<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 14, 1998.
Registration No. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ECHO BAY MINES LTD.
(Exact names of registrant as specified in its charter)
CANADA NONE
(State or other jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
6400 SOUTH FIDDLERS GREEN CIRCLE, SUITE 1000
ENGLEWOOD, COLORADO, 80111-4957
(303) 714-8600
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
----------------------
ROBERT L. LECLERC, Q.C.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SUITE 1000, 6400 SOUTH FIDDLERS GREEN CIRCLE
ENGLEWOOD, COLORADO, 80111-4957
(303) 714-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
----------------------
COPIES TO:
RONALD R. LEVINE, II, ESQUIRE MICHAEL GLUCKMAN, ESQUIRE
Davis, Graham & Stubbs LLP Milner Fenerty
370 - Seventeenth Street 2900 ManuLife Place
Denver, Colorado, 80201 10180-101 Street
(303) 892-9400 Edmonton, Alberta T5J 3V5
(403) 423-7100
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFERING: FROM TIME TO TIME
AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT.
----------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
===============================================================================================================
Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered per share/(1)/ offering price/(1)/ registration fee/(1)/
---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Shares
(without par value)/(2)/ 1,500,000 $3.28125 $4,921,875 $1,452
===============================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c). Based upon the average of the high and low prices
of the Company's Common Stock on the American Stock Exchange on May 11,
1998.
(2) This Registration Statement also applies to Rights under the Company's
Shareholders' Rights Plan, which are attached to and tradeable with the
Common Shares registered hereby. No registration fees are required for such
rights and the shares underlying such rights as they will be issued for no
additional consideration.
-----------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION, dated May 14, 1998
PROSPECTUS
1,500,000 SHARES
ECHO BAY MINES LTD.
COMMON SHARES
This Prospectus relates to 1,500,000 common shares (the "Shares") of Echo
Bay Mines Ltd. (the "Company") to be offered for sale or otherwise transferred
from time to time by the shareholder named herein (the "Selling Shareholder").
The Shares will be sold in transactions (which may include block transactions)
on the American Stock Exchange, The Toronto Stock Exchange, in negotiated
transactions or otherwise, at fixed prices, which may be changed, at market
prices prevailing at the time of sale, at negotiated prices, or without
consideration, or by any other legally available means. The Selling Shareholder
may offer the Shares to third parties (including purchasers) directly or by or
through brokers, dealers, agents or underwriters who may receive compensation in
the form of discounts, concessions, commissions or otherwise. The Selling
Shareholder and any brokers, dealers, agents or underwriters that participate in
the distribution of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act of 1933, as amended (the "Securities Act"), in
which event any discounts, concessions and commissions received by any such
brokers, dealers, agents or underwriters and any profit on resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act. The aggregate net proceeds to the Selling Shareholder
from the sale of the Shares will be the purchase price of such Shares less any
commissions. The Company will not receive any proceeds from the sale of Shares
by the Selling Shareholder. The Company will pay all expenses incurred in
connection with this offering, other than underwriting discounts and selling
commissions and expenses of counsel to the Selling Shareholder. See "Plan of
Distribution."
The Shares were issued by the Company to the Selling Shareholder in
connection with the settlement of a dispute between the Company and such Selling
Shareholder. The Shares are "restricted securities" under the Securities Act
prior to their sale hereunder. This Prospectus has been prepared for the
purpose of registering the Shares under the Act to allow for future sales by the
Selling Shareholder to the public without restriction. See "Selling
Shareholder."
SEE "RISK FACTORS" BEGINNING ON PAGE 6 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SHARES.
The Company's Common Shares are listed on the American Stock Exchange
(Symbol: "ECO") and The Toronto Stock Exchange (Symbol: "ECO"). The Common
Shares offered have been listed on such exchanges. On May 11, 1998, the last
reported per share sales prices of the Common Shares on the American Stock
Exchange and The Toronto Stock Exchange were $3.375 and C$4.80, respectively.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Prospectus is May ___, 1998.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Commission. The Company is currently subject to the periodic reporting and
other informational requirements of the Exchange Act. Such reports and other
information may be inspected and copied at the public reference facilities of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices: 7 World Trade Center,
Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Commission by mail at prescribed rates. Requests should be
directed to the Commission's Public Reference Section, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Commission also
maintains a website at http://www.sec.gov that contains reports, proxy
statements, and other information. The Company's Common Shares are listed on
the American Stock Exchange (the "AMEX"). Reports, proxy and information
statements and other information relating to the Company can be inspected at the
offices of the AMEX at 86 Trinity Place, New York, New York 10006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (herein, together with all amendments and exhibits, referred to as the
"Registration Statement") under the Securities Act with respect to the
securities covered by this Prospectus. This Prospectus, which forms part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement, certain parts of which have been omitted in accordance
with the rules and regulations of the Commission. For further information with
respect to the Company and such securities, reference is hereby made to such
Registration Statement, including the exhibits filed therewith. The
Registration Statement and the exhibits thereto can be obtained by mail from or
inspected and copied at the public reference facilities maintained by the
Commission as provided above.
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
The Company is a Canadian corporation and certain of its directors and
officers, as well as certain of the experts named herein, are neither citizens
nor residents of the United States. A substantial part of the assets of several
of such persons and of the Company are located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon such persons or to enforce against them or the Company
within the United States judgment of courts of the United States predicated upon
the civil liability provisions of the federal securities laws of the United
States. Milner Fenerty, Canadian counsel to the Company, has advised the
Company that there is doubt as to the enforceability against such persons and
the Company in Canada, in original actions or in actions to enforce judgments of
United States courts, of liabilities predicated solely upon the federal
securities laws of the United States.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1997;
(2) Quarterly Report on Form 10-Q for the quarter ended March 31, 1998;
(3) Registration Statement on Form 8-A (File No. 1-8542), dated September
12, 1994, relating to the Company's Shareholder Rights Plan;
(4) The description of the Common Shares contained in the Company's
Registration Statement on Form 8-A (File No. 1-8542) dated August 2,
1983.
All documents subsequently filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the
offering of the securities offered hereby shall be deemed to be incorporated
-2-
<PAGE>
by reference in this prospectus and to be a part hereof from the date of filing
of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the oral or written request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to the Secretary,
Echo Bay Mines Ltd., 6400 South Fiddlers Green Circle, Suite 1000, Englewood,
Colorado 80111-4957, telephone (303) 714-8600, facsimile: (303) 714-8999.
CONCURRENT OFFERING
Concurrent with this offering, the Company will file with certain of the
Canadian securities regulatory authorities a short form prospectus qualifying
the Shares offered for resale hereunder.
-3-
<PAGE>
THE COMPANY
Echo Bay is a major North American gold mining company with interests in
four existing mines, two new gold mines with final stage development deferred
pending gold price improvement, and a number of active early and late stage
exploration projects. Echo Bay mines, processes and explores for gold, and also
produces a significant amount of silver. In 1997, Echo Bay produced a total of
approximately 721,000 ounces of gold, at an average cash operating cost of $249
per ounce, and 11,021,000 ounces of silver. In 1996, Echo Bay produced a total
of approximately 769,000 ounces of gold and 7,100,000 ounces of silver. As of
December 31, 1997, Echo Bay reported proven and probable ore reserves of 7.5
million ounces of gold and 46.5 million ounces of silver. In addition, Echo Bay
has other mineralization at its existing mines consisting of 74.1 million tons
at a grade of 0.027 ounces of gold per ton and 0.6 million tons at a grade of
0.99 ounces of silver per ton. In 1997, Echo Bay achieved revenues of $305.4
million and incurred a net loss of $420.5 million, after expensing $34.9 million
on exploration and development and recording a provision for impaired assets and
other charges of $362.7 million as described below. In 1996, Echo Bay achieved
revenues of $337.3 million and incurred a net loss of $176.7 million after
taking into account provisions totaling $107.1 million related to the write-off
of and provision for the Alaska-Juneau development property and the provision
for the McCoy/Cove pit wall stabilization.
In August 1997, in view of the decrease in gold price, Echo Bay deferred
final construction decisions on two planned gold mines, Paredones Amarillos in
Mexico and Aquarius in Canada, and deferred further development of the Ulu
satellite deposit located near its Lupin mine in the Northwest Territories,
Canada, all pending an improvement in gold prices. Echo Bay has continued with
the completion of the frozen underground barrier system at Aquarius, and with
engineering, acquisition of a mill grinding circuit, permitting and water
development work at Paredones Amarillos, in order to permit construction to
begin as soon as possible at such time as a final construction decision is made.
In the third quarter of 1997, Echo Bay conducted a major review of life-
of-mine plans for its four producing gold mines, and a complete evaluation of
the feasibility studies for its portfolio of development projects, exploration
properties and other assets. On completion of this work, Echo Bay assessed the
carrying values of all of its assets. As a result of the review, in the third
quarter of 1997, Echo Bay recorded a $309.8 million provision for impaired
assets. The provision was comprised of $50.0 million related to the Kingking
project in the Philippines, $107.4 million related to Santa Elina activities in
Brazil, $127.0 million related to operating mines including Lupin ($65.0
million), McCoy/Cove ($47.0 million) and Kettle River ($15.0 million), and $25.4
million related to certain share investments, closure and legal costs.
In January 1998, following further declines in the market price of gold,
the Company temporarily suspended operations at its Lupin gold mine and reduced
operations at its McCoy/Cove mine until the gold price improves significantly.
As a result of these actions, the Company's 1998 production targets are 500,000-
520,000 ounces of gold (a reduction of approximately 25%, or 175,000 ounces of
gold, from 1997 results) and 7,000,000-8,000,000 ounces of silver. The Company
also wrote off its remaining interest in the Santa Elina project and reduced its
corporate headquarters staff by 40%. In connection with these actions, the
Company recorded a $52.9 million charge in the fourth quarter of 1997.
The cash operating costs at the Company's four operating mines averaged
$249 per ounce for 1997. Total production costs were $359 per ounce during the
same period. Taking into account the above suspension and reduction in
operations, 1998 cash operating costs are expected to be approximately $245-255
per ounce of gold produced. In the current low gold price environment, the
Company's cost structure has significant implications for the Company's
liquidity and flexibility to invest funds in exploration and development. In
January 1998, the Company also announced the following additional actions to
reduce costs: (i) reduction in budgeted new project expenditures for 1998 to $3
million and (ii) reduction in the 1998 exploration budget to $6 million. While
the Company continues to generate cash flow from operations at current gold
prices before taking into account cash exploration and development expenses, the
amount of cash flow available for acquisitions, investments, exploration and
development is very limited. As a result, the Company is carefully monitoring
its discretionary spending, though it intends to continue to conduct limited
exploration and development activities consistent with a more focused program.
-4-
<PAGE>
The Company's existing credit facilities provide some additional
liquidity. At December 31, 1997, the Company had not utilized $85.0 million of
the amounts committed thereunder, of which $29.5 million was actually available
for borrowing in view of the credit facility covenant limitations. However, the
amounts available for borrowing under the credit facilities vary with precious
metals prices, among other factors, and the continuation of gold prices at
depressed levels could have the effect of reducing or eliminating the Company's
capacity to borrow under the credit facilities. The Company and its lenders are
in negotiations aimed at restructuring the terms of its credit facilities in
order to provide more liquidity than is currently available. The Company
believes it is currently in compliance in all material respects with covenants
under the credit facility. To remain in compliance throughout 1998 (assuming the
credit facilities are not amended), the Company has taken certain actions to
reduce its expenses, such as reductions in budgeted new project and exploration
expenditures for 1998, and increased hedging activities, and may be required to
seek additional external financing and to further reduce discretionary spending,
absent a substantial improvement in gold prices. There can be no assurance that
the Company will be successful in attracting external financing on terms and
conditions favorable to it. In the event the Company is unsuccessful in
restructuring the credit facilities or in accessing external financing on
acceptable terms, it may be required to curtail other discretionary
expenditures.
In March 1997, the Company issued $100.0 million of 11% capital
securities due 2027 (the "Capital Securities"). The Company has the right to
defer interest payments on the Capital Securities for up to 10 consecutive semi-
annual periods. During a period of interest deferral, interest accrues at a
rate of 12% per annum, compounded semi-annually. The Company, at its option,
may satisfy its deferred interest obligation by delivering common shares to a
trustee for sale, the proceeds of which would be remitted to the holders of the
securities in payment of the deferred interest. The present value of the
Capital Securities' principal amount, $4.2 million at year-end 1997, is
classified as debt. The present value of the future interest payments, $95.8
million, is a separate component of shareholders' equity. In March 1998, the
Company exercised its right to defer its April 1998 interest payment to holders
of the Capital Securities.
The Company was incorporated in Canada in 1964. Its executive office is
located at 6400 South Fiddlers Green Circle, Suite 1000, Englewood, CO 80111-
4957, telephone (303) 714-8600, and its registered office is located at Suite
1210 ManuLife Place, 10180 - 101 Street, Edmonton, Alberta, Canada , T5J 3S4,
telephone (403) 496-9002.
-5-
<PAGE>
RISK FACTORS
Purchasers of the Common Shares being offered hereby should carefully
read this entire Prospectus and the documents incorporated by reference herein.
Purchasers should consider, among other things, the risk factors set forth
below.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements that are not historical facts contained or incorporated by
reference in this Prospectus are forward-looking statements that involve risks
and uncertainties that could cause actual results to differ materially from
targeted or projected results. Such forward-looking statements include
statements regarding targets for gold and silver production, cash operating
costs and certain significant expenses, percentage increases and decreases in
production from the Company's principal mines, schedules for completion of
detailed feasibility studies and initial feasibility studies, potential
increases in reserves and production, the timing and scope of future drilling
and other exploration activities, expectations regarding receipt of permits and
commencement of mining or production, anticipated grades and recovery rates, the
ability to secure financing and potential acquisitions or increases in property
interests. Factors that could cause actual results to differ materially
include, among others, changes in gold and silver prices, unanticipated grade,
geological, metallurgical, processing, access, transportation of supplies or
other problems, results of current exploration activities, results of pending
and future feasibility studies, changes in project parameters as plans continue
to be refined, political, economic and operational risks of foreign operations,
availability of materials and equipment, the timing of receipt of governmental
permits, force majeure events, the failure of plant, equipment or processes to
operate in accordance with specifications or expectations, accidents, labor
relations, delays in start-up dates, environmental costs and risks, the outcome
of acquisition negotiations and general domestic and international economic and
political conditions, as well as other factors described in this Prospectus and
an accompanying Prospectus Supplement, if any, and in the Company's annual
reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form
8-K filed with the Securities and Exchange Commission. Many of such factors are
beyond the Company's ability to control or predict.
Actual results may differ materially from those projected. Prospective
investors are cautioned not to put undue reliance on forward-looking statements,
and should not infer that there has been no change in the affairs of the Company
since the date of this Prospectus that would warrant any modification of any
forward-looking statement made in this Prospectus. For a discussion of certain
of such risks and uncertainties, see the "Risk Factors" set forth below and the
discussions contained in the Company's annual reports on Form 10-K, quarterly
reports on Form 10-Q and current reports on Form 8-K filed with the Securities
and Exchange Commission. The Company disclaims any intent or obligation to
update publicly these forward-looking statements, whether as a result of new
information, future events or otherwise.
RECENT LOSSES
In the fiscal years ended December 31, 1997, 1996 and 1995, the Company
incurred net losses of $420.5 million, $176.7 million and $50.1 million,
respectively. The loss in 1997 reflects a $362.7 million provision for impaired
assets and other charges, including provisions related to the Kingking project
($50.0 million); Santa Elina ($143.6 million); Lupin ($65.0 million), McCoy/Cove
($47.0 million) and Kettle River ($15.0 million) operating properties; $25.4
million to write down certain share investments to market value and to provide
for estimated legal and closure costs; and $16.7 million related to severance
costs. The loss in 1996 included a $77.1 million write-down of and reclamation
and closure provision for the Alaska-Juneau development property and a $30.0
million provision for McCoy/Cove pit wall stabilization. During those years, the
Company incurred exploration and development expenses of $34.9 million, $63.6
million and $69.8 million, respectively. The Company expects that it will
continue to incur losses in the near future, and that its return to
profitability will depend on, among other things, a significant increase in the
price of gold over current prices, the ability to bring into commercial
production the projects that have been the subject of the Company's exploration
and development program and the profitability of production at existing and new
mines. See "Gold and Silver Prices," "Uncertainty of Reserve and Other
Mineralization Estimates" and "Estimation of Asset Carrying Values" for
additional disclosure with respect to factors which may affect the carrying
values of the Company's assets, and the Company's results of operations and
financial condition generally.
-6-
<PAGE>
LIQUIDITY
The cash operating costs at the Company's four operating mines averaged
$249 per ounce in 1997. Total production costs were $359 per ounce during the
same period. In the current low gold price environment, the Company's cost
structure has significant implications for the Company's liquidity and
flexibility to invest funds in exploration and development. While the Company
continues to generate cash flow from operations at current gold prices before
taking into account cash exploration and development expenses, the amount of
cash flow available for acquisitions, investments, exploration and development
is very limited. As a result, the Company is carefully monitoring its
discretionary spending, though it intends to continue to conduct limited
exploration and development activities consistent with a more focused program.
The Company's existing credit facilities provide some additional
liquidity. At December 31, 1997, the Company had not utilized $85.0 million of
the amounts committed thereunder, of which $29.5 million was actually available
for borrowing in view of the credit facility covenant limitations. However, the
amounts available for borrowing under the credit facilities vary with precious
metals prices, among other factors, and the continuation of gold prices at
depressed levels could have the effect of reducing or eliminating the Company's
capacity to borrow under the credit facilities. The Company and its lenders are
in negotiations aimed at restructuring the terms of its credit facilities in
order to provide more liquidity than is currently available. The Company
believes it is currently in compliance in all material respects with covenants
under the credit facility. To remain in compliance throughout 1998 (assuming the
credit facilities are not amended), the Company has taken certain actions to
reduce its expenses, such as reductions in budgeted new project and exploration
expenditures for 1998, and increased hedging activities, and may be required to
seek additional external financing and to further reduce discretionary spending,
absent a substantial improvement in gold prices. There can be no assurance that
the Company will be successful in attracting external financing on terms and
conditions favorable to it. In the event the Company is unsuccessful in
restructuring the credit facilities or in accessing external financing on
acceptable terms, it may be required to curtail other discretionary activities.
In March 1997, the Company issued $100.0 million of 11% capital
securities due 2027 (note 7 to the consolidated financial statements). The
Company has the right to defer interest payments on the capital securities for
up to 10 consecutive semi-annual periods. During a period of interest deferral,
interest accrues at a rate of 12% per annum, compounded semi-annually. The
Company, at its option, may satisfy its deferred interest obligation by
delivering common shares to a trustee for sale, the proceeds of which would be
remitted to the holders of the securities in payment of the deferred interest.
The present value of the capital securities' principal amount, $4.2 million at
year-end 1997, is classified as debt. The present value of the future interest
payments, $95.8 million, is a separate component of shareholders' equity. In
March 1998, the Company exercised its right to defer its April 1998 interest
payment to holders of the capital securities.
MINING AND PROCESSING
The Company's business operations are subject to risks and hazards
inherent in the mining industry, including but not limited to unanticipated
variations in grade and other geological problems, water conditions, surface or
underground conditions, metallurgical and other processing problems, mechanical
equipment performance problems, the unavailability of materials and equipment,
accidents, labor force disruptions, force majeure factors, unanticipated
transportation costs, and weather conditions, any of which can materially and
adversely affect, among other things, the development of properties, production
quantities and rates, costs and expenditures and production commencement dates.
The Company's processing facilities are dependent on continuous mine feed
to remain in operation. Insofar as the Company's mines may not maintain
material stockpiles of ore or material in process, any significant disruption in
either mine feed or processing throughput, whether due to equipment failures,
adverse weather conditions, supply interruptions, labor force disruptions or
other issues, may have an immediate adverse effect on the results of operations
of the Company. A significant reduction in mine feed or processing throughput
at a particular mine could cause the unit cost of production to increase to the
point where the Company could determine that some or all of the Company's
reserves were uneconomic to exploit.
-7-
<PAGE>
The Company periodically reviews mining schedules, production levels and
asset lives in its life-of-mine planning for all of its operating and
development properties. Significant changes in the life-of-mine plans can occur
as a result of mining experience, new ore discoveries, changes in mining methods
and rates, process changes, investments in new equipment and technology,
precious metals price assumptions, and other factors. Based on this analysis,
the Company reviews its accounting estimates and in the event of an impairment,
may be required to write-down the carrying value of a mine or mines. In 1997,
the Company completed a major review of life-of-mine plans for the Company's
four producing gold mines and performed a complete evaluation of the Company's
portfolio of development projects, exploration properties and other assets. As
a result of this process, in 1997 the Company recorded provisions to write down
the carrying values of its producing mines, including Lupin ($65.0 million),
McCoy/Cove ($47.0 million) and Kettle River ($15.0 million). This complex
process continues for the life of every mine. See "Estimation of Asset Carrying
Values."
As a result of the foregoing risks, among other things, expenditures on
any and all projects, actual production quantities and rates, and cash costs may
be materially and adversely affected and may differ materially from anticipated
expenditures, production quantities and rates, and costs, just as estimated
production dates may be delayed materially, in each case especially to the
extent development projects are involved. Any such events can materially and
adversely affect the Company's business, financial condition, results of
operations and cash flows.
MINE DEVELOPMENT RISKS
The Company's ability to maintain, or increase, its annual production of
gold and silver will be dependent in significant part on its ability to bring
new mines into production, including the Aquarius project in Canada and the
Paredones Amarillos project in Mexico, and to expand existing mines. Recently
the Company deferred final construction decisions on Aquarius and Paredones
Amarillos and deferred further development of the Ulu satellite deposit in
Canada. Although the Company utilizes the operating history of its existing
mines to derive estimates of future operating costs and capital requirements,
such estimates may differ materially from actual operating results at new mines
or at expansions of existing mines. The economic feasibility analysis with
respect to any individual project is based upon, among other things, the
interpretation of geological data obtained from drill holes and other sampling
techniques, feasibility studies (which derive estimates of cash operating costs
based upon anticipated tonnage and grades of ore to be mined and processed),
precious metals price assumptions, the configuration of the ore body, expected
recovery rates of metals from the ore, comparable facility and equipment costs,
anticipated climatic conditions, estimates of labor productivity, royalty or
other ownership burdens and other factors. In addition, many of the risks
identified below under "--Exploration Risks" are also applicable to the
Company's development projects. Such development projects also are subject to
the successful completion of final feasibility studies, issuance of necessary
permits and receipt of adequate financing. Although the Company's feasibility
studies are completed with the Company's knowledge of the operating history of
similar ore bodies in the region, the actual operating results of its
development projects may differ materially from those anticipated, and
uncertainties related to operations are even greater in the case of development
projects.
GOLD AND SILVER PRICES
The profitability of the Company's current operations is directly related
and sensitive to the market price of gold and silver. Gold prices are currently
and have recently been at depressed levels. Gold, silver and other metal prices
fluctuate widely and are affected by numerous factors beyond the Company's
control, including global supply and demand, expectations with respect to the
rate of inflation, the exchange rates of the dollar to other currencies,
interest rates, forward selling by producers, central bank sales and purchases,
production and cost levels in major gold-producing regions such as South Africa
and the former Soviet Union, global or regional political, economic or financial
situations and a number of other factors.
The current demand for, and supply of, gold and silver affect the prices
of such metals, but not necessarily in the same manner as current demand and
supply affect the prices of other commodities. The potential supply of gold
consists of new mine production plus existing stocks of bullion and fabricated
gold held by governments, financial institutions, industrial organizations and
individuals. Since mine production in any single year constitutes a very small
portion of the total potential supply of gold, normal variations in current
production do not necessarily have a significant effect on the supply of gold or
on its price. If gold or silver prices should decline below the Company's cash
costs of
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production and remain at such levels for any sustained period, the Company could
determine that it is not economically feasible to continue commercial production
at any or all of its mines. In January 1998, the Company temporarily suspended
operations at the Lupin mine and reduced operations at the McCoy/Cove mine
pending significant improvement in gold prices. Although the Company has a
hedging program in place to reduce the risk associated with gold and silver
price volatility, there is no assurance that the Company's hedging strategies
will be successful. Furthermore, should the Company experience a prolonged
period of depressed gold prices and prepare its reserve calculations and/or
life-of-mine plans at significantly lower prices than those used at year-end
1997, the Company could experience additional material write-downs of its
investment in mining properties. See "Uncertainty of Reserve and Other
Mineralization Estimates" and "Estimation of Asset Carrying Value."
Spot market prices and futures prices for gold are currently higher than
the Company's cash operating costs ($249 per ounce for 1997), but such prices
are lower than Echo Bay's total production costs ($359 per ounce for 1997).
The volatility of gold and silver prices is illustrated in the following
table which sets forth the average of the daily closing prices for gold and
silver for the periods indicted:
YEAR ENDED DECEMBER 31,
1998(1) 1997 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ---- ----
Gold(2) ($ per ounce) 298 332 388 384 384 360 344
Silver(3) ($ per ounce) 6.30 4.87 5.18 5.19 5.29 4.30 3.94
(1) For the period from January 1, 1998 to May 11, 1998
(2) On the London Bullion Market
(3) As quoted by Handy and Harman
As of May 11, 1998, the closing prices for the metals described above
were:
Gold: $ 299 per ounce
Silver: $5.79 per ounce
ESTIMATION OF ASSET CARRYING VALUES
The Company periodically undertakes a detailed review of the life-of-
mine plans for its four operating properties and an evaluation of the Company's
portfolio of development projects, exploration projects and other assets. In
light of both the short-term and long-term view of precious metals prices and
the results of feasibility and engineering studies, the Company assesses the
recoverability of the carrying values of those assets. For operating mines and
development properties, the carrying values are compared to estimated future net
cash flows from each property; for other assets, carrying values are compared to
estimated net realizable values based on market comparables and, for share
investments, quoted market values. For purposes of estimating future cash flows
for its producing gold mines and development projects in its 1997 review, the
Company used price assumptions of $300 per ounce for gold for 1998 and $350 per
ounce thereafter. As a result of the carrying value analysis, the Company
recorded $346.0 million in provisions for impaired assets in 1997. The
provisions included $50.0 million to write off the Kingking project in the
Philippines: $143.6 million to write off the Company's investment in Santa Elina
Mines Corporation in Brazil; $127.0 million to reduce the carrying values of
Lupin ($65.0 million), McCoy/Cove ($47.0 million) and Kettle River ($15.0
million); and $25.4 million to write down certain shares investments to market
value and to provide for estimated legal and closure costs.
The Company intends to assess the carrying values of its assets on an
ongoing basis as required by generally accepted accounting principles. Factors
which may affect carrying values include, but are not limited to, gold and
silver prices, capital cost estimates, mining, processing and other operating
costs, grade and metallurgical characteristics of ore, mine design and timing of
production. There can be no assurance that, particularly in the event
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of a prolonged period of depressed gold prices, the Company will not be required
to take additional material write-downs of its operating and development
properties.
UNCERTAINTY OF RESERVE AND OTHER MINERALIZATION ESTIMATES
There are numerous uncertainties inherent in estimating proven and
probable reserves and other mineralization, including many factors beyond the
control of the Company. The estimation of reserves and other mineralization
involves subjective judgments about many relevant factors, and the accuracy of
any such estimate is a function of the quality of available data and of
engineering and geological interpretation and judgment. Results of drilling,
testing and production subsequent to the date of an estimate may justify
revision of such estimate. Assumptions about prices are subject to great
uncertainty and gold and silver prices have fluctuated widely in recent years
and are currently at depressed levels. See "Gold and Silver Prices." No
assurance can be given that the volume and grade of reserves mined and processed
and recovery rates will not be less than anticipated. Declines in the market
price of gold and related precious metals also may render reserves or other
mineralization containing relatively lower grades of mineralization uneconomic
to exploit. The prices used in estimating the Company's ore reserves at
December 31, 1997 were $350 per ounce of gold and $5.00 per ounce of silver.
The market prices were $293 per ounce of gold and $6.13 per ounce of silver at
December 31, 1997. The market price of gold is currently below the price at
which the Company estimates its reserves. If the Company were to determine that
its reserves and future cash flows should be calculated at a significantly lower
gold price than that used at December 31, 1997, there would likely be a
reduction in the amount of gold reserves. For example, the Company estimates
that, based on extrapolation of information developed in reserve calculation,
but without the same degree of analysis as required for reserve calculation, if
the Company's reserves at December 31, 1997 were based on a price of $325 per
ounce of gold, reserves at the operating properties would decrease approximately
8%. In addition, if the price realized by the Company for its gold or silver
bullion were to decline substantially below the price at which ore reserves were
calculated for a sustained period of time, the Company potentially could
experience material write-downs of its investment in mining properties. Under
certain of such circumstances, the Company may discontinue the development of a
project or mining at one or more of its properties. For example, in 1997, the
Company conducted a major review of life-of-mine plans for its four producing
mines and evaluated its portfolio of development projects, exploration
properties and other assets, which resulted in the recording of $346.0 million
in provisions for impaired assets. The Company also recently deferred final
construction decisions on two planned gold mines (Paredones Amarillos and
Aquarius), and deferred further development of the Ulu satellite deposit.
Additionally, in January 1998, the Company temporarily suspended operations at
the Lupin mine and reduced operations at the McCoy/Cove mine until a significant
recovery in the gold price occurs. Further, changes in operating and capital
costs and other factors, including but not limited to short-term operating
factors such as the need for sequential development of ore bodies and the
processing of new or different ore grades and ore types, may materially and
adversely affect reserves.
EXPLORATION RISKS
Since mines have limited lives based on proven and probable ore
reserves, the Company continually seeks to replace and expand its reserves.
Moreover, two of the Company's mines, McCoy/Cove and Lupin (without taking into
account supplemental production from Ulu) are entering a period of declining
production as the existing ore reserves are depleted, which has led to
significant emphasis on the Company's exploration program. Mineral exploration,
at both newly acquired properties and existing mining operations, is highly
speculative in nature, involves many risks and frequently does not result in the
discovery of minable reserves. There can be no assurance that the Company's
exploration efforts will result in the discovery of significant gold or silver
mineralization or that any mineralization discovered will result in an increase
of the Company's proven or probable reserves. If proven or probable reserves
are developed, it may take a number of years and substantial expenditures from
the initial phases of drilling until production is possible, during which time
the economic feasibility of production may change. For example, a new
feasibility study completed in December 1996 on the Alaska-Juneau project
concluded that the project was uneconomic as designed, and the Company recorded
a $77.1 million provision in connection with the decision not to proceed.
Similarly, the feasibility study the Kingking project completed in the third
quarter of 1997 indicated that the project was uneconomic with the option
agreement in place and the Company recorded a $50.0 million provision to write
off its entire investment in the project. No assurance can be given that the
Company's exploration programs will result in the replacement of current
production with new reserves or that the Company's development program will be
able to extend the life of the
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Company's existing mines. In the event that new reserves are not developed, the
Company will not be able to sustain any mine's current level of gold or silver
production beyond the life of its existing reserve estimates.
The Company encounters strong competition from other mining companies
in connection with the acquisition of properties producing or capable of
producing precious metals. As a result of this competition, some of which is
with companies with greater financial resources than the Company, the Company
may be unable to acquire attractive mining properties on terms it considers
acceptable. In addition, there are a number of uncertainties inherent in any
program relating to the location of economic ore reserves, the development of
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities. Accordingly,
there can be no assurance that the Company's acquisition and exploration
programs will yield new reserves to replace and expand current reserves.
MINING RISKS AND INSURANCE
The business of gold and silver mining is generally subject to a
number of risks and hazards, including environmental conditions, industrial
accidents, labor disputes, unusual or unexpected geological conditions, ground
or slope failures, cave-ins, changes in the regulatory environment and natural
phenomena such as inclement weather conditions, floods, blizzards and
earthquakes. Such occurrences could result in damage to, or destruction of,
mineral properties or production facilities, personal injury or death,
environmental damage to the Company's properties or the properties of others,
delays in mining, monetary losses and possible legal liability. The Company
maintains insurance against certain risks that are typical in the gold mining
industry and in amounts that the Company believes to be reasonable, but which
may not provide adequate coverage in certain circumstances. However, insurance
against certain risks (including certain liabilities for environmental pollution
or other hazards as a result of exploration and production) is not generally
available to the Company or to other companies in the industry on acceptable
terms. During 1996, the Company recorded a $30.0 million provision related to
estimated costs to remove waste rock from an unstable portion of the pit wall at
McCoy/Cove.
GOVERNMENTAL AND ENVIRONMENTAL REGULATION
The Company's mining operations and exploration activities are subject
to extensive foreign or US federal, state and local laws and regulations
governing exploration, development, production, exports, taxes, labor standards,
waste disposal, protection and remediation of the environment, reclamation,
historic and cultural resources preservation, mine safety and occupational
health, toxic substances and other matters. The costs of discovering,
evaluating, planning, designing, developing, constructing, operating and closing
the Company's mines and other facilities in compliance with such laws and
regulations is significant. It is possible that the costs and delays associated
with compliance with such laws and regulations could become such that the
Company would not proceed with the development or operation of a mine.
As part of its normal course operating and development activities, the
Company has expended significant resources, both financial and managerial, to
comply with governmental and environmental regulations and permitting
requirements, and will continue to do so in the future. Moreover, it is
possible that future regulatory developments, such as increasingly strict
environmental protection laws, regulations and enforcement policies thereunder,
and claims for damages to property and persons resulting from the Company's
operations, could result in substantial costs and liabilities in the future.
The Company is required to obtain governmental permits to develop its
reserves and for expansion or advanced exploration activities at its operating
and exploration properties. Obtaining the necessary governmental permits is a
complex and time-consuming process involving numerous foreign or US federal,
state and local agencies. The duration and success of each permitting effort
are contingent upon many variables not within the Company's control. In the case
of foreign operations, governmental approvals, licenses and permits are, as a
practical matter, subject to the discretion of the applicable governments or
governmental officials. In the context of environmental protection permitting,
including the approval of reclamation plans, the Company must comply with known
standards, existing laws and regulations that may entail greater or lesser costs
and delays depending on the nature of the activity to be permitted and the
interpretation of the laws and regulations implemented by the permitting
authority. The failure to obtain certain
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permits, or the imposition of extensive conditions upon certain permits, could
have a material adverse effect on the Company's business, operations and
prospects.
In past sessions of the United States Congress, both the House of
Representatives and Senate have considered legislation that seeks to reform the
General Mining Law of 1872, as amended (the "Mining Law"), which governs the
location and maintenance of unpatented mining claims and related activities on
federal lands. As part of the most recent budget reconciliation process, each
of the Senate and the House of Representatives passed separate legislation that
sought to reform the Mining Law, although such legislation was not enacted into
law. Similar legislation has also been proposed in the current session of the
US Congress, as has other legislation which could have the effect of increasing
costs of operations. The Company anticipates that if Congress were to enact
legislation modifying the Mining Law, such legislation may impose a royalty on
production of minerals from unpatented mining claims, and could contain new
requirements for mined land reclamation and other environmental control
measures. The Bureau of Land Management of the US Department of the Interior
has commenced a program to revise the federal regulations applicable to
activities on unpatented mining claims to impose more stringent reclamation and
environmental protection requirements on those activities. The extent to which
any such new legislation or administrative action would affect existing
unpatented mining claims or mining operations thereon is unclear at this time.
Any reform of the Mining Law based on these initiatives could increase the costs
of mining activities on unpatented mining claims, and as a result could have an
adverse effect on the Company and its results of operations, particularly the
Company's operations at McCoy/Cove and, to a lesser extent, Round Mountain.
Until such time, if any, as new reform legislation is enacted or administrative
action is taken, the ultimate effects and costs of compliance on the Company
cannot be estimated.
RISK OF INTERNATIONAL OPERATIONS
Many of the mineral rights and interests of the Company are subject to
government approvals, licenses and permits. Such approvals, licenses and
permits are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. No assurance can be given that the
Company will be successful in obtaining any or all of the various approvals,
licenses and permits that it seeks, that it will obtain them in a timely fashion
or that it will be able to maintain them in full force and effect without
modification or revocation.
In certain countries in which the Company has assets and operations,
such assets and operations are subject to various political, economic and other
uncertainties, including, among other things, the risks of war or civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
concessions, licenses, permits, approvals and contracts, taxation policies,
foreign exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations, currency controls and foreign governmental
regulations that favor or require the awarding of contracts to local contractors
or require foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. In addition, in the event of a dispute arising from
foreign operations, the Company may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the United States or Canada. The Company also may be
hindered or prevented from enforcing its rights with respect to a governmental
instrumentality because of the doctrine of sovereign immunity. It is not
possible for the Company to accurately predict such developments or changes in
law or policy or to what extent any such developments or changes may have a
material adverse effect on the Company's operations.
TITLE TO PROPERTIES
Certain of the Company's United States mineral rights, including at
the McCoy/Cove and Round Mountain properties, consist of unpatented lode mining
claims. Unpatented mining claims may be located on US federal public lands open
to appropriation, and may be either lode claims or placer claims depending upon
the nature of the deposit within the claim. In addition, unpatented millsite
claims, which may be used for processing operations or other activities
ancillary to mining operations, may be located on federal public lands that are
non-mineral in character. Unpatented mining claims and millsites are unique
property interests, and are generally considered to be subject to greater title
risk than other real property interests because the validity of unpatented
mining claims is often uncertain and is always subject to challenges of third
parties or contests by the federal government. The validity of an unpatented
mining claim, in terms of both its location and its maintenance, is dependent on
strict compliance with a complex body of federal and
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state statutory and decisional law. In addition, there are few public records
that definitively control the issues of validity and ownership of unpatented
mining claims.
INFLATION AND CURRENCY RISKS
The Company directly or indirectly holds mining interests in several
countries, including Mexico, Brazil, Russia, Burkina Faso, Mali, Ghana and
Chile, which historically have had unstable currencies as a result of inflation,
currency controls or other reasons. Although the production resulting from such
mining interests is generally sold in US dollars, the Company is vulnerable to
the effects of inflation in its operations in certain countries, and
profitability levels may be eroded by unfavorable exchange rates. None of the
countries in which the Company holds mineral interests currently restricts the
repatriation of profits, other than through the requirement to register such
distributions. While recent years have seen a generally positive trend toward
lowering inflation and stabilizing exchange rates in these countries, there is
no assurance that governments will continue with current economic policies or
that inflation will be lower than it has been historically.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Shares by the
Selling Shareholder.
SELLING SHAREHOLDER
The following table set forth (i) the name of the Selling Shareholder,
(ii) the number of Common Shares currently beneficially owned by the Selling
Shareholder and (iii) the number of such Common Shares which will be
beneficially owned by the Selling Shareholder after the offering, assuming the
sale of all the Shares being offered herein.
<TABLE>
<CAPTION>
BENEFICIAL BENEFICIAL
OWNERSHIP PRIOR SHARES TO BE OWNERSHIP AFTER
SELLING SHAREHOLDER TO OFFERING OFFERED OFFERING
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Nationwide Development Corporation(1) 1,500,000(1) 1,500,000(1) 0
</TABLE>
__________________________
(1) The Shares were issued by the Company to the Selling Shareholder in
settlement of a dispute relating to termination of the Company's investment
in the Kingking project in the Philippines. In the settlement, the Company
paid U.S. $500,000 in cash and agreed to issue 1.25 million Common Shares,
subject to adjustment as provided below. The number of shares to be issued
was subject to decrease or increase if the closing price of the Company's
Common Shares on the American Stock Exchange for the ten trading days prior
to the later of the effective date of this Registration Statement of which
this Prospectus is a part and the qualification of the Shares for issuance
in Canada (the "Approval Date") is less than U.S. $2.375 or greater than
U.S. $3.00. If the average trading price on the Approval Date is less than
U.S. $2.375 per share, the Company must deliver shares having an aggregate
value of U.S. $3.0 million and if the average trading price on the Approval
Date is greater than U.S. $3.00 per share, the Company must deliver shares
having an aggregate value of U.S. $3.75 million.
DESCRIPTION OF ECHO BAY SHARE CAPITAL
GENERAL
The authorized share capital of the Company consists of an unlimited
number of Common Shares, without par value, of which 139,370,031 were
outstanding on May 11, 1998, and an unlimited number of preferred shares,
issuable in series, none of which are currently outstanding. In addition, as of
May 11, 1998, 4,731,580 Common Shares have been reserved for issuance upon the
exercise of outstanding options.
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COMMON SHARES
The holders of Common Shares have one vote for each share held and are
not entitled to cumulative votes for the election of directors. Each Common
Share is entitled to participate equally in such dividends as may be declared by
the Board of Directors of the Company out of funds legally available therefor
and is entitled to share equally in any distribution to holders of Common Shares
on liquidation. The holders of Common Shares have no preemptive, conversion or
redemption rights. Each outstanding Common Share is fully paid and
nonassessable.
Under the terms of the Company's Capital Securities due 2027, the Company
has the right to defer interest payments for up to 10 consecutive semi-annual
periods. During any deferral period, the Company is prohibited from paying
dividends on its Common Shares. The Company has exercised its right to defer the
April 1998 interest payment on the Capital Securities and is therefore
prohibited from paying dividends on its Common Shares until the conclusion of
the deferral period.
PREFERRED SHARES
The Board of Directors of the Company may issue preferred shares from
time to time in one or more series, subject to the provisions of the Articles of
Incorporation of the Company. When any preferred shares of the Company are
outstanding, no dividends may be paid or declared on outstanding Common Shares
unless all dividends on preferred shares of all series shall have been paid in
full with respect to past dividend periods, and the full dividends thereon for
the then current dividend period shall have been declared and a sum set apart
for payment thereof. Any sinking fund requirements with respect to preferred
shares of the Company must also be complied with before dividends on Common
Shares may be paid.
SHAREHOLDER RIGHTS PLAN
Under the Company's shareholder rights plan, if any person or group were
to announce an intention to acquire, or were to acquire, 20% or more of the
Company's Common Shares without complying with the conditions of a "permitted
bid," then the owners of each share of common stock (other than the acquiring
person or group) would become entitled to exercise a right to buy one additional
Common Share at 50% of the lowest share price on The Toronto Stock Exchange
during the prior 90 days. The plan expires in 2004, subject to reconfirmation
by shareholders in 1999.
A "permitted bid," which does not trigger the entitlement to acquire
shares under the plan, is one that complies with applicable securities law in
all jurisdictions where at least 5% of the Company's Common Shares are owned; is
made to all shareholders for all outstanding shares; is open for a minimum of 60
days; takes up no shares until at least 66 2/3% of the outstanding shares have
been tendered to the bid, including those owned by the acquiring person or
group; and meets certain other conditions.
PLAN OF DISTRIBUTION
The Company has been advised by the Selling Shareholder that it may sell
or transfer all or a portion of the Shares offered hereby from time to time to
third parties directly or by or through brokers, dealers, agents or
underwriters, who may receive compensation in the form of underwriting
discounts, concessions or commissions from the Selling Shareholder and/or from
purchasers of the Shares for whom they may act as agent. Such sales and
transfers of the Shares may be effected from time to time in one or more
transactions on the American Stock Exchange or The Toronto Stock Exchange, in
negotiated transactions or otherwise, at a fixed price or prices, which may be
changed, at market pries prevailing at the time of sale, at negotiated prices,
or without consideration, or by any other legally available means. Any or all
of the Shares may be sold or transferred from time to time by means of (a) a
block trade in which the broker or dealer so engaged will attempt to sell the
Shares as agent but may position and resell a portion of the block as principal
to facilitate the transaction; (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this Prospectus;
(c) ordinary brokerage transactions and transactions in which the broker
solicits purchasers; (d) through the writing of options on the Shares; and (e)
any other legally available means. To the extent required, the number of Shares
to be sold or transferred , the purchase price, the name of such agent, broker,
dealer or underwriter and any applicable discounts or commissions and any other
required information with
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respect to a particular offer will be set forth in an accompanying Prospectus
Supplement. The aggregate net proceeds to the Selling Shareholder from the sale
of the Shares will be the purchase price of such Shares less any commissions.
The Selling shareholder and any brokers, dealers, agents or underwriters
that participate in the distribution of the Shares may be deemed to be
"underwriters" within the meaning of the Securities Act, in which event any
discounts, concessions and commissions received by such brokers, dealers, agents
or underwriters and any profit on the resale of the Shares purchased by them may
be deemed to be underwriting commissions or discounts under the Securities Act.
No underwriter, broker, dealer or agent has been engaged by the Company
in connection with the distribution of the Shares.
Any Shares covered by this Prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than
pursuant to this Prospectus. There is no assurance that the Selling Shareholder
will sell any or all of the Shares. The Selling Shareholder may transfer,
devise or gift Shares by other means not described herein.
The Company will pay all of the expenses incident to the registration of
the Shares, other than underwriting discounts and selling commissions, if any,
and fees and expenses of counsel for the Selling Shareholder.
In order to comply with the securities laws of certain states, if
applicable, Shares will be sold in such jurisdictions only through registered
or licensed brokers or dealers. In addition, in certain states the Shares may
not be sold unless they have been registered or qualified for sale in the
applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
EXPERTS
The consolidated financial statements of the Company included in its
Annual Report on Form 10-K for the year ended December 31, 1997 have been
audited by Ernst & Young, independent chartered accountants, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are, and audited financial statements to
be included in subsequently filed documents will be, incorporated herein by
reference in reliance upon the reports of Ernst & Young pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the validity of the Common Shares,
and certain other matters with respect to Canadian law, will be passed upon for
the Company by Milner Fenerty, Edmonton, Alberta. The Company is also
represented with respect to U.S. securities matters by Davis, Graham & Stubbs
LLP, Denver, Colorado.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14 - OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses, other than underwriting fees and
commissions, expected to be borne by the Registrants in connection with the
distribution of the securities being registered (all amounts are estimated
except the SEC registration fee):
Securities and Exchange Commission registration fee US $ 1,452
Legal fees and expenses 10,000
Printing and engraving expenses 10,000
Accounting fees and expenses 5,000
Miscellaneous 3,548
-------
TOTAL 30,000
=======
ITEM 15 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Canada Business Corporations Act, Echo Bay Mines Ltd. (the
"Company" or "Echo Bay") may indemnify a present or former director or officer
of Echo Bay or of another corporation of which Echo Bay is a stockholder or
creditor against amounts paid to settle civil, criminal or administrative
actions or judgments and expenses in connection therewith, where the director or
officer was made a party by reason of his position with Echo Bay or such other
corporation and provided that the director or officer acted honestly and in good
faith with a view to the best interests of Echo Bay and, in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, had reasonable grounds for believing that his conduct was lawful. Such
indemnification may be made in connection with a derivative action only with
court approval. A director or officer is entitled to indemnification from Echo
Bay as a matter of right if he was substantially successful on the merits and
fulfilled the conditions set forth above.
A policy of directors' and officers' liability insurance is maintained
by Echo Bay, which policy insures directors and officers for losses as a result
of claims based upon their acts or omissions as directors and officers of the
Registrant, including liabilities arising under the Securities Act of 1933, and
also reimburses Echo Bay for payments made pursuant to the indemnity provisions
under the Canada Business Corporations Act.
ITEM 16 - EXHIBITS
3.1 Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 to
the Company's Registration Statement on Form S-3, No. 33-77738, filed
April 14, 1994)
3.2 By-laws (Incorporated by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-3, No. 33-77738, filed April 14, 1994)
5.1 Opinion and Consent of Milner Fenerty*
23.1 Consent of Ernst & Young**
23.2 Consent of Milner Fenerty - contained in Exhibit 5.1*
24.1 Echo Bay Mines Ltd. Power of Attorney**
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99.1 Form of Canadian short form prospectus of the Company relating to Common
Shares*
- -----------------
* To be filed by amendment.
** Filed herewith.
ITEM 17 - UNDERTAKINGS
Echo Bay hereby undertakes that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrants hereby undertake:
(a) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement
(or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a
fundamental change in the information set forth in the
Registration Statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the
Registration Statement or any material change to such
information in the Registration Statement,
provided, however, that paragraphs (a)(i) and (a)(ii) do not
apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by Echo Bay pursuant to Section 13 or Section 15(d)
of the Securities Exchange Act of 1934, that are incorporated by
reference in the Registration Statement;
(b) That for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall
be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(c) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrants pursuant to the foregoing provisions or otherwise,
the Registrant have been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Englewood, County of Arapahoe, State of
Colorado, on the 13th day of May, 1998.
ECHO BAY MINES LTD.
By: /s/ Robert L. Leclerc*
---------------------------------
Robert L. Leclerc, Q.C., Chairman,
Chief Executive Officer and US
Authorized Representative
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ Robert L. Leclerc* Chairman, Chief Executive Officer and May 13, 1998
- ----------------------------- Director (Principal Executive Officer)
Robert L. Leclerc, Q.C.
/s/ Peter H. Cheesbrough* Senior Vice-President, Finance and May 13, 1998
- ----------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Vice-President and Controller May 13, 1998
- ----------------------------- (Principal Accounting Officer)
Tom S. Q. Yip
/s/ John N. Abell* Director May 13, 1998
- -----------------------------
John N. Abell
/s/ Latham C. Burns* Director May 13, 1998
- -----------------------------
Latham C. Burns
Director
- -----------------------------
Pierre Choquette
/s/ John Gilray Christy* Director May 13, 1998
- -----------------------------
John Gilray Christy
/s/ Peter Clarke* Director May 13, 1998
- -----------------------------
Peter Clarke
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
/s/ John F. McOuat* Director May 13, 1998
- -----------------------------
John F. McOuat
Director
- -----------------------------
Monica E. Sloan
/s/ R. Geoffrey P. Styles* Director May 13, 1998
- -----------------------------
R. Geoffrey P. Styles
</TABLE>
*By: /s/ Tom S. Q. Yip
-------------------
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
23.1 Consent of Ernst & Young
24.1 Echo Bay Mines Ltd. Power of Attorney
II-5
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related prospectus of Echo Bay Mines Ltd.
for the registration of 1,500,000 shares of its common stock and to the
incorporation by reference therein of our report dated January 26, 1998, except
for Notes 7, 18 and 19, as to which the date is March 17, 1998, with respect to
the consolidated financial statements of Echo Bay Mines Ltd. included in its
Annual Report (Form 10-K) for the year ended December 31, 1997, filed with the
Securities and Exchange Commission.
/s/ Ernst & Young
Edmonton, Canada
May 12, 1998 Chartered Accountants
<PAGE>
Exhibit 24.1
ECHO BAY MINES LTD.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors
and/or officers of Echo Bay Mines Ltd. (the "Company" or the "Registrant"),
hereby constitutes Peter H. Cheesbrough, Tom S. Q. Yip, Ronald R. Levine, II,
and each of them, his or her true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, to sign the Registration
Statement on Form S-3 to be filed by the Company and any and all amendments
(including without limitation post-effective amendments and any amendments
pursuant to Rule 462 under the Securities Act) to such Registration Statement,
and to file the same with the Securities and Exchange Commission, together with
any exhibits thereto and other documents therewith, granting unto said
attorneys-in-fact and agents and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary and advisable to
enable the Registrant to comply with the Securities Act and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof to be done in and about the premises, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agents, or any of them, or any
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has subscribed these presents
this 24th day of April, 1998.
SIGNATURE TITLE
- --------- -----
/s/ Robert L. Leclerc Chairman, Chief Executive Officer and
- ---------------------------- Director (Principal Executive Officer)
Robert L. Leclerc, Q.C.
/s/ Peter H. Cheesbrough Senior Vice-President, Finance and Chief
- ---------------------------- Financial Officer (Principal Financial Officer)
Peter H. Cheesbrough
/s/ Tom S. Q. Yip Vice-President and Controller (Principal
- ---------------------------- Accounting Officer)
Tom S. Q. Yip
/s/ John N. Abell Director
- ----------------------------
John N. Abell
/s/ Latham C. Burns Director
- ----------------------------
Latham C. Burns
Director
- ----------------------------
Pierre Choquette
/s/ John Gilray Christy Director
- ----------------------------
John Gilray Christy
/s/ Peter Clarke Director
- ----------------------------
Peter Clarke
<PAGE>
SIGNATURE TITLE
- --------- -----
/s/ John F. McOuat Director
- ----------------------------
John F. McOuat
Director
- ----------------------------
Monica E. Sloan
/s/ R. Geoffrey P. Styles Director
- ----------------------------
R. Geoffrey P. Styles
