Echo Bay loses on lower production

Lower gold output and decreased realized prices contributed to a loss-making second quarter for Echo Bay Mines (ECO-X).

The company suffered a second-quarter net loss of US$400,000 (3 per share) on revenue of US$63.6 million, compared with year-ago net earnings of US$10.2 million (4 per share) on US$84.3 million.

For the first half of 2001, the net earnings tallied US$3.4 million, down from US$7.5 million in 2000. Revenues between the two periods fell 6%.

Total gold production for the three months ended June 30 reached 176,284 oz. This was down 6% from the previous year, thanks to reduced production from the McCoy-Cove gold-silver mine in Nevada. Silver production at McCoy-Cove dropped 51% to 1.7 million oz. The lower production forced cash costs up US$32 to US$218 per oz.

The company realized an average of US$298 per oz. for its second-quarter production. This was US$24 per oz. lower than in 2000. Average realized silver prices slipped US71 per oz. to US$4.52 per oz. Gold ounces sold climbed 20%. Silver sales fell 47%.

The company’s strongest contribution came from its half-interest in the Round Mountain gold mine in Nevada, which churned out 97,770 oz. during the quarter, compared with 76,408 the year before. The increase is thanks to better heap-leach recoveries and higher-grade ore, which was stacked on the pads during the first quarter. Cash operating costs fell US$8 to US$194 per oz. as higher production offset increased fuel costs. Echo Bay has upped the mine’s 2001 production estimate to 370,000 oz. gold from the previous 300,00 oz.

Echo Bay established new smelting contracts for stockpiled concentrates at McCoy-Cove after the previous smelter was shut down. The company now expects to produce 90,000 oz. gold and 6.54 million oz. silver at the operation this year. This is up from the previous estimates of 60,000 oz. and 5 million oz.

Reclamation continues at McCoy-Cove. The total reclamation now stands at 1,571 acres. Re-contouring waste dumps will continue for the next two years, as will seeding.

The Lupin mine completed its first year of operation after a two-year hiatus, contributing 37,954 oz. at US$217 per oz. Cash costs also benefited from a US$6-million gain (24 per oz.) from closing out certain Canadian dollar contracts. Echo Bay has deferred the gain, recognizing it through the third quarter.

At the Lupin underground operation, the company completed a winze in April. This will enable crews to move ore to the hoisting shaft. It will enable them to mine an ore zone 200 metres below the winze.

Echo Bay finished the second quarter with US$10 million in cash and equivalents. Total debt decreased by US$3.7 million and the company retained US$19 million on its revolving credit line. Echo Bay expects to finalize the terms of a refinancing with the current syndicate and have formal documentation in place by Sept. 5.