Vancouver — Edmonton, Alta.-based
The company tabled net earnings of US$5.5 million (or 1 per share) on revenue of US$55.2 million during the recent 3-month period, compared with earnings of US$3.8 million (nil per share) on revenue of US$64.5 million in the corresponding quarter of 2001.
Echo Bay realized an average gold price of US$345 per oz., compared with US$310 per oz. last year, representing a US$55 premium over the average market price of $290 per oz.
The revenue drop during the quarter was a result of lower production.
The company produced 149,276 oz. gold during the quarter, compared with 173,470 oz. a year earlier. Consolidated cash operating costs rose to US$216 from US$212 per oz.
Silver output at the McCoy-Cove mine in Nevada fell 100,000 oz. to 1.5 million oz., reflecting the winding-down of production.
Echo Bay ended the quarter with US$9.8 million in cash and cash equivalents and reduced its bank debt to US$17 million. At current gold spot prices, the company expects to repay its bank debt by the end of September 2002.
In March, shareholders approved the issuance of 361.6 million shares to retire all of its 11% capital securities, which were worth US$100 million and due in 2027. In addition, the company settled all the accrued and unpaid interest, which tallied to US$68.9 million. The new principal holders of the company are
“Retirement of the capital securities has removed the significant debt that inhibited the company’s financial flexibility,” says Chairman Robert Leclerc.
Echo Bay remains highly leveraged to gold prices. Its gold forward sales position consists of 45,000 oz. at a minimum price of US$293 per oz. plus 105,000 sold gold call options that have a strike price of US$297 per oz. The hedge book represents about 38% of the remaining gold production during 2002. Beyond that, the company is totally unhedged.
The company’s 50%-owned Round Mountain mine in Nevada produced 93,571 oz. gold for Echo Bay during the quarter, compared with 100,368 oz. in the corresponding period last year. The shortfall is attributed to lower production as a result of lower grades. Cash operating costs for the quarter were US$187 per oz., compared with US$185 per oz. in the previous year.
At the Gold Hill property, 4 miles north of the current mining and processing facilities at Round Mountain, Echo Bay and its joint-venture partner have committed US$2 million for exploration in 2002.
At McCoy-Cove, gold production weighed in at 16,501 oz. during the quarter, compared with 22,303 oz. a year earlier, while cash operating costs rang in at US$225 per oz., compared with US$257. Neither mining nor infrastructure costs were incurred, and reclamation efforts are under way. Re-contouring waste dumps and seeding are expected to continue for two years.
In February, Echo Bay signed an agreement with Newmont Mining to sell the entire McCoy-Cove complex. Echo Bay will receive US$6 million, and Newmont will assume all of the reclamation and closure obligations. The agreement is still subject to due diligence by Newmont.
Meanwhile, at the Lupin mine in Nunavut, 28,717 oz. gold were produced during the quarter, compared with 37,954 oz. in the year-earlier quarter. This is a result of lower grades and a reduction in the number of tonnes milled.
Development of production drifts in the lower sections of the mine, combined with preparations for pillar recovery in the upper portions, should improve production for the remainder of the year.
Cash operating costs at Lupin were pegged at US$283 per oz., up from US$217 a year earlier. This was attributed to lower production and the difference in the U.S. exchange rate between the two periods. Ongoing ramping and mine development continue to provide access to the deposit below the 1,450-metre level.
At Kettle River mine, in Washington state, gold production during the first quarter totalled 10,487 oz., compared with 12,845 oz. last year. The company attributes the production shortfall to lower grades at the K-2 mine, and to stockpiled material. As a result, cash operating costs were US$260 per oz., up from US$242 in the first quarter of 2001.
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