Glamis Gold posts 3-month loss, completes Rayrock merger

Lower production rates and low gold prices took their toll on Glamis Gold (GLG-T) during the first quarter.

The company posted a loss of US$3.3 million (or US7 cents per share) on revenue of US$7.9 million for the recent 3-month period, compared with earnings of US$334,000 (US1 cents per share) on revenue of US$8.9 million in the first quarter of 1998.

(The 1999 results include one month of production at properties recently acquired through the amalgamation of Rayrock Resources [T.N.M., Feb. 1-7/99].)

The loss includes shortfalls of US$1.3 million at the Ivan copper mine in Chile and US$800,000 at the Rand mine in southern California, as well as a US$400,000 reduction in profits as reflected in the realized price of gold, compared with last year.

At the end of the first quarter, Glamis had working capital of US$34.2 million, of which US$30 million has yet to be committed. Capital expenditures during the period, not including the Rayrock takeover, totalled US$3 million. Major expenditures included US$1.5 million for stripping at the Rand mine and US$900,000 at the San Martin project in Honduras. General and administrative charges, together with exploration expenses, rose by US$1.1 million in the recent first quarter, compared with the corresponding period last year.

First-quarter production at the wholly owned Picacho open-pit mine in southeastern California, was 2,238 oz. gold at a cash cost of US$160 per oz., compared with 5,689 oz. at US$136 per oz. a year ago. The mine exhausted its reserves in 1998 but is expected to yield a limited amount of gold over the next two years as the heaps are drained.

At the Rand mine, production totalled 11,900 oz. gold at a cash cost of US$256 per oz., compared with 21,209 oz. at a cash cost of US$227 per oz. during the first three months of 1998. Mining was recently suspended but is expected to resume in the Yellow Aster pit in the second quarter. Proven and probable reserves stand at 33.4 million tons averaging 0.021 oz. gold per ton, or 710,000 contained ounces.

Glamis’s share of production from its main operations in March is as follows:

• The wholly owned Dee mine in Nevada produced 4,130 oz. gold at a cash cost of US$191 per oz.
• The wholly owned Daisy mine, also in Nevada, produced 1,305 oz. gold at a cash cost of US$545 per oz.
• The 66.7%-held Marigold mine, in Nevada as well, produced 4,344 oz gold at a cash cost of US$242 per oz.

Underground development work at Dee is expected to extend the mine life into the year 2002. Proven and probable reserves there are 1.8 million tons averaging 0.155 oz. gold per ton, or 275,000 contained ounces.

By comparison, Marigold’s proven and probable reserves are estimated at 13.2 million tons averaging 0.032 oz. gold, or 423,000 contained ounces, whereas Daisy’s are listed as being 4.1 million tons averaging 0.033 oz. gold, or 138,000 oz.

Meanwhile, a feasibility study at the San Martin project is under way, with startup tentatively slated for late 1999/early 2000. Capital costs are not expected to exceed US$18 million, with total cash costs pegged at below US$200 per oz. Glamis hopes to minimize capital costs by transferring mining equipment and infrastructure from its depleted Picacho mine.

The oxide resource at San Martin is open-ended, and stepout drilling is attempting to expand the resource.

Overall, Glamis’s operations generated positive cash flow of US$1.3 million during the first three months of 1999, and the company anticipates 1999 gold production will exceed 200,000 oz.