Equity Silver improves its financial position

The past year was good for Equity Silver Mines. As well as paying off its bank debt and paying dividends to shareholders for the first time, the company reports it substantially improved its financial position in 1987.

Earnings were $3,582,000 or 12 cents per share, before an extraordinary writeoff of $l8,566,000, compared to $22,000 in 1986. After the writeoff, a net loss of $14,934,000 or 49 cents was recorded for the year.

The loss comes from writing off $33.6 million for the leach and gold scavenger plants which are no longer used at the company’s mill near Houston, B.C. The leach plant, which hasn’t been used since April, 1984, is no longer needed in the treatment of the ore, and lower than anticipated production from the scavenger plant makes recovery of the investment in that equipment unlikely. The original cost of the two plants was $69 million.

President A. Petrina explains the results also include a non-recurring gain of $10,967,000 from the purchase and subsequent sale to Placer Dome of 4,985,000 oz silver at a profit of $2.20 per oz, under the now-completed silver sale agreement with the parent company.

Higher prices for precious metals was offset by increased smelter charges, increased depreciation and depletion charges as a result of the 1986 mill expansion, Petrina says. He adds that in the first three quarters, the mill was processing lower grade and harder ore, while in the fourth quarter, costs were unusually low due to improved grades and recoveries, lower operating costs and the sale of previously written-down inventories.

Cash from operations rose to $14.3 million from $12.4 million in 1986. During the year, the company paid $10.8 million to retire its bank debt and paid two quarterly dividends to shareholders. Cash balance at year-end was $5.3 million.

Under Equity’s exploration program, 19 precious metals prospects have been acquired by direct ownership, option or joint venture agreements at a cost of $4.9 million. Most of this was funded by a flow-through common share issue. Evaluation of these and exploration for additional ore reserves in the mine area will continue in 1988.