Echo Bay Announces First Quarter 2002 Results
EDMONTON, Alberta, Apr 25, 2002 /PRNewswire-FirstCall via COMTEX/ -- Echo Bay Mines Ltd. (Toronto; Amex: ECO) today reported net earnings of US$5.5 million ($0.01 per share) in the first quarter compared with net earnings of $3.8 million (breakeven per share) a year ago. The per share amount includes the equity portion of the interest on the company's capital securities, $4.6 million ($0.03 per share) in 2002 compared with $4.3 million ($0.03 per share) in 2001.
Revenue reported for the period was $55.2 million, down from $64.5 million the previous year. The average price realized during the quarter was $345 per ounce of gold compared with $310 per ounce in the same quarter the previous year. The average realized price of gold was $55 per ounce better than the average market price of $290 per ounce during the quarter. Revenue was negatively affected by lower production offset by the recognition of deferred revenue ($7.5 million) in the quarter. The deferred revenue relates to hedging contracts that were closed in prior years.
Gold production in the quarter was 149,276 ounces compared with 173,470 ounces in the same quarter the previous year. Silver production from McCoy/Cove during the quarter was 1.5 million ounces compared with 1.6 million ounces produced in 2001. With the winding down of production at McCoy/Cove and lower grades at Lupin, the lower production had been expected.
Consolidated cash operating costs for the quarter were $216 per ounce compared with $212 per ounce a year ago.
Debt and liquidity - capital securities retired, net debt down to $7 million
The company ended the quarter with $9.8 million in cash and cash equivalents and bank debt of $17 million. At current gold spot prices, the company expects to repay its bank debt by the maturity date of September 30, 2002.
On March 28, 2002, the shareholders of the company approved the issuance of 361,561,230 common shares to retire 100 percent of the $100 million 11% capital securities due 2027 along with all accrued and unpaid interest, which then amounted to $68.9 million. On April 3, 2002, the exchange of capital securities for common shares was completed with the company issuing 361,561,230 common shares. The new principal holders of common shares of the company are Newmont Mining Corporation of Canada Limited with 244,993,890 common shares and Kinross Gold Corporation with 57,126,674 common shares.
Robert Leclerc, Chairman and Chief Executive Officer, said, "Retirement of the capital securities has removed the significant debt that inhibited the company's financial flexibility. With this accomplished, the company looks forward to considering opportunities for growth."
The company is highly leveraged to gold prices. The current gold forward sales position consists of 45,000 ounces at a minimum price of $293 per ounce along with 105,000 sold gold call options with a strike price of $297 per ounce. The hedge book represents approximately 38 percent of the remaining 2002 planned gold production and the company is totally unhedged beyond 2002.
Round Mountain: continues strong performance, exploration drilling at Gold Hill
The company has a 50 percent ownership interest in, and is the operator of, the Round Mountain mine in Nevada. The company's share of mine production was 93,571 ounces for the quarter compared with 100,368 ounces in 2001, with the lower production resulting primarily from lower grades milled. Cash operating costs for the quarter were $187 per ounce compared to $185 per ounce in the previous year reflecting the lower production.
During the quarter, work continued on the Gold Hill property located four miles north of the current mining and processing facilities. The joint venture partners have committed a minimum of $2 million for 2002 for an exploration program to delineate the potential of Gold Hill and other targets at the Round Mountain site.
McCoy/Cove: completion of processing low grade stockpiled ore
At McCoy/Cove in Nevada, gold production was 16,501 ounces for the quarter compared with 22,303 ounces in 2001, and silver production amounted to 1.5 million ounces compared with 1.6 million ounces in the prior year. Cash operating costs per ounce were $225 compared with $257 in 2001, reflecting no mining costs and the reduction of infrastructure costs during the quarter.
The property is now in full reclamation mode. Re-contouring waste dumps and seeding are expected to continue for another two years.
On February 13, 2002 the Company entered into an agreement with Newmont Mining Corporation providing for the sale to Newmont of the entire McCoy/Cove complex. This agreement calls for a payment to Echo Bay of US$6 million and the assumption by Newmont of all reclamation and closure obligations at McCoy/Cove. The agreement is expressly subject to the completion of due diligence by Newmont by July 31, 2002 and there is no assurance the transaction will be completed. Until completion of the transaction, Echo Bay will operate McCoy/Cove for its own account.
Lupin: lower grades as anticipated
Gold production for the quarter was 28,717 ounces compared to 37,954 ounces in the first quarter of 2001 reflecting lower grades and fewer tons milled. Development of production drifts in the lower portions of the mine and preparations for pillar recovery in the upper part of the mine should improve production for the remainder of the year.
Cash operating costs were $283 per ounce compared with $217 per ounce in 2001 reflecting the lower production and the difference in the exchange rate (US$0.625:C$1 versus US$0.591:C$1 in 2001). In 2001, a $0.9 million ($24 per ounce) benefit was realized from a deferred gain on closing out certain Canadian dollar contracts for Lupin expenditures in 1997.
Ongoing ramping and development continues to provide encouraging results, and development of areas below the 1450 meter level continues to prove up continuity of the ore body.
Kettle River: encouraging drilling at K-2 extension and Emanuel Creek property
Gold production for the quarter was 10,487 ounces, down from 12,845 ounces in 2001, reflecting the lower grades encountered at the K-2 mine and stockpile ore. With the lower production, cash operating costs per ounce were $260 per ounce compared with $242 per ounce in 2001. The higher costs per ounce result only from the lower production as actual spending was 12 percent less than in 2001.
Results from exploration of the northeast extension to the K-2 mine and diamond drilling at the Emanuel Creek property during the first quarter are encouraging and drilling will continue through the second quarter to determine the extent of the mineralization.
Statistical information is available with this release at the press release area of the company's web site, www.echobaymines.ca .
Echo Bay mines gold and silver in North America. The primary markets for its shares are the American and Toronto stock exchanges.
Contact: Lois-Ann L. Brodrick, Vice President and Secretary - +1-780-496-9704
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements herein that are not historical facts are forward- looking statements. They involve risks and uncertainties that could cause actual results to differ materially from targeted results. These risks and uncertainties include, but are not limited to, future changes in gold prices (including derivatives) and/or production costs which could render projects uneconomic; ability to access financing; availability of hedging opportunities; differences in ore grades, recovery rates and tons mined from those expected; changes in mining and milling/heap leaching rates from currently planned rates; the results of future exploration activities and new exploration opportunities; changes in project parameters as plans continue to be refined; increasingly stringent reclamation requirements imposed by regulatory authorities; and other factors detailed in the company's filings with the Securities and Exchange Commission
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SOURCE Echo Bay Mines Ltd.
CONTACT: Lois-Ann L. Brodrick, Vice President and Secretary of Echo Bay
Mines Ltd., +1-780-496-9704
URL: echobaymines.ca
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