Glamis feels price pinch

Despite an increase in gold production, Glamis Gold (GLD-T) was unable to turn a profit in 1999. The company posted a loss of US$21.3 million (or US33 per share) on revenue of US$57.5 million, compared with a loss, in 1998, of US$2 million (US6 per share) on revenue of US$32.9 million.

Cash flow from operations decreased to US$6.2 million in 1999 from US$9.3 million in 1998, while exploration expenses skyrocketed to US$4 million from just US$34,000.

A US$8.2-million writedown did not help matters. This included US$6.8 million in development costs at the Rand mine in California and US$1.1-million note against the Cieneguita project in Mexico. A US$5.1-million loss was associated with the Ivan copper mine in Chile, and other one-time charges were associated with mergers involving Mar-West Resources and Rayrock Resources (RAY-T).

Glamis produced 175,894 oz. gold in 1999, up from 106,113 oz. a year earlier. The increase is attributed to three newly acquired mines in Nevada: Marigold (67%-owned by Glamis), Dee and Daisy.

The Rand mine produced the most gold — 70,978 oz., though this was less than the 87,015 oz. in 1998. The decrease was caused by a stripping program, completed near the end of the third quarter. Production in the subsequent quarter reached a record 31,829 oz. Total cash costs at Rand amounted to US$210 in 1999, compared with US$228 in the previous year.

The company’s average realized gold price fell to US$282 per oz. from US$310 in 1998.

In October 1999, Glamis sold the Ivan copper mine near Antofagasta, Chile, to Minera Milpo of Lima, Peru, for US$21 million as part of its plan to reduce costs and focus on gold production. Glamis acquired the small underground operation through its merger with Rayrock in February 1999; the merger, in turn, was accomplished by issuing 29.3 million shares and paying $52.8 million.

Proven and probable reserves at Ivan are pegged at 9.3 million tonnes grading 2.35% copper, which, at current production rates, would support another 14 years of mining.

In Honduras, work continued on the US$27-million San Martin gold project, which is scheduled to start up in the fourth quarter. At last report, the project hosted proven and probable reserves of 43 million tons grading 0.025 oz. gold per ton. The waste-to-ore stripping ratio is 0.4-to-1.

In 2000, Glamis expects to produce a total of 238,000 oz. gold at an average total cash cost of US$200 per oz.