The newly constructed San Martin mine, which will likely become the flagship operation of
The 4,000-oz. shipment occurred only 63 days after the first application of solution to the heap-leach pads. To date, most of the ore stacked on the pads has been run-of-mine material from the Rosa pit. Future production will make use of the newly commissioned crushing, agglomeration, conveying and stacking facilities.
Brian Christie, an analyst with Canaccord Capital, says production from the open-pit operation in 2000 could total 10,000-12,000 oz. In 2001, Glamis expects production from San Martin to exceed 113,000 oz. at a cash cost of US$113 per oz., up from the original forecast of 85,000 oz.
Over a projected mine life of 10 years, San Martin will produce an estimated 80,000 oz. per year at a cash cost of US$149 per oz. and a total cost of US$210 per oz. Glamis says that, based on exploration now under way on the 54-sq.-mile property, there is good potential for increasing reserves. Initial results from ongoing drilling will be announced at the end of the first quarter.
Since acquiring the San Martin project through a $40-million takeover of Mar-West Resources in late 1998, Glamis has doubled reserves to 39.3 million tonnes grading 0.86 gram gold per tonne, equivalent to 1.1 million contained ounces. The stripping ratio is 0.4-to-1.
The US$27-million cost of building San Martin was funded by Glamis, a company that continues to be free of debt.
“San Martin is a key component of the company’s future,” says Glamis President Kevin McArthur, “and its low-cost production is expected to return the company to profitability in 2001.”
Christie regards Glamis as one of the premier heap-leach gold miners, and, setting a $4 target, continues to rate its shares as a “buy.” The company currently trades at $2.25-2.28 within a 52-week range of $3.70-1.90 and has 70.1 million shares outstanding, or 77.1 million fully diluted. Working capital at the end of the third quarter of 2000 was US$26.2 million.
For the nine months ended Sept 30, 2000, the company incurred a loss of US$11.1 million (or 16 per share), including a one-time charge of US$4.3 million associated with the suspension of underground mining at the Dee mine in Nevada. The comparative loss in the corresponding period of 1999 was US$9 million (14 per share).
In the first nine months of 2000, Glamis produced 160,433 oz. at an average cash cost of US$231 per oz. and a total production cost of US$293 per oz., versus year-ago costs of 110,582 oz. at US$233 per oz. and US$307 per oz.
Cash flow from operations was US$2.3 million (3 per share) during the 9-month period, compared with US$3.3 million (5 per share) in the corresponding period of 1999.
Glamis’ operations include the wholly owned Rand mine in California, the 66.7%-owned Marigold mine in Nevada, and the newly constructed San Martin mine in Honduras. Operations at the poorly performing Dee mine, in northeastern Nevada, were to have ceased at the end of 2000.
Christie predicts Glamis will have produced 227,000 oz. in 2000 at a cash cost of US$222 per oz. and a total production cost of US$277 per oz. For 2001, production is forecast at 235,900 oz. at an improved cash cost of US$165 per oz.
“The San Martin mine should help propel the company to a new level, with regards to higher production and lower costs,” states Christie. “Although somewhat illiquid, the company does offer good leverage to a rising gold price.”
Glamis has completed a revised feasibility study of the Cerro San Pedro project in the central Mexican state of San Luis Potosi. The open-pit, heap-leach project is a 50-50 joint venture with
Based on a gold price of US$275 per oz. and a silver price of US$5 per oz., the project is expected to have a rate of return of 14.4% (before financing costs). Over a mine life of eight years, the operation is expected to produce 108,800 oz. gold-equivalent at US$169 per oz. Capital costs are pegged at US$44.5 million.
Glamis and Metallica have agreed to continue limited development of the project pending improvements in the price of gold.
At the wholly owned Cerro Blanco project in Guatemala, a preliminary economic analysis indicates that an open-pit mine could produce 180,000 oz. gold-equivalent per year at US$176 per oz. gold-equivalent over a mine life of eight years. Milling would be required, thus boosting the capital outlay to US$70 million and resulting in a 9.7% rate of return. Glamis continues to investigate ways of improving the economics, including additional drilling in 2001.
Exploration drilling at the Marigold mine resulted in a new discovery on the southern portion of the property. Based on 172 reverse-circulation holes, an initial resource is estimated at 47.8 million tonnes grading 0.96 gram, equivalent to 1.5 million contained ounces. Initial metallurgical tests indicate that the Millennium zone of mineralization is oxidized and amenable to run-of-mine leaching.
Preliminary scoping has generated a pit model containing 391,500 oz. in a measured and indicated resource of 8.7 million tonnes grading 1.4 grams, and 270,270 oz. in an inferred resource of 7 million tonnes grading 1.2 grams.
A substantial part of the US$2.4-million Marigold exploration budget in 2001 will be devoted to expanding this new discovery.
Glamis is the operator and 66.7%-owner of the Marigold mine.
The new Millennium zone has the potential to be larger than Marigold and slightly higher in grade.
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