Glamis hit by higher costs

Vancouver Higher production costs at the San Martin mine in Honduras and increased exploration spending resulted in 40% drop in profits for Glamis Gold (GLG-T).

The Reno-based miner posted a profit of US$$1.9 million, or 2 cents a share, in the first three months of 2003, down from US$3.2 million, or 4 cents a share in the corresponding period of 2002. Operating cash flow came in at US$7.5 million.

"Our operating mines continue to generate strong cash flows and we remain on schedule to produce 250,000 ounces of gold at a total cash cost of less than US$170 per ounce in 2003," says Glamis’ CEO Kevin McArthur, "despite a temporary production shortfall at the San Martin mine in Honduras."

Hitting the bottom line was US$2.4 million in exploration expenses in the quarter, compared with only US$300,000 last year. The bulk of the spending, some US$2.2 million, or 2 cents a share, went into its Guatemalan projects.

Gold sales in the quarter rang in at US$20.7 million, up slightly from US$18.2 million for the first quarter of 2002. The company produced 61,292 oz of gold at a total cash cost of US$170 per oz, compared to 61,726 oz at a total cash cost of $150 per oz in the first quarter of the previous year.

The San Martin mine contributed 26,620 oz during the quarter at a total cash cost of US$142 per oz compared to 31,361 oz in the first quarter of 2002 at a total cash cost of US$86 per oz. The shortfall is attributed to unseasonable rainfall, which temporarily affected leach pad chemistry and delayed gold recoveries in the heap.

Glamis’ 66.7%-owned Marigold operation in Nevada saw total cash costs decline by 11% over last year to US$170 per oz. with production hitting 22,153 oz, while the deleted Rand mine in California added 12,519 oz in the quarter at a total cash cost of US$227 per oz, compared to 18,750 oz at a total cash cost of US$233 per oz for the initial quarter of 2002. All mining activities ceased during the first quarter although gold production will continue until the end of 2004.

In Mexico, basic engineering work has been completed on the El Sauzal project. Permitting for the mine is on schedule, and Glamis expects to commence plant and mine construction in the second half of 2003. Production is expected to average 190,000 oz of gold per year at a total cash cost of US$110 per oz starting in 2005.

In Guatemala, the measured and indicated resource of the Marlin project has been boosted to 53.9 million tonnes grading 1.7 gram gold and 24.4 grams silver per tonne. A feasibility study has been completed for both an open pit operation, as well as a combined open pit and underground mine.

The open pit vision yields proven and probable reserves of 13 million tonnes grading 3.6 grams gold and 47.8 grams silver at a 1 gram gold cut off grade. The strip ratio comes in at 5.3-to-1.

The second option is more favourable, yielding proven and probable reserves of 10.9 million tonnes grading 3.5 grams gold and 45.9 grams silver, using a 1 gram cut of for the open pit and 5-gram cut off for the underground portion. The strip ratio comes in at 3.5-to-1.

"While the ultimate size and details of the Marlin mine plan are expected to change as drilling continues, we are pleased to have completed this feasibility study that establishes basic operating parameters and capital and operating costs for the Marlin mine," adds McArthur. "As optimization studies and drilling programs continue, we are confident in our team’s ability to convert more of the large mineral resource to reserves and to discover additional mineralization."

At March 31, 2003, the company held US$157.2 million in cash and equivalents and working capital stood at US$168.7 million. The company is debt free and unhedged.