Echo Bay restates to a loss (September 23, 2002)

Edmonton-based gold and silver miner Echo Bay Mines (ECO-T) has restated its second-quarter, per-share results to reflect a loss related to an April share offering.

Under the new accounting handling, Echo Bay’s second-quarter loss comes to 27 per share, compared with the previously reported nil per share. For the first half of 2002, the per-share loss rings in at 31, instead of the previous break-even result.

In early April, Echo Bay issued 361.6 million shares to retire a capital securities debt totalling US$100 million in principal amount plus accrued and unpaid interest owed to Newmont Mining (NEM-N) and Kinross Gold (K-T).

The capital securities were originally issued in early 1997 and, at the end of 2001, the principal plus accrued and unpaid interest amounted to US$164.2 million.

The deal came as an interest payment of US$83.8 million was headed to its deadline of March 31, 2003.

After the dust settled, Newmont was left with a 48.8% stake in Echo Bay; Kinross had got an 11.4% interest.

The move also generated a $137.8-million loss for Echo Bay, thanks to the difference between the company’s share price and the book value of the debt. The loss was split between earnings ($5.5 million) and shareholders’ equity ($132.3 million).

Echo Bay says “a strict interpretation of the Canadian accounting pronouncements requires that the equity portion of the loss be included in determining earnings per common share.”

The new accounting does not affect operating figures. The company’s second-quarter net loss from operations was US$1.4 million; for the first half of the year, the loss was US$4 million. Balance sheet and cash flow statements were not affected.