<PAGE>

================================================================================
                                  UNITED STATES
                       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, 2000

                                      OR

[_]  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 540, 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]

Aggregate market value of the voting securities
held by non-affiliates of the registrant at March 28, 2001....  U.S.$210,910,718
                                                                ----------------
Number of common shares outstanding as of March 28, 2001......       140,607,145
                                                                     -----------
================================================================================
<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                                        Page
                                                                                                                        ----
                                                              PART I
<S>                                                                                                                     <C>
   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.........................................................................................    10
      MCCOY/COVE......................................................................................................    12
        Geology and Ore Reserves......................................................................................    13
        Mining and Processing.........................................................................................    14
      KETTLE RIVER....................................................................................................    15
        Geology and Ore Reserves......................................................................................    16
        Mining and Processing.........................................................................................    16
      LUPIN...........................................................................................................    17
        Geology and Ore Reserves......................................................................................    18
        Mining and Processing.........................................................................................    19
        Supplies, Utilities and Transportation........................................................................    19
        Water Supply and Waste Disposal...............................................................................    20
      DEVELOPMENT PROGRAM.............................................................................................    21
        Aquarius......................................................................................................    21
      OTHER PROJECTS..................................................................................................    22
        Kuranakh/Golden Eagle.........................................................................................    22
      EXPLORATION.....................................................................................................    23
      ALASKA-JUNEAU...................................................................................................    23
      SUNNYSIDE.......................................................................................................    24
      OTHER...........................................................................................................    24
        Precious Metal Sales and Hedging Activities...................................................................    24
        Governmental and Environmental Regulation.....................................................................    25
        Employees.....................................................................................................    29
        Executive Officers of the Registrant..........................................................................    29
        Mining Risks and Insurance....................................................................................    29
        Supplies, Utilities and Transportation........................................................................    30
        Waste Disposal................................................................................................    30
        Royalties.....................................................................................................    30
        History of the Company........................................................................................    30
      RISK FACTORS....................................................................................................    32
        Profitability.................................................................................................    32
        Mine Development Risks........................................................................................    32
        Exploration Risks.............................................................................................    32
        Liquidity and Capital Resources...............................................................................    33
</TABLE>
                                       i
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                                       <C>
        Gold and Silver Prices........................................................................................    33
        Estimation of Asset Carrying Values...........................................................................    34
        Uncertainty of Reserve and Other Mineralization Estimates.....................................................    34
        Mining and Processing.........................................................................................    35
        Mining Risks and Insurance....................................................................................    35
        Governmental Regulation.......................................................................................    36
        Risk of International Operations..............................................................................    36
        Title to Properties...........................................................................................    37
        Inflation and Currency Risks..................................................................................    37
      GLOSSARY........................................................................................................    38
      GOLD PRICES.....................................................................................................    42
      SILVER PRICES...................................................................................................    42
      EXCHANGE RATES..................................................................................................    42
      CONVERSION TABLE................................................................................................    42
      MINE PROCESSING.................................................................................................    43

   ITEM 3-LEGAL PROCEEDINGS...........................................................................................    46
      SUMMA...........................................................................................................    46
      COLORADO SCHOOL OF MINES........................................................................................    46
      OTHER...........................................................................................................    46

   ITEM 4-SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.........................................................    46

                                    PART II

   ITEM 5-MARKET FOR THE REGISTRANT'S COMMON SHARES AND RELATED SHAREHOLDER MATTERS...................................    47
      MARKET INFORMATION..............................................................................................    47
      DIVIDENDS.......................................................................................................    48
      CERTAIN TAX MATTERS.............................................................................................    48
        United States Federal Income Tax Considerations...............................................................    48
        Canadian Federal Income Tax Considerations....................................................................    49

   ITEM 6-SELECTED FINANCIAL DATA.....................................................................................    50

   ITEM 7-MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.......................    51
      SUMMARY.........................................................................................................    51
      RESULTS OF OPERATIONS...........................................................................................    51
        Revenue.......................................................................................................    51
        Operating Costs...............................................................................................    51
        Royalties.....................................................................................................    52
        Depreciation and Amortization.................................................................................    52
        Reclamation and Mine Closure..................................................................................    52
        General and Administrative....................................................................................    52
        Exploration and Development...................................................................................    52
        Loss (Gain) on Sale of Interests in Mining and Other Properties...............................................    53
      LIQUIDITY AND CAPITAL RESOURCES.................................................................................    53
      COMMITMENTS AND CONTINGENCIES...................................................................................    54
        Hedging Activities............................................................................................    54
        Other.........................................................................................................    55
</TABLE>
                                      ii
<PAGE>

<TABLE>
<CAPTION>
<S>                                                                                                                       <C>
   ITEM 7A-QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK.................................................    56

   ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................................................    57
      INDEX TO FINANCIAL STATEMENTS...................................................................................    57

   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 2000, the
Company had three operating mines in the United States: Round Mountain in
Nevada; McCoy/Cove in Nevada; and Kettle River in Washington. The Company also
reopened the Lupin mine, located in the Nunavut Territory of Canada. The Lupin
mine had been placed on care and maintenance in early 1998 due to depressed gold
prices and a high cost structure. A reengineering study identified savings that
helped lower costs and allowed the Company to recommence operations and gold
production in April 2000. All of the Company's mines are 100% owned except for
Round Mountain, which is 50% owned.

The Company's operations in 2000 were, and will continue to be, materially
affected by the price of gold, which averaged $332 per ounce in 1997, $294 per
ounce in 1998, and $279 per ounce in 1999 and 2000. At December 31, 2000 the
gold price was $274 per ounce.

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."

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

In 2000, the Company produced a total of 694,663 ounces of gold and 12,328,297
ounces of silver at an average cash operating cost of $193 per ounce. The
Company reported net earnings of $18.6 million on revenues of $281 million. At
December 31, 2000, the Company had 4.5 million ounces of gold reserves and 10.9
million ounces of silver reserves.

The Company expects to produce 570,000 ounces of gold and five million ounces of
silver at an average cash operating cost of $225 per ounce of gold in 2001. The
expected decline in production will result from the completion of mining at
McCoy/Cove. 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."

A glossary of terms used in the mining industry and in the report is included on
pages 38 - 41.

                                       1
<PAGE>

OPERATIONS SUMMARY

<TABLE>
<CAPTION>
Gold and Silver Production
--------------------------
Gold Production (ounces)                                                  2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>              <C>
Round Mountain (50%)                                                   320,064           270,904          255,252
McCoy/Cove                                                             162,784           124,536          167,494
Lupin                                                                  117,729                --               --
Kettle River                                                            94,086           104,396          113,692
-----------------------------------------------------------------------------------------------------------------
Total gold                                                             694,663           499,836          536,438
=================================================================================================================
Percentage increase (decrease) from prior year                           39.0%              (6.8%)          (25.6%)
=================================================================================================================

<CAPTION>
Silver Production (ounces)                                                2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                 <C>                <C>              <C>
Total silver-all from McCoy/Cove                                    12,328,297         8,430,072        9,412,823
=================================================================================================================
Percentage increase (decrease) from prior year                            46.2%            (10.4%)          (14.6%)
=================================================================================================================

<CAPTION>
Production Costs
----------------
Production Costs per Ounce of Gold Produced                               2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>               <C>              <C>
  Direct mining expense                                               $    192          $    237         $    209
  Deferred stripping and mine development costs                              3               (23)              (1)
  Inventory movements and other                                             (2)                1               --
-----------------------------------------------------------------------------------------------------------------
Cash operating costs                                                       193               215              208
  Royalties                                                                  9                11               11
  Production taxes                                                           2                --                2
-----------------------------------------------------------------------------------------------------------------
Total cash costs                                                           204               226              221
  Depreciation                                                              35                58               62
  Amortization                                                              20                20               25
  Reclamation and mine closure                                              12                11                9
-----------------------------------------------------------------------------------------------------------------
Total production costs                                                $    271          $    315         $    317
=================================================================================================================
Percentage decrease from prior year                                      (14.0%)            (0.6%)          (11.7%)
=================================================================================================================

<CAPTION>
Cash Operating Costs per Ounce of Gold Produced                           2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>               <C>              <C>
Round Mountain                                                        $    195          $    200         $    198
McCoy/Cove                                                                 179               221              203
Lupin                                                                      213                --               --
Kettle River                                                               218               238              244
-----------------------------------------------------------------------------------------------------------------
Company consolidated weighted average                                 $    193          $    215         $    208
=================================================================================================================
Percentage increase (decrease) from prior year                           (10.2%)             3.4%           (16.5%)
=================================================================================================================
</TABLE>

In 2000, the average cash operating cost per ounce was $193 compared with $215
in 1999 and $208 in 1998. Cash operating costs per ounce were lower in 2000
compared to 1999, reflecting increased grades and higher production at
McCoy/Cove. 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. The Company's consolidated
cash operating cost target is $225 per ounce of gold produced in 2001.

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                       2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>              <C>
Operating costs per financial statements                           $   173,435       $   139,816      $   148,769
Change in finished goods inventory and other                               208             2,381           (1,704)
Co-product cost of silver produced                                     (39,574)          (34,732)         (35,486)
-----------------------------------------------------------------------------------------------------------------
Cash operating costs                                               $   134,069       $   107,465      $   111,579
=================================================================================================================
Gold ounces produced                                                   694,663           499,836          536,438
=================================================================================================================
Cash operating costs per ounce                                     $       193       $       215      $       208
=================================================================================================================

<CAPTION>
Revenue
-------
Revenue Data

Year ended December 31                                                    2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>              <C>
Gold
----
Ounces sold                                                            676,439           486,592          553,130
Average price realized per ounce - revenue basis                   $       319       $       325      $       333
Average price realized per ounce - cash basis (1)                  $       294       $       335      $       340
Average market price per ounce                                     $       279       $       279      $       294
Revenue (millions of U.S. dollars)                                 $     215.8       $     158.2      $     183.9
Percentage of total revenue                                                 77%               75%              79%

Silver
------
Ounces sold                                                         12,347,779         9,173,012        8,198,867
Average price realized per ounce - revenue basis                   $      5.28       $      5.69      $      5.88
Average price realized per ounce - cash basis (1)                  $      5.21       $      5.22      $      5.36
Average market price per ounce                                     $      5.00       $      5.25      $      5.54
Revenue (millions of U.S. dollars)                                 $      65.2       $      52.2      $      48.3
Percentage of total revenue                                                 23%               25%              21%
-----------------------------------------------------------------------------------------------------------------
Total revenue (millions of U.S. dollars)                           $     281.0       $     210.4      $     232.2
=================================================================================================================
</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                                                    2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>               <C>              <C>
Increase in volume                                                 $    79,770       $   (16,438)     $   (62,291)
Lower gold prices                                                       (4,084)           (3,649)         (16,040)
Higher (lower) silver prices                                            (5,061)           (1,743)           5,083
-----------------------------------------------------------------------------------------------------------------
Increase/(decrease) in total revenue from the previous year        $    70,625       $   (21,830)     $   (73,248)
=================================================================================================================
</TABLE>

The increase in gold revenue from 1999 to 2000 was primarily due to the
re-commissioning of Lupin operations, increased mill grades and recoveries at
McCoy/Cove and higher leach pad tons at Round Mountain. The increase in silver
revenues from 1999 to 2000 was due to higher grades and increased production at
McCoy/Cove. 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 silver inventories carried over from 1998 more than offsetting lower silver
prices realized.

                                       3
<PAGE>

RESERVES
The data referred to herein, in respect of ore reserves and other
mineralization, has been verified by Ralph Bullis, Director of Exploration.
Mr. Bullis, a full-time employee of the Company, is a "qualified person" within
the meaning of applicable Canadian securities regulatory standards. He has
verified the data disclosed herein, including any relevant sampling, analytical
and test data. The following table presents ore reserves by property. 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.

--------------------------------------------------------------------------------
Ore Reserves/(1)/
(thousands, except average grades)
(proven and probable at December 31)

<TABLE>
<CAPTION>
                                                                                   2000          1999          1998
                              ---------------------------------------------------------  ------------  ------------
                                                    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)
                              -------------------------------------------------------------------------------------
Gold
----
Mines:
<S>                                <C>            <C>          <C>         <C>            <C>           <C>
   Round Mountain                     273,206         0.019         5,218         2,609         2,938         3,188
   McCoy/Cove                           4,720         0.034           161           161           514           699
   Lupin                                1,678         0.259           434           434           518           543
   Kettle River                           363         0.193            70            70           162           237
                                                            -------------------------------------------------------
Total mines                                                         5,883         3,274         4,132         4,667
                                                            -------------------------------------------------------

Development properties:
   Aquarius                            17,527         0.068         1,189         1,189         1,164         1,263
   Paredones Amarillos/(2)/                --            --            --            --            --           869
                                                            -------------------------------------------------------

Total development properties                                        1,189         1,189         1,164         2,132
                                                            -------------------------------------------------------

Total gold                                                          7,072         4,463         5,296         6,799
                                                            =======================================================

Silver
------
McCoy/Cove                              4,720         2.309        10,899        10,899        28,243        38,809
                                                            -------------------------------------------------------
Total silver                                                       10,899        10,899        28,243        38,809
                                                            =======================================================
</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 Instrument 43-101. 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-
       Reserves."

/(2)/  In the third quarter of 1999, the Company sold its interest in the
       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.

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 $300 per ounce at December
31, 2000 ($325 per ounce at December 31, 1999 and 1998) and a silver price of
$5.00 per ounce at December 31, 2000 ($5.50 per ounce at December 31, 1999 and
$5.75 per ounce at December 31, 1998.) The market price for gold

                                       4
<PAGE>

has for more than three years traded, on average, below the level used in
estimating reserves at December 31, 2000. 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,
2000, there would be a reduction in the amount of gold reserves. The Company
estimates that if reserves at December 31, 2000 were based on $275 per ounce of
gold, reserves would decrease by approximately 10% at Round Mountain, 3% at
Kettle River and 2% at the Aquarius development property. There would be no
impact on reserves at Lupin and McCoy/Cove. The estimates are based on
extrapolation of information developed in the reserve calculation, but without
the same degree of analysis required for reserve estimation. 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, 1999 to December 31, 2000 is as follows.

<TABLE>
<CAPTION>
                                                                                   (millions of ounces)
                                                                                  Gold           Silver
---------------------------------------------------------------------------------------------------------
<S>                                                                              <C>             <C>
Proven and probable reserves at December 31, 1999                                  5.3             28.2
   Production/(1)/                                                                (1.0)           (19.6)
   Extensions, discoveries and adjustments
     --   Round Mountain                                                           0.1               --
     --   McCoy/Cove                                                                --              2.3
     --   Lupin                                                                    0.1               --
     --   Aquarius                                                                  --               --
   Change in gold and silver price assumptions                                      --               --
---------------------------------------------------------------------------------------------------------
Proven and probable reserves at December 31, 2000                                  4.5             10.9
=========================================================================================================
</TABLE>

/(1)/  Production represents previously modeled, in-situ ounces mined during
       2000; this amount does not reflect recovery losses from heap leaching and
       milling.

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)

                                                               2000                       1999                    1998
                               ------------------------------------   ------------------------   ----------------------
                                                  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>
Measured and Indicated
Gold
----
Round Mountain                     18,706       9,353        0.022        15,682         0.020     14,254        0.020
McCoy/Cove                             --          --           --           100         0.350        125        0.120
Lupin                                  76          76        0.263            69         0.275        485        0.345
Kettle River                          418         418        0.189            17         0.235        188        0.223

Silver
------
McCoy/Cove                             --          --           --           100         2.000        125       12.352

Inferred
Gold
----
Mines:
Round Mountain                     90,534      45,267        0.014        47,440         0.015     39,890        0.013
McCoy/Cove                             --          --           --            --            --        300        0.157
Lupin                                 611         611        0.326           739         0.337        200        0.269
Kettle River                           96          96        0.177            --            --         --           --

Development properties /(2)/:
Aquarius                              724         724        0.066           575         0.078        785        0.064
Ulu                                 1,279       1,279        0.326         1,509         0.374      1,509        0.374
Paredones Amarillos /(3)/              --          --           --            --            --        205        0.020

Silver
------
McCoy/Cove                             --          --           --            --            --        300        3.567
</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)/ The Company's construction and production decisions at its development
      properties depend on the issuance of appropriate permits and the ability
      of the Company to obtain required financing. See "Development Program."

/(3)/ In the third quarter of 1999, the Company sold 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.

                                       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 changes 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; fluctuations in grades and
recovery rates; geological, metallurgical, processing, access, transportation or
other problems; results of exploration activities, pending and future
feasibility studies; changes in project parameters as plans continue to be
refined; political, economic and operational risks; availability of materials
and equipment; regulatory risks, including but not limited to reclamation
security requirements and the timing for the 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 for projects; environmental costs and risks; and 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 owns the remaining
undivided 50% interest in the joint venture common operation. Homestake
increased its interest in the Round Mountain mine from 25% to 50% by acquiring
Case Pomeroy's 25% interest as of July 1, 2000. 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 Round Mountain gold mine is an
open-pit mining operation located 60 miles north of Tonopah in Nye County,
Nevada. The property position consists of contiguous patented and unpatented
mining claims covering approximately 27,500 acres. The Company has received
patents to convert minable land to patented status. Patented claims now cover
all the current reserves in the ultimate pit.

The following table sets forth operating data for the Round Mountain operation
from 1996 through 2000. The Company's share of production is 50% of the ounces
shown.

<TABLE>
<CAPTION>
                                                      2000             1999           1998            1997            1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                           <C>              <C>            <C>             <C>             <C>
Gold produced (ounces)                             640,128          541,808        510,504         477,680         410,974
Mining cost/ton of ore and waste              $       0.83     $       0.73   $       0.66    $       0.65    $       0.69
Heap leaching cost/ton of ore                 $       0.68     $       0.68   $       0.74    $       0.61    $       0.80
Milling cost/ton of ore                       $       2.80     $       2.92   $       3.36    $       4.38              --
Production cost/ounce of gold produced:
   Direct mining expense                      $        200     $        221   $        209    $        208    $        228
   Deferred stripping cost                              (1)             (19)            (7)              2              (2)
   Inventory movements and other                        (4)              (2)            (4)             (3)             (5)
                                              ------------     ------------   ------------    ------------    ------------
     Cash operating cost                               195              200            198             207             221
   Royalties paid                                       17               19             20              22              32
   Production taxes                                      1               --              3               4               4
                                              ------------     ------------   ------------    ------------    ------------
     Total cash cost                                   213              219            221             233             257
   Depreciation                                         43               48             46              39              51
   Amortization                                         18               18             18              18              18
   Reclamation and mine closure                          9                9              7               7               5
                                              ------------     ------------   ------------    ------------    ------------
     Total production costs                   $        283     $        294   $        292    $        297    $        331
                                              ------------     ------------   ------------    ------------    ------------
Capital expenditures (millions)/(1)/          $        4.6     $        7.7   $       12.6    $       30.7    $       17.5
Deferred (applied) mining
   expenditures (millions)/(1)/               $        0.4     $        5.1   $        1.7    $       (0.4)   $        0.4
Heap leached-reusable pad:
   Ore processed (tons/day)                         24,335           15,602         18,953          26,608          27,737
   Total ore processed (000 tons)                    8,785            5,741          6,842           9,552           9,819
   Grade (ounce/ton)                                 0.028            0.034          0.036           0.036           0.036
   Recovery rate (%)                                  61.6             73.4           70.6            74.9            66.1
   Gold recovered (ounces)                         141,176          140,988        182,378         268,518         231,420
Heap leached-dedicated pad:
   Ore processed (tons/day)                        141,047          120,020        101,892         107,716          87,706
   Total ore processed (000 tons)                   50,918           44,167         36,783          38,670          31,048
   Grade (ounce/ton)                                 0.011            0.011          0.010           0.010           0.011
   Recovery rate (%)                                    (2)              (2)            (2)             (2)             (2)
   Gold recovered (ounces)                         352,132          215,825        221,396         195,558         167,004
Milled: /(3)/
   Ore processed (tons/day)                          9,304            8,083          7,993             n.m.             --
   Total ore processed (000 tons)                    3,387            2,999          2,885             274              --
   Gold grade (ounce/ton)                            0.045            0.067          0.045           0.041              --
   Gold recovery rate (%)                             83.1             87.0           77.9            60.0              --
   Gold recovered (ounces)                         139,870          157,901         97,686           6,410              --
High grade ore processed:/(4/
   Gold recovered (ounces)                           6,950           27,094          9,044           7,194          12,550
--------------------------------------------------------------------------------------------------------------------------
</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 a mill to treat higher-grade non-oxidized ore was
       completed in the fourth quarter of 1997.

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

n.m.   Not meaningful.

Geology and Ore Reserves
------------------------
The Round Mountain orebody straddles the margin of a volcanic caldera complex.
Gold-bearing hydrothermal fluids were transported along major structural
conduits created by the volcano's collapse and associated faulting. These
ascending fluids deposited gold in permeable zones along a broad northwest
trend. Primarily gold mineralization at Round Mountain occurs as electrum, a
natural gold/silver alloy, in association with quartz, adularia and pyrite.
Narrow fractures in shear zones host a higher-grade mineralization while porous
sites within the volcanic rock host the disseminated mineralization. Economic
gold mineralization is found in both the volcanic and surrounding sedimentary
rocks as well as overlaying alluvial placers. The oblong open-pit mine is over a
mile at its longest dimension and currently more than 1,200 feet from the
highest working level to the bottom of the pit.




<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
                                              Round Mountain Mine
                                              Ore Reserves/(1)(2)/
                                               December 31, 2000
--------------------------------------------------------------------------------------------------------------------------
                                                                                   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                                                   177,300               0.022             3,847
Offloads and heap leach stockpiles /(4)/                              89,760               0.011               974
Mill stockpiles                                                        6,146               0.065               397
--------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                                       273,206               0.019             5,218
==========================================================================================================================

Proven                                                               192,517               0.018             3,549
Probable                                                              80,689               0.021             1,669
--------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                                       273,206               0.019             5,218
==========================================================================================================================

Total Proven and Probable-1999                                       320,062               0.018             5,875
==========================================================================================================================
</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 2000 was 61.6%. The eventual average recovery rate for
       the dedicated pad is estimated to be approximately 50%. The mill recovery
       rate was 83.1% in 2000.

/(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 0.76:1.

                                       9
<PAGE>

Mining and Processing
---------------------

The Round Mountain operation uses conventional open-pit mining methods and
recovers gold using four independent processing operations. These include
crushed ore leaching (reusable pad), run-of-mine ore leaching (dedicated pad),
milling of higher grade non-oxidized ore, and the gravity concentration circuit.
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 a reusable pad is used to recover gold from oxide ores above a
cut-off grade of 0.018 ounce per ton. Ore is crushed to less than 3/4 inches at
a rate of up to 30,000 tons per day and conveyed to two parallel 1.5 million
square foot asphalt reusable leach pads. This ore is leached for approximately
100 days, rinsed, removed and placed on the dedicated leach pad and re-leached.
The remaining gold values are sufficient to justify additional leaching of the
ore on the dedicated pad over a period of years. In 2000, 24,335 tons of ore per
day were processed on the reusable heap leach pad, compared to 15,602 tons per
day in 1999. Reusable pad volume varies with ore release, which is 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 ore (down to a cut-off grade of 0.006 ounces per ton for oxidized
ores) and ore removed from the reusable leach pad, in addition to the stockpiled
ore that was previously removed from the reusable pads, is transported to a
dedicated run-of-mine leach pad. Ore is placed in 50-foot thick layers for
leaching. After completion of an initial leaching cycle of approximately 100
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 leach pad covers approximately 30.7
million square feet and has a capacity of approximately 320 million tons. In
2000, the operation processed 141,047 tons of ore per day on the dedicated pad,
compared to 120,020 tons per day in 1999. Production in 2000 from the dedicated
pad was 352,132 ounces, compared to 215,825 ounces in 1999, due to increased
tons and higher grades.

Construction of an 8,000 ton-per-day mill to treat higher grade non-oxide ore
was completed in the fourth quarter of 1997, at a total cost of $62 million (the
Company's share, $31 million). The mill processed 9,304 tons per day in 2000
producing 139,870 ounces, compared to 8,083 tons per day in 1999 producing
157,901 ounces. The reduction in mill ounces resulted from lower grades. The
mill facility achieved a recovery rate of 83.1% from both higher-grade oxide and
non-oxidized ores during 2000 by employing gravity concentration, fine grinding
and cyanide leaching. Optimization efforts were undertaken during 2000 and by
late in the year the facility was regularly attaining daily tonnage in excess of
10,000 tons per day. Efforts to continue to increase the mill throughput rate
are continuing and tonnage processed is expected to again increase in 2001. In
addition, some success has been achieved in processing certain high-grade oxide
ores through the mill.

Gravity concentration is only applied to the highest grade ore containing coarse
gold. A 500 ton-per-day gravity recovery circuit processes ore from several
small flat-lying narrow, but very high-grade veins within the Round Mountain ore
body. The mine produced 6,950 ounces of gold from the gravity circuit in 2000,
compared to 27,094 ounces in 1999 due to lower coarse gold availability. Gravity
circuit tails are sent to the mill for further cleaning and disposal.

Ore and waste rock was mined at a rate of approximately 193,837 tons per day in
2000 compared to 214,516 tons per day in 1999. The decrease in total mining tons
was attributable to a reduction in the waste to ore stripping ratio to 0.82:1 in
2000 compared to 1.40:1 in 1999.

                                       10
<PAGE>

The joint venture partners approved the purchase of a new fleet of eight 240-ton
haul trucks at a total cost of $18 million (the Company's share, $9 million).
The trucks are scheduled to be delivered in 2001 and will replace older higher
cost units.

Mining at Round Mountain is expected to be complete during 2006 (assuming no
additions to reserves), with completion of stockpile processing in 2008. 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
2000, the operation completed a $1 million exploration program (the Company's
share, $0.5 million) to test four target areas. A similar program has been
budgeted for 2001 to explore geologic environments similar to the Round Mountain
deposit.

In 2001, Round Mountain is expected to produce up to 5% less gold than 2000's
production of 640,128 ounces (the Company's share, 320,064 ounces) reflecting
anticipated increased waste and lower dedicated pad mine ore, partially offset
by increased reusable pad grade and increased tons milled and grade. See
"Cautionary `Safe Harbor' Statement under the United States Private Securities
Litigation Reform Act of 1995" and "Risk Factors".

                                       11
<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 and was completed in October
2000. Mining in the McCoy open pit was completed in April 2000. Mining is still
being conducted at the Cove South Deep underground.

The McCoy/Cove property consists of approximately 1,482 unpatented claims
covering approximately 30,000 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
1996 through 2000.

<TABLE>
<CAPTION>
                                                   2000            1999           1998            1997            1996
-------------------------------------------------------------------------------------------------------------------------
<S>                                         <C>             <C>            <C>             <C>              <C>
Gold produced (ounces)                          162,784         124,536        167,494         187,034         271,731
Silver produced (ounces)                     12,328,297       8,430,072      9,412,823      11,021,708       7,102,348
Mining cost/ton of ore and waste            $      0.78     $      0.66    $      0.71     $      0.74      $     0.72
Heap leaching cost/ton of ore               $      2.44     $      1.82    $      1.74     $      1.70      $     1.68
Milling cost/ton of ore                     $      6.38     $      6.32    $      6.09     $      8.82      $     9.50
Production cost/ounce of gold produced:
  Direct mining expense                     $       166     $       252    $       200     $       276      $      286
  Deferred stripping cost                            12             (35)            (1)            (10)           (16)
  Inventory movements and other                       1               4              4               5               1
                                            -----------     -----------    -----------     -----------      ----------
   Cash operating cost                              179             221            203             271             271
  Royalties                                           3               2              3               3               5
  Production taxes                                    5              --              2              (1)              4
                                            -----------     -----------    -----------     -----------      ----------
   Total cash cost                                  187             223            208             273             280
  Depreciation                                       26              48             52              66              71
  Amortization                                       28              27             37              44              46
  Reclamation and mine closure                       11              11              9              10               8
                                            -----------     -----------    -----------     -----------      ----------
   Total production cost                    $       252     $       309    $       306     $       393      $      405
                                            -----------     -----------    -----------     -----------      ----------
Average gold-to-silver price ratio(1)              56:1            54:1           54:1            67:1            75:1
Capital expenditures (millions)             $       0.6     $       1.1    $       1.3     $       2.2      $      7.3
Deferred (applied) mining
  expenditures (millions)                   $      (5.0)    $       9.5    $       0.5     $       3.7      $      6.0
Heap leached:
   Ore processed (tons/day)                       4,971          11,262         11,296          17,840         16,671
   Total ore processed (000 tons)                 1,809           4,178          4,112           6,494          6,068
   Gold grade (ounce/ton)                         0.024           0.022          0.021           0.018          0.018
   Silver grade (ounce/ton)                        0.96            0.37           0.26            0.29           0.27
   Gold and silver recovery rates                   /(2)/           /(2)/          /(2)/           /(2)/          /(2)/
   Gold recovered (ounces)                       46,892          45,200         53,096          55,129         66,834
   Silver recovered (ounces)                    910,858         396,428        398,006         396,928        513,227
</TABLE>

                                       12
<PAGE>

<TABLE>
<CAPTION>
                                                   2000            1999           1998            1997           1996
------------------------------------------------------------------------------------------------------------------------
<S>                                          <C>              <C>            <C>            <C>             <C>
Milled:
   Ore processed (tons/day)                      11,461          12,000         11,829           9,315          9,031
   Total ore processed (000 tons)                 4,172           4,452          4,306           3,391          3,287
   Gold grade (ounce/ton)                         0.053           0.038          0.046           0.061          0.086
   Silver grade (ounce/ton)                        3.71            3.02           2.95            4.54           3.14
   Gold recovery rate (%)                          50.7            45.8           57.8            64.3           79.5
   Silver recovery rate (%)                        69.8            61.3           69.8            69.7           73.5
   Gold recovered (ounces)                      115,892          79,336        114,398         131,905        204,897
   Silver recovered (ounces)                 11,417,439       8,033,644      9,014,817      10,624,780      6,589,121
------------------------------------------------------------------------------------------------------------------------
</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, by conglomerate/sandstone of the Panther Canyon Formation and by
dolomite in the Home Station Formation.

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------------------------
                                                  McCoy/Cove Mine
                                                 Ore Reserves/(1)/
                                                 December 31, 2000
----------------------------------------------------------------------------------------------------------------------------
                                             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 Underground                                  53             0.405           0.725                21              38
Stockpiles                                     4,667             0.030           2.327               140          10,861
----------------------------------------------------------------------------------------------------------------------------
Proven and Probable-2000                       4,720             0.034           2.309               161          10,899
============================================================================================================================

Proven                                         4,667             0.030           2.327               140          10,861
Probable                                          53             0.405           0.725                21              38
----------------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                 4,720             0.034           2.309               161          10,899
============================================================================================================================

Total Proven and Probable-1999                11,832             0.043           2.387               514          28,243
============================================================================================================================
</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.

The gold-equivalent cut-off grades for the underground is 0.275 ounce per ton.
All other reserves are in stockpiles.

                                       13
<PAGE>

Mining and Processing
---------------------
Ore and waste rock was mined from the open pits at a rate of 55,938 tons per day
in 2000, compared to 117,641 tons per day in 1999. The lower rate is an average
for the full year despite the completion of mining prior to year's end. Longer
hauls and smaller working areas also affected mining rates. All material
required drilling and blasting prior to excavation. The open pit mining
operation employed 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. A portion of the fleet is being used for
reclamation activities.

Ore mined from underground amounted to 63,000 tons in 2000, compared to 133,000
tons mined in 1999. The lower mining rate is attributable to both higher
development requirements and mining less productive drift and fill cuts as
opposed to mining open stopes in 1999.

The Company mined the Cove pit at a high rate to minimize dewatering time and
costs. Water pumped out of the Cove pit averaged 14,000 gallons per minute at
the end of 2000. The Company uses infiltration ponds for water pumped from the
mine. Dewatering activities must be maintained while underground operations are
still active.

The ore mined from the Cove pit was all oxide in the early years of production.
Oxide ore was replaced by sulfide ore at depth. 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 increased from 2.7 million tons in 1999 to 4.7 million tons in
2000. Stockpiled ore fluctuated as a function of the mine plan. Because open pit
mining has been completed, the stockpiled ore will now be consumed.

The mill uses 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 2000 was from sulfide ores
mined during the year. Mill throughput averaged 11,461 tons per day in 2000
compared to 12,000 in 1999. Gold and silver mill production increased in 2000
compared to 1999 due to higher grades and increased recoveries as a result of
the higher grades. The higher grades also brought harder ores, which decreased
the throughput. For a general description of McCoy/Cove's mining and mill
recovery process, see page 45.

The Cove South Deep underground contributed 60,130 tons to the mill and produced
approximately 10,700 ounces of gold and 43,000 ounces of silver. Mining will
continue at Cove South Deep into the first half of 2001.

Heap leach crushing was completed in the first half of 2000 as the remainder of
the oxide ore was mined from the McCoy and Cove pits. Residual leaching will
continue in 2001. Rinsing and restoration of the first of three heap leach pads
commenced in 1999 and contouring and seeding was completed in 2000.

Heap leach gold production was slightly higher in 2000 compared to 1999 due to
higher grade ore placed on pad 3 and re-leaching of pad 2. Heap leach processing
averaged 4,971 tons per day in 2000, down from 11,262 tons per day in 1999.

In 2001, McCoy/Cove will be processing ore from stockpiles and the Cove South
Deep underground. Residual heap leaching will continue in 2001. As a result,
McCoy/Cove is expected to produce about 60% less gold and silver in 2001
compared to the 162,784 ounces of gold and 12.3 million ounces of silver
produced in 2000. See "Cautionary `Safe Harbor' Statement under the United
States Private Securities Litigation Reform Act of 1995" and "Risk Factors."

                                       14
<PAGE>

KETTLE RIVER
The Kettle River properties are located in Ferry County in the State of
Washington and cover approximately 7,535 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. Mining at Lamefoot was completed in December 2000.

In December 1994, construction commenced at the K-2 project. 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.

During the year, exploration efforts identified an extension to the northeast of
the K-2 deposit. A $3.4 million development program is planned for 2001. The
resource of approximately 500,000 tons is scheduled for mining in 2002.

In 2000, the Company acquired a 75 percent interest in the Golden Eagle advanced
gold exploration project. Golden Eagle is located in the Republic district of
Washington State approximately 15 miles from the Kettle River millsite. The
Company plans to spend $0.8 million for exploration activity in the Republic
district in 2001 including work at Golden Eagle.

The following table sets forth operating data for the Kettle River operation
from 1996 through 2000.

<TABLE>
<CAPTION>
                                                     2000           1999          1998           1997           1996
-----------------------------------------------------------------------------------------------------------------------
<S>                                          <C>            <C>           <C>            <C>            <C>
Gold produced (ounces)                             94,086        104,396       113,692        129,866        124,910
Mining cost/ton of ore                       $      20.52   $      23.57  $      21.65   $      21.53   $      21.12
Milling cost/ton of ore                      $      11.58   $      11.22  $      10.71   $      10.58   $      11.96
Production cost/ounce of gold produced:
   Direct mining expense                     $        224   $        239  $        238   $        231   $        190
   Deferred mine development                           --             --            --             --             --
   Inventory movements and other                       (6)            (1)            6             (4)            11
                                             ------------   ------------  ------------   ------------   ------------
     Cash operating cost                              218            238           244            227            201
   Royalties                                           13             15            12             14             10
   Production taxes                                     1              2             1              2              2
                                             ------------   ------------  ------------   ------------   ------------
     Total cash cost                                  232            255           257            243            213
   Depreciation                                        11             55            77             54             59
   Amortization                                         8              8             5             36             45
   Reclamation and mine closure                        15             15            12             12              8
                                             ------------   ------------  ------------   ------------   ------------
     Total production cost                   $        266   $        333  $        351   $        345   $        325
                                             ------------   ------------  ------------   ------------   ------------
Capital expenditures (millions)              $        1.4   $        0.4  $        1.5   $        3.8   $        8.8
Milled:
   Ore processed (tons/day)                         1,470          1,698         2,017          2,118          1,652
   Total ore processed (000 tons)                     535            630           734            771            601
   Grade (ounce/ton)                                0.209          0.198         0.187          0.197          0.240
   Recovery rate (%)                                 84.1           83.7          82.8           85.4           86.5
-----------------------------------------------------------------------------------------------------------------------
</TABLE>

                                       15
<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, 2000
-----------------------------------------------------------------------------------------------------------------------
                                                                                   Average grade
                                                                     Tonnage             of gold   Gold content/(2)/
                                                           (000's short tons)   (ounces per ton)    (000's ounces)
-----------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>                  <C>                <C>
Lamefoot stockpile                                                       107               0.196                21
K-2                                                                      256               0.191                49
-----------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                                           363               0.193                70
=======================================================================================================================

Proven                                                                   363               0.193                70
Probable                                                                  --                  --                --
-----------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                                           363               0.193                70
=======================================================================================================================

Total Proven and Probable-1999                                           779               0.208               162
=======================================================================================================================
</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 2000 was 83.7%.

The cut-off grade is 0.135 ounces 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 2000, approximately 62% of ore milled came from Lamefoot and
approximately 38% of ore milled came from K-2.

At the Lamefoot property, the mining method used was longhole open stoping, with
delayed backfill. Zones with ore widths of 50 feet used cemented backfill in
primary stopes and unconsolidated fill in secondary stopes. Zones under 50 feet
in width were filled with unconsolidated fill. Ore was removed from the stopes
using remote control muckers and hauled to the surface using 26-ton haul trucks.
Total Lamefoot ore production in 2000 was 379,447 tons compared to 381,603 in
1999. Mining was completed in December 2000.

The mining method used 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 2000 was 227,671 tons compared to 257,258 in 1999.

The mill processed approximately 1,470 tons of ore per day in 2000, compared to
1,698 tons per day in 1999. Total Kettle River production decreased in 2000
compared to 1999 due to fewer tons mined.

In 2001, Kettle River is expected to produce about 30% to 35% less than the
94,086 ounces of gold produced in 2000, reflecting anticipated lower mill
tonnage, somewhat 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."

                                       16
<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 lease covers 6,998 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, located approximately 100 miles north of
Lupin, in 1995. 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 tons of
other mineralization at an average grade of 0.374 ounces 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.

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.

The Lupin mine was placed on care and maintenance in early 1998 due to depressed
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 2000 the Company reopened the Lupin mine. A reengineering study, completed
late in 1998, identified savings that helped lower costs. Gold production from
Lupin recommenced in April 2000. The Company incurred and expensed start-up
costs of $4.8 million in 2000. Based on current reserves of 434,000 ounces and
other mineralization of 0.7 million tons at an average grade of 0.320 ounces of
gold per ton, the mine plan projects production through 2004. Drilling indicates
additional mineralization at depth, which if confirmed by additional drilling,
could extend the mine life for several more years. The Ulu satellite deposit
represents the potential for additional mill feed for the site.

                                       17
<PAGE>

The following table below sets forth operating data for the Lupin mine from 1996
through 2000.

<TABLE>
<CAPTION>
                                                    2000           1999          1998           1997           1996
-------------------------------------------------------------------------------------------------------------------
<S>                                             <C>                <C>           <C>       <C>            <C>
Gold produced (ounces)                           117,729             --            --        165,335        166,791
Mining cost/ton of ore                          C$ 42.36             --            --      C$  46.09      C$  44.08
Milling cost/ton of ore                         C$ 13.98             --            --      C$  11.77      C$  12.39
Production cost/ounce of gold  produced:
   Canadian dollars:
     Direct mining expense                      C$   344             --            --      C$    381      C$    411
     Deferred mine development                        (6)            --            --             13            (4)
     Inventory movements and other                    --             --            --             (1)             1
                                                  ------         ------        ------        -------        -------
       Cash operating cost                      C$   338             --            --      C$    393      C$    408
                                                  ------         ------        ------        -------        -------
   U.S. dollars:
     Cash operating cost                       US$   213             --            --     US$    284     US$    299
     Royalties                                        --             --            --             --             --
     Production taxes                                 --             --            --             --             --
                                                  ------         ------        ------        -------        -------
       Total cash cost                               213             --            --            284            299
     Depreciation                                     27             --            --             71             71
     Amortization                                      8             --            --             24             21
     Reclamation and mine closure                     17             --            --             14              8
                                                  ------         ------        ------        -------        -------
     Total production cost                     US$   265             --            --     US$    393     US$    399
                                                  ------         ------        ------        -------        -------
Capital expenditures (millions US$)              $   4.7             --            --       $   12.3       $   15.7
Deferred (applied) mining
   expenditures (millions US$)                   $   0.4             --            --       $   (1.8)      $    0.2
Milled:
   Ore processed (tons/day)                        1,861             --            --          2,167          2,111
   Total ore processed (000 tons)                    508             --            --            789            768
   Grade (ounce/ton)                               0.248             --            --          0.226          0.235
   Recovery rate (%)                                93.3             --            --           92.6           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.

--------------------------------------------------------------------------------
                                  Lupin Mine
                               Ore Reserves/(1)/
                               December 31, 2000
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                                   Average grade
                                                                     Tonnage             of gold   Gold content/(2)/
                                                          (000's short tons)    (ounces per ton)    (000's ounces)
--------------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                   <C>                <C>
Center Zone                                                              610               0.275               168
East Zone                                                                177               0.226                40
West Zone                                                                673               0.251               169
McPherson Zone                                                           218               0.263                57
--------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                                         1,678               0.259               434
====================================================================================================================

Proven                                                                 1,141               0.256               292
Probable                                                                 537               0.264               142
--------------------------------------------------------------------------------------------------------------------
Total Proven and Probable-2000                                         1,678               0.259               434
====================================================================================================================

Total Proven and Probable-1999                                         1,931               0.268               518
====================================================================================================================
</TABLE>

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

                                       18
<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 2000 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 4,510 feet.

The ore in the Center, West, East and McPherson 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 1,861 tons per day in
2000.

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 greater depths.
Mechanized cut and fill mining techniques may afford an opportunity to reduce
dilution and to improve profitability at depth.

During 1997, a study determined that a required exhaust air raise, doubling as
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, thereby reducing haulage costs. The project was started in 1997, prior to
the mine's temporary shut down. Further work was re-started upon
re-commissioning of the mine in early 2000. Final commissioning of the winze is
expected to take place in April 2001.

In 2001, Lupin is expected to produce about 25% to 30% more than the 117,729
ounces of gold produced in 2000, reflecting a full year of production. See
"Cautionary `Safe Harbor' Statement under the United States Private Securities
Litigation Reform Act of 1995" and "Risk Factors."

Supplies, Utilities and Transportation
--------------------------------------
The Lupin mill facilities and mine are in a remote location in the sub-Arctic
region of Canada. The Company must therefore prepare for and 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 using 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. Winter
road operating costs are shared with other third party users.

                                       19
<PAGE>

In order to operate the winter road, the Company is required to obtain certain
licenses from the Federal and Territorial Governments. To date, the Company has
experienced no significant difficulties in obtaining these licenses. The current
license of occupation expires in 2003. The process to file a new application for
a jointly held license of occupation among major road users is underway. 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 annual requirements for diesel fuel, chemical reagents and 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 the Company's Boeing 727 aircraft, 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. Since 1995, approximately 31% 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
all regulatory standards prior to discharge. In July of 2000, the Lupin water
license was extended for a period of 8 years through 2008, to coincide with the
anticipated mine life.

                                       20
<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. Federal
environmental permitting started in May 1995. On June 30, 2000 the Minister of
the Environment concluded that the project was not likely to cause significant
adverse environmental effects and public concerns did not warrant a referral to
a review panel. The project was referred back to the Minister of Fisheries and
Oceans for action under Section 37 of the Canadian Environmental Assessment Act.
In August 2000, Oceans and Fisheries Canada (O&FC) issued the Letter of Intent
and Memorandum of Understanding for the Aquarius Project. A draft version of the
federal permit "Authorization For Works Or Undertakings Affecting Fish Habitat"
was released for comment by O&FC in December 2000. The Company anticipates full
federal permitting during the first quarter 2001. This will allow the company to
proceed with obtaining all necessary provincial and municipal permits to build
and operate the project.

Based on the revised bankable feasibility study completed during the second
quarter 2000, Aquarius has proven and probable reserves of 1,189,000 ounces of
gold at December 31, 2000 (17.5 million tons of ore at an average grade of 0.068
ounces per ton). The reserves are based on a cutoff grade of 0.015 ounce per
ton. The cutoff grade was based on a price of $300 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 extensive drilling advanced
geostatistical analysis with multiple techniques, cross validation with
production data and independent estimates, and review of the results by an
expert consultant.

In 1998, the Company completed the infrastructure required for the frozen earth
system (ice-wall) 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 and the placement of more
than 2,200 freeze-wells spaced 6.3 feet apart. This will allow an adequate
distance between the freeze-wells to provide a solid ice barrier. The
freeze-wells penetrate the bedrock, which has little water flow. A
calcium-chloride solution (refrigerant) will be cooled to minus 20(0) F by
electrically powered refrigeration units and circulated through the
freeze-wells. As the circulation of the refrigerant progresses, cylindrical
columns of frozen soil will form around each freeze-well. The size of the
columns increases over time, forming a virtually watertight, impermeable
barrier. The Company expects that it will take approximately four months for
this process to entirely form the ice-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 revised bankable feasibility study evaluated a number of processing options
for treating the Aquarius ore. Based on test results, economic evaluation and a
"least risk" approach a simplified gravity/flotation process was selected. This
process is based on semi-autogenous grinding (SAG) utilizing milling

                                       21
<PAGE>

equipment previously belonging to the Paredones Amarillos project. The mill has
been designed to process 7,500 tonnes (8,250 tons) per day.

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
northerly of the two segments first.

Electrical power will be supplied to the project from Ontario Hydro, the main
utility provider in the province of Ontario. The on-site primary sub-station and
power-line to the Ontario grid were 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 189,000 ounces. Average
cash operating costs are expected to be approximately $150 per ounce. Total
production costs are anticipated to be $240 per ounce. The capital cost to
construct Aquarius is estimated at $90 million, excluding the value of owner
equipment contributions. 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 pit-perimeter road construction were completed in 1997. The
remainder of the engineering, procurement, and construction activities are
currently deferred until the spot price for gold increases and the Company
obtains financing under acceptable terms.

Development holding costs are expensed as incurred. The Company expensed
Aquarius holding costs of $0.7 million in 2000 and $0.5 million in 1999. At
December 31, 2000, the Company has a net book value of approximately $48 million
in acquisition and construction costs related to Aquarius. Further delays in
development and construction from continued low gold prices could result in a
write-down of all or a portion of these costs. The Company expects to expense
approximately $1.4 million in development holding costs and $1.6 million in
depreciation for Aquarius in 2001.

OTHER PROJECTS
Kuranakh/Golden Eagle
---------------------
Under an agreement with Newmont Gold Company, completed in July 2000, the
Company exchanged its 50% interest in the Kuranakh gold project located in
eastern Russia for Newmont's 75% operating interest in the Golden Eagle project
located in the Republic district of Washington State. The Company may also
receive up to an additional $7 million from Newmont depending on whether certain
permitting, financing and project completion conditions are achieved in respect
of Kuranakh. Further, each party will be required to pay a production royalty to
the other, starting at 0.5% of its share in production at a $350 per ounce gold
price and increasing to 1% at a $400 gold price. No gain or loss was recorded
pursuant to this agreement.

Kuranakh is situated next to an existing mine and milling operation in the Sakha
Republic. Over the past four years the Company conducted exploration and other
work, and concluded that Kuranakh was a good development opportunity. The
Company, with its Russian partners, had conceived various parameters under which
the project might be advanced and had detailed discussions with the Russian
government on a production sharing and gold sales agreement. However,
significant capital would be required and the

                                       22
<PAGE>

Company believes that, in a climate of low gold prices, it would have difficulty
obtaining the capital needed for development and construction. The Company
concluded that the Kuranakh gold project would be a better opportunity for a
financially stronger enterprise. This led to discussions, and ultimately the
agreement with Newmont.

Golden Eagle is an advanced gold exploration project located approximately 15
miles from the Company's Kettle River operation. Covering approximately 204
acres of fee land and patented mining claims in a prospective area for mineral
exploration, Golden Eagle represents a good opportunity to extend operations at
Kettle River. The Company commenced a drilling program during the third quarter
of 2000. The agreement with Newmont also includes other holdings in the Republic
District representing 3,500 acres where mineral rights and/or surface rights are
held.

EXPLORATION
In addition to conducting exploration for new gold deposits, the Company
explores for extensions of known reserves at its mines and development
properties. The Company's exploration program concentrates on those projects
believed to represent the most promising near-term prospects. 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 2000, efforts at Round Mountain focused on identification and exploration in
the areas surrounding the minesite. Four areas were drilled with further
drilling recommended at one of those targets. At McCoy/Cove, detailed drilling
from underground further defined the Cove South Deep deposit in coordination
with mining and extraction of the deposit. Five additional targets were drill
tested at McCoy/Cove during the year. At Kettle River the East Veins deposit, a
satellite located to the north east of the K-2 deposit, was successfully drilled
off from underground development headings with additions to other
mineralization. Drill tests of continuations of the East Veins were encouraging
and further drilling is planned in 2001. The Company continues to evaluate
opportunities within the region for extending the life of the project.

In 2000, the Company carried out extensive reviews of projects in Nevada and
selected areas of the western U.S. as well as in the Timmins area in Ontario,
Canada. Four U.S. properties acquired in 1999 were drill tested with results
warranting further work on one of the properties. Two new properties were
acquired during 2000 in Nevada. Drilling planned for 2001 will follow up on the
results of fieldwork done on these properties during the year. In Canada,
activities in the Timmins area included drill tests of two properties with field
examinations of several others. Further drilling is planned on two Timmins
properties in 2001. The Youga/Bitou project is a joint venture project in
Burkina Faso, West Africa and the only project in which the Company is involved
outside of North America. Further drilling and fieldwork were done during 2000
in support of the feasibility study managed by the operating partner.

ALASKA-JUNEAU
By judgement entered on July 6, 2000 the Superior Court for the State of Alaska
found that Echo Bay Alaska Inc., an indirect subsidiary of the Company, had
completed the requirements of a closeout plan relating to final reclamation of
the Alaska-Juneau mine. Among other findings, the Court concluded, as to those
areas within the mine where Echo Bay Alaska Inc. activities took place, there
exists no risk of a release or threatened release of a hazardous substance in
sufficient concentrations to present a danger to human or ecological receptors.

According to the findings of the Court, a full compromise and settlement of all
claims and courses of action raised by the State of Alaska or which could have
been asserted against Echo Bay Alaska Inc. constitutes the completion of the
closeout plan requirements and related work plans. This finding is based upon
all information made available to the State by Echo Bay Alaska Inc. and its
contractors. The Company believes that all obligations in respect of the
Alaska-Juneau project have been satisfied and

                                       23
<PAGE>

there is no further liability to the Company or its subsidiaries relating to the
reclamation and closure of the project. The remaining $2.0 million reclamation
accrual was credited to Other Income in 2000.

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 three years for all of
the conditions of the consent decree agreement to be fulfilled by both parties.
SGC has $4.7 million accrued at December 31, 2000 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 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.

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.

Certain of the Company's counterparties require margin deposits 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 2000, the Company delivered approximately 37% of gold production against
forward sales and put options at an average commitment price of $313 per ounce.
This compares with 77% of gold production at $346 per ounce in 1999 and 96% of
gold production at $341 per ounce in 1998. Approximately 35% of silver
production was delivered against forward sales and put options at an average
cash price of $5.71 per ounce in 2000. This compares to 43% at $5.66 per ounce
in 1999 and 50% at $5.44 per ounce in 1998.

                                       24
<PAGE>

The Company's hedge position as of December 31, 2000 partially protects the
Company against gold price declines in the years 2001 through 2005. For 2001,
this position includes forward sales of approximately 125,000 ounces at a
forward price of $312 per ounce. For 2002 through 2005, the Company has forward
sales totaling 195,000 ounces of gold at a forward price of $310 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 2001.

The Company's hedging commitments are described in note 17 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, 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 that may affect the Lupin operation in the future. 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. Third party interests in
lands in the Nunavut Settlement Area created prior to April 1, 1999 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 that 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. 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.

Third party interests in lands in the Nunavut Settlement Area created on or
after April 1, 1999 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 will be additionally responsible, in consultation with the appropriate
regional Inuit associations, for the administration and management of those
subsurface rights.

                                      25
<PAGE>

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
who are residents 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 that 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 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 C$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

                                       26
<PAGE>

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 recent legislative sessions, 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 that 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. Although none of these
proposed modifications was enacted into law, Congress may consider the same or
similar proposals in 2001 as well.

The one area in which specific action has been taken relates to the regulation
of surface activities on federally owned lands administered by the Bureau of
Land Management ("BLM"). New surface management regulations (the "3809
Regulations") were enacted and became effective on January 20, 2001. The effect
of the new 3809 Regulations is to create an environment significantly more
stringent and restrictive for activities and operations on federal lands
involving unpatented mining claims and millsites. For example, the new 3809
Regulations provide that all activities on unpatented mining claims or millsites
for which approval of a Plan of Operations is required (which includes all
activities other than exploration activities that disturb less than five acres
of surface) are subject to a new standard of review by the BLM, which must make
a determination that the proposed activities would not cause substantial
irreparable harm to significant scientific, cultural or environmental resource
values that cannot be effectively mitigated. That new standard would apply to
any new significant activities undertaken by the Company or its subsidiaries on
federal public lands. While imposition of that new standard should not have an
effect on the Company's existing approved Plans of Operation (to which it does
not apply) at its Round Mountain, McCoy/Cove and Kettle River properties, if the
Company needs to make any substantive modifications to those existing Plans of
Operation (such as widening a road or expanding a leach pad or tailings
facility), that standard (as well as all other provisions of the new 3809
Regulations) would apply unless the Company could demonstrate to the BLM's
satisfaction that it was not practical for economic, environmental, safety or
technical reasons. In addition, under previous regulations, up to 75% of
financial security for the performance of reclamation obligations could be
provided by corporate guarantees. While the new 3809 Regulations do provide for
existing financial guarantees to continue to be in effect, no new corporate
guarantees will be accepted after July 19, 2001. To the extent applied to
modifications of the Company's current operations, and to the extent the Company
engages in activities or operations on public lands outside of its current
permit boundaries (including any new projects), the new 3809 Regulations will
make the process for the preparation and obtaining of approval of a Plan of
Operations more time-consuming and expensive, and any such proposed activities
or operations will be subject to more detailed and expensive regulatory
requirements. Moreover, the Company's ultimate ability to have any such proposed
activities or operations approved will be subject to a much greater level of
uncertainty. The new regulations may not significantly affect existing
operations, so long as such operations do not require, for their continuing
viability, new discretionary permits for land outside the boundaries of land
currently permitted or significant changes within current permit boundaries.
New, including expanded, exploration or mining operations will need to quantify
the cost burden imposed by the new regulations when assessing the economic
viability of any project. Litigation is currently pending in Washington, D.C.
and Nevada federal courts to stay the enforcement of the new regulations.

In addition, the BLM has called upon two of the Company's subsidiaries to
provide other security to replace corporate guarantees that had been given in
respect of the Round Mountain and McCoy/Cove operations. The subsidiaries
consider the BLM's action, taken by administrative decision, to be arbitrary,
capricious and an abuse of discretion and will vigorously oppose and contest the
decision. The potential impact on the Company as a result of such administrative
action is difficult to predict. See "Risk Factors-Governmental Regulation."

A material direct economic impact of potential mining law revision could come
from the imposition of royalties on production from the McCoy/Cove mine in
Nevada, as the reserves 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 claims to patented status. The Company's
applications for

                                       27
<PAGE>

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 cannot predict with certainty whether those patents will be
issued or the time frame for such issuance. Patents for the Round Mountain mine
were received in September 2000. 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.

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
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.

                                       28
<PAGE>

Employees
---------
At December 31, 2000, the Company employed 1,240 persons excluding temporary
employees directly involved in short-term programs, broken down as follows.

Round Mountain, including ancillary services                        678
McCoy/Cove                                                          149
Kettle River                                                        101
Lupin                                                               276
Technical and corporate staff and other                              36
                                                                 ------
                                                                  1,240
                                                                 ======

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                     57      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

ROBERT L. LECLERC                        56      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                       50      Vice  President,  Operations  of the  Company  since  March 1998;
                                                 prior  thereto  various  senior  operations  positions  with  the
                                                 Company

TOM S.Q. YIP                             43      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 $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.

                                       29
<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 18 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

                                       30
<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 significantly increased exploration activities.
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 held interests in mining properties, principally in Brazil, and also in
Bolivia. The Company sold its investment in Santa Elina in 1998.

In 1997, in response to declining gold prices, the Company deferred final
construction decisions on the Aquarius and Paredones Amarillos development
properties and deferred further development of the Ulu deposit. The Company also
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 to the Company's
consolidated financial statements.

In January 1998, the Company temporarily suspended operations at the Lupin mine.
In November 1999, the Company announced its decision to reopen the Lupin mine.
Production recommenced in April 2000.

The Company agreed in 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.

                                       31
<PAGE>

RISK FACTORS
Profitability
-------------
The Company reported net earnings of $18.6 million in 2000 and net losses of
$37.3 million in 1999, and $20.1 million in 1998. The 2000 results compared to
1999 reflect higher gold and silver sales volume, the 1999 loss on the sale of
the Company's interest in Paradones Amarillos, and lower depreciation and
amortization. These factors were partially offset by increased operating costs
and lower gold and silver prices realized. 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, the 1998 gain on the sale of Santa Elina and
other mining properties 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 resulted from lower gold
and silver volumes and prices realized. The Company incurred exploration and
development expenses of $10.3 million in 2000, $8.8 million in 1999, and $12.0
million in 1998. The Company's profitability depends on, among other things, the
price of gold and silver, the profitability of production at existing and new
mines, 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
-----------------
Because 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.
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

                                       32
<PAGE>

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 four operating mines averaged $193 per
ounce in 2000, and are expected to increase to approximately $225 per ounce in
2001. Total production costs were $271 per ounce in 2000. In the current gold
price environment, the Company's cost structure has significant implications for
the Company's liquidity and ability 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 term and revolving credit facilities expire in August
2001. The Company currently has $19.0 million outstanding under its revolving
credit facility. Based on the current trailing 90-day average spot price of
gold, the Company is restricted to an additional borrowing capacity of
approximately $4 million available under this credit facility. At current gold
prices, the Company does not anticipate drawing on the revolving line. The
Company believes it is currently in compliance with the credit facility
covenants. The Company is in the process of refinancing this facility and
believes it will be successful in this effort prior to August 2001.

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. Future reclamation obligations are
expected to be funded from operating cash flows. Early in 2001, regulators in
Nevada called upon two of the Company's subsidiaries to provide other security
to replace corporate guarantees that had been given in respect of the Round
Mountain and McCoy/Cove operations. The subsidiaries disagree with the
regulators' position and believe that they qualify under the criteria set out
for corporate guarantees and will oppose the regulatory position. The potential
impact on the Company as a result of such administrative action is difficult to
predict. See "Governmental and Environmental Regulation". 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.

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 since the beginning of 1997, at depressed levels. Gold and silver
prices fluctuate widely and are affected by numerous factors beyond the
Company's control, including global supply and demand, expectations with respect
to the rate of inflation, the exchange rates of the dollar to other currencies,
interest rates, forward selling by producers, central

                                       33
<PAGE>

bank sales and purchases, production and cost levels in major gold-producing
regions such as South Africa and Australia, 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.
As 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 of time, 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 2000, 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 2000 analysis used price assumptions of $300 per ounce of
gold and $5.00 per ounce of silver for purposes of estimating future cash flows
except for 2001, for which prices of $280 per ounce of gold and $5.00 per ounce
of silver were used. No asset impairments were evident in 2000, 1999 or 1998
based on the Company's analyses in those years.

The Company assesses the carrying values of its assets on an ongoing basis as
required by generally accepted accounting principles. Factors that 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." Assurance cannot 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, 2000 were $300 per ounce of gold and
$5.00 per ounce of silver. The market prices were $274 per ounce of gold and
$4.60 per ounce of silver at December 31, 2000. The market price of gold has for
more than three years traded, on average, below the price at which the Company
estimates its reserves. If the Company were to determine that its reserves and
future cash flows should be estimated at a

                                       34
<PAGE>

significantly lower gold price than that used at December 31, 2000, there would
likely be a reduction in the amount of gold reserves. The Company estimates that
if reserves at December 31, 2000 were based on $275 per ounce of gold, reserves
would decrease by approximately 10% at Round Mountain, 3% at Kettle River and 2%
at the Aquarius development property. There would not be an impact on Lupin and
McCoy/Cove reserves. The estimates are based on extrapolation of information
developed in the reserve calculation, but without the same degree of analysis as
required for reserve estimation. 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.
Under certain such circumstances, the Company may discontinue the development of
a project or mining at one or more of its properties. 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 may 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 may 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

                                       35
<PAGE>

which may not provide adequate coverage in certain circumstances. However,
insurance against certain risks (including certain liabilities for environmental
pollution or other hazards as a result of exploration and production) is not
generally available to the Company or to other companies 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. and 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, Company assets are subject to various political, economic
and other uncertainties, including, among other things, the risks of war or
civil unrest, expropriation, nationalization, renegotiation or nullification of
existing concessions, licenses, permits, approvals and contracts, taxation
policies, foreign exchange and repatriation restrictions, changing political
conditions, international monetary fluctuations, currency controls and foreign
governmental regulations that favor or require the awarding of contracts to
local contractors or require foreign contractors to employ citizens of, or
purchase supplies from, a particular jurisdiction. In addition, in the event of
a dispute arising from foreign operations, the Company may be subject to the
exclusive jurisdiction of foreign courts or may not be successful in subjecting
foreign persons to the jurisdiction of courts in the United States or Canada.
The Company also

                                       36
<PAGE>

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 the McCoy/Cove
property, 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 the Company's McCoy/Cove mine are derived, and upon which some of
the Company's surface facilities and facilities ancillary to its 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."

                                       37
<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.

                                       38
<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.

                                       39
<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."

Mineral Reserve - An "Ore Reserve" or "Mineral Reserve" is the economically
mineable part of a Measured or Indicated Resource demonstrated by at least a
preliminary feasibility study. This study must include adequate information on
mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be
justified. An Ore Reserve or Mineral Reserve gives effect to diluting materials
and allowances for losses that may occur when the material is mined but does not
reflect any subsequent losses in leaching or milling.

Proven Mineral Reserve: This category of Mineral Reserve is the economically
mineable part of a Measured Mineral Resource where there is the highest degree
of confidence in the estimate. It is restricted to that part of the deposit
where production planning is taking place and for which any variation in the
estimate would not significantly affect potential economic viability.

Probable Mineral Reserve: This is the economically mineable part of an
Indicated, and in some cases a Measured, Mineral Resource where there is a
lesser degree of confidence in the estimate. The underlying preliminary
feasibility study must address whether economic extraction can be justified.

Mineral Resource - The term "Mineral Resource" covers mineralization and natural
material of intrinsic economic interest which has been identified and estimated
through exploration and sampling. Within this mineralization Mineral Reserves
may subsequently be defined by the consideration and application of technical,
economic, legal, environmental, socio-economic and governmental factors. To
qualify as a Mineral Resource the material must have reasonable prospects for
economic extraction, having regard to relevant technical and economic factors.
Mineral Resources are sub-divided, in decreasing order of geological confidence,
into Measured, Indicated and Inferred categories.

Measured Mineral Resource: This part of a Mineral Resource is one for which
quantity, grade or quality, densities, shape and physical characteristics are so
well established that they can be estimated with confidence sufficient to allow
the appropriate application of technical and economic parameters, to support
production planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration, sampling and testing
information gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes that are spaced closely
enough to confirm both geological and grade continuity.

Indicated Mineral Resource: The "Indicated" category is used where the nature,
quality, quantity and distribution of data are such as to allow confident
interpretation of the geological framework and reasonably to assume continuity
of mineralization. The Indicated Mineral Resource estimate is intended to be of
sufficient quality to support a preliminary feasibility study which can serve as
the basis for development and production planning decisions.

Inferred Mineral Resource: This is the part of a Mineral Resource for which
quantity and grade or quality can be estimated on the basis of geological
evidence and limited sampling and reasonably assumed, but not verified,
geological and grade continuity. The information is based on limited information
and

                                       40
<PAGE>

sampling gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes. Due to the uncertainty which
may attach to Inferred Mineral Resources, it cannot be assumed that all or any
part of an Inferred Mineral Resource will be upgraded to an Indicated or
Measured Mineral Resource as a result of continued exploration.

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 Reserve - See Mineral Reserve.

Other Mineralization - See Mineral Resource.

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.

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.

                                       41
<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,
                                                   -----------------------------------------------------------------
                                          2001*        2000         1999         1998         1997         1996
                                     -----------   --------     --------     --------     --------      -------
<S>                                  <C>           <C>         <C>           <C>        <C>            <C>
High                                    $    273     $  313       $  326       $  313       $  367       $  415
Low                                          256        264          253          273          283          367
Average                                      264        279          279          294          332          388
End of Period                                260        274          290          286          293          369

* Through March 28, 2001
</TABLE>

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,
                                                   -----------------------------------------------------------------
                                            2001*       2000         1999         1998          1997         1996
                                       -----------   --------     --------     --------     --------      -------
<S>                                    <C>         <C>         <C>           <C>         <C>           <C>
High                                    $     4.87   $  5.53      $  5.77      $  7.31      $  6.13      $  5.79
Low                                           4.30      4.60         4.91         4.72         4.18         4.67
Average                                       4.56      5.00         5.25         5.54         4.87         5.18
End of Period                                 4.39      4.60         5.40         4.87         6.13         4.87

* Through March 28, 2001
</TABLE>

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,
                                    --------------------------------------------------------------------------------
                            2001*             2000            1999             1998             1997            1996
                  ---------------  --------------- ---------------  ---------------  --------------- ---------------
<S>               <C>              <C>             <C>              <C>              <C>             <C>
High                     C$1.4936        C$ 1.4341       C$ 1.4433        C$ 1.4075        C$ 1.3353      C$  1.3310
Low                        1.5732           1.5593          1.5514           1.5765           1.4358          1.3822
Average                    1.5265           1.4852          1.4864           1.4823           1.3838          1.3638
End of Period              1.5670           1.5002          1.4433           1.5512           1.4352          1.3697

* Through March 28, 2001
</TABLE>

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

                                       42
<PAGE>

MINE PROCESSING
Milling is the traditional method of recovering gold from ore. All of the
Company's producing mines 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 44.

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 45.

                                       43
<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 is 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 do not:
     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 (SO2) and air. The tailings are then pumped to a lined tailings
     pond. The solids settle to the bottom, and the water that does not
     evaporate is recirculated back to the mill.

                                       44
<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.

                                       45
<PAGE>

                           ITEM 3-LEGAL PROCEEDINGS

SUMMA
In September 1992, the Summa Corporation commenced a lawsuit against Echo Bay
Exploration Inc. and Echo Bay Management Corporation, indirect subsidiaries of
the Company, alleging improper deductions in the calculation of royalties
payable over several years of production at the McCoy/Cove and Manhattan mines.
The matter was tried in the Nevada State Court in April 1997, with Summa
claiming more than $13 million in damages, and, in September 1997, judgement was
rendered for the Echo Bay companies. The decision was appealed by Summa to the
Supreme Court of Nevada, which heard the matter on November 9, 1999.

On April 26, 2000, the Supreme Court of Nevada reversed the decision of the
trial court and remanded the case back to the trial court for "a calculation of
the appropriate [royalties] in a manner not inconsistent with this order". The
case was decided by a panel comprised of three of the seven Justices of the
Supreme Court of Nevada and the Echo Bay defendants petitioned that panel for a
rehearing. The petition was denied by the three member panel on May 15, 2000 and
remanded to the lower court for consideration of other defenses and arguments
put forth by the Echo Bay defendants. The Echo Bay defendants filed a petition
for a hearing before the full Court and on December 22, 2000, the Court recalled
its previous decision. Both the Echo Bay defendants and their counsel believe
that grounds exist to modify or reverse the decision. The Company has $1.5
million accrued related to the Summa litigation. If the appellate reversal of
the trial decision is maintained and the trial court, on remand, were to dismiss
all the Echo Bay defenses, the royalty calculation at McCoy/Cove would change
and additional royalties would be payable.

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. In October 2000, the Company's subsidiary
and plaintiff agreed to a settlement. This settlement has been filed with the
Court for approval and in January 2001 the Colorado School of Mines requested
the Court to expedite approval of the settlement agreement. The Company has
$130,000 accrued in relation to this litigation.

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 2000.

                                       46
<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, 1999 through
January 31, 2001 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
                                        --------------------------                 -----------------------
                                   High          Low          Volume         High            Low       Volume
                                   (Canadian Dollars)     (shares in           (U.S. Dollars)       (shares in
                                                          thousands)                                thousands)
--------------------------------------------------------------------------------------------------------------
<S>                                <C>           <C>      <C>                <C>             <C>    <C>
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
Fourth Quarter                     3.69          1.75         2,721          2.50            1.13       9,747
2000
----
First Quarter                      2.85          1.76         2,445          1.94            1.25       7,052
Second Quarter                     2.09          1.30         2,824          1.38            0.88       6,776
Third Quarter                      1.61          1.05         2,075          1.06            0.69       4,763
October                            1.15          0.92           481          0.75            0.63       2,146
November                           1.12          0.77           669          0.69            0.50       1,905
December                           0.90          0.52         1,599          0.63            0.32       4,629
2001
----
January                            0.92          0.59           513          0.63            0.38       1,292
February                           1.43          0.85         2,844          0.94            0.58       2,865
--------------------------------------------------------------------------------------------------------------
</TABLE>

On March 28, 2001, the closing price of the common shares on The Toronto
Stock Exchange and on the American Stock Exchange was C$1.01  and U.S. $0.68,
respectively.

On March 28, 2001 the Company had 140,607,145 common shares outstanding held
by approximately 66,000 registered and nominee shareholders.

Early in 2000, The American Stock Exchange advised the Company that its listing
eligibility was under review. The review was undertaken because the Company had
fallen below two of the Exchange's continued listing guidelines. The Company had
sustained net losses in its five most recent fiscal years (1995 to 1999) and in
the Exchange's view, the Company's shareholders' equity under generally accepted
accounting principles in the United States is inadequate. The Company is
addressing the Exchange's

                                       47
<PAGE>

concerns through periodic progress reviews and currently the matter is in
abeyance pending a review of the Company's December 31, 2000 financial
statements.

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 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.

                                       48
<PAGE>

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 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 the 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.

                                      49
<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 14 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                                  2000         1999         1998         1997         1996
------------------------------------------------------------------------------------------------------------------------------
<S>                                                            <C>          <C>          <C>          <C>          <C>
Statement of Operations Data
Revenue                                                        $    281.0   $    210.4   $    232.2   $    305.4   $    337.3
Average gold price realized per ounce                          $      319   $      325   $      333   $      362   $      384
Earnings (loss) before taxes/(2)/                              $     16.8   $    (37.1)  $    (19.8)  $   (418.7)  $   (176.1)
Effective tax rate                                                  (10.4%)       (0.6%)       (1.8%)       (0.4%)       (0.4%)
Net earnings (loss)/(2)/                                       $     18.6   $    (37.3)  $    (20.1)  $   (420.5)  $   (176.7)
Net earnings (loss)  attributable to common  shareholders
/(2) (3)/                                                      $      3.2   $    (51.0)  $    (32.6)  $   (426.2)  $   (176.7)
Net earnings (loss) per common share/(2) (3)/                  $     0.02   $    (0.36)  $    (0.23)  $    (3.06)  $    (1.31)
Weighted average common shares outstanding (millions)               140.6        140.6        140.1        139.4        134.4
Balance Sheet Data
Working capital (deficiency)                                   $      5.0   $      4.0   $     (0.5)  $    (28.7)  $    (52.9)
Current ratio                                                        1.07         1.07         0.99         0.73         0.74
Total assets                                                   $    295.8   $    340.2   $    368.1   $    432.8   $    832.1
Gold, silver and currency financings                           $     32.5   $     56.7   $     52.8   $     66.5   $    182.9
Deferred income taxes                                          $      4.7   $      7.4   $      7.5   $      7.9   $      8.4
Shareholders' equity                                           $    116.8   $    101.1   $    133.8   $    153.7   $    492.3
Common shares outstanding (millions)                                140.6        140.6        140.6        139.4        139.4
Other Data
Dividends paid on common shares     - total                    $       --   $       --   $       --   $       --   $     10.1
                                    - per share                $       --   $       --   $       --   $       --   $    0.075
Net cash flows provided from (used in) operating activities    $     42.3   $     37.7   $     14.1   $     (9.2)  $     29.9
Capital and exploration spending                               $     16.5   $     14.7   $     24.1   $    151.1   $    161.7
------------------------------------------------------------------------------------------------------------------------------
</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 note 18 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 14 to the Company's consolidated financial statements.

<TABLE>
<CAPTION>
                                                   2000          1999         1998          1997         1996
      ---------------------------------------------------------------------------------------------------------
      <S>                                     <C>           <C>          <C>           <C>          <C>
      Earnings (loss) before income taxes     $      1.6    $    (48.0)  $    (40.4)   $   (499.9)  $   (173.1)
      Net earnings (loss)                     $      3.3    $    (48.2)  $    (40.8)   $   (454.7)  $   (173.7)
      Net earnings (loss) per common share    $     0.02    $    (0.34)  $    (0.29)   $    (3.26)  $    (1.29)
      Total assets                            $    297.4    $    341.3   $    370.1    $    435.5   $    919.6
      Gold and other financings               $    129.5    $    154.3   $    147.9    $    162.3   $    182.9
      Deferred income taxes                   $      4.7    $      7.4   $      7.5    $      7.9   $     55.0
      Shareholders' equity                    $    (18.4)   $    (19.5)  $     24.2    $     67.4   $    533.1
      ---------------------------------------------------------------------------------------------------------
</TABLE>

/(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
      provisions of $30.0 million ($0.22 per share) for the Cove pit wall at the
      McCoy/Cove mine in Nevada and $77.1 million ($0.57 per share) 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.

                                       50
<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 1998 through 2000 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 14 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 that
should be considered in evaluating these statements.

SUMMARY
The Company had net earnings of $18.6 million ($0.02 per share) in 2000,
compared with net losses of $37.3 million ($0.36 per share) in 1999 and $20.1
million ($0.23 per share) in 1998. The 2000 results compared to 1999 reflect
higher gold and silver sales volume, the 1999 loss on the sale of the Company's
interest in Paradones Amarillos, and lower depreciation and amortization. These
factors were partially offset by increased operating costs and lower gold and
silver prices realized in 2000. The 1999 results compared to 1998 reflect lower
gold sales volumes, the loss on the sale of the Company's interest in Paradones
Amarillos, the 1998 gain on the sale of Santa Elina and other mining properties,
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 in 1999.

The Company produced 694,663 ounces of gold and 12.3 million ounces of silver in
2000. Production targets for 2001 are 570,000 ounces of gold and five million
ounces of silver. The expected decline in production will result from the
completion of mining at McCoy/Cove.

The average gold price realized by the Company in 2000 was $319 per ounce. This
was above the average market price of $279 per ounce in 2000, but lower than the
$325 per ounce average price realized in 1999. To help protect against gold
price declines, the Company has forward sales contracts on 125,000 ounces of its
estimated 2001 gold production at an average price of $312 per ounce.

In 2000, operating activities provided net cash flows of $42.3 million.

RESULTS OF OPERATIONS
Revenue
-------
Revenue increased to $281.0 million in 2000 from $210.4 million in 1999,
reflecting higher gold and silver sales volume ($79.8 million), resulting
primarily from the recommencement of Lupin operations and increased production
at McCoy/Cove. These factors were partially offset by lower gold and silver
prices realized. The decrease in revenue in 1999 from 1998 reflected lower gold
sales volume, primarily from McCoy/Cove, and decreased gold and silver prices
realized.

Operating Costs
---------------
Consolidated cash operating costs per ounce of gold produced were $193 in 2000,
$215 in 1999 and $208 in 1998. Cash operating costs generally reflect mining and
processing costs, most significantly labor, consumable materials, repairs of
machinery and equipment, fuel, utilities and environmental compliance. Cash
operating costs per ounce were lower in 2000 compared to 1999, reflecting
increased grades and

                                       51
<PAGE>

higher production at McCoy/Cove. 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.

The Company's cash operating cost target for 2001 is $225 per ounce of gold
produced, reflecting an anticipated 15% to 20% decrease in production in 2001,
largely due to the completion of mining at McCoy/Cove.

Royalties
---------
Royalties increased to $8.0 million in 2000 from $7.2 million in 1999 and $7.5
million in 1998, primarily due to increased production. The Company's royalty
expense target for 2001 is $7 million. See note 18 to the consolidated financial
statements.

Depreciation and Amortization
-----------------------------
Depreciation expense was $32.5 million in 2000, $40.9 million in 1999, and $45.8
million in 1998. Depreciation expense decreased in 2000 and 1999 from 1998 due
to McCoy/Cove and Kettle River assets approaching the end of their useful lives
and being fully depreciated and not replaced. Depreciation per ounce was $35 in
2000, $58 in 1999 and $62 in 1998.

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 $18.2 million in 2000
and $14.0 million in 1999 compared to $17.5 million in 1998 reflect changes in
production levels. Amortization per ounce was $20 in 2000, $20 in 1999 and $25
in 1998.

For 2001, the Company expects depreciation and amortization expense to be $45
million, compared to $50.7 million in 2000.

Reclamation and Mine Closure
----------------------------
Reclamation and mine closure expense varies with the quantity of gold and silver
produced and the mix of production from the various mines. The quantities of the
Company's proven and probable reserves also affect reclamation and mine closure
expense, as the total estimated costs are accrued over these ounces. Reclamation
and mine closure expense increased by $3.5 million in 2000 compared to 1999, as
a result of increased production. The increase in 1999 compared to 1998 reflects
increases in reclamation and mine closure rates. For 2001, the Company expects
this expense to be $8 million.

General and Administrative
--------------------------
Decreases in general and administrative costs over the past three years reflect
downsizing and cost reduction initiatives. For 2001, the Company expects general
and administrative costs to be $6 million.

Exploration and Development
---------------------------
Exploration and development expense was $10.3 million in 2000 and $8.8 million
in 1999, down from $12.0 million in 1998. Exploration and development expense
includes Lupin costs relating to the recommencement of operations of $4.8
million in 2000 and annual care and maintenance costs of $3.4 million in 1999
and $4.6 million in 1998. 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. For 2001, the
Company expects exploration and development expenditures to total $5 million.

                                       52
<PAGE>

Loss (Gain) on Sale of Interests in 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.

LIQUIDITY AND CAPITAL RESOURCES
In 2000, 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 refinance its
indebtedness on favorable terms, to make interest payments on the capital
securities or to pursue new acquisitions or investments.

Net cash flows provided from operating activities were $42.3 million in 2000,
compared with net cash flows provided from operating activities of $37.7 million
in 1999 and net cash flows used in operating activities of $14.1 million in
1998. The 2000 results reflect the recommencement of Lupin operations and
increased sales volume.

Net cash used in investing activities in 2000 totaled $6.7 million, largely
related to investments in mining properties, plant and equipment.

Net cash used in financing activities was $24.8 million in 2000, reflecting debt
repayments of $36.8 million and currency borrowings of $12.0 million.

At December 31, 2000, the Company had $14.3 million in cash and cash equivalents
and $2.2 million in short-term investments.

At December 31, 2000, the Company's current debt was $26.5 million and its
long-term debt was $6.0 million.

The Company's existing term and revolving credit facilities expire in August
2001. The Company currently has $19.0 million outstanding under its revolving
credit facility. Based on the current trailing 90-day average spot price of
gold, the Company is restricted to an additional borrowing capacity of $4
million under this credit facility. At current gold prices, the Company does not
anticipate drawing on the revolving line. The Company believes it is currently
in compliance with the credit facility covenants. The Company is in the process
of refinancing this facility and believes it will be successful in this effort
prior to August 2001.

At December 31, 2000, the estimated fair value of the Company's hedge portfolio
was $8.4 million, which is within the predetermined margin limits. Certain
counterparties could require margin deposits 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 in 2027
(note 7 to the consolidated financial statements). 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. Deferred interest obligations not settled with
proceeds from the sale of shares remain an unsecured liability of the Company.
Since April 1998, the Company has exercised its right to defer its interest
payments to holders of the capital securities. Interest deferred to date amounts
to $43.1 million at December 31, 2000 and is payable no later than April 1, 2003
together with any additional compounded or deferred interest up to that date.
Although the Company has the contractual right to issue shares in

                                       53
<PAGE>

settlement of this obligation, market conditions in 2003 will determine the
Company's ability to settle through the delivery and sale of common shares.

The Company expects to spend $22 million for capital expenditures in 2001,
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.

Early in 2000, The American Stock Exchange advised the Company that its listing
eligibility was under review. The review was undertaken because the Company had
fallen below two of the Exchange's continued listing guidelines. The Company had
sustained net losses in its five most recent fiscal years (1995 to 1999) and in
the Exchange's view, the Company's shareholders' equity under generally accepted
accounting principles in the United States is inadequate. The Company is
addressing the Exchange's concerns through periodic progress reviews and
currently the matter is in abeyance pending a review of the Company's December
31, 2000 financial statements.

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 values of
which are derived from movements in the underlying prices or rates.

The gold- and silver-related instruments used in hedging 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 that 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.

                                       54
<PAGE>

Certain of the Company's counterparties require margin deposits 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 2000, the Company delivered approximately 37% of gold production against
forward sales and put options at an average commitment price of $313 per ounce.
This compares with 77% of gold production at $346 per ounce in 1999 and 96% of
gold production at $341 per ounce in 1998. Approximately 35% of silver
production was delivered against forward sales and put options at an average
cash price of $5.71 per ounce in 2000. This compares to 43% at $5.66 per ounce
in 1999 and 50% at $5.44 per ounce in 1998.

The Company's hedge position as of December 31, 2000 partially protects the
Company against gold price declines in the years 2001 through 2005. For the year
2001, this position includes forward sales of approximately 125,000 ounces at a
forward price of $312 per ounce. For the years 2002 through 2005, the Company
has forward sales totaling 195,000 ounces of gold at a forward price of $310 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 2001.

The Company's hedging commitments are described in note 17 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 its future costs. Certain of the Company's subsidiaries have provided
corporate guarantees and other forms of security to regulatory authorities in
connection with future reclamation activities. Early in 2001, regulators in
Nevada formally called upon two of the Company's subsidiaries to provide other
security to replace corporate guarantees that had been given in respect of the
Round Mountain and McCoy/Cove operations. The subsidiaries disagree with the
regulators' position and believe that they qualify under the criteria set out
for corporate guarantees and will oppose the regulatory decision. Although the
outcome cannot be predicted, the Company and their counsel believe that the
Company will prevail. See "Business and Properties-Other-Government Regulation
and Environmental Issues."

The Company's operations are subject to certain royalty obligations as described
in note 18 to the Company's consolidated financial statements.

Lease commitments are described in note 18 to the Company's consolidated
financial statements.

The Company's provision for future reclamation and closure costs at the former
Sunnyside mine in Colorado is reviewed periodically and may be adjusted, as
additional information becomes available.

Other commitments and contingencies are discussed in notes 17 and 18 to the
consolidated financial statements.

                                       55
<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, 2000 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>
(Amounts in millions of U.S.                                Expected Year of Maturity                         Fair Value
                                        -----------------------------------------------------------------
dollars, except amounts per ounce or                                                               There-   of Financial
unless otherwise noted)                   2001       2002       2003        2004         2005       After    Instruments
---------------------------------------------------------------------------------------------------------------------------
<S>                                    <C>         <C>        <C>         <C>         <C>          <C>      <C>
Assets:
  Short-term investments                     --         --         --          --           --          --     $     2.9
Liabilities:
  Currency loans                       $   26.5         --         --          --           --          --     $    26.5
  Capital securities/(1)/                                                                                      $     6.0
  Principal                                                                                        $ 100.0
  Fixed interest rate/(2)/                   11%        11%        11%         11%          11%         11%
Derivative financial instruments:
  Gold forward sales                                                                                           $     5.7
    Ounces                              125,000     60,000     60,000      60,000       15,000          --
    Price per ounce                    $    312    $   310    $   310     $   310     $    310          --
  Silver forward sales                                                                                         $     1.8
    Ounces (000's)                        1,500         --         --          --           --          --
    Price per ounce                    $   5.85         --         --          --           --          --
  Gold call options sold                                                                                       $    (2.2)
    Ounces                                   --         --         --          --      105,000          --
    Price per ounce                          --         --         --          --     $    340          --
  Gold call options purchased                                                                                  $     2.4
    Ounces                              105,000     60,000     60,000      60,000      120,000          --
    Price per ounce                    $    351    $   360    $   360     $   360     $    395          --
  Silver put options purchased                                                                                 $     1.4
    Ounces (000's)                        1,000         --         --          --           --          --
    Price per ounce                    $   6.00         --         --          --           --          --
  Silver call options purchased                                                                                $      --
    Ounces (000's)                        1,500         --         --          --           --          --
    Price per ounce                    $   6.60         --         --          --           --          --
  Silver put options sold                                                                                      $    (0.4)
    Ounces (000's)                        2,500         --         --          --           --          --
    Price per ounce                    $   4.75         --         --          --           --          --
  Foreign currency contracts                                                                                   $    (0.3)
    Canadian dollars (000's)             20,000         --         --          --           --          --
    Exchange rate (C$ to US$1.00)          1.47         --         --          --           --          --
---------------------------------------------------------------------------------------------------------------------------
</TABLE>

/(1)/  At December 31, 2000, the present value of the $100.0 million principal
       payment in 2027 was $5.8 million. At December 31, 2000, the fair value of
       the entire capital securities obligation, including the interest
       component, was $56.1 million.

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

                                       56
<PAGE>

              ITEM 8-FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                         INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
                                                                                                               Page
                                                                                                               ----
<S>                                                                                                            <C>
Management's Responsibility For Financial Reporting............................................................  58
Report Of Independent Chartered Accountants....................................................................  59
Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference......................................  59
Consolidated Balance Sheets....................................................................................  60
Consolidated Statements Of Operations..........................................................................  61
Consolidated Statements Of Deficit.............................................................................  61
Consolidated Statements Of Cash Flow...........................................................................  62
Notes to Consolidated Financial Statements.....................................................................  63
</TABLE>

                                      57
<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 perform 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 31, 2001


                                       58
<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, 2000 and 1999 and the consolidated statements of operations,
deficit and cash flow for each of the years in the three-year period ended
December 31, 2000. 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, 2000 and 1999 and the results of its operations and its cash flows
for each of the years in the three-year period ended December 31, 2000 in
accordance with accounting principles generally accepted in Canada.


Edmonton, Canada                                /s/ Ernst & Young LLP
January 31, 2001                                Chartered Accountants



Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference

In the United States, reporting standards for auditors require the addition of
an explanatory paragraph (following the opinion paragraph) when the financial
statements are affected by conditions and events that cast substantial doubt on
the company's ability to continue as a going concern, such as those described in
Note 1 to the financial statements. Our report to the shareholders dated January
31, 2001 is expressed in accordance with Canadian reporting standards, which do
not permit a reference to such events and conditions in the auditors' report
when these are adequately disclosed in the financial statements.


Edmonton, Canada                                /s/ Ernst & Young LLP
January 31, 2001                                Chartered Accountants

                                      59
<PAGE>

                              ECHO BAY MINES LTD.

                          CONSOLIDATED BALANCE SHEETS

                                  December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars                                                        2000                   1999
---------------------------------------------------------------------------------------------------------------
<S>                                                                       <C>                    <C>
ASSETS
Current assets:
   Cash and cash equivalents                                              $    14,269            $     3,401
   Short-term investments                                                       2,186                  2,042
   Interest and accounts receivable                                             3,022                  2,942
   Inventories (note 2)                                                        39,443                 37,204
   Prepaid expenses and other assets                                           14,031                 15,621
---------------------------------------------------------------------------------------------------------------
                                                                               72,951                 61,210

Plant and equipment (note 3)                                                  138,527                167,438
Mining properties (note 3)                                                     63,499                 81,959
Long-term investments and other assets (note 4)                                20,868                 29,565
---------------------------------------------------------------------------------------------------------------
                                                                          $   295,845            $   340,172
===============================================================================================================

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
   Accounts payable and accrued liabilities                               $    26,073            $    29,961
   Income and mining taxes payable                                              5,780                  3,004
   Debt and other financings (note 5)                                          26,500                 13,750
   Deferred income (note 6)                                                     9,651                 10,525
---------------------------------------------------------------------------------------------------------------
                                                                               68,004                 57,240

Debt and other financings (note 5)                                              6,032                 42,919
Deferred income (note 6)                                                       50,698                 83,684
Other long-term obligations (note 8)                                           49,632                 47,847
Deferred income taxes                                                           4,694                  7,381

Commitments and contingencies (notes 8, 17 and 18)

Shareholders' equity:
   Common shares (note 13), no par value, unlimited number
     authorized; issued and outstanding - 140,607,145 shares                  713,343                713,343
   Capital securities (note 7)                                                140,076                124,616
   Deficit                                                                   (711,680)              (714,844)
   Foreign currency translation                                               (24,954)               (22,014)
---------------------------------------------------------------------------------------------------------------
                                                                              116,785                101,101
---------------------------------------------------------------------------------------------------------------
                                                                          $   295,845            $   340,172
===============================================================================================================
</TABLE>

See accompanying notes.

                                       60
<PAGE>

                              ECHO BAY MINES LTD.

                     CONSOLIDATED STATEMENTS OF OPERATIONS

                            Year ended December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars,
Except for per share data                                                     2000             1999            1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>              <C>             <C>
Revenue                                                               $    280,976     $    210,351    $    232,181
-------------------------------------------------------------------------------------------------------------------
Expenses:
   Operating costs                                                         173,435          139,816         148,769
   Royalties (note 18)                                                       8,034            7,197           7,547
   Production taxes                                                          2,460              256           1,618
   Depreciation and amortization                                            50,664           54,941          63,286
   Reclamation and mine closure                                             10,572            7,025           6,295
   General and administrative                                                5,650            7,429           8,027
   Exploration and development                                              10,336            8,754          12,010
   Interest and other (note 9)                                               3,012            8,194          11,845
   Loss (gain) on sale of interests in mining and other properties
     (note 10)                                                                  --           13,795          (7,447)
-------------------------------------------------------------------------------------------------------------------
                                                                           264,163          247,407         251,950
-------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes                                         16,813          (37,056)        (19,769)
Income tax expense (recovery) (note 11)                                     (1,748)             216             354
-------------------------------------------------------------------------------------------------------------------
Net earnings (loss)                                                  $      18,561    $     (37,272)  $     (20,123)
===================================================================================================================
Net earnings (loss) attributable to common shareholders (note 7)     $       3,164    $     (50,969)  $     (32,555)
===================================================================================================================
Earnings (loss) per share                                            $        0.02    $       (0.36)  $       (0.23)
===================================================================================================================
Weighted average number of shares outstanding (thousands)                  140,607          140,607         140,084
===================================================================================================================
</TABLE>

                      CONSOLIDATED STATEMENTS OF DEFICIT

                             Year ended December 31

<TABLE>
<CAPTION>
thousands of U.S. dollars                                                     2000             1999            1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>              <C>             <C>
Balance, beginning of year                                           $   (714,844)    $    (663,875)  $    (631,320)
Net earnings (loss)                                                        18,561           (37,272)        (20,123)
Interest on capital securities, net of nil tax effect (note 7)            (15,397)          (13,697)        (12,432)
-------------------------------------------------------------------------------------------------------------------
Balance, end of year                                                 $   (711,680)    $    (714,844)  $    (663,875)
===================================================================================================================
</TABLE>

See accompanying notes.

                                       61
<PAGE>

                             ECHO BAY MINES LTD.

                     CONSOLIDATED STATEMENTS OF CASH FLOW

                            Year ended December 31


<TABLE>
<CAPTION>
thousands of U.S. dollars                                                             2000            1999            1998
--------------------------------------------------------------------------------------------------------------------------
<S>                                                                            <C>             <C>             <C>
CASH PROVIDED FROM (USED IN):
OPERATING ACTIVITIES
Net earnings (loss)                                                            $    18,561     $   (37,272)    $   (20,123)
Add (deduct):
   Depreciation                                                                     32,457          40,957          45,792
   Amortization                                                                     18,207          13,984          17,494
   Deferred income included in revenue (note 6)                                    (24,473)        (11,129)         (5,381)
   Deferred income included in operating costs (note 6)                             (3,149)             --              --
   Deferral of gains on restructuring of hedge commitments (note 6)                  2,434          14,014           5,236
   Deferred income taxes                                                            (2,400)             --              --
   Net gain on sale of other assets (note 9)                                          (432)           (736)           (495)
   Unrealized losses on share investments                                               28           1,508           3,013
   Loss (gain) on sale of interests in mining properties and other (note 10)            --          13,795          (7,447)
   Other                                                                               769             961             (90)
Change in cash invested in operating assets and liabilities:
   Interest and accounts receivable                                                    (85)            864           1,898
   Inventories                                                                      (2,869)            882           3,743
   Prepaid expenses and other assets                                                   (31)            290          (2,309)
   Accounts payable and accrued liabilities                                            496            (459)        (26,748)
   Income and mining taxes payable                                                   2,790              13            (512)
--------------------------------------------------------------------------------------------------------------------------
                                                                                    42,303          37,672          14,071
--------------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Mining properties, plant and equipment                                              (7,387)        (33,265)        (26,971)
Long-term investments and other assets                                                (524)         (5,135)           (534)
Proceeds on sale of plant and equipment                                                332             972           3,763
Proceeds on sale of short-term investments                                             182             485           3,018
Net proceeds from (cost of) repurchase of gold and silver hedging contracts             --          (3,334)          8,673
Proceeds on sale of investment in Santa Elina (note 10)                                 --              --           6,252
Proceeds on sale of mining properties                                                   --              --           1,195
Other                                                                                  712          (1,411)            342
--------------------------------------------------------------------------------------------------------------------------
                                                                                    (6,685)        (41,688)         (4,262)
--------------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Debt borrowings                                                                     12,000          17,000              --
Debt repayments                                                                    (36,750)        (16,181)        (18,327)
Other                                                                                   --          (1,389)           (448)
--------------------------------------------------------------------------------------------------------------------------
                                                                                   (24,750)           (570)        (18,775)
--------------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents                                10,868          (4,586)         (8,966)
Cash and cash equivalents, beginning of year                                         3,401           7,987          16,953
--------------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year                                         $    14,269     $     3,401     $     7,987
==========================================================================================================================
</TABLE>

See accompanying notes.

                                       62
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

    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 77% of 2000 revenue and silver 23%. In 2000 and 1999, the Company
had three operating mines in the United States: Round Mountain and McCoy/Cove in
Nevada; Kettle River in Washington. In 2000, the Company recommenced operations
at its Lupin mine in the Nunavut Territory, Canada. 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 14. 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.

Basis of Presentation
The Company's term and revolving credit facility described in note 5 matures in
August 2001. The Company is in discussions with lenders to arrange a new
borrowing facility but has not yet entered into a final agreement. The Company's
ability to borrow is constrained by conditions in the gold mining industry and
its recent and currently expected future operating results. Should the Company
be unable to arrange a new borrowing facility to replace its maturing facility,
it is unlikely that the Company would be able to settle its existing loan with
cash from operations or other sources. As a result of these conditions, there is
substantial doubt about the Company's ability to continue its operations in the
normal course of business. These financial statements are prepared on a going
concern basis, which assumes that the Company will continue to realize its
assets and discharge its liabilities in the normal course of business for the
foreseeable future. Consequently, they do not include any adjustments to the
carrying amounts and classifications of assets and liabilities, which may be
necessary should the Company not be able to continue to operate in the normal
course of business. Management is continuing to discuss replacement financing
with its lenders and is confident that a satisfactory agreement will be reached
prior to the maturity date of the existing credit facility.

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 venture's assets,
liabilities, revenues and expenses.

                                       63
<PAGE>

                               ECHO BAY MINES LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

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

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 is a decline in the market value of a
long-term share investment that is 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
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 are 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 and the
settlement of deferred interest on the capital securities through the delivery
and sale of common shares 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.

                                       64
<PAGE>

                               ECHO BAY MINES LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

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

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.

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.

Income taxes
In 2000, the Company adopted the provisions of CICA Handbook Section 3465
"Income Taxes" on a prospective basis. The provisions require the use of the
liability method of tax allocation and the recognition of deferred income taxes
based on the differences between the carrying amounts of assets and liabilities
for accounting and tax purposes. The adoption of the new standard had no effect
on the Company's financial statements.

                                       65
<PAGE>

                               ECHO BAY MINES LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

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

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, 2000 were $300 per ounce of gold and $5.00 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 $300 per ounce price
used at December 31, 2000, 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. 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 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 13. 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.

                                       66
<PAGE>

                               ECHO BAY MINES LTD.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                December 31, 2000

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


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. Call options written after October 24, 2000 will be carried at
fair value in accordance with Emerging Issues Committee Abstract 113,
"Accounting by Commodity Producers for Written Call Options."

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
                                                        2000              1999
------------------------------------------------------------------------------
Precious metals     --     bullion              $     18,357      $     16,033
                    --     in-process                  8,293             7,538
Materials and supplies                                12,793            13,633
------------------------------------------------------------------------------
                                                $     39,443      $     37,204
==============================================================================

                                       67
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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

<TABLE>
<CAPTION>

3.   PROPERTY, PLANT AND EQUIPMENT
Net book value                                                                              2000             1999
-----------------------------------------------------------------------------------------------------------------
                                                   Plant and            Mining          Net Book         Net Book
Property and percentage owned                      Equipment        Properties             Value            Value
-----------------------------------------------------------------------------------------------------------------
<S>                                             <C>               <C>               <C>              <C>
Round Mountain (50%)                            $     57,404      $     43,033      $    100,437     $    115,326
McCoy/Cove (100%)                                     19,685             3,348            23,033           48,466
Lupin (100%)                                          24,111             2,412            26,523           27,539
Kettle River (100%)                                      774             1,174             1,948            2,298
Aquarius (100%)                                       34,493            13,532            48,025           51,635
Other                                                  2,060                --             2,060            4,133
-----------------------------------------------------------------------------------------------------------------
                                                $    138,527      $     63,499      $    202,026     $    249,397
=================================================================================================================

Plant and equipment                                                       2000                               1999
-----------------------------------------------------------------------------------------------------------------
                                                                      Net Book                           Net Book
                                                        Cost             Value              Cost            Value
-----------------------------------------------------------------------------------------------------------------
Land improvements and utility systems           $     72,853      $      5,165      $     74,018     $      8,245
Buildings                                            155,893            33,518           153,128           37,544
Equipment                                            384,236            62,311           389,360           78,707
Construction in progress                              40,671            37,533            44,542           42,942
-----------------------------------------------------------------------------------------------------------------
                                                $    653,653      $    138,527      $    661,048     $    167,438
=================================================================================================================

Mining properties                                                                           2000             1999
-----------------------------------------------------------------------------------------------------------------
Producing mines' acquisition and development costs                                  $    276,951     $    272,362
Less accumulated amortization                                                            248,792          230,470
-----------------------------------------------------------------------------------------------------------------
                                                                                          28,159           41,892
Development properties' acquisition and development costs                                 13,532           14,065
Deferred mining costs                                                                     21,808           26,002
-----------------------------------------------------------------------------------------------------------------
                                                                                    $     63,499     $     81,959
=================================================================================================================
</TABLE>

<TABLE>
<CAPTION>
4.       LONG-TERM INVESTMENTS AND OTHER ASSETS
                                                                               2000                1999
-------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                 <C>
Premiums paid on gold and silver option contracts                      $     21,647        $     34,103
Reclamation deposits                                                          8,639               7,116
Other                                                                         2,056                 828
-------------------------------------------------------------------------------------------------------
                                                                             32,342              42,047
Less current portion included in prepaid expenses and other assets           11,474              12,482
-------------------------------------------------------------------------------------------------------
                                                                       $     20,868        $     29,565
=======================================================================================================
</TABLE>

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: $11.4 million in 2001, $1.0 million in
2002, $1.4 million in 2003, $2.1 million in 2004, $3.3 million in 2005 and $2.4
million thereafter. Refer to note 6 for a discussion of the deferral of premiums
received on gold and silver option contracts sold.

                                       68
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


5.    DEBT AND OTHER FINANCINGS
                                                          2000              1999
--------------------------------------------------------------------------------
Currency loans                                    $     26,500      $     51,250
Capital securities (note 7)                              6,032             5,419
--------------------------------------------------------------------------------
                                                        32,532            56,669
Less current portion                                    26,500            13,750
--------------------------------------------------------------------------------
                                                  $      6,032      $     42,919
================================================================================

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, 2000, a $7.5 million currency term loan was
outstanding under the facility, with an effective interest rate of 8.25%. The
Company repaid an outstanding gold term loan under the agreement in 1999.

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, 2000, the Company had $19.0 million outstanding under its
revolving credit facility. Based on the trailing 90-day average spot price of
gold, the Company is restricted to an additional borrowing capacity of $4
million under this credit facility. The Company is in the process of refinancing
this facility and believes it will be successful in this effort prior to the
expiration of the current facility in August 2001. At December 31, 2000, the
effective interest rate on the revolving loan was 8.32%. Annual commitment fees
on the unutilized credit facility are 0.5%.

Other information
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 $25.2 million in outstanding surety bonds and letters of credit
at December 31, 2000, primarily related to the bonding of future reclamation
obligations. At December 31, 2000, annual fees on the letters of credit range
from 0.50% to 1.75%.

Interest payments were $4.3 million in 2000, $5.0 million in 1999 and $7.2
million in 1998.

Future gold and silver delivery commitments are summarized by year in note 17.

                                       69
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


6.     DEFERRED INCOME
                                                            2000         1999
------------------------------------------------------------------------------
Modification of hedging contracts                       $  39,336    $  61,382
Premiums received on gold and silver option contracts      20,310       30,835
Other                                                         703        1,992
------------------------------------------------------------------------------
                                                           60,349       94,209
Less current portion                                        9,651       10,525
------------------------------------------------------------------------------
                                                        $  50,698    $  83,684
==============================================================================

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: $20.8 million in 2001, $30.7 million in 2002, $(2.3)
million in 2003, $(8.1) million in 2004, $(0.9) million in 2005 and $(0.9)
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: $9.7 million in 2001, $1.4 million in
2002, $1.4 million in 2003, $3.3 million in 2004, $3.4 million in 2005 and $1.1
million thereafter. Refer to note 4 for a discussion of the deferral of premiums
paid on gold and silver option contracts purchased.

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. Deferred interest
obligations not settled with proceeds from the sale of shares remain an
unsecured liability of the Company. Since April 1998, the Company has exercised
its right to defer its interest payments to holders of the capital securities.
Interest deferred to date amounts to $43.1 million at December 31, 2000 and is
payable no later than April 1, 2003 together with any additional compounded or
deferred interest up to that date. Although the Company has the contractual
right to issue shares in settlement of this obligation, market conditions in
2003 will determine the Company's ability to settle through the delivery and
sale of common shares. The present value of the capital securities' principal
amount, $5.8 million, has been classified as debt within gold and other
financings (note 5). The present value of the future interest payments of $94.2
million plus deferred accrued interest 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

                                       70
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


of the capital securities has been charged directly to deficit on the
consolidated balance sheet. For purposes of per share calculations, interest on
the equity portion decreases the earnings attributable to common shareholders.
See note 14 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

<TABLE>
<CAPTION>
                                                                                             2000             1999
------------------------------------------------------------------------------------------------------------------
<S>                                                                                  <C>              <C>
Accrued reclamation and mine closure:
   Round Mountain                                                                    $     10,659     $      8,177
   McCoy/Cove                                                                              19,284           19,469
   Lupin                                                                                    8,280            6,518
   Kettle River                                                                             8,620            6,808
   Sunnyside                                                                                4,702            5,763
   Other                                                                                       --            1,014
------------------------------------------------------------------------------------------------------------------
                                                                                           51,546           47,749
Other                                                                                          --            4,302
------------------------------------------------------------------------------------------------------------------
                                                                                           51,546           52,051
Less current portion included in accounts payable and accrued liabilities                   1,914            4,204
------------------------------------------------------------------------------------------------------------------
                                                                                     $     49,632     $     47,847
==================================================================================================================
</TABLE>

Reclamation and mine closure
At December 31, 2000, the Company's future reclamation and mine closure costs
are estimated to be $73.2 million. The aggregate obligation accrued to December
31, 2000 was $51.5 million, including accruals of $ 10.6 million in 2000, $7.0
million in 1999, and $6.3 million in 1998. The remaining $21.7 million,
including $9.9 million at Round Mountain, $9.8 million at Lupin and $2.0 million
at Kettle River, 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.

9.   INTEREST AND OTHER

<TABLE>
<CAPTION>
                                                                          2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
Interest income                                                   $       (964)     $       (166)    $       (328)
Interest expense                                                         5,194             4,723            5,559
Alaska-Juneau reclamation                                               (2,048)               --               --
Unrealized loss on share investments                                        28             1,508            3,013
(Gain) loss on sale of share investments                                  (181)             (485)             962
Gain on sale of plant and equipment                                       (251)             (251)          (1,457)
Other                                                                    1,234             2,865            4,096
-----------------------------------------------------------------------------------------------------------------
                                                                  $      3,012      $      8,194     $     11,845
=================================================================================================================
</TABLE>

                                       71
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


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

<TABLE>
<CAPTION>
                                                                          2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<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)
-----------------------------------------------------------------------------------------------------------------
                                                                  $         --      $     13,795     $     (7,447)
=================================================================================================================
</TABLE>

Loss on sale of interest in Paredones Amarillos
The Company agreed in 1999 to sell its 60% interest in the Paredones Amarillos
project in Mexico to its joint venture partner. 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 partner assumed all project liabilities. In
1999, the Company recognized a loss on the sale of Paredones Amarillos of $13.8
million.

Gain on sale of investment in Santa Elina
In 1998, the Company sold its investment in Santa Elina, which had no book
value, for $6.3 million in cash, net of selling costs, and a 48.1% interest in
the Chapada exploration property in Brazil, to which the Company assigned no
book value. The Company realized no gain when it sold the Chapada property in
the second quarter of 1999.

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

<TABLE>
<CAPTION>
                                                                          2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
Earnings (loss) before income taxes:
   Canada                                                         $        637      $    (22,386)    $    (23,471)
   United States and other                                              16,176           (14,670)           3,702
-----------------------------------------------------------------------------------------------------------------
                                                                  $     16,813      $    (37,056)    $    (19,769)
=================================================================================================================
Current income tax expense:
   Canada                                                         $        201      $        216     $        354
   United States and other                                                 451                --               --
-----------------------------------------------------------------------------------------------------------------
                                                                           652               216              354
-----------------------------------------------------------------------------------------------------------------
Deferred income tax expense (recovery):
   Canada                                                               (2,400)               --               --
   United States and other                                                  --                --               --
-----------------------------------------------------------------------------------------------------------------
                                                                        (2,400)               --               --
-----------------------------------------------------------------------------------------------------------------
Income tax expense (recovery)                                     $     (1,748)     $        216     $        354
=================================================================================================================
</TABLE>

                                       72
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


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 43.2% for 2000 and
43.5% for 1999 and 43.2% for 1998 for the following reasons.

<TABLE>
<CAPTION>
                                                                          2000              1999             1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                               <C>               <C>              <C>
Earnings (loss) before income taxes                               $     16,813      $    (37,056)    $    (19,769)
=================================================================================================================
Income tax effect of:
   Expected Canadian federal and provincial corporate
     income taxes                                                 $      7,246      $    (16,115)    $     (8,540)
   Utilization of net operating loss                                    (5,760)             (838)              --
   Operating loss from which no tax benefit is derived                      --                --           12,720
   Canadian resource allowance and earned depletion                        113            (2,153)          (2,349)
   Foreign earnings subject to different income tax rates               (1,326)           18,182           (1,687)
   Other items                                                          (2,021)            1,140              210
-----------------------------------------------------------------------------------------------------------------
Income tax expense (recovery)                                     $     (1,748)     $        216     $        354
=================================================================================================================
Effective tax rate (current and deferred)                                (10.4%)            (0.6%)           (1.8%)
=================================================================================================================
</TABLE>

Loss carryforwards
At December 31, 2000, the Company had U.S. net operating loss carryforwards of
approximately $409 million to apply against future taxable income and $212
million to apply against future alternative minimum taxable income. These loss
carryforwards do not include the provisions for impaired assets, which have not
yet been recognized fully for income tax purposes. The net operating loss
carryforwards expire at various times from 2001 to 2020. Additionally, the
Company has Canadian non-capital loss carryforwards of approximately $64 million
and net capital loss carryforwards of approximately $208 million. The
non-capital loss carryforwards expire at various times from 2003 to 2007. The
net capital loss carryforwards have no expiration date.

Deferred tax liabilities and assets
Significant components of the Company's deferred tax liabilities and assets are
as follows.

<TABLE>
<CAPTION>
                                                                             2000                                 1999
--------------------------------------------------------------------------------- ------------------------------------
                                                                 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     $    6.4     $    --     $    6.4     $   10.3    $    --     $   10.3
   Other tax liabilities                             5.3          0.8         6.1          8.0         0.7         8.7
--------------------------------------------------------------------------------- ------------------------------------
Total deferred tax liabilities                      11.7          0.8        12.5         18.3         0.7        19.0
--------------------------------------------------------------------------------- ------------------------------------
Deferred tax assets:
   Net operating loss and other carryforwards      117.2        145.0       262.2         37.3       135.4       172.7
   Book over tax depreciation and depletion         34.5         13.2        47.7         36.2        16.3        52.5
   Accrued liabilities                               4.7         19.8        24.5          4.3        25.9        30.2
   Other tax assets                                  9.2          4.7        13.9         21.0         4.7        25.7
--------------------------------------------------------------------------------- ------------------------------------
Total deferred tax assets before allowance         165.6        182.7       348.3         98.8       182.3       281.1
Valuation allowance for deferred tax assets       (158.6)      (181.9)     (340.5)       (87.9)     (181.6)     (269.5)
--------------------------------------------------------------------------------- ------------------------------------
Total deferred tax assets                            7.0          0.8         7.8         10.9         0.7        11.6
--------------------------------------------------------------------------------- ------------------------------------
Net deferred tax liabilities                    $    4.7     $    --     $    4.7     $    7.4    $    --     $    7.4
================================================================================= ====================================
</TABLE>

                                       73
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


The net increase in the valuation allowance for deferred tax assets was $71.0
million for 2000 and $1.7 million for 1999.

Income tax payments
Income tax payments were $0.2 million in 2000, $0.2 million in 1999 and $1.6
million in 1998.

12.  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.

13.  COMMON SHARES
Changes in the number of common shares outstanding during the three years ended
December 31, 2000 were as follows.

<TABLE>
<CAPTION>
                                                       Number of
                                                          Shares          Amount
--------------------------------------------------------------------------------
<S>                                                   <C>             <C>
Balance, December 31, 1997                            139,370,031     $  709,593
1998     Issuance of shares                             1,237,114          3,750
--------------------------------------------------------------------------------
Balance, December 31, 1998, 1999 and 2000             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
The Company's shareholders rights plan was not renewed by the shareholders of
the Company at the annual meeting in May 2000 and the plan expired 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. The Company has reserved an
aggregate of 750,000 common shares 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.

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.

                                       74
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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

Changes in the number of options outstanding during the three years ended
December 31, 2000 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, 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
2000:   Options granted                                   --                --              --                 --
        Options expired                             (100,458)            12.88              --                 --
        Options forfeited                         (1,021,417)             8.92         (13,000)              5.85
-----------------------------------------------------------------------------------------------------------------
Options outstanding, December 31, 2000             4,371,811        C$    8.71         227,450         C$   11.44
=================================================================================================================
</TABLE>

The number of shares reserved for future grants at December 31, 2000 are
5,240,691 under the Employee Share Incentive Plan. The number and weighted
average price of shares exercisable under the Employee Share Incentive Plan are
3,389,484 at C$10.41 at December 31, 2000; 3,521,787 at C$11.66 at December 31,
1999; and 3,352,269 at C$12.29 at December 31, 1998. The number and weighted
average price of shares exercisable under the Director Equity Plan are 196,575
at C$12.40 at December 31, 2000; 171,575 at C$12.73 at December 31, 1999; and
123,825 at C$13.69 at December 31, 1998.

Options outstanding at December 31, 2000 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
 -----------------------------
       1,510,077      C$2.55   -   C$3.59           C$   2.95                8        527,750          C$    3.13
       1,147,473        5.75   -     8.88                8.02                4      1,147,473                8.02
       1,213,605       10.70   -    15.75               13.13                5      1,213,605               13.13
         500,656       16.25   -    19.63               16.95                4        500,656               16.95

 Director Equity Plan
 --------------------
          84,500      C$3.70   -   C$8.00           C$   6.02                7         53,625          C$    6.44
         142,950       12.50   -    18.25               14.64                4        142,950               14.64
-----------------------------------------------------------------------------------------------------------------
</TABLE>

                                       75
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


14.  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. In 2000, the Company recognized $3.1 million
in deferred foreign exchange gains. Under U.S. GAAP, foreign exchange contracts
would be carried at market value and changes included in current earnings.

In accordance with Canadian GAAP, the Company's short-term share investments are
carried at the lower of cost or market based on quoted market prices. Under U.S.
GAAP, these investments would have been marked to market, with unrealized gains
or losses excluded from earnings and reported as accumulated other comprehensive
income in shareholders' equity, net of tax.

At December 31, 2000, 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
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 rises above $340 per ounce by purchasing 105,000 ounces of gold
call options at a strike price of $400 per ounce. In accordance with U.S. GAAP,
the 105,000 ounces of gold call options sold would not qualify for hedge
accounting and therefore would be marked to market at December 31, 2000. As a
result, the Company has recorded an unrealized gain on gold call options sold of
$3.0 million in 2000 and an unrealized loss 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

                                       76
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


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

<TABLE>
<CAPTION>
                                                                         2000               1999               1998
-------------------------------------------------------------------------------------------------------------------
<S>                                                              <C>                <C>                <C>
Net earnings (loss) under Canadian GAAP                          $     18,561       $    (37,272)      $    (20,123)
Additional interest expense on capital securities                     (15,397)           (13,697)           (12,432)
Change in market value of foreign exchange contracts                      948              5,540             (2,640)
Amortization of deferred foreign exchange gains                        (3,149)                --                 --
Unrealized loss on short-term investments                                  28                 --                 --
Unrealized gain/(loss) on gold call options sold                        2,964             (2,146)                --
Amortization of deferred financing costs on capital                      (633)              (633)              (633)
 securities
Recognition of severance expense                                           --                 --             (4,980)
-------------------------------------------------------------------------------------------------------------------
Net earnings (loss) under U.S. GAAP                              $      3,322       $    (48,208)      $    (40,808)
===================================================================================================================
Earnings (loss) per share under U.S. GAAP                        $       0.02       $      (0.34)      $      (0.29)
===================================================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                         Canadian       Capital                         U.S.
December 31, 2000                            GAAP    Securities       Other             GAAP
--------------------------------------------------------------------------------------------
<S>                                    <C>           <C>           <C>            <C>
Short-term investments                 $    2,186    $       --    $      760     $    2,946
Long-term investments and other
assets                                     20,868           792            --         21,660
Gold and other financings                  32,532        96,968            --        129,500
Deferred income                            60,349            --        (2,846)        57,503
Other long-term obligations                49,632        43,108          (533)        92,207
Common shares                             713,343            --        36,428        749,771
Capital securities                        140,076      (140,076)           --             --
Deficit                                   711,680          (792)       33,021        743,909
Shareholders' equity (deficit)            116,785      (139,284)        4,139        (18,360)
--------------------------------------------------------------------------------------------

<CAPTION>
                                         Canadian       Capital                         U.S.
December 31, 1999                            GAAP    Securities       Other             GAAP
--------------------------------------------------------------------------------------------
<S>                                    <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        27,035         3,379         78,261
Common shares                             713,343            --        36,428        749,771
Capital securities                        124,616      (124,616)           --             --
Deficit                                   714,844        (1,425)       33,812        747,231
Shareholders' equity (deficit)            101,101      (123,191)        2,616        (19,474)
--------------------------------------------------------------------------------------------
</TABLE>

                                       77
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

    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, 1999 to December 31,
2000 under U.S. GAAP would have been as follows.

<TABLE>
<CAPTION>
                                                                             2000
---------------------------------------------------------------------------------
<S>                                                                  <C>
Balance, beginning of year                                           $    (19,474)
Net earnings                                                                3,322
Unrealized gain on short-term investments                                     732
Foreign currency translation                                               (2,940)
---------------------------------------------------------------------------------
Balance, end of year                                                 $    (18,360)
=================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                            2000             1999            1998
-----------------------------------------------------------------------------------------------------------------
<S>                                                                <C>              <C>             <C>
Net earnings (loss) under U.S. GAAP                                $       3,322    $     (48,208)  $     (40,808)
-----------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss), after a nil income tax effect:
   Unrealized gain (loss) arising during period                              732               --             --
   Foreign currency translation adjustments                               (2,940)           4,562          (6,211)
-----------------------------------------------------------------------------------------------------------------
Other comprehensive income (loss)                                         (2,208)           4,562          (6,211)
-----------------------------------------------------------------------------------------------------------------
Comprehensive income (loss)                                        $       1,114    $     (43,646)  $     (47,019)
=================================================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                               2000              1999
-------------------------------------------------------------------------------------
<S>                                                    <C>               <C>
Unrealized gain/(loss) on share investments            $        732      $         --
Foreign currency translation                                (24,954)          (22,014)
-------------------------------------------------------------------------------------
Accumulated other comprehensive loss                   $    (24,222)     $    (22,014)
=====================================================================================
</TABLE>

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 earnings and losses would have been reported.

<TABLE>
<CAPTION>
                                                                    2000               1999               1998
--------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                <C>                <C>
Net earnings (loss) under U.S. GAAP                         $      3,322       $    (48,208)      $    (40,808)
Pro forma stock compensation expense,
   after a nil income tax effect                                    (929)            (1,845)            (1,654)
--------------------------------------------------------------------------------------------------------------
Pro forma net earnings (loss) under U.S. GAAP               $      2,393       $    (50,053)      $    (42,462)
==============================================================================================================
Pro forma earnings (loss) per share under U.S. GAAP         $       0.02       $      (0.36)      $      (0.30)
==============================================================================================================
</TABLE>

                                       78
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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

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

Derivative instruments and hedging activities
In 1998, the FASB issued Statement No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and in 2000, Statement No. 138 "Accounting
for Certain Derivative Instruments and Certain Hedging Activities" effective for
fiscal quarters of fiscal years beginning after June 15, 2000 (January 1, 2001
for the Company). The statement requires all derivative instruments to be
recognized at fair value on the balance sheet. The changes in fair value are
accounted for through earnings unless the instrument qualifies for special hedge
accounting treatment. The Company enters into contracts to reduce the risk of
changes in the price of gold and silver. The majority of these contracts are
forward sales that qualify for exemption from Statement No. 133 under the normal
purchase and sales provision. Upon implementation, all derivative instruments
held by the Company that do not qualify for the normal purchase and sale
exemption would be recognized at fair value on the balance sheet with changes in
fair value recorded in earnings. Gains and losses on the early termination or
other restructuring of gold, silver and foreign currency hedging contracts would
be deferred in accumulated other comprehensive income until the formerly hedged
items are recorded in earnings. The transition adjustment recorded under U.S.
GAAP at January 1, 2001 would have decreased assets by $11.5 million and
liabilities by $48.6 million, offset by increases to accumulated other
comprehensive income of $36.0 million and net earnings of $1.1 million.

Other
The estimated fair values of cash and cash equivalents, short-term investments
and currency loans approximate their book values. The fair values were
determined from quoted market prices or estimated using discounted cash flow
analysis. See note 17 for further disclosure regarding estimated fair values of
financial instruments.

                                       79
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


15.    JOINT VENTURES
Summarized below is the Company's 50% interest in the Round Mountain mine,
accounted for by the proportionate consolidation method.

<TABLE>
<CAPTION>
                                                                  2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                  <C>
Revenues                                                  $     90,633        $     87,469         $     87,748
Expenses:
   Operating costs                                              60,231              52,880               51,359
   Royalties                                                     5,585               5,021                5,078
   Production taxes                                                470                  57                  654
   Depreciation and amortization                                18,978              17,704               16,274
   Reclamation and mine closure                                  2,881               2,438                1,787
   Exploration                                                     529                 431                  613
   Other                                                          (753)                753                3,281
---------------------------------------------------------------------------------------------------------------
Earnings before income taxes                              $      2,712        $      8,185         $      8,702
===============================================================================================================

<CAPTION>
                                                                  2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                  <C>
Current assets                                            $     33,424        $     33,105         $     69,461
Non-current assets                                             109,212             126,611              120,956
Current liabilities                                            (11,244)            (10,667)              (9,370)
Non-current liabilities                                        (18,395)            (18,845)             (19,965)
---------------------------------------------------------------------------------------------------------------
Equity                                                    $    112,997        $    130,204         $    161,082
===============================================================================================================

<CAPTION>
                                                                  2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                  <C>
Net cash provided from (used in):
   Operating activities                                   $     11,260        $      9,108         $     16,286
   Investing activities                                         (5,075)            (12,799)             (12,438)
   Financing activities                                             --                  --                   --
---------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash                           $      6,185        $     (3,691)        $      3,848
===============================================================================================================
</TABLE>

16.    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 2000
and 1999, the Company had three operating mines in the United States: Round
Mountain and McCoy/Cove in Nevada; and Kettle River in Washington. In 2000, the
Company recommenced operations at its Lupin mine in the Nunavut Territory,
Canada. All are 100% owned except for Round Mountain, which is 50% owned.

                                       80
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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

In making operating decisions and allocating resources, the Company's management
specifically focuses on the production levels and cash operating costs generated
by each operating segment, as summarized in the following tables.

<TABLE>
<CAPTION>
Gold Production (ounces)                                          2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                            <C>                 <C>                  <C>
Round Mountain (50%)                                           320,064             270,904              255,252
McCoy/Cove                                                     162,784             124,536              167,494
Lupin                                                          117,729                  --                   --
Kettle River                                                    94,086             104,396              113,692
---------------------------------------------------------------------------------------------------------------
Total gold                                                     694,663             499,836              536,438
===============================================================================================================

<CAPTION>
Silver Production (ounces)                                        2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                  <C>                  <C>
Total silver-all from McCoy/Cove                            12,328,297           8,430,072            9,412,823
===============================================================================================================

<CAPTION>
Cash Operating Costs per Ounce of Gold Produced                   2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                  <C>
Round Mountain                                            $        195        $        200         $        198
McCoy/Cove                                                         179                 221                  203
Lupin                                                              213                  --                   --
Kettle River                                                       218                 238                  244
---------------------------------------------------------------------------------------------------------------
Company consolidated weighted average                     $        193        $        215         $        208
===============================================================================================================

<CAPTION>
Reconciliation of Cash Operating
Costs per Ounce to Financial Statements                           2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                  <C>
Operating costs by minesite:
     Round Mountain                                       $     60,501        $     53,055         $     51,502
     McCoy/Cove                                                 69,920              63,429               66,606
     Lupin                                                      22,883                  --                1,645
     Kettle River                                               20,131              23,332               29,016
---------------------------------------------------------------------------------------------------------------
Total operating costs per financial statements                 173,435             139,816              148,769
Change in finished goods inventories and other                     208               2,381               (1,704)
Co-product cost of silver produced                             (39,574)            (34,732)             (35,486)
---------------------------------------------------------------------------------------------------------------
Cash operating costs                                      $    134,069        $    107,465         $    111,579
===============================================================================================================
Gold ounces produced                                           694,663             499,836              536,438
===============================================================================================================
Cash operating costs per ounce                            $        193        $        215         $        208
===============================================================================================================
</TABLE>

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

<TABLE>
<CAPTION>
                                                                  2000                1999                 1998
---------------------------------------------------------------------------------------------------------------
<S>                                                       <C>                 <C>                  <C>
Total gold and silver revenues                            $    280,976        $    210,351         $    232,181
Average gold price realized per ounce                     $        319        $        325         $        333
Average silver price realized per ounce                   $       5.28        $       5.69         $       5.88
---------------------------------------------------------------------------------------------------------------
</TABLE>

                                       81
<PAGE>

                              ECHO BAY MINES LTD.

                    NOTES CONSOLIDATED FINANCIAL STATEMENTS


                               December 31, 2000

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


Depreciation and amortization by minesite is as follows.

<TABLE>
<CAPTION>
                                                                     2000             1999            1998
--------------------------------------------------------------------------------------------------------------
<S>                                                              <C>              <C>             <C>
Round Mountain                                                   $ 18,978         $ 17,704        $ 16,274
McCoy/Cove                                                         21,539           22,743          29,034
Lupin                                                               4,874            5,381           6,233
Kettle River                                                        1,637            6,141           9,315
Depreciation of non-minesite assets                                 3,636            2,972           2,430
--------------------------------------------------------------------------------------------------------------
Total depreciation and amortization per financial statements     $ 50,664         $ 54,941        $ 63,286
==============================================================================================================
</TABLE>


Total assets by minesite are as follows.

<TABLE>
<CAPTION>
                                                              2000              1999
-------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>
Minesites:
     Round Mountain                                       $   121,592       $   127,435
     McCoy/Cove                                                42,354            63,521
     Lupin                                                     34,860            33,983
     Kettle River                                              10,101             9,398
Development properties:
     Aquarius                                                  48,437            51,589
Non-minesite assets                                            38,501            53,936
--------------------------------------------------------------------------------------------
Total assets                                              $   295,845       $   339,862
============================================================================================
</TABLE>


Capital expenditures by minesite are as follows.

<TABLE>
<CAPTION>
Millions of U.S. dollars                                    2000          1999          1998
--------------------------------------------------------------------------------------------------------------
<S>                                                       <C>           <C>           <C>
Round Mountain                                            $  4.6        $  7.7        $  12.6
McCoy/Cove                                                   0.6           1.1            1.3
Lupin                                                        4.7            --             --
Kettle River                                                 1.4           0.4            1.5
--------------------------------------------------------------------------------------------------------------
</TABLE>

Financial information regarding geographic areas is set out below.

<TABLE>
<CAPTION>
                                                                2000             1999              1998
--------------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>              <C>
Revenue:
   Canada                                                 $    44,370       $        --      $    11,360
   United States                                              236,606           210,351          220,821
--------------------------------------------------------------------------------------------------------------
Total revenue                                             $   280,976       $   210,351      $   232,181
==============================================================================================================
</TABLE>


<TABLE>
<CAPTION>
                                                                 2000              1999             1998
--------------------------------------------------------------------------------------------------------------
<S>                                                       <C>               <C>              <C>
Assets:
    Canada                                                 $   100,310       $    89,095      $    92,457
    United States                                              193,431           247,653          267,843
    Other                                                        2,104             3,114            7,776
 --------------------------------------------------------------------------------------------------------------
 Total assets                                              $   295,845       $   339,862      $   368,076
==============================================================================================================
</TABLE>

                                       82
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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

17.    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.

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 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 call options with 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 2001 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 on the repurchases have been deferred and will be recognized in
revenue as the formerly hedged gold and silver is sold (notes 4 and 6).

The Company's hedge contracts require the Company to pay the three-month gold
lease rate on 255,000 of its 320,000 ounces of forward sales and on 105,000
ounces of call options sold. The three-month gold lease rate was approximately
0.81% at the end of 2000. 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).

                                       83
<PAGE>

                              ECHO BAY MINES LTD.

                    NOTES CONSOLIDATED FINANCIAL STATEMENTS


                               December 31, 2000


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



Gold and silver commitments
The Company's gold and silver commitments at December 31, 2000 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>
2001                                         125,000      $       312          1,500,000      $      5.85
2002                                          60,000              310                 --               --
2003                                          60,000              310                 --               --
2004                                          60,000              310                 --               --
2005                                          15,000              310                 --               --
---------------------------------------------------------------------------------------------------------
                                             320,000      $       311          1,500,000      $      5.85
=========================================================================================================
</TABLE>

The Company's option position at December 31, 2000 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
----
2001                          --    $     --            --    $     --       105,000    $    351            --     $     --
2002                          --          --            --          --        60,000         360            --           --
2003                          --          --            --          --        60,000         360            --           --
2004                          --          --            --          --        60,000         360            --           --
2005                          --          --            --          --       120,000         395       105,000          340
--------------------------------------------------------------------------------------------------------------------------------
                              --    $     --            --    $     --       405,000    $    368       105,000     $    340
================================================================================================================================
Silver
-----
2001                   1,000,000    $   6.00     2,500,000    $   4.75     1,500,000    $   6.60            --     $     --
--------------------------------------------------------------------------------------------------------------------------------
                       1,000,000    $   6.00     2,500,000    $   4.75     1,500,000    $   6.60            --     $     --
================================================================================================================================
</TABLE>

Currency position
At December 31, 2000, the Company had an obligation under foreign currency
exchange contracts to purchase C$20.0 million in 2001 at an exchange rate of
C$1.47 to U.S.$1.00.

                                       84
<PAGE>

                              ECHO BAY MINES LTD.

                    NOTES CONSOLIDATED FINANCIAL STATEMENTS


                               December 31, 2000


   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, 2000 and 1999.

<TABLE>
<CAPTION>
                                                             December 31, 2000                    December 31, 1999
                                            -----------------------------------     --------------------------------
                                                    Carrying         Estimated           Carrying         Estimated
                                                      Amount        Fair Value             Amount        Fair Value
-------------------------------------------------------------------------------     --------------------------------
<S>                                             <C>   <C>         <C>   <C>          <C>               <C>
   Gold forward sales                           $         --      $      5,700       $         --      $       (900)
   Silver forward sales                                   --             1,800                 --             1,000
   Gold options     - puts purchased                      --                --              1,400             1,700
                    - calls sold                      (3,000)           (2,200)            (4,100)           (5,600)
                    - puts sold                           --                --             (1,300)             (600)
                    - calls purchased                  6,800             2,400              9,100             8,000
   Silver options   - puts purchased                   1,200             1,400              2,500             1,400
                    - puts sold                       (1,300)             (400)            (2,200)             (500)
                    - calls purchased                    700                --              1,000               300
   Foreign currency contracts                             --              (300)                --            (1,200)
-------------------------------------------------------------------------------     --------------------------------
                                                                  $      8,400                         $      3,600
===============================================================================     ================================
</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, 2000 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         $      3,200
   Silver prices                                                           $  0.25/ounce         $        300
   Interest rates (effect on gold and silver forward sales and options)               1%         $      1,400
-------------------------------------------------------------------------------------------------------------
</TABLE>

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

<TABLE>
<CAPTION>
                                                                 2000                1999                 1998
------------------------------------------------------------------------------------------------------------------
<S>                                                         <C>                 <C>                  <C>
 Revenue:
   Gold loans and swaps                                     $    1,289          $    1,658           $    3,096
   Gold forward sales                                           16,540              17,710                7,179
   Silver forward sales                                          3,297               3,439                3,118
   Gold and silver options                                       1,517               4,077               11,122
Operating costs:
   Foreign currency contracts                                   (1,971)             (3,068)              (2,805)
   Crude oil contracts                                              --                  --                 (636)
------------------------------------------------------------------------------------------------------------------
                                                            $   20,672          $   23,816           $   21,074
==================================================================================================================
</TABLE>

                                       85
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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


18.    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 $1.4 million in rental expense in 2000, net of $1.6 million
in rental income related to office subleases. The Company's commitments under
the remaining terms of the leases are approximately $9.6 million, payable as
follows: $2.0 million in 2001, $2.0 million in 2002, $1.6 million in 2003, $1.5
million in 2004, $1.0 million in 2005 and $1.5 million thereafter.

Summa
In September 1992, the Summa Corporation commenced a lawsuit against Echo Bay
Exploration Inc. and Echo Bay Management Corporation, indirect subsidiaries of
the Company, alleging improper deductions in the calculation of royalties
payable over several years of production at the McCoy/Cove and Manhattan mines.
The matter was tried in the Nevada State Court in April 1997, with Summa
claiming more than $13 million in damages, and, in September 1997, judgement was
rendered for the Echo Bay companies. The decision was appealed by Summa to the
Supreme Court of Nevada, which heard the matter on November 9, 1999.

On April 26, 2000, the Supreme Court of Nevada reversed the decision of the
trial court and remanded the case back to the trial court for "a calculation of
the appropriate [royalties] in a manner not inconsistent with this order". The
case was decided by a panel comprised of three of the seven Justices of the
Supreme Court of Nevada and the Echo Bay defendants petitioned that panel for a
rehearing. The petition was denied by the three member panel on May 15, 2000 and
remanded to the lower court for consideration of other defenses and arguments
put forth by the Echo Bay defendants. The Echo Bay defendants filed a petition
for a hearing before the full Court and on December 22, 2000, the Court recalled
its previous decision. Both the Echo Bay defendants and their counsel believe
that grounds exist to modify or reverse the decision. The Company has $1.6
million accrued related to the Summa litigation. If the appellate reversal of
the trial decision is maintained and the trial court, on remand, were to dismiss
all the Echo Bay defenses, the royalty calculation at McCoy/Cove would change
and additional royalties would be payable.

                                       86
<PAGE>

                              ECHO BAY MINES LTD.

                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                               December 31, 2000

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

Handy and Harman
On March 29, 2000 Handy & Harman Refining Group, Inc., which operated a facility
used by the Company for the refinement of dore bars, filed for protection under
Chapter 11 of the U.S. Bankruptcy Code. The outcome of these proceedings is
uncertain at this time. The Company has gold and silver accounts at this
refining facility with an estimated market value of approximately $2.4 million.

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

                                       87
<PAGE>

                         QUARTERLY FINANCIAL HIGHLIGHTS

                                  (Unaudited)

               (millions of U.S. dollars except per share data)

<TABLE>
<CAPTION>
                                                                             Net Earnings    Earnings (Loss)
                                                                 Revenue           (Loss)         per Share
------------------------------------------------------------------------------------------------------------
<S>                                                            <C>           <C>             <C>
2000
First quarter                                                  $    51.8        $    (2.7)        $    (0.04)
Second quarter                                                      84.3             10.2               0.04
Third quarter                                                       76.4              9.0               0.04
Fourth quarter                                                      68.5              2.1              (0.02)
------------------------------------------------------------------------------------------------------------
Total                                                          $   281.0        $    18.6         $     0.02
============================================================================================================

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)
============================================================================================================
</TABLE>

Net earnings (loss) and per share amounts include the loss on the sale of the
Company's interest in Paredones Amarillos of $13.8 million in the third quarter
of 1999. 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, and is incorporated herein by reference.
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 will appear in the Echo Bay Mines Ltd.
proxy statement to be filed within 120 days after the end of the fiscal year,
and is incorporated herein by reference.

           ITEM 12-SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                                AND MANAGEMENT

The information required by this item will appear in the Echo Bay Mines Ltd.
proxy statement to be filed within 120 days after the end of the fiscal year,
and is incorporated herein by reference.

             ITEM 13-CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The information required by this item will appear in the Echo Bay Mines Ltd.
proxy statement to be filed within 120 days after the end of the fiscal year,
and is incorporated herein by reference.

                                       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..............................................................58
Report Of Independent Chartered Accountants......................................................................59
Comments by Auditors for U.S. Readers on Canada-U.S. Reporting Difference........................................59
Consolidated Balance Sheets......................................................................................60
Consolidated Statements Of Operations............................................................................61
Consolidated Statements Of Deficit...............................................................................61
Consolidated Statements Of Cash Flow.............................................................................62
Notes to Consolidated Financial Statements.......................................................................63
</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 and 24 are filed herewith. All other exhibits are
       incorporated by reference as indicated below.

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

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

          4.2       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).

                                       89
<PAGE>

         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, 1999).

         21         Subsidiaries of the Registrant.

         23.1       Consent of Ernst & Young LLP.

         24         Power of Attorney.


(b)      Reports on Form 8-K

         None filed in the quarter ended December 31, 2000.

                                       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: March 30, 2001

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>
<S>                                <C>                                <C>
       Signature                           Title                           Date

/s/ Robert L. Leclerc              Chairman, Chief Executive Officer  March 30, 2001
------------------------------     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
* JOHN F. MCOUAT
* R. GEOFFREY P. STYLES


                                   * A majority of the
                                     Board of Directors


* By   /s/ Lois-Ann L. Brodrick                                       March 30, 2001
       ---------------------------------------------
       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, 2000
                       Commission File Number:   1-8542


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


                                   EXHIBITS

--------------------------------------------------------------------------------
<PAGE>

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


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

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