: (1)
Direct mining expense $242 $225 $228 $218
Deferred stripping cost (11) (24) (2) (23)
Inventory movement and other 7 8 (5) --
Cash operating cost 238 209 221 195
Royalties 30 32 32 31
Production taxes 4 1 4 4
Total cash cost 272 242 257 230
Depreciation 53 62 51 62
Amortization 18 20 18 20
Reclamation 5 5 5 5
Total production cost $348 $329 $331 $317
Reusable heap leach pad:
Ore processed (tons/
day) (100%) 27,475 25,407 27,737 22,490
Grade (ounce/ton) 0.034 0.034 0.036 0.034
Recovery rate (%) 62.8 66.4 66.1 70.9
Dedicated heap leach pad:
Ore processed (tons/
day) (100%) 71,497 77,912 87,706 66,197
Grade (ounce/ton) 0.010 0.012 0.011 0.012
Recovery rate (%) (3)
Lupin Mine (100% owned)
Gold produced (ounces) 36,938 54,093 166,791 172,110
Tons of ore mined and
milled 175,440 220,310 768,276 722,827
Mining cost/ton of ore
(Canadian dollars) C$48.10 C$37.74 C$44.08 C$44.23
Milling cost/ton of ore
(Canadian dollars) C$12.52 C$11.09 C$12.39 C$12.26
Production cost per ounce of
gold produced: (1)
Direct mining expense
(Canadian dollars) C$464 C$385 C$411 C$423
Deferred mine development
cost (Canadian dollars) (2) (13) (4) (22)
Inventory movement and
other (Canadian dollars) 1 1 1 4
Cash operating cost
(Canadian dollars) C$463 C$373 C$408 C$405
Cash operating cost
(U.S. dollars) $343 $275 $299 $296
Royalties -- -- -- --
Production taxes -- -- -- --
Total cash cost 343 275 299 296
Depreciation 81 55 71 68
Amortization 29 18 21 19
Reclamation 8 7 8 7
Total production cost $461 $355 $399 $390
Milled:
Ore processed (tons/day) 1,928 2,421 2,111 1,986
Total tons milled 175,440 220,310 768,276 722,827
Grade (ounce/ton) 0.228 0.266 0.235 0.258
Recovery rate (%) 92.3% 92.4% 92.5% 92.5%
ECHO BAY MINES
Mine Operating Data
(continued)
Three months Twelve months
ended Dec. 31 ended Dec. 31
U.S. dollars, except where
indicated 1996 1995 1996 1995
Kettle River Mine (100% owned)
Gold produced (ounces) 30,839 26,580 124,910 100,419
Tons of ore mined and milled 171,212 133,165 601,468 547,597
Mining cost/ton of ore $20.79 $20.11 $21.12 $22.60
Milling cost/ton of ore $10.65 $12.84 $11.96 $12.76
Production cost per ounce of
gold produced: (1)
Direct mining expense $185 $202 $190 $237
Deferred mine development cost -- -- -- --
Inventory movement and other 32 (8) 11 (7)
Cash operating cost 217 194 201 230
Royalties 15 4 10 8
Production taxes 2 2 2 2
Total cash cost 234 200 213 240
Depreciation 60 70 59 74
Amortization 45 45 45 45
Reclamation 8 7 8 7
Total production cost $347 $322 $325 $366
Milled:
Ore processed (tons/day) 1,881 1,463 1,652 1,504
Total tons milled 171,212 133,165 601,468 547,597
Grade (ounce/ton) 0.207 0.237 0.240 0.212
Recovery rate (%) 87.2% 84.3% 86.5% 86.6%
(1) Effective January 1, 1996, Echo Bay adopted the new Gold Production
Cost Standard developed by the Gold Institute as a means of facilitating
meaningful comparisons among companies through uniform presentation of all
cost data industry-wide. "Cash production costs" reported by Echo Bay in
prior periods have been converted into "cash operating costs" in accordance
with the new standard. In Echo Bay's case, there is no material difference
between the two.
(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.
(3) Recovery rates on dedicated heap leach 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, while the silver recovery rate is
estimated at 30% 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%.
ECHO BAY MINES
Ore Reserves and Other Mineralization
PROVEN AND PROBABLE RESERVES(1)
1996 1995
Tons(2) Grade(3)Content(4) Tons(2) Grade(3)Content(4)
(000) (oz/ton) (000oz) (000) (oz/ton) (000oz)
Gold
Producing Mines:
McCoy/Cove 35,379 0.033 1,183 47,221 0.032 1,526
Round Mountain
(50%) 238,255 0.019 4,525 254,410 0.020 5,000
Lupin 1,576 0.281 443 2,445 0.280 685
Kettle River 1,987 0.186 370 1,602 0.206 330
-- -- 6,521 -- -- 7,541
Development Properties Owned:(5)
Alaska-Juneau(6) - - 0 67,063 0.051 3,442
Aquarius 21,730 591,277 - - 0 -
Paredones
Amarillos
(60%) 23,972 0.032 775 -- 0 --
-- 2,052 -- -- 3,442 --
Total gold -- -- 8,573 -- -- 10,983
Silver Producing Mines:
McCoy/Cove 35,379 1.52 53,858 7,221 1.33 62,913
Total silver -- -- 53,858 -- -- 62,913
OTHER MINERALIZATION(1)
1996
Measured and Indicated Inferred
Tons(2) Grade(3) Content(4) Tons(2)
(000) (oz/ton) (000oz) (000)
Gold
Producing Mines:
McCoy/Cove 1,473 0.029 42 --
Round Mountain (50%) 18,373 0.022 399 34,585
Lupin 1,459 0.297 434 1,906
Kettle River 146 0.185 27 136
-- -- 902 --
Development Properties Owned:(5)
Alaska-Juneau -- -- 0 --
Aquarius -- -- 0 --
Paredones Amarillos(60%) -- -- 0 --
-- -- 0 --
Development Properties Optioned:(7)
Chapada (50%)(8) -- -- 0 56,700
Kingking (75%)9 -- -- 0 168,750
Total gold -- -- 902 --
Silver
Producing Mines:
McCoy/Cove 1,473 1.36 2,001 --
Total silver -- -- 2,001 --
Tons(2) Grade Content Tons(2)
(000) (%) (million (000)
lb.)
Copper
Development Properties Optioned:(7)
Chapada (50%)(8) -- -- 0 56,700
Kingking (75%)(9) -- -- 0 168,750
Total copper -- -- 0 --
1996
Inferred 1995
Total Total
Grade(3) Content(4) Content(4) Content(4)
(oz/ton) (000oz) (000oz) (000oz)
Gold
Producing Mines:
McCoy/Cove -- 0 42 243
Round Mountain (50%) 0.011 383 782 780
Lupin 0.320 610 1,044 1,092
Kettle River 0.176 24 51 204
-- 1,017 1,919 2,319
Development Properties Owned:(5)
Alaska-Juneau -- 0 0 1,571
Aquarius -- 0 0 1,300
Paredones Amarillos(60%) -- 0 0 651
-- 0 0 3,522
Development Properties
Optioned:(7)
Chapada (50%)(8) 0.012 660 660 660
Kingking (75%)(9) 0.017 2,850 2,850 2,850
-- 3,510 3,510 3,510
Total gold -- 4,527 5,429 9,351
Silver
Producing Mines: -- 0 2,001 4,415
Total silver -- 0 2,001 4,415
Total Total
Grade Content Content Content
(%) (million (million (million
lb.) lb.) lb.)
Copper
Development Properties Optioned:(7)
Chapada (50%)(8) 0.43 486 486 486
Kingking (75%)(9) 0.47 1,586 1,586 1,586
Total copper -- 2,072 2,072 2,072
(1) Echo Bay's share, estimated at year-end. Calculations for both 1996
and 1995 were based on a gold price of $375 per ounce and a silver price of
$5.00 per ounce for producing mines and development properties owned. For
development properties optioned, Chapada's other mineralization was based on
estimates prepared by Santa Elina Gold Corporation assuming a gold price of
$400 per ounce and a copper price of $1.00 per pound; Kingking's other
mineralization was based on estimates prepared by Benguet Corporation assuming
a gold price of $340 per ounce and a copper price of $1.00 per pound.
(2) To convert from tons to tonnes, multiply by 0.90718. To convert from
tonnes to tons, divide by 0.90718.
(3) 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.
(4) To convert content from ounces to tonnes, divide by 32,150.8. To
convert content from tonnes to ounces, multiply by 32,150.8.
(5) Assumes successful completion of permitting and financing for each
property.
(6) Written off in 1996.
(7) Assumes the company earns and exercises its right to acquire the
indicated interest in the optioned property. Kingking's other mineralization
is based on estimates prepared by Benguet Corporation and included in its
March 1994 pre-definitive feasibility study. Chapada's other mineralization
is based on estimates prepared by Santa Elina Gold Corporation and included in
its December 1994 initial public offering statement. Echo Bay is conducting
its own advanced exploration program and initial feasibility study at each
property, and Echo Bay plans to calculate its own estimates of reserves and
other mineralization on completion of this work. Echo Bay's policy is to
classify this mineralization as inferred until its own calculations have been
completed.
(8) Echo Bay owns an option entitling it to acquire a 50% direct interest
in Chapada from Santa Elina Gold Corporation. In addition, Echo Bay owned 7%
of the common shares of Santa Elina at year-end 1995 and 51% of the common
shares at year-end 1996, giving Echo Bay indirect Chapada interests of 6% and
42% respectively. Until a decision is made on exercising the option, Echo
Bay will continue to show its Chapada interest at 50%.
(9) Echo Bay owns an option to acquire up to a 75% interest in Kingking
through various foreign subsidiaries and alliances with Filipino affiliates.
SOURCE Echo Bay
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CONTACT:
Media Contact: Jill Paukert, 303-714-8825, or
Investor Contact: Ted Sheldon, 303 714-8813
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