Higher costs take toll on Glamis

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

The Reno-based miner earned US$$1.9 million (or US2 per share) in the recent 3-month period, compared with US$3.2 million (US4 a share) in the first quarter of 2002.

Operating cash flow was US$7.5 million in the recent period.

“Despite a temporary production shortfall at the San Martin mine in Honduras, our mines continue to generate strong cash flow,” says CEO Kevin McArthur. “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.”

Glamis had US$2.4 million in exploration expenses in the quarter, compared with only US$300,000 a year earlier. Most of this was applied to projects in Guatemala.

Gold sales in the quarter amounted to US$20.7 million, up slightly from US$18.2 million a year earlier. The company produced 61,292 oz. gold at a total cash cost of US$170 per oz., compared with 61,726 oz. at US$150 per oz. in the first quarter of the previous year. Glamis realized a sale price of US$348 per oz. gold, a significant jump from the US$292 per oz. recieved in the first quarter of 2002.

San Martin contributed 26,620 oz. during the quarter at a total cash cost of US$142 per oz., compared with 31,361 oz. in the first quarter of 2002, when cash costs hit a record US$86 per oz. The shortfall is attributed to unseasonable rainfall, which delayed gold recoveries in the heap.

Meanwhile, Glamis’s 66.7%-owned Marigold operation, in Nevada, enjoyed an 11% decline in cash costs to US$170 per oz., while producing 22,153 oz.

The now-depleted Rand mine in California produced 12,519 oz. in the recent quarter at a cash cost of US$227 per oz., compared with 18,750 oz. at US$233 per oz. a year earlier. Mining has ceased at the mine, though gold will continue to be produced from stockpiles until the end of 2004.

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

In Guatemala, the measured and indicated resource at 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 and a combined open pit/underground mine.

The solely open-pit proposal carries with it a proven and probable reserve estimate of 13 million tonnes grading 3.6 grams gold and 47.8 grams silver at a cutoff grade of 1 gram gold per tonne. Stripping ration: 5.3-to-1.

The second, more favourable option is based on a proven and probable reserve of 10.9 million tonnes grading 3.5 grams gold and 45.9 grams silver, using cutoffs of 1 gram gold for the open pit and 5 grams for the underground portion. The stripping ratio, in this case, would be 3.5-to-1.

Says McArthur: “While the ultimate size and details of the Marlin mine plan are expected to change as drilling continues, we’re pleased to have completed this feasibility study that establishes basic operating parameters and capital and operating costs for the Marlin mine. 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, the company had US$157.2 million in cash, plus working capital of US$168.7 million. The company is debt-free and un-hedged.