Writedown sinks Glamis Gold in quarter

Denver — Despite producing a record amount of the yellow metal, Glamis Gold (GLG-N) reported a fourth-quarter loss of US$37.5 million (or 54 per share) after posting a US$37.5-million writedown.

For the year, the company incurred a net loss of US$48.7 million (70 per share), compared with a loss of US$21.6 million (33 per share) in 1999.

Fourth-quarter production reached 57,957 oz., down from 65,312 oz. in the corresponding period in 1999, though full-year production hit a record 218,390 oz., up 24% from the previous year.

Higher gold production resulted in a 9% improvement in revenue to US$61.6 million, while the average realized gold price for the year edged up slightly to US$280 per oz.

However, because of such prolonged low gold prices, Glamis took a critical look at its assets and adjusted the book value of those assets to fit the current lower prices. As a result, Glamis reduced the carrying value of the Rand mine in California by US$14.4 million, reflecting a decision to mine only a portion of the proposed Yellow Aster pit.

Also, Glamis wrote off the US$14.3-million value of the Imperial project after the Department of the Interior denied the plan of operations in January. The company intends to appeal the decision, though it has reclassified the project’s reserves as resources.

In Guatemala, the company wrote down the carrying value of the Cerro Blanco deposit, totalling US$800,000.

This review of the company’s assets also included readjusting reserves in light of a gold price of US$275 per oz., instead of US$300 per oz. Nevertheless, proven and probable reserves increased 21% with the addition of the Cerro San Pedro gold-silver project in Mexico and contributions from the new Millennium deposit at the 66%-held Marigold mine in Nevada. Glamis picked up Cerro San Pedro from Cambior (CBJ-T) in mid-2000.

At Dec. 31, proven and probable reserves stood at 2.8 million oz. gold. The company has another 4.3 million oz. in the resource category.

Glamis ended the year with working capital of US$20.5 million, including US$13.3 million in cash and equivalents. The company remains debt-free.

In 2001, the company plans to produce 235,000 oz. gold at a total cash cost of US$165 per oz. Nearly half the production will come from the newly opened San Martin mine in Honduras, which achieved commercial production on Jan. 1.