<PAGE>

================================================================================
                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C. 20549
                                   FORM 10-K

[X]       ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934

                  For the fiscal year ended December 31, 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
                                                          --------------

          Securities registered pursuant to Section 12(b) of the Act:

                                                   Name of each exchange
          Title of each class                       on which registered
          -------------------                       -------------------
      Common shares, no par value                 American Stock Exchange

                             ____________________
       Securities registered pursuant to Section 12(g) of the Act: None
                                                                   ----

      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
                                -----    -----

      Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]

<TABLE>
<S>                                                                          <C>
Aggregate market value of the voting securities held by non-affiliates
of the registrant at February 16, 2000.....................................  U.S.$210,910,718
                                                                                 ------------

Number of common shares outstanding as of February 16, 2000................  140,607,145
                                                                             -----------
=============================================================================================
</TABLE>
<PAGE>

                               TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                                   Page
                                                                                                   ----
<S>                                                                                                <C>
                                               PART 1

ITEMS 1 AND 2-BUSINESS AND PROPERTIES...........................................................   1
   INTRODUCTION.................................................................................   1
   OPERATIONS SUMMARY...........................................................................   2
    Gold and Silver Production..................................................................   2
    Production Costs............................................................................   2
    Revenue.....................................................................................   3
   RESERVES.....................................................................................   4
    Change in Proven and Probable Reserves......................................................   5
   OTHER MINERALIZATION.........................................................................   6
   CAUTIONARY "SAFE HARBOR" STATEMENT UNDER THE UNITED STATES PRIVATE
    SECURITIES LITIGATION REFORM ACT OF 1995....................................................   7
   ROUND MOUNTAIN...............................................................................   8
    Geology and Ore Reserves....................................................................   9
    Mining and Processing.......................................................................   9
   MCCOY/COVE...................................................................................  11
    Geology and Ore Reserves....................................................................  12
    Mining and Processing.......................................................................  13
   KETTLE RIVER.................................................................................  14
    Geology and Ore Reserves....................................................................  15
    Mining and Processing.......................................................................  15
   LUPIN........................................................................................  16
    Geology and Ore Reserves....................................................................  17
    Mining and Processing.......................................................................  18
    Supplies, Utilities and Transportation......................................................  18
    Water Supply and Waste Disposal.............................................................  19
   DEVELOPMENT PROGRAM..........................................................................  20
    Aquarius....................................................................................  20
   OTHER PROJECTS...............................................................................  21
    Paredones Amarillos.........................................................................  21
    Kuranakh....................................................................................  21
   EXPLORATION..................................................................................  22
   ALASKA-JUNEAU................................................................................  22
   SUNNYSIDE....................................................................................  22
   OTHER........................................................................................  22
    Precious Metal Sales and Hedging Activities.................................................  22
    Governmental and Environmental Regulation...................................................  23
    Employees...................................................................................  27
    Executive Officers of the Registrant........................................................  27
    Mining Risks and Insurance..................................................................  27
    Supplies, Utilities and Transportation......................................................  28
    Waste Disposal..............................................................................  28
    Royalties...................................................................................  28
    History of the Company......................................................................  28
   RISK FACTORS.................................................................................  30
    Recent Losses...............................................................................  30
    Mine Development Risks......................................................................  30
    Exploration Risks...........................................................................  30
    Liquidity and Capital Resources.............................................................  31
    Gold and Silver Prices......................................................................  31
</TABLE>

                                       i
<PAGE>

<TABLE>
<S>                                                                                              <C>
    Estimation of Asset Carrying Values........................................................  32
    Uncertainty of Reserve and Other Mineralization Estimates..................................  32
    Mining and Processing......................................................................  33
    Mining Risks and Insurance.................................................................  33
    Governmental Regulation....................................................................  34
    Risk of International Operations...........................................................  34
    Title to Properties........................................................................  35
    Inflation and Currency Risks...............................................................  35
   GLOSSARY....................................................................................  36
   GOLD PRICES.................................................................................  40
   SILVER PRICES...............................................................................  40
   EXCHANGE RATES..............................................................................  40
   CONVERSION TABLE............................................................................  40
   MINE PROCESSING.............................................................................  41

ITEM 3-LEGAL PROCEEDINGS.......................................................................  44
   SUMMA.......................................................................................  44
   COLORADO SCHOOL OF MINES....................................................................  44
   OTHER.......................................................................................  44

ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.....................................  44

                                    PART II

ITEM 5-MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS...............  45
   MARKET INFORMATION..........................................................................  45
   DIVIDENDS...................................................................................  45
   CERTAIN TAX MATTERS.........................................................................  46
    United States Federal Income Tax Considerations............................................  46
    Canadian Federal Income Tax Considerations.................................................  47

ITEM 6-SELECTED FINANCIAL DATA.................................................................  48

ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...  50
   SUMMARY.....................................................................................  50
   RESULTS OF OPERATIONS.......................................................................  50
    Revenue....................................................................................  50
    Operating Costs............................................................................  51
    Royalties..................................................................................  51
    Depreciation and Amortization..............................................................  51
    Reclamation and Mine Closure...............................................................  51
    General and Administrative.................................................................  51
    Exploration and Development................................................................  51
    Loss (Gain) on Sale of Mining and Other Properties.........................................  52
    Provision for Impaired Assets and Other Charges............................................  52
   LIQUIDITY AND CAPITAL RESOURCES.............................................................  52
   COMMITMENTS AND CONTINGENCIES...............................................................  53
    Hedging Activities.........................................................................  53
    Other......................................................................................  54
</TABLE>

                                      ii
<PAGE>

<TABLE>
<S>                                                                                             <C>
   YEAR 2000..................................................................................  54

ITEM 7A-QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK............................  55

ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................................  56
   INDEX TO FINANCIAL STATEMENTS..............................................................  56
QUARTERLY FINANCIAL HIGHLIGHTS................................................................  88

ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE...  88

                                   PART III

ITEM 10-DIRECTORS OF THE REGISTRANT...........................................................  88

ITEM 11-EXECUTIVE COMPENSATION................................................................  88

ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................  88

ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS........................................  88

                                    PART IV

ITEM 14-EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K......................  89

SIGNATURES....................................................................................  91
</TABLE>

                                      iii
<PAGE>

                                    PART I

                     ITEMS 1 AND 2-BUSINESS AND PROPERTIES

INTRODUCTION

In this report, the "Company" refers to Echo Bay Mines Ltd. and its subsidiaries
unless the context specifies otherwise.  The Company's financial statements are
presented in accordance with generally accepted accounting principles in Canada.
In this report, all dollar amounts are expressed in U.S. dollars unless
specified otherwise.

The Company mines, processes and explores for gold.  The Company also produces a
significant amount of silver at its McCoy/Cove mine in Nevada.  In 1999, the
Company had three operating mines in the United States: Round Mountain in
Nevada; McCoy/Cove in Nevada; and Kettle River in Washington.  All are 100%
owned except for Round Mountain, which is 50% owned.

The Company's operations in 1999 were, and will continue to be, materially
affected by the price of gold, which averaged $388 per ounce in 1996, $332 per
ounce in 1997, and $294 per ounce in 1998.  In 1999, the gold price averaged
$279 per ounce and reached a 20-year low of $253 per ounce in July 1999.  At
December 31, 1999, the gold price had recovered to $290 per ounce.

In January 1998, the Company temporarily suspended operations at its 100%-owned
Lupin mine in the Nunavut Territory, Canada. In the fourth quarter of 1999, the
Company announced plans to reopen Lupin. Lupin production is expected to
recommence in April 2000. See "Lupin."

In 1997, in view of the drop in the gold price, the Company deferred a final
construction decision on its planned Aquarius gold mine in Canada.  See
"Development Program-Aquarius".  In the third quarter of 1999, the Company
agreed to sell its investment in the Paredones Amarillos project to its joint
venture partner.  A final construction decision had been deferred on Paredones
Amarillos in 1997.  See "Other Projects-Paredones Amarillos".

The Company's exploration efforts focus principally on projects located in North
America where the Company already has an extensive gold mining infrastructure.

In 1999, the Company produced a total of 499,836 ounces of gold at an average
cash operating cost of $215 per ounce.  1999 silver production was 8,430,072
ounces.  In 1999, the Company reported a net loss of $37.3 million on revenues
of $210.4 million.  At December 31, 1999, the Company had 5.3 million ounces of
gold reserves and 28.2 million ounces of silver reserves.

In 2000, the Company expects to produce from 660,000 to 700,000 ounces of gold
at an average cash operating cost of $200 to $210 per ounce and between 9 and 10
million ounces of silver.  For a general identification of risk factors involved
in the Company's business, see "Cautionary `Safe Harbor' Statement under the
United States Private Litigation Reform Act of 1995" and "Risk Factors."

                                       1
<PAGE>

OPERATIONS SUMMARY

<TABLE>
<CAPTION>
Gold and Silver Production
--------------------------
Gold Production (ounces)                                                   1999                1998                1997
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                 <C>                <C>
Round Mountain (50%)                                                    270,904             255,252             238,840
McCoy/Cove                                                              124,536             167,494             187,034
Kettle River                                                            104,396             113,692             129,866
Lupin                                                                        --                  --             165,335
-----------------------------------------------------------------------------------------------------------------------
Total gold                                                              499,836             536,438             721,075
=======================================================================================================================
Percentage decrease from prior year                                        (6.8%)             (25.6%)              (6.2%)
=======================================================================================================================

Silver Production (ounces)                                                 1999                1998                1997
-----------------------------------------------------------------------------------------------------------------------
Total silver-all from McCoy/Cove                                      8,430,072           9,412,823          11,021,708
=======================================================================================================================
Percentage increase (decrease) from prior year                            (10.4%)             (14.6%)              55.2%
=======================================================================================================================

Production Costs
----------------
Production Costs per Ounce of Gold Produced                                1999                1998                1997
-----------------------------------------------------------------------------------------------------------------------
  Direct mining expense                                                 $   237            $    209             $   251
  Deferred stripping and mine development costs                             (23)                 (1)                 (3)
  Inventory movements and other                                               1                  --                   1
-----------------------------------------------------------------------------------------------------------------------
Cash operating costs                                                        215                 208                 249
  Royalties                                                                  11                  11                   9
  Production taxes                                                           --                   2                   1
-----------------------------------------------------------------------------------------------------------------------
Total cash costs                                                            226                 221                 259
  Depreciation                                                               58                  62                  58
  Amortization                                                               20                  25                  32
  Reclamation and mine closure                                               11                   9                  10
-----------------------------------------------------------------------------------------------------------------------
Total production costs                                                  $   315            $    317             $   359
=======================================================================================================================
Percentage decrease from prior year                                        (0.6%)             (11.7%)              (3.8%)
=======================================================================================================================

Cash Operating Costs per Ounce of Gold Produced                            1999                1998                1997
-----------------------------------------------------------------------------------------------------------------------
Round Mountain                                                            $ 200            $    198             $   207
McCoy/Cove                                                                  221                 203                 271
Kettle River                                                                238                 244                 227
Lupin                                                                        --                  --                 284
-----------------------------------------------------------------------------------------------------------------------
Company consolidated weighted average                                     $ 215            $    208             $   249
=======================================================================================================================
Percentage increase (decrease) from prior year                              3.4%              (16.5%)              (2.0%)
=======================================================================================================================
</TABLE>

In 1999, the average cash operating cost per ounce was $215 compared with $208
in 1998 and $249 in 1997.  Cash operating costs per ounce were higher in 1999
compared to 1998, reflecting lower production at McCoy/Cove partially offset by
savings in mining and milling costs at McCoy/Cove and Kettle River.  Cash
operating costs per ounce were lower in 1998 compared to 1997, reflecting the
third quarter 1997 write-down of deferred mining balances, cost savings at
McCoy/Cove, lower costs due to higher production and due to the 1997 mine plan
change at Round Mountain, and the absence of higher cost Lupin production.  The
Company's consolidated cash operating cost target is $200 to $210 per ounce of
gold produced in 2000.

Operating costs include mining and processing costs for gold and silver sold
during the year. The most significant of these costs are labor, consumable
materials, repairs of machinery and equipment, fuel, utilities and environmental
compliance.  The cost of transporting personnel and freight to the Lupin mine is
also a significant cost for that operation.

                                       2
<PAGE>

The reconciliation of cash operating costs per ounce to the financial statements
for the last three years is provided below.

<TABLE>
<CAPTION>
Reconciliation of Cash Operating
Costs per Ounce to Financial Statements
Thousands of U.S. dollars, except per ounce amounts                         1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>                 <C>
Operating costs per financial statements                              $  139,816           $  148,769          $   213,120
Change in finished goods inventory and other                               2,381               (1,704)              10,956
Co-product cost of silver produced                                       (34,732)             (35,486)             (44,528)
--------------------------------------------------------------------------------------------------------------------------
Cash operating costs                                                  $  107,465           $  111,579          $   179,548
==========================================================================================================================
Gold ounces produced                                                     499,836              536,438              721,075
==========================================================================================================================
Cash operating costs per ounce                                        $      215           $      208          $       249
==========================================================================================================================

<CAPTION>
Revenue
-------
Revenue Data
Year ended December 31                                                      1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>                 <C>
Gold
----
Ounces sold                                                              486,592              553,130              698,337
Average price realized per ounce - revenue basis                      $      325           $      333          $       362
Average price realized per ounce - cash basis/(1)/                    $      335           $      340          $       345
Average market price per ounce                                        $      279           $      294          $       332
Revenue (millions of U.S. dollars)                                    $    158.2           $    183.9          $     252.6
Percentage of total revenue                                                   75%                  79%                  83%

Silver
------
Ounces sold                                                            9,173,012            8,198,867           10,037,753
Average price realized per ounce - revenue basis                      $     5.69           $     5.88          $      5.26
Average price realized per ounce - cash basis/(1)/                    $     5.22           $     5.36          $      4.99
Average market price per ounce                                        $     5.25           $     5.54          $      4.87
Revenue (millions of U.S. dollars)                                    $     52.2           $     48.3          $      52.8
Percentage of total revenue                                                   25%                  21%                  17%
--------------------------------------------------------------------------------------------------------------------------
Total revenue (millions of U.S. dollars)                              $    210.4           $    232.2          $     305.4
==========================================================================================================================
</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 volume and prices were:

<TABLE>
<CAPTION>
Revenue Variances
Thousands of U.S. dollars
Year ended December 31                                                      1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>                 <C>
Decrease in volume                                                    $  (16,438)          $  (62,291)         $   (14,501)
Lower gold prices                                                         (3,649)             (16,040)             (15,880)
Higher (lower) silver prices                                              (1,743)               5,083               (1,506)
--------------------------------------------------------------------------------------------------------------------------
Decrease in total revenue from the previous year                      $  (21,830)          $  (73,248)         $   (31,887)
==========================================================================================================================
</TABLE>

The decrease in gold revenue from 1998 to 1999 was due to lower gold sales
volume resulting primarily from lower grades at McCoy/Cove, and decreased gold
prices realized.  The increase in silver revenue from 1998 to 1999 was due to
high silver inventories at year end 1998 more than offsetting lower silver
prices realized.  The decrease in gold revenue from 1997 to 1998 was due to
decreased gold sales volume reflecting the absence of production from Lupin and
decreased mill grades at McCoy/Cove and Kettle River in 1998, and lower gold
prices realized.  The decrease in silver revenues from 1997 to 1998 was due to
decreased production reflecting lower mill grades, partially offset by higher
silver prices realized.

                                       3
<PAGE>

RESERVES

The following table presents ore reserves by property.  These reserves were
estimated by the Company. A description of each mine follows the "Reserves" and
"Other Mineralization" sections.  See "Risk Factors" for a discussion of items
that could affect the Company's reserve estimates.

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------
Ore Reserves/(1)/
(thousands, except average grades)
(proven and probable at December 31)
                                                                         1999          1998          1997
                                 --------------------------------------------  ------------  ------------
                                          Average                   Contained     Contained     Contained
                                            grade    Contained    ounces (the   ounces (the   ounces (the
                                          (ounces       ounces      Company's     Company's     Company's
                                   Tons  per ton)       (100%)         share)        share)        share)
                              ---------------------------------------------------------------------------
<S>                           <C>           <C>      <C>          <C>           <C>           <C>
Gold
----
Mines:
 Round Mountain                 320,062     0.018       5,875          2,938         3,188         3,519
 McCoy/Cove                      11,832     0.043         514            514           699           915
 Kettle River                       779     0.208         162            162           237           339
 Lupin/(2)/                       1,931     0.268         518            518           543           543
                                                  -------------------------------------------------------

Total mines                                             7,069          4,132         4,667         5,316
                                                  -------------------------------------------------------

Development properties:
 Aquarius                        15,826     0.074       1,164          1,164         1,263         1,274
 Paredones Amarillos/(3)/            --        --          --             --           869           889
                                                  -------------------------------------------------------

Total development properties                            1,164          1,164         2,132         2,163
                                                  -------------------------------------------------------

Total gold                                              8,233          5,296         6,799         7,479
                                                  =======================================================

Silver
------
McCoy/Cove                       11,832     2.387      28,243         28,243        38,809        46,525
                                                  -------------------------------------------------------
Total silver                                           28,243         28,243        38,809        46,525
                                                  =======================================================
</TABLE>

/(1)/ The definitions of proven and probable ore are those used in Canada by
      certain provincial securities regulatory authorities and are set forth in
      National Policy No. 2-A. The definitions are substantially the same as
      those applied in the United States by the Securities and Exchange
      Commission which are based on definitions used by the United States Bureau
      of Mines and the United States Geological Survey. See "Glossary-Ore
      Reserves."

/(2)/ In January 1998, the Company temporarily suspended operations at the Lupin
      mine. The Company expects Lupin production to recommence in April 2000.
      See "Lupin."

/(3)/ In the third quarter of 1999, the Company agreed to sell its interest in
      Paredones Amarillos project. The Company's share of Paredones Amarillos'
      reserves of 869,000 ounces of gold was removed from the Company's
      estimates of reserves as of December 31, 1999. See "Other Projects-
      Paredones Amarillos."

The Company reports extractable (minable) ore reserves.  Reserves do not reflect
recovery losses in the milling or heap leaching processes, but do include
allowance for dilution of ore in the mining process.

Ore reserves were estimated based on a gold price of $325 per ounce at December
31, 1999 ($325 per ounce at December 31, 1998 and $350 per ounce at December 31,
1997) and a silver price of $5.50 per ounce at December 31, 1999 ($5.75 per
ounce at December 31, 1998 and $5.00 per ounce at December 31, 1997.)  The
market price for gold has for more than two years traded, on average, below the
level

                                       4
<PAGE>

used in estimating reserves at December 31, 1999. If the market price for gold
were to continue at such levels and the Company determined that its reserves
should be estimated at a significantly lower gold price than that used at
December 31, 1999, there would be a reduction in the amount of gold reserves.
For example, the Company estimates that, based on extrapolation of information
developed in reserve calculation, but without the same degree of analysis as
required for reserve estimation, if the Company's reserves at December 31, 1999
were based on a price of $300 per ounce of gold, while reserves at the operating
properties would not decrease, the reserves at the Aquarius development property
would decrease approximately 11%. Should any significant reductions in reserves
occur, material write-downs of the Company's investment in mining properties
and/or increased amortization, reclamation and closure charges may be required.

Change in Proven and Probable Reserves
--------------------------------------
The reconciliation of the change in proven and probable reserves from December
31, 1998 to December 31, 1999 is as follows.

<TABLE>
<CAPTION>
                                                                                       (millions of ounces)
                                                                                      Gold              Silver
--------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>               <C>
Proven and probable reserves at December 31, 1998                                     6.8                38.8
 Production/(1)/                                                                     (0.7)               (9.3)
 Extensions, discoveries and adjustments
  --  Round Mountain                                                                  0.2                  --
  --  McCoy/Cove                                                                       --                (1.1)
  --  Paredones Amarillos/(2)/                                                       (0.9)                 --
  --  Aquarius                                                                       (0.1)                 --
 Change in gold and silver price assumptions                                           --                (0.2)
-------------------------------------------------------------------------------------------------------------
Proven and probable reserves at December 31, 1999                                     5.3                28.2
=============================================================================================================
</TABLE>

/(1)/ Production represents previously modeled, in-situ ounces mined during
      1999; this amount does not reflect recovery losses from heap leaching and
      milling.

/(2)/ In the third quarter of 1999, the Company agreed to sell its interest in
      Paredones Amarillos project. The Company's share of Paredones Amarillos'
      reserves of 869,000 ounces of gold was removed from the Company's
      estimates of reserves as of December 31, 1999. See "Other Projects-
      Paredones Amarillos."

For further information on ore reserves for specific mines, see the mines'
descriptions in "Business and Properties."

                                       5
<PAGE>

OTHER MINERALIZATION
The following table presents other mineralization by property.  Other
mineralization for producing mines and development properties is generally
estimated by the Company.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------
Other Mineralization/(1)/
(thousands, except average grades) (at December 31)
                                                           1999                      1998                       1997
                             ----------------------------------  ------------------------  -------------------------
                                            Tons        Average        Tons       Average          Tons       Average
                               Tons         (the          grade        (the         grade          (the         grade
                              (100%    Company's        (ounces   Company's       (ounces     Company's       (ounces
                             basis)       share)       per ton)      share)      per ton)        share)      per ton)

                           ------------------------------------------------------------------------------------------
<S>                        <C>         <C>             <C>       <C>           <C>         <C>              <C>
Gold
----
Mines:
Round Mountain               126,244      63,122          0.016      54,143          0.015      71,132          0.016
McCoy/Cove                       100         100          0.350         425          0.146         635          0.025
Kettle River                      17          17          0.235         188          0.223         149          0.174
Lupin (including Ulu)/(2)/     2,317       2,317          0.359       2,194          0.358       2,194          0.358
                           ------------------------------------------------------------------------------------------

                             128,678      65,556          0.029      56,950          0.030      74,110          0.027
                           ------------------------------------------------------------------------------------------
Development properties/(3)/:
Aquarius                         575         575          0.078         785          0.064         826          0.062
Paredones Amarillos/(4)/          --          --             --         205          0.020         399          0.018
                           ------------------------------------------------------------------------------------------

                                 575         575          0.078         990          0.055       1,225          0.048
                           ------------------------------------------------------------------------------------------

Total gold                   129,253      66,131          0.029      57,940          0.030      75,335          0.027
                           ==========================================================================================

Silver
------
Mines:
McCoy/Cove                       100         100          2.000         425          6.151         635          0.986
                           ------------------------------------------------------------------------------------------
Total silver                     100         100          2.000         425          6.151         635          0.986
                           ==========================================================================================
</TABLE>

/(1)/ Other mineralization has not been included in the proven and probable ore
      reserve estimates because even though enough drilling, trenching, and/or
      underground work indicate a sufficient amount and grade to warrant further
      exploration or development expenditures, these resources do not qualify
      under the U.S. Securities and Exchange Commission standards as
      commercially minable ore bodies until further drilling, metallurgical
      work, and other economic and technical feasibility factors based upon such
      work are resolved.

/(2)/ In January 1998, the Company temporarily suspended operations at the Lupin
      mine. The Company expects Lupin production to recommence in April 2000.
      See "Lupin."

/(3)/ The Company's construction and production decisions at its development
      properties is dependent on the issuance of appropriate permits and the
      ability of the Company to obtain required financing. See "Development
      Program."

/(4)/ In the third quarter of 1999, the Company agreed to sell its interest in
      the Paredones Amarillos project. The Company's share of Paredones
      Amarillos' other mineralization of 205,000 tons at an average grade of
      0.020 ounces of gold per ton was removed from the Company's estimates of
      other mineralization as of December 31, 1999. See "Other Projects-
      Paredones Amarillos."

                                       6
<PAGE>

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, 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. See "Risk
Factors" for items which could affect forward-looking statements.

                                       7
<PAGE>

ROUND MOUNTAIN
The Company owns an undivided 50% interest in and operates the Round Mountain
gold mine, acquired in 1985.  Homestake Mining Company and Case, Pomeroy &
Company, Inc. each own an undivided 25% interest in the joint venture common
operation.  Mining equipment, crushing facilities, heap leaching facilities,
milling facilities, gold extraction and recovery facilities, administration and
maintenance buildings and other equipment are included in the joint venture.
The mine, located 60 miles north of Tonopah in Nye County, Nevada, consists of
open-pit mining operations on contiguous patented and unpatented mining claims
covering approximately 27,500 acres.  The Company has completed all steps
currently required under U.S. law to convert the minable land to patented status
and has filed application for patents.  The patents have not been issued to date
and are currently in the process of government review.  See "Other-Government
Regulation and Environmental Issues."

The following table sets forth operating data for the Round Mountain operation
from 1995 through 1999.  The Company's share of production is 50% of the ounces
shown.

<TABLE>
<CAPTION>
                                              1999       1998       1997       1996        1995
-----------------------------------------------------------------------------------------------
<S>                                       <C>        <C>        <C>        <C>         <C>
Gold produced (ounces)                     541,808    510,504    477,680    410,974     344,434
Mining cost/ton of ore and waste          $   0.73   $   0.66   $   0.65   $   0.69    $   0.61
Heap leaching cost/ton of ore             $   0.68   $   0.74   $   0.61   $   0.80    $   0.65
Milling cost/ton of ore                   $   2.92   $   3.36   $   4.38         --          --
Production cost/ounce of gold produced:
   Direct mining expense                  $    221   $    209   $    208   $    228    $    218
   Deferred stripping cost                     (19)        (7)         2         (2)        (23)
   Inventory movements and other                (2)        (4)        (3)        (5)         --
                                          --------   --------   --------   --------    --------
       Cash operating cost                     200        198        207        221         195
   Royalties paid                               19         20         22         32          31
   Production taxes                             --          3          4          4           4
                                          --------   --------   --------   --------    --------
       Total cash cost                         219        221        233        257         230
   Depreciation                                 48         46         39         51          62
   Amortization                                 18         18         18         18          20
   Reclamation and mine closure                  9          7          7          5           5
                                          --------   --------   --------   --------    --------
       Total production costs             $    294   $    292   $    297   $    331    $    317
                                          --------   --------   --------   --------    --------
Capital expenditures (millions)/(1)/      $    7.7   $   12.6   $   30.7   $   17.5    $   11.7
Deferred (applied) mining
 expenditures (millions)/(1)/             $    5.1   $    1.7   $   (0.4)  $    0.4    $    4.0
Heap leached-reusable pad:
   Ore processed (tons/day)                 15,602     18,953     26,608     27,737      22,490
   Total ore processed (000 tons)            5,741      6,842      9,552      9,819       7,961
   Grade (ounce/ton)                         0.034      0.036      0.036      0.036       0.034
   Recovery rate (%)                          73.4       70.6       74.9       66.1        70.9
   Gold recovered (ounces)                 140,988    182,378    268,518    231,420     192,052
Heap leached-dedicated pad:
   Ore processed (tons/day)                120,020    101,892    107,716     87,706      66,197
   Total ore processed (000 tons)           44,167     36,783     38,670     31,048      23,434
   Grade (ounce/ton)                         0.011      0.010      0.010      0.011       0.012
   Recovery rate (%)                         /(2)/      /(2)/      /(2)/      /(2)/       /(2)/
   Gold recovered (ounces)                 215,825    221,396    195,558    167,004     138,700
Milled: /(3)/
   Ore processed (tons/day)                  8,083      7,993       n.m.         --          --
   Total ore processed (000 tons)            2,999      2,885        274         --          --
   Gold grade (ounce/ton)                    0.067      0.045      0.041         --          --
   Gold recovery rate (%)                     87.0       77.9       60.0         --          --
   Gold recovered (ounces)                 157,901     97,686      6,410         --          --
High grade ore processed:/(4)/
   Gold recovered (ounces)                  27,094      9,044      7,194     12,550      12,244
Other gold recovered (ounces)                   --         --         --         --       1,438
-----------------------------------------------------------------------------------------------
</TABLE>

                                       8
<PAGE>

/(1)/  The Company's 50% share.

/(2)/  For dedicated leach pads, a gold recovery rate cannot be calculated until
       leaching is complete. The eventual recovery rate is estimated to be
       approximately 50%.

/(3)/  Construction of an 8,000 ton per day mill to treat higher-grade non-
       oxidized ore was completed in the fourth quarter of 1997.

/(4)/  A high-grade occurrence was discovered April 1992. A small gravity plant
       was constructed to recover these ounces.

n.m.   Not meaningful.

Geology and Ore Reserves
------------------------
Gold mineralization in the Round Mountain deposit is associated with Tertiary
volcanism and Caldera Formation.  The deposit is hosted by a thick sequence of
rhyolitic ash-flow tuffs deposited on a Paleozoic and Cretaceous basement.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                   Round Mountain Mine
                                                  Ore Reserves/(1)(2)/
                                                    December 31, 1999
------------------------------------------------------------------------------------------------------------------------
                                                                            Average grade
                                                            Tonnage               of gold     Gold content/(3)/
                                                 (000's short tons)      (ounces per ton)        (000's ounces)
------------------------------------------------------------------------------------------------------------------------
<S>                                              <C>                     <C>                  <C>
Round Mountain pit                                          203,661                 0.021                 4,300
Offloads and heap leach stockpiles/(4)/                     110,286                 0.011                 1,219
Mill stockpiles                                               6,115                 0.058                   356
------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999                              320,062                 0.018                 5,875
========================================================================================================================

Proven                                                      225,968                 0.018                 4,021
Probable                                                     94,094                 0.018                 1,854
------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999                              320,062                 0.018                 5,875
========================================================================================================================

Total Proven and Probable-1998                              358,597                 0.018                 6,375
========================================================================================================================
</TABLE>

/(1)/ The Company's share is 50% of the reserves presented.

/(2)/ See "Reserves" for a discussion of the estimation of proven and probable
      ore reserves.

/(3)/ Reserves include allowances for dilution in mining but do not reflect
      losses in the leaching process. The average leach recovery rate for the
      reusable pad in 1999 was 73.4%. The eventual average recovery rate for the
      dedicated pad is estimated to be approximately 50%. The mill recovery rate
      was 87.0% in 1999.

/(4)/ The offloads consist of approximately 68 million tons of previously
      crushed, leached and rinsed ore. The heap leach stockpiles consist of
      approximately 42 million tons of previously unprocessed ore. Sampling and
      metallurgical testing conducted in 1994 and 1995 confirmed that this
      material can be profitably processed on the dedicated leach pads.

The cut-off grades are 0.006 ounce of gold per ton for oxides and 0.010 ounce
per ton for non-oxides.  The prospective waste to ore ratio of pit ore is 0.7:1.

Mining and Processing
---------------------
Ore and waste rock was mined at a rate of 214,516 tons per day in 1999, compared
to 195,629 tons per day in 1998.  All material mined requires drilling and
blasting prior to excavation.  The open pit mining operation employs three 28-
cubic yard electric mining shovels, one 23 cubic-yard front-end loader, two 15-
cubic yard loaders, and twenty-one 150-ton, thirteen 190-ton and nine 85-ton
mechanical haul trucks. A 22-cubic yard hydraulic mining shovel is used outside
the pit to load low-grade previously leached ore.

                                       9
<PAGE>

Gold recovery from ore occurs from four independent recovery operations. Most of
the ore is heap leached. These include crushed ore (reusable pad) leaching, run-
of-mine ore (dedicated pad) leaching, gravity concentration, and the milling of
higher-grade non-oxidized ore. Most of the ore is heap leached, with higher
grade oxidized ores placed on the reusable pad and lower grade ores placed on
the dedicated pad.

Heap leaching on two parallel 1.5 million square feet asphalt reusable pads is
used to recover gold from oxidized ore above a cut-off grade of 0.018 ounce per
ton. Most of the contained gold is released after approximately 100 days on the
reusable pad, and the ore is then transferred to the dedicated pad. The
remaining gold values are sufficient to justify additional leaching of the ore
on the low-cost dedicated pad over a period of years. In 1999, 15,602 tons of
ore per day were processed on the reusable heap leach pad, compared to 18,953
tons per day in 1998. Production from the reusable pad was 140,988 in 1999
compared to 182,378 in 1998 due to decreased mine tonnage and slightly lower
grades. Reusable pad production is variable and determined by the phases of the
pit being mined. For a general description of Round Mountain's mining and heap-
leach recovery process see page 43.

Lower grade oxidized ore (down to a cut-off grade of 0.006 ounce per ton) and
ore removed from the reusable leach pad are hauled directly to a dedicated leach
pad. Ore is placed in 50-foot thick layers for leaching. After completion of an
initial leaching cycle of approximately 90 days, additional layers of ore are
placed until the heap reaches an ultimate height of 400 feet. The dedicated
leach pad is constructed in phases as capacity is needed. The existing dedicated
pad covers approximately 30.1 million square feet and has a capacity of
approximately 286 million tons. In 1999, 120,020 tons of ore per day were
processed on the dedicated pad, compared to 101,892 tons per day in 1998. 1999
production from the dedicated pad was 215,825, compared to 221,396 in 1998, due
to increased tons and higher grades.

The 8,000 ton per day mill, constructed in 1997, recovers gold from higher-grade
non-oxidized ore by employing gravity concentration and cyanide leaching. In
1999, it was shown that good recoveries could be achieved in milling higher-
grade oxidized ore as well. In 1999, the mill facility achieved a recovery rate
of 87% from both higher-grade oxide and non-oxidized ores. The mill processed
8,083 tons per day in 1999, compared to 7,993 tons per day in 1998. Mill
production was 157,901 ounces in 1999, compared to 97,686 ounces in 1998, due to
improved grades and recoveries.

Gravity concentration is applied only to the highest-grade ores containing
coarse gold. A 500-ton per day gravity recovery circuit processes ore from
small, high-grade veins excavated within the main Round Mountain ore body.
Production from the gravity plant was 27,094 ounces in 1999, compared to 9,044
ounces in 1998.

Mining at Round Mountain is expected to be complete in 2005 (assuming no new
gold discoveries), with completion of stockpile processing in 2011.

The joint venture partners continue to support an aggressive exploration program
in the vicinity of the mine in order to add reserves and extend the mine life.
In 1999, a total of 96 exploration holes were completed to test six target
areas. A similar program has been budgeted for 2000 to explore geologic
environments similar to the Round Mountain deposit.

In 2000, Round Mountain is expected to produce about 5% to 10% more gold than
1999's production of 541,808 ounces (the Company's share, 270,904 ounces)
reflecting anticipated less waste and higher dedicated pad grades, offset by
lower grades and recoveries from the mill and the reusable pad. See "Cautionary
'Safe Harbor' Statement under the United States Private Securities Litigation
Reform Act of 1995" and "Risk Factors."

                                       10
<PAGE>

MCCOY/COVE
The McCoy/Cove property commenced production in April 1986 as an open pit heap
leaching operation. The McCoy mine and surrounding property, which was purchased
by the Company in September 1986, is located in Lander County, Nevada, about 30
miles southwest of the town of Battle Mountain. The Cove deposit, located one
mile northeast of the McCoy deposit, was discovered in early 1987. Open pit
mining of the Cove deposit began in early 1988.

The McCoy/Cove property consists of approximately 1,663 unpatented claims
covering approximately 33,000 acres of United States federal land administered
by the Bureau of Land Management of the Department of the Interior. The Company
has completed all steps currently required under U.S. law to convert certain
unpatented claims to patented status and has filed the appropriate applications
for patents. The patents have not been issued to date and are currently in the
process of government review. See "Other-Government Regulation and Environmental
Issues."

During 1996, the Company recorded a $30.0 million provision related to the
estimated costs to remove waste rock from a portion of the Cove pit wall that
had collapsed. The remediation was completed in the second quarter of 1999, at a
total cost of $24.2 million. The unused portion of the remediation accrual of
$5.8 million has been pooled with deferred mining costs.

In 1997, as a result of the lower gold prices, the Company recorded a $47.0
million provision for impaired assets related to McCoy/Cove. The need for and
the amount of the provision were determined by comparing asset carrying values
to estimated future net cash flows from existing reserves.

The following table sets forth operating data for the McCoy/Cove operation from
1995 through 1999.

<TABLE>
<CAPTION>
                                               1999         1998          1997         1996          1995
---------------------------------------------------------------------------------------------------------
<S>                                      <C>          <C>          <C>           <C>          <C>
Gold produced (ounces)                      124,536      167,494       187,034      271,731       310,016
Silver produced (ounces)                  8,430,072    9,412,823    11,021,708    7,102,348    11,905,806
Mining cost/ton of ore and waste         $     0.66   $     0.71   $      0.74   $     0.72   $      0.67
Heap leaching cost/ton of ore            $     1.82   $     1.74   $      1.70   $     1.68   $      2.32
Milling cost/ton of ore                  $     6.32   $     6.09   $      8.82   $     9.50   $     10.67
Production cost/ounce of gold produced:
  Direct mining expense                  $      252   $      200   $       276   $      286   $       206
  Deferred stripping cost                       (35)          (1)          (10)         (16)           15
  Inventory movements and other                   4            4             5            1            (4)
                                         ----------   ----------   -----------   ----------   -----------
    Cash operating cost                         221          203           271          271           217
  Royalties                                       2            3             3            5             5
  Production taxes                               --            2            (1)           4             7
                                         ----------   ----------   -----------   ----------   -----------
   Total cash cost                              223          208           273          280           229
  Depreciation                                   48           52            66           71            53
  Amortization                                   27           37            44           46            46
  Reclamation and mine closure                   11            9            10            8             5
                                         ----------   ----------   -----------   ----------   -----------
  Total production cost                  $      309   $      306   $       393   $      405   $       333
                                         ----------   ----------   -----------   ----------   -----------
Average gold-to-silver price ratio/(1)/        54:1         54:1          67:1         75:1          74:1
Capital expenditures (millions)          $      1.1   $      1.3   $       2.2   $      7.3   $       8.6
Deferred (applied) mining
  expenditures (millions)                $      9.5   $      0.5   $       3.7   $      6.0   $      (7.3)
Heap leached:
  Ore processed (tons/day)                   11,262       11,296        17,840       16,671        11,966
  Total ore processed (000 tons)              4,178        4,112         6,494        6,068         4,355
  Gold grade (ounce/ton)                      0.022        0.021         0.018        0.018         0.018
  Silver grade (ounce/ton)                     0.37         0.26          0.29         0.27          0.49
  Gold recovery rate                          /(2)/        /(2)/         /(2)/        /(2)/         /(2)/
  Silver recovery rate                        /(2)/        /(2)/         /(2)/        /(2)/         /(2)/
  Gold recovered (ounces)                    45,200       53,096        55,129       66,834        59,910
  Silver recovered (ounces)                 396,428      398,006       396,928      513,227       877,463

</TABLE>

                                       11
<PAGE>

<TABLE>
<CAPTION>
                                         1999         1998          1997         1996          1995
----------------------------------------------------------------------------------------------------
<S>                                  <C>          <C>          <C>           <C>          <C>
Milled:
     Ore processed (tons/day)           12,000       11,829         9,315        9,031         7,275
     Total ore processed (000 tons)      4,452        4,306         3,391        3,287         2,648
     Gold grade (ounce/ton)              0.038        0.046         0.061        0.086         0.113
     Silver grade (ounce/ton)             3.02         2.95          4.54         3.14          5.27
     Gold recovery rate (%)               45.8         57.8          64.3         79.5          82.4
     Silver recovery rate (%)             61.3         69.8          69.7         73.5          78.8
     Gold recovered (ounces)            79,336      114,398       131,905      204,897       250,106
     Silver recovered (ounces)       8,033,644    9,014,817    10,624,780    6,589,121    11,028,343
-----------------------------------------------------------------------------------------------------
</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)/ As dedicated leach pads are used at McCoy/Cove, a gold recovery rate
      cannot be calculated until leaching is complete. The ultimate recovery
      rate for crushed ore is estimated to be about 68% for gold and 35% for
      silver and for run-of-mine ore, 48% for gold and 10% for silver.

Geology and Ore Reserves
------------------------
Gold deposition in the McCoy pit is associated with the intrusion of a Tertiary-
age quartz diorite stock into Mesozoic sedimentary formations including
quartzites, conglomerates, and limestones. Gold occurs in the Skarn Formation
proximal to the intrusion and as a stockwork-type deposit in the highly
fractured sediments.

The Cove deposit is a sediment hosted gold-silver deposit that is spatially
associated with a sequence of argillically altered felsite dikes. Gold and
silver mineralization occurs both as a rind around the altered intrusion and
away from the intrusions along favorable horizons such as permeable beds and
fractured zones. Cove ore is hosted by limestone of the Augusta Mountain
Formation and by conglomerate/sandstone of the Panther Canyon Formation.

<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
                                                         McCoy/Cove Mine
                                                        Ore Reserves/(1)/
                                                        December 31, 1999
-----------------------------------------------------------------------------------------------------------------
                                              Tonnage           Average grade                   Content/(2)/
                                   (000's short tons)          (ounces per ton)                (000's ounces)
                                 --------------------      -----------------------         ----------------------
                                                            Gold            Silver         Gold            Silver
                                                            ----            ------         ----            ------
<S>                              <C>                       <C>              <C>            <C>            <C>
Cove Pit                                 8,383             0.042            2.540           353           21,291
Cove Underground                           114             0.474            0.281            54               32
West Contact of McCoy Pit                  645             0.036               --            23               --
Stockpiles                               2,690             0.031            2.572            84            6,920
-----------------------------------------------------------------------------------------------------------------
Proven and Probable-1999                11,832             0.043            2.387           514           28,243
=================================================================================================================

Proven                                   5,700             0.038            2.556           218           14,569
Probable                                 6,132             0.048            2.230           296           13,674
-----------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999          11,832             0.043            2.387           514           28,243
=================================================================================================================

Total Proven and Probable-1998          21,684             0.032            1.790           699           38,809
=================================================================================================================
</TABLE>

/(1)/ See "Reserves" for a discussion of the estimation of proven and probable
      ore reserves.

/(2)/ Reserves include allowances for dilution in mining but do not reflect
      losses in the recovery process. Recovery rates for the life-of-mine are
      estimated to be 55% for gold and 68% for silver.

                                       12
<PAGE>

The gold-equivalent cut-off grades are 0.008 ounce per ton for oxides and 0.100
ounce per ton for high- grade sulfides and 0.038 ounce per ton for low-grade
sulfides. The prospective waste-to-ore ratio is 1.1:1.

Mining and Processing
---------------------
Ore and waste rock was mined at a rate of 117,641 tons per day in 1999, compared
to 120,677 tons per day in 1998. In 1999, 14.2 million tons were mined as part
of the Cove pit wall remediation. All material requires drilling and blasting
prior to excavation. The open pit mining operation employs one 35-cubic yard
hydraulic mining shovel, two 23-cubic yard hydraulic mining shovels, one 23-
cubic yard wheel loader, eight 150-ton and ten 190-ton mechanical haul trucks.

The Company mines at a high rate to minimize the time and expense required to
keep the Cove pit dewatered. Water pumped out of the Cove pit averaged 15,000
gallons per minute at the end of 1999. The Company uses infiltration ponds for
water pumped from the mine.

The ore mined from the Cove pit was all oxide in the early years of production.
Oxide ore is replaced by sulfide ore at depth. Almost all of the remaining ore
at Cove is sulfide. In the second half of 1997, McCoy/Cove began processing
carbonaceous ore that had in past years been mined from the Cove pit and
stockpiled.

Stockpiled ore decreased from 5.5 million tons in 1998 to 2.7 million tons in
1999. Stockpiled ore fluctuates as a function of the mine plan.

Gold recovery from ore occurs from a 10,000 ton per day mill and from crushing
and run-of-mine heap leaching operations.

The mill utilizes flotation and agitation leach circuits to recover gold and
silver from high-grade oxide ore and sulfide ores not amenable to heap leaching.
The majority of the ore processed through the mill in 1999 was from low-grade
sulfide and carbonaceous stockpiles. Mill throughput averaged 12,000 tons per
day in 1999 compared to 11,829 in 1998. Gold and silver mill production
decreased in 1999 compared to 1998 due to lower grades and recoveries from
processing stockpiled material. For a general description of McCoy/Cove's mining
and mill recovery process, see page 42.

The Cove East underground contributed 133,400 tons to the mill and produced
approximately 13,500 ounces of gold and 1.5 million ounces of silver.
Development of the Cove East deposit has been utilized to provide access for
exploration drifting and drilling on Cove South Deep.

Heap leach gold production was lower compared to 1998 due to slower recovery.
Heap leach processing averaged 11,262 tons per day in 1999, down from 11,296
tons per day in 1998.

Heap leach crushing will be completed in the first half of 2000 as the remainder
of the oxide ores will be mined from the McCoy and Cove pits. Rinsing and
restoration on the first of three heap leach pads commenced in 1999 and the
second heap leach pad is planned for 2000.

Mining operations are expected to run through 2000, with the processing of
stockpiled ore continuing into 2002.

In 2000, McCoy/Cove will be mining the higher-grade ore made accessible from the
completion of the pit wall remediation. As a result, McCoy/Cove is expected to
produce about 60% to 70% more gold in 2000 compared to the 124,536 ounces
produced in 1999. Silver production is expected to increase about 15% to 20%
from the 8.4 million ounces produced in 1999. See "Cautionary 'Safe Harbor'
Statement under the United States Private Securities Litigation Reform Act of
1995" and "Risk Factors."

                                       13
<PAGE>

KETTLE RIVER
The Kettle River properties are located in Ferry County in the State of
Washington and cover approximately 7,775 acres through patented and unpatented
mining claims and fee lands.

Development of the Lamefoot project began during 1992 when the portal was
collared. By December 1994, 17,500 feet of drifting was complete. Lamefoot
commenced production in December 1994, and achieved full production in June
1995. In December 1994, surface excavation for building construction and portal
clearing commenced at K-2. The portal was collared in March 1995 and a total of
10,629 feet of development was completed by the end of 1996. K-2 stope
development began in the fourth quarter of 1996 and production commenced in
January 1997.

In 1997, as a result of the lower gold prices, the Company recorded a $15.0
million provision for impaired assets related to Kettle River. The need for and
the amount of the provision were determined by comparing asset carrying values
to estimated future net cash flows from existing reserves.

The following table sets forth operating data for the Kettle River operation
from 1995 through 1999.

<TABLE>
<CAPTION>
                                                      1999              1998             1997              1996             1995
--------------------------------------------------------------------------------------------------------------------------------
<S>                                               <C>               <C>              <C>               <C>              <C>
Gold produced (ounces)                             104,396           113,692          129,866           124,910          100,419
Mining cost/ton of ore                            $  23.57          $  21.65         $  21.53          $  21.12         $  22.60
Milling cost/ton of ore                           $  11.22          $  10.71         $  10.58          $  11.96         $  12.76
Production cost/ounce of gold produced:
   Direct mining expense                          $    239          $    238         $    231          $    190         $    237
   Deferred mine development                            --                --               --                --               --
   Inventory movements and other                        (1)                6               (4)               11               (7)
                                                  --------          --------         --------          --------         --------
       Cash operating cost                             238               244              227               201              230
   Royalties                                            15                12               14                10                8
   Production taxes                                      2                 1                2                 2                2
                                                  --------          --------         --------          --------         --------
       Total cash cost                                 255               257              243               213              240
   Depreciation                                         55                77               54                59               74
   Amortization                                          8                 5               36                45               45
   Reclamation and mine closure                         15                12               12                 8                7
                                                  --------          --------         --------          --------         --------
       Total production cost                      $    333          $    351         $    345          $    325         $    366
                                                  --------          --------         --------          --------         --------
Capital expenditures (millions)                   $    0.4          $    1.5         $    3.8          $    8.8         $    9.5
Deferred (applied) mining
 expenditures (millions)                          $     --          $     --         $     --          $     --         $     --
Milled:
   Ore processed (tons/day)                          1,698             2,017            2,118             1,652            1,504
   Total ore processed (000 tons)                      630               734              771               601              548
   Grade (ounce/ton)                                 0.198             0.187            0.197             0.240            0.212
   Recovery rate (%)                                  83.7              82.8             85.4              86.5             86.6
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       14
<PAGE>

Geology and Ore Reserves
------------------------
Ore reserves at Kettle River exist at the Lamefoot and K-2 deposits. At
Lamefoot, gold occurs near the contact between Permian age siliciclastic and
carbonate rocks and is associated with silicification, magnetite, hematite,
pyrrhotite and pyrite. At K-2, gold is contained in steeply dipping quartz
carbonate veins hosted by Eocene age volcanic rocks.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                      Kettle River
                                                    Ore Reserves/(1)/
                                                    December 31, 1999
------------------------------------------------------------------------------------------------------------------------
                                                                                    Average grade
                                                                     Tonnage              of gold    Gold content/(2)/
                                                          (000's short tons)     (ounces per ton)       (000's ounces)
------------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                    <C>                  <C>
Lamefoot                                                                 456                 0.207                   94
K-2                                                                      323                 0.209                   68
------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999                                           779                 0.208                  162
========================================================================================================================

Proven                                                                   647                 0.209                  135
Probable                                                                 132                 0.205                   27
------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999                                           779                 0.208                  162
========================================================================================================================

Total Proven and Probable-1998                                         1,171                 0.202                  237
========================================================================================================================
</TABLE>

/(1)/ See "Reserves" for a discussion of the estimation of proven and probable
      ore reserves.

/(2)/ Reserves do not reflect losses in the milling process but do include
      allowance for dilution in the mining process. The average mill recovery
      rate of gold in 1999 was 83.7%.

Cut-off grades are 0.120 ounce of gold per ton at Lamefoot and 0.125 ounce of
gold per ton at K-2.

Mining and Processing
---------------------
At Kettle River, a series of deposits are mined and trucked to feed a central
mill. In 1999, approximately 60% of ore milled came from Lamefoot and
approximately 40% of ore milled came from K-2.

At the Lamefoot property, the mining method is longhole open stoping, with
delayed backfill. Zones with ore widths of 50 feet utilize cemented backfill in
primary stopes and unconsolidated fill in secondary stopes. Zones under 50 feet
in width are filled with unconsolidated fill. Ore is removed from the stopes
using remote control muckers and hauled to the surface using 26-ton haul trucks.
Total Lamefoot ore production in 1999 was 381,603 tons compared to 435,163 in
1998 due to longer underground ore hauls related to deeper mining activity at
Lamefoot.

The mining method utilized at K-2 is longhole open stoping, similar to Lamefoot,
but due to the narrow widths, cemented fill is required in the South zone. Total
K-2 ore production in 1999 was 257,258 tons compared to 243,867 in 1998,
reflecting more material mined and hauled to the surface.

The mill processed approximately 1,698 tons of ore per day in 1999, compared to
2,017 tons per day in 1998. Total Kettle River production decreased in 1999
compared to 1998 due to fewer Lamefoot tons.

Mining operations are expected to continue through at least 2001 at Kettle
River, depending upon the success of the Company's exploration activities.

In 2000, Kettle River is expected to produce about 10% to 15% less than the
104,396 ounces of gold produced in 1999, reflecting anticipated lower tonnages
offset by higher grade and recovery. See "Cautionary 'Safe Harbor' Statement
under the United States Private Securities Litigation Reform Act of 1995" and
"Risk Factors."

                                       15
<PAGE>

LUPIN
The Lupin mine is an underground operation located 250 miles northeast of
Yellowknife in the Nunavut Territory of Canada, 56 miles south of the Arctic
Circle.  Production began in October 1982.

The Lupin mining leases cover 16,699 acres.  The principal lease was renewed for
21 years in 1992, and provided the Company has complied with its terms, is
renewable for further 21 year periods subject to any applicable regulations then
in effect.  The lease was granted by the Department of Indian Affairs and
Northern Development on behalf of the Crown and is subject to the provisions of
the Territorial Lands Act and the Canada Mining Regulations.  The lease is in
good standing.  See "Other-Government Regulation and Environmental Issues" for
discussion regarding Inuit ownership interests.

The Company purchased the Ulu property in 1995, located approximately 100 miles
north of Lupin.  The property is subject to a 5% net smelter royalty after the
recovery of 675,000 ounces of gold.  Ulu has approximately 1.5 million minable
tons of other mineralization at an average grade of 0.374 ounce of gold per ton.
The deposit is open on strike and down dip.  In the third quarter of 1997, the
Company deferred further development of Ulu in light of the downturn in gold
prices.

The Lupin mine was placed on care and maintenance in early 1998 due to falling
gold prices and a high cost structure.  Annual care and maintenance costs were
$3.4 million in 1999 and $4.6 million in 1998.

In the fourth quarter of 1999, the Company announced plans to reopen the Lupin
mine.  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 lower than $245 per ounce.  Based on current reserves of
518,280 ounces and other mineralization of 0.8 million tons at an average grade
of 0.332 ounces of gold per ton, 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
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.

In 1997, as a result of the lower gold prices, the Company recorded a $65.0
million provision for impaired assets related to the Lupin and Ulu properties.
The need for and the amount of the provision were determined by comparing asset
carrying values to estimated future net cash flows from existing reserves.

See "Cautionary 'Safe Harbor' Statement under the United States Private
Securities Litigation Reform Act of 1995" and "Risk Factors."

                                       16
<PAGE>

The table below sets forth operating data for the Lupin mine from 1995 through
1999.

<TABLE>
<CAPTION>
                                                1999            1998            1997             1996             1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                             <C>             <C>       <C>              <C>              <C>
Gold produced (ounces)                             --             --         165,335          166,791          172,110
Mining cost/ton of ore                             --             --       C$  46.09        C$  44.08        C$  44.23
Milling cost/ton of ore                            --             --       C$  11.77        C$  12.39        C$  12.26
Production cost/ounce of gold  produced:
  Canadian dollars:
       Direct mining expense                       --             --       C$    381        C$    411        C$    423
       Deferred mine development                   --             --              13               (4)             (22)
       Inventory movements and other               --             --              (1)               1                4
                                                                            --------         --------         --------
         Cash operating cost                       --             --       C$    393        C$    408        C$    405
                                                                            --------         --------         --------
  U.S. dollars:
       Cash operating cost                         --             --      US$    284       US$    299       US$    296
       Royalties                                   --             --              --               --               --
       Production taxes                            --             --              --               --               --
                                                                            --------         --------         --------
         Total cash cost                           --             --             284              299              296
       Depreciation                                --             --              71               71               68
       Amortization                                --             --              24               21               19
       Reclamation and mine closure                --             --              14                8                7
                                                                            --------         --------         --------
       Total production cost                       --             --      US$    393       US$    399       US$    390
                                                                            --------         --------         --------
Capital expenditures (millions US$)                --             --        $   12.3         $   15.7         $   14.5
Deferred (applied) mining
  expenditures (millions US$)                      --             --        $   (1.8)        $    0.2         $    2.8
Milled:
  Ore processed (tons/day)                         --             --           2,167            2,111            1,986
  Total ore processed (000 tons)                   --             --             789              768              723
  Grade (ounce/ton)                                --             --           0.226            0.235            0.258
  Recovery rate (%)                                --             --            92.6             92.5             92.5
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

Geology and Ore Reserves
------------------------
Gold at the Lupin deposit occurs in a Z-shaped isoclinally folded iron formation
of Archean age.  Gold is associated with pyrrhotite, arsenopyrite and quartz.

<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------------------------------
                                                            Lupin Mine
                                                         Ore Reserves/(1)/
                                                         December 31, 1999
------------------------------------------------------------------------------------------------------------------------
                                                                                     Average grade
                                                                     Tonnage               of gold     Gold content/(2)/
                                                          (000's short tons)      (ounces per ton)        (000's ounces)
------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>                   <C>                   <C>
Center Zone                                                              743                 0.282                   210
East Zone                                                                202                 0.221                    44
West Zone                                                                825                 0.264                   218
McPherson Zone                                                           161                 0.285                    46
------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999                                         1,931                 0.268                   518
========================================================================================================================

Proven                                                                 1,455                 0.275                   399
Probable                                                                 476                 0.249                   119
------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-1999                                         1,931                 0.268                   518
========================================================================================================================

Total Proven and Probable-1998                                         2,018                 0.269                   543
========================================================================================================================
</TABLE>

/(1)/ See "Reserves" for a discussion of the estimation of proven and probable
      ore reserves.

                                       17
<PAGE>

/(2)/ Reserves do not reflect losses in the milling process but do include
      allowance for dilution of ore in the mining process. The mining recovery
      factor was estimated at 85%. The average mill recovery rate in 1997 was
      93%.

The cut-off grade used in the reserve calculation is 0.150 ounce of gold per ton
at the upper levels of the mine and 0.204 ounce of gold per ton at the lower
levels of the mine.

Mining and Processing
---------------------
Access to the Lupin underground mine, removal of ore and waste, and movement of
personnel within the mine, is by a shaft developed to a depth of 3,970 feet and
by a ramp driven to a depth of 4,430 feet.

The ore in the Center, West and East Zones has been mined by the sub-level,
long-hole open stoping method.  In 1995, Lupin incorporated "pastefill", which
is composed of mine tailings and cement, into the stoping sequence.

After the ore is mined, it is hoisted to the surface for processing and recovery
of gold in a 2,300 ton per day mill, where the recovered gold is cast in dore
bars prior to being shipped off site.  The mill processed 2,167 tons per day in
1997.

The ore grade at Lupin declines with depth, and the deposit becomes more
erratic.  The Center Zone of the three-zoned ore body also tends to be narrower.
Additional ground support is required and longer truck haulage distances are a
factor as the depth increases.  All of this causes slower and more costly mining
in the deeper levels of the mine.  The Company has changed its mining techniques
and backfill process to address the challenges of mining at depth.  Mechanized
cut and fill mining techniques may afford an opportunity to better utilize
equipment and to improve profitability at depth.

During 1997, a study was completed which determined that an internal winze was
feasible to access ore below the current depth of the ramp.  The winze will
allow the hoisting of ore from the deeper areas of the mine, reducing haulage
costs.

Supplies, Utilities and Transportation
--------------------------------------
The Lupin mine and mill facilities are in a remote location in the sub-Arctic
region of Canada which requires the Company to respond to difficult weather and
other conditions.  At the mine, the Company maintains supplies of spare parts
and other materials, including fuel, in excess of what would be required at less
remote locations.

The principal supplies needed for the operation of the Lupin mine are diesel
fuel, chemical reagents (including lime, cyanide and zinc), cement,  grinding
media, drill steel, equipment parts, lubricants, food and explosives.  The
largest single item is diesel fuel, which is used principally to generate power.
A diesel-powered generating plant provides power for all the Lupin facilities.
The powerhouse has a primary installed capacity of approximately 18,000
kilowatts which is supplemented by additional standby generators having a
combined capacity of 1,500 kilowatts.  Heating for the Lupin facilities is
obtained by utilizing waste heat from these generators augmented by oil-fired
boilers.

All equipment, materials and supplies must be transported to the mine from
Edmonton or Yellowknife.  Personnel are transported from these locations and
from Kugluktuk (formerly Coppermine) and Cambridge Bay in the Nunavut Territory.
Each year since 1983, the Company has completed a 360-mile ice road commencing
40 miles northeast of Yellowknife and ending at the Lupin mine as the most
economical way of transporting bulk items, including fuel, to the mine. Costs of
operating the winter road during the suspension of operations has had minimal
financial impact on the Company due to cost recoveries through third party user
fees.

In order to operate the winter road, the Company is required to obtain certain
permits from the governments of the Nunavut and Northwest Territories.  To date,
the Company has experienced no significant difficulties in obtaining these
permits.  The winter road is usable for approximately 12 weeks each year
beginning in mid-January during which time tractor-trailers can transport all of
the Company's

                                       18
<PAGE>

annual requirements for diesel fuel, chemical reagents and certain other
supplies. There are on-site facilities for the storage of approximately 5.4
million U.S. gallons of diesel fuel, which is in excess of the mine's annual
requirements.

Surface facilities at the Lupin mine include a 6,300-foot compacted gravel
airstrip with an instrument landing and navigation system and runway lighting.
Supplies and personnel that must be brought in by air are transported
principally on a Boeing 727, which carries up to 114 passengers, or up to 35,000
pounds of freight, or a combination of both passengers and freight.

Voice and data communications with the Lupin mine are maintained via satellite,
which provides for uninterrupted communications regardless of weather
conditions.

Water Supply and Waste Disposal
-------------------------------
Water for mining, milling and domestic use is obtained on site by pumping from
Contwoyto Lake.  Tailings from the mill are pumped into a tailings pond or
pumped underground as part of the paste-backfill.  In 1997, approximately 32% of
tailings were placed underground as paste-backfill. Water from the tailings pond
is processed through a water treatment plant and monitored for compliance with
the Nunavut Territory's standards prior to discharge.  The Company is in the
process of renewing its water license, which expires May 31, 2000.

                                       19
<PAGE>

DEVELOPMENT PROGRAM
Aquarius
--------
In 1997, the Company deferred a final construction decision on its 100%-owned
Aquarius project, located in Macklem Township, 40 kilometers east of Timmins,
Ontario, Canada.  The City of Timmins is centrally located in northeastern
Ontario on Highway 101 approximately 700 kilometers, by road, northwest of
Toronto.  All-weather primary highways connect with Thunder Bay to the west and
North Bay, Sudbury and Toronto to the south.  The project site is located two
kilometers south of Highway 101.

The project site is on a group of 12 patented claims that grant the Company fee
simple title.  The patents are part of a larger land package of leased and
staked claims that cover most of the northern portion of Macklem Township.
Environmental work on the project commenced in May 1995 and the Company expects
completion and approval of the Comprehensive Study Review (CSR) by the
Department of Fisheries & Oceans by the end of the second quarter of 2000.  The
Company will then send the CSR document to the Canadian Environmental Assessment
Agency and to the responsible Minister.  The Company anticipates full federal
approval during the second quarter of 2000.  This will allow the Company to
proceed with obtaining all of the necessary federal and provincial permits to
operate the project.

Aquarius has 1,164,000 ounces of proven and probable gold reserves at December
31, 1999 (15.8 million tons of ore at an average grade of 0.074 ounces per ton).
The reserves were based on a cutoff grade of 0.017 ounce per ton.  The cutoff
grade was based on a price of $325 per ounce of gold.  The gold recovery is
expected to be 95%.

Aquarius is an Archean lode gold deposit with mineralization in carbonate
altered ultramafic rocks, associated felsic intrusives, and quartz veins in
talc-chlorite schists.  Clay overburden 10 to 40 meters thick overlays 30 to 80
meters of glacial till.  The "nuggety" style of gold mineralization at Aquarius
is characteristic of this deposit type and leads to difficulty in the prediction
of ore grades.  This difficulty is addressed by:  i) extensive drilling, ii)
advanced geostatistical analysis with multiple techniques, iii) cross validation
with production data and independent estimates, and iv) review of the results by
an expert consultant.

In 1998, the Company completed the frozen earth system around the pit perimeter
to prevent groundwater from flowing into the pit from the surrounding water
table. Similar systems have been used successfully in construction and
underground mining for over 100 years.  The circumference of the freeze system
is 12,000 ft (2.25 miles, equivalent to 3.66 km), and includes over 600,000
linear feet of drilling in more than 2,200 holes spaced 6.3 feet apart.  This
will allow an adequate distance between the holes to provide a solid barrier,
and it will allow the holes to penetrate the bedrock, which has little water
flow.  A brine solution cooled with refrigeration units is circulated through
the holes, removing the heat from surrounding material and allow it to freeze.
The Company expects that it will take approximately four months for this process
to entirely freeze the wall to prevent water from leaking through the glacial
overburden.  The Company does not plan to operate the frozen earth system during
the period of project deferral.  All facilities and equipment are on a scheduled
care and maintenance program designed to fully preserve all assets.

The Company completed a supplementary engineering review of the Aquarius project
in the third quarter of 1999.  This review considered an alternative processsing
methodology based on semi-autogenous grinding (SAG) and ball milling and the
utilization of certain mining equipment previously belonging to the Paredones
Amarillos project.  See "Other Projects-Paredones Amarillos".  The results of
the review were sufficiently encouraging for the Company to pursue a third party
engineering review process in order to produce an engineering document suitable
for financing purposes.  The Company expects this study will be completed in the
second quarter of 2000.

The first planned stage of mining will be removal of the clay and sand
overburden.  The rock mining stage will produce all of the ore to be milled.
Due to the shape of the deposit, the pit will have two separate bottoms with a
ridge of waste rock separating them.  Mining will be phased to exploit the more

                                       20
<PAGE>

northerly of the two segments first.

The revised processing of ore based on the supplementary engineering study
utilizes a primary crushing circuit followed by SAG and ball milling.  The mill
would contain both gravity and leach circuits.  A flotation recovery circuit is
also being considered.  Centrifugal separators will process the ore that is
amenable to recovery by gravity separation techniques.  A SAG/ball mill and a
series of agitated cyanide leach tanks will process the ore not amenable to
recovery by gravity separation techniques.  The mill has been designed to
process 7,500 tonnes per day under the revised plan.

Electrical power will be supplied to the project from Ontario Hydro, the main
utility provider in the province of Ontario.  The primary sub-station was
installed in 1997.

There will be two sources for water supply.  Fresh water will come from one or
more wells located near the minesite development.  Water will also be reclaimed
from the tailings area.

Based on the proposed mine plan and revised processing concept, the average
annual production rate is expected to be approximately 190,000 ounces.  Average
cash operating costs are expected to be less than $200 per ounce.  Total
production costs are anticipated to be approximately $300 per ounce.  See
"Cautionary 'Safe Harbor' Statement under the United States Private Securities
Litigation Reform Act of 1995" and "Risk Factors."

During the operating phase of the mine, the total site workforce is expected to
consist of approximately 215 people.

Site clearing and road construction began in 1997, but completion was deferred.
The remainder of the engineering, procurement, and construction activities are
currently deferred.

Development holding costs are expensed as incurred.  The Company expensed
Aquarius holding costs of $0.5 million in 1999 and $0.5 million in 1998.  At
December 31, 1999, the Company has capitalized a total of $51.6 million in
acquisition and construction costs related to Aquarius. The Company expects to
expense approximately $1.0 million in development holding costs and $1.6 million
in depreciation for Aquarius in 2000.  The additional investment required to
start-up the Aquarius project will be determined by the revised engineering
study.

OTHER PROJECTS
Paredones Amarillos
-------------------
The Company agreed in the third quarter of 1999 to sell, and has since sold, its
60% interest in the Paredones Amarillos project to its joint venture partners,
subsidiaries Viceroy Resource Corporation ("Viceroy").  In return, the Company
received full ownership of a mill owned by the joint venture, valued at $2.5
million, and a 2% net profits royalty related to Paredones Amarillos production,
capped at $2.0 million.  The joint venture partners have assumed all project
liabilities.  In the third quarter of 1999, the Company recognized a loss on the
sale of Paredones Amarillos of $13.8 million.

Kuranakh
--------
The Company owns 50% of Kuranakh Gold Mining Company ("KGMC") which owns the
Kuranakh project located in the Aldan district of the Sakha Republic in the
eastern part of Russia near the town of Nizhny Kuranakh.  The remaining 50% of
the KMGC is owned by two Russian companies, OAO Aldanzoloto (30%) and OAO
Sakhazoloto (20%).

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.

                                       21
<PAGE>

EXPLORATION
The Company explores for extensions of known reserves at its mines and
development properties in addition to conducting exploration for new gold
deposits.  The Company's exploration program concentrated on those projects
believed to represent the most promising near-term prospects in its portfolio.
In particular, exploration efforts are focused on projects located where the
Company already has, or plans an extensive gold mining infrastructure,
principally those prospects in North America.

In 1999, efforts at Round Mountain focused on identification and exploration in
the areas surrounding the minesite.  Six targets were drill tested with further
drilling warranted at four of those targets.  At McCoy/Cove, the Cove East
mineralized zone was successfully defined by drilling and mined out during the
year.  At Cove South Deep, the limits of a high grade underground zone of
mineralization were defined with definition drilling followed by mining planned
for 2000.  Two other targets on the mine claims were drill tested from surface
during 1999 at McCoy/Cove.  During the year, exploration at Kettle River was
directed at testing an area to the northeast of the K-2 deposit.  Results in
that area were sufficiently encouraging to warrant further definition drilling
from new underground development drifts to be completed in 2000.  The Company
continues to evaluate opportunities within the region for extending the life of
the project.

In 1999, the Company carried out extensive reviews of projects in Nevada and the
western U.S. as well as in the Timmins area in Ontario, Canada.  As a result of
these efforts, three new properties in the U.S. and one new property in Ontario
are now held under agreement with exploration activity planned on each in 2000.
In addition, two new properties were acquired as a result of company regional
exploration programs and work on these is also planned in 2000. Work was also
carried out under terms of joint ventures to advance a number of exploration
projects, such as the Ogden property located near the Aquarius project, the
Kilgore property in Idaho and the Youga/Bitou property in Burkina Faso, West
Africa.  In 2000, other than West Africa, no exploration activity is planned
outside of North America.

ALASKA-JUNEAU
In 1996, the Company wrote off its entire remaining investment in the Alaska-
Juneau project of $57.1 million, and established a reserve of $20.0 million to
cover estimated reclamation and closure responsibilities.  In July 1997, the
Company entered into an agreement which transferred certain responsibilities for
the Alaska-Juneau project closure to a third party environmental firm.  The
third party's performance under the contract is supported by corporate
guarantees and surety bonds.  Total actual spending related to reclamation and
closure costs as of December 31, 1999 is $18.0 million.  The provision for
future reclamation and closure costs is reviewed periodically and adjusted as
additional information becomes available.

SUNNYSIDE
In 1996, Sunnyside Gold Corporation ("SGC"), an indirect wholly owned subsidiary
of the Company, finalized a consent decree with the state of Colorado that set
standards for the release of all reclamation and water treatment permits and
resolved future enforcement issues regarding groundwater seeps and springs.  SGC
estimates that it will take a minimum of an additional four years for all of the
conditions of the consent decree agreement to be fulfilled by both parties.  SGC
has $5.8 million accrued at December 31, 1999 for future reclamation costs at
the Sunnyside mine.  SGC's provision for future reclamation costs is reviewed
periodically and adjusted as additional information becomes available.

OTHER
Precious Metal Sales and Hedging Activities
-------------------------------------------
The Company's dore bars are further refined by third parties before they are
sold as gold or silver bullion.  The refined gold and silver is sold to banks or
precious metal dealers.

The Company's profitability is subject to changes in gold and silver prices,
exchange rates, interest rates and certain commodity prices.  To reduce the
impact of such changes, the Company attempts to lock in

                                       22
<PAGE>

the future value of certain of these items through hedging transactions. These
transactions are accomplished through the use of derivative financial
instruments, the value of which is derived from movements in the underlying
prices or rates.

The gold- and silver-related instruments used in these transactions include
commodity loans, fixed and floating forward sales contracts, spot-deferred
contracts, swaps and options.  Sensitivity to changing metal prices is reduced,
and future revenues are hedged, as the Company's future production will satisfy
these loans and other delivery commitments.  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.  Forward currency transactions more closely link profitability of
Canadian operations to the price of gold in U.S. dollars.  The Company has also
engaged in crude oil hedging activities, including forward purchase agreements
and swaps, to reduce the impact of fluctuations in crude oil prices on its
operating costs.

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.

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.

In 1999, the Company delivered approximately 77% of gold production against
forward sales, put options and gold loans at an average commitment price of $346
per ounce.  This compares with 96% of gold production at $341 per ounce in 1998
and 33% of gold production at $397 per ounce in 1997.  Approximately 43% of
silver production was delivered against forward sales and put options at an
average cash price of $5.66 per ounce in 1999.  This compares to 50% at $5.44
per ounce in 1998 and 7% at $5.32 per ounce in 1997.  1997 deliveries reflect
the impact of an early 1997 repurchase of outstanding gold and silver forward
sales.

The Company's hedge position as of December 31, 1999 partially protects the
Company against gold price declines in the years 2000 through 2005.  For 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
$273 per ounce to provide downside protection in 2000.  For 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.

The Company's hedge commitments at December 31, 1999 are set out in note 18 to
the Company's consolidated financial statements.

Governmental and Environmental Regulation
-----------------------------------------
Canada
The mining industry in the Nunavut Territory, where the Company's Lupin mine is
situated, operates under Canadian federal and territorial legislation governing
prospecting, development, production,

                                       23
<PAGE>

environmental protection, exports, income taxes, labor standards, mine safety
and other matters. The Company believes its Canadian operations are operating in
substantial compliance with applicable law. The operation of the Lupin mine is
subject to substantial regulation by government authorities, which is in many
instances discretionary.

The Company's Lupin operation is subject to environmental regulation primarily
by the Federal Department of Indian Affairs and Northern Development and the
Nunavut Water Board.  The Company is subject to the jurisdiction of the Nunavut
Water Board and any further approvals or licenses will have to be obtained from
that Board.  In addition, any changes or additions to existing operations at
Lupin may be subject to environmental assessment by the federal government under
the Canadian Environmental Assessment Act (Canada).  The federal Departments of
Fisheries & Oceans and Environment have an enforcement role in the event of
environmental incidents, but presently have no direct regulatory role in
relation to the Lupin operation.  Lupin is also subject to enforcement by the
Nunavut Department of Sustainable Development pursuant to the Nunavut
Environmental Protection Act.  This Act contains requirements to obtain licenses
and permits which may, in the future, affect the Lupin operation.  The Company
believes it is in substantial compliance with all relevant territorial
environmental law.

On April 1, 1999, the Nunavut Agreement, dated May 25, 1993, between the Inuit
of Canada's eastern arctic region and Her Majesty the Queen in right of Canada,
came into force.  Under this agreement, the Inuit were granted ownership of
approximately 360,000 square kilometers of land in an area referred to as the
Nunavut Settlement Area, including ownership of subsurface rights in
approximately 37,500 square kilometers of those lands.  Existing third party
interests in lands in the Nunavut Settlement Area are protected under the
Nunavut Agreement.  Where a third party was granted a mining lease under the
Canada Mining Regulations in lands comprising the Nunavut Settlement Area, that
interest continues in accordance with the terms and conditions on which it was
granted, including any rights granted under the legislation which gave rise to
the interest.  However, where any successor legislation has the effect of
diminishing the rights afforded to the federal government, it will not bind the
Inuit without its consent. The Inuit are entitled to receive whatever
compensation is payable by the interest holder for the use or exploitation of
mineral rights.  The federal government continues to administer the third party
interest on behalf of the Inuit, unless the third party and the Inuit enter into
an agreement under which the third party agrees to the administration of their
interest by the Inuit. In the event such an agreement is reached, the applicable
legislation will cease to apply to the third party interest.  Existing
subsurface interests in such lands continue to be administered in accordance
with applicable legislation relating to those interests and are not affected by
the Nunavut Agreement.

New third party interests in lands in the Nunavut Settlement Area are granted,
in the case of surface rights, by the appropriate regional Inuit association
and, in the case of subsurface rights, by Nunavut Tungavik Incorporated which
will hold subsurface title to Inuit owned lands and who will be additionally
responsible, in consultation with the appropriate regional Inuit associations,
for the administration and management of those subsurface rights.

On January 1, 1994, the North American Free Trade Agreement ("NAFTA") between
Canada, the United States and Mexico came into force.  NAFTA amends the
Investment Canada Act and its regulations and guidelines in that the investors
of the United States and Mexico are treated more favorably than all other "non-
Canadian" investors with respect to reviews by Investment Canada.  Direct
acquisitions of Canadian businesses by investors from the United States or
Mexico are only subject to review if the acquisitions exceed a certain threshold
which is adjusted annually in accordance with a formula set out in Annex I to
NAFTA.  However, indirect acquisitions of Canadian businesses by investors from
the United States or Mexico are not subject to review.

The Competition Act (Canada) ("the Act") obliges parties to proposed
transactions in the nature of mergers and acquisitions which exceed prescribed
party size and transaction size thresholds to notify the Commissioner of
Competition (the "Commissioner"), provide prescribed information about the
parties and the transaction, and prohibits the parties from completing the
transaction until the prescribed waiting period (either 14 or 42 days, depending
on the form of the notification used) has expired.  The party size

                                       24
<PAGE>

threshold is exceeded when the transacting parties, together with their
affiliates, have assets in Canada or have gross annual revenues from sales in,
from or into Canada that exceed Cdn.$400 million. The transaction size threshold
depends on the type of transaction. For asset acquisitions, pre-notification is
required where the assets in Canada or gross annual revenues from sales in or
from Canada generated by those assets exceeds Cdn.$35 million. For share
acquisitions, pre-notification is required if the corporation, the shares of
which are being acquired, has assets in Canada or gross revenues from sales in
or from Canada generated from those assets that exceed Cdn.$35 million, and
where the person or persons acquiring the shares acquire voting rights that
exceed 20% for public companies and 35% for private companies. The purpose of
the pre-notification provisions is to provide the Commissioner with information
to assess whether he should challenge the transaction under the merger
provisions of the Act on the grounds that they are likely to prevent or lessen
competition substantially.

United States
The Company's U.S. operations are subject to comprehensive regulation with
respect to operational, environmental, safety and similar matters by federal
agencies including the U.S. Department of the Interior (Bureau of Land
Management), the U.S. Department of Agriculture (U.S. Forest Service), the U.S.
Environmental Protection Agency ("EPA"), the U.S. Mine Safety and Health
Administration ("MSHA") and similar state and local agencies.  Failure to comply
with applicable laws, regulations and permits can result in injunctive actions,
damages and civil and criminal penalties.  If the Company expands or changes its
existing operations or proposes any new operations, it may be required to obtain
additional or amended permits or authorizations in accordance with the National
Environmental Policy Act (NEPA) or state law counterparts.  The Company spends
substantial time, effort and funds in planning, constructing and operating its
facilities to ensure compliance with U.S. environmental and other regulatory
requirements.  Such efforts and expenditures are common throughout the U.S.
mining industry and generally should not have a material adverse effect on the
Company's competitive position.

The Company believes its U.S. operations are in substantial compliance with
applicable air and water quality laws and regulations, including reporting
requirements under the Emergency Planning Community Right to Know Act, and that
it has acquired or applied for all permits required under such laws or requested
by the states in which it is operating.

Certain wastes from mining and mineral processing operations are currently
exempt from regulation under the Bevill amendment to the federal Resource
Conservation and Recovery Act ("RCRA").  However, Congress may consider revision
and reauthorization of RCRA, as well as the federal Clean Water Act and
Endangered Species Act, each of which substantially affects mine development and
operations.  The effect of any revised or additional regulation on the Company's
U.S. operations cannot be determined until the legislative process is completed
and new administrative rules are issued, but they can have a significant impact
upon operations of all mining companies and increase the costs of those
operations.

New laws and regulations, amendments to existing laws and regulations,
administrative interpretation of existing laws and regulations, or more
stringent enforcement of existing laws and regulations, could have a material
adverse impact on the Company's results of operations and financial condition,
although the results of such actions are speculative.  For example, during the
1999 legislative session, legislation was considered in the United States
Congress which proposed a number of modifications to the General Mining Law of
1872, which has traditionally governed the location and maintenance of
unpatented mining claims and related activities on federal land.  Among these
modifications were proposals which would have (i) imposed a royalty on
production from unpatented mining claims, (ii) increased the cost of holding and
maintaining such claims, and (iii) imposed more specific reclamation
requirements and standards for operations on such claims.  None of these
proposed modifications was enacted into law.  The same or similar proposals may
be considered by Congress in 2000 as well.  In addition, the Bureau of Land
Management is currently working on proposed administrative revisions to federal
regulations which govern surface activities (including reclamation and financial
assurance requirements) on unpatented mining claims.  Those regulations are
likely to be finalized during 2000.  The potential impact on the

                                       25
<PAGE>

Company as a result of such congressional or administrative action is difficult
to predict. See "Risk Factors-Governmental Regulation."

A material direct economic impact of potential mining law revision could be from
the imposition of royalties on production from the McCoy/Cove mine and the
50%-owned Round Mountain mine in Nevada, as a material portion of the reserves
from these mines are from unpatented lode mining claims on federal land.
However, the Company has completed all of the steps currently required under
U.S. law to convert critical McCoy/Cove and Round Mountain claims to patented
status.  The Company's applications for patents are being processed, and the
Company expects the government to complete its administrative review in
accordance with applicable law and regulations, although the Company can not
predict with certainty whether those patents will be issued or the time frame
for such issuance.  See "Risk Factors -Government Regulations."

The federal Comprehensive Environmental Response, Compensation and Liability Act
of 1980 ("CERCLA"), commonly called the "Superfund Act," contains stringent
reporting requirements for the release or disposal of hazardous substances, with
substantial fines for noncompliance.  In addition, under CERCLA, any party
responsible for the release or threatened release of a hazardous substance into
the environment is liable for all clean-up costs.  Responsible parties under
CERCLA include the owner or operator of the site where the release occurs or
anyone who owned or operated the site when a disposal was made, regardless of
culpability.  Mining wastes are subject to CERCLA regulation if they contain
hazardous substances, and EPA has included several mining sites on its list of
high-priority sites for clean-up under CERCLA.

The Stibnite property near Yellow Pine, Idaho was the subject of a preliminary
investigation/site assessment ("PI/SA") by the Environmental Protection Agency
indicating that the site may be eligible for inclusion on the National
Priorities List ("NPL") under CERCLA.  During 1985, Copper Range Company, then
an acquired subsidiary of the Company, and from November 1985 to December 1989,
Round Mountain Gold Corporation, a subsidiary of the Company, owned a 20%
interest in a joint venture that controlled several claims in the Stibnite area.
Copper Range Company, a subsidiary of the Company from January 1985 until
November 1985, is on the list of present and former owners or operators of
properties at the Stibnite site.  Round Mountain Gold Corporation, because it
owned 20% of the joint venture between November 1985 and December 1989, also
may be alleged to have liability for a share of the cleanup costs at the site.
At this time, it is not possible to estimate the size of the potential cost of
cleanup, or to state how much of that liability, if any, might be the
responsibility of Round Mountain Gold Corporation.  However, in 1997 a voluntary
Administrative Order on Consent was entered into between the State of Idaho
Division of Environmental Quality and the three principal companies involved in
the site pursuant to which remediation studies have been conducted, and some
remediation of the site has subsequently been performed.  No CERCLA cost
recovery action against Round Mountain Gold Corporation or the Company is
presently anticipated.

Various types of dust control, revegetation and similar reclamation-related
measures are generally required for the Company's U.S. operations under specific
state or federal air, water quality and mine reclamation rules and permits.  The
Bureau of Land Management ("BLM") and Forest Service permits and Plans of
Operations for the Company's operations also contain reclamation-related
requirements.  The Company believes its operations are in substantial compliance
with these reclamation requirements.

The Company believes that all of its U.S. operations are currently being
conducted in substantial compliance with applicable MSHA and similar state
labor, health and safety rules.

                                       26
<PAGE>

Employees
---------
At December 31, 1999, the Company employed 1,212 persons excluding temporary
employees directly involved in short-term programs, broken down as follows.


Round Mountain, including ancillary services                         670
McCoy/Cove                                                           275
Kettle River                                                         149
Lupin                                                                 74
Technical and corporate staff and other                               44
                                                                   -----
                                                                   1,212
                                                                   =====

A sufficient supply of qualified workers is available for both Canadian and U.S.
operations, although the continuation of such supply depends upon a number of
factors, including, principally, the demand occasioned by other projects.  None
of the Company's employees are represented by labor unions. The Company believes
it generally has good relations with its employees.  The Company provides its
employees with a competitive compensation package and comprehensive benefits
program.

Executive Officers of the Registrant
------------------------------------
The executive officers of the Company are listed below.

<TABLE>
<CAPTION>
                                                   Position with the Company and business experience within the
Name                                      Age      last five years
---------------------------------------------------------------------------------------------------------------
<S>                                       <C>      <C>
LOIS-ANN L. BRODRICK                      56       Vice President and Corporate Secretary of the Company since
                                                   March 1998; Corporate Secretary of the Company from May 1996 to
                                                   March 1998; prior thereto Assistant Corporate Secretary of the
                                                   Company

DONALD C. EWIGLEBEN                       46       Vice President, Environmental and Public Affairs of the Company
                                                   since August 1994

ROBERT L. LECLERC                         55       Chairman and Chief Executive Officer of the Company since April
                                                   1997; Chairman of the Company from May 1996 to April 1997; prior
                                                   thereto Chairman and Chief Executive Officer and partner, Milner
                                                   Fenerty (barristers and solicitors)

JERRY L.J. MCCRANK                        49       Vice President, Operations of the Company since March 1998;
                                                   prior thereto various senior operations positions with the
                                                   Company

TOM S.Q. YIP                              42       Vice President, Finance and Chief Financial Officer of the
                                                   Company since August 1999; Vice President, Controller and
                                                   Principal Accounting Officer of the Company from March 1998 to
                                                   August 1999; Controller and Principal Accounting Officer of the
                                                   Company from September 1997 to March 1998; prior thereto various
                                                   corporate financial positions with the Company
------------------------------------------------------------------------------------------------------------------
</TABLE>

Mining Risks and Insurance
--------------------------
The Company carries insurance against property damage, including boiler and
machinery insurance, and also comprehensive general liability insurance of a
total of $50 million per occurrence, which is available to all operations.  The
Company carries special liability policies applicable to aircraft and motor
vehicles.  It is also insured against dishonesty and gold and silver bullion
thefts, as well as losses of goods in transit.  The property damage and boiler
and machinery insurance policies include coverage for business interruption,
resulting from an insured physical loss, subject to a five day waiting period
and a maximum indemnification period of one year.

                                       27
<PAGE>

Risks not insured against include mine cave-ins, mine flooding and other
uninsurable underground hazards, ground failure in open-pit mines and most types
of environmental pollution against which the Company cannot insure or against
which it has elected not to insure.

The Company believes that it has taken adequate precautions to minimize the risk
of environmental pollution.  However, with respect to certain mines, there is
some risk that cyanide may escape from leach pads or tailings dams in sufficient
quantities to cause water or surface pollution and there is some risk of
environmental impairment liability under environmental laws.  See "Government
Regulation and Environmental Issues."

Underground mining is generally subject to certain types of risks and hazards,
including unusual or unexpected formations, pressures, cave-ins, flooding and
other conditions.  The Company has not experienced any significant cave-ins at
its underground mines.  In addition, because mining can be conducted on a number
of different levels at the same time, a cave-in in one area would not
necessarily affect mining in other areas.

Open-pit mining, such as that conducted at certain of the Company's mines, is
generally subject to certain types of risks and hazards, primarily unpredictable
pit wall failure.  Open pit mining is conducted in phases and a pit wall failure
in one area would not necessarily affect overall pit design or mining in
unaffected areas.  See "McCoy/Cove" regarding the Company's 1996 $30.0 million
provision related to the estimated costs to remove waste rock from a portion of
the Cove pit wall that had collapsed.

Supplies, Utilities and Transportation
--------------------------------------
The principal supplies needed for the operation of the Company's mines are
explosives, diesel fuel, chemical reagents (including cyanide, lime, sulfur
dioxide, sodium hydroxide and zinc dust), cement, equipment parts and
lubricants.

Power is supplied to the Company's mines by power companies or by diesel
generators. Each mine has access to adequate water.

Each of the U.S. mines has good road access by either paved or gravel roads from
state highways.

See also "Lupin-Supplies, Utilities and Transportation."

Waste Disposal
--------------
Heap leaching is done with a weak cyanide solution held within a closed circuit,
which includes the leach pads and surface holding ponds.  Leached ore from the
reusable pad at Round Mountain is washed and deposited adjacent to the mine
site.  Where dedicated pads are used, the leached ore remains on the pads.  Mill
processing may use a cyanide leaching solution, which is contained within the
mills' processing circuits.  See "Government Regulation and Environmental
Issues."

See also "Lupin-Water Supply and Waste Disposal."

Royalties
---------
Production from the Company's mines is subject to certain royalties.  These are
described in note 19 to the Company's consolidated financial statements.

History of the Company
----------------------
The Company was incorporated in Canada in 1964.  Between 1964 and 1982, the
Company developed and operated several silver mines near Port Radium in the
Northwest Territories of Canada and produced 35.5 million ounces of silver.
These silver reserves were mined out in 1982.

In 1979, the Company optioned the Lupin gold property, located 190 miles east of
Port Radium.  Construction of the Lupin mine began in August 1980, and
commercial production commenced in

                                       28
<PAGE>

October 1982. During 1982 through 1984, the Company concentrated efforts on
developing the Lupin mine.

With earnings generated from Lupin, the Company initiated an aggressive
acquisition, exploration and development program.

During 1985 and 1986, the Company acquired a 50% interest in the Round Mountain
mine and 100% interests in the McCoy, Borealis, Manhattan, Sunnyside and Illipah
mines.  The Cove deposit was discovered adjacent to the McCoy mine in early
1987, and major expansions at McCoy/Cove and Round Mountain were started in
1988.  The mine expansions were substantially funded by borrowing gold and
silver.  Gold and silver financing allowed the Company to hedge future
production and to obtain the low interest rates associated with bullion
financings.  The Borealis, Manhattan, Sunnyside and Illipah mines have
subsequently been mined out and closed.

In 1985, the Company acquired a 100% interest in the Alaska-Juneau project near
Juneau, Alaska.  In 1987, the Company entered into a joint venture related to
the Kensington project near Juneau, Alaska, in which the Company held a 50%
interest.

In 1990, the Company brought the Kettle River mine in Washington state into
commercial production.  In 1992, the Company increased its ownership interest to
100% from 70% when the Company's 30% partner withdrew from the Kettle River
joint venture.

Beginning in 1993, the Company increased exploration activities significantly.
Exploration programs were funded at all operating properties and also at many
other locations along the major gold belts of North America, Central America,
South America and West Africa.  Most of the Company's exploration expenditures
were made outside of the United States and Canada.

In 1995, the Company added five development properties: Paredones Amarillos in
Mexico, Chapada in Brazil, Kingking in the Philippines, and Aquarius and Ulu in
Canada.  The Company sold its interest in the Kensington project to its joint
venture partner in 1995.

In 1996, underground development began at Ulu and the Company wrote off its
entire remaining investment in the Alaska-Juneau project.

During 1996 and 1997, the Company increased its ownership from 7% to 58% of the
outstanding common shares of Santa Elina Mines Corporation ("Santa Elina"),
which holds interests in mining properties, principally in Brazil, and also in
Bolivia.

In 1997, in response to the declining gold prices, in the fourth quarter of
1997, the Company deferred final construction decisions on the Aquarius and
Paredones Amarillos development properties and deferred further development of
the Ulu deposit and the Company narrowed the focus of its exploration program
principally to projects in North America where the Company already has extensive
gold mining infrastructure.

During 1997, the Company recorded $346.0 million in provisions for impaired
assets and recorded $16.7 million for related severance costs as described in
note 11 to the Company's consolidated financial statements.

In January 1998, the Company temporarily suspended operations at the Lupin mine.
In the fourth quarter of 1999, the Company announced its decision to reopen the
Lupin mine, with production expected to recommence in April 2000.

The Company agreed in the third quarter of 1999 to sell its 60% interest in the
Paredones Amarillos project in Mexico to its joint venture partner, and
recognized a loss of $13.8 million.

                                       29
<PAGE>

RISK FACTORS
Recent Losses
-------------
The Company incurred net losses of $37.3 million in 1999, $20.1 million in 1998,
and $420.5 million in 1997.  The loss in 1999 compared to 1998 reflects lower
gold sales volumes, the 1999 loss on the sale of the Company's interest in
Paredones Amarillos of $13.8 million versus the 1998 gain on the sale of Santa
Elina and other mining properties of $7.4 million, and decreased average gold
and silver prices realized.  These factors were partially offset by decreased
operating costs, lower depreciation and amortization, increased silver sales
volumes and decreased exploration and development spending.  The loss in 1998
reflects reduced operating costs and decreased exploration and development
expense compared to 1997, partially offset by lower revenues resulting from
lower gold and silver volumes and decreased average gold price realized.  The
loss in 1997 reflects a $362.7 million provision for impaired assets and other
charges, primarily comprised of write-offs related to the Kingking project
($50.0 million) and the investment in Santa Elina ($143.6 million); and the
reduction of carrying values at certain operating properties ($127.0 million).
The Company incurred exploration and development expenses of  $8.8 million in
1999, $12.0 million in 1998, and $34.9 million in 1997.  The Company's
profitability depends on, among other things, the price of gold and silver,  the
profitability of production at existing and new mines, a successful restart of
the Lupin mine, and the ability to bring into commercial production the projects
that have been the subject of the Company's exploration and development
programs.  See "Liquidity," "Gold and Silver Prices," "Uncertainty of Reserve
and Other Mineralization Estimates" and "Estimation of Asset Carrying Values"
for additional disclosure with respect to factors which may affect the carrying
values of the Company's assets, and the Company's results of operations and
financial condition generally.

Mine Development Risks
----------------------
The Company's ability to maintain, or increase, its annual production of gold
and silver will be dependent in significant part on its ability to bring new
mines into production, such as the Aquarius project in Canada, and to expand
existing mines.  In 1997, the Company deferred a final construction decision on
Aquarius and deferred further development of the Ulu satellite deposit in
Canada.  Although the Company utilizes the operating history of its existing
mines to derive estimates of future operating costs and capital requirements,
such estimates may differ materially from actual operating results at new mines
or at expansions of existing mines.  The economic feasibility analysis with
respect to any individual project is based upon, among other things, the
interpretation of geological data obtained from drill holes and other sampling
techniques, feasibility studies (which derive estimates of cash operating costs
based upon anticipated tonnage and grades of ore to be mined and processed),
precious metals price assumptions, the configuration of the ore body, expected
recovery rates of metals from the ore, comparable facility and equipment costs,
anticipated climatic conditions, estimates of labor productivity, royalty or
other ownership burdens and other factors.  In addition, many of the risks
identified below under "Exploration Risks" are also applicable to the Company's
development projects.  Such development projects are also subject to the
successful completion of final feasibility studies, issuance of necessary
permits and receipt of adequate financing.  Although the Company's feasibility
studies are completed with the Company's knowledge of the operating history of
similar ore bodies in the region, the actual operating results of its
development projects may differ materially from those anticipated, and
uncertainties related to operations are even greater in the case of development
projects.

Exploration Risks
-----------------
Since mines have limited lives based on proven and probable reserves, the
Company continually seeks to replace and expand its reserves.  Moreover, two of
the Company's mines, McCoy/Cove and Kettle River are nearing the end of their
mine lives, which has led to significant emphasis on the Company's exploration
program.  Mineral exploration, at both newly acquired properties and existing
mining operations, is highly speculative in nature, involves many risks and
frequently does not result in the discovery of minable reserves.  There can be
no assurance that the Company's exploration efforts will result in the discovery
of significant gold or silver mineralization or that any mineralization
discovered will result in an increase of the Company's proven or probable
reserves.  If proven or probable reserves are developed, it may take a number of
years and substantial expenditures from the initial phases of drilling until
production is possible, during which time the economic feasibility of production
may change.  For example, the feasibility study on

                                       30
<PAGE>

the Kingking project completed in 1997 indicated that the project was uneconomic
with the option agreement in place and the Company recorded a $50.0 million
provision to write off its entire investment in the project. No assurance can be
given that the Company's exploration programs will result in the replacement of
current production with new reserves or that the Company's development program
will be able to extend the life of the Company's existing mines. In the event
that new reserves are not developed, the Company will not be able to sustain any
mine's current level of gold or silver production beyond the life of its
existing reserve estimates.

The Company encounters strong competition from other mining companies in
connection with the acquisition of properties producing or capable of producing
precious metals.  As a result of this competition, some of which is with
companies with greater financial resources than the Company, the Company may be
unable to acquire attractive mining properties on terms it considers acceptable.
In addition, there are a number of uncertainties inherent in any program
relating to the location of economic ore reserves, the development of
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities.  Accordingly,
there can be no assurance that the Company's acquisition and exploration
programs will yield new reserves to replace and expand current reserves.

Liquidity and Capital Resources
-------------------------------
The cash operating costs at the Company's three operating mines averaged $215
per ounce in 1999, and are expected to decrease to between $200 and $210 per
ounce in 2000.  Total production costs were $315 per ounce in 1999.  In the
current low gold price environment, the Company's cost structure has significant
implications for the Company's liquidity and flexibility to invest funds in
exploration and development.  While the Company continues to generate cash flow
from operations at current gold prices,  the amount of cash flow available for
acquisitions, investments, exploration and development is very limited.  As a
result, the Company is carefully monitoring its discretionary spending, though
it intends to continue to conduct exploration and development activities
consistent with a more focused program.

The Company's existing credit facilities provide some additional liquidity.  The
Company currently has $38 million outstanding, and up to $12 million or gold
equivalent, subject to covenant limitations, available until August 2001, under
its revolving credit facility.  The Company has no restrictions on the borrowing
capacity of this line, based on the current trailing 90-day average spot price
of gold.  A depressed gold price can limit the Company's ability to borrow under
the revolving credit facility.  While management believes existing loan
facilities and other capital resources are adequate for 2000, the Company may be
required to seek additional external financing and to further reduce
discretionary spending.  There can be no assurance that the Company would be
successful in attracting external financing on terms and conditions favorable to
it.

Certain regulatory agencies may require security to be provided for some or all
of the cost to restore land disturbed during operations.  The Company has
provided letters of credit, surety bonds and corporate guarantees as security
for these future reclamation costs. Future reclamation costs are determined
using management's best estimates of the scope of work to be performed and the
related costs.  See note 8 to the consolidated financial statements.  These
estimates may change based on future changes in operations, costs, reclamation
activities and regulatory requirements.  See "Governmental and Environmental
Regulation."  The Company is currently in compliance with all reclamation
bonding requirements.  In the event that the Company is unable to secure the
necessary letters of credit or surety bonds or to provide the necessary
corporate guarantees to secure reclamation obligations, the Company could be in
violation of its operating permits which could have a significant impact on the
Company's ability to continue operating at the specific location.  Future
reclamation obligations are expected to be funded from operating cash flows.

Gold and Silver Prices
----------------------
The profitability of the Company's current operations is directly related and
sensitive to the market price of gold and silver.  Gold prices are currently and
have been at depressed levels since the beginning of 1997.  Gold and silver
prices fluctuate widely and are affected by numerous factors beyond the
Company's control,

                                       31
<PAGE>

including global supply and demand, expectations with respect to the rate of
inflation, the exchange rates of the dollar to other currencies, interest rates,
forward selling by producers, central bank sales and purchases, production and
cost levels in major gold-producing regions such as South Africa and the former
Soviet Union, global or regional political, economic or financial situations and
a number of other factors.

The current demand for, and supply of, gold and silver affect the prices of such
metals, but not necessarily in the same manner as current demand and supply
affect the prices of other commodities.  The potential supply of gold consists
of new mine production plus existing stocks of bullion and fabricated gold held
by governments, financial institutions, industrial organizations and
individuals.  Since mine production in any single year constitutes a very small
portion of the total potential supply of gold, normal variations in current
production do not necessarily have a significant effect on the supply of gold or
on its price.  If gold or silver prices should decline below the Company's cash
costs of production and remain at such levels for any sustained period, the
Company could determine that it is not economically feasible to continue
commercial production at any or all of its mines.  For example, in January 1998,
the Company temporarily suspended operations at the Lupin mine.  Although the
Company has a hedging program in place to reduce the risk associated with gold
and silver price volatility, there is no assurance that the Company's hedging
strategies will be successful.  See "Other-Precious Metal Sales and Hedging
Activities" and "Management's Discussion and Analysis - Commitments and
Contingencies."  Furthermore, should the Company experience a prolonged period
of depressed gold prices and prepare its reserve calculations and/or life-of-
mine plans at significantly lower prices than those used at year-end 1999, the
Company could experience material write-downs of its investment in mining
properties.  See "Uncertainty of Reserve and Other Mineralization Estimates" and
"Estimation of Asset Carrying Value."

Estimation of Asset Carrying Values
-----------------------------------
The Company periodically undertakes a detailed review of the life-of-mine plans
for its operating properties and an evaluation of the Company's portfolio of
development projects, exploration projects and other assets.  The recoverability
of the Company's carrying values of its operating and development properties are
assessed by comparing carrying values to estimated future net cash flows from
each property.  The 1999 analysis used price assumptions of $325 per ounce of
gold and $5.50 per ounce of silver for purposes of estimating future cash flows.
No asset impairments were evident in 1999 or 1998 based on the Company's
analyses in those years.  The 1997 analysis resulted in the Company recording a
$346.0 million provision for impaired assets in 1997.  See note 11 to the
consolidated financial statements.

The Company assesses the carrying values of its assets on an ongoing basis as
required by generally accepted accounting principles.  Factors which may affect
carrying values include, but are not limited to, gold and silver prices, capital
cost estimates, mining, processing and other operating costs, grade and
metallurgical characteristics of ore, mine design and timing of production. In
the event of a prolonged period of depressed gold prices, the Company may be
required to take additional material write-downs of its operating and
development properties.

Uncertainty of Reserve and Other Mineralization Estimates
---------------------------------------------------------
There are numerous uncertainties inherent in estimating proven and probable
reserves and other mineralization, including many factors beyond the control of
the Company.  The estimation of reserves and other mineralization involves
subjective judgments about many relevant factors, and the accuracy of any such
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment.  Results of drilling, testing and
production subsequent to the date of an estimate may justify revision of such
estimate.  Assumptions about prices are subject to great uncertainty and gold
and silver prices have fluctuated widely in recent years and are currently at
depressed levels.  See "Gold and Silver Prices."  No assurance can be given that
the volume and grade of reserves mined and processed and recovery rates will be
as anticipated.  Declines in the market price of gold and related precious
metals also may render reserves or other mineralization containing relatively
lower grades of mineralization uneconomic to exploit.  The prices used in
estimating the Company's ore reserves at December 31, 1999 were $325 per ounce
of gold and $5.50 per ounce of silver.  The market prices were $290 per ounce of
gold and $5.40 per ounce of silver at December 31, 1999.  The market price of
gold has for more than two years traded, on average, below the price at which
the Company estimates its reserves.  If the Company were to determine

                                       32
<PAGE>

that its reserves and future cash flows should be estimated at a significantly
lower gold price than that used at December 31, 1999, there would likely be a
reduction in the amount of gold reserves. For example, the Company estimates
that, based on extrapolation of information developed in reserve estimation, but
without the same degree of analysis as required for reserve estimation, if the
Company's reserves at December 31, 1999 were based on a price of $300 per ounce
of gold, while the reserves at the operating properties would not decrease, the
reserves at Aquarius would decrease approximately 11%. Under certain such
circumstances, the Company may discontinue the development of a project or
mining at one or more of its properties. For example, in 1997 the Company
deferred a final construction decision on the planned gold mine Aquarius and
deferred further development of the Ulu satellite deposit. Additionally, in
January 1998, the Company temporarily suspended operations at the Lupin mine.
Further, changes in operating and capital costs and other factors, including but
not limited to short-term operating factors such as the need for sequential
development of ore bodies and the processing of new or different ore grades and
ore types, may materially and adversely affect reserves.

Mining and Processing
---------------------
The Company's business operations are subject to risks and hazards inherent in
the mining industry, including but not limited to unanticipated variations in
grade and other geological problems, water conditions, surface or underground
conditions, metallurgical and other processing problems, mechanical equipment
performance problems, the unavailability of materials and equipment, accidents,
labor force disruptions, force majeure factors, unanticipated transportation
costs and weather conditions, any of which can materially and adversely affect,
among other things, the development of properties, production quantities and
rates, costs and expenditures and production commencement dates.

The Company's processing facilities are dependent on continuous mine feed to
remain in operation.  Insofar as the Company's mines may not maintain material
stockpiles of ore or material in process, any significant disruption in either
mine feed or processing throughput, whether due to equipment failures, adverse
weather conditions, supply interruptions, labor force disruptions or other
issues, may have an immediate adverse effect on the results of operations of the
Company.  A significant reduction in mine feed or processing throughput at a
particular mine could cause the unit cost of production to increase to the point
where the Company could determine that some or all of the Company's reserves
were uneconomic to exploit.

The Company periodically reviews mining schedules, production levels and asset
lives in its life-of-mine planning for all of its operating and development
properties.  Significant changes in the life-of-mine plans can occur as a result
of mining experience, new ore discoveries, changes in mining methods and rates,
process changes, investments in new equipment and technology, precious metals
price assumptions, and other factors.  Based on this analysis, the Company
reviews its accounting estimates and in the event of an impairment, may be
required to write-down the carrying value of a mine or mines.  This complex
process continues for the life of every mine.  See "Estimation of Asset Carrying
Values."

As a result of the foregoing risks, among other things, expenditures on any and
all projects, actual production quantities and rates, and cash costs may be
materially and adversely affected and may differ materially from anticipated
expenditures, production quantities and rates, and costs, just as estimated
production dates may be delayed materially, in each case especially to the
extent development projects are involved.  Any such events can materially and
adversely affect the Company's business, financial condition, results of
operations and cash flows.

Mining Risks and Insurance
--------------------------
The business of gold and silver mining is generally subject to a number of risks
and hazards, including environmental conditions, industrial accidents, labor
disputes, unusual or unexpected geological conditions, ground or slope failures,
cave-ins, changes in the regulatory environment and natural phenomena such as
inclement weather conditions, floods, blizzards and earthquakes.  Such
occurrences could result in damage to, or destruction of, mineral properties or
production facilities, personal injury or death, environmental damage to the
Company's properties or the properties of others, delays in mining, monetary
losses and possible legal liability.  The Company maintains insurance against
certain risks that are typical in the gold mining industry and in amounts that
the Company believes to be reasonable, but which may not provide

                                       33
<PAGE>

adequate coverage in certain circumstances. However, insurance against certain
risks (including certain liabilities for environmental pollution or other
hazards as a result of exploration and production) is not generally available to
the Company or to other companies within the industry on acceptable terms. See
"Other-Insurance and Mining Risks."

Governmental Regulation
-----------------------
The Company's mining operations and exploration and development activities are
subject to extensive Canadian, U.S. or other foreign federal, state, provincial,
territorial and local laws and regulations governing exploration, development,
production, exports, taxes, labor standards, waste disposal, protection and
remediation of the environment, reclamation, historic and cultural resources
preservation, mine safety and occupational health, toxic substances, reporting
and other matters.  See "Other-Governmental Regulation and Environmental
Issues."  The costs of discovering, evaluating, planning, designing, developing,
constructing, operating and closing the Company's mines and other facilities in
compliance with such laws and regulations are significant.  It is possible that
the costs and delays associated with compliance with such laws and regulations
could become such that the Company would not proceed with the development or
operation of a mine.

As part of its normal course of operating and development activities, the
Company has expended significant resources, both financial and managerial, to
comply with governmental regulations and permitting requirements, and
anticipates that it will continue to do so in the future.  Moreover, it is
possible that future regulatory developments, such as increasingly strict
environmental protection laws, regulations and enforcement policies thereunder,
and claims for damages to property and persons resulting from the Company's
operations, could result in substantial costs and liabilities in the future.

The Company is required to obtain governmental permits to develop its reserves
and for expansion or advanced exploration activities at its operating properties
and its exploration properties.  Obtaining the necessary governmental permits is
a complex and time-consuming process involving numerous Canadian, U.S. or
foreign federal, state, provincial, territorial and local agencies.  The
duration and success of each permitting effort are contingent upon many
variables not within the Company's control. In the case of foreign operations,
governmental approvals, licenses and permits are, as a practical matter, subject
to the discretion of the applicable governments or governmental officials.  In
the context of environmental protection permitting, including the approval of
reclamation plans, the Company must comply with known standards, existing laws
and regulations that may entail greater or lesser costs and delays depending on
the nature of the activity to be permitted and the interpretation of the laws
and regulations implemented by the permitting authority.  The failure to obtain
certain permits and associated financial assurance, or the imposition of
extensive conditions upon certain permits, could have a material adverse effect
on the Company's business, operations and prospects.

Risk of International Operations
--------------------------------
Many of the mineral rights and interests of the Company are subject to
governmental approvals, licenses, agreements and permits.  Such approvals,
licenses, agreements and permits are, as a practical matter, subject to the
discretion of the applicable governments or governmental officials.  No
assurance can be given that the Company will be successful in obtaining any or
all of the various approvals, licenses, agreements, and permits it seeks, that
it will obtain them in a timely fashion, or on terms favorable to it, or that it
will be able to maintain them in full force and effect without modification or
revocation.

In certain countries in which the Company has assets and operations, such assets
and operations are subject to various political, economic and other
uncertainties, including, among other things, the risks of war or civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
concessions, licenses, permits, approvals and contracts, taxation policies,
foreign exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations, currency controls and foreign governmental
regulations that favor or require the awarding of contracts to local contractors
or require foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction.  In addition, in the event of a dispute arising from
foreign operations, the Company may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the United States or Canada.

                                       34
<PAGE>

The Company also may be hindered or prevented from enforcing its rights with
respect to a governmental instrumentality because of the doctrine of sovereign
immunity. It is not possible for the Company to accurately predict such
developments or changes in law or policy or to what extent any such developments
or changes may have a material adverse effect on the Company's operations.

Title to Properties
-------------------
Certain of the Company's United States property rights, including at the Round
Mountain and McCoy/Cove properties, consist of unpatented lode mining claims.
Unpatented mining claims may be located on U.S. federal public lands open to
appropriation, and may be either lode claims or placer claims depending upon the
nature of the deposit within the claim. In addition, unpatented millsite claims,
which may be used for processing operations or other activities ancillary to
mining operations, may be located on U.S. federal public lands that are non-
mineral in character. The validity of unpatented mining claims and millsites,
from which a material portion of the reserves at each of the Company's Round
Mountain and McCoy/Cove mines are derived, and upon which some of the Company's
surface facilities and facilities ancillary to it mining operations are located,
is often uncertain and may be contested and subject to title defects. Unpatented
mining claims and millsites are generally considered to be subject to greater
title risk than other real property interests. The validity of an unpatented
mining claim or millsite, in terms of its location and maintenance, and the uses
thereof, is dependent on strict compliance with a complex body of federal and
state statutory and decisional law, administrative interpretation of that law
and, for unpatented mining claims, the existence of a discovery of valuable
minerals. In addition, there are few public records that definitively control
the issues of validity and ownership of unpatented mining claims or millsites.
While the Company has obtained various reports, opinions and certificates of
title with respect to certain of the unpatented mining claims and millsites it
owns or to which it has rights in accordance with what the Company believes is
industry practice, and the uses being made by the Company of the mining claims
and millsites it owns or controls are in accordance with what the Company
believes is industry practice, there can be no assurance that title to any of
its unpatented mining claims or millsites may not be defective.

Inflation and Currency Risks
----------------------------
The Company has historically held direct or indirect mining interests in
countries having unstable currencies as a result of inflation, currency controls
or other reasons. Although the production resulting from such mining interests
would be generally sold in U.S. dollars, the Company would be vulnerable to the
effects of inflation in its operations in certain countries, and profitability
levels may be eroded by unfavorable exchange rates. None of the countries in
which the Company holds mineral interests currently restricts the repatriation
of profits, other than through the requirement to register such distributions.
While recent years have seen a generally positive trend toward lowering
inflation and stabilizing exchange rates in these countries, there is no
assurance that governments will continue with current economic policies or that
inflation will be lower than it has been historically. See "Exchange Rates."

                                      35
<PAGE>

GLOSSARY
The following terms are described to aid in understanding the Company's Form 10-
K and other periodic filings.  Geological terms are generally not included.

Adit - A tunnel driven horizontally into the side of the mountain or hill to
gain access to mineralization for exploration or mining.

Assay - A chemical test performed on a sample of ore, mineral or rock to
determine the mineralized content.

Call option - An option contract that gives the holder the right, but not the
obligation, to buy a specific commodity on a specific future date at a fixed
price.

Concentrate - A metal-rich product from a mineral separation process such as
flotation. The metals are "concentrated" from ore and the remainder is discarded
as neutralized tailings. The contained metals are recovered from the
concentrates either by leaching or by smelting.

Contango - The premium paid over spot prices on a forward contract. The contango
is based on the difference between the cost of leasing gold and current money
interest rates.

Dilution - The unwanted but unavoidable inclusion of some barren or low-grade
rock along with the ore being mined. This lowers the grade of the mined
material.

Dore - An unrefined bar of bullion containing an alloy of gold, silver and
impurities. The Company ships dore bars to refiners for further processing, then
sells the refined gold and silver to precious metal dealers, mainly banks and
their affiliates.

Drift - An underground horizontal passage providing access to a mineralized
area.

Drilling
Blasthole Drilling - The drilling of holes in rock to insert with an explosive
charge. The drill holes are usually about 10-25 feet apart. The ensuing
synchronized blast will break up the rock so it can be dug out.

Diamond (or Core) Drilling - Drilling with a hollow diamond-studded bit to cut
out a solid rock core. A column of rock is extracted from inside the drill rod
for geological examination and assay.

In-Fill Drilling - Drilling between widely spaced holes (typically up to 200
feet apart) to establish or upgrade the ore reserve classification.

Rotary Drilling - Drilling with a bit that breaks the rock into chips. The chips
are continually flushed from the hole (outside the drill pipe) and are collected
in sequence for geological examination and assay.

Reverse-Circulation Drilling - A type of Rotary Drilling that uses a double-
walled drill pipe. Compressed air, water or other drilling medium is forced down
the space between the two pipes to the drill bit, and the drilled chips are
flushed back up to the surface through the center tube of the drill pipe.

Step-Out Drilling - Drilling at widely spaced intervals (typically in increments
of 300 feet) outward from known deposits to test for extensions of
mineralization.

Exercise (or strike) price - The price at which the underlying commodity or
security can be bought, sold, or settled on exercise of the option contract. In
the case of a call option, the exercise price is the price at which the buyer of
the option has the right to purchase the underlying commodity or security. In
the case of a put option, the exercise price is the price at which the buyer of
the option has the right to sell the underlying commodity or security.

                                       36
<PAGE>

Exploration - Exploration can be divided into three basic categories:
Grassroots Exploration - Exploration for ore in an area that has the correct
geologic setting, although no ore may have been found yet in that precise
location.

Headframe Exploration - Exploration for a separate ore body "within sight of the
headframe" of an existing mine.

Definition Exploration - Exploration that defines an ore body, or searches for
extensions to it, once it has been discovered.

Feasibility Studies - Determinations of the economic feasibility of mining a
deposit, based on progressively greater levels of information.

Initial Feasibility (Level 1) - A preliminary estimate of what the economic
parameters of mining a deposit are likely to be, based on a particular mining
plan, process flow sheet, facility design, infrastructure, and estimated capital
and operating costs. A Level 1 estimate usually describes an installation that
might be built. The deposit is classified as other mineralization.

Detailed/Optimized Feasibility (Level 2) - A refinement and reassessment of the
initial study, based on extensive additional information, detailed engineering,
and optimization work. This provides a level of confidence such that a decision
to build the project can be made. A Level 2 estimate generally describes an
installation that probably will be built, rather than an installation which is
conceptual only. The deposit is now classified as ore reserves.

Definitive Feasibility (Level 3) - Yet a further increase in the level of
engineering and other detailed work. The designs and estimates provided in the
Level 3 estimate are for the installation that will be built with minimal
modifications. The Company would not normally proceed to this level of detail
before making a construction decision unless it were to be required for stand-
alone project financing.

Flotation - A process for concentrating minerals based on the selective adhesion
of certain minerals to air bubbles in a mixture of water and ground-up ore. When
the right chemicals are added to a frothy water bath of ore that has been ground
to the consistency of talcum powder, the minerals will float to the surface. The
metal-rich flotation concentrate is then skimmed off the surface.

Forward contract - A legal agreement to buy or sell a commodity at a specific
price on a future date.

Gold loan - A low interest rate method of debt financing that also acts to hedge
future selling prices. A gold producer borrows gold bullion from a bank or
dealer and sells it on the spot market, thereby establishing the sales price for
the quantity of gold borrowed. The producer replaces the borrowed gold from its
future production according to an agreed upon schedule. A gold loan allows the
producer to receive the proceeds from the sale of the borrowed gold immediately,
rather than as the metal is produced.

Grade - The metal content of ore. With precious metals, grade is expressed as
troy ounces per ton of ore.
Cut-off Grade-The minimum grade of ore that can be mined and processed
economically.

Heap Leaching - A low-cost leaching process in which ore is placed in a large
heap on an impermeable pad. The solvent, a weak cyanide solution, is dripped or
sprinkled over the heap and collected at the bottom after percolating through
the ore and dissolving the metals. See the illustration in "Mine Processing."

Leaching - The extraction of a soluble metallic compound from ore by dissolving
the metals in a solvent. See also Heap Leaching.

Leach Cycle - The average amount of time that ore is leached.

                                       37
<PAGE>

Leach Pad - A large, impermeable foundation or pad used as a base for ore during
heap leaching. The pad prevents the leach solution from escaping out of the
circuit.

Dedicated Pad - A Leach Pad which is constructed to permanently accommodate one
ore heap. The pad forms the tailings pile when economic recovery has been
reached and the pad neutralized.

Reusable Pad - A pad where ore is loaded and then unloaded at the end of each
Leach Cycle. The pad, made of durable materials, can be reused continually.

Mill - A plant where ore is ground, usually to fine powder, and the metals are
extracted by physical and/or chemical processes. See the illustration in "Mine
Processing."

Mineralization - Mineral-bearing rock. In this report, mineralization generally
refers to the presence of gold and silver established by widely spaced drilling.
It is referred to as "other mineralization" to distinguish it from "proven and
probable reserves."  See Ore Reserves.

Ore Body - A mineral deposit that can be mined at a profit under existing
economic conditions.

Ore Pass - A vertical or steeply inclined raise used to move ore by gravity to
the mine level where it will be crushed and hoisted to surface.

Ore Reserves - The tonnage and grade of an economically and legally extractable
ore body. The Company's reserves are minable reserves and do not reflect losses
in the recovery process. They include allowance for dilution of ore in the
mining process. Securities regulations in both Canada and the U.S. set strict
requirements for proven and probable ore reserves.

Proven Ore Reserves - "Proven ore" or "measured ore" means that material for
which tonnage is computed from dimensions revealed in outcrops or trenches or
underground workings or drill holes and for which the grade is computed from the
results of adequate sampling, and for which sites for inspection, sampling and
measurement are so spaced and the geological character so well defined that the
size, shape and mineral content are established, and for which the computed
tonnage and grade are judged to be accurate within limits which shall be stated
and for which it shall be stated whether the tonnage and grade of proven ore or
measured ore are "in-situ" or extractable, with dilution factors shown, and
reasons for the use of these dilution factors clearly explained.

Probable Ore Reserves - "Probable ore" or "indicated ore" means that material
for which tonnage and grade are computed partly from specific measurements,
samples or production data, and partly from projection for a reasonable distance
on geological evidence, and for which the sites available for inspection,
measurement and sampling are too widely or otherwise inappropriately spaced to
outline the material completely or to establish its grade throughout.

The Canadian and U.S. regulations are presented in "Reserves."

                                       38
<PAGE>

Other Mineralization - See Mineralization.

Ounce - Throughout this report, the terms "ounce" and "milliounce" are used as
abbreviations for the troy ounce measure of weight. The troy ounce has been used
exclusively as a precious metals measurement, probably since the 16th century.


           One troy ounce  =  1.097 avoirdupois ounces
                           =  31.103 grams
           One milliounce  =  0.001 ounce


Put option - An option contract that gives the holder the right, but not the
obligation, to sell a specific commodity on a specific future date at a fixed
price.

Ramp - An underground tunnel providing access for exploration or the movement of
materials and equipment between mine levels.

Recovery Rate - The percentage of metals recovered in a mineral separation
process. Recovery rates vary considerably depending on physical, metallurgical
and economic circumstances.

Reserves - See Ore Reserves.

Run-of-Mine Ore - Uncrushed ore in its natural state just as it is when blasted.

Shaft - A vertical accessway to a mine. Shafts are used for the movement of
personnel and materials, including ore and nonmineralized rock.

Spot deferred sale - Similar to a forward sale except the date of sale may be
deferred many times before the gold is ultimately delivered. The contango will
increase at each deferral or roll forward.

Stope - An underground working area where ore is mined.

Swap - Transactions that generally involve the contractual exchange of interest
payment obligations, currency positions, or commodities (or any combination
thereof), on a specified amount of notional principal for a specified period of
time.

Tailings - The neutralized material discarded after the economically recoverable
metals have been extracted from the ore by Milling or Heap Leaching.

Ton - The short ton is used throughout this report. It is a unit of weight equal
to 2,000 pounds or 907.2 kilograms.

Waste-to-Ore Ratio - In an open pit mine, large quantities of nonmineralized
rock often cover up the ore and must be removed. The stripping ratio is the
number of tons of nonmineralized material removed per ton of ore mined.

                                       39
<PAGE>

GOLD PRICES
The following table sets forth annual high, low, average and end of period
afternoon fixing gold prices in U.S. dollars per troy ounce on the London
Bullion Market.

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                           -------------------------------------------------------------
                                            2000*          1999          1998          1997          1996          1995
                                    -------------          -----         -----         -----         -----         -----
<S>                                 <C>                    <C>           <C>           <C>           <C>           <C>
High                                        $ 313          $ 326         $ 313         $ 367         $ 415         $ 396
Low                                           279            253           273           283           367           372
Average                                       290            279           294           332           388           384
End of Period                                 303            290           286           293           369           387
</TABLE>

* Through February 16, 2000

SILVER PRICES
The following table sets forth annual high, low, average and end of period noon
prices in U.S. dollars per troy ounce as quoted by Handy & Harman.

<TABLE>
<CAPTION>
                                                                          Year ended December 31,
                                                           -------------------------------------------------------------
                                            2000*           1999          1998          1997          1996          1995
                                    -------------          -----         -----         -----         -----         -----
<S>                                 <C>                    <C>           <C>           <C>           <C>           <C>
High                                      $  5.53          $5.77         $7.31         $6.13         $5.79         $6.01
Low                                          5.14           4.91          4.72          4.18          4.67          4.36
Average                                      5.28           5.25          5.54          4.87          5.18          5.20
End of Period                                5.32           5.40          4.87          6.13          4.87          5.11
</TABLE>

* Through February 16, 2000

EXCHANGE RATES
The exchange rates of the Canadian dollar to the U.S. dollar at the end of each
period and the high, the low and the average exchange rates for each period,
were as follows (such rates, which are expressed in Canadian dollars, being the
noon buying rates in New York City for cable transfers in U.S. dollars as
certified for customs purposes by the Federal Reserve Bank of New York).

<TABLE>
<CAPTION>
                                                                      Year ended December 31,
                                                ------------------------------------------------------------------------------
                              2000*               1999              1998              1997              1996              1995
                   ----------------             ------            ------            ------            ------            ------
<S>                <C>                      <C>               <C>               <C>               <C>               <C>
High                     C$  1.4341         C$  1.4433        C$  1.4075        C$  1.3353        C$  1.3310        C$  1.3285
Low                          1.4600             1.5514            1.5765            1.4358            1.3822            1.4238
Average                      1.4488             1.4864            1.4823            1.3838            1.3638            1.3689
End of Period                1.4516             1.4433            1.5512            1.4352            1.3697            1.3655
</TABLE>

* Through February 16, 2000

CONVERSION TABLE
For ease of reference, the following conversion factors are provided.  The term
"ounce" as used in this report means "troy ounce."


1 mile                  =          1.6093 kilometers
1 foot                  =          0.305 meter
1 acre                  =          0.4047 hectare
1 U.S. gallon           =          3.785 liters
1 short ton             =          2,000 pounds
                        =          907.2 kilograms
1 troy ounce            =          1.097 avoirdupois ounces
                        =          31.103 grams

                                       40
<PAGE>

MINE PROCESSING
Milling is the traditional method of recovering gold from ore.  All of the
Company's producing mines including Lupin use milling.  Details of the process
vary from mine to mine, but the principles remain the same.  The mill recovery
process at the McCoy/Cove operation, where both oxide ores and sulfide ores are
processed, is illustrated on page 42.

Heap leaching is a low-cost gold recovery process that can only be successfully
applied to certain oxidized, permeable ores.  It has a lower recovery rate than
milling but is a less expensive process. Heap leaching is particularly suited to
large, low-grade oxide ore deposits.  Both Round Mountain and McCoy/Cove use
heap leaching.  Details of the process vary from mine to mine, but the
principles remain the same.  To describe how the heap leach process works, the
Round Mountain mine's reusable leach pad process is illustrated on page 43.

                                       41
<PAGE>

            General Description of Mining and Mill Recovery Process

Milling is the traditional method of recovering gold from ore.  Details of the
process vary from mine to mine, but the principles remain the same.  (Heap
leaching is another method of recovering gold from certain types of low-grade
ore, described on the next page.)  Here is how the mill recovery process works
at the McCoy/Cove operation, where the Company has both oxide ores and sulfide
ores.


  Ore is blasted and trucked from an open pit to the mill.
  Ore is gold-bearing rock. After it's blasted, it ranges
  from powder to boulders as large as five feet across.

  A giant jaw crusher reduces all of the ore to eight
  inches or smaller.

  Crushed ore is ground to the consistency of fine sand in
  a series of three grinding mills. Steel balls tumble with
  the ore and water inside huge rotating drums, pulverizing
  the ore and liberating most of the gold and silver.

  After grinding, sulfide ores need two extra steps that
  oxide ores don't: flotation and regrinding.

  Flotation is a method of concentrating sulfide ores. The
  mineral particles are floated to the surface by a froth of
  induced air, where they concentrate and are skimmed off.
  The remaining under-flow, which still contains some gold and
  silver, skips the next step.

  The sand-size concentrated sulfide particles are reground
  even finer, to the size of talcum powder. This frees the
  precious metals from the sulfides trapping them.

  Oxide ores, sulfide ore underflows, and reground sulfide
  concentrates all go to large leaching tanks, where a
  cyanide solution dissolves the gold and silver from the
  solids like hot water leaches tea from tea leaves.

  After 36 to 96 hours, zinc powder is added to the
  "pregnant" leach solution. This precipitates the gold and
  silver from the solution in the form of metallic powder.
  The powder is collected on filters and smelted into bullion
  bars. The bars are shipped to refineries for further
  processing into the pure metals.

  The leftover solids from the leach tanks, called tailings,
  are pumped to a treatment plant, where the contaminants are
  neutralized using sulfur dioxide (SO\\2\\) and air. The
  tailings are then pumped to a lined tailings pond. The
  solids settle to the bottom, and the water that doesn't
  evaporate is recirculated back to the mill.

                                       42
<PAGE>

         General Description of Mining and Heap-Leach Recovery Process

Heap leaching is a gold recovery process that can only be applied to permeable
ores. It has a lower recovery rate than milling, but lower-grade ores can be
economically heap leached rather than milled because heap leaching costs are
much lower. Here is how Round Mountain's reusable leach pad process works. The
details, but not the principles, vary among individual mines.

Ore is mined and hauled by truck from
the open pit. Ore is gold-bearing rock.

Crushing reduces the ore to less than
three-quarters of an inch in size.
Lime is added to stabilize the cyanide.

After being loaded onto the impermeable
leach pad, the ore is sprinkled for
approximately 100 days with a weak
sodium cyanide solution. This
penetrates the ore, dissolving the
almost-microscopic bits of gold and
silver. The "pregnant" solution drains
to the collection area at the lower
side of the pad and flows to a pump.
At the end of the leach cycle, the
leached ore is washed with water and
drained.

The pregnant solution is pumped through
a series of tanks containing activated
carbon, which removes the gold and
silver from the cyanide solution. The
"barren" solution is recycled back to
the leach pads.

The gold and silver are stripped from
the carbon, forming a highly
concentrated solution. The carbon is
regenerated and returned to the
adsorption circuit.

The precious metals in the concentrated
solution are electrolytically
deposited on steel wool cathodes in
the electrowinning cells.

The gold precipitated on the cathodes
is then placed into an electrorefining
cell, where the gold is plated out in
the form of foil. The foil is
fire-refined into dore bars containing
about half gold and half silver,
together with minor amounts of
impurities.

The dore bars are shipped to a precious
metals refinery for final processing
into pure gold and silver.


                                       43
<PAGE>

                           ITEM 3-LEGAL PROCEEDINGS

SUMMA
In 1995, the Summa Corporation commenced a lawsuit against the Company and the
predecessor owner of the McCoy/Cove and Manhattan mines, claiming more than
$13.0 million resulting from alleged improper deductions in the calculation of
royalties payable over several years of production at McCoy/Cove and the former
Manhattan mine.  The matter was tried in the Nevada State court in April 1997,
and, in September 1997, judgement was rendered for the Company, holding the
Company's method of calculation was correct and that it was not in breach of the
governing agreement.  The court also awarded substantial costs and attorneys'
fees to the Company.  The decision was appealed by Summa to the Nevada Supreme
Court, which heard the matter on November 9, 1999.  A decision is expected
within 180 days of that date.  The Company continues to believe that the appeal
should be dismissed and the finding of the lower court upheld.  The Company has
$1.6 million accrued related to the Summa litigation.

COLORADO SCHOOL OF MINES
On January 24, 2000, a subsidiary of the Company was served with a complaint in
the case of Colorado School of Mines vs. AK Steel, et al., Civil Action 99-N-
1863 (USDC Colorado). This lawsuit seeks contribution from numerous parties for
environmental cleanup costs at a federal Comprehensive Environmental Response,
Compensation and Liability Act site. Discovery has yet to commence, but the
Company will vigorously pursue the defense of this claim. The Company at this
time does not have sufficient information to reasonably estimate an amount, if
any, for which the Company's subsidiary may be liable in this matter.

OTHER
The Company is also engaged in routine litigation incidental to its business.


          ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

There were no matters submitted to a vote of security holders during the fourth
quarter of 1999.

                                       44
<PAGE>

                                    PART II

ITEM 5-MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS

MARKET INFORMATION

The Company's common shares were first sold to the public at $2.36 per share in
April 1983 after giving effect to the six-for-five share split in 1983 and the
two-for-one share split in 1987.  The Company's current stock exchange listings,
together with the date of listing, are set out below.

     Canada-Toronto (April 1983)
     United States-American (October 1983)
     France-Paris (March 1985)
     Belgium-Brussels (October 1985)
     Switzerland-Zurich (April 1987)
     Germany-Frankfurt (November 1988)

The following table sets forth for the period from January 1, 1998 through
January 31, 2000 the high and low reported prices and trading volume of the
common shares on The Toronto Stock Exchange and the American Stock Exchange.

<TABLE>
<CAPTION>
                                     The Toronto Stock Exchange                     American Stock Exchange
                                     --------------------------                     -----------------------
                                                              Volume                                       Volume
                                High             Low        (shares in         High          Low         (shares in
                                 (Canadian Dollars)         thousands)           (U.S. Dollars)           thousands)
---------------------------------------------------------------------------------------------------------------------
<S>                             <C>              <C>        <C>                <C>           <C>         <C>
1998
----
First Quarter                   3.70            2.20             9,716         2.63         1.25              40,234
Second Quarter                  5.60            3.15             5,622         3.88         2.19              20,497
Third Quarter                   4.05            2.40             5,221         2.69         1.56              19,041
Fourth Quarter                  4.30            2.65             3,398         2.94         1.69              14,862
1999
----
First Quarter                   3.18            2.46             2,116         2.19         1.63               7,239
Second Quarter                  2.80            2.05             2,054         1.94         1.38               6,701
Third Quarter                   4.00            1.78             3,675         2.63         1.19              12,232
October                         3.69            2.40             1,131         2.50         1.63               3,868
November                        2.80            2.12               790         1.81         1.50               2,477
December                        2.40            1.75               800         1.56         1.13               3,402
2000
----
January                         2.10            1.76               938         1.44         1.25               1,818
---------------------------------------------------------------------------------------------------------------------
</TABLE>

On February 16, 2000, the closing price of the common shares on The Toronto
Stock Exchange and on the American Stock Exchange was C$2.10 and U.S. $1.50,
respectively.

On February 16, 2000 the Company had 140,607,145 common shares outstanding held
by approximately 66,000 registered and nominee shareholders.

DIVIDENDS

The Company suspended payment of dividends beginning in 1997. The declaration
and payment of future dividends is dependent upon the Company's capital
requirements, earnings and economic outlook. Additionally, since April 1998, the
Company has exercised its right to defer its interest payment to

                                       45
<PAGE>

holders of the capital securities. During the deferral period, the Company is
prohibited from paying dividends.

Historically, dividends payable to Canadian residents have been converted to and
paid in Canadian dollars.

See "Certain Tax Matters-Canadian Federal Income Tax Considerations" for
information with respect to Canadian withholding tax applicable to non-Canadian
shareholders.

CERTAIN TAX MATTERS

The following paragraphs summarize certain United States and Canadian federal
income tax considerations in connection with the receipt of dividends paid on
common shares of the Company and certain United States and Canadian federal
income tax considerations in connection with a disposition of common shares.
These tax considerations are stated in brief and general terms and are based on
United States and Canadian law currently in effect.  There are other potentially
significant United States and Canadian federal income tax considerations and
state, provincial or local income tax considerations with respect to ownership
and disposition of the common shares which are not discussed herein.  The tax
considerations relative to ownership and disposition of the common shares may
vary from taxpayer to taxpayer depending on the taxpayer's particular status.
Accordingly, prospective purchasers should consult with their tax advisors
regarding tax considerations which may apply to their particular situation.

United States Federal Income Tax Considerations
-----------------------------------------------

Dividends on common shares paid to U.S. citizens or corporations (including any
Canadian federal income tax withheld) will be generally subject to U.S. federal
ordinary income taxation to the extent that a shareholder received a
distribution out of the shareholder's ratable share of the Company's current or
accumulated earnings and profits (e.g., a taxable dividend distribution).  To
the extent that the amount of the dividend distribution exceeds the
shareholder's ratable share, such excess would not be taxable but would reduce
the shareholder's basis in the Company's common stock.  To the extent that the
distribution exceeds the shareholder's adjusted basis in the shares (i.e. cost
less all non-taxable dividend distributions), the excess would be taxable as a
gain as if the shareholder had sold or exchanged the shares.  In this case,
holding periods for capital gain purposes would be the same as the holding
period for such stock from which that dividend would be attributed.  Such
dividends will not be eligible for the deduction for dividends received by
corporations (unless such corporation owns by vote and value at least 10% of the
stock of the Company, in which case a portion of such dividend may be eligible
for such deduction).

U.S. corporations, U.S. citizens and U.S. residents will generally be entitled,
subject to certain limitations, to a credit against their U.S. federal income
tax for Canadian federal income taxes withheld from such dividends.  Taxpayers
may claim a deduction for such taxes if they do not elect to claim such tax
credit.  No deduction for foreign taxes may be claimed by an individual taxpayer
who does not itemize deductions.  Because the application of the foreign tax
credit depends upon the particular circumstances of each shareholder,
shareholders are urged to consult their own tax advisors in this regard.

The Company believes that it is not a "passive foreign investment company" (a
"PFIC"), a "foreign personal holding company" (a "FPHC"), or a "controlled
foreign corporation" (a "CFC"), for United States Federal income tax purposes,
and the Company does not expect to become a PFIC, a FPHC or a CFC. If the
Company were, or were to become, a PFIC, a FPHC, or a CFC, some or all United
States shareholders would be required to include in their taxable income certain
undistributed amounts of the

                                       46
<PAGE>

Company's income, or, in certain circumstances, to pay an interest charge
together with tax calculated at maximum rates on certain "excess distributions,"
including gains on the sale of stock.

Any United States person who owns 5% or more in value of the stock of the
Company may be required to file IRS Form 5471 with respect to the Company and
its non-United States subsidiaries to report certain acquisitions or
dispositions of stock of the Company. Annual filings of Form 5471 would be
required from any United States person owning 50% or more of the stock of the
Company or, if the Company were a FPHC or a CFC, from certain United States
persons owning 10% or more of the stock of the Company.

Canadian Federal Income Tax Considerations
------------------------------------------

Dividends paid on common shares held by non-residents of Canada will generally
be subject to Canadian withholding tax.  This withholding tax is levied at the
basic rate of 25%, although this rate may be reduced by the terms of any
applicable tax treaty.  The Canada-U.S. tax treaty provides that the withholding
rate on dividends paid to U.S. residents on common shares is 5%, if such
dividends were paid to a shareholder which is a company and which owns at least
10% of voting stock of the Company, or 15% in all other cases.  Generally, a
non-resident of Canada who holds common shares as capital property will not be
subject to Canadian federal income tax on capital gains realized on the
disposition of his or her common shares provided that during the five years
preceding the disposition the non-resident, together with non-arm's-length
persons, has not at any time owned 25% or more of the issued shares of any class
of the Company.

                                       47
<PAGE>

                        ITEM 6-SELECTED FINANCIAL DATA

The following table is derived in part from the audited consolidated financial
statements of the Company.  The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Canada.
In all material respects, they conform with principles generally accepted in the
United States (except as described in footnote 1 to this table and note 15 to
the Company's consolidated financial statements).  This information should be
read in conjunction with the audited consolidated financial statements and the
notes thereto.

<TABLE>
<CAPTION>
Selected Financial Data/(1)/
Year ended December 31
millions of U.S. dollars except
for gold price and per share data                                     1999        1998         1997         1996         1995
-----------------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>          <C>         <C>          <C>          <C>
Statement of Operations Data
Revenue                                                            $ 210.4      $232.2      $ 305.4      $ 337.3      $ 360.7
Average gold price realized per ounce                              $   325      $  333      $   362      $   384      $   388
Loss before taxes/(2)/                                             $ (37.1)     $(19.8)     $(418.7)     $(176.1)     $ (44.7)
Effective tax rate                                                    (0.6%)      (1.8%)       (0.4%)       (0.4%)        7.2%
Loss before preferred share dividends/(2)/(4)/                     $ (37.3)     $(20.1)     $(420.5)     $(176.7)     $ (41.6)
Net loss/(2)/                                                      $ (37.3)     $(20.1)     $(420.5)     $(176.7)     $ (50.1)
Net loss attributable to common shareholders/(2)/(3)/              $ (51.0)     $(32.6)     $(426.2)     $(176.7)     $ (50.1)
Loss per common share/(2)/                                         $ (0.36)     $(0.23)     $ (3.06)     $ (1.31)     $ (0.43)
Weighted average common shares outstanding (millions)                140.6       140.1        139.4        134.4        116.2
Balance Sheet Data
Working capital (deficiency)                                       $   4.0      $ (0.5)     $ (28.7)     $ (52.9)     $ 109.6
Current ratio                                                         1.07        0.99         0.73         0.74         1.84
Total assets                                                       $ 339.9      $368.1      $ 432.8      $ 832.1      $ 871.2
Gold, silver and currency financings                               $  56.7      $ 52.8      $  66.5      $ 182.9      $ 152.8
Deferred income taxes                                              $   7.4      $  7.5      $   7.9      $   8.4      $   8.1
Common shareholders' equity                                        $ 101.1      $133.8      $ 153.7      $ 492.3      $ 588.9
Common shares outstanding (millions)                                 140.6       140.6        139.4        139.4        129.9
Other Data
Dividends paid on common shares - total                            $    --      $   --      $    --      $  10.1      $   9.0
                                - per share                        $    --      $   --      $    --      $0.0750      $0.0750
Dividends paid on convertible preferred
   shares of subsidiary/(4)/ - total                               $    --      $   --      $    --      $    --      $   8.5
                             - per share                           $    --      $   --      $    --      $    --      $  1.75
Net cash flows provided from (used in) operating activities        $  37.7      $ 14.1      $  (9.2)     $  29.9      $  67.3
Capital and exploration spending                                   $  14.7      $ 24.1      $ 151.1      $ 161.7      $ 138.3
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>

/(1)/ This information should be read in conjunction with the Company's audited
      consolidated financial statements and accompanying notes. Commitments and
      contingencies are described in notes 18 and 19 to the Company's
      consolidated financial statements. The Company's consolidated financial
      statements are prepared in accordance with Canadian generally accepted
      accounting principles. Had the consolidated financial statements been
      prepared in accordance with accounting principles generally accepted in
      the United States, certain selected financial data would be disclosed as
      follows. See also note 15 to the Company's consolidated financial
      statements.

<TABLE>
<CAPTION>
                                                      1999            1998             1997            1996            1995
----------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>             <C>             <C>             <C>             <C>
Loss before income taxes                            $(48.0)         $(40.4)         $(499.9)        $(173.1)         $(39.2)
Net loss                                            $(48.2)         $(40.8)         $(454.7)        $(173.7)         $(44.6)
Loss per common share                               $(0.34)         $(0.29)         $ (3.26)        $ (1.29)         $(0.38)
Total assets                                        $341.3          $370.1          $ 435.5         $ 919.6          $881.3
Gold and other financings                           $154.3          $147.9          $ 162.3         $ 182.9          $152.8
Deferred income taxes                               $  7.4          $  7.5          $   7.9         $  55.0          $  8.1
Common shareholders' equity                         $(19.5)         $ 24.2          $  67.4         $ 533.1          $599.0
----------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       48
<PAGE>

/(2)/ In 1997, the Company recorded a $362.7 million provision for impaired
      assets and other charges ($2.60 per share). In 1996, the Company recorded
      a $30.0 million ($0.22 per share) provision related to the estimated costs
      to remove waste rock from a portion of the Cove pit wall that had
      collapsed at the McCoy/Cove mine in Nevada and recorded a $77.1 million
      ($0.57 per share) provision to write off the $57.1 million book value of
      its Alaska-Juneau development property in Alaska and to accrue $20.0
      million for estimated reclamation and closure costs.

/(3)/ After interest expense on the equity portion of the capital securities,
      issued in 1997.  See note 7 to the consolidated financial statements.

/(4)/ All of the outstanding shares of preferred stock of subsidiary were
      redeemed or converted into common shares of the Company during 1995.

                                       49
<PAGE>

                ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial results of the Company's operations
for the years 1997 through 1999 should be read in conjunction with the financial
data and the Company's consolidated financial statements, included elsewhere in
this report. The Company's consolidated financial statements are prepared in
accordance with accounting principles generally accepted in Canada. Except as
described in note 15 to the Company's consolidated financial statements, they
conform in all material respects to those principles generally accepted in the
United States.

Material changes in the Company's reserves may significantly impact results of
operations and asset carrying values. See the discussion of reserves in
"Business and Properties-Reserves."

The following contains statements that are, by their nature, forward-looking and
uncertain. See "Cautionary 'Safe Harbor' Statement under the United States
Private Litigation Reform Act of 1995", "Business and Properties-Risk Factors"
and "Commitments and Contingencies" for a discussion of certain factors which
should be considered in evaluating these statements.

SUMMARY
The Company had a net loss of $37.3 million ($0.36 per share) in 1999, compared
with losses of $20.1 million ($0.23 per share) in 1998 and $420.5 million ($3.06
per share) in 1997. The 1999 results compared to 1998 reflect lower gold sales
volumes ($22.1 million), the 1999 loss on the sale of the Company's interest in
Paredones Amarillos ($13.8 million), the 1998 gain on the sale of Santa Elina
and other mining properties ($7.4 million) and decreased average gold and silver
prices realized ($5.4 million). These factors were partially offset by decreased
operating costs ($9.0 million), lower depreciation and amortization ($8.3
million), increased silver sales volumes ($5.7 million) and decreased
exploration and development spending ($3.3 million). The 1998 results compared
to 1997 reflect reduced operating costs, decreased exploration and development
spending and the 1997 provision for asset impairment of $346.0 million.

The Company produced 499,836 ounces of gold and 8.4 million ounces of silver in
1999. Production targets for 2000 are 660,000 to 700,000 ounces of gold and 9 to
10 million ounces of silver.

The average gold price realized by the Company in 1999 was $325 per ounce. This
was above the average market price of $279 per ounce in 1999, but lower than the
$333 per ounce average price realized in 1998. To help protect against gold
price declines, the Company has forward sales contracts on approximately 25% of
its estimated 2000 gold production at an average price of $310 per ounce.
Additionally, the Company has purchased put options on approximately 40% of its
estimated 2000 gold production at an average strike price of $273 per ounce.

In 1999, net cash flows provided from operating activities were $37.7 million.

RESULTS OF OPERATIONS
Revenue
-------
Revenue declined to $210.4 million in 1999 from $232.2 million in 1998,
reflecting lower gold sales volume ($22.1 million), resulting primarily from
lower grades at McCoy/Cove, and decreased gold and silver prices realized ($5.4
million). These factors were partially offset by a higher volume of silver sales
($5.7 million), reflecting high silver inventories at year end 1998. The
decrease in revenue in 1998 from 1997 reflected lower gold and silver sales
volume resulting from lower grades at McCoy/Cove and Kettle River and the
absence of Lupin production. 1998 revenue was also affected by lower gold prices
realized compared to 1997.

                                       50
<PAGE>

Operating Costs
---------------
Consolidated cash operating costs per ounce of gold produced were $215 in 1999,
$208 in 1998 and $249 in 1997. Cash operating costs generally reflect mining and
processing costs, most significantly labor, consumable materials, repairs of
machinery and equipment, fuel, utilities and environmental compliance. 1999 cash
operating costs per ounce increased compared to 1998, largely due to lower
production at McCoy/Cove, partially offset by savings in mining and milling
costs at McCoy/Cove and Kettle River. 1998 cash operating costs per ounce
decreased from 1997, reflecting the 1997 write-down of deferred mining balances,
cost savings at McCoy/Cove, lower costs due to higher production and due to the
1997 mine plan change at Round Mountain, and the absence of Lupin's higher-cost
production.

The Company's cash operating cost target for 2000 is $200 to $210 per ounce of
gold produced, reflecting an anticipated 30% to 40% increase in production in
2000, largely due to increased grades at McCoy/Cove and the Lupin mine
recommencing production in the second quarter of 2000.

Royalties
---------
Royalties decreased to $7.2 million in 1999 from $7.5 million in 1998 and $8.3
million in 1997, primarily due to lower precious metals prices. The Company's
royalty expense target for 2000 is $7 to $8 million. See note 19 to the
consolidated financial statements.

Depreciation and Amortization
-----------------------------
Depreciation expense was $40.9 million in 1999, $45.8 million in 1998, and $51.9
million in 1997. The decrease in 1999 and 1998 depreciation expense compared to
1997 was due to reduced Lupin depreciation rates during the temporary suspension
of operations. Depreciation expense also decreased in 1999 and 1998 from 1997
due to the fact that as McCoy/Cove and Kettle River approach the end of their
useful lives, major groups of assets are being fully depreciated and not
replaced. Depreciation per ounce was $58 in 1999, $62 in 1998 and $58 in 1997.

Amortization varies with the quantity of gold and silver sold and the mix of
production from the various mines. The quantities of the Company's proven and
probable reserves also affect amortization expense, as the Company's investment
is amortized over these ounces. Amortization expense of $14.0 million in 1999
and $17.5 million in 1998 compared to $27.4 million in 1997 reflect the impact
of the 1997 write-down of ore body carrying values at Kettle River and decreased
production. Amortization per ounce was $20 in 1999, $25 in 1998 and $32 in 1997.

For 2000, the Company expects depreciation and amortization expense to be in the
range of $55 to $60 million, compared to $54.9 million in 1999.

Reclamation and Mine Closure
----------------------------
Reclamation and mine closure expense increased in 1999 compared to 1998, as a
result of increases in reclamation and mine closure rates in 1999. 1998's
decrease in reclamation and mine closure expense compared to 1997 reflects the
absence of Lupin production in 1998. For 2000, the Company expects this expense
to be in the range of $10 to $11 million.

General and Administrative
--------------------------
Decreases in general and administrative costs over the past three years reflect
downsizings and cost reduction initiatives. For 2000, the Company expects
general and administrative costs to be in the range of $7 to $8 million.

Exploration and Development
---------------------------
Exploration and development expense was $8.8 million in 1999 and $12.0 million
in 1998, down from $34.9 million in 1997. For 2000, the Company expects
exploration and development expenditures to

                                       51
<PAGE>

total $9 to $10 million, including Lupin start-up costs. The Company has reduced
exploration and development programs in response to market conditions, which may
limit the discovery and development of new reserves. This could have adverse
implications on the Company as McCoy/Cove and Kettle River near the end of their
mine lives.

Loss (Gain) on Sale of Mining and Other Properties
--------------------------------------------------
In 1999, the Company recognized a $13.8 million loss on the sale of its 60%
interest in the Paredones Amarillos project in Mexico to its joint venture
partner. In 1998, the Company recognized a total gain of $7.4 million on the
sale of its investment in Santa Elina and interests in other mining properties.
The Company sold interests in various other mining properties in 1997,
recognizing a total gain of $3.9 million.

Provision for Impaired Assets and Other Charges
-----------------------------------------------
1997's provision for impaired assets and other charges of $362.7 million
consisted of a $346.0 million provision for impaired assets and $16.7 million
for severance costs. The $346.0 million provision was primarily comprised of
$50.0 million to write off the Kingking project; $143.6 million to write off the
Company's investment in Santa Elina; and $127.0 million to reduce the carrying
values of certain of its operating properties. See note 11 to the consolidated
financial statements.

LIQUIDITY AND CAPITAL RESOURCES
The gold price reached a 20-year low of $253 per ounce in July 1999. In 1999,
the market price of gold averaged $279 per ounce. A depressed gold price
significantly affects the Company's ability to proceed with construction of the
Aquarius mine, to expand its exploration activities, to make interest payments
on the capital securities or to pursue new acquisitions or investments.

Net cash flows provided from operating activities were $37.7 million in 1998,
compared with net cash flows provided from operating activities of $14.1 million
in 1998, and net cash flows used in operating activities of $9.2 million in
1997. The 1999 results reflect decreased cash operating costs and decreased
exploration and development spending, partially offset by lower gold and silver
cash prices realized and decreased gold sales volume.

Net cash used in investing activities in 1999 totaled $41.7 million, largely
related to investments in mining properties, plant and equipment.

Net cash used in financing activities was $0.6 million in 1999, reflecting debt
repayments of $17.6 million offset by currency borrowings of $17.0 million.

At December 31, 1999, the Company had $3.4 million in cash and cash equivalents
and $2.0 million in short-term investments.

At December 31, 1999, the Company's current debt was $13.8 million and its long-
term debt was $42.9 million.

The Company currently has $38.0 million outstanding, and up to $12.0 million or
gold equivalent, subject to covenant limitations, available until August 2001,
under its revolving credit facility. The Company has borrowed an additional $8.0
million under the facility since December 31, 1999. The Company has no
restrictions on the borrowing capacity of this line based on the current
trailing 90-day average spot price of gold. A depressed gold price can limit the
Company's ability to borrow under the revolving credit facility. The Company
believes it is currently in compliance with the credit facility covenants.

                                       52
<PAGE>

At December 31, 1999, the estimated fair value of the Company's hedge portfolio
was $3.6 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.

In 1997, the Company issued $100.0 million of 11% capital securities due 2027
(note 7 to the consolidated financial statements). The Company has the right to
defer interest payments on the capital securities for up to 10 consecutive semi-
annual periods. During a period of interest deferral, interest accrues at a rate
of 12% per annum, compounded semi-annually. The Company, at its option, may
satisfy its deferred interest obligation by delivering common shares to a
trustee for sale, the proceeds of which would be remitted to the holders of the
securities in payment of the deferred interest. Since April 1998, the Company
has exercised its right to defer its interest payments to holders of the capital
securities. Deferred interest of $27.0 million was accrued at December 31, 1999.

The Company expects to spend $12 million for capital expenditures in 2000,
funded by its operating cash flow and credit facilities. The Company will
continue to monitor its discretionary spending in view of the current gold
market and the cost structure of its operating mines.

COMMITMENTS AND CONTINGENCIES
Hedging Activities
------------------
The Company's profitability is subject to changes in gold and silver prices,
exchange rates, interest rates and certain commodity prices. To reduce the
impact of such changes, the Company attempts to lock in the future value of
certain of these items through hedging transactions. These transactions are
accomplished through the use of derivative financial instruments, the value of
which is derived from movements in the underlying prices or rates.

The gold- and silver-related instruments used in these transactions include
commodity loans, fixed and floating forward contracts, spot-deferred contracts,
swaps and options. Sensitivity to changing metal prices is reduced, and future
revenues are hedged, as the Company's future production will satisfy these loans
and other delivery commitments. 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 also engaged in crude oil hedging activities, including forward
purchase agreements and swaps, to reduce the impact of fluctuations in crude oil
prices on its operating costs.

Gains and losses resulting from hedging activities are recognized in earnings on
a basis consistent with the hedged item. When hedged production is sold, revenue
is recognized in amounts implicit in the commodity loan, delivery commitment or
option agreement. Gains or losses on foreign currency and crude oil hedging
activities are recorded in operating costs, or capitalized in the cost of
assets, when the hedged Canadian dollars are purchased and when crude oil
supplies are used in operations. Gains and losses on early termination of
hedging contracts are deferred until the hedged items are recognized in
earnings. Premiums paid or received on gold and silver option contracts
purchased or sold are deferred and recognized in earnings on the option
expiration dates.

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.

                                       53
<PAGE>

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.

In 1999, the Company delivered approximately 77% of gold production against
forward sales, put options and gold loans at an average commitment price of $346
per ounce. This compares with 96% of gold production at $341 per ounce in 1998
and 33% of gold production at $397 per ounce in 1997. Approximately 43% of
silver production was delivered against forward sales and put options at an
average cash price of $5.66 per ounce in 1999. This compares to 50% at $5.44 per
ounce in 1998 and 7% at $5.32 per ounce in 1997. 1997 deliveries reflect the
impact of an early 1997 repurchase of outstanding gold and silver forward sales.

The Company's hedge position as of December 31, 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
$273 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.

The Company's hedging commitments are described in note 18 to the Company's
consolidated financial statements. See also "Qualitative and Quantitative
Disclosures about Market Risk."

Other
-----
The Company's operations are subject to laws and regulations concerning
protection of the environment. These laws and regulations change periodically
and are generally becoming more restrictive, which may have the effect of
increasing future costs. See "Business and Properties-Other-Government
Regulation and Environmental Issues."

The Company's operations are subject to certain royalty obligations as described
in note 19 to the Company's consolidated financial statements.

Lease commitments are described in note 19 to the Company's consolidated
financial statements.

The Company's provisions for future reclamation and closure costs at the former
Sunnyside mine in Colorado and the Alaska-Juneau property in Alaska are reviewed
periodically and may be adjusted as additional information becomes available.

Other commitments and contingencies are discussed in notes 18 and 19 to the
consolidated financial statements.

YEAR 2000
The Year 2000 issue did not produce any adverse effects to the Company's systems
before, on or after January 1, 2000. Additionally, the Company did not
experience any interruptions in delivery of critical supplies due to any effects
of the Year 2000 issue on its third party suppliers.

                                       54
<PAGE>

               ITEM 7A-QUALITATIVE AND QUANTITATIVE DISCLOSURES
                               ABOUT MARKET RISK

See "Management's Discussion and Analysis-Results of Operations" for a
discussion of market risks related to the Company's hedging activities.

The following table provides information as of December 31, 1999 about the
Company's derivative financial instruments and other financial instruments that
are sensitive to changes in commodity prices, interest rates and exchange rates.

<TABLE>
<CAPTION>
                                                         Expected Year of Maturity
                                     --------------------------------------------------------------
(Amounts in millions of U.S.                                                                           Fair Value
dollars, except amounts per ounce or                                                         There-   of Financial
unless otherwise noted)                    2000       2001      2002      2003      2004      after    Instruments
------------------------------------------------------------------------------------------------------------------
<S>                                    <C>        <C>        <C>       <C>       <C>       <C>        <C>
Assets:
 Short-term investments                $    2.0         --        --        --        --         --          $ 2.4
Liabilities:
 Currency loans                        $   13.8   $   37.5   $    --        --        --         --          $51.3
 Capital securities/(1)/                                                                                     $ 5.4
 Principal                                                                                   $100.0
 Fixed interest rate/(2)/                    11%        11%       11%       11%       11%        11%
Derivative financial instruments:
 Gold forward sales                                                                                          $(0.9)
    Ounces                              167,917    105,000    60,000    60,000    60,000     15,000
    Price per ounce                    $    310   $    315   $   315   $   315   $   315   $    315
 Silver forward sales                                                                                        $ 1.0
    Ounces (000's)                        1,500      1,500        --        --        --         --
    Price per ounce                    $   5.85   $   5.85        --        --        --         --
 Gold put options purchased                                                                                  $ 1.7
    Ounces                              268,750         --        --        --        --         --
    Price per ounce                    $    273         --        --        --        --         --
 Gold call options sold                                                                                      $(5.6)
    Ounces                              187,500         --        --        --        --    105,000
    Price per ounce                    $    360         --        --        --        --   $    340
 Gold call options purchased                                                                                 $ 8.0
    Ounces                              167,917    105,000    60,000    60,000    60,000    120,000
    Price per ounce                    $    338   $    351   $   360   $   360   $   360   $    395
 Gold put options sold                                                                                       $(0.6)
    Ounces                               66,667         --        --        --        --         --
    Price per ounce                    $    290         --        --        --        --         --
 Silver put options purchased                                                                                $ 1.4
    Ounces (000's)                        1,000      1,000        --        --        --         --
    Price per ounce                    $   6.00   $   6.00        --        --        --         --
 Silver call options purchased                                                                               $ 0.3
    Ounces (000's)                        1,500      1,500        --        --        --         --
    Price per ounce                    $   6.60   $   6.60        --        --        --         --
 Silver put options sold                                                                                     $(0.5)
    Ounces (000's)                        2,500      2,500        --        --        --         --
    Price per ounce                    $   4.75   $   4.75        --        --        --         --
 Foreign currency contracts                                                                                  $(1.2)
    Canadian dollars (000's)             24,000         --        --        --        --         --
    Exchange rate (C$ to US$1.00)          1.34         --        --        --        --         --
------------------------------------------------------------------------------------------------------------------
</TABLE>

/(1)/  At December 31, 1999, the present value of the $100.0 million principal
       payment in 2027 is $5.4 million. At December 31, 1999, the fair value of
       the entire capital securities obligation, including the interest
       component, is $60.0 million.

/(2)/  During a period of interest deferral, the interest rate on the capital
       securities is 12%, compounded semi-annually.

                                       55
<PAGE>

              ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         INDEX TO FINANCIAL STATEMENTS


<TABLE>
<CAPTION>
                                                                         Page
                                                                         ----
<S>                                                                      <C>
Management's Responsibility For Financial Reporting......................  57
Report Of Independent Chartered Accountants..............................  58
Consolidated Balance Sheet...............................................  59
Consolidated Statement Of Operations.....................................  60
Consolidated Statement Of Deficit........................................  60
Consolidated Statement Of Cash Flow......................................  61
</TABLE>

                                       56
<PAGE>

Management's Responsibility for Financial Reporting

The accompanying financial statements and related data are the responsibility of
management. Management has prepared the statements in accordance with accounting
principles generally accepted in Canada.

The integrity of the financial reporting process is also the responsibility of
management. Management maintains systems of internal controls designed to
provide reasonable assurance that transactions are authorized, assets are
safeguarded, and reliable financial information is produced. Management selects
accounting principles and methods that are appropriate to the Company's
circumstances, and makes decisions affecting the measurement of transactions in
which estimates or judgments are required to determine the amounts reported.

The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting. The Board carries out this
responsibility principally through its Audit Committee.

The Audit Committee consists entirely of outside directors. The Committee meets
periodically with management and the external auditors to discuss internal
financial controls, auditing matters and financial reporting issues. The
Committee satisfies itself that each party is properly discharging its
responsibilities; reviews the quarterly and annual financial statements and the
external auditors' report; and recommends the appointment of the external
auditors for review by the Board and approval by the shareholders.

The external auditors audit the financial statements annually on behalf of the
shareholders. They also performed certain procedures related to the Company's
unaudited interim financial statements and report their findings to the Audit
Committee. The external auditors have free access to management and the Audit
Committee.



                              /s/ Robert L. Leclerc
                              ------------------------------------------------
                              Robert L. Leclerc
                              Chairman and Chief Executive Officer and Director



                              /s/ Tom S.Q. Yip
                              ------------------------------------------------
                              Tom S.Q. Yip
                              Vice President, Finance and
                              Chief Financial Officer

January 25, 2000

                                       57
<PAGE>

Report of Independent Chartered Accountants

The Board of Directors
Echo Bay Mines Ltd.

We have audited the consolidated balance sheets of Echo Bay Mines Ltd. as at
December 31, 1999 and 1998 and the consolidated statements of operations,
deficit and cash flow for each of the years in the three-year period ended
December 31, 1999. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in Canada and the United States. Those standards require that we plan and
perform an audit to obtain reasonable assurance whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as at
December 31, 1999 and 1998 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 1999 in
accordance with accounting principles generally accepted in Canada.



Edmonton, Canada                                /S/ Ernst & Young LLP
January 25, 2000                                Chartered Accountants


                                       58
<PAGE>

                              ECHO BAY MINES LTD.

                           CONSOLIDATED BALANCE SHEET

                                  December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars                                                        1999                      1998
---------------------------------------------------------------------------------------------------------------
<S>                                                                         <C>                       <C>
ASSETS
Current assets:
   Cash and cash equivalents                                                $   3,401                 $   7,987
   Short-term investments                                                       2,042                     3,336
   Interest and accounts receivable                                             2,942                     3,585
   Inventories (note 2)                                                        37,204                    37,929
   Prepaid expenses and other assets                                           15,621                     6,635
---------------------------------------------------------------------------------------------------------------
                                                                               61,210                    59,472

Plant and equipment (note 3)                                                  167,438                   196,670
Mining properties (note 3)                                                     81,959                    95,738
Long-term investments and other assets (note 4)                                29,255                    16,196
---------------------------------------------------------------------------------------------------------------
                                                                            $ 339,862                 $ 368,076
===============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued liabilities                                 $  29,961                 $  43,609
   Income and mining taxes payable                                              3,004                     2,941
   Gold and other financings (note 5)                                          13,750                    11,652
   Deferred income (note 6)                                                    10,525                     1,727
---------------------------------------------------------------------------------------------------------------
                                                                               57,240                    59,929

Gold and other financings (note 5)                                             42,919                    41,119
Deferred income (note 6)                                                       83,374                    77,818
Other long-term obligations (note 8)                                           47,847                    47,943
Deferred income taxes                                                           7,381                     7,513

Commitments and contingencies (notes 18 and 19)

Common shareholders' equity:
   Common shares (note 14), no par value, unlimited number
    authorized; issued and outstanding - 140,607,145 shares                   713,343                   713,343
   Capital securities (note 7)                                                124,616                   110,862
   Deficit                                                                   (714,844)                 (663,875)
   Foreign currency translation                                               (22,014)                  (26,576)
---------------------------------------------------------------------------------------------------------------
                                                                              101,101                   133,754
---------------------------------------------------------------------------------------------------------------
                                                                            $ 339,862                 $ 368,076
===============================================================================================================
</TABLE>

See accompanying notes.

                                      59
<PAGE>

                              ECHO BAY MINES LTD.

                      CONSOLIDATED STATEMENT OF OPERATIONS

                             Year ended December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars,
except for per share data                                        1999            1998            1997
-----------------------------------------------------------------------------------------------------

<S>                                                     <C>             <C>             <C>
Revenue                                                     $ 210,351       $ 232,181      $  305,429
-----------------------------------------------------------------------------------------------------
Expenses:
 Operating costs                                              139,816         148,769         213,120
 Royalties (note 19)                                            7,197           7,547           8,304
 Production taxes                                                 256           1,618             865
 Depreciation and amortization                                 54,941          63,286          79,316
 Reclamation and mine closure                                   7,025           6,295           8,819
 General and administrative                                     7,429           8,027          10,948
 Exploration and development                                    8,754          12,010          34,927
 Interest and other (note 9)                                    8,194          11,845           9,068
 Loss (gain) on sale of interests in mining and other
  properties (note 10)                                         13,795          (7,447)         (3,877)
 Provision for impaired assets and other charges (note 11)         --              --         362,665
-----------------------------------------------------------------------------------------------------
                                                              247,407         251,950         724,155
 -----------------------------------------------------------------------------------------------------
Loss before income taxes                                      (37,056)        (19,769)       (418,726)
Income tax expense (note 12)                                      216             354           1,782
-----------------------------------------------------------------------------------------------------
Net loss                                                    $ (37,272)      $ (20,123)     $ (420,508)
=====================================================================================================

Net loss attributable to common shareholders (note 7)       $ (50,969)      $ (32,555)     $ (426,222)
=====================================================================================================

Loss per share                                              $   (0.36)      $   (0.23)     $    (3.06)
=====================================================================================================

Weighted average number of shares outstanding (thousands)     140,607         140,084         139,367
=====================================================================================================
</TABLE>


                       CONSOLIDATED STATEMENT OF DEFICIT

                             Year ended December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars                                                   1999             1998              1997
----------------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>               <C>
Balance, beginning of year                                          $   (663,875)     $  (631,320)      $  (201,931)
Net loss                                                                 (37,272)         (20,123)         (420,508)
Interest on capital securities, net of nil tax effect (note 7)           (13,697)         (12,432)           (5,714)
Issue costs related to capital securities (note 7)                            --               --            (3,167)
----------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                $   (714,844)     $  (663,875)      $  (631,320)
======================================================================================================================
</TABLE>

See accompanying notes.

                                       60
<PAGE>

                              ECHO BAY MINES LTD.

                      CONSOLIDATED STATEMENT OF CASH FLOW

                            Year ended December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars                                                                 1999          1998           1997
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>           <C>           <C>
CASH PROVIDED FROM (USED IN):
OPERATING ACTIVITIES
Net loss                                                                             $ (37,272)    $ (20,123)    $ (420,508)
Add (deduct):
  Depreciation                                                                          40,957        45,792         51,887
  Amortization                                                                          13,984        17,494         27,429
  Loss (gain) on sale of interests in mining properties and other                       13,795        (7,447)        (3,877)
  Non-cash portion of provision for impaired assets and other charges (note 11)             --            --        355,782
  Unrealized losses on share investments                                                 1,508         3,013          6,643
  Deferred income included in revenue (note 6)                                         (11,129)       (5,381)       (14,079)
  Deferral of gains on restructuring of hedge commitments (note 6)                      14,014         5,236             --
  Net gain on sale of other assets (note 9)                                               (736)         (495)        (2,759)
  Other                                                                                    961           (90)          (991)
Change in cash invested in operating assets and liabilities:
  Interest and accounts receivable                                                         864         1,898          2,178
  Inventories                                                                              882         3,743         (5,753)
  Prepaid expenses and other assets                                                        290        (2,309)         2,812
  Accounts payable and accrued liabilities                                                (459)      (26,748)        (8,824)
  Income and mining taxes payable                                                           13          (512)           856
---------------------------------------------------------------------------------------------------------------------------
                                                                                        37,672        14,071         (9,204)
---------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Mining properties, plant and equipment                                                 (33,265)      (26,971)      (112,001)
Net proceeds from (cost of) repurchase of gold and silver hedging contracts             (3,334)        8,673         63,070
Proceeds from repurchase of foreign exchange contracts                                      --            --          5,995
Long-term investments and other assets                                                  (5,135)         (534)       (21,626)
Proceeds on sale of plant and equipment                                                    972         3,763          1,920
Proceeds on sale of investment in Santa Elina (note 10)                                     --         6,252             --
Proceeds on sale of short-term investments                                                 485         3,018          3,089
Proceeds on sale of mining properties                                                       --         1,195             --
Proceeds on sale of long-term investments                                                   --            --          7,894
Other                                                                                   (1,411)          342         (1,362)
---------------------------------------------------------------------------------------------------------------------------
                                                                                       (41,688)       (4,262)       (53,021)
---------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Currency borrowings                                                                     17,000            --         15,538
Debt repayments                                                                        (16,181)      (18,327)      (131,749)
Capital securities issued, net of issuance costs (note 7)                                   --            --         96,700
Equity portion of interest on capital securities (note 7)                                   --            --         (4,270)
Common share issues, net of issuance costs (note 14)                                        --            --             59
Other                                                                                   (1,389)         (448)          (296)
---------------------------------------------------------------------------------------------------------------------------
                                                                                          (570)      (18,775)       (24,018)
---------------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents                                               (4,586)       (8,966)       (86,243)
Cash and cash equivalents, beginning of year                                             7,987        16,953        103,196
---------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                               $   3,401     $   7,987     $   16,953
===========================================================================================================================
</TABLE>

See accompanying notes.

                                       61
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted


1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
General
Echo Bay Mines Ltd. mines, processes and explores for gold and silver. Gold
accounted for 75% of 1999 revenue and silver 25%.  In 1999 and 1998, the Company
had three operating mines in the United States: Round Mountain in Nevada;
McCoy/Cove in Nevada; and Kettle River in Washington.  In January 1998, the
Company temporarily suspended operations at its Lupin mine in the Nunavut
Territory, Canada.  In the fourth quarter of 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.

The Company's financial position and operating results are directly affected by
the market price of gold in relation to the Company's production costs.  Silver
price fluctuations also affect the Company's financial position and operating
results, although to a lesser extent.  Gold and silver prices fluctuate in
response to numerous factors beyond the Company's control.

The consolidated financial statements are prepared on the historical cost basis
in accordance with accounting principles generally accepted in Canada and, in
all material respects, conform with accounting principles generally accepted in
the United States, except as described in note 15.  The statements are expressed
in U.S. dollars.

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.

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

Principles of consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries.  Interests in joint ventures, each of which by contractual
arrangement is jointly controlled by all parties having an equity interest in
the joint venture, are accounted for using the proportionate consolidation
method to consolidate the Company's share of the joint ventures' assets,
liabilities, revenues and expenses.

Share investments
Short-term investments, comprised of publicly traded common shares, are recorded
at the lower of cost or quoted market prices, with unrealized losses included in
income.  Long-term common share investments are recorded at cost.  A provision
for loss is recorded in income if there were a decline in the market value of a
long-term share investment that was other than temporary.  If the Company's
share investment represents more than a 20% ownership interest and the Company
can exercise significant influence over the investee, the equity method of
accounting is used.  The equity method reports the investment at cost, adjusted
for the Company's pro rata share of the investee's undistributed earnings or
losses since acquisition.

Foreign currency translation
The Company's self-sustaining Canadian operations are translated into U.S.
dollars using the current-rate method, which translates assets and liabilities
at the year-end exchange rate and translates revenue and expenses at average
exchange rates.  Exchange differences arising on translation are recorded as a

                                       62
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

separate component of shareholders' equity.  The change in the balance is
attributable to fluctuations in the exchange rate of U.S. dollars to Canadian
dollars.  The Company's foreign operations that are not self-sustaining are
translated into U.S. dollars using the temporal method, which translates
monetary assets and liabilities at the year-end exchange rate, and translates
additions to non-monetary assets and liabilities, revenue and expenses at
average exchange rates.  Exchange differences arising on translation are
recorded in current earnings.

Revenue recognition
Revenue is recognized when title to delivered gold or silver and the risks and
rewards of ownership pass to the buyer.

Earnings (loss)  per share
Earnings (loss) per share is calculated based on the weighted average number of
common shares outstanding during the year.  For per share calculations, the
amount of capital securities interest that is charged directly to the deficit
decreases the earnings, or increases the loss, attributable to common
shareholders.  Fully diluted earnings (loss) per share is the same as basic
earnings (loss) per share because the Company's outstanding options are not
dilutive.

Cash and cash equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents.

Inventories
Precious metals inventories are valued at the lower of cost, using the "first-
in, first-out" method, or net realizable value.  Materials and supplies are
valued at the lower of average cost or replacement cost.

Plant and equipment
Plant and equipment are recorded at cost.  Depreciation is provided using the
straight-line method over each asset's estimated economic life to a maximum of
20 years.

Mining properties - producing mines' acquisition and development costs
Mining properties are recorded at cost of acquisition.  Mine development costs
include expenditures incurred to develop new ore bodies, to define further
mineralization in existing ore bodies and to expand the capacity of operating
mines.  These expenditures are amortized against earnings on the unit-of-
production method over the expected economic life of each mine.

Mining properties - mining costs
Mining costs are the costs incurred at producing properties to remove ore and
waste from an open pit or underground mine.  These costs are deferred when they
relate to gold that will be produced in future years.  These deferred costs are
charged to operating costs in the period in which the related production occurs.

For open pit mining operations, mining costs are deferred when the ratio of tons
mined per ounce of gold recovered exceeds the average ratio estimated for the
life of the mine.  These deferred costs are charged to operating costs when the
actual ratio is below the average ratio.

                                       63
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

For underground mining operations, these costs include the cost of accessing and
developing new production areas.

Development properties
At properties identified as having the potential to add to the Company's proven
and probable reserves, the direct costs of acquisition and development are
capitalized as they are incurred.  Determination as to reserve potential is
based on results of feasibility studies which indicate whether a property is
economically feasible.  After drilling has confirmed the shape and continuity of
mineralization, initial feasibility studies are then optimized.  If production
commences, these costs are transferred to "producing mines' acquisition and
development costs" and amortized against earnings as described above.  If a
project is determined not to be commercially feasible, unrecovered costs are
expensed in the year in which the determination is made.

Exploration costs
The costs of exploration programs not anticipated to result in additions to the
Company's reserves and other mineralization in the current year are expensed as
incurred.

Reclamation and mine closure costs
Estimated site restoration and closure costs for each producing mine are charged
against operating earnings on the unit-of-production method over the expected
economic life of each mine.

Review of life-of-mine plans and carrying values
Plant and equipment are depreciated and mining properties are amortized over
their anticipated economic lives.  Each year, the Company estimates ore reserves
and prepares a comprehensive mining plan for the then-anticipated remaining life
of each property.  The prices used in estimating the Company's ore reserves at
December 31, 1999 were $325 per ounce of gold and $5.50 per ounce of silver.
Based on year-end ore reserves and the current life-of-mine plan for each of the
Company's properties, the Company reviews its accounting estimates and makes
needed adjustments.  This complex process continues for the life of every mine.

The Company reviews the carrying value of each mine by comparing the net book
value with the estimated undiscounted future cash flow from the property.  For
purposes of this analysis, the net book value of each mine is reduced by
deferred hedging gains pertaining to future production from that mine as well as
reclamation and mine closure accruals.  If the net book value exceeds the
undiscounted future cash flow, then a corresponding impairment write-down is
recorded.

Reserve risks
If the Company were to determine that its reserves and future cash flows should
be calculated at a significantly lower gold price than the $325 per ounce price
used at December 31, 1999, there would likely be a material reduction in the
amount of gold reserves.  In addition, if the price realized by the Company for
its gold or silver bullion were to decline substantially below the price at
which ore reserves were calculated for a sustained period of time, the Company
potentially could experience material write-downs of its investment in its
mining properties (note 11).  Under certain of such circumstances, the Company
might discontinue the development of a project or mining at one or more of its
properties or might temporarily suspend operations at a producing property and
place that property in a "care and

                                       64
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

maintenance" mode. Reserves could also be materially and adversely affected by
changes in operating and capital costs and other factors, including but not
limited to, short-term operating factors such as the need for sequential
development of ore bodies and the processing of new or different ore grades and
ore types.

Significant changes in the life-of-mine plans can occur as a result of mining
experience, new ore discoveries, changes in mining methods and rates, process
changes, investments in new equipment and technology, and other factors. Changes
in the significant assumptions underlying future cash flow estimates, including
assumptions regarding precious metals prices, may have a material effect on
future carrying values and operating results.

Capitalization of interest
Interest cost is capitalized on construction programs until the facilities are
ready for their intended use.

Stock-based compensation plans
The Company has three stock-based compensation plans, which are described in
note 14. No compensation expense is recognized for these plans when the stock or
stock options are issued to employees. Any consideration paid by employees on
the exercise of stock options is credited to share capital.

Hedging activities
The Company's profitability is subject to changes in gold and silver prices,
exchange rates, interest rates and certain commodity prices. To reduce the
impact of such changes, the Company locks in the future value of certain of
these items through hedging transactions. These transactions are accomplished
through the use of derivative financial instruments, the value of which is
derived from movements in the underlying prices or rates.

The gold- and silver-related instruments used in these transactions include
commodity loans, fixed and floating forward sales contracts, spot-deferred
contracts, swaps and options. Sensitivity to changing metal prices is reduced,
and future revenues are hedged, as the Company's future production will satisfy
these loans and other delivery commitments. 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 also engaged in crude oil hedging activities, including
forward purchase agreements and swaps, to reduce the impact of fluctuations in
crude oil prices on its operating costs.

Gains and losses resulting from hedging activities are recognized in earnings on
a basis consistent with the hedged item. When hedged production is sold, revenue
is recognized in amounts implicit in the commodity loan, delivery commitment or
option agreement. Gains or losses on foreign currency and crude oil hedging
activities are recorded in operating costs, or capitalized in the cost of
assets, when the hedged Canadian dollar transactions occur and when crude oil
supplies are used in operations. Gains and losses on early termination of
hedging contracts are deferred until the formerly hedged items are recognized in
earnings. Premiums paid or received on gold and silver option contracts
purchased or sold are deferred and recognized in earnings on the option
expiration dates.

                                       65
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

The carrying values of gold loans are remeasured using the market value of gold
at the reporting date. Differences between these values and the loan proceeds
that were originally received are recorded as deferred income and will be
included in revenue when the production related to the loans is delivered.

2. INVENTORIES
                                               1999       1998
-----------------------------------------------------------------
Precious metals  --  bullion                $16,033    $14,704
                 --  in-process               7,538      8,568
Materials and supplies                       13,633     14,657
-----------------------------------------------------------------
                                            $37,204    $37,929
=================================================================


3. PROPERTY, PLANT AND EQUIPMENT

Net book value                                                  1999       1998
--------------------------------------------------------------------------------
                                   Plant and       Mining   Net Book   Net Book
Property and percentage owned      Equipment   Properties      Value      Value
--------------------------------------------------------------------------------
Round Mountain (50%)                $ 67,384      $47,942   $115,326   $121,987
McCoy/Cove (100%)                     29,267       19,199     48,466     65,230
Lupin (100%)                          27,539           --     27,539     30,873
Kettle River (100%)                    1,600          698      2,298      8,443
Aquarius (100%)                       37,515       14,120     51,635     49,481
Paredones Amarillos (60%) (note 10)       --           --         --     13,432
Other                                  4,133           --      4,133      2,962
--------------------------------------------------------------------------------
                                    $167,438      $81,959   $249,397   $292,408
================================================================================


Plant and equipment                                   1999                 1998
--------------------------------------------------------------------------------
                                                  Net Book             Net Book
                                           Cost      Value      Cost      Value
--------------------------------------------------------------------------------
Land improvements and utility systems  $ 74,018   $  8,245  $ 77,151   $ 13,950
Buildings                               153,128     37,544   149,442     46,343
Equipment                               389,360     78,707   386,161     95,598
Construction in progress                 44,542     42,942    40,779     40,779
--------------------------------------------------------------------------------
                                       $661,048   $167,438  $653,533   $196,670
================================================================================

Mining properties                                               1999       1998
--------------------------------------------------------------------------------
Producing mines' acquisition and development costs          $272,362   $270,585
Less accumulated amortization                                230,470    216,810
--------------------------------------------------------------------------------
                                                              41,892     53,775
Development properties' acquisition and development costs     14,065     24,067
Deferred mining costs                                         26,002     17,896
--------------------------------------------------------------------------------
                                                            $ 81,959   $ 95,738
================================================================================

                                       66
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

4. LONG-TERM INVESTMENTS AND OTHER ASSETS
                                                               1999        1998
--------------------------------------------------------------------------------
Premiums paid on gold and silver option contracts            $34,103    $14,090
Other                                                          7,634      4,421
--------------------------------------------------------------------------------
                                                              41,737     18,511
Less current portion included in prepaid expenses and other
 assets                                                       12,482      2,315
--------------------------------------------------------------------------------
                                                             $29,255    $16,196
================================================================================

Premiums paid on gold and silver option contracts
Premiums paid on gold and silver option contracts purchased are deferred and
recognized in earnings on the option expiration dates. These deferred premiums
are expected to be recognized as follows: $12.5 million in 2000, $11.4 million
in 2001, $1.0 million in 2002, $1.4 million in 2003, $2.1 million in 2004, and
$5.7 million thereafter. Refer to note 6 for a discussion of the deferral of
premiums received on gold and silver option contracts sold.

5. GOLD AND OTHER FINANCINGS

                                           1999          1998
----------------------------------------------------------------
Gold loans                              $    --       $ 6,867
Currency loans                           51,250        41,035
Capital securities (note 7)               5,419         4,869
----------------------------------------------------------------
                                         56,669        52,771
Less current portion                     13,750        11,652
----------------------------------------------------------------
                                        $42,919       $41,119
================================================================


Gold term loan and currency loans
The Company has a term and revolving facility with a syndicate of commercial
banks under which the Company can borrow either gold or dollars. The facility is
convertible between gold and dollar borrowings. Interest on gold borrowings is
calculated at the banks' gold rate plus 1.75%, and interest on dollar borrowings
at LIBOR plus 1.75%. At December 31, 1999, a $21.3 million currency term loan
was outstanding under the facility, with an effective interest rate of 7.94%.
The Company repaid an outstanding gold term loan under the agreement in the
third quarter of 1999 (18,502 ounces were outstanding at December 31, 1998).

The facility requires that the aggregate gold and currency commitment be repaid
quarterly at a specified principal amount in dollars and/or the equivalent
number of ounces valued at the original gold loan price of $349 per ounce. The
gold loan was restructured at a price of $388 per ounce in 1996. Beginning in
the third quarter of 1998, the Company opted to accelerate its repayment of gold
ounces and decelerate its repayment of the currency loan from the original
repayment schedule, which called for quarterly installments through the second
quarter of 2001. The difference between the restructured gold loan price of $388
per ounce and the spot price on the repayment date for these accelerated ounces
has been deferred and will be recognized in earnings in accordance with the
original repayment schedule.

At December 31, 1999, the Company had $30.0 million outstanding, and up to $20.0
million or gold equivalent, subject to covenant limitations, available until
August 2001, under the revolving credit facility.  The Company has no
restrictions on the borrowing capacity of this line, based on the current

                                       67
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

trailing 90-day average spot price of gold. At December 31, 1999, the effective
interest rate on the revolving loan was 7.94%. Annual commitment fees on the
unutilized credit facility are 0.5%.

Gold loan
At December 31, 1998, a 5,523-ounce gold loan priced at $403 per ounce was
outstanding, which the Company repaid in the first quarter of 1999.

Other information
For financial statement presentation, outstanding gold loans at December 31,
1998 were remeasured to the ending gold price for the period ($286 per ounce).
Unrealized remeasurement gains or losses are recorded in deferred income and
included in revenue upon delivery of the gold production related to the loans
(note 6).

Certain of the Company's financing arrangements require it to maintain specified
ratios of assets to liabilities and cash flow to debt. The Company is in
compliance with these ratios and other covenant requirements.

The Company had $30.2 million in outstanding surety bonds and letters of credit
at December 31, 1999, primarily related to the bonding of future reclamation
obligations. At December 31, 1999, annual fees on the letters of credit range
from 0.50% to 1.75%.

Interest payments were $5.0 million in 1999, $7.2 million in 1998 and $9.4
million in 1997.

Future gold and silver delivery commitments are summarized by year in note 18.

6. DEFERRED INCOME

                                                             1999      1998
-----------------------------------------------------------------------------
Modification of hedging contracts                         $61,382   $62,565
Premiums received on gold and silver option contracts      30,835    13,502
Other                                                       1,682     3,478
-----------------------------------------------------------------------------
                                                           93,899    79,545
Less current portion                                       10,525     1,727
-----------------------------------------------------------------------------
                                                          $83,374   $77,818
=============================================================================

Modification of hedging contracts
Gains and losses on the early termination or other restructuring of gold, silver
and foreign currency hedging contracts are deferred until the formerly hedged
items are recognized in earnings. These deferred gains (losses) are expected to
be recognized as follows: $26.3 million in 2000, $20.8 million in 2001, $26.4
million in 2002, $(2.3) million in 2003, $(8.1) million in 2004, and $(1.7)
million thereafter.

Premiums received on gold and silver option contracts
Premiums received on gold and silver option contracts sold are deferred and
recognized in earnings on the option expiration dates. These deferred premiums
are expected to be recognized as follows: $10.5 million in 2000, $9.7 million in
2001, $1.4 million in 2002, $1.4 million in 2003, $3.3 million in 2004, and $4.5
million thereafter. Refer to note 4 for a discussion of the deferral of premiums
paid on gold and silver option contracts purchased.

                                       68
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

7. CAPITAL SECURITIES
In 1997, the Company issued $100.0 million of 11% capital securities due in
April 2027. The effective interest rate on the capital securities is 11%, or 12%
compounded semi-annually during a period of interest deferral.

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 interest payments to holders of the
capital securities. The present value of the capital securities' principal
amount, $5.4 million, has been classified as debt within gold and other
financings (note 5). The present value of the future interest payments of $94.6
million plus deferred accrued interest at December 31, 1999 of $27.0 million has
been classified within a separate component of shareholders' equity as the
Company has the unrestricted ability to settle the future interest payments by
issuing its own common shares to the trustee for sale. Interest on the debt
portion of the capital securities has been classified as interest expense on the
consolidated statement of earnings, and interest on the equity portion of the
capital securities has been charged directly to deficit on the consolidated
balance sheet. For purposes of per share calculations, the equity portion
increases the loss attributable to common shareholders. See note 15 for a
discussion of differences in treatment of the capital securities under generally
accepted accounting principles in the United States.

8. OTHER LONG-TERM OBLIGATIONS
                                                    1999          1998
----------------------------------------------------------------------------
Accrued reclamation and mine closure              $47,749       $42,891
Provision for McCoy/Cove pit wall remediation          --        15,183
Other                                               4,302         4,612
----------------------------------------------------------------------------
                                                   52,051        62,686
Less current portion included in accounts payable
and accrued liabilities                             4,204        14,743
----------------------------------------------------------------------------
                                                  $47,847       $47,943
============================================================================

Reclamation and mine closure
At December 31, 1999, the Company's future reclamation and mine closure costs
are estimated to be $79.5 million. The aggregate obligation accrued to December
31, 1999 was $47.7 million, including accruals of $7.0 million in 1999, $6.3
million in 1998, and $8.8 million in 1997. The remaining $31.8 million will be
accrued on the unit-of-production method over the remaining life of each mine.
Future reclamation costs are determined using management's best estimates of the
scope of work to be performed and related costs. These estimates may change
based on future changes in operations, cost of reclamation activities and
regulatory requirements.

Provision for McCoy/Cove pit wall remediation
In 1996, the Company recorded a $30.0 million provision related to the estimated
costs to remove waste rock from a portion of the Cove pit wall that had
collapsed at the McCoy/Cove mine in Nevada. Remediation work to permit mining in
the affected portion of the Cove pit began in 1997 and was completed during the
second quarter of 1999. Total spending for the pit wall remediation was $24.2

                                       69
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

million. The unused portion of the remediation accrual of $5.8 million has been
pooled with deferred mining costs.

9.   INTEREST AND OTHER

<TABLE>
<CAPTION>
                                                                             1999                1998                1997
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>                 <C>
Interest income                                                          $   (166)          $    (328)          $  (2,517)
Interest expense                                                            4,723               5,559               5,686
Interest capitalized                                                           --                  --                (523)
Unrealized loss on share investments                                        1,508               3,013               6,643
(Gain) loss on sale of share investments                                     (485)                962                (466)
Gain on sale of plant and equipment                                          (251)             (1,457)             (2,293)
Other                                                                       2,865               4,096               2,538
-------------------------------------------------------------------------------------------------------------------------
                                                                         $  8,194           $  11,845           $   9,068
=========================================================================================================================
</TABLE>

10.  LOSS (GAIN) ON SALE OF INTERESTS IN MINING AND OTHER PROPERTIES

<TABLE>
<CAPTION>
                                                                             1999                1998                1997
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>                 <C>
Loss on sale of interest in Paredones Amarillos                          $ 13,795           $      --           $      --
Gain on sale of investment in Santa Elina                                      --              (6,252)                 --
Gain on sale of interests in other mining properties                           --              (1,195)             (3,877)
-------------------------------------------------------------------------------------------------------------------------
                                                                         $ 13,795           $  (7,447)          $  (3,877)
=========================================================================================================================
</TABLE>

Loss on sale of interest in Paredones Amarillos
The Company agreed 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% net profits royalty related to Paredones
Amarillos production, capped at $2.0 million.  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 1997, the Company recorded $143.6 million in provisions for impaired assets
related to its investment in Santa Elina, which effectively eliminated the
carrying value of the investment (note 11).  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.

                                       70
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

11.  PROVISION FOR IMPAIRED ASSETS AND OTHER CHARGES
The recoverability of the Company's carrying values of its operating and
development properties are assessed each year by comparing carrying values to
estimated future net cash flows from each property.  The Company recorded a
$346.0 million provision for impaired assets in 1997, as follows.

<TABLE>
<CAPTION>
                                                Acquisition
                                   Deferred    and develop-      Plant and            Other       Legal and        Total
                                     mining      ment costs      equipment     assets (net)   closure costs         1997
------------------------------------------------------------------------------------------------------------------------
<S>                                <C>         <C>               <C>           <C>            <C>             <C>
Operating properties:
   McCoy/Cove                        $47,000      $      --       $     --      $      --       $    --       $ 47,000
   Lupin                              17,198         43,435          4,367             --            --         65,000
   Kettle River                           --         11,220          3,780             --            --         15,000
------------------------------------------------------------------------------------------------------------------------
                                      64,198         54,655          8,147             --            --        127,000
------------------------------------------------------------------------------------------------------------------------
Other properties:
   Kingking                               --         46,183            314          3,467            --         49,964
   Santa Elina                            --        138,878          5,873         (1,133)           --        143,618
------------------------------------------------------------------------------------------------------------------------
                                          --        185,061          6,187          2,334            --        193,582
------------------------------------------------------------------------------------------------------------------------
Share investments                         --             --             --         15,641            --         15,641
Other                                     --             --             --          2,116         7,690          9,806
------------------------------------------------------------------------------------------------------------------------
Provision for impaired assets        $64,198      $ 239,716       $ 14,334      $  20,091       $ 7,690     $  346,029
------------------------------------------------------------------------------------------------------------------------
Severance expense                                                                                               16,636
------------------------------------------------------------------------------------------------------------------------
Provision for impaired assets and other charges                                                             $  362,665
========================================================================================================================
</TABLE>

In 1997, the Company wrote off the carrying value of the Kingking project after
electing not to exercise its option interest.  In 1998, the Company issued
1,237,114 common shares at $3.03 per share to Nationwide Development Corporation
("Nadecor"), which held an ownership interest in the Kingking project.  The
share issuance settled any obligations of the Company owed to Nadecor.

In 1997, the Company wrote off its $143.6 million investment in Santa Elina,
which included a copper/gold project, a number of small gold exploration
properties, a significant land position and a hydro-power project in the
feasibility stage.

                                       71
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted


12.    INCOME TAX EXPENSE
Geographic components
The geographic components of earnings before income tax expense and income tax
expense were as follows.

<TABLE>
<CAPTION>
                                                                           1999                1998                1997
-----------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                 <C>                <C>
Income (loss) before income taxes:
   Canada                                                              $(22,386)           $(23,471)          $(131,289)
   United States and other                                              (14,670)              3,702            (287,437)
-----------------------------------------------------------------------------------------------------------------------
                                                                       $(37,056)           $(19,769)          $(418,726)
=======================================================================================================================
Current income tax expense (recovery):
   Canada                                                              $    216            $    354           $     559
   United States and other                                                   --                  --               1,559
-----------------------------------------------------------------------------------------------------------------------
                                                                            216                 354               2,118
-----------------------------------------------------------------------------------------------------------------------
Deferred income tax expense (recovery):
   Canada                                                                    --                  --                  --
   United States and other                                                   --                  --                (336)
-----------------------------------------------------------------------------------------------------------------------
                                                                             --                  --                (336)
-----------------------------------------------------------------------------------------------------------------------
Income tax expense                                                     $    216            $    354           $   1,782
=======================================================================================================================
</TABLE>

Effective tax rate
The effective tax rate on the Company's earnings differed from the combined
Canadian federal and provincial corporate income tax rates of 43.5% for 1999 and
43.2% for 1998 and 1997 for the following reasons.

<TABLE>
<CAPTION>
                                                                           1999                1998                1997
-----------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                 <C>                 <C>
Loss before income taxes                                               $(37,056)           $(19,769)          $(418,726)
=======================================================================================================================
Income tax effect of:
   Expected Canadian federal and provincial corporate
         income taxes                                                  $(16,115)           $ (8,540)          $(180,890)
   Operating loss from which no tax benefit is derived                     (838)             12,720             161,385
   Canadian resource allowance and earned depletion                      (2,153)             (2,349)             (2,081)
   Foreign losses subject to different income tax rates                  18,182              (1,687)             23,978
   Other items                                                            1,140                 210                (610)
-----------------------------------------------------------------------------------------------------------------------
Income tax expense                                                     $    216            $    354           $   1,782
=======================================================================================================================
Effective tax rate (current and deferred)                                  (0.6%)              (1.8%)              (0.4%)
=======================================================================================================================
</TABLE>

Loss carryforwards
At December 31, 1999, the Company had U.S. net operating loss carryforwards of
approximately $382 million to apply against future taxable income and $193
million to apply against future alternative minimum taxable income. These loss
carryforwards do not include the provisions for impaired assets (note 11), which
have not yet been recognized fully for income tax purposes. The net operating
loss carryforwards expire at various times from 2001 to 2018. Additionally, the
Company has Canadian non-capital loss carryforwards of approximately $47 million
and net capital loss carryforwards of approximately $36 million. The non-capital
loss carryforwards expire at various times from 2003 to 2005.  The net capital
loss carryforwards have no expiration date.

                                       72
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

Income tax payments
Income tax payments were $0.2 million in 1999, $1.6 million in 1998 and $0.2
million in 1997.

13.  PREFERRED SHARES
The Company is authorized to issue an unlimited number of preferred shares,
issuable in series.  Each series is to consist of such number of shares and to
have such designation, rights, privileges, restrictions and conditions as may be
determined by the directors.  No preferred shares are currently issued.

14.  COMMON SHARES
Changes in the number of common shares outstanding during the three years ended
December 31, 1999 were as follows.

<TABLE>
<CAPTION>
                                                                                        Number of
                                                                                           Shares            Amount
-------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                  <C>
Balance, December 31, 1996                                                            139,355,781          $709,534
1997:  Exercise of share options                                                           14,250                59
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1997                                                            139,370,031           709,593
1998:  Issuance of shares to Nationwide Development Corporation (note 11)               1,237,114             3,750
-------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1998 and 1999                                                   140,607,145          $713,343
===================================================================================================================
</TABLE>

Dividends
The Company has not paid dividends since 1996 and is prohibited from paying
common share dividends during a period of interest deferral related to the
capital securities (note 7).

Shareholder rights plan
Under the Company's shareholder rights plan, if any person or group were to
announce an intention to acquire, or were to acquire, 20% or more of the
Company's common shares without complying with the conditions of a "permitted
bid," then the owners of each share of common stock (other than the acquiring
person or group) would become entitled to exercise a right to buy one additional
common share at 50% of the lowest share price on The Toronto Stock Exchange
during the prior 90 days.

A "permitted bid," which does not trigger the entitlement to acquire shares
under the plan, is one that complies with applicable securities law in all
jurisdictions where at least 5% of the Company's common shares are owned; is
made to all shareholders for all outstanding shares; is open for a minimum of 60
days; takes up no shares until at least two-thirds of the outstanding shares
have been tendered to the bid, including those owned by the acquiring person or
group; and meets certain other conditions.

Unless confirmed by the shareholders of the Company at the annual meeting
planned for May 2000, the shareholder rights plan will expire at that time.

Restricted share grant plan
Effective February 1997, the Company adopted a restricted share grant plan to
provide incentive to officers of the Company.  An aggregate of 750,000 common
shares of the Company have been reserved for issuance under the plan, but no
grants are outstanding.  The vesting of any shares which may be granted under
this plan is at the discretion of the Compensation Committee of the Board of
Directors.

                                       73
<PAGE>

                              ECHO BAY MINES LTD

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

Employee Share Incentive Plan and Director Equity Plan

These plans provide for the granting of options to purchase common shares to
officers and employees (under the employee share incentive plan) and to eligible
directors (under the director equity plan). Outstanding share options under the
plans are exercisable at prices equal to the market value on the date of grant.
The option holder may exercise each share option over a period of 10 years from
the date of grant.  Options generally vest in 25% increments on the first,
second, third and fourth year anniversaries following the grant date.  Option
prices are denominated in Canadian dollars.  No more grants are to be made under
the director equity plan.

Changes in the number of options outstanding during the three years ended
December 31, 1999 were as follows.

<TABLE>
<CAPTION>
                                                   Employee Share Incentive Plan                    Director Equity Plan
                                                   -----------------------------           -----------------------------
                                                                         Weighted                               Weighted
                                                    Number of             Average          Number of             Average
                                                       Shares      Exercise Price             Shares      Exercise Price
------------------------------------------------------------------------------------------------------------------------
<S>                                                 <C>            <C>                       <C>                 <C>
Options outstanding, December 31, 1996              4,338,667        C$     12.85            157,900         C$    14.67
1997:   Options granted                             1,414,060                8.00             52,000                8.00
        Options exercised                             (14,250)               5.75                 --                  --
        Options expired                               (13,760)               9.75                 --                  --
        Options forfeited                            (732,598)              12.25            (14,950)              14.91
------------------------------------------------------------------------------------------------------------------------
Options outstanding, December 31, 1997              4,992,119        C$     11.60            194,950         C$    12.87
1998:   Options granted                               857,906                3.59             45,500                3.70
        Options expired                               (78,700)               9.75                 --                  --
        Options forfeited                            (794,005)              10.35                 --                  --
------------------------------------------------------------------------------------------------------------------------
Options outstanding, December 31, 1998              4,977,320         C$    10.44            240,450         C$    11.14
1999:   Options granted                             1,170,000                2.55                 --                  --
        Options expired                               (34,937)               9.75                 --                  --
        Options forfeited                            (618,697)               9.94                 --                  --
------------------------------------------------------------------------------------------------------------------------
Options outstanding, December 31, 1999              5,493,686         C$     8.82            240,450         C$    11.14
========================================================================================================================
</TABLE>

The number of shares reserved for future grants at December 31, 1999 are
4,118,816 under the Employee Share Incentive Plan.  The number and weighted
average price of shares exercisable under the Employee Share Incentive Plan are
3,521,787 at C$11.66 at December 31, 1999; 3,352,269 at C$12.29 at December 31,
1998; and 2,746,121 at C$12.78 at December 31, 1997.  The number and weighted
average price of shares exercisable under the Director Equity Plan are 171,575
at C$12.73 at December 31, 1999; 123,825 at C$13.69 at December 31, 1998; and
74,800 at C$14.22 at December 31, 1997.

                                       74
<PAGE>

                              ECHO BAY MINES LTD

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

Options outstanding at December 31, 1999 had the following characteristics.

<TABLE>
<CAPTION>
                                           Weighted       Weighted                              Weighted
   Number of                       Average Exercise        Average        Number of     Average Exercise
      Shares            Exercise    Price of Shares    Years Until           Shares      Price of Shares
 Outstanding         Price Range        Outstanding     Expiration      Exercisable          Exercisable
--------------------------------------------------------------------------------------------------------
<S>              <C>               <C>                 <C>              <C>             <C>
 Employee Share Incentive Plan
 -----------------------------
   1,887,043     C$2.55 - C$3.59         C$    2.95              9          183,888           C$    3.59
   1,291,888       5.75 -   8.88               7.99              5        1,131,136                 7.99
   1,725,119      10.70 -  15.75              13.11              5        1,624,238                13.26
     589,636      16.25 -  19.63              16.92              4          582,525                16.89
 Director Equity Plan
 --------------------
      97,500     C$3.70 - C$8.00         C$    5.99              8           37,375           C$    6.70
     142,950      12.50 -  18.25              14.64              5          134,200                14.41
--------------------------------------------------------------------------------------------------------
</TABLE>

15.    DIFFERENCES BETWEEN CANADIAN AND U.S. 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, which differ in some
respects from those in the United States, as described below.

In accordance with Canadian GAAP, the present value of the principal amount of
the capital securities issued in 1997 is classified as debt within gold and
other financings, while the present value of the future interest payments is
classified as a separate component of shareholders' equity (note 7).  The
deferred accrued interest is classified within this equity component as the
Company has the option to satisfy the deferred interest by delivering common
shares.  The related issuance costs were allocated proportionately to deferred
financing charges and retained earnings based on the debt and equity
classifications.  Interest on the capital securities has been allocated
proportionately to interest expense and deficit based on the debt and equity
classifications.  Under U.S. GAAP, the face value of the securities would be
classified entirely as debt within gold and other financings; the related
issuance costs would be classified as deferred financing charges within long-
term investments and other assets and would be amortized to interest expense
over the life of the securities; and the interest on the capital securities
would be classified entirely as interest expense.

In accordance with Canadian GAAP, certain long-term foreign exchange contracts
are considered to be hedges of the cost of goods to be purchased in foreign
currencies in future periods.  Gains and losses related to changes in market
values of such contracts are recognized as a component of the cost of goods when
the related hedged purchases occur.  Under U.S. GAAP, changes in market value
would be included in current earnings.

At December 31, 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 enhance 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

                                       75
<PAGE>

                              ECHO BAY MINES LTD

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

105,000 ounces of gold call options sold would not qualify for hedge accounting
and therefore would be marked to market at December 31, 1999. As a result, the
Company has recorded an unrealized loss on gold call options sold of $2.1
million in 1999 under U.S. GAAP.

In accordance with Canadian GAAP, the severance costs associated with the
temporary suspension of operations at Lupin were recognized on the commitment
date (generally defined as the date the severance plan is established and
approved by management) which occurred in 1997.  Conditions for recognizing
involuntary termination benefits under U.S. GAAP include similar criteria as
Canadian GAAP.  Additionally, however, the benefit arrangement must also have
been communicated to employees.  As the Lupin severance activities were not
communicated to employees prior to December 31, 1997, under U.S. GAAP the
related costs would be recognized in 1998.

The Company previously disclosed a difference of $36.4 million between Canadian
and U.S. GAAP regarding the cost of the 1996 Santa Elina acquisition, which
under U.S. GAAP would have increased mining properties and common shares by
$36.4 million.  Additionally, the Company disclosed a difference between
Canadian and U.S. GAAP regarding Santa Elina resulting from differences between
the allocated values and the tax bases of assets acquired and liabilities
assumed.  Under U.S. GAAP, this would result in an increased allocation to
mining properties of $46.6 million and a corresponding deferred income tax
liability related to the tax effect of the future amortization resulting from
the increased basis.  The valuation difference of $36.4 million and the deferred
tax difference of $46.6 million have been eliminated following the write-off of
the Santa Elina assets in 1997 (note 11).  Due to the increased basis in Santa
Elina under U.S. GAAP, the 1997 write-off under U.S. GAAP would exceed the
write-off of $143.6 million recognized under Canadian GAAP by $36.4 million,
comprised of the original valuation difference ($36.4 million) and the deferred
tax difference ($46.6 million), offset by the recognition of a deferred tax
benefit ($46.6 million).

In accordance with Canadian GAAP, certain of the Company's mining properties are
amortized over proven and probable reserves and other mineralization.  Under
U.S. GAAP, only proven and probable reserves would be used as the basis for
amortization.

Certain 1998 and 1997 U.S. GAAP financial information has been adjusted to amend
the reconciling amounts originally presented for mining properties and share
investments.  As a result, in comparison to amounts previously reported, net
loss under U.S. GAAP has been increased by $0.9 million in 1998 and decreased by
$5.8 million in 1997, and common shareholders' equity at December 31, 1998 has
been increased by $11.5 million.

                                       76
<PAGE>

                              ECHO BAY MINES LTD

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

The effects on the consolidated statement of earnings of the above differences
would have been as follows.

<TABLE>
<CAPTION>
                                                                          1999                 1998                 1997
------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                  <C>                 <C>
Net loss under Canadian GAAP                                          $(37,272)            $(20,123)           $(420,508)
Additional interest expense on capital securities                      (13,697)             (12,432)              (5,714)
Change in market value of foreign exchange contracts                     5,540               (2,640)              (8,110)
Unrealized loss on gold call options sold                               (2,146)                  --                   --
Amortization of deferred financing costs on capital securities            (633)                (633)                (475)
Recognition of severance expense                                            --               (4,980)               4,980
Write-off of Santa Elina properties, net of income tax                                                           (36,428)
 benefit   of $46.6 million (note 11)                                       --                   --
Amortization of mining properties                                           --                   --               11,526
------------------------------------------------------------------------------------------------------------------------
Net loss under U.S. GAAP                                              $(48,208)            $(40,808)           $(454,729)
========================================================================================================================
Loss per share under U.S. GAAP                                        $  (0.34)            $  (0.29)           $   (3.26)
========================================================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                      Unrealized
                                                         Loss on    Foreign    Santa Elina
                                          Canadian  Call Options    Exchange   Acquisition/    Capital        U.S.
December 31, 1999                             GAAP          Sold   Contracts    Write-off    Securities       GAAP
------------------------------------------------------------------------------------------------------------------
<S>                                       <C>       <C>            <C>         <C>           <C>          <C>
Long-term investments and other assets    $ 29,255  $         --   $      --   $         --  $    1,425   $ 30,680
Gold and other financings                   56,669            --          --             --      97,581    154,250
Deferred income                             93,899            --      (5,995)            --          --     87,904
Other long-term obligations                 47,847         2,146       1,233             --      27,035     78,261
Common shares                              713,343            --          --         36,428          --    749,771
Capital securities                         124,616            --          --             --    (124,616)        --
Deficit                                    714,844         2,146      (4,762)        36,428      (1,425)   747,231
Common shareholders' equity                101,101        (2,146)      4,762             --    (123,191)   (19,474)
------------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                                                   Foreign       Santa Elina
                                                 Canadian         Exchange      Acquisition/          Capital              U.S.
December 31, 1998                                    GAAP        Contracts         Write-off       Securities              GAAP
-------------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>                 <C>            <C>                <C>                 <C>
Long-term investments and other assets           $ 16,196        $      --         $      --        $   2,059          $ 18,255
Accounts payable and accrued liabilities           43,609               --                --            3,000            46,609
Gold and other financings                          52,771               --                --           95,131           147,902
Deferred income                                    79,545           (5,995)               --               --            73,550
Other long-term obligations                        47,943            6,774                --           12,731            67,448
Common shares                                     713,343               --            36,428               --           749,771
Capital securities                                110,862               --                --         (110,862)               --
Deficit                                           663,875              779            36,428           (2,059)          699,023
Common shareholders' equity                       133,754             (779)               --         (108,803)           24,172
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       77
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

The continuity of shareholders' equity from December 31, 1998 to December 31,
1999 under U.S. GAAP would have been as follows.

                                                     1999
-----------------------------------------------------------
Balance, beginning of year                       $ 24,172
Net loss                                          (48,208)
Foreign currency translation                        4,562
-----------------------------------------------------------
Balance, end of year                             $(19,474)
===========================================================

For purposes of preparing U.S. GAAP financial information, the Company has
adopted U.S. Financial Accounting Standards Board ("FASB") Statement No. 130,
"Reporting Comprehensive Income," which requires the reporting of all changes in
equity during a period from non-owner sources as part of a full set of financial
statements.  These changes would include foreign currency translation
adjustments and activity related to unrealized gains or losses included as a
separate component of common shareholders' equity under U.S. GAAP.

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

<TABLE>
<CAPTION>
                                                                             1999               1998               1997
-------------------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                <C>               <C>
Net loss under U.S. GAAP                                                 $(48,208)          $(40,808)         $(454,729)
-------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), after a nil income tax effect:
 Foreign currency translation adjustments                                   4,562             (6,211)            (5,071)
-------------------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)                                           4,562             (6,211)            (5,071)
-------------------------------------------------------------------------------------------------------------------------
Comprehensive loss                                                       $(43,646)          $(47,019)         $(459,800)
=========================================================================================================================
</TABLE>

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

                                                     1999              1998
-----------------------------------------------------------------------------
Foreign currency translation                     $(22,014)         $(26,576)
-----------------------------------------------------------------------------
Accumulated other comprehensive loss             $(22,014)         $(26,576)
=============================================================================

                                      78
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

U.S. GAAP tax disclosure
Significant components of the Company's deferred tax liabilities and assets
under U.S. GAAP disclosure requirements would have been as follows.

<TABLE>
<CAPTION>
                                                                       1999                           1998
---------------------------------------------------------------------------  -----------------------------
                                                           U.S.                             U.S.
millions of U.S. dollars                     Canada   and other       Total   Canada   and other     Total
---------------------------------------------------------------------------  -----------------------------
<S>                                          <C>      <C>         <C>         <C>      <C>         <C>
Deferred tax liabilities:
 Tax over book depreciation and depletion    $ 10.3     $    --     $  10.3     $ 11.1   $    --   $  11.1
 Other tax liabilities                          8.0         0.7         8.7        5.1       3.3       8.4
---------------------------------------------------------------------------  -----------------------------
Total deferred tax liabilities                 18.3         0.7        19.0       16.2       3.3      19.5
---------------------------------------------------------------------------  -----------------------------
Deferred tax assets:
 Net operating loss and other carryforwards    37.3       135.4       172.7       38.1     142.8     180.9
 Book over tax depreciation and depletion      36.2        16.3        52.5       32.9      10.8      43.7
 Accrued liabilities                            4.3        25.9        30.2        3.9      27.5      31.4
 Other tax assets                              21.0         4.7        25.7       19.1       4.7      23.8
---------------------------------------------------------------------------  -----------------------------
Total deferred tax assets before allowance     98.8       182.3       281.1       94.0     185.8     279.8
Valuation allowance for deferred tax assets   (87.9)     (181.6)     (269.5)     (83.2)   (184.6)   (267.8)
---------------------------------------------------------------------------  -----------------------------
Total deferred tax assets                      10.9         0.7        11.6       10.8       1.2      12.0
---------------------------------------------------------------------------  -----------------------------
Net deferred tax liabilities                 $  7.4     $    --     $   7.4     $  5.4   $   2.1   $   7.5
===========================================================================  =============================
</TABLE>

The net increase in the valuation allowance for deferred tax assets was $1.7
million for 1999 and $31.3 million for 1998.

Stock-based compensation
FASB Statement No. 123, "Accounting for Stock-Based Compensation," gives the
option to either follow fair value accounting or to follow Accounting Principles
Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB No. 25")
and related Interpretations.  The Company has determined that it will elect to
continue to follow APB No. 25 and related Interpretations in accounting for its
employee and director stock options in financial information prepared in
conformity with U.S. GAAP.

In accordance with Canadian GAAP and U.S. GAAP (under APB No. 25), the Company
does not recognize compensation expense for stock option grants in the earnings
statement, as the market prices of the underlying stock on the grant dates do
not exceed the exercise prices of the options granted.

Had the Company adopted Statement No. 123 for its U.S. GAAP disclosure, the
following net losses would have been reported.

<TABLE>
<CAPTION>
                                                                   1999                 1998                  1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                  <C>                  <C>
Net loss under U.S. GAAP                                       $(48,208)            $(40,808)            $(454,729)
Pro forma stock compensation expense,
 after a nil income tax effect                                   (1,845)              (1,654)               (2,126)
--------------------------------------------------------------------------------------------------------------------
Pro forma net loss under U.S. GAAP                             $(50,053)            $(42,462)            $(456,855)
====================================================================================================================
Pro forma loss per share under U.S. GAAP                       $  (0.36)            $  (0.30)            $   (3.28)
====================================================================================================================
</TABLE>

The Company has utilized the Black-Scholes option valuation model to estimate
the fair value of options granted, assuming a weighted average option life of 6
years, risk-free interest rates ranging from 4.87% to

                                      79
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

6.64%, dividend yields ranging from nil to 1% and volatility factor of 60% for
1999 grants, 50% for 1998 grants and 40% for 1997, 1996 and 1995 grants. The
weighted average fair value of options granted is estimated at $1.08 per share
in 1999, $1.27 per share in 1998 and $3.98 per share in 1997.

Other
The estimated fair values of cash and cash equivalents, short-term investments,
currency loans and the capital securities obligation approximate their book
values.  The fair values were determined from quoted market prices or estimated
using discounted cash flow analysis.  See note 18 for further disclosure
regarding estimated fair values of financial instruments.

In 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.

16.  JOINT VENTURES
Summarized below are the Company's 50% interest in the Round Mountain mine, and
58% interest in Santa Elina (1997 only), accounted for by the proportionate
consolidation method.  In 1997, the Company wrote off its entire investment in
Santa Elina of $143.6 million (note 11).

<TABLE>
<CAPTION>
                                                                  1999                  1998                   1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                   <C>                   <C>
Revenues                                                      $ 87,469              $ 87,748              $  79,864
Expenses:
  Operating costs                                               52,880                51,359                 48,413
  Royalties                                                      5,021                 5,078                  5,250
  Production taxes                                                  57                   654                    942
  Depreciation and amortization                                 17,704                16,274                 13,548
  Reclamation and mine closure                                   2,438                 1,787                  1,673
  Exploration                                                      431                   613                  8,615
  Provision for impaired assets                                     --                    --                142,056
  Other                                                            753                 3,281                  2,693
--------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes                           $  8,185              $  8,702              $(143,326)
====================================================================================================================

--------------------------------------------------------------------------------------------------------------------
                                                                  1999                  1998                   1997
--------------------------------------------------------------------------------------------------------------------
Current assets                                                $ 33,105              $ 69,461              $  62,781
Non-current assets                                             126,611               120,956                123,435
Current liabilities                                            (10,667)               (9,370)               (11,031)
Non-current liabilities                                        (18,845)              (19,965)               (29,214)
--------------------------------------------------------------------------------------------------------------------
Equity                                                        $130,204              $161,082              $ 145,971
====================================================================================================================

                                                                  1999                  1998                   1997
--------------------------------------------------------------------------------------------------------------------
Net cash provided from (used in):
  Operating activities                                        $  9,108              $ 16,286              $   7,910
  Investing activities                                         (12,799)              (12,438)               (28,383)
  Financing activities                                              --                    --                 15,811
--------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                               $ (3,691)             $  3,848              $  (4,662)
====================================================================================================================
</TABLE>

                                      80
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

17.  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 1999
and 1998, the Company had three operating mines in the United States: Round
Mountain in Nevada; McCoy/Cove in Nevada; and Kettle River in Washington.  All
are 100% owned except for Round Mountain, which is 50% owned.  In January 1998,
the Company temporarily suspended operations at its 100% owned Lupin mine in the
Nunavut Territory, Canada.  In the fourth quarter of 1999, the Company announced
plans to reopen the Lupin mine, with the first production expected to occur in
April 2000.

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>
Gold Production (ounces)                                            1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------
<S>                                                           <C>                  <C>                 <C>
Round Mountain (50%)                                             270,904              255,252              238,840
McCoy/Cove                                                       124,536              167,494              187,034
Kettle River                                                     104,396              113,692              129,866
Lupin                                                                 --                   --              165,335
--------------------------------------------------------------------------------------------------------------------
Total gold                                                       499,836              536,438              721,075
====================================================================================================================

Silver Production (ounces)                                          1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------
Total silver-all from McCoy/Cove                               8,430,072            9,412,823           11,021,708
====================================================================================================================

Cash Operating Costs per Ounce of Gold Produced                     1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------
Round Mountain                                                $      200           $      198          $       207
McCoy/Cove                                                           221                  203                  271
Kettle River                                                         238                  244                  227
Lupin                                                                 --                   --                  284
--------------------------------------------------------------------------------------------------------------------
Company consolidated weighted average                         $      215           $      208          $       249
====================================================================================================================

Reconciliation of Cash Operating
Costs per Ounce to Financial Statements                             1999                 1998                 1997
--------------------------------------------------------------------------------------------------------------------
Operating costs by minesite:
  Round Mountain                                              $   53,055           $   51,502          $    48,549
  McCoy/Cove                                                      63,429               66,606               89,577
  Kettle River                                                    23,332               29,016               27,665
  Lupin                                                               --                1,645               47,329
--------------------------------------------------------------------------------------------------------------------
Total operating costs per financial statements                   139,816              148,769              213,120
Change in finished goods inventories and other                     2,381               (1,704)              10,956
Co-product cost of silver produced                               (34,732)             (35,486)             (44,528)
--------------------------------------------------------------------------------------------------------------------
Cash operating costs                                          $  107,465           $  111,579          $   179,548
====================================================================================================================
Gold ounces produced                                             499,836              536,438              721,075
====================================================================================================================
Cash operating costs per ounce                                $      215           $      208          $       249
====================================================================================================================
</TABLE>

                                       81
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 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 revenues on a consolidated basis.
Information regarding the Company's consolidated revenues is provided below.

<TABLE>
<CAPTION>
                                                         1999           1998            1997
---------------------------------------------------------------------------------------------------
<S>                                                  <C>            <C>             <C>
Total gold and silver revenues                       $210,351       $232,181        $305,429
Average gold price realized per ounce                $    325       $    333        $    362
Average silver price realized per ounce              $   5.69       $   5.88        $   5.26
---------------------------------------------------------------------------------------------------
</TABLE>

Depreciation and amortization by minesite is as follows.

<TABLE>
<CAPTION>
                                                                    1999           1998           1997
---------------------------------------------------------------------------------------------------------
<S>                                                              <C>             <C>            <C>
Round Mountain                                                   $17,704        $16,274        $13,548
McCoy/Cove                                                        22,743         29,034         36,126
Kettle River                                                       6,141          9,315         11,438
Lupin                                                              5,381          6,233         15,885
Depreciation of non-minesite assets                                2,972          2,430          2,319
---------------------------------------------------------------------------------------------------------
Total depreciation and amortization per financial statements     $54,941        $63,286        $79,316
=========================================================================================================
</TABLE>

Total assets by minesite are as follows.
                                                 1999               1998
---------------------------------------------------------------------------
Minesites:
  Round Mountain                             $127,435           $135,302
  McCoy/Cove                                   63,521             84,119
  Kettle River                                  9,398             14,928
  Lupin                                        33,983             38,010
Development properties:
  Aquarius                                     51,589             49,527
  Paredones Amarillos                              --             16,451
Non-minesite assets                            53,936             29,739
---------------------------------------------------------------------------
Total assets                                 $339,862           $368,076
===========================================================================

Capital expenditures by minesite are as follows.

millions of U.S. dollars           1999         1998          1997
--------------------------------------------------------------------
Round Mountain                    $ 7.7        $12.6         $30.7
McCoy/Cove                          1.1          1.3           2.2
Kettle River                        0.4          1.5           3.8
Lupin                                --           --          12.3
--------------------------------------------------------------------

Financial information regarding geographic areas is set out below.

                                      1999          1998               1997
-----------------------------------------------------------------------------
Revenue:
  Canada                          $     --      $ 11,360           $ 68,959
  United States                    210,351       220,821            236,470
-----------------------------------------------------------------------------
Total revenue                     $210,351      $232,181           $305,429
=============================================================================

                                       82
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

                                      1999               1998           1997
------------------------------------------------------------------------------
Assets:
  Canada                          $ 89,095           $ 92,457       $125,346
  United States                    247,653            267,843        296,962
  Other                              3,114              7,776         10,459
------------------------------------------------------------------------------
Total assets                      $339,862           $368,076       $432,767
==============================================================================

18.  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.
The gains and losses comprising the $4.8 million net cost of the

                                       83
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

repurchases have been deferred and will be 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 467,917 ounces of forward sales and on 105,000 of
its 292,500 ounces of call options sold.  The three-month gold lease rate was
approximately 1.5% at the end of 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.

Gains and losses on the early termination or other restructuring of gold, silver
and foreign currency hedging contracts are deferred until the formerly hedged
items are recognized in earnings (note 6).

Premiums paid or received on gold and silver options contracts purchased or sold
are deferred and recognized in earnings on the option expiration dates (notes 4
and 6).

Gold and silver commitments
The Company's gold and silver commitments at December 31, 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>
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                --                     --
-------------------------------------------------------------------------------------------------
                         467,917                  $313         3,000,000                  $5.85
=================================================================================================
</TABLE>

                                       84
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

   Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                share and per ounce or unless otherwise noted

The Company's option position at December 31, 1999 was as follows.

<TABLE>
<CAPTION>
                       Put Options                                              Call Options
                         Purchased            Put Options Sold                     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
----
2000             268,750     $ 273          66,667       $ 290         167,917         $ 338             187,500         $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     $ 273          66,667       $ 290         572,917         $ 359             292,500         $353
=============================================================================================================================
Silver
------
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                  --         $ --
=============================================================================================================================
</TABLE>

Currency position
At December 31, 1999, the Company had an obligation under foreign currency
exchange contracts to purchase C$24.0 million in 2000 at an exchange rate of
C$1.34 to U.S.$1.00.

Other hedging activity information

Shown below are the carrying amount, estimated fair value and unrealized gain on
the Company's gold loans at December 31, 1998 (note 5).  The carrying amount
includes deferred income recorded on the balance sheet related to gold loan
remeasurement.  The Company had no outstanding gold loans at December 31, 1999.

                                                        December 31, 1998
-----------------------------------------------------------------------------
                              Carrying          Estimated       Unrealized
                                Amount         Fair Value             gain
-----------------------------------------------------------------------------
Gold loans                      $9,400             $6,900           $2,500
=============================================================================

                                      85
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

Shown below are the carrying amounts and estimated fair values of the Company's
other outstanding hedging instruments at December 31, 1999 and 1998.

<TABLE>
<CAPTION>
                                                          December 31, 1999               December 31, 1998
                                               ----------------------------    ----------------------------
                                               Carrying           Estimated    Carrying           Estimated
                                                 Amount          Fair Value      Amount          Fair Value
---------------------------------------------------------------------------    ----------------------------
   <S>                                         <C>                 <C>         <C>               <C>
   Gold forward sales                          $     --          $     (900)   $     --          $   25,400
   Silver forward sales                              --               1,000          --              12,900
   Gold options      - puts purchased             1,400               1,700       1,600               2,400
                     - calls sold                (4,100)             (5,600)         --                  --
                     - puts sold                 (1,300)               (600)         --                  --
                     - calls purchased            9,100               8,000          --                  --
   Silver options    - puts purchased             2,500               1,400       2,500               2,100
                     - calls sold                    --                  --      (3,400)               (500)
                     - puts sold                 (2,200)               (500)    (10,100)             (6,100)
                     - calls purchased            1,000                 300      10,100                 700
   Foreign currency contracts                        --              (1,200)         --              (6,800)
   Crude oil contracts                               --                  --          --                (100)
---------------------------------------------------------------------------    ----------------------------
                                                                 $    3,600                      $   30,000
===========================================================================    ============================
</TABLE>

Fair values are estimated for the contract settlement dates based on market
quotations of various input variables.  These variables are used in valuation
models that estimate the fair market value.

The fair value of the Company's hedged position can be affected by market
conditions beyond the Company's control.  The effect of changes in various
market factors on the Company's outstanding hedged position at December 31, 1999
would be as follows.

<TABLE>
<CAPTION>
                                                                                                   Effect on
                                                                             Amount of       Market Value of
                                                                                Change       Hedged Position
------------------------------------------------------------------------------------------------------------
<S>                                                                      <C>                 <C>
Change in:
  Gold prices                                                            $ 10.00/ounce               $ 4,600
  Silver prices                                                          $  0.25/ounce               $   800
  Interest rates (effect on gold and silver forward sales and options)         1%                    $ 3,000
------------------------------------------------------------------------------------------------------------
</TABLE>

                                       86
<PAGE>

                             ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                              December 31, 1999

    Tabular dollar amounts in thousands of U.S. dollars, except amounts per
                 share and per ounce or unless otherwise noted

Hedging gains and losses represent the difference between spot or market prices
and realized amounts. Shown below are the hedging gains (losses) recognized in
earnings.

<TABLE>
<CAPTION>
                                                   1999        1998         1997
--------------------------------------------------------------------------------
<S>                                            <C>         <C>           <C>
Revenue:
  Gold loans and swaps                         $  1,658    $  3,096      $ 1,891
  Gold forward sales                             17,710       7,179        1,001
  Silver forward sales                            3,439       3,118          508
  Gold and silver options                         4,077      11,122        3,131
Operating costs:
  Foreign currency contracts                     (3,068)     (2,805)       1,317
  Crude oil contracts                                --        (636)       1,343
Interest expense:
  Gold swap on capital securities                    --          --          156
--------------------------------------------------------------------------------
                                               $ 23,816    $ 21,074      $ 9,347
================================================================================
</TABLE>

19.  OTHER COMMITMENTS AND CONTINGENCIES
Royalties
Round Mountain mine production is subject to a net smelter return royalty
ranging from 3.53% at gold prices of $320 per ounce or less to 6.35% at gold
prices of $440 per ounce or more. Its production is also subject to a gross
revenue royalty of 3.0%, reduced to 1.5% after $75.0 million has been paid.

McCoy/Cove production is subject to a 2% net smelter return royalty. This
royalty is based on sales less certain deductions.

A portion of production from the Lamefoot area of the Kettle River mine is
subject to a 5% net smelter return royalty. K-2 area production at Kettle River
is subject to a 5% gross proceeds royalty and a net smelter return royalty
ranging from 2% at gold prices of $300 per ounce or less to 3% at gold prices of
$400 per ounce or more.

Operating lease commitments
The Company's principal lease commitments are for equipment and office premises.
The Company incurred $3.0 million in rental expense in 1999, net of $1.5 million
in rental income related to office subleases. The Company's commitments under
the remaining terms of the leases are approximately $11.2 million, payable as
follows: $2.7 million in 2000, $2.1 million in 2001, $1.9 million in 2002, $1.6
million in 2003, $1.5 million in 2004 and $1.4 million thereafter.

                                       87
<PAGE>

                         QUARTERLY FINANCIAL HIGHLIGHTS
                                  (Unaudited)
                (millions of U.S. dollars except per share data)

<TABLE>
<CAPTION>
                                         Net Earnings            Loss per
                           Revenue              (Loss)              Share
-------------------------------------------------------------------------
<S>                        <C>          <C>                      <C>
1999
First quarter              $  48.8            $  (5.1)            $ (0.06)
Second quarter                50.9               (7.0)              (0.07)
Third quarter                 54.2              (19.9)              (0.17)
Fourth quarter                56.5               (5.3)              (0.06)
-------------------------------------------------------------------------
Total                      $ 210.4            $ (37.3)            $ (0.36)
-------------------------------------------------------------------------

1998
First quarter              $  52.9            $  (7.6)            $ (0.07)
Second quarter                65.3                2.1               (0.01)
Third quarter                 55.6               (6.0)              (0.06)
Fourth quarter                58.4               (8.6)              (0.09)
-------------------------------------------------------------------------
Total                      $ 232.2            $ (20.1)            $ (0.23)
-------------------------------------------------------------------------
</TABLE>

In 1999, net loss includes the loss on the sale of the Company's interest in
Paredones Amarillos of $13.8 million in the third quarter of 1999. In 1998, net
earnings (loss) includes the gain on the sale of the Company's investment in
Santa Elina of $6.3 million in the second quarter of 1998. See note 10 to the
consolidated financial statements.

ITEM 9-CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                                  DISCLOSURE

None.

                                   PART III

                      ITEM 10-DIRECTORS OF THE REGISTRANT

The information about the directors of the Company required by this item is
located in the Echo Bay Mines Ltd. proxy statement to be filed within 120 days
after the end of the fiscal year. Information about the executive officers of
the Company required by this item appears in Part I of this Annual Report on
Form 10-K.

                        ITEM 11-EXECUTIVE COMPENSATION

The information required by this item appears in the Echo Bay Mines Ltd. proxy
statement to be filed within 120 days after the end of the fiscal year.

    ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The information required by this item appears in the Echo Bay Mines Ltd. proxy
statement to be filed within 120 days after the end of the fiscal year.

            ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item appears in the Echo Bay Mines Ltd. proxy
statement to be filed within 120 days after the end of the fiscal year.

                                      88
<PAGE>

                                    PART IV

   ITEM 14-EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)  The following documents are filed as part of this report:

1.   Financial Statements included in Part II, Item 8 Echo Bay Mines Ltd.

<TABLE>
<CAPTION>
                                                                            Page
                                                                            ----
<S>                                                                         <C>
Management's Responsibility For Financial Reporting........................   57
Report Of Independent Chartered Accountants................................   58
Consolidated Balance Sheet.................................................   59
Consolidated Statement Of Operations.......................................   60
Consolidated Statement Of Deficit..........................................   60
Consolidated Statement Of Cash Flow........................................   61
</TABLE>

2.   Financial Statement Schedules included in Part IV
     All schedules are omitted because they are not applicable or the required
     information is shown in the financial statements or notes thereto.

3.   Exhibits required to be filed by Item 601 of Regulation S-K
     Exhibits 21, 23.1, 24 and 27 are filed herewith. All other exhibits are
     incorporated by reference as indicated below.

     Exhibit
       No.     Exhibit Description
       ---     -------------------

       2.1  Share Subscription and Purchase Agreement among Sercor, Ltd., Echo
            Bay Mines Ltd. and Kendall Gold Corporation (incorporated by
            reference to Exhibit 2.1 of the report on Form 8-K of file no.
            1-8542 filed on April 24, 1996).

       2.2  Merger Agreement between Santa Elina Gold Corporation and Kendall
            Gold Corporation (incorporated by reference to Exhibit 2.2 of the
            report on Form 8-K of file no. 1-8542 filed on April 24, 1996).

       3.1  Restated Articles of Incorporation of the Registrant (incorporated
            herein by reference to Exhibit 3(a) of Registration Statement No.
            2-84687).

       3.2  By-Laws of the Registrant (incorporated herein by reference to
            Exhibit 3(b) of Registration Statement No. 2-84687).

       4.1  Shareholder rights plan, dated September 2, 1994 (incorporated
            herein by reference to the report on Form 8-K of file No. 1-8542
            which was made effective on October 14, 1994).

       4.2  Shelf registration statement, as amended, dated February 12, 1998
            (incorporated herein by reference to Registration Statement
            333-35857 and amendments thereto).



                                       89
<PAGE>

       4.3  Indenture and First Supplemental Indenture between Echo Bay Mines
            Ltd. and Bankers Trust Company and Global Security for 11% Capital
            Securities dated March 27, 1997 (incorporated herein by reference to
            the report on Form 8-K of file No. 1-8542 which was made effective
            on March 31, 1997).

      10.1  Employee Share Incentive Plan (incorporated herein by reference to
            Exhibit 10(n) of Registration Statement No. 2-84687).

      10.2  Amendment dated February 18, 1986, to the Employee Share Incentive
            Plan described in 10.1 above (incorporated herein by reference to
            Exhibit 10.29 of the report on Form 10-K of file No. 1-8542 for the
            year ended December 31, 1986).

      10.3  Director Equity Plan and amendment to Employee Share Incentive Plan
            (incorporated herein by reference to Registration Statement on Form
            S-8, file No. 33-91696).

      10.4  Employment Agreement dated May 10, 1996 with Robert L. Leclerc
            (incorporated herein by reference to exhibit 10.6 of the report on
            Form 10-K of file No. 1-8542 for the year ended December 31, 1996).

      10.5  Employee Share Incentive Plan and Restricted Share Grant Plan
            (incorporated herein by reference to Registration Statement on Form
            S-8, file No. 333-31835).

      10.6  Registration Statement dated May 14, 1998 (incorporated herein by
            reference to Registration Statement on Form S-3, file No. 333-52613
            and amendments thereto).

      10.7  Second Amended and Restated Gold Bullion Loan Agreement dated as of
            February 11, 1999 (incorporated herein by reference to exhibit 10.7
            of the report on Form 10-K of file No. 1-8542 for the year ended
            December 31, 1998).

      21    Subsidiaries of the Registrant.

      23.1  Consent of Ernst & Young LLP.

      24    Power of Attorney.

      27    Financial Data Schedule.


(b)   Reports on Form 8-K

      Filed on March 18, 1999, related to the deferral of the April 1999
      interest payment on the capital securities.

      Filed on September 30, 1999, related to the deferral of the October 1999
      interest payment on the capital securities.

                                       90
<PAGE>

                                  SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.


                                       By: /s/ Robert L. Leclerc
                                           ------------------------------------
                                           Robert L. Leclerc, Chairman, Chief
                                           Executive Officer and Director

                                       Date: February 18, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant in
the capacity and on the date indicated.

<TABLE>
<CAPTION>
Signature                                                 Title                           Date
<S>                                                  <C>                             <C>
/s/ Robert L. Leclerc                                Chairman, Chief Executive       February 18, 2000
--------------------------------------------         Officer and Director
Robert L. Leclerc

/s/ Tom S.Q. Yip                                     Vice President, Finance and
--------------------------------------------         Chief Financial Officer
Tom S.Q. Yip

/s/ David A. Ottewell                                Controller and Principal
--------------------------------------------         Accounting Officer
David A. Ottewell

* JOHN N. ABELL
* LATHAM C. BURNS
* JOHN G. CHRISTY
* PETER CLARKE
* ROBERT L. LECLERC
* JOHN F. MCOUAT
* MONICA E. SLOAN
* R. GEOFFREY P. STYLES                              *  A majority of the
                                                        Board of Directors

* By  /s/ Lois-Ann L. Brodrick                                                       February 18, 2000
      --------------------------------------
      Lois-Ann L. Brodrick, Attorney-in-fact
</TABLE>

                                       91
<PAGE>

================================================================================


                      SECURITIES AND EXCHANGE COMMISSION

                             Washington, DC 20549


                                   FORM 10-K
                                   ---------


                ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d)
                  OF THE SECURITIES AND EXCHANGE ACT OF 1934


                  For the fiscal year ended December 31, 1999
                       Commission File Number:   1-8542


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


                                   EXHIBITS


================================================================================
<PAGE>

Exhibits 21, 23.1, 24 and 27 are filed herewith. All other exhibits are
incorporated by reference as indicated below.

Exhibit No.  Exhibit Description
-----------  -------------------

     2.1     Share Subscription and Purchase Agreement among Sercor, Ltd.,
             Echo Bay Mines Ltd. and Kendall Gold Corporation (incorporated by
             reference to Exhibit 2.1 of the report on Form 8-K of file no.
             1-8542 filed on April 24, 1996).
     2.2     Merger Agreement between Santa Elina Gold Corporation and Kendall
             Gold Corporation (incorporated by reference to Exhibit 2.2 of the
             report on Form 8-K of file no. 1-8542 filed on April 24, 1996).
     3.1     Restated Articles of Incorporation of the Registrant
             (incorporated herein by reference to Exhibit 3(a) of Registration
             Statement No. 2-84687).
     3.2     By-Laws of the Registrant (incorporated herein by reference to
             Exhibit 3(b) of Registration Statement No. 2-84687).
     4.1     Shareholder rights plan, dated September 2, 1994 (incorporated
             herein by reference to the report on Form 8-K of file No. 1-8542
             which was made effective on October 14, 1994).
     4.2     Shelf registration statement, as amended, dated February 12, 1998
             (incorporated herein by reference to Registration Statement 333-
             35857 and amendments thereto).
     4.3     Indenture and First Supplemental Indenture between Echo Bay Mines
             Ltd. and Bankers Trust Company and Global Security for 11%
             Capital Securities dated March 27, 1997 (incorporated herein by
             reference to the report on Form 8-K of file No. 1-8542 which was
             made effective on March 31, 1997).
    10.1     Employee Share Incentive Plan (incorporated herein by reference
             to Exhibit 10(n) of Registration Statement No. 2-84687).
    10.2     Amendment dated February 18, 1986, to the Employee Share
             Incentive Plan described in 10.1 above (incorporated herein by
             reference to Exhibit 10.29 of the report on Form 10-K of file No.
             1-8542 for the year ended December 31, 1986).
    10.3     Director Equity Plan and amendment to Employee Share Incentive
             Plan (incorporated herein by reference to Registration Statement
             on Form S-8, file No. 33-91696).
    10.4     Employment Agreement dated May 10, 1996 with Robert L. Leclerc
             (incorporated herein by reference to exhibit 10.6 of the report
             on Form 10-K of file No. 1-8542 for the year ended December 31,
             1996).
    10.5     Employee Share Incentive Plan and Restricted Share Grant Plan
             (incorporated herein by reference to Registration Statement on
             Form S-8, file No. 333-31835).
    10.6     Registration Statement dated May 14, 1998 (incorporated herein by
             reference to Registration Statement on Form S-3, file No. 333-
             52613 and amendments thereto).
    10.7     Second Amended and Restated Gold Bullion Loan Agreement, dated as
             of February 11, 1999 (incorporated herein by reference to exhibit
             10.7 of the report on Form 10-K of file No. 1-8542 for the year
             ended December 31, 1998).
    21       Subsidiaries of the Registrant.
    23.1     Consent of Ernst & Young LLP.
    24       Power of Attorney.
    27       Financial Data Schedule.