| To: Susan Saline who wrote (160) | 11/5/1997 12:05:00 PM | | From: Roebear | of 300 | | |
Susan, Here it is, a bit long and explains the latest drop. Seems like they have set themselves for a lower mining cost. Also note the increased silver production, I have higher hopes over the next year for silver than gold, no big CB supplies to scare everyone. BTW, nice to meet you too. BBL Roebear
Echo Bay Reports Third Quarter Results
ENGLEWOOD, Colo., Nov. 4 /PRNewswire/ -_ Echo Bay Mines Ltd. (Amex:AND - news) today
reported a net loss of $17.7 million ($0.14 per share) in the third quarter of 1997 before a special
one-time restructuring provision of $309.8 million ($2.22 per share). The restructuring charge
brought the total quarterly loss to $327.5 million ($2.36 per share).
A year ago, Echo Bay had a third quarter net loss of $42.4 million ($0.31 per share), including a
provision of $30.0 million ($0.22 per share) for waste rock stabilization at the McCoy/Cove mine in
Nevada.
The restructuring provision is a non-cash charge. It reduces the cost basis of the company's assets
on the consolidated balance sheet. It also reduces the company's future gold production costs by an
estimated $20-30 per ounce of gold produced over the lives of the mines, as it reduces deferred
mining costs and future depreciation and amortization amounts. There is no tax effect; the amount is
the same pre-tax and after-tax.
The restructuring provision resulted from a previously reported comprehensive review of the carrying
values of the company's assets, including four producing gold mines and a portfolio of exploration
properties, development projects and other assets, in light of current market conditions. As reported,
Echo Bay initiated the asset value review in the second quarter of this year.
Details of the non-cash charges follow:
$107.4 million write-down of Echo Bay's investment in Santa Elina Mines Corporation in
Brazil to its current market value of $45.0 million.
$50.0 million write-off of Echo Bay's entire investment in the Kingking copper-gold project in
the Philippines.
$127.0 million reduction in the carrying values of three producing mines in the United States
and Canada (McCoy/Cove, Lupin and Kettle River) as a result of continuing low gold prices.
$25.4 million to write down certain other investments and assets to market value and to
provide for estimated legal and restructuring expenses.
The company assessed the recoverability of the carrying values of all assets in light of both
short-term and long-term views of the gold price. A brief discussion of each carrying value
assessment follows.
Santa Elina Mines Corporation: The market value of Echo Bay's investment in this gold exploration
and development company in Brazil has dropped precipitously in the wake of the decline in value of
many junior exploration companies and the plunge in world gold prices to 12-year lows. The
company wrote down its investment by $107.4 million to Santa Elina's estimated market value of
$45.0 million.
Kingking: Echo Bay took a $50.0 million charge to write off its entire investment in this copper-gold
project in the Philippines. As reported, Echo Bay and its joint venture partner, TVI Pacific Inc.
(TSE: TVI), completed a feasibility study in April of this year. The study concluded that Kingking
would not meet the joint venture's desired rates of return, principally due to the required payment of
$67 million in order to exercise the purchase option (Echo Bay's 75% share, $50.3 million). The
joint venture elected to let the option expire.
Share Investments and Other: This $25.4 million charge includes $15.6 million to write down Echo
Bay's portfolio of share investments in other companies, reflecting the decline in market value of
many gold exploration and development companies and continued low gold prices, and $9.8 million
for miscellaneous asset write-downs and estimated legal and restructuring expenses. The share
investments are principally common shares of exploration- oriented companies acquired by Echo
Bay as part of a global strategic-alliance strategy over a period of years. Because Echo Bay has
sharply refocused its exploration strategy, most of these share investments now are non-core assets
and will be disposed of. The miscellaneous asset write-down (mostly leasehold improvements
related to office downsizings and closures) is $2.1 million, and the accrual for estimated legal and
restructuring expenses is $7.7 million. Echo Bay implemented the final steps of a company-wide
downsizing in the third quarter, reducing Denver corporate office personnel from 116 to 75 and
closing a number of exploration offices around the world. The company expects a reduction of
approximately $4 million in annual cash operating costs and general & administrative expenses as a
result.
Three Producing Mines: As a result of continuing low gold prices, Echo Bay reduced by a total of
$127.0 million the carrying value of three gold mines -_ McCoy/Cove, Lupin and Kettle River. The
non-cash charge reduces Echo Bay's consolidated gold production costs by an estimated $20-30
per ounce of gold produced over the lives of the mines. Approximately half of the future cost
reduction, $10-15 per ounce of gold produced, is in cash operating costs (reflecting a $64.2 million
reduction in deferred mining costs) and the other $10-15 reduction in non-cash depreciation and
amortization expenses (reflecting a $62.8 million reduction in ore bodies, plant and equipment).
Echo Bay noted that the write-down puts its gold mines in a position to weather a prolonged period
of low gold prices. All four mines continue to perform well, and further improvements are
anticipated. The Round Mountain mine approved a new mining plan in the third quarter that
increases cash flow and profitability and reduces cash operating costs. At McCoy/Cove, additional
mineralization has been discovered just outside the Cove open pit that has the potential of adding to
production and extending mine life. Lupin has introduced new mining and blasting methods at depth
that make deeper levels economic, potentially adding 2-3 additional years at current production
rates. At Kettle River, positive exploration results along extensions of two ore bodies indicate the
potential is excellent to add minable ounces and additional years of mine life in 1998 and beyond.
Third Quarter Operating Results
Echo Bay's gold production fell and silver production rose in the third quarter, as expected,
principally reflecting the planned processing of carbonaceous ores leaner in gold but richer in silver at
the McCoy/Cove mine. Company-wide quarterly gold production totaled 177,502 ounces this year,
down 19% from 218,043 ounces last year, as planned. For the first nine months, gold production
topped 550,000 ounces, in line with the company's full-year production target of 700-725,000
ounces. Silver production rose 56% to 3,271,677 ounces from 2,092,987 ounces a year ago,
bringing silver production for the first nine months to 7.6 million ounces _- easily achieving in the first
nine months the company's full-year 1997 production target of seven million ounces.
Cash operating costs rose 3% to $251 per ounce of gold produced in the quarter, principally
reflecting the lower gold grades processed at the McCoy/Cove mine.
Quarterly results also reflect lower gold prices this year than a year ago. The average price realized
by Echo Bay fell by $10 per ounce of gold sold in the quarter, to $380 per ounce this year from
$390 a year ago. Echo Bay's $380 realized price was $56 better than the $324 average spot price
per ounce of gold on world markets during the quarter, a result of the company's hedging programs.
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.
ECHO BAY MINES
(American and Toronto stock exchanges, symbol ECO)
Earnings Summary
U.S. dollars 1997 1996
THREE MONTHS ENDED SEPT. 30:
Revenue $74,450,000 $94,936,000
Net loss:
Before special
restructuring
provision $(17,725,000) $(42,415,000)
After special
restructuring
provision $(327,525,000) $(42,415,000)
Loss per share:
Before special
restructuring
provision $(0.14) $(0.31)
After special
restructuring provision $(2.36) $(0.31)
Weighted average
common shares outstanding139,370,031 137,603,507
NINE MONTHS ENDED SEPT. 30:
Revenue $224,103,000 $257,772,000
Net loss:
Before special
restructuring
provision $(55,218,000) $(72,174,000)
After special
restructuring
provision $(365,018,000) $(72,174,000)
Loss per share:
Before special
restructuring provision $(0.43) $(0.55)
After special
restructuring provision $(2.65) $(0.55)
Weighted average common
shares outstanding 139,370,031 132,794,837
''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, 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.
SOURCE Echo Bay Mines Ltd. |
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