Echo Bay mill to handle 5,000 tons ore per day

Described by Chairman Robert Calman as a company “writing its history on the run,” Echo Bay Mines (TSE) is aiming to produce about 550,000 oz gold this year and more than 700,000 oz in 1989.

The company which started out with a silver mine in 1964 in the Northwest Territories and only began mining gold (at the Lupin mine) at the end of 1982, is currently the fourth largest producer of the yellow metal in North America. It has eight mines in production, and a host of development and expansion projects on the go.

Shareholders at the recent annual meeting in Toronto were given a brief summary of some of the company’s activities, including the Cove project in Nevada which Echo Bay considers its most important development property.

The gold-silver Cove property is located in the central part of the state, one mile from the company’s producing McCoy mine. Current reserves at the Cove, to a depth of 1,200 ft, stand at a gold equivalent of 4.8 million oz, President John Zigarlick told shareholders. The property’s discovery hole was drilled in January, 1987.

While open pit mining at the Cove was started up in January of this year, deep drilling exploration continues. The deepest intersection to date is between 1,765 ft and 1,850 ft, Zigarlick said, while the best intersection assay is 320 ft of 0.77 oz gold per ton. New mill

Echo Bay is building a new 5,000-ton-per-day mill (designed for possible expansion) to process the higher grade ore of the McCoy and Cove projects. The company hopes to have the mill completed by mid-1989.

Clay content of the Cove ore slowed operations for about one month, Zigarlick said, but the company thinks it has overcome the problem through use of an agglomeration procedure to treat the ore. The company is also converting its Manhattan mill, located 160 miles from the Cove property, to process high grade ore to be trucked from the Cove site, until the new McCoy/ Cove mill is ready.

Echo Bay’s joint venture Round Mountain mine, also in Nevada, is being expanded to produce 300,000 oz gold annually. (Echo Bay, with a 50% interest, will claim half that total.) In 1987, the mine produced about 190,600 oz. Senior Vice- president Peter Clarke said the $140-million expansion project is about 70% complete and should be finished towards the end of this year. Echo Bay’s mine partners, each with a 25% interest, are Homestake Mining and Case, Pomeroy & Co. Joint venture

Still with the U.S., Echo Bay recently entered into a joint venture with two American mining firms, Silver King and Pacific Silver, involving two Nevada gold properties and Echo Bay’s Sunnyside gold-silver mine in Colorado. Silver King is acting as operator; Echo Bay has a 40% interest.

In Canada, Echo Bay earlier this year expanded its sphere of influence eastward by acquiring an approximate 25% interest in the Muscocho group of companies (20% in TSE-listed Muscocho Explorations, 22.4% in TSE-listed Flanagan McAdam Resources and 26.6% in VSE-listed McNellen Resources).

Of the various projects the Muscocho group is involved in, the Magino gold property is set to pour its first bar this month while the Magnacon property could be in production during the first quarter of 1989. Both projects are located in the Wawa area of northern Ontario. Production costs up

Echo Bay’s cash production costs, at $207(US) per oz in 1987, were up $15 from the previous year. Projected costs for 1988 are $220, but in 1989 that figure is expected to drop to $200. Total gold production in 1987 was about 500,500 oz.

On the exploration side, Echo Bay reports it spent $7 million on grassroots exploration in 1987, and has budgeted $9 million for this year. Focus of the activity is the western U.S., particularly Nevada; the company reports it will also be placing more emphasis on Canadian exploration this year.

In 1987, Echo Bay recorded net earnings of $48.5 million(US) (52} per share) on revenue of $215.2 million, compared with $25.9 million (30} per share) on revenue of $126.1 million the year before.

During the first quarter of 1988, the company reported net earnings of $10.9 million (11} per share) on revenue of $60 million, compared with $8.1 million (9} per share) on revenue of $43.4 million. In other news, the company has filed a preliminary prospectus with securities commissions in Alberta, Ontario and the U.S. for a public offering of 3.6 million common shares. Echo Bay, with 95.2 million shares outstanding, says it will use the proceeds of the offering for general corporate purposes.