<PAGE>
=============================================================================
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 September 30, 1999
------------------
[ ] 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
Englewood, CO 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 _______
-------
Title of Class Shares Outstanding as of
------------------------------ November 2, 1999
Common Shares ----------------------------
without nominal or par value 140,607,145
=============================================================================
<PAGE>
ECHO BAY MINES LTD.
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. Condensed Financial Statements (Unaudited)....................................................... 1
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operation............. 14
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings................................................................................ 29
ITEM 6. Exhibits and Reports on Form 8-K................................................................. 29
SIGNATURE.................................................................................................... 30
</TABLE>
i
<PAGE>
ECHO BAY MINES LTD.
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS (Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEET September 30 December 31
thousands of U.S. dollars 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,423 $ 7,987
Short-term investments 1,999 3,336
Interest and accounts receivable 3,771 3,585
Inventories (note 2) 37,348 37,929
Prepaid expenses and other assets 14,320 6,635
- ------------------------------------------------------------------------------------------------------------
62,861 59,472
Plant and equipment (note 3) 175,169 196,670
Mining properties (note 3) 78,305 95,738
Long-term investments and other assets 32,279 16,196
- ------------------------------------------------------------------------------------------------------------
$ 348,614 $ 368,076
============================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 36,001 $ 43,609
Income and mining taxes payable 2,876 2,941
Gold and other financings (note 4) 13,125 11,652
Deferred income (note 4) 33,169 15,182
- ------------------------------------------------------------------------------------------------------------
85,171 73,384
Gold and other financings (note 4) 40,374 41,119
Deferred income (note 4) 64,835 64,363
Other long-term obligations 46,034 47,943
Deferred income taxes 7,225 7,513
Commitments and contingencies (note 10)
Common shareholders' equity:
Common shares, no par value, unlimited number authorized;
140,607,145 shares issued and outstanding 713,343 713,343
Capital securities (note 5) 121,123 110,862
Deficit (705,968) (663,875)
Foreign currency translation (23,523) (26,576)
- ------------------------------------------------------------------------------------------------------------
104,975 133,754
- ------------------------------------------------------------------------------------------------------------
$ 348,614 $ 368,076
============================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
1
<PAGE>
ECHO BAY MINES LTD.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF OPERATIONS Three months ended Nine months ended
thousands of U.S. dollars, September 30 September 30
except for per share data 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue $ 54,211 $ 55,613 $153,855 $173,814
- -----------------------------------------------------------------------------------------------------------------
Expenses:
Operating costs 35,849 34,649 103,095 110,387
Royalties 1,727 1,959 5,042 5,899
Production taxes 85 369 214 1,052
Depreciation and amortization 13,999 14,793 40,416 46,111
Reclamation and mine closure 1,617 1,616 5,142 4,803
General and administrative 1,723 1,927 5,630 6,251
Exploration and development 1,892 2,462 5,898 8,244
Loss (gain) on sale of interests in mining and
other properties (note 6) 13,795 -- 13,795 (7,447)
Interest and other (note 7) 3,445 3,756 6,505 9,818
- -----------------------------------------------------------------------------------------------------------------
74,132 61,531 185,737 185,118
- -----------------------------------------------------------------------------------------------------------------
Loss before income taxes (19,921) (5,918) (31,882) (11,304)
- -----------------------------------------------------------------------------------------------------------------
Income tax expense (recovery):
Current (28) 105 143 279
Deferred -- 20 -- 20
- -----------------------------------------------------------------------------------------------------------------
(28) 125 143 299
- -----------------------------------------------------------------------------------------------------------------
Net loss $(19,893) $ (6,043) $(32,025) $(11,603)
=================================================================================================================
Net loss attributable to common shareholders (note 5) $(23,312) $ (9,089) $(42,093) $(20,806)
=================================================================================================================
Loss per share $ (0.17) $ (0.06) $ (0.30) $ (0.15)
=================================================================================================================
Weighted average number of shares outstanding 140,607 140,607 140,607 139,909
(thousands)
=================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT Three months ended Nine months ended
OF DEFICIT September 30 September 30
thousands of U.S. dollars 1999 1998 1999 1998
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balance, beginning of period $(682,656) $(643,037) $(663,875) $(631,320)
Net loss (19,893) (6,043) (32,025) (11,603)
Interest on capital securities, net of nil tax effect (note 5) (3,419) (3,046) (10,068) (9,203)
- -----------------------------------------------------------------------------------------------------------------
Balance, end of period $(705,968) $(652,126) $(705,968) $(652,126)
=================================================================================================================
</TABLE>
2
See accompanying notes to interim consolidated financial statements.
<PAGE>
ECHO BAY MINES LTD.
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT Three months ended Nine months ended
OF CASH FLOW September 30 September 30
thousands of U.S. dollars 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH PROVIDED FROM (USED IN):
OPERATING ACTIVITIES
Net cash flows provided from operating activities $10,628 $ 4,435 $ 28,872 $ 5,277
- ------------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Mining properties, plant and equipment (8,060) (7,061) (23,899) (16,927)
Long-term investments and other assets (161) (117) (5,175) (570)
Proceeds on repurchase of gold forward sales -- -- 1,500 8,673
Short-term investments -- -- 485 3,018
Proceeds on the sale of plant and equipment 141 734 402 3,184
Proceeds on sale of investment in Santa Elina (note 6) -- -- -- 6,252
Proceeds on the sale of other mining properties -- -- -- 1,195
Other (77) 495 (1,304) (57)
- ------------------------------------------------------------------------------------------------------------------------------
(8,157) (5,949) (27,991) 4,768
- ------------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Currency borrowings -- -- 11,000 --
Debt repayments (3,285) (4,999) (13,056) (13,327)
Other -- (112) (1,389) (338)
- ------------------------------------------------------------------------------------------------------------------------------
(3,285) (5,111) (3,445) (13,665)
- ------------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (814) (6,625) (2,564) (3,620)
Cash and cash equivalents, beginning of period 6,237 19,958 7,987 16,953
- ------------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 5,423 $13,333 $ 5,423 $ 13,333
==============================================================================================================================
</TABLE>
See accompanying notes to interim consolidated financial statements.
3
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated balance
sheet, consolidated statement of operations, consolidated statement of deficit,
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 September 30, 1999 and December 31, 1998 and the consolidated
results of operations and cash flow for the three and nine months ended
September 30, 1999 and 1998. 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, 1998.
Certain of the comparative figures have been reclassified to conform with the
current period's presentation.
2. INVENTORIES
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Precious metals -- bullion $ 16,436 $ 14,704
-- in-process 7,540 8,568
Materials and supplies 13,372 14,657
- ----------------------------------------------------------------------------------------------------------------
$ 37,348 $ 37,929
================================================================================================================
</TABLE>
3. PROPERTY, PLANT AND EQUIPMENT
Plant and equipment
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cost $ 663,528 $ 653,533
Less accumulated depreciation 488,359 456,863
- ----------------------------------------------------------------------------------------------------------------
$ 175,169 $ 196,670
================================================================================================================
Mining properties September 30 December 31
1999 1998
- ----------------------------------------------------------------------------------------------------------------
Producing mines' acquisition and development costs $ 271,350 $ 270,585
Less accumulated amortization 226,045 216,810
- ----------------------------------------------------------------------------------------------------------------
45,305 53,775
Development properties' acquisition and development costs 13,776 24,067
Deferred mining costs 19,224 17,896
- ----------------------------------------------------------------------------------------------------------------
$ 78,305 $ 95,738
================================================================================================================
</TABLE>
4
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
4. GOLD AND OTHER FINANCINGS AND DEFERRED INCOME
<TABLE>
<CAPTION>
Financings Deferred Income
------------------------------- ------------------------------
September 30 December 31 September 30 December 31
1999 1998 1999 1998
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold loans $ -- $ 6,867 $ 2,286 $ 3,478
Currency loans 48,375 41,035 -- --
Capital securities (note 5) 5,124 4,869 -- --
Repurchase of gold and silver hedging contracts (note 10) -- -- 41,296 52,283
Repurchase of foreign currency exchange contracts -- -- 5,995 5,995
Deferred gain on restructuring of capital securities swap -- -- 14,028 4,287
Premiums received on gold and silver option contracts -- -- 34,399 13,502
- ----------------------------------------------------------------------------------------------------------------------------
53,499 52,771 98,004 79,545
Less current portion 13,125 11,652 33,169 15,182
- ----------------------------------------------------------------------------------------------------------------------------
$ 40,374 $ 41,119 $ 64,835 $ 64,363
============================================================================================================================
</TABLE>
Since the third quarter of 1998, the Company has accelerated its quarterly gold
loan repayments and decelerated its quarterly currency loan repayments from the
original repayment schedule related to outstanding gold and currency borrowings
under a gold loan agreement. The agreement requires that the aggregate gold and
currency commitment be repaid quarterly at a specified principal amount in
dollars and/or the equivalent number of gold ounces valued at the original gold
loan price of $349 per ounce. The gold loan was restructured in 1996 at a price
of $388 per ounce. The differences between the restructured gold loan price of
$388 per ounce and the spot price on the repayment dates for the accelerated
ounces have been deferred and will be recognized in earnings in accordance with
the original repayment schedule. The Company repaid the outstanding gold loan in
the third quarter of 1999. At September 30, 1999, a $24.4 million currency term
loan was still outstanding under the agreement.
5. CAPITAL SECURITIES
In 1997, the Company issued $100.0 million of 11% capital securities due in
April 2027. The Company has the right to defer interest payments on the capital
securities for a period not to exceed 10 consecutive semi-annual periods. During
a period of interest deferral, interest accrues at a rate of 12% per annum,
compounded semi-annually, on the full principal amount and deferred interest.
The Company, at its option, may satisfy its deferred interest obligation by
delivering common shares to the indenture trustee for the capital securities.
The trustee would sell the Company's shares and remit the proceeds to the
holders of the securities in payment of the deferred interest obligation. Since
April 1998, the Company has exercised its right to defer its semi-annual
interest payments to holders of the capital securities. The deferred interest
accrued at September 30, 1999, totaling $26.2 million, has been classified
within the equity component of the capital securities obligation on the balance
sheet as the Company has the option to satisfy the deferred interest by
delivering common shares.
5
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
6. LOSS (GAIN) ON SALE OF INTERESTS IN MINING AND OTHER PROPERTIES
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1997 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Loss on sale of interest in Paredones Amarillos $13,795 $ -- $13,795 $ --
Gain on sale of investment in Santa Elina -- -- -- (6,252)
Gain on sale of interests in other mining properties -- -- -- (1,195)
- ---------------------------------------------------------------------------------------------------------------------------
$13,795 $ -- $13,795 $ (7,447)
===========================================================================================================================
</TABLE>
Loss on sale of interest in Paredones Amarillos
The Company signed an agreement in the third quarter of 1999 to sell its 60%
interest in the Paredones Amarillos project in Mexico to its joint venture
partner. In return, the Company will receive full ownership of a mill owned by
the joint venture, valued at $2.5 million, and a 2% royalty related to Paredones
Amarillos production. The joint venture partner will assume all project
liabilities. In the third quarter of 1999, the Company recognized a loss on the
sale of Paredones Amarillos of $13.8 million.
Gain on sale of investment in Santa Elina
In 1998, the Company sold its investment in Santa Elina, which had no book
value, for $6.3 million in cash, net of selling costs, and a 48.1% interest in
the Chapada exploration property in Brazil, to which the Company assigned no
book value. The Company realized no gain when it sold the Chapada property in
the second quarter of 1999.
7. INTEREST AND OTHER
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Interest income $ (145) $ (60) $ (260) $ (242)
Interest expense 1,173 1,055 3,402 4,584
Unrealized loss on share investments 731 1,608 1,508 2,814
(Gain) loss on sale of share investments -- -- (485) 962
(Gain) loss on sale of plant and equipment 338 (175) 300 (1,361)
Other 1,348 1,328 2,040 3,061
- ------------------------------------------------------------------------------------------------------------------------------
$ 3,445 $ 3,756 $6,505 $ 9,818
==============================================================================================================================
</TABLE>
8. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES (GAAP)
U.S. GAAP financial statements
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 and in the
footnotes to the financial statements included in the Company's annual report on
Form 10-K for the year ended December 31, 1998.
6
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
At September 30, 1999, the Company had 105,000 ounces of gold call options sold
with a strike price of $340 per ounce. The Company sold these call options in
the third quarter of 1999 to obtain better prices on certain of its gold forward
contracts. The Company has limited the potential loss on these call options to
$60 per ounce if the spot price of gold reaches levels above $340 per ounce by
purchasing 105,000 ounces of gold call options at a strike price of $400 per
ounce. In accordance with U.S. GAAP, the 105,000 ounces of gold call options
sold would not qualify for hedge accounting and therefore would be marked to
market at September 30, 1999. As a result, the Company has recorded an
unrealized loss on gold call options sold of $2.3 million in the third quarter
of 1999 under U.S. GAAP.
The effects of the GAAP differences on the consolidated statement of operations
would have been as follows.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss under Canadian GAAP $(19,893) $(6,043) $ (32,025) $ (11,603)
Unrealized/realized loss on share investments 731 1,608 1,508 1,180
Change in market value of foreign exchange contracts 548 (1,487) 4,366 (2,645)
Additional interest expense on capital securities (3,419) (3,046) (10,068) (9,203)
Amortization of deferred financing on capital securities (158) (158) (475) (475)
Unrealized loss on gold call options sold (2,271) -- (2,271) --
Recognition of severance expense -- -- -- (4,980)
Amortization of mining properties -- 436 -- 1,469
- -------------------------------------------------------------------------------------------------------------------------------
Net loss under U.S. GAAP $(24,462) $ (8,690) $ (38,965) $ (26,257)
================================================================================================================================
Loss per share under U.S. GAAP $ (0.17) $ (0.06) $ (0.28) $ (0.19)
===============================================================================================================================
</TABLE>
The effects of the GAAP differences on the consolidated balance sheet would have
been as follows.
<TABLE>
<CAPTION>
Unrealized Mining
Loss on Call Foreign Properties Santa Elina
Canadian Options Exchange Share Amorti- Acquisition/ Capital U.S.
September 30, 1999 GAAP Sold Contracts Investments zation Write-off Securities GAAP
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Short-term investments $ 1,999 $ -- $ -- $ 71 $ -- $ -- $ -- $ 2,070
Long-term investments and
other assets 32,279 -- -- -- -- -- 1,583 33,862
Mining properties 78,305 -- -- -- (11,526) -- -- 66,779
Gold and other financings 53,499 -- -- -- -- -- 94,875 148,374
Deferred income 98,004 -- (5,995) -- -- -- -- 92,009
Other long-term obligations 46,034 2,271 2,408 -- -- -- 26,248 76,961
Common shares 713,343 -- -- -- -- 36,428 -- 749,771
Capital securities 121,123 -- -- -- -- -- (121,123) --
Deficit 705,968 2,271 (3,587) (9,064) 11,526 36,428 (1,583) 741,959
Foreign currency
translation 23,523 -- -- (19) -- -- -- 23,504
Net unrealized loss on
share investments -- -- -- 9,012 -- -- -- 9,012
Common shareholders'
equity 104,975 (2,271) 3,587 71 (11,526) -- (119,540) (24,704)
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce of unless otherwise noted
The following statement of comprehensive loss would be disclosed in accordance
with U.S. GAAP.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net loss under U.S. GAAP $(24,462) $ (8,690) $(38,965) $(26,257)
Other comprehensive income (loss), after a nil income tax
effect:
Unrealized gain/loss on share investments:
Net unrealized holding loss arising during the period (828) (1,736) (1,465) (706)
Reclassification adjustment for net (gain) loss recognized in
earnings -- -- (485) 962
- --------------------------------------------------------------------------------------------------------------------------
Net unrealized income (loss) (828) (1,736) (1,950) 256
Foreign currency translation adjustments (573) (2,421) 3,079 (4,596)
- --------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss) (1,401) (4,157) 1,129 (4,340)
- --------------------------------------------------------------------------------------------------------------------------
Comprehensive loss $(25,863) $(12,847) $(37,836) $(30,597)
==========================================================================================================================
</TABLE>
Additionally, under U.S. GAAP, the equity section of the balance sheet would
present a subtotal for accumulated other comprehensive loss, as follows.
<TABLE>
<CAPTION>
September 30 December 31
1999 1998
- -----------------------------------------------------------------------------------------------
<S> <C> <C>
Foreign currency translation $(23,504) $(26,583)
Net unrealized loss on share investments (9,012) (7,547)
- -----------------------------------------------------------------------------------------------
Accumulated other comprehensive loss $(32,516) $(34,130)
===============================================================================================
</TABLE>
In June 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," effective for fiscal quarters of fiscal
years beginning after June 15, 2000. The impact of the new standard on the
Company's financial information prepared under U.S. GAAP has not yet been
determined.
9. SEGMENT INFORMATION
The Company's management regularly evaluates the performance of the Company by
reviewing operating results on a minesite by minesite basis. As such, the
Company considers each producing minesite to be an operating segment. In the
first nine months of 1999, the Company had three operating mines: Round Mountain
in Nevada, USA; McCoy/Cove in Nevada, USA; and Kettle River in Washington, USA.
In January 1998, the Company temporarily suspended operations at its Lupin mine
in the Nunavut Territory of Canada. In November 1999, the Company announced
plans to reopen the Lupin mine, with the first production expected to occur in
April 2000. All of the Company's mines are 100% owned except for Round Mountain,
which is 50% owned.
8
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
In making operating decisions and allocating resources, the Company's management
specifically focuses on the production levels and cash operating costs generated
by each operating segment, as summarized in the following tables.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
Gold Production (ounces) 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Round Mountain (50%) 74,422 69,143 204,872 208,230
McCoy/Cove 29,173 50,057 90,863 125,501
Kettle River 24,400 29,363 76,080 88,195
- --------------------------------------------------------------------------------------------------------------------------
Total gold 127,995 148,563 371,815 421,926
==========================================================================================================================
Silver Production (ounces) - all from McCoy/Cove 1,325,650 1,993,141 5,908,967 6,305,770
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
Cash Operating Costs per Ounce of Gold Produced 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Round Mountain $ 178 $ 186 $ 197 $ 189
McCoy/Cove 258 201 227 208
Kettle River 257 241 242 241
- --------------------------------------------------------------------------------------------------------------------------
Company consolidated weighted average $ 220 $ 202 $ 216 $ 206
==========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
Three months ended Nine months ended
Reconciliation of Cash Operating September 30 September 30
Costs per Ounce to Financial Statements 1999 1998 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating costs by minesite:
Round Mountain $ 13,521 $ 13,001 $ 37,459 $ 38,856
McCoy/Cove 16,477 14,127 48,290 48,099
Kettle River 5,851 7,521 17,346 21,787
Lupin -- -- -- 1,645
- --------------------------------------------------------------------------------------------------------------------------
Total operating costs per financial statements 35,849 34,649 103,095 110,387
Change in finished goods inventories and other (717) 2,536 2,626 2,068
Co-product cost of silver produced (6,973) (7,175) (25,409) (25,538)
- --------------------------------------------------------------------------------------------------------------------------
Cash operating costs $ 28,159 $ 30,010 $ 80,312 $ 86,917
==========================================================================================================================
Gold ounces produced 127,995 148,563 371,815 421,926
==========================================================================================================================
Cash operating costs per ounce $ 220 $ 202 $ 216 $ 206
==========================================================================================================================
</TABLE>
9
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
The Company's management generally monitors revenue on a consolidated basis.
Information regarding the Company's consolidated revenue is provided below.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total gold and silver revenue $ 54.2 $ 55.6 $ 153.9 $ 173.8
Average gold price realized per ounce $ 321 $ 318 $ 324 $ 332
Average silver price realized per ounce $ 7.10 $ 6.59 $ 5.87 $ 6.08
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
10. HEDGING ACTIVITIES AND COMMITMENTS
The Company reduces the risk of future gold and silver price declines by hedging
a portion of its production. The principal hedging tools used are gold and
silver loans, fixed and floating forward sales contracts, spot-deferred
contracts, swaps and options.
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.
The credit risk exposure related to all hedging activities is limited to the
unrealized gains on outstanding contracts based on current market prices. To
reduce counterparty credit exposure, the Company deals only with large, credit-
worthy financial institutions and limits credit exposure to each. In addition,
the Company deals only in markets it considers highly liquid to allow for
situations where positions may need to be reversed.
In September 1999, the market value of the Company's gold and silver hedge
position, which included forward sales commitments and option positions,
decreased significantly as a result of an increase in the market price of gold.
The market price of gold reached a 20-year low of $253 per ounce in July 1999,
but recovered to $299 per ounce on September 30, 1999.
Margin deposits are required by certain of the Company's counterparties if the
fair value of the hedge position is less than the predetermined margin
threshold. The Company regularly reviews its margin risk and attempts to
mitigate this risk by modifying its hedge position whenever market conditions
allow. The increase in the gold price in September 1999 eroded the market value
of the Company's gold and silver hedge position to a point where the Company
felt such modifications were appropriate. At the end of September 1999, the
Company repurchased a significant portion of its gold and silver forward sales
commitments and restructured its gold and silver option positions to better
complement the new forward sales positions. The Company purchased 606,250
ounces of gold call options at an average strike price of $357 per ounce. These
purchased call options have expiration dates that match the Company's forward
sales commitments and call options sold and have strike prices ranging from $20
to $60 per ounce above the forward sales prices and call options sold strike
prices. The quantity of call options purchased is equal to 70% of the Company's
forward sales and call options sold in the years 2000 to 2005 and will allow the
Company to participate in price rallies above the call option strike prices
while reducing the Company's margin risk related to these commitments. A
similar strategy has been implemented for the Company's silver hedge position.
At September 30, 1999, the Company has accrued a net cost of $4.8 million
related to the repurchases. The gains and losses comprising the $4.8 million
will be deferred and
10
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
recognized in revenue as the formerly hedged gold and silver is sold. These
deferred gains (losses) will be recognized as follows: $(0.1) million in 1999,
$8.9 million in 2000, $1.9 million in 2001, $(2.5) million in 2002, $(2.5)
million in 2003, $(8.3) million in 2004, $(1.1) million in 2005, and $(1.1)
million in 2006.
The Company's hedge contracts require the Company to pay the three month gold
lease rate on 300,000 of its 557,029 ounces of forward sales and on 105,000 of
its 355,000 ounces of call options sold. The three-month gold lease rate was 4%
at September 30, 1999. The gold lease payments are made on a quarterly basis.
For accounting purposes, the amounts are being deferred and recognized in
revenue as the hedged gold is sold. The Company has no floating silver lease
rate contracts.
Gold and silver commitments
The Company's gold and silver commitments at September 30, 1999 were as follows.
<TABLE>
<CAPTION>
Gold Silver
-------------------------- ----------------------------------
Forward Price of Forward Price of
Sales Forward Sale Sales Forward Sales
(ounces) (per ounce) (ounces) (per ounce)
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Remainder of 1999 89,112 $ 326 750,000 $ 5.34
2000 167,917 310 1,500,000 5.85
2001 105,000 315 1,500,000 5.85
2002 60,000 315 -- --
2003 60,000 315 -- --
2004 60,000 315 -- --
2005 15,000 315 -- --
- ----------------------------------------------------------------------------------------------
557,029 $ 315 3,750,000 $ 5.75
==============================================================================================
</TABLE>
The Company's option positions at September 30, 1999 were as follows.
<TABLE>
<CAPTION>
Put Options Purchased Put Options Sold Call Options Purchased Call Options Sold
--------------------- ---------------- ---------------------- -----------------
Strike Price Strike Price Strike Price Strike Price
Ounces per Ounce Ounces per Ounce Ounces per Ounce Ounces per Ounce
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gold
- ----
Remainder of 1999 -- $ -- 33,333 $ 290 33,333 $ 322 -- $ --
2000 268,750 282 66,667 290 167,917 338 250,000 360
2001 -- -- -- -- 105,000 351 -- --
2002 -- -- -- -- 60,000 360 -- --
2003 -- -- -- -- 60,000 360 -- --
2004 -- -- -- -- 60,000 360 -- --
2005 -- -- -- -- 120,000 395 105,000 340
- ---------------------------------------------------------------------------------------------------------------------------------
268,750 $ 282 100,000 $ 290 606,250 $ 357 355,000 $ 354
=================================================================================================================================
Silver
- -----
Remainder of 1999 -- $ -- -- $ -- -- $ -- 835,000 $ 5.50
2000 1,000,000 6.00 2,500,000 4.75 1,500,000 6.60 -- --
2001 1,000,000 6.00 2,500,000 4.75 1,500,000 6.60 -- --
- ---------------------------------------------------------------------------------------------------------------------------------
2,000,000 $ 6.00 5,000,000 $ 4.75 3,000,000 $ 6.60 835,000 $ 5.50
=================================================================================================================================
</TABLE>
11
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
Beginning in the third quarter of 1998, the Company opted to accelerate its
quarterly gold ounce repayments and decelerate its quarterly currency repayments
from an original repayment schedule under a loan agreement (note 4). The gold
loan was repaid in the third quarter of 1999. The differences between the
restructured gold loan price and the spot price on the repayment dates for these
accelerated ounces have been deferred and will be recognized in earnings in
accordance with the original repayment schedule.
Shown below are the carrying amount, estimated fair value and unrealized gain on
the Company's gold loans at December 31, 1998 (note 4). Carrying amounts
include deferred income recorded on the balance sheet related to gold loan
remeasurement. The Company had no outstanding gold loans at September 30, 1999.
<TABLE>
<CAPTION>
December 31, 1998
- ---------------------------------------------------------------
Carrying Estimated Unrealized
Amount Fair Value gain
- ---------------------------------------------------------------
<S> <C> <C> <C>
Gold loans $9,400 $ 6,900 $ 2,500
===============================================================
</TABLE>
Shown below are the carrying amounts and estimated fair values of the Company's
other hedging instruments at September 30, 1999 and December 31, 1998.
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------------------- -----------------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold forward sales $ -- $ (5,400) $ -- $ 25,400
Silver forward sales -- 700 -- 12,900
Gold options - puts purchased 5,300 2,100 1,600 2,400
- calls sold (7,400) (6,700) -- --
- puts sold (1,900) (700) -- --
- calls purchas 10,400 10,600 -- --
Silver options - puts purchased 2,500 1,500 2,500 2,100
- calls sold (5,200) (200) (3,400) (500)
- puts sold (9,500) (600) (10,100) (6,100)
- calls purchased 14,100 300 10,100 700
Foreign currency contracts -- (2,400) -- (6,800)
Crude oil contracts -- -- -- (100)
- ----------------------------------------------------------------------------------------------------------------------
$ (800) $ 30,000
======================================================================================================================
</TABLE>
Fair values are estimated based upon market quotations of various input
variables. These variables were used in valuation models that estimate the fair
market value.
12
<PAGE>
ECHO BAY MINES LTD.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
Tabular dollar amounts in thousands of U.S. dollars, except amounts
per share and per ounce or unless otherwise noted
The fair value of the Company's hedge position can be affected by market
conditions beyond the Company's control. The approximate effect of changes in
various market factors on the Company's outstanding hedge position at September
30, 1999 would be as follows.
<TABLE>
<CAPTION>
Effect on
Amount of Market Value of
Change Hedge Position
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Change in:
Gold prices $ 10.00/ounce $ 4,800
Silver prices $ 0.25/ounce $ 1,000
Interest rates (effect on gold and silver forward sales and options) 1% $ 3,500
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
13
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
September 30, 1999
(U.S. dollars)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company's profitability is determined in large part by gold and silver
prices. Market prices of gold and silver are determined by factors beyond the
Company's control. The Company's operations continue to be materially affected
by the depressed price of gold, which averaged $272 per ounce during the first
nine months of 1999. The gold price recovered to $299 per ounce on September
30, 1999, and on November 2, 1999 was $291 per ounce.
The Company reduces the risk of future gold and silver price declines by hedging
a portion of its production. The principal hedging tools used are gold and
silver loans, fixed and floating forward sales contracts, spot-deferred
contracts, swaps and options.
Through its hedge position, the Company has ensured a minimum average cash price
of $345 per ounce of gold on approximately 87% of planned 1999 gold production.
The Company's hedge position as of September 30, 1999 partially protects the
Company against gold price declines in the years 2000 through 2005. For the
year 2000, this position includes forward sales of approximately 168,000 ounces
at a forward price of $310 per ounce. Additionally, the Company has purchased
put options on approximately 269,000 ounces of gold at an average strike price
of $282 per ounce to provide downside protection in the year 2000. For the
years 2001 through 2005, the Company has forward sales totaling 300,000 ounces
of gold at a forward price of $315 per ounce. In addition, the Company has
hedged 2.5 million silver ounces at a minimum average cash price of $5.91 per
ounce in each of the years 2000 and 2001. See note 10 to the interim
consolidated financial statements.
In September 1999, the market value of the Company's gold and silver hedge
position decreased significantly as a result of an increase in the market price
of gold. Margin deposits are required by certain of the Company's
counterparties if the fair value of the hedge position is less than the
predetermined margin threshold. The Company regularly reviews its margin risk
and attempts to mitigate this risk by modifying its hedge position whenever
market conditions allow. The increase in the market price of gold in September
1999 eroded the market value of the Company's hedge position to a point where
the Company felt such modifications were appropriate. The Company repurchased a
significant portion of its gold and silver sales commitments and restructured
its gold and silver option positions to better complement the new forward
positions. These changes to the Company's hedge position will allow the Company
to more fully participate in future gold price rallies while reducing the
Company's margin call risk. See note 10 to the interim consolidated financial
statements.
In November 1999, the Company announced plans to reopen the Lupin mine, located
in the Nunavut Territory of Canada. The Lupin mine was placed on care and
maintenance in early 1998 due to falling gold prices and a high cost structure.
A reengineering study, completed in late 1998, identified savings that helped
lower costs. The Company expects that the first gold production from Lupin will
occur in April 2000, assuming a five-month start-up and restaffing period.
The Company signed an agreement in the third quarter of 1999 to sell its 60%
interest in the Paredones Amarillos project in Mexico to its joint venture
partner. In return, the Company will receive full ownership of a mill owned by
the joint venture, valued at $2.5 million, and a 2% royalty related to Paredones
Amarillos production. The joint venture partner will assume all project
liabilities. The Company recognized a loss on the sale of Paredones Amarillos
of $13.8 million in the third quarter of 1999.
The Company continues to defer a final construction decision on Aquarius, a
planned gold mine in Ontario, Canada.
14
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
September 30, 1999
(U.S. dollars)
The Company's exploration efforts are focused on projects principally located in
North America where the Company already has extensive gold mining
infrastructure.
In March 1997, the Company issued $100.0 million of 11% capital securities due
2027 (see note 5 to the interim 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 on the full
principal amount and deferred interest. The Company, at its option, may satisfy
its deferred interest obligation by delivering common shares to the indenture
trustee for sale, the proceeds of which would be remitted to the holders of the
securities in payment of the deferred interest. The Company has exercised its
right to defer interest payments since April 1998.
LIQUIDITY AND CAPITAL RESOURCES
Net cash flow provided from operating activities was $28.9 million for the first
nine months of 1999 compared to $5.3 million for the first nine months of 1998.
The 1999 results compared to 1998 reflect the 1998 payment for severance and
other costs accrued at the end of 1997 related to asset impairment ($17.0
million), lower payments in 1999 related to vendor, payroll and other accruals
($14.4 million), higher volume of silver sold ($6.7 million), reduced operating
costs ($7.3 million), and lower exploration and development spending ($2.3
million). These factors were partially offset by lower volume of gold sold
($23.7 million).
Net cash used in investing activities was $28.0 million in the first nine months
of 1999, primarily related to mining properties, plant and equipment ($23.9
million) and long-term deposits for reclamation obligations ($5.0 million),
partially offset by $1.5 million received on the repurchase of gold forwards
entered into in the first quarter of 1999.
Cash used in financing activities was $3.4 million in the first nine months of
1999, comprised of gold and currency loan repayments ($13.1 million) and the
repayment of a capital lease obligation ($1.4 million), largely offset by
currency borrowings of $11.0 million.
The Company had $5.4 million in cash and cash equivalents and $2.0 million in
short-term investments at September 30, 1999.
At September 30, 1999, the Company's total debt was $53.5 million, of which
$13.1 million was current.
At September 30, 1999, Company had $24.0 million outstanding, and up to an
additional $26.0 million or gold equivalent, subject to covenant limitations,
available until August 2001, under its revolving credit facility. In October
1999, the Company borrowed an additional $6.0 million under its revolving credit
facility primarily related to the partial repurchase and restructuring of its
gold and silver hedge position (note 10 to the interim consolidated financial
statements). The Company has no restrictions on the borrowing capacity of this
line, based on the current trailing 90-day average spot price of gold.
At September 30, 1999, the estimated unrealized loss on the Company's hedge
portfolio was $0.8 million, which is within the predetermined margin limits.
Margin deposits could be required by certain counterparties if the fair value of
the hedge portfolio were less than the predetermined margin threshold.
For the full year 1999, the Company expects to incur $10 million in capital
expenditures, of which $6.7 million has been incurred in the first nine months
of 1999. Additionally, the Company expects to incur $25 million in deferred
15
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
FINANCIAL CONDITION
September 30, 1999
(U.S. dollars)
stripping and McCoy/Cove pit wall remediation costs for the full year 1999, of
which $17.2 million has been incurred in the first nine months of 1999. The
remediation of the pit wall was completed in the second quarter of 1999. The
Company will rely on its operating cash flow and borrowing capacity under its
revolving loan facility to fund the remainder of its planned 1999 capital and
deferred mining expenditures. The Company continues to monitor its
discretionary spending in view of the depressed gold price and the cost
structure at the Company's operating mines.
16
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
FINANCIAL REVIEW
Three month results
The Company reported a net loss of $19.9 million ($0.17 per share) in the third
quarter of 1999, compared to a net loss of $6.0 million ($0.06 per share) in the
third quarter of 1998. The 1999 results compared to 1998 reflect the loss on
the sale of the Company's interest in Paredones Amarillos ($13.8 million), lower
volume of gold sold ($4.9 million) and increased operating costs ($1.2 million).
These factors were partially offset by higher volume of silver sold ($2.1
million), higher gold and silver prices realized ($1.4 million), lower
depreciation and amortization ($0.8 million), and decreased exploration and
development ($0.6 million).
Gold production decreased 14% to 127,995 ounces in the third quarter of 1999
compared to 148,563 ounces in the third quarter of 1998. Decreased production
reflects lower mill tonnage, grades and recoveries at McCoy/Cove and decreased
mill tonnage at Kettle River. These factors were partially offset by increased
mill tonnage and recoveries at Round Mountain.
Cash operating costs were $220 per ounce of gold in the third quarter of 1999,
versus $202 in the third quarter of 1998. The increase was primarily a result
of lower production at McCoy/Cove and Kettle River. Total production costs were
$324 per ounce in the third quarter of 1999, versus $310 per ounce in the third
quarter of 1998.
Nine month results
The Company reported a net loss of $32.0 million ($0.30 per share) in the first
nine months of 1999, compared to a net loss of $11.6 million ($0.15 per share)
in the first nine months of 1998. The 1999 results compared to 1998 reflect
decreased volume of gold sold ($23.0 million), the loss on the sale of the
Company's interest in Paredones Amarillos ($13.8 million), the absence of the
1998 gain on the sale of Santa Elina ($6.3 million), and decreased gold and
silver prices realized ($4.3 million). These factors were partially offset by
increased volume of silver sold ($7.4 million), reduced operating costs ($7.3
million), lower depreciation and amortization ($5.7 million) and lower
exploration and development ($2.3 million).
Gold production decreased 12% to 371,815 ounces in the first nine months of 1999
compared to 421,926 ounces in the first nine months of 1998. Decreased
production was primarily due to lower mill grades and recoveries at McCoy/Cove,
decreased mill tonnage at Kettle River and fewer reusable heap leach tons placed
at Round Mountain. These factors were partially offset by increased mill grades
and recoveries at Round Mountain.
Cash operating costs were $216 per ounce of gold in the first nine months of
1999, versus $206 in the first nine months of 1998, reflecting lower production
at all three mines. Total production costs were $316 per ounce in the first
nine months of 1999, versus $315 per ounce in the first nine months of 1998.
The term ounce as used in this Form 10-Q means "troy ounce".
17
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
Revenue
Statistics for gold and silver ounces sold and other revenue data are set out
below.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
Revenue Data 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold
- ----
Ounces sold 124,492 140,044 346,602 415,915
Average price realized/ounce - revenue basis $ 321 $ 318 $ 324 $ 332
Average price realized/ounce - cash basis/(1)/ $ 340 $ 338 $ 345 $ 342
Average market price/ounce $ 257 $ 289 $ 272 $ 294
Revenue (millions of U.S. $) $ 40.0 $ 44.5 $ 112.2 $ 138.0
Percentage of total revenue 74% 80% 73% 79%
Silver
- ------
Ounces sold 2,004,113 1,681,081 7,105,224 5,881,786
Average price realized/ounce - revenue basis $ 7.10 $ 6.59 $ 5.87 $ 6.08
Average price realized/ounce - cash basis/(1)/ $ 5.14 $ 5.18 $ 5.23 $ 5.47
Average market price/ounce $ 5.24 $ 5.22 $ 5.11 $ 5.73
Revenue (millions of U.S. $) $ 14.2 $ 11.1 $ 41.7 $ 35.8
Percentage of total revenue 26% 20% 27% 21%
- ------------------------------------------------------------------------------------------------------------
Total revenue (millions of U.S. dollars) $ 54.2 $ 55.6 $ 153.9 $ 173.8
============================================================================================================
</TABLE>
/(1)/ Excludes non-cash items affecting gold and silver revenues, such as the
recognition of deferred income or deferral of revenue to future periods
for hedge accounting purposes.
The effects of changes in sales prices and volume were as follows.
<TABLE>
<CAPTION>
Revenue Variance Analysis
1999 vs. 1998 Three months ended Nine months ended
(millions of U.S. dollars) September 30 September 30
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Higher (lower) gold prices $ 0.4 $ (2.8)
Higher (lower) silver prices 1.0 (1.5)
Change in volume (2.8) (15.6)
- ----------------------------------------------------------------------------------------
Decrease in revenue $(1.4) $(19.9)
========================================================================================
</TABLE>
18
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
Production Costs
Production cost data per ounce of gold is set out below.
<TABLE>
<CAPTION>
Three months ended Nine months ended
Production Costs per September 30 September 30
Ounce of Gold Produced 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Direct mining expense $ 260 $ 204 $ 232 $ 208
Deferred stripping and mine development costs (30) (2) (18) (3)
Inventory movements and other (10) -- 2 1
- ------------------------------------------------------------------------------------------------------------------
Cash operating costs 220 202 216 206
Royalties 11 11 10 11
Production taxes 1 2 -- 2
- ------------------------------------------------------------------------------------------------------------------
Total cash costs 232 215 226 219
Depreciation 63 59 61 60
Amortization 19 27 20 26
Reclamation and mine closure 10 9 9 10
- ------------------------------------------------------------------------------------------------------------------
Total production costs $ 324 $ 310 $ 316 $ 315
==================================================================================================================
</TABLE>
Expenses
Operating costs per ounce vary with the quantity of gold and silver sold and
with the cost of operations. Cash operating costs were $220 per ounce of gold
in the third quarter of 1999 and $202 in the third quarter of 1998. See
"Operations Review."
<TABLE>
<CAPTION>
Reconciliation of Cash Operating
Costs per Ounce to Financial Statements Three months ended Nine months ended
thousands of U.S. dollars, September 30 September 30
except per ounce amounts 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Operating costs per financial statements $ 35,849 $ 34,649 $103,095 $110,387
Change in finished goods inventory and other (717) 2,536 2,626 2,068
Co-product cost of silver produced (6,973) (7,175) (25,409) (25,538)
- ------------------------------------------------------------------------------------------------------------------
Cash operating costs $ 28,159 $ 30,010 $ 80,312 $ 86,917
==================================================================================================================
Gold ounces produced 127,995 148,563 371,815 421,926
==================================================================================================================
Cash operating costs per ounce $ 220 $ 202 $ 216 $ 206
==================================================================================================================
</TABLE>
Reserve estimates
The prices used in estimating the Company's ore reserves at December 31, 1998
were $325 per ounce of gold and $5.75 per ounce of silver. The market price for
gold is currently below this level. If the Company determines that its reserves
should be estimated at a significantly lower price than that used at December
31, 1998, there could be a material reduction in the amount of gold reserves.
For example, the Company estimates that based on extrapolation of information
developed in reserve estimation, but without the same degree of analysis as
required for reserve estimation, if the Company's reserves at December 31, 1998
were based on a price of $300 per ounce of gold, reserves at the operating
properties would decrease approximately 12%. The Company estimates that such
changes in gold price assumptions could have material impacts to the reserve
estimations for Aquarius. Should any significant reductions in reserves occur,
material write-downs of the Company's investment in mining properties and/or
increased amortization charges may be required.
19
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
OPERATIONS REVIEW
Operating data by mine is set out below.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
Operating Data by Mine 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold production (ounces)
- ------------------------
(a) Round Mountain (50%) 74,422 69,143 204,872 208,230
(b) McCoy/Cove 29,173 50,057 90,863 125,501
(c) Kettle River 24,400 29,363 76,080 88,195
- ---------------------------------------------------------------------------------------------------------------------
Total gold 127,995 148,563 371,815 421,926
=====================================================================================================================
Silver production (ounces)
- --------------------------
(b) McCoy/Cove 1,325,650 1,993,141 5,908,967 6,305,770
- ---------------------------------------------------------------------------------------------------------------------
Total silver 1,325,650 1,993,141 5,908,967 6,305,770
=====================================================================================================================
</TABLE>
Gold production decreased 14% to 127,995 ounces in the third quarter of 1999
compared to 148,563 ounces in the third quarter of 1998. Decreased production
was primarily due to lower mill tonnage, grades and recoveries at McCoy/Cove and
decreased mill tonnage at Kettle River, offset in part by increased mill tonnage
and recoveries at Round Mountain. Silver production decreased to 1.3 million
ounces in the third quarter of 1999 from 2.0 million ounces in the third quarter
of 1998, reflecting lower mill grades and recoveries at McCoy/Cove. For the
full year 1999, the Company's gold production target is between 480,000 and
500,000 ounces and the silver production target is between 7 and 8 million
ounces.
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
Operating Data by Mine 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Cash operating costs (per ounce of gold)
- ---------------------------------------
(a) Round Mountain $ 178 $ 186 $ 197 $ 189
(b) McCoy/Cove 258 201 227 208
(c) Kettle River 257 241 242 241
- ---------------------------------------------------------------------------------------------------------------------
Company average $ 220 $ 202 $ 216 $ 206
=====================================================================================================================
</TABLE>
Cash operating costs were $220 per ounce of gold in the third quarter of 1999,
compared to $202 in the third quarter of 1998. The Company has targeted
consolidated cash operating costs of $220 to $230 per ounce of gold produced for
the full year 1999.
20
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
(a) Round Mountain, Nevada (50% owned)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
OPERATING DATA 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold produced (ounces):
Heap leached - reusable pad (50%) 14,966 18,400 50,923 77,045
Heap leached - dedicated pad (50%) 27,753 36,336 77,186 90,282
Milled (50%) 22,580 12,962 65,662 37,602
Other (50%) 9,123 1,445 11,101 3,301
-------- ------- -------- --------
Total (50%) 74,422 69,143 204,872 208,230
Ore and waste mined (million tons) (100%) 20.4 18.6 58.2 52.1
Mining cost/ton of ore and waste $ 0.69 $ 0.66 $ 0.70 $ 0.65
Heap leaching cost/ton of ore $ 0.70 $ 0.89 $ 0.70 $ 0.70
Milling cost/ton of ore $ 2.70 $ 3.25 $ 3.00 $ 3.42
Production cost per ounce of gold produced:
Direct mining expense $ 206 $ 199 $ 211 $ 190
Deferred stripping cost (7) (7) (13) 3
Inventory movements and other (21) (6) (1) (4)
-------- ------- -------- --------
Cash operating cost 178 186 197 189
Royalties 17 20 17 20
Production taxes -- 2 -- 2
-------- ------- -------- --------
Total cash cost 195 208 214 211
Depreciation 45 44 46 42
Amortization 18 17 18 18
Reclamation and mine closure 9 7 9 7
-------- ------- -------- --------
Total production costs $ 267 $ 276 $ 287 $ 278
-------- ------- -------- --------
Heap leached - reusable pad:
Ore processed (tons/day) (100%) 14,734 16,167 14,691 20,801
Grade (ounce/ton) 0.037 0.032 0.036 0.037
Recovery rate (%) 69.2 61.6 72.4 69.6
Heap leached - dedicated pad:
Ore processed (tons/day) (100%) 137,308 88,297 115,763 108,429
Grade (ounce/ton) 0.011 0.010 0.011 0.010
Recovery rate/(1)/
Milled:
Ore processed (tons/day) (100%) 8,815 8,055 7,934 7,895
Grade (ounce/ton) 0.043 0.044 0.068 0.047
Recovery rate (%) 86.5 79.4 87.4 76.6
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ 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%.
Production in the third quarter of 1999 from the Round Mountain mine, located in
central Nevada (the Company's share, 50%), was almost 8% higher than the same
quarter in 1998. The Company's portion of total gold production rose to 74,422
ounces in the third quarter of 1999 from 69,143 ounces in the third quarter of
1998. The majority of the increase came from improved mill recoveries and in-
process inventory carryovers from the previous quarter. The ore was associated
with a high-grade feeder structure. This ore contributed to the mill producing
22,580 ounces of gold in the third quarter of 1999, compared with 12,962 ounces
in the third
21
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
quarter of 1998. This feeder structure was also the source for over 9,000 ounces
of nuggety gold that was recovered from the site's gravity plant. Cash costs
were down in the third quarter of 1999 compared to the third quarter of 1998 as
a result of the higher production.
Tons of ore and waste mined during the third quarter of 1999 increased by over
9% as compared to the third quarter of 1998. The expansion of the northwestern
portion of the pit is nearly complete, which resulted in the strip ratio
declining as mining reached ore during the third quarter of 1999. Loading of
the dedicated pads increased by 55% in the third quarter of 1999 compared to the
same quarter in 1998, with the majority of this ore being placed on the recently
expanded west dedicated pad. Leaching will begin on this portion of the pad
mid-November with production expected in the first quarter of 2000.
In July 1999 the site produced its five millionth ounce of gold (100%) since the
Company took over as operator of the property in 1985. Exploration efforts are
ongoing and have proven successful at adding to reserves through the years. The
joint venture partners are now in the second year of a multi-year exploration
program directed at identifying and exploring targets within the area of mutual
interest associated with Round Mountain. Several targets have been identified
and exploration drilling continues.
22
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
(b) McCoy/Cove, Nevada (100% owned)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
OPERATING DATA 1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold produced (ounces):
Milled 21,997 36,504 58,693 84,385
Heap leached 7,176 13,553 32,170 41,116
---------- ---------- ---------- ----------
Total gold 29,173 50,057 90,863 125,501
Silver produced (ounces):
Milled 1,250,475 1,907,457 5,683,146 5,988,628
Heap leached 75,175 85,684 225,821 317,142
---------- ---------- ---------- ----------
Total silver 1,325,650 1,993,141 5,908,967 6,305,770
Ore and waste mined (million tons) 8.1 12.2 32.6 30.7
Mining cost/ton of ore and waste $ 0.78 $ 0.68 $ 0.69 $ 0.69
Milling cost/ton of ore $ 6.94 $ 5.74 $ 6.36 $ 5.94
Heap leaching cost/ton of ore $ 2.04 $ 1.90 $ 1.74 $ 1.67
Production cost per ounce of gold produced:
Direct mining expense $ 332 $ 198 $ 246 $ 211
Deferred stripping cost (74) -- (28) (9)
Inventory movements and other -- 3 9 6
---------- ---------- ---------- ----------
Cash operating cost 258 201 227 208
Royalties 2 3 2 3
Production taxes -- 2 -- 2
---------- ---------- ---------- ----------
Total cash cost 260 206 229 213
Depreciation 56 50 51 54
Amortization 26 42 27 40
Reclamation and mine closure 10 9 11 9
---------- ---------- ---------- ----------
Total production costs $ 352 $ 307 $ 318 $ 316
---------- ---------- ---------- ----------
Average gold-to-silver price ratio /(1)/ 49.0:1 55.8:1 52.7:1 51.4:1
Milled:
Ore processed (tons/day) 11,251 12,675 12,144 11,932
Gold grade (ounce/ton) 0.040 0.054 0.035 0.044
Silver grade (ounce/ton) 2.39 2.95 2.65 2.67
Gold recovery rate (%) 52.8 63.0 44.9 57.4
Silver recovery rate (%) 51.3 66.3 59.5 70.3
Heap leached:
Ore processed (tons/day) 9,655 11,255 11,758 11,779
Gold grade (ounce/ton) 0.021 0.021 0.022 0.020
Silver grade (ounce/ton) 0.45 0.23 0.29 0.27
Recovery rates /(2)/
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
/(1)/ 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.
/(2)/ 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 35% for crushed ore and 10% for uncrushed, run-of-mine ore.
23
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
At McCoy/Cove in Nevada, gold production was down by 42% in the third quarter of
1999 compared with the same quarter in 1998. This was the result of fewer tons
and lower grades being processed through the mill as well as fewer tons being
placed under leach. The majority of the ore treated during the third quarter of
1999 was from stockpiles as the site was preparing the next phase of mining and
was moving mostly waste. This phase of mining became accessible after
completion of the remediation of the Cove high wall in June 1999.
During the third quarter of 1999, low-grade ore types, with corresponding lower
recoveries, were milled. The ore types processed reduced throughput by
approximately 11% compared to the third quarter of 1998. These factors, when
combined with fewer tons placed under leach, resulted in cash operating costs
increasing $57 per ounce in the third quarter of 1999 over the same quarter the
previous year. Cost reduction efforts helped offset some of the increase from
lower production. Higher-grade ores, with corresponding higher recoveries, will
be accessed by the end of 1999 and are expected to improve both production and
cash operating costs in 2000.
The Cove East underground will have produced over 23,000 gold-equivalent ounces
when mining of this particular area is completed in the fourth quarter of 1999.
Drifting done for the development of the Cove East deposit has been utilized to
provide access for exploration drilling on the Cove South Deep target.
The Cove South Deep target has two zones of mineralization. The upper zone is
smaller and relatively well defined. Exploration drifting has allowed the
Company to verify ore continuity, obtain bulk samples for metallurgical
evaluation and perform additional underground definition drilling. Economics
for the upper zone appear favorable and warrant development. The Company
anticipates 45,000 gold-equivalent ounces of production from this area starting
in early 2000. Additional work is currently under way to determine the economic
viability of the lower zone of mineralization. Other underground targets have
also been identified and will be explored over the next several months.
24
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
(c) Kettle River, Washington (100% owned)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30 September 30
OPERATING DATA 1999 1998 1999 1998
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Gold produced (ounces) 24,400 29,363 76,080 88,195
Tons of ore mined 155,011 171,932 468,813 537,442
Mining cost/ton of ore $ 24.02 $ 22.30 $ 24.04 $ 21.86
Milling cost/ton of ore $ 11.79 $ 11.76 $ 11.37 $ 10.61
Production cost per ounce of gold produced:
Direct mining expense $ 260 $ 233 $ 248 $ 237
Deferred mine development cost -- -- -- --
Inventory movements and other (3) 8 (6) 4
-------- -------- -------- --------
Cash operating cost 257 241 242 241
Royalties 15 11 15 12
Production taxes 3 1 2 1
-------- -------- -------- --------
Total cash cost 275 253 259 254
Depreciation 77 86 71 73
Amortization 8 5 8 5
Reclamation and mine closure 15 12 15 12
-------- -------- -------- --------
Total production costs $ 375 $ 356 $ 353 $ 344
-------- -------- -------- --------
Milled:
Ore processed (tons/day) 1,688 1,983 1,656 2,021
Tons of ore milled 153,588 180,452 452,173 551,807
Grade (ounce/ton) 0.190 0.193 0.199 0.193
Recovery rate (%) 83.8 84.1 84.6 82.8
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
At Kettle River in the state of Washington, gold production declined to 24,400
ounces in the third quarter of 1999 from 29,363 ounces in the same quarter the
previous year. Mining slows as it continues deeper in the ore bodies and as haul
distances increase. This slower mining rate resulted in fewer tons available
for processing, down almost 15% in the third quarter of 1999 from the same
quarter the previous year. Grades and recoveries remained relatively unchanged
in the third quarter of 1999 compared to the third quarter of 1998. Cost
controls helped the site limit the impact of the lower production on their cost
per ounce, which increased to $257 per ounce in the third quarter of 1999 from
$241 per ounce in the third quarter of 1998.
Additional mineralization is being investigated to the east of the K-2 deposit.
Drilling will be done on this material within the next several months. While
this mineralization appears to be limited in nature, it has the potential to
extend the life of Kettle River allowing additional regional exploration to
continue.
25
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
RECENT DEVELOPMENTS
Lupin
In November 1999, the Company announced plans to reopen the Lupin mine, located
in the Nunavut Territory of Canada. The Lupin mine was placed on care and
maintenance in early 1998 due to falling gold prices and a high cost structure.
A reengineering study, completed late in 1998, identified savings that helped
lower costs. The new life of mine average cash operating costs are now
anticipated to be at or better than $245 per ounce. Based on current reserves of
543,000 ounces and other mineralization of 221,000 ounces, the mine plan
projects production through 2004. Drilling indicates additional mineralization
at depth and confirmation drilling will be done once the site is back in
operation. The Ulu satellite deposit, located approximately 100 miles north of
Lupin, represents the potential for additional mill feed for the site. The
Company expects that the first gold production from Lupin will occur in April
2000, assuming a five-month start-up and restaffing period.
During the first nine months of 1999, the Company incurred $2.1 million in care
and maintenance costs related to Lupin. These costs have been expensed as
incurred.
Development Properties
In 1997, the Company deferred final construction decisions on its two planned
gold mines, the 100% owned Aquarius in Ontario, Canada and the 60% owned
Paredones Amarillos in Mexico.
Paredones Amarillos has a mine plan that requires a gold price of $375 per ounce
to achieve an acceptable rate of return for the joint venture partners. The
Company feels that the project has limited flexibility with regard to
development alternatives. In the third quarter of 1999, the Company signed an
agreement to sell its 60% interest in the Paredones Amarillos project in Mexico
to its joint venture partner. In return, the Company will receive full
ownership of a mill owned by the joint venture, valued at $2.5 million, and a 2%
royalty related to Paredones Amarillos. The joint venture partner will assume
all project liabilities. The Company recognized a loss on the sale of Paredones
Amarillos of $13.8 million in the third quarter of 1999.
Alternatives continue to be evaluated for the development of the Aquarius
project. Different sized operations and types of processing technology are
being reviewed with the aim of lowering capital requirements and operating
costs. The Aquarius mine plan requires a gold price greater than the current
spot level to make it attractive to advance into production. More work is being
done on certain development alternatives for this project.
Development holding costs are expensed as incurred. During the first nine
months of 1999, the Company expensed a total of $0.4 million in holding costs
related to Aquarius and Paredones Amarillos.
Other projects
At the 50% owned Kuranakh project located in the Sakha Republic of the Russian
Federation, progress has slowed in the negotiations with the government
committee established for defining the terms of the production sharing
agreement, which will provide the producer with a fixed life-of-project tax
structure in return for a portion of the ounces being delivered to the Russian
government. Continued delays in this process have led the Company to restrict
spending on the project.
Exploration program
The Company's exploration program focuses on those projects principally located
in North America where the Company already has extensive gold mining
infrastructure. In addition, the Company has a 50% joint venture interest in
the Youga exploration project located in Burkina Faso, West Africa. The Company
and its joint venture partner have agreed to undertake a feasibility study,
anticipated to be complete by the end of 1999, that will include additional
development drilling and metallurgical work. For the first nine months of 1999,
the Company spent $3.4 million on exploration activities. Exploration costs are
expensed as incurred.
26
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
U.S. Mining Law Revision
In recent years, several proposals to change the general mining laws applicable
to operations on U.S. federal lands have been introduced into Congress. In
addition, the Bureau of Land Management of the U.S. Department of the Interior
has commenced a program to revise the federal regulations applicable to
activities on unpatented mining claims and to impose more stringent reclamation
and environmental protection requirements on those activities. 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.
Year 2000 Issue
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. The effects of the Year 2000 issue may be
experienced before, on, or after January 1, 2000, and, if not addressed, the
impact on operations and financial reporting may range from minor errors such as
slower transaction processing and slower financial reporting to significant
systems failure which could affect the Company's ability to conduct normal
business operations, and which may result in the interruption of gold and silver
production.
The Company has assessed the Year 2000 issue and in 1997 began the process of
modifying or upgrading portions of its software to address the issue. The cost
of this remediation was less than $1 million and has been expensed as incurred.
The Company has completed the planned modifications to information technology
and the related user testing. All major financial systems are now expected to
be Year 2000 compliant. The Company has completed modifications to critical
operating systems such as the crusher, mill and truck dispatch systems.
Modifications were made where required to embedded controllers within operating
equipment. Contingency plans have been and continue to be developed for other
equipment, such as the rolling back of clocks for date-sensitive equipment.
Additionally, critical third party suppliers of reagents, power, fuel and other
mine site supplies have been contacted to inquire about uninterrupted delivery
of critical operating parts and materials. Contingency plans have been
developed to address a prolonged interruption of power delivery. The Company
intends to have fully stocked inventories of critical supplies at the end of
1999. A prolonged delay in the delivery of key supplies such as electrical
power, fuel and reagents could result in the interruption of gold and silver
production.
Although the Company expects that its systems are Year 2000 compliant, it cannot
predict the outcome or success of the Year 2000 compliance programs of its
suppliers. The Company also cannot predict whether it will find additional
problems that would result in unplanned upgrades of applications after December
31, 1999. It is not possible to be certain that all aspects of the Year 2000
issue affecting the Company, including those related to the efforts of
suppliers, or other third parties, have been fully resolved.
27
<PAGE>
ECHO BAY MINES LTD.
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
For the Three and Nine Months Ended September 30, 1999
(U.S. dollars)
CAUTIONARY "SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995
With the exception of historical matters, the matters discussed in this report
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, divestitures or decreases 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, impacts of the Year
2000 problem and its effect on critical third party suppliers to the Company's
operations, the ability of the Company to complete remediation plans to its
information technology and operating systems to address the Year 2000 issue,
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 herein or in the Company's filings with the U.S. Securities and
Exchange Commission. Many of these factors are beyond the Company's ability to
predict or control. Readers are cautioned not to put undue reliance on forward-
looking statements.
28
<PAGE>
ECHO BAY MINES LTD.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is 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 Filed on September 30, 1999, related to the
deferral of the October 1999 interest payment on
the capital securities.
29
<PAGE>
ECHO BAY MINES LTD.
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 thereunto duly authorized.
ECHO BAY MINES LTD.
----------------------------------------
(Registrant)
November 3, 1999
- --------------------------
Date
/s/ David A. Ottewell
----------------------------------------
DAVID A. OTTEWELL
Controller and Principal
Accounting Officer
30
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS INCLUDED IN THE ECHO BAY MINES LTD. FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 5,423
<SECURITIES> 1,999
<RECEIVABLES> 3,771
<ALLOWANCES> 0
<INVENTORY> 37,348
<CURRENT-ASSETS> 62,861
<PP&E> 967,878
<DEPRECIATION> 714,404
<TOTAL-ASSETS> 348,614
<CURRENT-LIABILITIES> 85,171
<BONDS> 0
0
0
<COMMON> 713,343
<OTHER-SE> (608,368)
<TOTAL-LIABILITY-AND-EQUITY> 348,614
<SALES> 153,855
<TOTAL-REVENUES> 153,855
<CGS> 103,095
<TOTAL-COSTS> 153,909
<OTHER-EXPENSES> 31,828
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,142
<INCOME-PRETAX> (31,882)
<INCOME-TAX> 143
<INCOME-CONTINUING> (32,025)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (32,025)
<EPS-BASIC> (0.30)
<EPS-DILUTED> (0.30)
</TABLE>
