<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-8542
ECHO BAY MINES LTD.
(Exact name of registrant as specified in its charter)
Incorporated under the laws
of Canada None
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Suite 1000, 6400 S. Fiddlers Green Circle 80111-4957
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 714-8600
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X No
--- ---
<TABLE>
<CAPTION>
Shares Outstanding as of
Title of Class April 30, 1996
---------------------------- ------------------------
<S> <C>
Common Shares
without nominal or par value 130,511,166
</TABLE>
================================================================================
<PAGE> 2
ECHO BAY MINES LTD.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements................................ 1
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 17
PART II - OTHER INFORMATION
Item 1. Legal proceedings................................... 33
Item 6. Exhibits and Reports on Form 8-K.................... 33
SIGNATURES............................................................. 34
i
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
ECHO BAY MINES LTD.
CONSOLIDATED STATEMENT
OF EARNINGS Three months ended
thousands of U.S. dollars, March 31,
except for per share data 1996 1995
- - -----------------------------------------------------------------------------
<S> <C> <C>
Revenue $ 67,750 $ 84,209
- - -----------------------------------------------------------------------------
Operating expenses:
Operating costs 44,565 50,591
Royalties 2,103 2,079
Production taxes 709 1,363
Depreciation 12,885 14,180
Amortization 5,612 7,905
Reclamation 1,144 1,187
General and administrative 3,332 2,707
- - -----------------------------------------------------------------------------
70,350 80,012
- - -----------------------------------------------------------------------------
Operating earnings (loss) (2,600) 4,197
Exploration expense (9,303) (6,491)
Development properties expense (4,705) (7,895)
Other income (expense) 997 (559)
Interest income (expense) (151) 1,640
- - -----------------------------------------------------------------------------
Loss before taxes (15,762) (9,108)
- - -----------------------------------------------------------------------------
Income tax recovery (expense):
Current (206) (264)
Deferred (188) 475
- - -----------------------------------------------------------------------------
(394) 211
- - -----------------------------------------------------------------------------
Loss before
preferred stock dividends (16,156) (8,897)
Preferred stock dividends
of subsidiary -- (2,762)
- - -----------------------------------------------------------------------------
Net loss $ (16,156) $ (11,659)
=============================================================================
Loss per share $ (0.12) $ (0.10)
=============================================================================
Weighted average number of
shares outstanding (thousands) 130,046 112,699
=============================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE> 4
<TABLE>
<CAPTION>
- - -------------------------------------------------------------------------------
ECHO BAY MINES LTD.
CONSOLIDATED BALANCE SHEET March 31, December 31,
thousands of U.S. dollars 1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 149,981 $ 185,843
Interest and accounts receivable 14,209 14,749
Inventories (note 2) 43,204 34,173
Prepaid expenses and other assets 6,053 5,353
- - -------------------------------------------------------------------------------
213,447 240,118
Plant and equipment (note 3) 251,398 255,868
Mining properties (note 4) 328,554 318,219
Long-term investments and other assets (note 5) 55,469 56,956
- - -------------------------------------------------------------------------------
$ 848,868 $ 871,161
===============================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 53,186 $ 61,781
Income and mining taxes payable 2,249 2,547
Gold and other financings (note 6) 35,833 41,135
Deferred income (note 6) 12,192 25,053
- - -------------------------------------------------------------------------------
103,460 130,516
Gold and other financings (note 6) 114,373 111,679
Deferred income (note 6) 12,920 --
Other long-term obligations (note 7) 32,337 32,018
Deferred income taxes 8,298 8,096
Common shareholders' equity:
Common shares, no par value,
unlimited number authorized; issued and
outstanding - 130,497,801 shares
(129,880,804 shares at December 31, 1995) 623,577 618,965
Deficit (31,265) (15,109)
Foreign currency translation (14,832) (15,004)
- - -------------------------------------------------------------------------------
577,480 588,852
Commitments and contingencies (notes 9 and 10)
- - -------------------------------------------------------------------------------
$ 848,868 $ 871,161
===============================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
2
<PAGE> 5
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------
ECHO BAY MINES LTD.
CONSOLIDATED STATEMENT Three months ended
OF CASH FLOW March 31,
thousands of U.S. dollars 1996 1995
- - -----------------------------------------------------------------------------
<S> <C> <C>
Cash provided by (used in):
OPERATING ACTIVITIES
Working capital provided
from operations $ 2,345 $ 16,166
Increase in cash invested
in working capital
related to operations (18,241) (13,391)
- - -----------------------------------------------------------------------------
(15,896) 2,775
- - -----------------------------------------------------------------------------
FINANCING ACTIVITIES
Gold loan repayments (2,463) (2,463)
Dividends on preferred
stock of subsidiary -- (2,762)
Common share issues 4,611 764
- - -----------------------------------------------------------------------------
2,148 (4,461)
- - -----------------------------------------------------------------------------
INVESTING ACTIVITIES
Mining properties, plant and equipment (26,692) (10,173)
Long-term investments and
other assets (1,051) (315)
Proceeds on sale of mining
properties and other assets 5,550 --
Other 79 245
- - -----------------------------------------------------------------------------
(22,114) (10,243)
- - -----------------------------------------------------------------------------
Net decrease in
cash and cash equivalents (35,862) (11,929)
Cash and cash equivalents,
beginning of period 185,843 201,527
- - -----------------------------------------------------------------------------
Cash and cash equivalents,
end of period $ 149,981 $ 189,598
=============================================================================
<CAPTION>
ECHO BAY MINES LTD.
CONSOLIDATED STATEMENT Three months ended
OF RETAINED EARNINGS (DEFICIT) March 31,
thousands of U.S. dollars 1996 1995
- - -----------------------------------------------------------------------------
<S> <C> <C>
Balance, beginning of period $(15,109) $ 44,140
Net loss (16,156) (11,659)
- - -----------------------------------------------------------------------------
Balance, end of period $(31,265) $ 32,481
=============================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE> 6
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated statement
of earnings, consolidated statement of retained earnings, consolidated balance
sheet and consolidated statement of cash flow contain all adjustments,
consisting only of normal recurring accruals, necessary to present fairly in all
material respects the consolidated financial position of Echo Bay Mines Ltd.
(the company) as of March 31, 1996 and December 31, 1995 and the consolidated
results of operations and cash flow for the three months ended March 31, 1996
and 1995.
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles for complete financial statements. For further information, refer to
the financial statements and related footnotes included in the company's annual
report on Form 10-K for the year ended December 31, 1995.
The effective corporate tax rate for interim periods is based on the estimated
annual effective corporate tax rate, excluding certain nonrecurring or unusual
events. The effective tax rate varies from statutory rates due primarily to
resource and depletion allowances and operating losses for which no tax benefit
has been recorded.
The financial statements are prepared on the historical cost basis in accordance
with accounting principles generally accepted in Canada and, in all material
respects, conform with those principles generally accepted in the United States
except as described in note 8 to the company's interim consolidated financial
statements and with International Accounting Standards. The statements are
expressed in U.S. dollars.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
Certain of the comparative figures have been reclassified to conform with the
current period's presentation.
4
<PAGE> 7
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
2. INVENTORIES
thousands of U.S. dollars
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
March 31, December 31,
1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
Precious metals - bullion $ 8,531 $ 5,944
- in-process 10,992 10,312
Materials and supplies 23,681 17,917
- - ------------------------------------------------------------------------------
$43,204 $34,173
==============================================================================
</TABLE>
3. PLANT AND EQUIPMENT
thousands of U.S. dollars
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
March 31, December 31,
1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
Cost $614,725 $605,442
Less accumulated depreciation 363,327 349,574
- - ------------------------------------------------------------------------------
$251,398 $255,868
==============================================================================
</TABLE>
4. MINING PROPERTIES
thousands of U.S. dollars
<TABLE>
<CAPTION>
- - ------------------------------------------------------------------------------
March 31, December 31,
1996 1995
- - ------------------------------------------------------------------------------
<S> <C> <C>
Producing mines' acquisition,
exploration and development costs $357,389 $364,611
Less accumulated amortization 227,063 221,125
- - ------------------------------------------------------------------------------
130,326 143,486
Development properties' acquisition,
exploration and development costs 119,987 102,204
Deferred mining costs 78,241 72,529
- - ------------------------------------------------------------------------------
$328,554 $318,219
==============================================================================
</TABLE>
5
<PAGE> 8
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
5. LONG-TERM INVESTMENTS AND OTHER ASSETS
thousands of U.S. dollars
<TABLE>
<CAPTION>
- - --------------------------------------------------------------------------------------------------------------------------------
March 31, 1996 December 31, 1995
Market Carrying Market Carrying
Value Value Value Value
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Share investments carried at cost:
TVI Pacific Inc.
11,666,667 common shares
(15.6% interest)(2) $ 23,365 $ 7,579 $ 18,715 $ 7,579
Santa Elina Gold Corporation
9,000,000 common shares
(6.7% interest)(3) 14,129 13,073 9,889 13,073
Canarc Resources Corp.
3,000,000 common shares
(10.1% interest)(4) 5,194 4,153 3,055 4,153
Cluff Resources plc(5) -- -- 6,033 2,899
Other common share investments 11,225 9,518 8,157 8,315
- - --------------------------------------------------------------------------------------------------------------------------------
53,913 34,323 45,849 36,019
Equity investment in:
Etruscan Enterprises Ltd.
4,175,275 common shares
(25.5% interest)(1) 12,528 8,254 12,815 8,877
- - --------------------------------------------------------------------------------------------------------------------------------
$ 66,441 42,577 $ 58,664 44,896
Property options 6,778 7,764
Other assets 6,114 4,296
- - --------------------------------------------------------------------------------------------------------------------------------
$ 55,469 $ 56,956
================================================================================================================================
</TABLE>
(1) At December 31, 1995, 4,175,275 common shares (27.0% interest).
(2) At December 31, 1995, 11,666,667 common shares (15.7% interest).
(3) At December 31, 1995, 9,000,000 common shares (6.7% interest).
(4) At December 31, 1995, 3,000,000 common shares (10.5% interest).
(5) At December 31, 1995, 3,630,800 common shares (4.8% interest).
These shares were sold in the first quarter of 1996.
Equity Investment
During 1995, the company purchased 4,175,275 common shares of Etruscan
Enterprises, Ltd. ("Etruscan") for $9.0 million, which resulted in an ownership
interest sufficient to account for this investment using the equity method.
Etruscan is the company's joint venture partner in the Koma Bangou project, an
advanced stage exploration project in Niger, West Africa.
6
<PAGE> 9
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
Share investments
The company has purchased common shares of exploration-oriented companies that
give the company access to exploration and development prospects along some of
the major gold belts of the world, including properties in South America, West
Africa and the Philippines.
Property options
In several cases the company paid a premium over the then-market value of the
common shares of exploration-oriented companies to fund exploration programs on
certain properties, and for the right to acquire direct interests in these
properties. These amounts are being expensed as the exploration work is being
conducted, until development potential is established. The company holds options
to purchase direct interests in these properties at purchase considerations
dependent on the properties' reserves and other mineralization.
6. GOLD AND OTHER FINANCINGS AND DEFERRED INCOME
<TABLE>
<CAPTION>
Financings Deferred Income
---------------------------------- -------------------------------
March 31, December 31, March 31, December 31,
thousands of U.S. dollars 1996 1995 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold swaps $ 101,044 $ 101,480 $ 27,233 $ 26,925
Gold loan 21,066 23,279 291 291
Debenture payable 28,096 28,055 -- --
Other -- -- (2,412) (2,163)
- - --------------------------------------------------------------------------------------------------------------------------------
150,206 152,814 25,112 25,053
Less current portion 35,833 41,135 12,192 25,053
- - --------------------------------------------------------------------------------------------------------------------------------
$ 114,373 $ 111,679 $ 12,920 $ --
================================================================================================================================
</TABLE>
a) Gold swaps
Gold swaps refer to currency loans and related, independently arranged, future
gold delivery commitments. Taken together, the loans and commitments create
obligations effectively denominated in gold and represent hedges of future gold
production. At March 31, 1996 and December 31, 1995, 336,990 ounces of gold were
deliverable under gold swap agreements as described below.
(i) U.S. dollar notes and bonds
In 1990, bonds totaling $84.0 million were swapped for an obligation to deliver
218,000 ounces of gold in 1997, equivalent to a selling price of $385 per ounce.
The effective interest rate on the bond and swap arrangement was 2.96% at March
31, 1996.
7
<PAGE> 10
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
(ii) Swiss franc bonds
In 1989, the company swapped Swiss franc bonds with a principal amount of SFr110
million, originally issued in 1986, for an obligation to deliver 175,311 ounces
of gold in 1996. In 1991, bonds with a principal amount of SFr88.7 million were
converted into common shares, and the 1989 swap arrangement was renegotiated.
All gains relating to changes in the price of gold and changes in the exchange
rate of the Swiss franc to the U.S. dollar have been deferred and will be
recorded as revenue on a basis that matches the gain with the production
originally designated for delivery in 1996. The company's remaining net gold
delivery commitment relating to the Swiss Franc bond and swap arrangement is
118,990 ounces at $374 per ounce, including deferred amounts. In the first
quarter of 1996, the net gold delivery commitment was rescheduled. The company
will now deliver 69,267 ounces in the fourth quarter of 1996 with the remaining
49,723 ounces spread equally over the following nine quarters. The effective
rate of interest on the Swiss Franc bond and swap arrangement was 1.37% at March
31, 1996.
b) Gold loan
At March 31, 1996, 53,150 ounces of gold were outstanding under a gold loan
agreement (60,200 ounces at December 31, 1995). The outstanding gold loan was
remeasured to $396 per ounce, the gold price at March 31, 1996 ($387 per ounce
in 1995). Unrealized remeasurement gains or losses are included in deferred
income. This loan has been outstanding since 1992, when the company borrowed
173,000 ounces of gold under a gold bullion agreement with six banks. The
agreement contains both term and revolving loan provisions. The term loan, which
was used to refinance existing debt, is being repaid at the rate of 2,350 ounces
per month with the balance of 32,000 ounces due on December 31, 1996. At March
31, 1996, the company had no amounts outstanding under the revolving commitment.
The company had $75.0 million or gold equivalent available until 1999 under the
revolving commitment.
The facility is convertible between gold and dollar borrowings. Interest on gold
borrowings is calculated at the banks' gold rate plus 0.55%, and interest on
dollar borrowings at LIBOR plus 0.55%. The effective interest rate on the gold
loan was 2.01% at March 31, 1996.
c) Debenture payable
A subsidiary of the company has issued a debenture in the amount of $28.0
million, which bears interest at the one-month discount rate for bankers'
acceptances plus 0.325%. This debenture is payable in 1997 and is secured by a
letter of credit.
8
<PAGE> 11
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
d) Other information
Certain of the company's financing arrangements require it to maintain specified
ratios of assets to liabilities and cash flow to debt. The company is in
compliance with these ratios and other covenant requirements.
The company had outstanding letters of credit of $52.3 million at March 31,
1996, primarily relating to the bonding of future reclamation obligations and to
the debenture issued by a subsidiary of the company. Annual fees on the letters
of credit range from 0.50% to 0.55%.
At March 31, 1996, the company had unutilized credit facilities of $86.3 million
including the $75.0 million revolving commitment (note 6b). Annual commitment
fees on the unutilized credit facilities are 0.225%
Future gold and silver delivery commitments are summarized in note 9.
7. OTHER LONG-TERM OBLIGATIONS
Other long-term obligations consist primarily of accrued reclamation costs of
$30.6 million at March 31, 1996 and $30.9 million at December 31, 1995.
8. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
The company prepares its consolidated financial statements in accordance with
accounting principles generally accepted in Canada. These differ in some
respects from those in the United States, as described below.
In accordance with Canadian GAAP, certain long-term foreign exchange contracts
are considered to be hedges of the cost of goods to be purchased in foreign
currencies in future periods. Gains and losses related to changes in market
values of such contracts are deferred, then recognized as a component of the
cost of goods when the related hedged purchases occur. Under U.S. GAAP, changes
in market value would be included in current earnings.
In accordance with Canadian GAAP, some of the company's share investments are
carried at cost as long-term investments (note 5). These non-equity method
investments are written down and the loss recognized in earnings only when the
loss in value is other than a temporary decline. Under U.S. GAAP, these
investments would be marked to market, with unrealized gains or losses excluded
from earnings and reported in a separate component of common shareholders'
equity, net of tax. The unrealized gain on share investments carried at cost is
$19.6 million after a nil tax effect as of March 31, 1996.
9
<PAGE> 12
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
The effects on the consolidated statement of earnings of the above differences
would have been as follows:
<TABLE>
<CAPTION>
Three months ended
thousands of U.S. dollars, March 31,
except per share data 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net loss under
Canadian GAAP $ (16,156) $ (11,659)
Change in market value of
foreign exchange contracts 661 (34)
- - --------------------------------------------------------------------------------------------------------------------------------
Net loss under
U.S. GAAP $ (15,495) $ (11,693)
- - --------------------------------------------------------------------------------------------------------------------------------
Loss per share
under U.S. GAAP $ (0.12) $ (0.10)
- - --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Long-term investments and other assets, deficit, and common shareholders' equity
would have been $83.6 million, $22.8 million, and $605.6 million respectively at
March 31, 1996 and $78.6 million, $7.3 million and $610.5 million respectively
at December 31, 1995.
9. HEDGING ACTIVITIES AND COMMITMENTS
The company's profitability is subject to changes in gold and silver prices,
exchange rates, interest rates and certain commodity prices. To reduce the
impact of such changes the company attempts to lock in the future value of
certain of these items through hedging transactions. These transactions are
accomplished through the use of derivative financial instruments, the value of
which is derived from movements in the underlying prices or rates.
The gold- and silver-related instruments used in these transactions include
commodity loans, fixed-forward and spot-deferred contracts, swaps and options.
Sensitivity to changing metal prices is reduced, and future revenues are hedged,
as the company's future production will satisfy these loans and other delivery
commitments. The company engages in forward currency-exchange contracts to
reduce the impact on the Lupin mine's operating costs caused by fluctuations in
the exchange rate of U.S. dollars to Canadian dollars. The company also engages
in crude oil hedging activities, including forward purchase agreements and
swaps, to reduce the impact of fluctuations in crude oil prices on its operating
costs.
10
<PAGE> 13
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
a) Gold and silver commitments
As of March 31, 1996, the company's gold and silver commitments were as follows:
<TABLE>
<CAPTION>
Average
Price of Gold Price of
Forward Forward Loans Loans
Sales Sales and Swaps and Swaps
(ounces) (per ounce) (ounces) (per ounce)
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold
Balance of 1996 91,000 $ 406 122,417 $ 375
1997 69,333 419 240,100 386
1998 154,000 456 22,100 395
1999 290,667 497 5,523 395
2000 70,000 503 -- --
2001 and beyond 70,000 548 -- --
- - ------------------------------------------------------------------------------------------------------------------------------
745,000 $ 476 390,140 $ 383
==============================================================================================================================
Silver
Balance of 1996 2,600,000 $ 5.81
1997 2,600,000 5.96
1998 3,100,000 6.46
1999 2,800,000 6.47
- - ------------------------------------------------------------------------------
11,100,000 $ 6.19
==============================================================================
</TABLE>
11
<PAGE> 14
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
The company's option position as of March 31, 1996 was as follows:
<TABLE>
<CAPTION>
Put Options Purchased Call Options Sold
--------------------- -----------------
Strike Price Strike Price
Ounces per Ounce Ounces per Ounce
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold
Balance of 1996 45,000 $ 398 10,000 $ 421
==============================================================================================================================
Silver
Balance of 1996 1,080,000 $ 5.40 1,080,000 $ 6.43
1997 1,440,000 5.40 1,440,000 6.43
- - ------------------------------------------------------------------------------------------------------------------------------
2,520,000 $ 5.40 2,520,000 $ 6.43
==============================================================================================================================
</TABLE>
b) Currency position
The company's obligations to purchase Canadian dollars as of March 31, 1996 were
as follows:
<TABLE>
<CAPTION>
Canadian Exchange Rate
Dollars (C$ to US$1.00)
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance of 1996 $ 67,500,000 1.42
1997 99,900,000 1.49
1998 110,000,000 1.52
1999 111,000,000 1.56
2000 109,000,000 1.59
- - --------------------------------------------------------------------------------------------------------------------------------
$ 497,400,000 1.51
================================================================================================================================
</TABLE>
c) Crude oil position
The company's swap contracts and forward purchase commitments as of March 31,
1996 were as follows:
<TABLE>
<CAPTION>
Barrels of
Crude Oil Price per
Purchased Barrel
- - -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Balance of 1996 180,000 $ 18.40
1997 397,000 17.96
1998 20,000 17.50
- - -------------------------------------------------------------------------------------------------------------------------------
597,000 $ 18.08
===============================================================================================================================
</TABLE>
12
<PAGE> 15
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
d) Other hedging activity information
The company assesses the exposure that may result from a hedging transaction
prior to entering into the commitment, and only enters into transactions which
it believes accurately hedge the underlying risk and could be safely held to
maturity. The company does not actively engage in the practice of trading
derivative securities for profit. The company regularly reviews its unrealized
gains and losses on hedging transactions.
Shown below are the carrying amounts, estimated fair values, and unrealized
gains or losses on the company's hedging positions at March 31, 1996 and
December 31, 1995.
<TABLE>
<CAPTION>
Carrying Estimated Unrealized
thousands of U.S. dollars Amount Fair Value Gain(loss)
- - --------------------------------------------------------------------------------------------------------------------------
March 31, 1996
- - --------------
<S> <C> <C> <C>
Gold swaps $ 101,044 $ 99,244 $ 1,800
Gold loans 21,066 21,066 --
Off balance sheet instruments:
Gold forward sales -- 25,100
Silver forward sales -- 1,100
Gold and silver options - puts 2,597 (1,600)
- calls (2,069) 1,600
Foreign currency contracts -- 8,500
Crude oil contracts -- (300)
- - --------------------------------------------------------------------------------------------------------------------------
$ 36,200
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Carrying Estimated Unrealized
thousands of U.S. dollars Amount Fair Value Gain(loss)
- - ----------------------------------------------------------------------------------------------------------------------------
December 31, 1995
- - -----------------
<S> <C> <C> <C>
Gold swaps $ 101,480 $ 97,880 $ 3,600
Gold loans 23,279 23,279 --
Off balance sheet instruments:
Gold forward sales -- 34,900
Silver forward sales -- 6,400
Gold and silver options 378 1,100
Foreign currency contracts -- 7,800
Crude oil contracts -- (300)
- - ----------------------------------------------------------------------------------------------------------------------------
$ 53,500
============================================================================================================================
</TABLE>
Fair values are estimated for the contract settlement dates based upon market
quotations of various input variables. These variables were used in valuation
models which estimate the fair market value.
13
<PAGE> 16
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
Hedging gains and losses represent the differences between spot or market prices
and realized amounts. Shown below are the hedging gains and losses recognized in
earnings.
<TABLE>
<CAPTION>
Three months ended
Gains (losses) in thousands March 31,
of U.S. dollars 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue:
Gold loans $ (358) $ 68
Gold forward sales 225 789
Silver forward sales 125 1,310
Gold and silver options (211) (94)
Operating expenses:
Foreign currency contracts 277 (77)
Crude oil contracts 143 88
Dividends on preferred stock of subsidiary:
Interest rate swap -- (247)
- - --------------------------------------------------------------------------------------------------------------------------------
$ 201 $ 1,837
================================================================================================================================
</TABLE>
10. CONTINGENCIES
a) Alaska-Juneau
In December 1994, the U.S. Environmental Protection Agency (EPA) issued a
Technical Assistance Report, concluding that this development project as
configured in the May 1992 Final Environmental Impact Statement would be likely
to violate water quality and other environmental standards. In 1996, the
company's reapplication of permits included a new project description with an
alternative of Submarine Tailings Disposal (STD), which would require a change
in EPA regulations. For that purpose, the EPA has instituted rulemaking
procedures to enable it to consider the STD proposal. To review that proposal
and other options that could enable the Alaska-Juneau project to proceed, the
EPA will prepare a Supplemental Environmental Impact Statement expected to be
completed in 1997. The recoverability of the company's $59.7 million investment
in Alaska-Juneau is dependent on receipt of all necessary permits and the
company's ability to attain profitable production from the property or from
alternative courses of action that the company may pursue.
b) Sunnyside
Sunnyside Gold Corporation (SGC), an indirect wholly owned subsidiary of the
company, negotiated a consent decree with the State of Colorado that set
standards for the release of all reclamation and water treatment permits and
resolved future enforcement issues regarding groundwater seeps
14
<PAGE> 17
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
and springs. The consent decree, approved by the court in May 1996, settles
proceedings commenced by SGC in Colorado state court in May 1994 to clarify the
extent of SGC's responsibility, if any, for groundwater seeps and springs that
may occur subsequent to the planned sealing of the Sunnyside mine. In 1995, SGC
increased the provision for future reclamation costs at the Sunnyside mine by
$11.7 million. SCG's provision for future reclamation costs is reviewed
periodically and adjusted as additional information becomes available.
c) Summa
There is pending, in Nevada state court, a suit commenced by Summa Corporation
against the company and the predecessor owner of the McCoy/Cove and Manhattan
mines, claiming improper deductions in calculation of royalties payable over
several years from production at McCoy/Cove and the former Manhattan mine. Summa
Corporation filed a motion for summary judgment which sought $10.3 million for
allegedly underpaid royalties plus interest. The court denied Summa's motion.
The company does not agree with the amount sought by Summa and will vigorously
defend its position. The company proposed a settlement of $1.2 million that
Summa rejected. The company made an offer of judgment to the court of $1.5
million and Summa made an offer of judgment to the court of $7.5 million. Both
of these offers of judgment have expired and are now null and void. The May 1996
court date has been continued to February 3, 1997. The company has accrued $1.2
million related to the Summa litigation, including $1.0 million during the first
quarter of 1996.
11. SUBSEQUENT EVENT
On April 9, 1996, the company, Santa Elina Gold Corporation and Sercor Ltd. (a
private company that owns 67% of Santa Elina) signed an agreement enabling the
company to increase its ownership from 7% to 50% of the outstanding common
shares of Santa Elina. Each shareholder of Santa Elina other than the company
and Sercor Ltd. will receive one common share of the company for each 6.67
common shares of Santa Elina held. The company will purchase 23,479,185 common
shares of Santa Elina from Sercor in exchange for 3,520,118 common shares of the
company, which is the same ratio offered to the public shareholders. In
addition, the company will issue up to 50,535 common shares in exchange for
cancellation of the 1,193,333 outstanding options on Santa Elina common shares.
Upon consummation of the transactions, the company will have issued 8,830,934
common shares and the company and Sercor will each own 50% of Santa Elina.
The agreement is subject to regulatory approvals and approval by two-thirds
of the minority shareholders of Santa Elina. It is anticipated that the
15
<PAGE> 18
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1996
(U.S. dollars)
meeting, originally scheduled to take place on May 24, 1996, will occur in June.
The rescheduling accommodates the review process of the United States Securities
and Exchange Commission relating to the prospectus and registration statement
filed in connection with the transaction. The company and Santa Elina have
agreed that the company will deliver freely-tradeable shares to Santa Elina's
shareholders (other than affiliates of Santa Elina or the company) in connection
with the acquisition. Clearance of the registration statement will enable the
company to issue freely-tradeable shares to such shareholders upon completion of
the transaction.
Acquisition of the Santa Elina minority holders' shares is subject to approval
by two-thirds of the minority shareholders of Santa Elina voting at a special
meeting. The transaction has been approved by the boards of directors of the
companies, including an independent committee of Santa Elina's board.
As the transaction will result in the current shareholders of the company
retaining a majority of the company's shares, the transaction has been accounted
for as a purchase of 43% of Santa Elina by the company. The company's total
interest in Santa Elina will be 50% when added to its existing 7% interest.
Santa Elina will be consolidated into the company using the proportionate
consolidation method, as the company and Sercor will jointly control Santa
Elina. Under the proportionate consolidation method, 50% of Santa Elina's
assets, liabilities, revenues and expenses will be included in the company's
consolidated financial statements.
The total cost is estimated at $137.2 million including $121.8 million to
purchase the additional 43% interest in Santa Elina, $13.1 million cost of the
company's current 7% interest in Santa Elina, $1.6 million of transaction costs
and $0.7 million to cancel all outstanding options on the Santa Elina shares.
The purchase price will be allocated to the net assets of Santa Elina based on
the relative fair values. Santa Elina holds interests in mining properties in
Brazil, Bolivia and Chile.
16
<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
March 31, 1996
(U.S. dollars)
FINANCIAL CONDITION
Working capital provided from operations amounted to $2.3 million for the first
quarter of 1996 compared to $16.2 million in the first quarter of 1995. The 1996
results reflect lower production levels in the first quarter of 1996 ($7.3
million reduced cash margin) and increased operating costs per ounce ($5.0
million). Working capital from operations has been reduced by cash exploration
and development property expenses of $12.6 million in 1996 and $11.5 million in
1995, most of which represent discretionary investments for the future.
The company expects production levels to be higher and cash operating costs to
be lower in the remaining three quarters of 1996. For the full year 1996, the
company's targeted gold production remains at 725,000 to 750,000 ounces. The
company expects silver production to be no better than the lower end of the
target range of 7.5 to 8.5 million ounces for the full year 1996. Consolidated
cash operating costs are targeted at $245 to $255 per ounce of gold produced for
the full year 1996.
The increase in cash invested in working capital related to operations was $18.2
million in the first quarter of 1996. The primary use of the cash invested in
working capital was the annual resupply of diesel fuel, bulk materials and other
inventory items at the Lupin mine in the Northwest Territories of Canada ($5.7
million); the payment of common and preferred share dividends accrued at the end
of 1995 ($5.2 million); and the increase in precious metals inventories ($3.3
million) during the first quarter of 1996.
The company had gold loan repayments of $2.5 million in the first quarter of
1996, and issued 0.6 million shares of common stock on the exercise of stock
options ($4.6 million).
The company used $22.1 million of cash in investing activities in the first
quarter of 1996, for mining properties, plant and equipment ($26.7 million), and
long-term investments ($1.1 million), partially offset by the receipt of $5.6
million of cash on the sale of an investment in Cluff Resources plc.
For the year 1996, the company expects to incur $53 million in cash exploration
and development properties expenses; $70 million of capitalized acquisition,
exploration and development costs at development properties including Kingking;
and $43 million of capital expenditures.
17
<PAGE> 20
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
March 31, 1996
(U.S. dollars)
The company expects to fund these expenditures from working capital provided by
operations and existing working capital. The company has adequate resources and
liquidity to pursue additional acquisition, investment, exploration and
development programs. Working capital from operations was $2.3 million in the
first quarter of 1996 after incurring cash exploration and development costs of
$12.6 million. In addition, the company has $150.0 million in cash and cash
equivalents, and $86.3 million in established unutilized credit facilities at
March 31, 1996. The company also has an effective shelf registration statement
with the Securities and Exchange Commission pursuant to which it may sell up to
$200.0 million of debt and/or equity securities.
Most of the company's hedging transactions have no margin requirements. In some
instances however, mainly for longer term forward sales and options, margin
deposits are required when the market value exceeds the contract value by a
predetermined amount.
18
<PAGE> 21
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
FINANCIAL REVIEW
The company reported a net loss of $16.2 million ($0.12 per share) in the first
quarter of 1996, compared to a net loss of $11.7 million ($0.10 per share) in
the first quarter of 1995. The results reflect lower precious metals sales ($5.6
million decreased earnings margin), higher cash operating costs per ounce ($5.0
million), partially offset by the elimination of preferred stock dividends ($2.8
million), a $2.5 million gain on the sale of a share investment and higher
prices realized ($2.3 million).
Gold production decreased 12% to 161,246 ounces in the first quarter of 1996
compared to 182,826 ounces in the first quarter of 1995. Increased production at
the Lupin and Kettle River mines was offset by decreases at McCoy/Cove and Round
Mountain, reflecting lower-grade ores mined. Silver production decreased 57% to
1.2 million ounces in 1996 from 2.7 million ounces in 1995, a result of lower
grade and recovery at McCoy/Cove. Quarterly revenues were $67.7 million in 1996
and $84.2 million in 1995.
Cash operating costs were higher, $261 per ounce of gold in the first quarter of
1996 versus $234 per ounce of gold in the first quarter of 1995, due to lower
grades mined and fewer ounces recovered.
See "Operations Review" for further comments as to production and cash
production cost changes.
The term "ounce" as used in this Form 10-Q means "troy ounce".
19
<PAGE> 22
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
Revenue
The gold and silver ounces sold and other revenue data is set out below:
<TABLE>
<CAPTION>
Three months ended
March 31,
REVENUE DATA 1996 1995
- - -------------------------------------------------------------------------------------------------------------------------------
Gold
<S> <C> <C>
Ounces sold 155,189 179,498
Average price realized/ounce $ 397 385
Average market price/ounce $ 400 $ 379
Revenue (millions of U.S. dollars) $ 61.6 $ 69.1
Percentage of total revenue 91% 82%
Silver
Ounces sold (millions) 1.1 2.9
Average price realized/ounce $ 5.57 $ 5.13
Average market price/ounce $ 5.46 $ 4.63
Revenue (millions of U.S. dollars) $ 6.1 $ 15.1
Percentage of total revenue 9% 18%
- - -------------------------------------------------------------------------------------------------------------------------------
Total revenue (millions of
U.S. dollars) $ 67.7 $ 84.2
===============================================================================================================================
</TABLE>
The effects of changes in sales volume and prices were:
<TABLE>
<CAPTION>
REVENUE
VARIANCE ANALYSIS
1996 VS. 1995 Three months ended
(millions of U.S. dollars) March 31,
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Higher prices:
Gold $ 1.8
Silver 0.5
Change in volume (18.8)
- - ------------------------------------------------------------------------------------------------------------------------------
Decrease in revenue $ (16.5)
==============================================================================================================================
</TABLE>
20
<PAGE> 23
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
Production costs
Production cost data per ounce of gold is set out below:
<TABLE>
<CAPTION>
Three months ended
PRODUCTION COSTS March 31,
PER OUNCE OF GOLD PRODUCED 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Direct mining expense $ 298 $ 244
Deferred stripping and mine
development costs (33) 2
Inventory movements and other (4) (12)
- - --------------------------------------------------------------------------------------------------------------------------------
Cash operating costs 261 234
Royalties 11 10
Production taxes 4 6
- - --------------------------------------------------------------------------------------------------------------------------------
Total cash costs 276 250
Depreciation 76 66
Amortization 33 37
Reclamation 6 5
- - --------------------------------------------------------------------------------------------------------------------------------
Total production costs $ 391 $ 358
================================================================================================================================
</TABLE>
Effective January 1, 1996, the company adopted the "Gold Institute Production
Cost Standard" for reporting production costs on a per ounce basis. This
standard defines cash operating costs as those costs directly associated with
the mining and milling of gold and silver, adjusted for such items as
inventories and mining costs relating to future production. Other cash costs,
specifically royalties and production taxes, are defined as those costs
resulting from, but not directly related to, the production of gold and silver.
Non-cash costs are defined as costs accounted for ratably over the life of an
operation, including depreciation, amortization, and reclamation costs.
Prior period costs have been restated to conform with the new standard.
21
<PAGE> 24
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
Expenses
Operating costs vary with the quantity of gold and silver sold and with the cost
of operating. The cash operating costs were higher, $261 per ounce of gold in
the first quarter of 1996 versus $234 per ounce of gold in the first quarter of
1995. The increase in operating costs per ounce in the first quarter of 1996 was
a result of lower grades mined and fewer ounces produced. See "Operations
Review".
<TABLE>
<CAPTION>
RECONCILIATION OF CASH OPERATING COSTS
PER OUNCE TO FINANCIAL STATEMENTS Three months ended
thousands of U.S. dollars, March 31,
except per ounce amounts 1996 1995
- - --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating costs per financial statements $ 44,565 $ 50,591
Change in finished goods inventory and other 2,572 (189)
Co-product cost of silver produced (5,111) (7,652)
- - --------------------------------------------------------------------------------------------------------------------------------
Cash operating costs $ 42,026 $ 42,750
================================================================================================================================
Gold ounces produced 161,246 182,826
Cash operating costs per ounce $ 261 $ 234
</TABLE>
Depreciation is a fixed cost, a portion of which is charged to depreciation
expense based on the number of ounces sold and a portion of which is charged to
inventory based on the number of ounces in inventory at quarter end. The
decrease in depreciation expense is due to the increase in precious metals
inventory during the first quarter of 1996.
Amortization varies with the quantity of gold and silver sold and the mix of
production at the four mines. The decrease in amortization in the first quarter
of 1996 reflects fewer ounces sold in the first quarter of 1996.
General and administrative expenses increased in the first quarter of 1996
compared to the first quarter of 1995, reflecting increased support for
exploration, business development and project development activities.
Exploration expense rose 54% in the first quarter of 1996, to $9.3 million,
compared to $6.5 million in the first quarter of 1995, reflecting the company's
expanded search for reserves and production. Much of the expanded 1995
exploration activity took place in quarters subsequent to the first quarter of
1995. 1996 exploration expense is expected to be $43 million, but is dependent
upon opportunities. 1995 exploration expense totaled $46.5 million. To increase
gold reserves and production, the company has entered into strategic alliances
and joint ventures with exploration-oriented companies that give the company
access to exploration and development prospects along some of the major gold
belts around the world, especially in North America, South America, West Africa
and the
22
<PAGE> 25
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
Philippines. The company is conducting exploration drilling programs at
prospects in Mexico, South America, the Philippines, West Africa, Canada and the
United States.
Development properties expense was $4.7 million for the first quarter of 1996
compared to $7.9 million in the first quarter of 1995. The decrease in 1996 is
primarily due to reduced expenditures resulting from the 1995 sale of the
Kensington development property and to the completion of the underground
drilling program at the Alaska-Juneau development property in the second quarter
of 1995.
Other income of $1.0 million for the first quarter of 1996 compared to other
expense of $0.5 million for the first quarter of 1995 is primarily due to the
gain on the sale of the investment in Cluff Resources plc during the first
quarter of 1996 ($2.5 million), offset by a $1.0 million accrual for Summa
litigation (note 10c).
Net interest expense of $0.2 million for the first quarter of 1996 compared to
net interest income of $1.6 million for the first quarter of 1995 is primarily
due to a decrease in cash on hand and increased gold lease rates affecting
interest paid related to gold denominated financings.
Preferred stock dividends are nil in the first quarter of 1996 compared to $2.8
million in the first quarter of 1995 due to the fourth quarter 1995 conversion
or redemption of all the outstanding preferred shares.
Reserve estimates
The price used in estimating the company's ore reserves at December 31, 1995 was
$375 per ounce of gold and $5.00 per ounce of silver. The market price for gold
and silver is currently above these levels. If the company determines that its
reserves should be calculated at a significantly lower price than used at
December 31, 1995, there would likely be a material reduction in the amount of
gold reserves. Should such reductions occur, material write-downs of the
company's investment in mining properties and/or increased amortization charges
may be required.
23
<PAGE> 26
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
OPERATIONS REVIEW
Operating data by mine is set out in the table below:
<TABLE>
<CAPTION>
Three months ended
OPERATING DATA March 31,
BY MINE 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gold production (ounces)
(a) McCoy/Cove 48,890 78,871
(b) Round Mountain (50%) 39,716 45,884
(c) Lupin 40,310 35,515
(d) Kettle River 32,330 22,556
- - ----------------------------------------------------------------------------------------------------------------------------------
Total gold 161,246 182,826
==================================================================================================================================
Silver production (ounces)
(a) McCoy/Cove 1,175,057 2,732,770
- - ----------------------------------------------------------------------------------------------------------------------------------
Total silver 1,175,057 2,732,770
==================================================================================================================================
</TABLE>
Gold production decreased 12% to 161,246 ounces in the first quarter of 1996
from 182,826 ounces in the first quarter of 1995, reflecting lower mill grade
and recovery rates at McCoy/Cove and time lags between placement of ore on the
Round Mountain dedicated heap leach pad and the recovery of gold; offset
partially by an increase in tons milled at Lupin and a first full quarter of
production exclusively from Kettle River's Lamefoot deposit. Silver production
decreased 57% to 1.2 million ounces in the first quarter of 1996 from 2.7
million ounces in the first quarter of 1995, reflecting lower grades and
recovery rates at McCoy/Cove. The company expects higher production levels in
the remaining three quarters of 1996. For the full year 1996, the gold
production target remains at 725,000 to 750,000 ounces and the silver production
target is expected to be no better than the lower end of the target range of 7.5
to 8.5 million ounces.
<TABLE>
<CAPTION>
Three months ended
OPERATING DATA March 31,
BY MINE 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash operating costs
(per ounce of gold)
(a) McCoy/Cove $ 314 $ 225
(b) Round Mountain (50%) 216 177
(c) Lupin 291 322
(d) Kettle River 170 253
- - ----------------------------------------------------------------------------------------------------------------------------------
Company Average $ 261 $ 234
==================================================================================================================================
</TABLE>
Cash production costs were higher, at $261 per ounce of gold in the first
quarter of 1996 versus $234 per ounce of gold in the first quarter of 1995,
reflecting the lower grades mined and fewer ounces produced.
24
<PAGE> 27
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
(a) McCoy/Cove, Nevada (100% owned)
<TABLE>
<CAPTION>
Three months ended
March 31,
OPERATING DATA 1996 1995
- - -------------------------------------------------------------------------------------
<S> <C> <C>
Gold produced (ounces):
Milled 34,300 63,946
Heap leached 14,590 14,925
Total gold 48,890 78,871
Silver produced (ounces):
Milled 1,033,577 2,500,791
Heap leached 141,480 231,979
Total silver 1,175,057 2,732,770
Ore and waste mined
(million tons) 15.5 16.6
Mining cost/ton of ore
and waste $ 0.70 $ 0.64
Milling cost/ton of ore $ 9.92 $ 10.70
Heap leaching cost/ton of ore $ 2.09 $ 2.19
Production cost per ounce of gold produced:(1)
Direct mining expense $ 369 $ 224
Deferred stripping cost (58) 16
Inventory movements and other 3 (15)
----------- -----------
Cash operating cost 314 225
Royalties 4 5
Production taxes 7 10
----------- -----------
Total cash cost 325 240
Depreciation 95 60
Amortization 45 47
Reclamation 6 5
----------- -----------
Total production cost $ 471 $ 352
----------- -----------
Average gold-to-silver
price ratio(2) 72.2:1 80.5:1
Milled:
Ore processed (tons/day) 7,579 7,282
Gold grade (ounce/ton) 0.070 0.120
Silver grade (ounce/ton) 2.70 4.79
Gold recovery rate (%) 75.7 84.2
Silver recovery rate (%) 72.5 78.6
Heap leached:
Ore processed (tons/day) 11,658 14,294
Gold grade (ounce/ton) 0.023 0.018
Silver grade (ounce/ton) 0.38 0.59
Recovery rates(3)
=====================================================================================
</TABLE>
25
<PAGE> 28
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
(1) Effective January 1, 1996, the company adopted the "Gold Institute
Production Cost Standard" for reporting production costs on a per ounce
basis. This standard defines cash operating costs as those costs
directly associated with the mining and milling of gold and silver,
adjusted for such items as inventories and mining costs relating to
future production. Other cash costs, specifically royalties and
production taxes, are defined as those costs resulting from, but not
directly related to, the production of gold and silver. Non-cash costs
are defined as costs accounted for ratably over the life of an
operation, including depreciation, amortization, and reclamation costs.
Prior period costs have been restated to conform to the standard.
(2) To convert costs per ounce of gold into comparable costs per ounce of
co-product silver, divide the production cost per ounce of gold by the
period's average gold-to-silver price ratio.
(3) Recovery rates on dedicated pads can only be estimated, as actual
recoveries will not be known until leaching is complete. At the
McCoy/Cove mine, the gold recovery rate is estimated at 68% for crushed
ore and 48% for uncrushed, run-of-mine ore, while the silver recovery
rate is estimated at 30% for crushed ore and 10% for uncrushed,
run-of-mine.
At McCoy/Cove, the company's largest producer, 48,890 ounces of gold were
produced during the first quarter of 1996, compared with 78,871 ounces in the
first quarter of 1995. Silver production was 1,175,057 ounces in the first
quarter of 1996, compared with 2,732,770 ounces in the first quarter of 1995.
The lower production was due mainly to the milling of lower-grade sulfide ores
from the deeper levels of the Cove deposit. The last of the high-grade sulfides
at Cove were depleted in late 1995.
Beginning in the second quarter, increased mill capacity and improving grades
and recoveries are expected to result in higher production levels for the
remainder of the year, although full year silver production is expected to be no
better than the lower end of the target range of 7.5 to 8.5 million ounces,
compared to 11.9 million ounces produced in 1995. Full-year gold production is
still anticipated to be on target with the company's earlier projection of
235,000 to 245,000 ounces in 1996 compared to 310,016 ounces produced in 1995.
Cash operating costs rose to $314 per ounce of gold produced in the first
quarter of 1996 from $225 in the first quarter of 1995, reflecting the lower
grades processed and fewer ounces produced. With increased production and
improving grades in the remaining quarters in 1996, unit costs are anticipated
to be $270 to $275 per ounce for the full year 1996.
The expansion of the mill's flotation circuit was completed in mid-April 1996,
three months ahead of schedule. The $4.0 million expansion provides increased
retention time for sulfide ore in the flotation circuit, improving recoveries
and reducing unit costs. Mill capacity has been increased to a nominal 10,000
tons/day from 7,500 tons/day.
In April 1996, mining recommenced on the original McCoy pit. The material being
mined on the pit's western perimeter is predominantly oxide and will provide
additional heap leaching and milling ore.
26
<PAGE> 29
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
(b) Round Mountain, Nevada (50% owned)
<TABLE>
<CAPTION>
Three months ended
March 31,
OPERATING DATA 1996 1995
- - -------------------------------------------------------------------------------
<S> <C> <C>
Gold produced (ounces):
Reusable heap leach pad (50%) 25,972 26,661
Dedicated heap leach pad (50%) 13,744 19,223
Total (50%) 39,716 45,884
Ore and waste mined
(million tons)(100%) 14.5 13.7
Mining cost/ton of ore
and waste $ 0.64 $ 0.57
Heap leaching cost/ton of ore $ 0.80 $ 1.01
Production cost per ounce of gold produced:(1)
Direct mining expense $ 268 $ 186
Deferred stripping costs (29) (4)
Inventory movements and other (23) (5)
-------- --------
Cash operating cost 216 177
Royalties 34 28
Production taxes 4 5
-------- --------
Total cash cost 254 210
Depreciation 62 57
Amortization 18 20
Reclamation 5 5
-------- --------
Total production cost $ 339 $ 292
-------- --------
Reusable heap leach pad:
Ore processed (tons/day)(100%) 25,902 19,895
Grade (ounce/ton) 0.038 0.029
Recovery rate (%) 65.6 83.9
Dedicated heap leach pad:
Ore processed (tons/day)(100%) 74,713 34,027
Grade (ounce/ton) 0.012 0.013
Recovery rate(2)
===============================================================================
</TABLE>
(1) Effective January 1, 1996, the company adopted the "Gold Institute
Production Cost Standard" for reporting production costs on a per ounce
basis. This standard defines cash operating costs as those costs
directly associated with the mining and milling of gold, adjusted for
such items as inventories and mining costs relating to future
production. Other cash costs, specifically royalties and production
taxes, are defined as those costs resulting from, but not directly
related to, the production of gold. Non-cash costs are defined as costs
accounted for ratably over the life of an operation, including
depreciation, amortization, and reclamation costs. Prior period costs
have been restated to conform to the standard.
(2) Recovery rates on dedicated pads can only be estimated, as actual
recoveries will not be known until leaching is complete. At the Round
Mountain mine, the gold recovery rate on the dedicated heap leach pad
is estimated at 50%.
At 50%-owned Round Mountain in Nevada, Echo Bay's portion of gold production
totaled 39,716 ounces in the first quarter of 1996, compared with 45,884 ounces
in the first quarter of 1995. Cash operating costs were $216 per ounce in the
first quarter of 1996 and $177 a year ago.
27
<PAGE> 30
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
The lower production and higher costs were functions of the time lag between
initial loading of ore on Round Mountain's dedicated heap leach pad and the
release of large quantities of contained gold over time. Round Mountain's
dedicated pad is nearly a mile long, and several months are required to fully
load a large enough area of one "lift" (one of six 50- foot-high layers of ore)
for leaching to commence. A total of 74,713 tons/day of ore were loaded on the
dedicated pad in the first quarter of 1996, up from 34,027 tons/day in the first
quarter of 1995, but this ore was not placed under leach until late in this
year's quarter. As a result, Echo Bay's share of dedicated pad production was
13,744 ounces in the first quarter of 1996, down from 19,223 ounces in the first
quarter of 1995. The benefit of the increased ore under leach will come in the
second quarter of this year and successive quarters.
The company's share of production from Round Mountain's reusable heap leach pad
was 25,972 ounces in the first quarter of 1996 and 26,661 ounces in the first
quarter of 1995. During the first quarter of 1996, the mine implemented its
decision to treat larger quantities of ore for shorter periods of time on the
reusable pad and then to recover more of the contained gold over a period of
years by releaching the material on the dedicated pad. Accordingly, about 30%
more ore was loaded on the reusable pad during the first quarter of 1996 than a
year earlier in 1995, and leaching time was reduced to 90 days from 140 days.
For the full year 1996, Round Mountain continues to expect total gold production
of 370,000 to 380,000 ounces (the company's share, 185,000 to 190,000 ounces),
compared to 344,434 ounces (the company's share 172,217) produced in 1995. The
processing changes implemented in the first quarter were designed to benefit
production and costs beginning in the second quarter.
Construction of the mill facilities began shortly after receipt of the necessary
permits at the end of March 1996. The 8,000-ton/day mill will process the large
quantities of nonoxidized ore with anticipated production of up to 100,000
ounces per year (the company's share, up to 50,000 ounces) beginning in late
1997. In preparation for startup, Round Mountain has stockpiled 2.1 million tons
of nonoxidized ore averaging 0.042 ounce/ton of gold. More ore is being added to
the stockpile every quarter.
Round Mountain has expanded its ore reserves significantly in recent years. In
1995, 2.2 million ounces were added on a 100% basis. Work continues to further
define mineralization within the recently expanded ultimate pit and to determine
the viability of pockets of mineralization identified outside the new pit
perimeter. Reserves are expected to increase further as this work is completed.
28
<PAGE> 31
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
(c) Lupin, Northwest Territories (100% owned)
<TABLE>
<CAPTION>
Three months ended
March 31,
OPERATING DATA 1996 1995
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Gold produced (ounces) 40,310 35,515
Tons of ore mined and milled 185,505 154,063
Mining cost/ton of ore C$ 41.81 C$ 46.26
Milling cost/ton of ore C$ 12.80 C$ 13.10
Production cost per ounce of gold produced:(1)
Canadian dollars:
Direct mining expense C$ 428 C$ 495
Deferred mine development cost (29) (42)
------ ------
Cash operating cost C$ 399 C$ 453
U.S. dollars:
Cash operating cost US$ 291 US$ 322
Royalties -- --
Production taxes -- --
------ ------
Total cash cost 291 322
Depreciation 72 80
Amortization 18 19
Reclamation 8 7
------ ------
Total production cost US$ 389 US$ 428
------ ------
Milled:
Ore processed (tons/day) 2,039 1,693
Grade (ounce/ton) 0.235 0.248
Recovery rate (%) 92.3 92.8
==================================================================================================================================
</TABLE>
(1) Effective January 1, 1996, the company adopted the "Gold Institute
Production Cost Standard" for reporting production costs on a per ounce
basis. This standard defines cash operating costs as those costs
directly associated with the mining and milling of gold, adjusted for
such items as inventories and mining costs relating to future
production. Other cash costs, specifically royalties and production
taxes, are defined as those costs resulting from, but not directly
related to, the production of gold. Non-cash costs are defined as costs
accounted for ratably over the life of an operation, including
depreciation, amortization, and reclamation costs. Prior period costs
have been restated to conform to the standard.
Production at Lupin, located in the Northwest Territories, was 40,310 ounces in
the first quarter of 1996, up from 35,515 ounces in the first quarter of 1995.
During the fourth quarter of 1995, mining began from the surface at Lupin to
access high-grade, near-surface ore from the East Zone. Mining was interrupted
in January 1996 by extreme weather conditions, deferring production of the
anticipated ounces. Mining resumed in late February 1996 with the higher-grade
East Zone ores being used to supplement mill feed from the Centre Zone,
increasing mill throughput to 2,400 tons/day. Full year 1996 production is
expected to be approximately 185,000 to 190,000 ounces, versus 172,110 ounces
produced in 1995.
Development of Ulu as a satellite mine is moving forward. Current activities are
centered on mobilizing camps and equipment to the staging and Ulu sites. The
first construction camp was operational in early April 1996 with the fuel tanks
in place. Underground development is anticipated to start in early June 1996.
29
<PAGE> 32
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
(d) Kettle River, Washington (100% owned)
<TABLE>
<CAPTION>
Three months ended
March 31,
OPERATING DATA 1996 1995
- - ---------------------------------------------------------------------------------
<S> <C> <C>
Gold produced (ounces) 32,330 22,556
Tons of ore mined and milled 132,973 128,718
Mining cost/ton of ore $ 22.24 $ 22.83
Milling cost/ton of ore $ 11.99 $ 13.59
Production cost per ounce of gold produced:(1)
Direct mining expense $ 172 $ 266
Inventory movements and other (2) (13)
--------- ---------
Cash operating cost 170 253
Royalties paid 10 10
Production taxes 2 2
--------- ---------
Total cash cost 182 265
Depreciation 56 83
Amortization 45 45
Reclamation 8 7
--------- ---------
Total production cost $ 291 $ 400
--------- ---------
Milled:
Ore processed (tons/day) 1,461 1,414
Grade (ounce/ton) 0.274 0.204
Recovery rate (%) 88.6 85.9
- - ---------------------------------------------------------------------------------
</TABLE>
(1) Effective January 1, 1996, the company adopted the "Gold Institute
Production Cost Standard" for reporting production costs on a per ounce
basis. This standard defines cash operating costs as those costs
directly associated with the mining and milling of gold, adjusted for
such items as inventories and mining costs relating to future
production. Other cash costs, specifically royalties and production
taxes, are defined as those costs resulting from, but not directly
related to, the production of gold. Non-cash costs are defined as costs
accounted for ratably over the life of an operation, including
depreciation, amortization, and reclamation costs. Prior period costs
have been restated to conform to the standard.
Gold production increased to 32,330 ounces at a cash operating cost of $170 per
ounce in the first quarter of 1996 versus 22,556 ounces at $253 per ounce in the
first quarter of 1995. The improvement reflects the first full quarter of
production exclusively from Lamefoot ore. Lamefoot is the fifth deposit to be
developed at the site. Its ore is higher-grade than the prior four ore bodies
mined. Permits are being sought and preparation work is being done for
exploration of a northern extension of the Lamefoot deposit.
Kettle River continues to target its full year 1996 production levels of 120,000
to 125,000 ounces of gold, compared to 100,419 ounces in 1995.
Advanced exploration is underway at the sixth deposit, K-2. Drifting along the
mineralization underground continues to prove up ore with grades equal to or
higher than the grades predicted by earlier exploration drilling from the
surface. A second diamond drill has been added to the underground exploration
program. Underground work on K-2 will produce sufficient quantities of ore to
facilitate bulk mill tests. Drilling has defined two new targets to the east of
the K-2 zone and has also identified continued ore-grade mineralization to the
south.
30
<PAGE> 33
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
RECENT DEVELOPMENTS
Santa Elina
On April 9, 1996, the company, Santa Elina Gold Corporation and Sercor Ltd. (a
private company that owns 67% of Santa Elina) signed an agreement enabling the
company to increase its ownership from 7% to 50% of the outstanding common
shares of Santa Elina. Each shareholder of Santa Elina other than the company
and Sercor Ltd. will receive one common share of the company for each 6.67
common shares of Santa Elina held. The company will purchase 23,479,185 common
shares of Santa Elina from Sercor in exchange for 3,520,118 common shares of the
company, which is the same ratio offered to the public shareholders. In
addition, the company will issue up to 50,535 common shares in exchange for
cancellation of the 1,193,333 outstanding options on Santa Elina common shares.
Upon consummation of the transactions, the company will have issued 8,830,934
common shares and the company and Sercor will each own 50% of Santa Elina.
The agreement is subject to regulatory approvals and approval by two-thirds of
the minority shareholders of Santa Elina. It is anticipated that the meeting,
originally scheduled to take place on May 24, 1996, will occur in June.
The rescheduling accommodates the review process of the United States Securities
and Exchange Commission relating to the prospectus and registration statement
filed in connection with the transaction. The company and Santa Elina have
agreed that the company will deliver freely-tradeable shares to Santa Elina's
shareholders (other than affiliates of Santa Elina or the company) in connection
with the acquisition. Clearance of the registration statement will enable the
company to issue freely-tradeable shares to such shareholders upon completion of
the transaction.
Acquisition of the Santa Elina minority holders' shares is subject to approval
by two-thirds of the minority shareholders of Santa Elina voting at a special
meeting. The transaction has been approved by the boards of directors of the
companies, including an independent committee of Santa Elina's board.
As the transaction will result in the current shareholders of the company
retaining a majority of the company's shares, the transaction has been accounted
for as a purchase of 43% of Santa Elina by the company. The company's total
interest in Santa Elina will be 50% when added to its existing 7% interest.
Santa Elina will be consolidated into the company using the proportionate
consolidation method, as the company and Sercor will jointly control Santa
Elina. Under the proportionate consolidation method, 50% of Santa Elina's
assets, liabilities, revenues and expenses will be included in the company's
consolidated financial statements.
The total cost is estimated at $137.2 million including $121.8 million to
purchase the additional 43% interest in Santa Elina, $13.1 million cost of the
company's current 7% interest in Santa Elina, $1.6 million of transaction costs
and $0.7 million to cancel all outstanding options on the Santa Elina shares.
The purchase price will be allocated to the net assets of Santa Elina based on
the relative fair values. Santa Elina holds interests in mining properties in
Brazil, Bolivia and Chile.
31
<PAGE> 34
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three Months Ended March 31, 1996
(U.S. dollars)
U.S. Mining Law Revision
Proposed legislation has been introduced in both houses of the current Congress
to modernize the general mining laws applicable to operations on federal lands,
including a comprehensive bi-partisan bill actively supported by the mining
industry. These proposals include royalty provisions, environmental controls and
requirements for reclamation.
The most material direct economic impact of mining law revision could be from
royalties for production at the McCoy/Cove mine in Nevada, which is on federal
land, and (to a lesser degree) at the 50%-owned Round Mountain mine in Nevada,
24% of whose reserves are on federal land. However, the company has completed
all of the steps currently required under U.S. law to convert the McCoy/Cove and
Round Mountain land to patented status (and thus to be exempt from any proposed
royalty), and it filed applications for patents. During 1994, the company filed
lawsuits against the U.S. Department of the Interior to require the government
to cease its delay and to issue certificates and patents to which the mines are
currently entitled. The government has formally notified the court that the key
certificates, which were the objective of the suits, were issued to the company
March 1, 1995. The Department is expected to complete its administrative review
and issue the patents in accordance with the regulations.
"SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995
Statements which are not historical facts contained in this Form 10-Q are
forward looking statements that involve risks and uncertainties that could cause
actual results to differ from projected results. Factors that could cause actual
results to differ materially include, among others: general economic conditions,
the market price of gold and silver, political events in foreign countries, the
risks associated with foreign operations generally, the timing of receipt of
necessary governmental permits, climatic conditions, labor relations,
availability and cost of material and equipment, the actual configuration of ore
bodies, delays in anticipated start-up dates, environmental risks, the results
of financing efforts and other risk factors detailed in Echo Bay's Form 10-K and
8-K filed with the Securities and Exchange Commission.
32
<PAGE> 35
ECHO BAY MINES LTD.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Sunnyside
On May 18, 1994, the company commenced proceedings in Colorado state court to
obtain a declaratory judgment clarifying the extent of the company's
responsibility, if any, for ground water seeps and springs that may occur
following the company's planned sealing of the Sunnyside Mine in Colorado. The
Colorado department of Public Health and Environment had asserted that any
changes in quantity or quality of water flowing from seeps or springs that occur
subsequent to sealing the mine might potentially require the company to acquire
discharge permits whether or not the water flows through the sealed mine. The
company sought the declaratory judgment before it completes the sealing, which
has been approved by the Division of Minerals and Geology of the Colorado
Department of Natural Resources. The company negotiated a consent decree with
state authorities which was approved by the court in May 1996 and which resolves
the litigation.
Alaska-Juneau
During 1994, the U.S. Attorney began a grand jury investigation of potential
Clean Water Act violations. The investigation is to determine whether the
company unlawfully discharged pollutants from the drainage tunnel without a
National Pollution Discharge Elimination System (NPDES) permit. The outcome of
this investigation is uncertain.
Summa
There is pending, in Nevada state court, a suit commenced by Summa Corporation
against the company and the predecessor owner of the McCoy/Cove and Manhattan
mines, claiming improper deductions in calculation of royalties payable over
several years from production at McCoy/Cove and the former Manhattan mine. Summa
Corporation filed a motion for summary judgment which seeks $10.3 million for
allegedly underpaid royalties plus interest. The court denied Summa's motion.
The company does not agree with the amount sought by Summa and will vigorously
defend its position. The company proposed a settlement of $1.2 million that
Summa rejected. The company made an offer of judgment to the court of $1.5
million and Summa made an offer of judgment to the court of $7.5 million. Both
of these offers of judgment have expired and are now null and void. The May 1996
court date has been continued to February 3, 1997. The company has accrued $1.2
million related to the Summa litigation, including $1.0 million during the first
quarter of 1996.
Other
The company is also engaged in routine litigation incidental to its business.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K - Form 8-K, filed on April 11, 1996, reporting the
company's April 9, 1996 agreement to increase its ownership from 7% to
50% of the outstanding shares of Santa Elina Gold Corporation. See
"Recent Developments".
Additionally, Form 8-K, filed on April 23, 1996, related to the entry
into definitive agreements with respect to the aforementioned Santa
Elina transaction.
33
<PAGE> 36
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECHO BAY MINES LTD.
-------------------------------
(Registrant)
May 10,1996
- - ---------------------
Date
/s/ G. Tywoniuk
-------------------------------
G. TYWONIUK
Vice President, Controller and
Principal Accounting Officer
34
<PAGE> 37
EXHIBIT INDEX
Exhibit No. Description Page
- - ----------- ----------- ----
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS INCLUDED IN THE ECHO BAY MINES LTD. FORM 10-Q FOR THE
QUARTER ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 149,981
<SECURITIES> 0
<RECEIVABLES> 14,209
<ALLOWANCES> 0
<INVENTORY> 43,204
<CURRENT-ASSETS> 213,447
<PP&E> 614,725
<DEPRECIATION> 363,327
<TOTAL-ASSETS> 848,868
<CURRENT-LIABILITIES> 103,460
<BONDS> 114,373
0
0
<COMMON> 623,577
<OTHER-SE> (46,097)
<TOTAL-LIABILITY-AND-EQUITY> 848,868
<SALES> 67,750
<TOTAL-REVENUES> 67,750
<CGS> 44,565
<TOTAL-COSTS> 70,350
<OTHER-EXPENSES> 13,011
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151
<INCOME-PRETAX> (15,762)
<INCOME-TAX> 394
<INCOME-CONTINUING> (16,156)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,156)
<EPS-PRIMARY> (0.12)
<EPS-DILUTED> (0.12)
</TABLE>
