JUNIOR MINING SPECIAL — Record gold, silver output boosts

New gold and silver production records were set by Echo Bay Mines (TSE) in 1993 and the Denver-based company is expecting similar output this year.

Gold output increased to 873,890 oz. last year, up 14% from 1992. Silver production rose even more dramatically, to 12.5 million oz. from 7.9 million ounces, or 57%.

The McCoy-Cove gold-silver mine in Nevada, the company boasts, has become North America’s largest silver producer.

Echo Bay reduced its 1993 cash production costs by US$23 per oz. of gold produced, to US$214 from US$237. Productivity improvements and cost reductions were reported at all four of its mines.

The company increased its exploration budget sharply in 1993 to US$13.5 million, up from US$5.7 million in 1992; a further increase in exploration spending was budgeted for 1994.

At year-end 1993, gold reserves stood at 11.7 million oz., up slightly from a year earlier, and silver reserves stood at 105.1 million oz., off about 7 million oz. from a year earlier.

The company funded major exploration programs at a number of locations in Canada and the U.S. and also at selected targets elsewhere in North America, principally in Canada’s Northwest Territories, Alaska and Mexico. In addition, the company has stepped up its search outside North America and is currently examining opportunities in Latin America and elsewhere. The McCoy/Cove mine in Nevada, the company’s largest and lowest-cost gold producer, yielded 395,608 oz. in 1993, up 31% from 301,512 oz. in 1992. Silver production increased 57% to 12,454,338 oz. Contributing to the increases were increased mill throughput, higher mill recovery rates and higher grades of ore milled and heap-leached.

McCoy/Cove is a gold mine, but it also produces such large quantities of silver that in 1993 it became the largest silver-producing mine on the continent. It is also one of the three largest silver producers in the world. Gold accounted for 72% of McCoy/Cove’s 1993 revenues, and silver accounted for 28%.

Echo Bay’s Lupin mine at Lupin in the Northwest Territories produced a record 217,504 oz. in 1993, compared with 214,482 oz. in 1992, despite some adversity. Increased mill throughput more than offset reduced grade. During the latter half of 1993, Lupin faced significant sloughing from the walls of an ore pass used to drop ore by gravity down to the underground crusher. This sloughing added barren rock to the ore processed by the crusher, reducing the overall grade of material milled. A new ore pass is being driven and should be operational in the second quarter of 1994, the company says.

Despite the problems with sloughing, full-year cash production costs at Lupin rose marginally, to US$247 per oz. in 1993 from US$244 a year earlier. Factors contributing to the ability to hold down costs were a weaker Canadian dollar, a 15% mill expansion completed in April and the success of employees in finding new and better ways to do the job, the company says. During its lifetime, Lupin has found more gold than it has mined. At the start of operations in 1982, it hosted reserves of 1.4 million oz. Since then it has produced more than 2 million oz., and it still has nearly 1 million oz. in reserves.

At 50%-owned Round Mountain in Nevada, Echo Bay’s share of 1993 production was 187,347 oz., compared with 185,300 oz. a year earlier. Cash production costs were reduced by US$11 per oz. in 1993, to US$205. (The cash costs had been US$216 in 1992 and US$231 in 1991.)

Round Mountain has the longest reserve life of all Echo Bay’s properties. It will take another 12 years to extract the gold in current reserves even if no more gold is found.

Echo Bay and its joint-venture partners are evaluating plans for an on-site mill to process 8,000-10,000 tons per day of “highest-grade” non-oxidized ore at Round Mountain. It is believed such a facility would significantly increase the amount of gold recovered from the same quantity of ore (compared with heap-leaching).

Echo Bay owns 100% of the Kettle River mine in northeastern Washington State. The company acquired the 30% minority interest of its former partner at year-end 1992. Echo Bay’s 100% share of 1993 production was 73,431 oz., up from 62,894 oz. a year earlier when Echo Bay’s share was only 70%. Cash production costs were reduced to US$277 per oz. in 1993, down US$17 from the previous year.

In Alaska, the company proposes re-opening its wholly owned, former producing A-J gold mine, using modern large-volume mining and milling methods. Echo Bay is in the first year of a 2-year exploration program aimed at expanding A-J’s reserves. Also in the same state, Echo Bay’s Kensington gold project (50% interest) awaits a higher gold price to make it economical.

Following the sale of common shares, the company eliminated in 1993 its net debt (total debt offset by cash, U.S. Treasuries and other short-term investments). At year-end, Echo Bay had in excess of US$252 million in cash and short-term investments, more than offsetting its total debt of US$217 million.

The company has reduced its net debt by nearly US$450 million during the past four years. Echo Bay’s debt peaked at US$415 million at June 30, 1990. The net debt reduction totaled US$135 million during 1993 alone. Echo Bay recorded 1993 net earnings of US$3.6 million compared with a net loss in 1992 of US$31.7 million.