Cove falls short as Echo turns in results

A 50% increase in ounces poured over the last 12-month period and a 20% hike in the price of the yellow metal reflects well on the bottom-line results of Echo Bay Mines, released this week.

But results from the Cove exploration program in Nevada do not augur so well for the company.

Not unexpectedly, the company attained record earnings of $48.5 million(US) in 1987, compared to just $25.9 million in 1986.

The company, which started out in the gold mining business with just one producing mine in 1982, poured 500,507 oz in 1987 from seven mines — one more than in 1986. The average cost the company pays to produce one ounce of gold remains relatively low at $207.

Accounting for most of the increase in production last year was the McCoy mine in northern Nevada, picked up from Tenneco Inc. in October, 1986. Gold production there was 90,788 oz in 1987.

Right next door to that mine, exploration geologists have outlined a huge, low-grade gold and silver deposit — the Cove deposit — which Echo Bay plans to bring into production by the end of 1988.

The open pit mine envisioned, (N.M. Jan 4/88) when coupled to a 5,000-ton-per-day mill, could churn out 225,000 oz of the yellow metal per year.

“Although we are pleased with the increase (in reserves at the Cove deposit), year-end reserves did not meet our estimate (of four million oz gold and 250 million oz silver), John Zigarlick, Jr., President of Echo Bay says, “but for a very good reason: We spent the time late in the year drilling to confirm Cove’s downward extension rather than on in-fill drilling to prove up reserves.”

Proven and probable mineable reserves at Cove total 2.1 million oz gold and 97.3 million oz silver. No tonnages or grades are reported by the company.

Earnings per share for 1987 were 52 cents compared to 30 cents in 1986.

The company’s shares traded this week at about $23.