Printer Friendly


    TORONTO, Aug. 5 /PRNewswire/ -- Echo Bay Mines Ltd. (Toronto; AMEX: ECO) today reported second quarter earnings of US$5.6 million before preferred stock dividends, compared with a net loss of US$0.4 million a year ago.  There were no preferred stock dividends a year ago; the preferred stock was issued in July 1992.
    On a per share basis, the company had net earnings of US$0.03 (after preferred stock dividends) in the second quarter, up from breakeven earnings of US$0.00 per share a year ago.
    The company produced more gold and silver at lower costs per ounce. Operating earnings nearly tripled, to US$12.3 million this year from US$4.2 million a year ago, reflecting the strength in operating results. The cash production cost per ounce of gold was reduced by US$24 to US$205, and the cash production cost of silver was reduced by US$0.47 to US$2.25 per ounce.  Gold production increased by 11 percent to 230,125 ounces, a new record, and silver production totaled 3.2 million ounces.
    Operating cash flow increased to US$30.0 million (US$0.28 per share) from US$22.8 million (US$0.22 per share) a year ago.  Quarterly revenues grew to US$94.0 million from US$86.3 million.
    The improvement in earnings was achieved despite a US$2.9 million charge against earnings in the second quarter for development property expenses, compared with zero a year ago.  At year-end 1992, the company adopted a policy of expensing the holding costs and reducing the net book values of its development properties over the lives of the major development permits, once permits have been obtained but final construction decisions have not yet been made.  The company's applications for Major Mine Permits have been approved for both of Echo Bay's development projects in Juneau, Alaska, by the City and Borough of Juneau.
    Exploration expense also increased sharply in the second quarter, to US$3.1 million this year from US$1.3 million last year.  Echo Bay is currently funding major exploration programs at all four of its producing mines in Canada and the United States, and is also examining other opportunities in North America, Latin America, Russia and elsewhere.
    Echo Bay is leveraged to future increases in the price of gold.  The company normally hedges about one-third of its coming year's gold production by a combination of forward sales and gold loan maturities. In addition, late in 1992 when gold prices were near a seven-year low, the company hedged against the risk of further price erosion by purchasing "puts" that guaranteed Echo Bay a minimum selling price of US$330 per ounce for 475,000 ounces of gold in 1993 -- about two-thirds of target 1993 gold production.
    The company paid for the "puts" largely by selling short-term "calls" on 135,000 ounces of gold at US$345.  All of those "calls" matured in the second quarter, and all were exercised.  No "calls" remain on the company's future production.
    Echo Bay sold 6,000,000 common shares to the public in July, and an additional 371,300 shares in early August when the underwriters exercised their option to purchase additional shares to cover over- allotments.  This increased the number of common shares outstanding to 111.6 million from 105.2 million.  The net proceeds of US$79.4 million were added to available funds to be used for general corporate purposes.
    The company has reduced its net debt to about US$7 million, net of cash and U.S. Treasury holdings, following the sale of common shares in July and August.  Assets exceed US$990 million.  Echo Bay has about US$214 million in cash, cash equivalents, and U.S. Treasury notes.
    This is a net debt reduction of more than US$400 million from a peak of US$414 million three years ago at June 30, 1990.
    The large reduction in net debt contributed to a US$2.3 million improvement in net interest expense from last year to this year.  Echo Bay recorded net interest income of US$0.8 million in the second quarter of this year versus net interest expense of US$1.5 million a year ago.
    Gold production rose by 11 percent to 230,125 ounces in the second quarter of 1993 from 207,641 ounces a year ago.  This is more gold than Echo Bay produced in any of the 42 prior quarters since it began producing gold in 1983.
    The company reduced its cash production costs by US$24 per ounce of gold produced, to US$205 per ounce.  Productivity improvements and cost reductions were made at all four of its mines, many of them generated by a quality- and teamwork-based initiative that the company calls the Continuous Improvement Process.
    The McCoy/Cove mine in Nevada set new records for higher production and lower costs in the second quarter.  Gold production rose to 106,307 ounces, 18 percent higher than the previous record set in the second quarter of 1992 with 89,987 ounces.  Silver production rose even more dramatically, up 35 percent to 3,201,845 ounces from 2,375,780 ounces a year ago.  This compares with an all-time record of 4,743,886 ounces of silver in the first quarter of 1993, when an exceptionally silver-rich area of the Cove ore body was being mined. The cash production cost per ounce of gold was reduced to US$191 in the second quarter, down US$36 from US$227 a year ago, and the cash production cost of silver was reduced to US$2.25, down US$0.47 from US$2.72.  The unit cost reductions were achieved despite lower millhead grades, reflecting increased production, better mill recoveries, successful cost containment efforts, and numerous operating efficiencies.
    McCoy/Cove is the largest silver-producing mine in North America, and one of the three largest in the world.  In the second quarter, silver accounted for 28 percent of McCoy/Cove's revenues, and gold accounted for 72 percent.
    The Lupin mine in the Northwest Territories marked another milestone when it produced its 2,000,000th ounce of gold on April 28.  Lupin had much less gold than that in reserves when it started up in 1982.  Today, it still has more than 1,000,000 ounces of gold in reserves, and no indication that the deposit is bottoming out.
    Lupin's gold production totaled 58,403 ounces in the second quarter, compared with 58,863 ounces a year ago when a higher grade of ore was mined.  Cash production costs were US$222 per ounce of gold produced, the same as a year ago.
    At 50-percent-owned Round Mountain in Nevada, second quarter production increased by 9 percent to 94,838 ounces (Echo Bay's share, 47,419 ounces).  Cash production costs were reduced by US$19 per ounce to US$205 this year from US$224 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 23,766 ounces of coarse gold in the second quarter of 1993 (Echo Bay's 50 percent share, 11,883 ounces).
    With its joint venture partners, Echo Bay is reviewing alternatives for a much larger mill, capable of processing about 8,000 tons/day of nonoxidized and high-clay ores.  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.
    Second quarter cash production costs at Kettle River in Washington State were down by US$13 per ounce of gold produced, to US$272 this year from US$285 last year, despite lower millhead grade and reduced mill throughput.  The improvement reflects the lower costs of open pit mining in 1993 versus underground mining in 1992.  Echo Bay's share of second quarter production was 17,996 ounces, compared with 15,449 ounces a year ago.  Echo Bay's former joint venture partner withdrew from the Kettle River project at year-end, increasing Echo Bay's interest from 70 percent to 100 percent.
    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.
    /NOTE:  Additional information is available by fax on request. Call Sharon Taylor at 303-592-8075./
    -0-             08/05/93
    CONTACT:  Paddy Broughton, 303-592-8048, or Ted Sheldon, 303-592-8049, both of Echo Bay Mines

-- DV006 -- X243 08/05/93
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:Aug 5, 1993

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters