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 TORONTO, May 10 /PRNewswire/ -- Echo Bay Mines Ltd. (TORONTO; AMEX: ECO) today reported earnings of US$0.3 million before preferred stock dividends in the first quarter, compared with a net loss of US$1.7 million a year ago. There were no preferred stock dividends a year ago; the company's preferred stock was issued in July 1992. On a per share basis, the company reported a net loss of US$0.02 (after the preferred stock dividends) in the first quarter of this year, the same as a year ago.
 The company produced more gold at a lower cost per ounce, but the operating improvement was eroded by sharply lower gold prices. The average price received per ounce of gold sold in the quarter fell by US$44 to US$334 this year from US$378 a year ago.
 Operating earnings more than doubled, to US$5.0 million this year from US$2.0 million a year ago, reflecting strength in operating results. Cash production costs were reduced by US$37 per ounce to US$215 per ounce of gold produced in the first quarter. Gold production increased by 15 percent and silver production more than doubled.
 Operating cash flow increased to US$23.9 million (US$0.23 per share) from US$17.8 million (US$0.17 per share) a year ago. Quarterly revenues rose to US$83.8 million from US$71.0 million.
 Exploration expense more than doubled in the first quarter, to US$1.6 million from US$0.6 million. The company has stepped up its exploration activities significantly.
 The company expensed US$2.0 million of development property costs in the first quarter, compared with zero a year ago. At year-end, the company adopted a policy of expensing holding costs of its development properties once major development permits have been issued but final construction decisions have not yet been made. In the first quarter of 1993, the company's 50-percent-owned Kensington property in Alaska was issued its Major Mine Permit by the City and Borough of Juneau; accordingly, Kensington holding costs of US$0.5 million in the first quarter of 1993 were expensed.
 The company's new policy is also to reduce the net book value of a permitted development property over the life of its permits, once permits have been issued but a final construction decision has not yet been made. Accordingly, the company charged against earnings in the first quarter a non-cash US$1.5 million reduction in the net book value of Echo Bay's investment in the Kensington development project, reducing the amount on Echo Bay's balance sheet to US$41.8 million at March 31.
 Echo Bay is more leveraged to increases in the price of gold than many other gold producers. The company normally hedges about one-third of its coming year's gold production by a combination of forward sales and gold loan maturities. It augmented this policy in late 1992 by buying "puts" on 475,000 ounces of gold at US$330 (mainly for added price "insurance" in 1993) and paid for them largely by selling "calls" on 135,000 ounces of gold at US$345. These "calls" mature in the second quarter, and based on current gold prices will likely be exercised.
 At March 31, Echo Bay had US$127 million in cash, cash equivalents, and U.S. Treasury notes. The company's total debt, net of cash and U.S. Treasury holdings, was US$91 million, down US$157 million from a year earlier and down US$9 million from Dec. 31. Net debt has been reduced by US$323 million from its peak of US$414 million in mid-1990.
 The large reduction in net debt contributed to a US$1.9 million improvement in net interest expense from last year to this year. Echo Bay recorded net interest income of US$0.2 million in the first quarter of this year versus net interest expense of US$1.7 million a year ago.
 Gold production rose to 193,051 ounces in the first quarter of 1993 from 168,370 ounces a year ago. Silver production more than doubled, to 4.7 from 2.1 million ounces.
 The company reduced its cash production costs by US$37 per ounce of gold produced, to US$215 from US$252. Productivity improvements and cost reductions were made at all four of its mines. Many of these were generated by a company-wide quality- and teamwork-based initiative called the Continuous Improvement Process.
 The McCoy/Cove mine in Nevada had an exceptionally strong first quarter. Gold production increased 33 percent; silver production more than doubled; and cash production costs were reduced by US$54 per ounce to US$195.
 McCoy/Cove is the company's largest precious metals producer. The first quarter is normally the most difficult quarter of the year, as harsh winter weather adversely affects Nevada production and costs. This winter was particularly severe. Despite that, McCoy/Cove increased gold production to 84,527 ounces in the first quarter from 63,789 ounces a year ago, reflecting record mill throughput levels.
 Silver production rose even more dramatically, to 4,743,886 ounces from 2,080,905 ounces, an increase of 128 percent. The area of the Cove ore body being mined in the first quarter of this year was much richer in silver, although modestly leaner in gold, than a year ago.
 McCoy/Cove is currently the largest silver-producing mine in North America, and one of the five largest in the world. In the first quarter, silver accounted for 41 percent of McCoy/Cove's revenues, and gold accounted for 59 percent.
 At Lupin in the Northwest Territories, gold production totaled 51,065 ounces in the first quarter, compared with 55,211 ounces a year ago when a higher grade of ore was mined. Cash production costs were US$240 per ounce of gold produced in the first quarter of this year, compared with US$243 a year ago.
 A 15 percent expansion was completed at Lupin in April, increasing Lupin's rated mill capacity to 2,300 tons/day from 2,000 tons/day at a cost of about US$6 million. As unit costs are volume-driven, the increased production is expected to help contain the increase in costs per ounce of gold produced from progressively deeper mine levels.
 At 50-percent-owned Round Mountain in Nevada, first quarter production increased by 12 percent to 76,470 ounces (Echo Bay's share, 38,235 ounces). Cash production costs were reduced by US$30 per ounce to US$223 this year from US$253 last year.
 Round Mountain discovered a narrow but very high-grade vein of coarse gold within the open pit in mid-1992. A gravity-recovery pilot- plant mill, purchased in late 1992, recovered 4,770 ounces of coarse gold in the first quarter of 1993 (Echo Bay's 50 percent share, 2,385 ounces).
 With its joint venture partners, Echo Bay is reviewing a variety of alternatives for a much larger mill, capable of processing 5,000 to 10,000 tons/day or more of nonoxidized and high-clay ores. The massive Round Mountain ore body contains large quantities of nonoxidized ore. Heap leach recovery rates can run considerably lower than 50 percent on nonoxidized material, depending on a variety of factors such as type of ore, clay content, and amount of coarse gold present. But a mill could recover more than 85 percent of the contained gold in nonoxidized material. This would not use up Round Mountain's reserves any faster, since the mining rate would not increase. But much more gold would be recovered from the same amount of ore processed. It is estimated that over the life of the mine, as much as 750,000 additional ounces could be recovered from the same amount of ore mined (Echo Bay's 50 percent share, 375,000 ounces). A decision is expected by the end of 1993.
 Echo Bay's former joint venture partner, Crown Resources Corp., withdrew from the Kettle River project in Washington State at year-end, increasing Echo Bay's interest from 70 percent to 100 percent. Echo Bay's first quarter production at Kettle River was 19,224 ounces in 1993 (100 percent basis), compared with 15,340 ounces a year ago (70 percent basis). Cash production costs were reduced by US$27 per ounce produced, to US$271 this year from US$298 a year ago, reflecting a year-end 1992 workforce reduction from 170 to 102 employees, curtailed underground mining and a reduced mill operating schedule.
 At the 100-percent-owned Alaska-Juneau development property in southeastern Alaska, the project's Major Mine Permit was approved on April 29 by the City and Borough of Juneau. The other major permits required are a series of related permits from the State of Alaska, expected to be issued shortly, and a federal "fill" permit from the U.S. Army Corps of Engineers, expected this summer. Legal challenges to the permits are anticipated from groups that oppose development, which could delay the final construction decision by an indeterminable period of time. However, the company hopes to complete the permitting process as soon as possible, so that it can move ahead to the financing phase.
 Echo Bay is one of the largest gold producers in North America. The company's shares are traded principally on the Toronto and American stock exchanges and on other major exchanges in North America and Europe.
 Additional information is available by fax on request. Call Sharon Taylor at 303-592-8075.
 -0- 5/10/93
 /CONTACT: Paddy Broughton, 303-592-8048; or Ted Sheldon, 303-592-8049, both of Echo Bay Mines/

CO: Echo Bay Mines Ltd. ST: Colorado IN: MNG SU: ERN

MC -- DV012 -- 6634 05/10/93 16:05 EDT
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Publication:PR Newswire
Date:May 10, 1993

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