Glamis completes Rayrock merger

The Toronto staff of Rayrock Resources (RAY-T) are clearing out their desks and heading to Reno, Nev., now that the company has been acquired by Glamis Gold (GLG-T).

Glamis issued 29.3 million shares and paid $52.8 million to acquire the company. It now has 66.2 million shares outstanding and US$40 million in cash.

The merged company is expected to change its name to New Glamis and operate out of Reno. Company assets are already being combined, and Rayrock’s Toronto office building will be sold.

Shares now total 75.7 million and are traded on both the Toronto and New York stock exchanges. The company has US$80 million in cash and marketable securities, with US$5 million in debt (T.N.M., Nov. 30-Dec. 6/98).

New Glamis is expected to produce a combined 200,000 oz. gold in 1999, building to 300,000 oz. over the next five years. The long-term combined cash costs are projected to be less than US$200 per oz.

In the next few months, the restructured company will focus on evaluating the Ivan copper mine in northern Chile, previously held by Rayrock. In 1998, the mine was expected to produce 21 million lbs. copper at 66 cents per lb.

From Rayrock, Glamis also acquires three open-pit mines in Nevada that produce a total of 90,000 oz. annually — the wholly owned Dee and Daisy mines and the 66.6%-held Marigold mine.

The Dee is scheduled to close in May, though reserves have been deemed sufficient for another three years of production. A similar mine life is projected for the Daisy mine, where annual production is pegged at 30,000 oz., whereas Marigold has an estimated five years of reserves at an annual rate of 60,000 oz. Daisy is being mined on a contract basis, though this may change given that New Glamis has a mining fleet available.

Drilling is in progress at the Marigold mine in Nevada, where New Glamis is attempting to increase reserves.

Prior to the merger, Glamis pulled its gold solely from the Rand and Picacho open-pit mines in California. The Rand accounted for about 90% of Glamis’s 90,000 oz. of yearly production and now serves as the flagship of New Glamis. The Picacho mine exhausted its reserves last year but is expected to yield a limited amount of gold over the next two years as the heaps are drained.

Exploration projects include the Imperial project in California. While an independent feasibility study suggests the deposit can support annual production of 110,000 oz. gold over 10 years, the rate of return is only 11% at a gold price of US$300 per oz. — 4% lower than the rate of return needed to justify development. Capital costs in the first year are pegged at US$40 million, with cash costs projected at US$191 per oz.

Meanwhile, feasibility work at the San Martin gold project in Honduras is expected to be completed by August. Prefeasibility work indicates that the capital cost of an open-pit run-of-mine operation will be US$15 million. Annual production is projected at 60,000 oz. at a cash cost of under US$150 per oz.

The oxide resource at San Martin remains open-ended, and stepout drilling is under way in an attempt to expand the resource.

Farther afield, at the Cerro Blanco project in Guatemala, core drilling has provided enough samples to warrant metallurgical testing, while, at the Viento Frio project in Panama, diamond drilling is under way.