Echo Bay writes down investment in Kettle River mine

Denver-based Echo Bay Mines (TSE) says it will reduce the book value of its investment in the Kettle River gold property in Washington state and two exploration properties by a total of US$18.1 million.

The company is recording fourth-quarter 1992 non-cash, after-tax charges of US$14.9 million against its investment in Kettle River and US$3.2 million for its Indin Lake and Tonopah exploration properties.

The Kettle River writedown follows an announcement (T.N.M., Jan. 4/93) by Crown Resources (TSE) that it is withdrawing from the Kettle River joint venture. Crown has held a 30% interest in the joint venture, subject to repayment of a non-recourse loan from Echo Bay secured by that interest. Echo Bay is electing to write off that loan, rather than including its US$14.9-million carrying value in the year-end net book value of its investment in Kettle River.

The writeoff reduces the total book value of Echo Bay’s investment in Kettle River to US$47.9 million at Dec. 31, 1992, compared with US$72.1 million a year ago.

The loan arose from an agreement in 1988, when Echo Bay increased its share of the Kettle River venture to 70% from 60% by acquiring 10% from Crown. As part of that acquisition, Echo Bay agreed to finance Crown’s 30% share of the capital investment required to develop the mine and mill.

Echo Bay will continue to operate the northeastern Washington State project, but is cutting back the mill operating rate to 1,500 tons per day from 2,000 tons.

Mining will continue at the Key East and Key West open pits, both of which will be operated by an outside contractor. The Overlook underground mine will be temporarily closed down.

Development work will continue at the Lamefoot deposit, about three miles from the Kettle River mill, to enable the property to be ready for production in early 1994, the company says.

The reduced level of operations will mean that the project’s workforce will be reduced to 102 employees from 170, and gold output will be reduced from about 85,000 oz. produced in 1992 on a 100% basis to about 65,000 oz. in 1993. The Indin Lake property, near Echo Bay’s Lupin mine in the Northwest Territories, was the subject of an exploration program in the mid-1980s. The Tonopah exploration property in Nevada came with the Tenneco gold properties acquired by Echo Bay in 1986.