Glamis, Mar-West plan to tie knot — Merger would accelerate development of San Martin deposit

A proposed merger agreement would see Glamis Gold (GLG-T) acquire all the issued and outstanding shares of Mar-West Resources (MSR-V).

Under the proposed arrangement, each Mar-West shareholder would be entitled to receive one share of Glamis, or 0.8 of a share of Glamis plus 96 cents, in return for two shares of Mar-West.

Reno, Nev.-based Glamis produces most of its gold from two mines in southern California. The Rand mine, near Bakersfield, turned out 22,843 oz. in the second quarter at an average cash cost of US$213 per oz., and the Picacho mine, in Imperial Cty., offered up 4,753 oz. at US$128 per oz.

The company squeaked out a small profit of US$203,000 (or 1 cents per share) over the first half of this year.

Glamis is awaiting permitting at its Imperial project, 8 miles northeast of Picacho. Proven and probable reserves stand at 86 million tonnes averaging 0.55 gram gold per tonne, equivalent to 1.5 million contained ounces.

In Mexico’s Chihuahua state, Glamis operates a small heap-leach operation, La Cieneguita, which it hopes to expand. Glamis holds a 60% interest in the project, with the remainder held by Aquiline Resources (AQI-V).

The company is reportedly debt-free with 31.2 million shares outstanding, US$28.7 million in cash and US$7.4 million in working capital.

By comparision, Vancouver-based Mar-West has 16.6 million shares outstanding (17.6 million fully diluted) and $5 million in its treasury.

Mar-West’s key assets include two hot-spring gold occurrences in Latin America: San Martin in south-central Honduras and Cerro Blanco in southeastern Guatemala.

The San Martin deposit, which is flat-lying and near the surface, is hosted in a series of schists. Last year’s drilling defined the Sinter zone, which measures 800 by 600 metres and has an average thickness of 20 metres. Based on 73 drill holes, the geological resource is estimated at 18.5 million tonnes grading 1 gram gold. This translates into 600,000 contained ounces in the measured and indicated category. Preliminary metallurgical tests suggest gold recoveries of between 40% and 80%. The deposit is amenable to open-pit mining, and heap-leach recovery is envisaged. New gold discoveries at the Palo Alto and Palo Ralo zones, about 2 km west of the Sinter zone, have the potential to increase the San Martin gold resource, Mar-West reports.

Glamis Gold is confident it can convert this resource into the proven and probable category. “This property is particularly well-suited for Glamis’s operation style,” says company president C.K. McArthur. “We anticipate being able to bring San Martin into production in the next couple of years at a low cash cost and with a minimal capital investment.”

Mar-West’s Cerro Blanco prospect was defined by geochemical and geophysical studies that highlighted a north-striking target with a strike length of 2.8 km. The southern portion of the target has been dubbed the 620 Hill zone, and it is on this structure that most of the reverse-circulation drilling performed to date has been focused. One recent drill hole cut 158.5 metres averaging 1.68 grams gold uncut (1.5 grams cut).

Drill results indicate that the mineralized structural corridor dips 60-70 to the west and has a true width of up to 135 metres. Mineralization remains open at depth, as well as to the north, south and west.

Mar-West holds additional concessions and interests in joint ventures in Honduras and El Salvador.

Shareholders and regulators have yet to approve the proposed merger. If they do, Mar-West’s president, Simon Ridgway, and its vice-president of exploration, Robert Wasylyshyn, would be retained to manage the newly consolidated company.