Led by a strong operational performance at its wholly owned San Martin mine in Honduras,
Gold production from its three operations totalled 63,929 oz. for the quarter at a cash cost of US$161 per oz. and a total production cost of US$234 per oz. For the first half of 2002, Glamis produced 125,655 oz. at a cash cost of US$156 per oz. and a total cost of US$226, versus 100,458 oz. at a cash cost of US$173 per oz. and a total cost of US$219 per oz. The company owns a 100% interest in the San Martin mine, a 66.7% interest in the Marigold mine in Nevada and 100% of the soon-to-be-depleted Rand mine in California. Production for the full year is forecast at more than 250,000 oz. at a cash cost of less than US$170 per oz.
Cash flow from operations amounted to US$8.9 million for the quarter and US$16.6 million for the half. Second quarter earnings were US$3.4 million (or US4 per share), bringing first-half earnings to US$6.6 million (US8 per share).
The San Martin open-pit/heap-leach mine in central Honduras continued to perform well above expectations. Second-quarter production rose to 33,772 oz. at a cash cost of US$112 per oz, compared with 31,361 oz. at US$86 per oz. in the first quarter and 13,579 oz. at US$150 a year ago. Both productivity and ore grades have exceeded projections so far this year. During a conference call, Glamis President Kevin McArthur told analysts lower-grades are expected during the second half of the 2002 as part of the planned mining sequence.
At the end of 2001, San Martin contained proven and probable reserves of 34.9 million tonnes grading 0.86 gram gold per tonne, equivalent to 963,000 oz. at a gold price of US$275 per oz. A further 365,000 oz. are contained in a measured and indicated resource of 17 million tonnes grading 0.65 gram. A recently completed drilling program in the west Palo Alto area is expected to add less than 100,000 oz. to reserves at year-end. The company is currently awaiting permits to begin exploration drilling on the nearby Minitas property.
Glamis’ share of production from its 66.7%-owned Marigold mine in Nevada, 40 miles southeast of Winnemucca, declined to 10,968 oz. during the second quarter at a cash cost of US$197 per oz. This compares with 11,615 oz. at US$190 per oz. in the first quarter and 17,879 oz. at US$146 in the second quarter of 2001.
The decline in production was the result of a shift to the stripping of waste rock in the Millenium expansion area and the mining of lower-grade ore as part of the mine plan. Nevertheless, the company expects to meet its 2002 production target of 55,000 oz. as it continues with the expansion project. Glamis and its 33.3% partner,
The Marigold expansion was approved last November, based on a positive feasibility study that combined the existing operations with the new Millenium deposits, including the Terry zone plus the Section 30 and 31 deposits. Proven and probable reserves total 68.5 million tonnes grading 0.93 gram, equal to over 2 million oz.
A drilling program consisting of 123 reverse-circulation holes totalling 22,000 metres was recently completed at the Marigold mine, largely infilling Sections 30 and 31, and for condemnation purposes in the expansion leach pad and waste stockpile areas.
Second-quarter production at the wholly owned Rand mine in California, 100 km northeast of Los Angeles, amounted to 19,189 oz. at a cash cost of US$228 per oz. Rand is in its last year of mining, with production expected to exceed 70,000 oz. for 2002. The mine will continue leaching over the next two years, recovering an additional 40,000 oz. in the process.
Glamis added to its pipeline of development projects with the acquisition of the El Sauzal and Marlin gold projects through the recently completed Francisco Gold merger. Much of the technical work has been completed on the El Sauzal project in Mexico’s Chihuahua state. The company is now focusing its efforts on site-plan optimization, process flowsheet simplification and completing the permitting process. McArthur says El Sauzal could be in production in early 2005 at an annualized rate of 173,000 oz., with cash costs of US$114 per oz. “Work completed to date has given a pretty firm indication that we will be able to reduce our original capital-cost estimate of US$100 million,” says McArthur. “We’re headed towards approval by the board in November of this year.”
The results of a positive independent bankable feasibility study completed in June indicate El Sauzal hosts 2 million oz. in proven and probable oxide reserves totalling 18.5 million tonnes grading 3.37 grams, at a stripping ratio of 1.3-to-1.
Most of the company’s current exploration activity is focused on its two Guatemalan exploration projects, with Marlin clearly the top priority. Glamis has three rigs on the property at present and is about to add a fourth. The company has budgeted a US$3-million drilling campaign over the next 12 months as it seeks to expand the 1.1-million-oz. gold and 15.3-million-oz. silver resource.
Based on Francisco’s previous drill results in a 500-metre portion of the Main zone, Glamis has come up with a measured resource of 4.2 million tonnes grading 1.94 grams gold and 29.33 grams silver, an indicated 8.6 million tonnes grading 1.46 grams gold and 22.22 grams silver, and an inferred 14.1 million tonnes grading 1.09 grams gold and 11.49 grams silver.
Assays results are just starting to come in for the 20 holes completed to date. “We are seeing good confirmation of the Main zone [in terms of] continuity and grade,” confirms McArthur.
At Cerro Blanco, the company’s other project in Guatemala, McArthur says recent drilling has shown the mineralized horizons at depth are somewhat narrower than first anticipated but are of considerably higher-grade. The company has begun to re-think the possibility of an underground component to the project.
“This is clearly a very interesting time for Glamis,” says McArthur. “Production from our mines provides a bulletproof foundation for the company, and these new projects are developing quite nicely.”
Meanwhile, Glamis says it is discussions with
“We believe this is a good project, but, given its size, it probably makes more sense to consolidate ownership before moving forward,” McArthur says.
At June 30, Glamis held cash and equivalents of US$45 million and working capital of US$57 million.
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