INVESTMENT COMMENTARY — Imperial’s potential renders Glamis a buy

The strength and potential of its assets in California bode well for Glamis Gold (GLG-T), according to Brian Christie, a mining analyst at brokerage house Canaccord Capital.

A low-cost North American gold miner, Glamis has been in continuous production since 1981. It was recently trading at the $10-10.50 level and is expected to edge up to $13.50-14 over the next 6-12 months.

Glamis operates open-pit heap-leach operations at its Picacho and Rand mines in California and expects to bring a third project on stream by the fourth quarter of fiscal 1997.

Christie estimates the company will boost gold output to 208,500 oz. by 1999, up from the 101,562 oz. produced in the fiscal year ended June 30, 1995.

For the current fiscal year, earnings are forecast at US4 cents per share, while cash flow is projected at US28 cents per share.

For fiscal 1999, Christie expects Glamis to generate US87 cents per share in cash flow and US38 cents in earnings, based on a gold price of US$390 per oz.

The big jump in Glamis’ production profile will come from its Imperial project, 8 miles northeast of its Picacho operation.

The company recently announced a positive production decision for Imperial, and construction is expected to start in the second quarter of 1997.

Proven and probable reserves at Imperial are estimated at 94 million tons grading 0.017 oz. gold per ton at a stripping ratio of 3-to-1.

The capital cost of the proposed 9.4-million-ton-per-year leaching operation is estimated at US$47.5 million.

Imperial expects to produce 103,500 oz. gold per year over a 10-12-year mine life at a cash operating cost of US$214 per oz. The total cost, including depreciation, amortization, royalties and taxes, is projected at US$292 per oz.

Glamis’ nearby Picacho mine produced 25,290 oz. gold in fiscal 1995 from 1.6 million tons of ore grading 0.024 oz. gold, for a cash cost of US$216 per oz.

The mine produced 14,434 oz. during the six months ended Dec. 31, 1995, at a cash cost of US$162 per oz. Production this year is projected at 25,000 oz.

Current proven and probable reserves at Picacho exceed 114,000 oz. gold.

Glamis’ other operation, the Rand mine, 100 miles north of Los Angeles, produced 76,272 oz. gold in fiscal 1995 at a cash cost of US$197 per oz.

Production problems related to unoxidized ore boosted Rand’s cash costs for the six months ended Dec. 31, 1995, to US$315 per oz. on production of 29,814 oz.

Christie expects 1996 production from Rand to yield 80,000 oz. gold. Proven and probable reserves at Rand stand at 1.4 million oz.

Cash flow and earnings estimates are based on a gold price of US$390 per oz.

and 32.4 million shares outstanding (assuming Glamis issues 6 million shares at US$8 each to fund the Imperial project).