Echo Bay Mines posts quarterly loss

Echo Bay Mines (ECO-T) suffered a loss in the third quarter even as it tried to distance itself from last year’s massive writedowns which totalled US$300 million.

The company recorded a loss of US$6 million (or 6 cents per share) in the 3-month period, compared with a loss of US$327 million ($2.36 per share) after special charges in the same period last year. Without the special charges, the company showed a loss of US$14.6 million (or 12 cents per share) in last year’s third quarter.

The smaller loss in 1998 resulted from lower operating costs, combined with reduced spending on exploration and development. The cash cost incurred at the company’s three mines was US$202 per oz. in the quarter, down 20% from the US$251 per oz. incurred a year ago. Exploration spending was cut by more than 75% to only US$2.5 million, down from US$11.1 million in the third quarter of 1997.

Revenue between the two periods fell to US$55.6 million from $74.5 million, a reflection of the closure of the Lupin mine in the Northwest Territories and lower realized gold prices.

Echo Bay has completed a re-engineering study at Lupin, the results of which indicate that production could be resumed at a life-of-mine cash cost of as little as US$245 per oz. Cost reductions could be made by mining 18% fewer tonnes, using a smaller workforce, and constructing a winze to gain access to ore below the 1,130-metre level. The company does not expect these changes to affect the head grade or reserves, though yearly production would fall to 150,000 oz. per year. Lupin contains the Centre, West and McPherson zones, all of which are open at depth and have the potential to extend the mine life.

Echo Bay has commissioned a third party to verify these proposed changes in a final engineering report due in the fourth quarter. It is estimated that resuming operations at Lupin could take more than five months to complete at a cost of US$8.5 million beyond holding costs.