Several factors, including a US$42.4-million (43 cents per share) writeoff of its investment in the Muscocho group of companies, have resulted in a first-quarter loss of US$37.9 million (43 cents per share) for Echo Bay Mines (TSE). The loss compares with earnings of US$10.6 million (11 cents per share) in the first quarter of 1989. Quarterly revenues rose to US$73.6 million this year from US$59.8 million last year, while operating cash flow (unaffected by the writeoff) declined to US$20.4 million (21 cents per share) from US$21.8 million (22 cents per share).
Echo Bay says that despite high gold and silver prices, the cost associated with the commencement of underground mining and sulphide ore processing at the McCoy/Cove mine in Nevada affected operating earnings. Gold production startup at the Kettle River mine in Washington State also contributed to higher costs. The company’s average production cost rose by US$44 per oz. to US$254.
The negative results were slightly offset by an increase in production at the Lupin and Round Mountain mines. Quarterly gold production rose by 23% to 174,829 oz., while silver production increased by 33% to 538,707 oz.
Late last year, the low-cost Borealis mine in Nevada, which produced more than 23,000 oz. of gold at a cost of US$134 per oz. in the first quarter of 1989, was mined out. Heap leaching of the mined ore continues, but with no new ore being added, the output is much lower than last year and the unit costs much higher.
More recently, Echo Bay decided against a plan to exchange its shares in the Muscocho group of companies for a direct interest in the Magino and Magnacon mines, and walked away from its US$42.4- million investment in the Muscocho group. Echo Bay said that new assessments of minable reserve grades and cash costs have made the deal unattractive. Echo Bay Mines (TSE) $000s except per share items Quarter ended Mar. 31 1990 1989 Revenue $73.600 $59,800 Net earnings(loss) (37,900 ) 10,600
per share (0.43 ) 0.1104 *US dollars
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