Lower grade cuts output, boosts costs for Echo Bay

A combination of lower ore grades and weaker gold prices slashed Echo Bay Mines’ (TSE) third-quarter earnings in half, from US$5.1 million (5 per share) in 1990 to US$2.3 million (2 per share).

At 50% owned Round Mountain in Nevada, Echo Bay’s share of gold production plummeted to 40,013 oz., a 43% decline. Likewise, Echo Bay’s production share from the 70% owned Kettle River in Washington State dropped by 14% to 15,330 oz. The lower grades also increased cash production costs — from US$186 per oz. to US$232 per oz. at Round Mountain and from US$231 to US$313 at Kettle River.

Offsetting the poor results from Round Mountain and Kettle River was a 14% increase in production at the company’s largest gold mine, McCoy/Cove in Nevada. Echo Bay produced 67,250 oz. from the mine at an average cash production cost of US$249, compared with US$291 last year.

In the Northwest Territories, the company intersected the Centre zone of the Lupin mineralization at a depth of 3,620 ft., nearly 600 ft. beneath the deepest mineralization included in reserve estimates. Meanwhile, the mine’s quarterly production hit a near-record high of 55,792 oz.

Echo Bay’s average realized price per oz. of gold sold was US$391 in the third quarter compared with US$406 a year ago. Total production declined to 178,385 oz. from 208,507 oz., partly due to the sale and writedown of Echo Bay’s interest in the unprofitable Alta Bay joint venture.

During the quarter, 66.3% of the company’s Swiss franc bonds were converted into common shares. The conversion helped to reduce Echo Bay’s total debt by US$68.8 million to US$277 million.