Thorunn Howatt
Northern News Services

Lupin Mine (June 17/02) - Workers won't be laid off at Lupin Mine even though a three-way $1.27 billion merger is meant to cut costs.

"Employees at all operating sites of the companies will really not be affected," said Echo Bay Mines' chief executive officer Robert Leclerc but added about 30 of Echo Bay's total workforce could be at risk. "Where there may be some casualties may be on a corporate office basis," Leclerc said.

Lupin's owner, Echo Bay Mines combined with Kinross Gold Corp. and TVX Gold Inc. last week to make a new company that will be led under the Kinross name. The mine is about 285 kilometres southeast of Kugluktuk, in Nunavut. It employs about 300 people. Echo Bay has an Inuit hiring policy that will stay in place under the new ownership structure.

Echo Bay spent money drilling and exploring for new, higher-grade veins of gold recently.

"We are executing new development programs at Lupin to open up new stopes and give us access to additional material," said Leclerc. The company also holds an exploration property north of Lupin called Ulu.

Kinross has two exploration properties called George Lake and Goose Lake.

"We are going to want to evaluate whether those can be developed on a basis that would allow us to say we can mine one of these properties and transport the material for processing at Lupin," said Leclerc.

Kinross expects to save about $15 million annually by streamlining the costs of exploration, purchasing and administration of the three companies.

Costs remain high

Lupin's costs have been high recently. It cost Echo Bay $283 to make an ounce of gold in the first quarter of this year compared with $217 per ounce in 2001. "The grade of the material that we are mining right now is not as high as historically we have been experiencing on average," said Leclerc.

Lupin re-opened two years ago after a two-year shutdown. This year it raised about $40 million through the sale of shares. Today Echo Bay has no debt and it has $10 million in the bank. And so far this year, gold is up 18 per cent. Analysts attribute the rise to weakness in the U.S. dollar and Middle-eastern political instability.

"We bought and paid for Lupin. We have bought and paid for all the assets that sit there," said Leclerc.

Echo Bay's history in the North goes back to 1964 when it mined silver from the Port Radium mine in the NWT.

Last year after the company aggressively attacked its $17 million debt, it reported a profit of $5.5 million on revenue of $55.2 million in the first quarter of 2002.

You have to become big to attract the big money -- that's the new policy of the evolved company. The new Kinross will be the world's seventh largest gold producer. The company's cash costs will be below $200 US an ounce -- much lower than Lupin's projected $240 per ounce.

Production will be about two million ounces a year.

Kinross is swapping shares worth $637 million for TVX and $641 million for Echo Bay.

In a separate deal, TVX will pay $180 million to buy out Newmont's 49.9 per cent stake in a TVX Newmont Americas joint venture.

Leclerc hopes the deal will be finalized in December.