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ECHO BAY MINES LTD. INDEX

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

Commission File Number 1-8542

ECHO BAY MINES LTD.
(Exact name of registrant as specified in its charter)

Registrant's telephone number, including area code (780) 496-9002

        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 ý    No o

ECHO BAY MINES LTD.
INDEX

CAUTIONARY "SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

        "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: The statements herein that are not historical facts are forward-looking statements. They involve risks and uncertainties that could cause actual results to differ materially from targeted results. These risks and uncertainties include, but are not limited to, the possibility that the combination of Kinross Gold Corporation, TVX Gold Inc. and Echo Bay Mines Ltd. (the "Company") may not be completed; future changes in gold prices (including derivatives) and/or production costs which could render projects uneconomic; ability to access financing; availability of hedging opportunities; differences in ore grades, recovery rates and tons mined from those expected; changes in mining and milling/heap leaching rates from currently planned rates; the results of future exploration activities and new exploration opportunities; changes in project parameters as plans continue to be refined; increasingly stringent reclamation requirements imposed by regulatory authorities; and other factors detailed in the Company's filings with the U.S. Securities and Exchange Commission.

        On September 17, 2002, the Company filed with the Commission a preliminary proxy statement regarding the proposed business combination transaction referred to in the following information. In addition, the Company will prepare and file with the Commission a definitive proxy statement and other documents regarding the proposed transaction. Investors and security holders are urged to read the definitive proxy statement, when it becomes available, because it will contain important information. The definitive proxy statement will be sent to shareholders of the Company to seek their approval of the proposed transaction. Investors and security holders may obtain a free copy of the definitive proxy statement, when it is available, and other documents filed with the Commission by the Company at the Commission's website at www.sec.gov. The definitive proxy statement, when it is available, and these other documents may also be obtained for free from the Company by directing a request to Lois-Ann L. Brodrick, Vice President and Secretary, 780-496-9002, investor_relations@echobaymines.ca.

Certain Information Concerning Participants

        The names, affiliations and interests of participants in the solicitation of proxies of the Company's shareholders to approve the combination is included in the preliminary proxy statement.

PART I—FINANCIAL INFORMATION

ITEM 1. CONDENSED FINANCIAL STATEMENTS (Unaudited)

ECHO BAY MINES LTD.

CONSOLIDATED BALANCE SHEETS

See accompanying notes to interim consolidated financial statements.

ECHO BAY MINES LTD.

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF DEFICIT

See accompanying notes to interim consolidated financial statements.

ECHO BAY MINES LTD.

CONSOLIDATED STATEMENTS OF CASH FLOW

See accompanying notes to interim consolidated financial statements.

ECHO BAY MINES LTD.

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2002

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 sheets, consolidated statements of operations, consolidated statements of deficit and consolidated statements 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, 2002 and December 31, 2001 and the consolidated results of operations and cash flow for the three and nine months ended September 30, 2002 and 2001. These financial statements do not include all disclosures required by generally accepted accounting principles for annual financial statements. For further information, refer to the financial statements and related footnotes included in the Company's annual report on Form 10-K for the year ended December 31, 2001. Except as otherwise noted in this report, the accounting policies described in the annual report have been applied in the preparation of these financial statements.

        On June 10, 2002, the Company, Kinross Gold Corporation ("Kinross") and TVX Gold Inc. ("TVX") announced that they had entered into an agreement providing for the proposed combination of the companies. In a concurrent transaction, TVX agreed to acquire from Newmont Mining Corporation ("Newmont") the interest in the TVX Newmont Americas joint venture that it does not already own. The combination of the companies is conditional upon the completion of this purchase.

        Shareholders of Echo Bay (other than Kinross) would receive 0.52 of a Kinross common share for each Echo Bay common share. At a Kinross special meeting, the shareholders of Kinross are expected to consider a one-for-three share consolidation which, if approved, would result in an exchange ratio change from 0.52 to 0.1733 of a Kinross common share for each Echo Bay common share. The Kinross share consolidation would not affect the percentage ownership interest of the Echo Bay shareholders in Kinross.

        As a result of the U.S. Securities and Exchange Commission's ongoing review of the preliminary proxy statement filed with the Commission on September 17, 2002, the Company will not be able to finalize and mail the proxy statement in time for the Company to hold its special meeting for the purpose of considering the combination in advance of November 30, 2002, the termination date specified in the combination agreement. The parties are discussing amending the combination agreement to extend the termination date, with a view to holding special meetings late in the fourth quarter 2002 or early in 2003.

        On June 9, 2002, Echo Bay Exploration Inc. and Echo Bay Minerals Company, two subsidiaries of the Company, entered into an asset purchase agreement with Newmont USA Limited ("Newmont USA"), a subsidiary of Newmont, providing for the conveyance of the McCoy/Cove complex. The agreement replaces a letter agreement dated February 13, 2002 related to the conveyance of the McCoy/Cove complex which called for a payment to the seller of $6 million and the assumption by Newmont of all reclamation and closure obligations. Under the February 13, 2002 letter agreement, Newmont had no obligation to complete the transaction. Newmont indicated it was willing to proceed with the conveyance of the McCoy/Cove complex only if the Kinross Combination was completed and the cash payment was eliminated. Accordingly, a new agreement was reached expressly containing these two conditions. The closing of the transaction is subject to, among other conditions, the completion of the Kinross Combination. In consideration of the conveyance of such assets, Newmont USA has agreed to assume all liabilities and obligations relating to the reclamation or remediation required for the McCoy/Cove complex. A gain is expected on the conveyance of the McCoy/Cove complex. Pending completion of the transaction, the Company will continue to operate McCoy/Cove for its own account. Mining and processing activities at the McCoy/Cove complex were completed on March 31, 2002.

        In May 2002, the Company sold a total of 39,100,000 units at a price of $0.70 per unit for aggregate gross proceeds of approximately $27.4 million. Each unit consisted of one common share and one share purchase warrant. The common shares and the warrants comprising the units separated upon closing and trade separately on the Toronto Stock Exchange and on the American Stock Exchange. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.90 at any time prior to November 14, 2003.

        On April 3, 2002 the Company issued 361,561,230 common shares in exchange for the entire capital securities debt obligation of $100 million in principal amount plus accrued and unpaid interest (notes 7 and 8).

        Certain of the comparative figures have been reclassified to conform to the current year's presentation.

2. INVENTORIES

3. PROPERTY, PLANT AND EQUIPMENT

4. OTHER LONG-TERM ASSETS

5. DEBT AND OTHER FINANCINGS

6. DEFERRED INCOME

7. CAPITAL STOCK

Capital securities retirement

        On April 3, 2002 the Company issued 361,561,230 common shares, representing approximately 72% of the outstanding common shares after giving effect to such issuance, in exchange for all of its $100 million aggregate principal amount of 11% junior subordinated debentures due 2027, plus accrued and unpaid interest thereon (the "capital securities").

        Following this issuance of common shares, and as at April 3, 2002, the principal holders of the Company's common shares and their respective ownership positions in the Company were Newmont Mining Corporation of Canada Limited ("Newmont Canada") (48.8%) and Kinross (11.4%). In connection with the completion of the capital securities exchange, three directors of the Company resigned from the board of directors. Two of the vacancies created by these resignations were filled by executive officers of Newmont Canada.

        As a result of eliminating the capital securities, the Company recorded an increase to common shares of $303.7 million, based on their quoted market value at the date of issue. The quoted market value of the common shares issued exceeded the book value of the capital securities by $134.8 million. This difference, along with transaction costs of $3.0 million, were recorded proportionately between interest expense ($5.5 million) and deficit ($132.3 million) in the second quarter of 2002 based on the debt and equity classifications of the capital securities.

Units offering

        In May 2002, the Company sold a total of 39,100,000 units at a price of $0.70 per unit for aggregate gross proceeds of approximately $27.4 million. Each unit consisted of one common share and one share purchase warrant. The common shares and the warrants comprising the units separated upon closing and trade separately on the Toronto Stock Exchange and the American Stock Exchange. Each warrant entitles the holder to purchase one common share of the Company at a price of $0.90 at any time prior to November 14, 2003.

8. CAPITAL SECURITIES

        On April 3, 2002 the Company issued 361,561,230 common shares in exchange for all of its capital securities (note 7). Prior to the exchange, the present value of the capital securities' principal amount was classified as debt (note 5) and the present value of the future interest payments plus deferred accrued interest was classified within a separate component of shareholders' equity. Interest on the debt portion of the capital securities was classified as interest expense on the consolidated statement of earnings and interest on the equity portion of the capital securities was charged directly to deficit on the consolidated balance sheet. The loss on conversion of the capital securities was charged proportionately between earnings and deficit (note 7). For purposes of per share calculations, the equity portions of interest and the loss on conversion decreases the earnings attributable to common shareholders. See note 10 for a discussion of differences in treatment of the capital securities under generally accepted accounting principles in the United States.

9. INTEREST AND OTHER

10. 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, 2001.

Capital securities retirement

        In accordance with Canadian GAAP, the loss on the retirement of the capital securities (note 7) was recorded proportionately between interest expense ($5.5 million) and deficit ($132.3 million) in the second quarter of 2002 based on the debt and equity classifications of the capital securities. Under U.S. GAAP, the entire loss of $137.8 million would be recorded as an extraordinary item.

        The effects of the GAAP differences on the consolidated statement of operations would have been as follows.

        The effects of the GAAP differences on the consolidated balance sheet would have been as follows.

(1)

The adjustment to common shares and deficit relates to the 1996 acquisition and 1997 write-off of the Company's investment in Santa Elina.

        The following statement of comprehensive income (loss) would be disclosed in accordance with U.S. GAAP.

        Additionally, under U.S. GAAP, the equity section of the balance sheet would present a subtotal for accumulated other comprehensive loss, as follows.

Recent accounting pronouncements

        In 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 143, Accounting for Asset Retirement Obligations, which is effective for fiscal years beginning after June 15, 2002. The Statement requires obligations associated with the retirement of long-lived assets be recognized at their fair value at the time that the obligations are incurred. Upon initial recognition of a liability, that cost should be capitalized as part of the related long-lived assets and allocated to expense over the useful life of the asset. The Company will adopt Statement 143 on January 1, 2003. The impact of adoption of Statement 143 on the Company's financial position or results of operations has not yet been determined.

11. 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 third quarter of 2002, the Company had three operating mines: Round Mountain in Nevada, USA; Kettle River in Washington, USA; and Lupin in the Nunavut Territory of Canada. All of the Company's mines are 100% owned except for Round Mountain, which is 50% owned. The Company operated a fourth mine, McCoy/Cove in Nevada, USA, until March 31, 2002 at which date mining and processing activities were completed.

        The Company's management generally monitors revenue on a consolidated basis. Information regarding the Company's consolidated revenue is provided below.

        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.

12. HEDGING ACTIVITIES AND COMMITMENTS

Gold commitments

        At September 30, 2002, the Company had commitments to deliver 15,000 ounces of gold in October 2002 at a price of $293 per ounce. The gold ounces were delivered as scheduled. The Company's option position at September 30, 2002 included 75,000 ounces of gold call options in October 2002 at an average strike price of $294 per ounce. The Company delivered 15,000 ounces into gold call options at $302 per ounce and settled the remaining 60,000 gold call options at a cost of $1.1 million in October 2002.

Currency position

        At September 30, 2002, the Company had an obligation under foreign currency exchange contracts to purchase C$12.3 million during the remainder of 2002 at an exchange rate of C$1.60 to U.S.$1.00. On October 7, 2002, the Company entered into foreign currency contracts to purchase C$45.1 million through June 2003 at an exchange rate of C$1.61 to U.S.$1.00.

        Shown below are the carrying amounts and estimated fair values of the Company's hedging instruments at September 30, 2002 and December 31, 2001.

        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.

13. OTHER COMMITMENTS AND CONTINGENCIES

Summa

        In September 1992, Summa Corporation commenced a lawsuit against two indirect subsidiaries of the Company, Echo Bay Exploration Inc. and Echo Bay Management Corporation (together the "Subsidiaries") alleging improper deductions in the calculation of royalties payable over several years of production at McCoy/Cove and another mine, which is no longer in operation. The matter was tried in the Nevada State Court in April 1997, with Summa claiming more than $13 million in damages, and, in September 1997, judgment was rendered for the Subsidiaries. The decision was appealed by Summa to the Supreme Court of Nevada, which in April 2000 reversed the decision of the trial court and remanded the case back to the trial court for "a calculation of the appropriate [royalties] in a manner not inconsistent with this order." The case was decided by a panel comprised of three of the seven Justices of the Supreme Court of Nevada and the Subsidiaries petitioned that panel for a rehearing. The petition was denied by the three member panel on May 15, 2000 and remanded to the lower court for consideration of other defences and arguments put forth by the Subsidiaries. The Subsidiaries filed a petition for a hearing before the full Supreme Court and on December 22, 2000, the Court recalled its previous decision. Both the Subsidiaries and their counsel believe that grounds exist to modify or reverse the decision. The Company has $1.5 million accrued related to this litigation. If the appellate reversal of the trial decision is maintained and the trial court, on remand, were to dismiss all of the Subsidiaries' defences, the royalty calculation at McCoy/Cove would change and additional royalties would be payable. Neither the Company, nor counsel to the Subsidiaries believe it is possible to quantify the precise liability pursuant to a revised royalty calculation.

Handy & Harman

        On March 29, 2000 Handy & Harman Refining Group, Inc., which operated a facility used by the Company for the refinement of doré bars, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. The Company has a claim for gold and silver accounts at this refining facility with an estimated market value of approximately $2.4 million. Further, in March 2002, the liquidating trustee for Handy & Harman commenced a series of adversary proceedings against numerous creditors, including two Company subsidiaries, alleging that certain creditors received preferential payments in metal or otherwise. The Company intends to oppose these proceedings vigorously. The success or failure of the liquidating trustee in prosecuting the claims may have an impact on the ultimate distribution of funds to creditors. The outcome of these proceedings is uncertain at this time.

Security for reclamation

        Certain of the Company's subsidiaries have provided corporate guarantees and other forms of security to regulatory authorities in connection with future reclamation activities. Early in 2001, regulators in Nevada called upon two of the Company's subsidiaries to provide other security to replace corporate guarantees that had been given in respect of the Round Mountain and McCoy/Cove operations totaling approximately $33 million. The Company disagrees with the regulators' position and believes that the subsidiaries qualify under the criteria set out for corporate guarantees and will oppose the regulatory decision. Although the outcome cannot be predicted, the Company and its counsel believe that the Company will prevail.

ECHO BAY MINES LTD.

MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS

For the Three Months and Nine Months Ended September 30, 2002

(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 prices. Market prices of gold are determined by factors beyond the Company's control. The Company's operations continue to be materially affected by the price of gold, which averaged $271 per ounce in 2001 and $306 per ounce during the first nine months of 2002.

        The Company continually monitors its hedging policy in light of forecasted production, operating and capital expenditures, exploration and development requirements and factors affecting volatility of gold prices such as actual and prospective interest and gold lease rate performance. The principal hedging tools used are forward sales contracts and options. Forward sales contracts obligate the Company to sell gold at a specific price on a future date. Call options give the holder the right, but not the obligation, to buy gold on a specific future date at a specific price. These tools reduce the risk associated with gold price declines, but also could limit the Company's participation in increases of gold prices.

        The Company's hedge position as of September 30, 2002 is shown in note 12 to the interim consolidated financial statements. The Company fulfilled its gold forward sales obligations in October 2002 by delivering 15,000 ounces of gold at $293 per ounce. The Company also delivered 15,000 ounces into gold call options at $302 per ounce and settled the remaining 60,000 gold call options at a cost of $1.1 million in October 2002.

        The Company engages in forward currency exchange contracts to reduce the impact on the Lupin mine's operating costs caused by fluctuations in the exchange rate of U.S. dollars to Canadian dollars. The Company has obligations to purchase C$12.3 million for the remainder of 2002 at an exchange rate of C$1.60 to US$1.00. In October 2002, the Company contracted to purchase C$45.1 million in 2003 at an exchange rate of C$1.61 to US$1.00.

        On June 10, 2002, the Company, Kinross and TVX announced that they had entered into an agreement providing for the proposed combination of the companies. In a concurrent transaction, TVX agreed to acquire from Newmont the interest in the TVX Newmont Americas joint venture that it does not already own. The combination of the companies is conditional upon the completion of this purchase.

        Shareholders of Echo Bay (other than Kinross) would receive 0.52 of a Kinross common share for each Echo Bay common share. At a Kinross special meeting, the shareholders of Kinross are expected to consider a one-for-three share consolidation which, if approved, would result in an exchange ratio change from 0.52 to 0.1733 of a Kinross common share for each Echo Bay common share. The Kinross share consolidation would not affect the percentage ownership interest of the Echo Bay shareholders in Kinross.

        As a result of the U.S. Securities and Exchange Commission's ongoing review of the preliminary proxy statement filed with the Commission on September 17, 2002, the Company will not be able to finalize and mail the proxy statement in time for the Company to hold its special meeting for the purpose of considering the combination in advance of November 30, 2002, the termination date specified in the combination agreement. The parties are discussing amending the combination agreement to extend the termination date, with a view to holding special meetings late in the fourth quarter 2002 or early in 2003.

        On June 9, 2002, Echo Bay Exploration Inc. and Echo Bay Minerals Company, two subsidiaries of the Company, entered into an asset purchase agreement with Newmont USA, a subsidiary of Newmont, providing for the conveyance of the McCoy/Cove complex. The agreement replaces a letter agreement dated February 13, 2002 related to the conveyance of the McCoy/Cove complex which called for a payment to the seller of $6 million and the assumption by Newmont of all reclamation and closure obligations. Under the February 13, 2002 letter agreement, Newmont had no obligation to complete the transaction. Newmont indicated it was willing to proceed with the conveyance of the McCoy/Cove complex only if the Kinross Combination was completed and the cash payment was eliminated. Accordingly, a new agreement was reached expressly containing these two conditions. The closing of the transaction is subject to, among other conditions, the completion of the Kinross Combination. In consideration of the conveyance of such assets, Newmont USA has agreed to assume all liabilities and obligations relating to the reclamation or remediation required for the McCoy/Cove complex. A gain is expected on the conveyance of the McCoy/Cove complex. Pending completion of the transaction, the Company will continue to operate McCoy/Cove for its own account. Mining and processing activities at the McCoy/Cove complex were completed on March 31, 2002.

LIQUIDITY AND CAPITAL RESOURCES

        Net cash flow provided by operating activities was $14.9 million for the first nine months of 2002 compared to $27.2 million for the first nine months of 2001. The 2002 results compared to 2001 reflect the decrease in production.

        Net cash used in investing activities was $11.9 million in the first nine months of 2002, primarily related to investments in mining properties, plant and equipment and a $4.0 million reclamation deposit to support letters of credit and bonds issued by third parties.

        Net cash provided from financing activities was $5.5 million in the first nine months of 2002 compared to net cash used for scheduled debt repayments of $9.5 million for the first nine months of 2001. In May 2002, the Company sold a total of 39,100,000 units at a price of $0.70 per unit for net proceeds of $25.5 million. Each unit consisted of one common share and one share purchase warrant. The Company repaid the remaining $17.0 million on its revolving credit facility and incurred $3.0 in transaction costs related to the issuance of common shares in exchange for its capital securities obligation. The Company is now debt free.

        On April 3, 2002 the Company issued 361,561,230 common shares in exchange for the entire capital securities debt obligation of $100 million in principal amount plus accrued and unpaid interest (See notes 7 and 8 to the interim consolidated financial statements).

        At September 30, 2002, the Company had $20.9 million in cash and cash equivalents and $2.2 million in short-term investments recorded at the lower of cost or fair value. The fair value of the short-term investments at September 30, 2002 was $16.3 million.

        The Company fulfilled its gold forward sales obligations in October 2002 by delivering 15,000 ounces of gold at $293 per ounce. The Company also delivered 15,000 ounces into gold call options at $302 per ounce and settled the remaining 60,000 gold call options at a cost of $1.1 million in October 2002. The Company's production is now completely unhedged.

        The Company expects to incur approximately $13.0 million for capital expenditures in 2002 funded by its operating cash flow, of which $10.8 million in expenditures have been incurred in the first nine months of 2002. The Company will rely on its operating cash flow to fund the remainder of its planned 2002 capital expenditures. The expenditures primarily relate to mining equipment at Round Mountain and Lupin. The Company monitors its discretionary spending in view of the cost structure of its operating mines and the availability of additional credit, and will modify or reduce its discretionary spending where necessary.

        See note 13 to the interim consolidated financial statements.

FINANCIAL REVIEW

Three month results

        The Company reported net income of $3.7 million for the third quarter of 2002 compared with a net loss of $0.2 million in the third quarter of 2001. On a per share basis, net earnings were $0.01 for the quarter compared to a net loss of $0.03 in 2001. The loss per share in 2001 included $4.1 million representing the equity portion of the interest on the Company's capital securities. The 2002 results, compared to 2001, reflect 15% lower gold sales volume and no silver sales due to the completion of operations at McCoy/Cove. These factors were partially offset by lower operating costs, depreciation and amortization reflecting the reduction in ounces sold and a 21% higher average realized gold price. Deferred gold revenue recognized in the third quarter of 2002 was $6.7 million compared to $3.2 million in 2001.

        Gold production decreased 19% to 139,088 ounces in the third quarter of 2002 compared to 171,533 ounces in the third quarter of 2001. The decrease in production resulted from lower tonnage at Lupin and Kettle River and the completion of production from McCoy/Cove, which has been in full reclamation mode since March 31, 2002. There was no silver production in the third quarter of 2002 compared to 1.7 million ounces from McCoy/Cove in the third quarter of 2001.

Nine month results

        The Company reported net earnings of $7.7 million in the first nine months of 2002, compared with net earnings of $3.2 million in the same period in 2001. On a per share basis, the loss was $0.33 (which includes a loss of $132.3 million on the retirement of capital securities in the second quarter as well as capital securities interest of $4.6 million) for the first nine months of 2002 compared with a loss of $0.07 in the same period of 2001 (which included $12.7 million representing the equity portion of interest on the capital securities). The 2002 results compared to 2001 reflect 20% lower gold sales volume, 63% lower silver sales volume and a one time charge of $5.5 million relating to the exchange of the Company's capital securities for common shares. These factors were partially offset by lower operating costs, depreciation and amortization reflecting the reduction in ounces sold and a 19% higher average realized gold price. Deferred revenue recognized in the first nine months of 2002 was $23.0 million compared to $10.6 million in the same period of 2001.

        Gold production decreased 20% to 418,006 ounces in the first nine months of 2002 compared to 521,287 ounces in the first nine months of 2001. The lower production resulted from mining lower grades and fewer tons at Lupin and Kettle River and completion of production at McCoy/Cove in March 2002. Silver production from McCoy/Cove was 1.5 million ounces, 71% lower than the 5.0 million ounces produced in 2001.

        The term "ounce" as used in this Form 10-Q means "troy ounce".

Revenue

        Statistics for gold and silver ounces sold and other revenue data are set out below.

(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.