San Martin paves profitable road for Glamis

Record quarterly production at the newly expanded San Martin heap-leach gold mine in Honduras, powered Glamis Gold (GLG-T) to a small profit during the three months ended September 30.

During the third quarter, the company posted earnings of US$600,000 (or 1 per share) on revenue of US$15.9 million, compared with a year-ago loss of US$7 million or (10 per share) on US$14.1 million. The recent third-quarter net income includes a one-time, US$8-million charge related to a final stock appreciation rights payment to a former Rayrock executive. Cash flow from operations tallied to US$2.2 million, up from US$535,000 a year earlier.

So far in 2001, Glamis’ net income amounts to US$2 million (3 per share), compared with a loss of US$10.6 million (15 per share) for the corresponding period of 2000. Revenue between the two periods slipped slightly to US$44.8 million from US$46.7 million. Cash flow more than tripled to more than US$8 million.

Third-quarter gold production topped 57,295 oz. at an average total cash cost of US$188 per oz., up from the 52,670 oz. produced at US$240 per oz. the previous year. The company notes that excluding unusually high cash costs at the Rand mine in California, which suffered lower production, cash cost for the recent quarter would have come in at US$134 per oz.

Year-to-date gold production sits at 157,753 oz. at US$178 per oz., down from 160,433 per oz. at US$231 per oz. For all of 2001, Glamis expects to pour 230,000 oz. at US$170 per oz. Production for 2002 is pegged at 255,000 oz. at US$172 per oz.

The bulk of the quarter’s production came from the company’s key foreign asset, the San Martin gold mine, which churned out a record 32,246 oz. of gold at US$123 per oz. Substantially more ounces of gold were placed on the heap than were produced during the quarter, but a lack of rainfall resulted in a delay in gold production at the process plant. Production at the mine for the year is expected to hit 110,000 oz., though that figure may rise if there is sufficient rain in the fourth quarter.

Production at the Rand mine fell almost 15,000 oz. to 10,800 oz. The lower production levels sent cash cost soaring to US$ $418 per oz., compared with US$182 per oz. a year earlier. The production shortfall arose from a lower mining rate in the second and third quarters, as stripping was completed in the final phase of the Yellow Aster Pit. Sustained ore mining resumed in September. Year 2001 production is expected to reach 65,000 oz., though 5,000 oz. may be delayed into the first quarter of 2002.

The 66.7%-owned Marigold mine in Nevada chipped in 14,249 oz. during the quarter. Cash costs were US$160 per oz., significantly better than the 8,189 oz. produced at US$325 per oz. the previous year. The turnaround is attributed to a simplification of operations; a more efficient leach cycle; and short waste hauls.

Following a go-ahead from the Interior’s Bureau of Land Management in September, the Terry zone expansion is expected to begin in early 2002. Further permitting required for the remainder of the Millennium expansion project is underway, and the results of a completed final feasibility study are expected by mid-November.

At the end of October, the Reno, Nevada-based company closed a C$50-million bought deal earmarked for the expansion of the Marigold mine, which will see annual production rise to 150,000 oz.

Also in late-October, the Department of the Interior reversed a legal opinion issued by the Clinton administration that effectively blocked development of the Imperial gold project in southern California.

“We are happy with the ruling but not sure where the procedure goes from here,” says David Hyatt, Glamis’s vice-president of investor relations.

The company awaits instructions from the BLM as to the permitting process for the project.

Glamis had US$7.7 million in cash and equivalents at the end of September.