Glencairn tames wildcat action (November 18, 2005)

Operations at the Limon gold mine in Nicaragua are up and running again after owner Glencairn Gold (GGG-T, GLE-X) reached an agreement with all three unions at the mine.

Mining operations had been suspended since November 3 by an illegal roadblock set up by some of the members of one of the unions opposed to extending an incentive program instituted at the mine to another union.

The program had earlier been approved by membership of both unions after contract negotiations earlier this year. The program, which changed the mine’s production bonus structure, was part of a two-year collective agreement with each union. The company says that exclusion of one of the unions would contravene Nicaraguan labour law.

The latest deal includes an unconditional agreement that future disputes will be resolved according to the resolution mechanisms outlined under the collective agreement. Glencairn says it did not make any concessions under the agreement.

The miner also said that during the suspension it began work on a revised mine plan at a higher cutoff grade for reserves at Limon. The change is expected to slightly reduce reserves as lower-grade ore below the 260-metre level are reclassified. Glencairn said the move is designed to reduce mining costs in the Talavera deposit. The company also said there will be an associated workforce reduction.

Meanwhile, development of a ramp to access the Santa Pancha deposit at Limon has resumed. The deposit is slated for production in the second quarter of 2006, with full production expected by the second half of the year.

During the three months ended Sept. 30, Limon produced 9,814 oz. of gold at a total cash cost of US$437 per oz., down from the year-ago 13,555 oz. poured at US$290 apiece. The decrease is attributed to lower-than-anticipated grades and production delays due to several illegal road blockades between the mine and the mill.

Glencairn ended the recent third quarter with a net loss of US$987,000 (or a penny per share), compared with a year-ago loss of US$2.2 million (US2 per share). So far this year, the company’s loss tallies to US$2.6 million (US2 per share), down from US$8.3 million (US6 per share) during the corresponding period of 2004.

At quarter’s end, Glencairn had cash and working capital of US$1.8 million and $4.7 million, both down from a year earlier. The reduction in working capital is owing to construction of the Bellavista open-pit gold mine in Costa Rica. Glencairn has so far spent around US$31 million building the mine, and says about US$4 million remains to be spent mostly on the grinding mill slated for construction in 2006.

Bellavista poured its first 6.4-kg gold bar earlier this summer; the mine is expected to produce 60,000 oz. gold annually over a life span of about eight years.

The company also warned that its current cash on hand, and cash from operations in 2005 and 2006 might not be sufficient to fund its needs. The company says it will need to raise around US$3 million during the next 12 months.

Shares in Glencairn were a penny better at 44 in late afternoon trading in Toronto following the news on Nov. 18.