ENGLEWOOD, July 30 /PRNewswire/ -- Echo Bay Mines Ltd. (AMEX: ECO; TSE)
today reported a net loss of $20.7 million ($0.17 per share) in the second
quarter, compared with a net loss of $14.6 million ($0.11 per share) a year
ago.
The quarterly results reflect sharply lower gold prices than a year ago.
The average price realized by Echo Bay fell by $42 per ounce of gold sold in
the quarter, to $350 per ounce this year from $392 a year ago. Echo Bay's
$350 realized price was $7 better than the $343 average spot price per ounce
of gold on world markets during the quarter, a result of the company's hedging
programs.
Gold production fell and silver production rose, as expected, reflecting
the planned processing of lower-grade ores at increased volumes. Quarterly
gold production totaled 190,397 ounces this year, down 7% from 205,601 ounces
last year. Silver production rose 17% to 1,933,588 ounces from 1,649,162
ounces a year ago.
Production was consistent with full-year production targets of 700-725,000
ounces of gold and 7.0 million ounces of silver.
Cash operating costs rose 10% to $262 per ounce of gold produced in the
quarter, reflecting the lower grades processed.
Interest Rate Reduced to 5 1/2% from 11% on $100 Million
In June, Echo Bay halved the interest rate on the company's $100 million
of capital securities issued in March. The 11% interest rate was reduced to
approximately 5 1/2%, saving $5.5 million per year, by converting a portion of
the company's $100 million obligation into a gold delivery contract. The
company has contracted to deliver 291,358 ounces of gold to a consortium of
banks in March 2002 and to be paid $100.0 million at that time by the banks, a
price of $343.22 per ounce of gold. Echo Bay will continue to pay semiannual
interest payments of $5.5 million (11%) to the securities holders; the banks
will pay to Echo Bay semiannual interest payments of $3.4 million (a rate of
6.76%) through March 2002; and Echo Bay will pay to the banks the floating
gold lease rate (1.25% at June 30, or approximately $0.6 million semiannually)
through March 2002. This date coincides with Echo Bay's right, at the end of
five years, to redeem the capital securities from the proceeds of an equity
issue. Through these transactions, Echo Bay's effective interest rate will be
the fixed interest rate of 4.24% (11% minus 6.76%) plus the floating gold
lease rate.
Corporate Office Downsizing
In July, Echo Bay implemented the final steps of a corporate office
downsizing that will reduce the number of Denver-based personnel from 116 to
75. The downsizing affects virtually every part of the corporate office,
including a variety of executive, administrative and clerical positions. The
company expects its 1998 cash operating costs and general & administrative
expenses to be reduced by a total of approximately $4 million as a result of
the downsizing.
Review of Life-of-Mine Plans and Asset Values Being Completed
Echo Bay's new management team is currently conducting a major review of
life-of-mine plans for Echo Bay's four producing gold mines and two planned
gold mines, and a complete evaluation of the feasibility studies for the
company's portfolio of development projects, exploration properties and other
assets. On completion of this work, currently expected in the third quarter,
management will assess the carrying values of all of the company's assets in
light of both short-term and long-term views of precious metals prices.
Construction Decision Deferral Being Discussed for Paredones Amarillos
In view of the precipitous drop in the gold price to 12-year lows in
recent weeks, Echo Bay is in discussions with its 40% joint venture partner,
Viceroy Resource Corporation, regarding deferral of a final construction
decision on the proposed Paredones Amarillos gold mine in Mexico until the
gold price improves.
Deferral of a final construction decision beyond 1997 would reduce the
total 1997 capital expenditure requirements of Paredones Amarillos to an
amount that would not exceed $16 million (Echo Bay's 60% share, $10 million)
from the originally planned $73 million (Echo Bay's share, $44 million). A
total of $3 million has already been spent in 1997 through June 30 (Echo Bay's
portion, $2 million).
The remaining amount that would be spent in the final months of 1997 (an
amount not to exceed $13 million, of which Echo Bay's portion would not exceed
$8 million) would be devoted to advancing the detailed engineering; finalizing
the acquisition of used grinding equipment; completing the acquisition of
several land parcels already under contract or option; and advancing the
necessary permitting activities, water development, and other work required to
maintain the integrity of the project and enable development to proceed
quickly and smoothly to construction at such time as a final construction
decision is made.
Echo Bay estimates that less than $2 million would be added to the total
cost of the project by deferring the final construction decision at least
until early 1998. This amount is more than offset by a $15 million reduction
in capital costs that has been achieved by re-engineering the mill process
flowsheet, including elimination of the cyanide regeneration circuit;
purchasing used equipment; redesigning the site layout; and optimizing a
number of other aspects of the project.
New Aquarius Gold Mine in Canada
Echo Bay is also considering deferring construction activities at the
company's 100%-owned Aquarius gold mine in the Timmins gold district of
Ontario until the gold price recovers. Deferral would reduce Echo Bay's total
1997 capital expenditures on Aquarius to approximately $39 million from the
originally planned $70 million. Of that, $12 million has already been spent
in 1997.
The remaining $27 million to be spent in the rest of 1997 would be devoted
primarily to completion of the frozen underground barrier system. The ground
freezing work includes installation of nearly 2,000 refrigeration pipes so
that a ring of ground can be frozen surrounding the planned open pit.
Beginning in November, refrigeration plants are scheduled to begin circulating
super-cooled brine (-20 degrees C) through these pipes from surface to
bedrock, freezing the ground. The freezing process is expected to take four
months, from November 1997 through February 1998. The ground within the
frozen perimeter of the planned open pit will then be dewatered. The
impermeable barrier of frozen ground is designed to keep any additional
underground water from flowing into the pit, significantly reducing the need
for further pumping. Underground freezing is a proven, cost-effective
technology that has been used in tunneling and shaft boring for over 100
years. Once frozen, the underground "freeze wall" can be maintained
indefinitely at a low annual maintenance cost.
Aquarius is planned to produce an average of 166,000 ounces of gold per
year at an average cash operating cost of $218 per ounce of gold produced over
a seven-year period, based on current ore reserves of 1.3 million ounces.
Additional exploration drilling is in progress directly to the east of the
planned open pit, where earlier drill holes produced encouraging results. The
potential is believed to be excellent to expand ore reserves and extend the
mine's life.
Exploration and Development Properties
In connection with the company's refocused search for new gold reserves
and production, Echo Bay expensed $9.9 million against current earnings and
capitalized another $1.8 million to advance its exploration and development
programs in the second quarter, down from $18.0 million and $10.8 million
respectively in the second quarter of last year.
Echo Bay funded exploration work on a number of projects in North America
in the second quarter. In addition, Echo Bay's strategic alliance partners
conducted exploration programs at several promising prospects. Highlights
include:
* At the Dolores project in Mexico, a strategic alliance with Minefinders
Corp. Ltd. (VSE: MFL), drilling results continue to be encouraging. Ore-grade
gold and silver mineralization has been encountered from surface to a depth of
more than 350 meters (1,150 feet) and over a strike length in excess of 2,000
meters (6,560 feet). Metallurgical tests are currently under way to determine
the degree of leachability of the material outlined to date. Echo Bay has
become the operator of the project, moved in a 30-person crew, completed
construction of a new camp, and plans to complete a minimum of 50 new drill
holes by the end of August. Echo Bay has an option to acquire a 60% interest
in Dolores for $20 per ounce times 60% of the proven and probable gold and
gold-equivalent silver production ounces as defined in a bankable feasibility
study.
* At Buffalo Valley in Nevada, 15 miles north of Echo Bay's McCoy/Cove
mine, approximately 500,000 ounces of gold mineralization has been identified
to date, with upside potential. Accelerated exploration drilling and
engineering studies are under way. On completion of a bankable feasibility
study, Echo Bay earns an option to purchase up to a 65% interest in Buffalo
Valley from Echo Bay's strategic alliance partner, Fairmile Gold Corp.
(Alberta: FLA.CA). Echo Bay has acquired 700,000 shares of Fairmile for C$1.4
million (US$1.1 million), with 80% of the funds being directed to the
exploration and development programs at Buffalo Valley.
* At Jessup in Nevada, an expanded exploration drilling program was
launched in April to offset and expand on encouraging mineralization
intercepts from earlier drilling. The current program calls for 25 holes
totaling 2,440 meters (8,000 feet). Echo Bay is earning a 51% interest in the
project from Americomm Resources Corp. (OTC Bulletin Board: AREC) and may
purchase an additional 19% interest depending on drill results. Early
indications are that Jessup is a typical Nevada-style epithermal
mineralization located close to the surface.
* Echo Bay has refocused its exploration efforts on those projects
believed to represent the most promising near-term prospects in its portfolio,
principally those located in the Americas where the company already has
extensive gold mining infrastructure. Particular emphasis has been placed on
those prospects located near the company's four producing gold mines and two
planned new mines, located in Canada, the United States and Mexico, where
extensive processing facilities already exist or are planned. To further this
strategy, in the second quarter Echo Bay agreed to sell its interest in two
longer-term exploration projects _ Committee Bay in the Northwest Territories
and Lik in Alaska _ and plans to use the $1.5 million proceeds to expand the
exploration drilling program at the company's Aquarius project. The potential
to expand ore reserves at Aquarius is believed to be excellent, with five
targets identified in addition to the 1.3 million ounces of current gold
reserves. Additional gold reserves and production at existing operations
extend mine life and lower total costs.
Kingking Project in the Philippines: Optimization Under Way
At the Kingking copper-gold project in the Philippines, Echo Bay and its
joint venture partner, TVI Pacific Inc. (TSE: TVI), completed an initial
feasibility study in late April. As reported, the study concluded that using
then-current metal prices for gold and copper, the "base case" project design
selected for the initial feasibility study would be marginally economic if
built to those specifications. The initial feasibility study also identified
a number of areas in which project economics could be improved, including
different mining rates, throughput levels, and processing alternatives. The
study concluded that significant upside potential exists for lower capital and
operating costs, improved metallurgical recoveries, and an expansion of the
known resource. Further optimization work began immediately and is currently
under way to improve the overall economics of the project.
The feasibility study indicated that based on the results of almost two
years of additional exploration drilling, Kingking has a much larger copper
content than originally estimated in 1995 when the partners acquired their
option to purchase the project. Echo Bay is currently considering whether the
Kingking project might be of more value to a copper producer or other company
than to Echo Bay, whose strategic focus is gold. Echo Bay has retained an
investment banking firm to consider various options and to make
recommendations.
Santa Elina Projects in Brazil
Echo Bay is currently in the process of reevaluating, refocusing and
rationalizing its entire portfolio of exploration and development projects in
Brazil, 83%-owned by Echo Bay's subsidiary, Santa Elina Mines Corporation.
Echo Bay holds a 51% interest in Santa Elina. Each project is being examined
in order to develop a strategy for realizing value as quickly as possible.
Pending the conclusion of this process, Echo Bay and Santa Elina have agreed
to defer final completion of the individual feasibility studies previously
begun on these projects.
There has been no deferral, however, in the ongoing exploration drilling,
geological studies, metallurgical tests, and various other exploration and
development work already well under way at these Santa Elina projects.
Highlights include:
* At Chapada, an expanded copper-gold porphyry project in Goias State,
Brazil, optimization work continues. Various mining scenarios, processing
methods and rates, economic parameters and other factors are being applied to
the large, near-surface minable resource of copper and gold. Initiatives are
under way for dealing with issues such as capital and transportation costs, as
well as treatment and refining costs. The recent privatization of the
Brazilian rail system is anticipated to result in significantly reduced
transportation costs for many commodities under long-term contracts.
Discussions have been initiated toward a significant reduction in earlier-
quoted rail costs for transporting copper concentrates 1,000 miles to the
nearest in-country smelter or a like distance to a deepwater port for shipment
to an overseas smelter. In addition, in connection with Brazil's economic
incentives for mineral development projects, the potential construction of an
on-site custom smelter is being considered. This would not only eliminate the
cost of transporting copper concentrates to a distant smelter, but would also
produce revenue from byproduct sulfuric acid production. Again, in
recognition of the high copper content of the deposit, it is possible that
Chapada could be of more interest to a copper producer or other company than
to Echo Bay, whose prime interest is in gold. The company has retained an
investment banking firm to consider various options and to make
recommendations.
* At Sao Francisco near the border of Brazil and Bolivia, a gold deposit
has been outlined with low-grade but near-surface and oxidized mineralization
_ ideal for a low-strip-ratio, open pit heap leaching operation. In-fill
drilling of the resource is well under way, and metallurgical testing suggests
that the material is amenable to heap leaching. Potential for further
mineralization exists beneath the designed pit. Over 30 sites of previous
garimpeiro or historic Portuguese gold mining have been identified and will be
investigated further on this large claim block. In addition, the potential
exists to achieve infrastructure synergies with Santa Elina's nearby Sao
Vicente gold mine, a low-grade open pit mine where operations have been
suspended while consideration is given to the project's potential conversion
from a milling operation to a lower-cost heap leaching operation. This would
allow the known resource to be treated in a more cost-effective method while
additional exploration is undertaken at Sao Vicente, including the potential
of a deep zone that has been identified at the southern edge of the open pit.
* At Fazenda Nova, a gold exploration property with several near-surface
targets suitable for open pit mining, drilling is continuing to better define
and expand the geologic resource. Six gold targets have been identified to
date, and work at the first two targets drilled has outlined oxidized, low-
grade gold mineralization. The objective is one or more open pit mines to
feed a central heap leaching operation. In addition, the associated claim
block has been expanded, and geochemical surveys have identified 43 additional
anomalies, four of which are currently being evaluated.
* At Guapore, consideration is being given to a 120-megawatt hydropower
plant proposed for the Guapore River. Santa Elina owns 83% of the planned
project, which could generate significant cash flow to Santa Elina for
30 years or more. This cash could be used to fund gold exploration and
development on the company's large land position throughout Brazil.
* Central to the assets of Santa Elina is a land position of over 96,000
square miles (25 million hectares) currently under application or permit.
Much of this land is located on known, but not extensively explored, gold
belts throughout Brazil. In many cases, these applications are on land
associated with previous garimpeiro workings or historical Portuguese mining.
Round Mountain, Nevada: New Mining Plan Improves Cash Flows
The 50%-owned Round Mountain mine in Nevada was Echo Bay's largest and
lowest-cost gold producer during the period. Gold production was up 13% to
64,948 ounces from 57,617 ounces in 1996. Significantly improved recoveries
of gold on both the reusable heap leach pad and the dedicated pad were the
biggest contributors to the site's performance during the quarter.
Cash operating costs were $194 per ounce, down from $202 in 1996. Lower
costs were attributable to the increased number of ounces produced.
In July, the mine produced its four millionth ounce of gold since Echo Bay
became the operator. The mine had less than half that much gold in reserves _
only 1.8 million ounces _ when Echo Bay acquired its interest in 1985. With
reserves of 9.1 million ounces at year-end 1996, Round Mountain has twice as
much gold remaining in the ground as the total amount mined in the past 12
years.
In July, as reported, Round Mountain approved a new mining plan that will
increase cash flow and profitability and reduce cash operating costs.
Echo Bay is the operator and owns a 50% interest in the mine. Homestake
Mining Company (NYSE: HM) and Case, Pomeroy & Company, Inc., a privately held
firm, own 25% each.
The new, optimized open pit design will eliminate the mining of lower-
grade, higher-cost material. Total material removed from the pit will be
reduced by more than 250 million tons 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.
The net result will be an increase of 30-40% in cash flow over the life of
the mine and a near-doubling of the net present value of the project.
The optimized pit will reduce the mine's current ore reserves by
approximately 1.2 million ounces of gold (Echo Bay's 50% share, 600,000
ounces). This revision will result in mining being completed in 10 years,
with ore processing continuing from stockpiles for another five 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). Annual production is
currently planned to remain at present levels until additional reserves are
proved up.
Round Mountain will also expand its exploration efforts. Ongoing
exploration efforts at the site will be two-fold. An in-fill drill program
will be directed at upgrading material within the pit, currently categorized
as other mineralization, to reserves. The North Feeder program is focused on
a deep target to the north, believed to be one of the deposit's feeder
structures. This zone is believed to have good potential for significant ore
reserve additions over the next few years. Several additional exploration
sites have been identified on the 380,000+ acre Round Mountain area of mutual
interest, only a small portion of which has been adequately explored.
Construction was completed on a new 8,000-ton/day mill at Round Mountain
late in July, with commissioning currently under way. Full production is
anticipated in the fourth quarter. Round Mountain has already stockpiled more
than 3.5 million tons of nonoxidized material over the last two years to
supplement millfeed ore mined in future quarters. Mill processing will result
in higher recoveries in treating the nonoxide ores than those that could have
been achieved from heap leach processing. Mill production from nonoxide ores
will partially offset a reduction in heap leach production from lower oxide
tonnages mined.
Production for the full year is still expected to meet Round Mountain's
target of 190-200,000 ounces of gold (Echo Bay's 50% share).
McCoy/Cove, Nevada: Stabilization Plan Approved
At McCoy/Cove, gold production fell and silver production rose, as
expected, reflecting the planned processing of lower-grade ores at increased
volumes. McCoy/Cove produced 52,541 ounces of gold during the quarter, down
24% from 69,574 ounces in 1996 but in line with projections for the year. Ten
percent more tons were processed through the mill and over 30% more tons
placed under leach to compensate for the lower grades encountered in this
portion of the ore body. Silver production was 1,933,588 ounces, up 17% from
1996, a result of more tons being processed through the mill and changes in
in-process inventory, more than offsetting the lower grade.
Cash operating costs for the quarter were $317 per ounce of gold produced,
compared with $256 per ounce a year ago. The increased cost reflects lower
gold production, slightly higher mining costs, and the additional cost of
processing the increased tonnage. Cash operating costs are anticipated to be
under $300 per ounce produced in the third and fourth quarters.
Cost reduction programs undertaken at McCoy/Cove include a reduction in
staff since the beginning of the year, lower mill operating costs per ton, and
reengineering of the process stream.
During the quarter, the plan for stabilizing the waste rock in the Cove
pit highwall was completed. The final geological study identifies
approximately 31.3 million tons of barren material that could potentially have
to be moved. Monitoring will be done to limit the work to the extent
necessary to allow for the safe mining of reserve ounces located below this
unstable area. Ore removal costs are estimated to range from $0.75 to $0.80
per ton. Total costs are anticipated to fall below the $30 million accrued in
the third quarter of 1996. Implementation of the plan began late in the
second quarter, with about one-quarter of the cash costs to occur in 1997 and
the remainder in 1998-99.
Full-year production is in line with McCoy/Cove's target of 210-220,000
ounces of gold and seven million ounces of silver.
Exploration drilling has hit additional gold mineralization at McCoy/Cove
just outside the southeastern edge of the Cove open pit. The mineralization
is relatively shallow and would require a stripping ratio currently estimated
to be between 3:1 and 4:1. Assays have been received on a total of nine holes
drilled to date. Thicknesses of 75+ feet of mineralization grading 0.07-0.09
ounce/ton of gold and 1.5-5.8 ounce/ton of silver have encouraged the company
to budget $800,000 to drill out this area on a grid of closely spaced holes
sufficient to determine by year-end 1997 whether or not this material could be
classified as ore reserves. If this mineralization is proved up as reserves,
it could extend the life of the McCoy/Cove mine by one or more years.
Lupin, Northwest Territories: Stockpiling of Ulu Ore Starts
Production at Lupin, located in the Northwest Territories, was 42,604
ounces during the quarter, down from 48,248 ounces in 1996. The lower
production was the result of processing fewer tons per day and those tons
having a lower grade than the same quarter in 1996.
The lower production resulted in cash operating costs increasing
marginally to $266 per ounce from $264 a year ago. The impact of the lower
production on unit costs per ounce was limited by personnel reductions and by
reductions in aviation and winter road costs.
Development is continuing at the Ulu deposit, located approximately 100
miles north of the Lupin mill. An underground ramp has been advanced to a
depth of 135 meters (440 feet). Ore-grade material has been recovered and
approximately 3,000 tons have already been stockpiled for transportation to
the mill over an ice road to be constructed in early 1999. As the underground
ramp moves downward, exploration drilling is under way to better understand
and define the mineralization outlined by surface drilling. The main body of
the deposit starts at a depth of approximately 150 meters (490 feet).
Current results are in line with Lupin's targeted 1997 annual production
of 160-170,000 ounces of gold.
Kettle River, Washington: More Tons Processed
At the Kettle River mine in Washington State, gold production was 30,304
ounces during the quarter, compared with 30,162 ounces a year ago. Kettle
River processed significantly increased tonnages during the quarter,
offsetting lower ore grades processed. The mill operated 91 days during the
quarter compared with 71 days in 1996.
Mining during the period was from both the Lamefoot and K-2 deposits, at a
ratio of about 3:1. As expected, cash operating costs rose to $256 from $220
per ounce a year ago, reflecting the higher mining costs and lower grades
associated with the K-2 deposit, coupled with the increased number of tons
mined and milled.
Additional mineralized material has been identified in association with a
northern extension of the Lamefoot deposit. Exploration drilling was
undertaken in July, and assays are pending. This area shows good exploration
potential for additional minable ounces. Drilling is also under way at the K-
2 deposit to identify extensions of the mineralization.
Kettle River expects to meet its full-year target production of 130-
140,000 ounces of gold. Costs are anticipated to decline from second quarter
levels, attributable to the processing of higher grades and the benefits of
cost-saving programs currently being implemented.
Alaska-Juneau Project Closure Transferred to Kvaerner Environmental
In late July, Echo Bay and Kvaerner Environmental signed an agreement
transferring responsibility for the Alaska-Juneau (A-J) project closure from
Echo Bay to Kvaerner. Under the terms of the agreement, Kvaerner assumes Echo
Bay's environmental and other risks and responsibilities associated with the
A-J project, except under certain limited circumstances specified in the
agreement.
At year-end 1996, Echo Bay wrote off its investment in the A-J project and
established a reserve of $20 million for estimated closure and reclamation
responsibilities. The total cost to Echo Bay of the closure agreement with
Kvaerner is within the reserved amount.
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.
Statistical Tables Attached
"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 and copper
prices, which could render projects uneconomic; differences in ore grades,
recovery rates, and tons mined from those expected; changes in mining and
milling rates from currently planned rates; the results of future exploration
activities and new exploration opportunities; conclusions of feasibility
studies now under way; 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, particularly those on Forms 10-Q, 10-K, 8-
K and S-4.
ECHO BAY MINES
Highlights
Three months Six months
ended June 30 ended June 30
U.S. dollars 1997 1996 1997 1996
Financial Data
Revenue (millions) $75.8 $95.1 $149.7 $162.8
Net loss (millions) $(20.7) $(14.6) $(37.5) $(30.8)
Exploration and development
(millions) $9.9 $18.0 $16.4 $32.0
Cash flow before exploration and
development (millions) (1) $9.6 $27.6 $17.1 $41.9
Cash flow after exploration and
development (millions) (1) $(0.2) $11.9 $1.0 $14.2
Gold ounces sold (2) 187,004 216,884 358,236 372,073
Silver ounces sold (2) 1,922,826 1,749,941 3,859,172 2,855,197
Average price realized:
Per ounce of gold sold $350 $392 $360 $394
Per ounce of silver sold $5.43 $5.77 $5.34 $5.69
Cash operating costs:
Per ounce of gold produced $262 $239 $258 $249
Per ounce of silver produced $4.40 $3.48 $4.21 $ 3.84
% of revenue from gold 86% 89% 86% 90%
% of revenue from silver 14% 11% 14% 10%
Production and Reserves
Production (ounces) (2)
Gold 190,397 205,601 373,725 366,847
Silver 1,933,588 1,649,162 4,371,001 2,824,219
Reserves (ounces) (3)
Gold -- -- 8,573,000 10,983,000
Silver -- -- 53,858,000 62,913,000
Per Share Data
Net loss $(0.17) $(0.11) $(0.29) $(0.24)
Operating cash flow (1) $-- $0.09 $0.01 $0.11
Shares outstanding (millions):
Weighted average 139.4 130.5 139.4 130.4
Period end 139.4 130.5 139.4 130.5
(1) Working capital provided by operations.
(2) Amounts sold differ from amounts produced due to inventory changes.
(3) Proven and probable reserves at the beginning of the year.
ECHO BAY MINES
Production and Costs
Three months Six months
ended June 30 ended June 30
1997 1996 1997 1996
Gold Production (ounces)
McCoy/Cove 52,541 69,574 104,827 118,464
Round Mountain (50%) 64,948 57,617 121,109 97,333
Lupin 42,604 48,248 79,206 88,558
Kettle River 30,304 30,162 68,583 62,492
Total gold 190,397 205,601 373,725 366,847
Silver Production (ounces)
McCoy/Cove 1,933,588 1,649,162 4,371,001 2,824,219
Total silver 1,933,588 1,649,162 4,371,001 2,824,219
Cash Operating Costs (U.S. dollars per ounce of gold produced)
McCoy/Cove (1) $317 $256 $301 $280
Round Mountain 194 202 201 208
Lupin 266 264 294 276
Kettle River 256 220 216 194
Company average $262 $239 $258 $249
Consolidated Costs (U.S. dollars per ounce of gold produced)
Cash operating costs $262 $239 $258 $249
Royalties 10 9 10 10
Production taxes 1 3 2 4
Total cash costs 273 251 270 263
Depreciation 62 63 63 69
Amortization 34 33 34 33
Reclamation and mine closure 10 6 10 6
Total production costs $379 $353 $377 $371
(1) In 1997, cash operating costs per ounce of silver produced at
McCoy/Cove were $4.40 and $4.21 for the three-month and six-month periods
respectively, based on average gold-to-silver price ratios of 72.0:1 and
71.6:1 respectively. In 1996, cash operating costs per ounce of silver
produced at McCoy/Cove were $3.48 and $3.84 for the three-month and six-month
periods respectively, based on average respective price ratios of 73.5:1 and
73.0:1.
ECHO BAY MINES
Consolidated Earnings Statement
(Unaudited)
Three months Six months
ended June 30 ended June 30
Thousands of U.S. dollars,
except for per share data 1997 1996 1997 1996
Revenue $75,815 $95,086 $149,653 $162,836
Expenses:
Operating costs 56,310 57,959 107,763 102,524
Royalties 2,074 2,129 4,318 4,232
Production taxes 223 787 662 1,496
Depreciation and amortization 21,348 23,519 41,321 42,016
Reclamation and mine closure 2,187 1,439 4,373 2,583
General and administrative 3,570 3,550 6,988 6,882
Exploration and development 9,940 18,013 16,430 32,021
Interest and other 400 1,990 4,041 1,144
96,052 109,386 185,896 192,898
Loss before income taxes (20,237) (14,300) (36,243) (30,062)
Income tax expense (recovery):
Current 57 435 375 641
Deferred 438 (132) 875 56
495 303 1,250 697
Net loss $(20,732) $(14,603) $(37,493) $(30,759)
Loss per share (1) $(0.17) $(0.11) $(0.29) $(0.24)
Weighted average number of
shares outstanding 139,370,031 130,513,930 139,363,557130,390,503
Certain prior-year items have been reclassified to conform with the
current presentation.
(1) 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 against revenues 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 $2,524,000 and
$2,639,000 for the three months and six months ended June 30, 1997
respectively.
ECHO BAY MINES
Consolidated Balance Sheet
(Unaudited)
June 30 Dec. 31 June 30
Thousands of U.S. dollars 1997 1996 1996
Assets
Current assets:
Cash and cash equivalents $67,138 $103,196 $134,274
Interest and accounts receivable 9,704 9,739 17,566
Inventories 45,865 33,941 40,760
Prepaid expenses and other assets 4,497 6,573 6,183
127,204 153,449 198,783
Plant and equipment 241,113 233,984 243,448
Mining properties 403,557 405,011 333,821
Long-term investments and other assets 54,944 39,701 60,682
$826,818 $832,145 $836,734
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $73,361 $72,421 $61,755
Income and mining taxes payable 3,717 3,651 3,250
Current portion of gold and other
financings(1) 14,961 129,445 59,970
Current portion of deferred income 16,081 876 15,421
108,120 206,393 140,396
Long-term gold and other financings (1) 47,116 53,478 86,006
Long-term deferred income 52,393 1,581 11,305
Other long-term obligations 66,203 69,992 32,673
Deferred income taxes 9,197 8,392 8,159
Common shareholders' equity:
Common shares 709,593 709,534 623,709
Capital securities 95,974 -- --
Deficit (245,230) (201,931) (50,763)
Foreign currency translation (16,548) (15,294) (14,751)
543,789 492,309 558,195
$826,818 $832,145 $836,734
(1) Total gold and other financings were $62.1 million at June 30, 1997
(including current portion of $15.0 million), down $83.9 million from $146.0
million at June 30, 1996 (including current portion of $60.0 million).
ECHO BAY MINES
Consolidated Statement Of Cash Flow
(Unaudited)
Three months Six months
ended June 30 ended June 30
Thousands of U.S. dollars 1997 1996 1997 1996
Cash Provided by (Used in):
Operating Activities
Net loss $(20,732) $(14,603) $(37,493) $(30,759)
Add items not affecting working capital:
Depreciation and amortization 21,348 23,519 41,321 42,016
Non-cash portion of exploration
and development expense 146 1,279 292 2,558
Deferred income taxes 438 (132) 875 56
Equity in loss of affiliate -- 920 -- 1,554
Loss (gain) on sale of assets 135 262 295 (2,318)
Other (1,555) 599 (4,336) 1,082
Working capital provided from
operations (220) 11,844 954 14,189
Change in cash invested in working
capital related to operations:
Interest and accounts receivable 31 (3,630) 34 (3,268)
Inventories (1,608) 1,129 (9,992) (6,760)
Prepaid expenses and
other assets 1,011 (534) 3,039 84
Accounts payable and
other liabilities 2,893 8,932 (8,717) (2,102)
Income and mining taxes payable 21 1,001 66 703
2,128 18,742 (14,616) 2,846
Financing Activities
Debt repayments (4,822) (2,464) (122,879) (4,927)
Capital securities issued,
net of issuance costs -- -- 96,700 --
Common share dividends -- (4,895) -- (4,895)
Common share issues,
net of issuance costs -- 134 60 4,745
Other 1,989 -- 1,989 --
(2,833) (7,225) (24,130) (5,077)
Investing Activities
Mining properties, plant and
equipment (29,143) (22,067) (49,965) (48,759)
Proceeds on repurchase of the company's:
Gold and silver forward sales -- -- 54,963 --
Gold swap -- -- 8,107 --
Foreign exchange contracts (677) -- 5,995 --
Long-term investments and
other assets (7,140) (5,667) (16,517) (6,718)
Proceeds on sale of mining properties
and long-term investments -- -- -- 5,550
Other (44) 510 105 589
(37,004) (27,224) 2,688 (49,338)
Net decrease in cash and
cash equivalents (37,709) (15,707) (36,058) (51,569)
Cash and cash equivalents,
beginning of period 104,847 149,981 103,196 185,843
Cash and cash equivalents,
end of period $67,138 $134,274 $67,138 $134,274
ECHO BAY MINES
Mine Operating Data
Three months Six Months
ended June 30 ended June 30
U.S. dollars,
except where indicated 1997 1996 1997 1996
McCoy/Cove Mine (100% owned)
Gold produced (ounces):
Milled 39,248 54,841 80,142 89,141
Heap leached 13,293 14,733 24,685 29,323
Total gold 52,541 69,574 104,827 118,464
Silver produced (ounces):
Milled 1,824,003 1,534,328 4,179,586 2,567,905
Heap leached 109,585 114,834 191,415 256,314
Total silver 1,933,588 1,649,162 4,371,001 2,824,219
Ore and waste mined (tons) 15,007,199 17,247,441 30,485,925 32,712,406
Mining cost/ton of ore and waste $0.74 $0.71 $0.71 $0.70
Milling cost/ton of ore $9.20 $9.79 $8.97 $9.85
Heap leaching cost/ton of ore $1.67 $1.73 $1.66 $1.88
Production cost per ounce of
gold produced: (1)
Direct mining expense $330 $302 $310 $330
Deferred stripping cost (28) (26) (19) (40)
Inventory movements and other 15 (20) 10 (10)
Cash operating cost 317 256 301 280
Royalties 3 4 3 4
Production taxes -- 4 1 6
Total cash cost 320 264 305 290
Depreciation 79 74 74 83
Amortization 45 46 45 46
Reclamation and mine closure 10 6 10 6
Total production cost $454 $390 $434 $425
Average gold-to-silver
price ratio (1) 72.0:1 73.5:1 71.6:1 73.0:1
Milled:
Ore processed (tons/day) 9,565 8,680 9,821 8,129
Gold grade (ounce/ton) 0.057 0.141 0.062 0.107
Silver grade (ounce/ton) 2.98 4.15 3.17 3.47
Gold recovery rate (%) 68.6 86.5 70.3 81.1
Silver recovery rate (%) 71.7 73.9 70.9 73.4
Heap leached:
Ore processed (tons/day) 20,512 15,661 19,080 13,659
Gold grade (ounce/ton) 0.014 0.023 0.013 0.023
Silver grade (ounce/ton) 0.25 0.33 0.21 0.35
Recovery rates (2)
Round Mountain Mine (50% owned)
Gold produced (ounces):
Reusable heap leach pad (50%)39,119 32,420 71,064 58,392
Dedicated heap leach pad (50%)25,829 22,940 50,045 36,684
Other (50%) -- 2,257 -- 2,257
Total (50%) 64,948 57,617 121,109 97,333
Ore and waste mined
(tons) (100%) 18,435,000 14,207,514 34,754,000 28,749,226
Mining cost/ton of ore and waste $0.64 $0.71 $0.67 $0.68
Heap leaching cost/ton of ore $0.57 $0.76 $0.62 $0.78
ECHO BAY MINES
Mine Operating Data (continued)
Three months Six months
ended June 30 ended June 30
U.S. dollars, except where indicated 1997 1996 1997 1996
Round Mountain Mine (continued)
Production cost per ounce of
gold produced:
Direct mining expense $191 $211 $200 $234
Deferred stripping cost 6 3 2 (10)
Inventory movement and other (3) (12) (1) (16)
Cash operating cost 194 202 201 208
Royalties 20 26 23 29
Production taxes 3 6 3 5
Total cash cost 217 234 227 242
Depreciation 36 46 41 53
Amortization 18 18 18 18
Reclamation and mine closure 7 5 7 5
Total production cost $278 $303 $293 $318
Reusable heap leach pad:
Ore processed (tons/day) (100%) 28,340 30,293 27,630 28,122
Grade (ounce/ton) 0.035 0.038 0.036 0.038
Recovery rate (%) 83.0 66.8 74.4 66.0
Dedicated heap leach pad:
Ore processed (tons/day) (100%) 110,154 96,461 99,467 85,709
Grade (ounce/ton) 0.010 0.013 0.010 0.013
Recovery rate (2)
Lupin Mine (100% owned)
Gold produced (ounces) 42,604 48,248 79,206 88,558
Tons of ore mined and milled 202,175 214,882 395,105 400,387
Mining cost/ton of ore
(Cdn dollars) C$43.40 C$39.48 C$44.70 C$40.56
Milling cost/ton of ore
(Cdn dollars) C$11.58 C$11.12 C$11.50 C$11.90
Production cost per ounce of
gold produced:
Direct mining expense (Cdn dollars)C$367 C$359 C$393 C$390
Deferred mine development cost
(Cdn dollars) 4 -- 11 (13)
Inventory movement and
other (Cdn dollars) (2) 1 (1) --
Cash operating cost
(Cdn dollars) C$369 C$360 C$403 C$377
Cash operating cost
(U.S. dollars) US$266 US$264 US$294 US$276
Royalties -- -- -- --
Production taxes -- -- -- --
Total cash cost 266 264 294 276
Depreciation 71 62 75 66
Amortization 28 18 28 18
Reclamation and mine closure 14 8 14 8
Total production cost US$379 US$352 US$411 US$368
Milled:
Ore processed (tons/day) 2,222 2,361 2,171 2,200
Total tons milled 202,175 214,882 395,105 400,387
Grade (ounce/ton) 0.228 0.243 0.218 0.239
Recovery rate (%) 92.3 92.4 92.2 92.4
ECHO BAY MINES
Mine Operating Data (continued)
Three months Six months
ended June 30 ended June 30
U.S. dollars, except where indicated 1997 1996 1997 1996
Kettle River Mine (100% owned)
Gold produced (ounces) 30,304 30,162 68,583 62,492
Tons of ore mined and milled 218,134 148,877 396,309 281,850
Mining cost/ton of ore $22.10 $22.38 $21.46 $22.31
Milling cost/ton of ore $9.06 $12.46 $10.19 $12.24
Production cost per ounce of
gold produced:
Direct mining expense $243 $211 $217 $191
Deferred mine development cost -- -- -- --
Inventory movement and other 13 9 (1) 3
Cash operating cost 256 220 216 $194
Royalties 17 8 14 9
Production taxes 2 2 2 2
Total cash cost 275 230 232 $205
Depreciation 65 62 57 59
Amortization 45 45 45 45
Reclamation and mine closure 12 8 12 8
Total production cost $397 $345 $346 $317
Milled:
Ore processed (tons/day) 2,397 1,636 2,178 1,549
Ore tons milled 218,134 148,877 396,309 281,850
Grade (ounce/ton) 0.162 0.244 0.198 0.258
Recovery rate (%) 85.5 83.1 87.2 85.8
(1) 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.
(2) 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 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%.
SOURCE Echo Bay Mines Ltd.
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CONTACT:
Robbin Lee of Echo Bay Mines, 303-714-8829
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