<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): January 14, 1997
ECHO BAY MINES LTD.
- ----------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Canada 1-8542 None
- ----------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
Suite 1000, 6400 S. Fiddler's Green Circle,
Englewood, Colorado 80111-4957
- ----------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 303-714-8600
- ----------------------------------------------------------------------
PAGE 1 of 3<PAGE>
ITEM 5. OTHER EVENTS
Incorporated by reference herein is the text of the
Company's press release dated January 14, 1997, which is attached
hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99.1 Press Release dated January 14, 1997.
-2-<PAGE>
SIGNATURE
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 hereunto duly authorized.
ECHO BAY MINES LTD.
Dated: January 14, 1997 By /s/ GERRY TYWONIUK
------------------------------
Gerry Tywoniuk
Vice President, Controller and
Principal Accounting Officer
-3-
ECHO BAY MINES Media Contact: Jill Paukert
6400 S. Fiddlers Green Circle 303 714-8825
Suite 1000 Investor Contact: Ted Sheldon
Englewood, CO 80111-4957 303 714-8813
FOR IMMEDIATE RELEASE
ECHO BAY MINES WILL BRING TWO NEW GOLD MINES INTO PRODUCTION,
-------------------------------------------------------------
TAKE $77 MILLION CHARGE TO WRITE OFF ALASKA-JUNEAU PROJECT
-------------------------------------------------------------
Tuesday, Jan. 14, 1997 -- Echo Bay Mines Ltd. (Amex and TSE: ECO)
announced today that its Board of Directors has approved bringing two
new gold mines into production, Aquarius in Canada and Paredones
Amarillos in Mexico, and the company will take a $77 million after-tax
charge ($0.55 per share) to write off the Alaska-Juneau property in
Alaska as of Dec. 31, 1996.
The decision to proceed with both projects is contingent on
arrangement of satisfactory financing. The Paredones decision is also
contingent on Viceroy, Echo Bay's 40% joint venture partner, approving
the project and obtaining its share of financing.
Echo Bay produces about 725-750,000 ounces of gold from four
mines in the United States and Canada. The two new mines to be
brought into production, Aquarius and Paredones Amarillos, will
together produce about 240-250,000 ounces of annual gold production
for Echo Bay's account. The new mines are targeted for startup in
late 1998 and expected to be in full-scale commercial production by
early 1999. Paredones Amarillos will be the largest gold mine in
Mexico.
Cash operating costs for the gold produced at the two new mines
are expected to average about $220-225 per ounce, compared
-more-<PAGE>
with Echo Bay's current consolidated cash operating costs of $245-255
per ounce. Total production costs of the two new mines are expected
to average about $320-325 per ounce, including depreciation,
amortization and reclamation.
The new mines will add 2.0 million ounces of gold to Echo Bay's
proven and probable reserves as of year-end 1996. The company
believes there is excellent potential to add to reserves and other
mineralization as exploration continues on these properties.
To bring both new mines into production will require an
investment by Echo Bay of $167 million over the coming two years. The
company said it intends to finance Aquarius with a new $75 million
unsecured corporate credit facility. Paredones Amarillos is to be
financed with a $36 million non-recourse project loan, subject to
arrangement of satisfactory terms. Most of the remaining funds will
come from cash on hand and operating cash flow from Echo Bay's four
existing gold mines.
In addition, the company said it will suspend payment of
dividends on its common shares. This will save about $21 million over
the next two years for mine development, based on Echo Bay's prior
practice of paying a semiannual dividend of US$0.0375 per common
share. The company said it believes shareholder interests are best
served by using its cash resources to build a foundation for sustained
future value rather than making short-term cash payouts at this time.
To have brought the A-J into production would have required an
additional investment exceeding $300 million over the next four years.
Echo Bay said it will invest its resources instead in Aquarius,
Paredones Amarillos and other more promising projects.
Richard C. Kraus, president and chief executive officer of Echo
Bay, said, "Going forward, we intend to realize better growth and
greater value for our shareholders from our assets. We believe
-more-<PAGE>
we can achieve this by concentrating our efforts and resources on
higher-quality, lower-cost gold mines. This means we will not develop
marginal properties. The decision to write off the A-J is a necessary
decision."
The company will write off its entire remaining investment in the
A-J project, $57 million, and will establish a reserve of $20 million
to cover estimated reclamation and closure responsibilities. A-J's
proven and probable reserves of 3.4 million ounces and other
mineralization of 1.6 million ounces will be removed from Echo Bay's
total gold resources as of Dec. 31, 1996. The company is implementing
plans to address the human resources, environmental and community
responsibilities related to this decision.
The company's decision to write off the A-J results from a new
feasibility study. The study was based on a new mine plan
incorporating extensive geological information from a two-year
underground drilling program completed in 1995. Geological assessment
of the drill data was completed in the third quarter of 1996. The
significantly increased information indicated a much smaller minable
geologic resource at only a marginally higher grade. The new mining
plan developed from this information incorporated narrower mining
zones than previously planned, a reduced scale of operations, and
higher-cost mining methods. The lower reserves and higher operating
costs could not be offset by savings from the newer concept of
submarine tailings disposal. In total, these factors rendered the
project uneconomic as currently designed.
Echo Bay is a major gold producer with mines in Canada and the
United States and with exploration and development projects on four
continents.
#####
See attached Fact Sheets on Aquarius and Paredones Amarillos.
-more-<PAGE>
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: The statements herein that are not historical
facts are forward-looking statements involving risks and uncertainties
that could cause actual results to vary materially from targeted
results. These include but are not limited to differences in ore
grades, recovery rates and tons mined from those expected; changes in
project parameters as plans continue to be refined; changes in mining
and milling rates from currently planned rates; and the results of
future exploration activities and new exploration opportunities on
nearby properties. Please refer to a discussion of these and other
factors in the company's 10-K, 10-Q and other Securities and Exchange
Commission filings.
