Glamis posts lower gold output

Vancouver A production shortfall at its flagship San Martin mine in Honduras resulted in a flat profit picture for Glamis Gold (GLG-T) in the second quarter of 2003.

The Reno-based company posted net income of US$3.9 million, or US$0.03 per share in the quarter, compared to net income of US$3.4 million or US$0.04 per share in the corresponding period of 2002.

Glamis produced 60,583 oz. at total cash cost of US$172 per oz. in the three months ended June 30. This marks a drop over the 63,929 oz. cranked out in same period last year 2001 at a total cash cost of US$156 per oz. Operating cash flow came in at US$9.1 million, up from US$8.9 million in the second quarter of 2002.

Gold sales tallied US$21.7 million, compared to US$20.3 million in 2002. Driving the increase was a strong bullion price, which averaged US$353 per oz., up from the US$313 recorded last year.

The San Martin mine in Honduras fell short of projections, cranking out 29,159 oz. of gold during the quarter, compared to 33,772 oz. in 2001. Total cash costs to produce an ounce of gold rang in at US$165, compared to US$112 per oz. in the previous year. Driving the shortfall was a delay in gold recoveries from the leach pads.

"We had some difficulties with solution management and pH issues," says company CEO, Kevin McArthur. "We are confident the problem has been corrected but because of the lower production, we have reduced our yearly target from 125,000 oz to 120,000 oz."

Glamis’ 66.7% owned Marigold operation in Nevada added 21,446 oz. of gold at a total cash cost of US$154 per oz., compared to 10,968 oz. at a total cash cost of US$197 per oz. in same period of 2002.

"During the year, we made excellent progress in advancing the Marigold expansion project which will result in substantially higher gold production and reduced total cash costs in subsequent years," continues McArthur. "Most recently, after completing the expansion, Glamis has made what could be an important new discovery in the Section 7 area".

The new find is dubbed the TZN target, where drilling has cut significant widths of oxide mineralization, which appears to be amenable to run-of-mine heap leaching. The discovery shows similar values to the Marigold reserve grades.

With three reverse circulation drills currently turning on the target, Glamis is looking into further expansion of the Marigold operation to run at a rate of more than 200,000 oz. of gold per year.

At the nearly depleted Rand mine in California, production increased to 9,958 oz of gold at a total cash cost of US$232 per oz., compared to 19,189 oz. of gold at total cash cost of US$228 per oz. in 2001. Active mining was completed in January but leaching operations will continue through 2004.

On the development front, Glamis completed a feasibility study on its El Sauzal project in Mexico. The study envisions a 190,000 oz. per year operation over a ten-year mine life. The final environmental review and permitting work is underway. El Sauzal holds reserves of 20.5 million tonnes grading 3.05 grams gold per tonne.

"We have permitted the El Sauzal project in Mexico and construction is now underway," adds McArthur. "With all of these positive developments, we are moving rapidly toward our near-term objective of doubling gold production to 500,000 oz. annually at a total cash cost of less than $150 per oz.”

At Marlin project in Guatemala, the company nearly tripled the mineral resource to more than 4 million oz. of gold equivalent, with 2.8 million oz. in the measured and indicated resource categories.

"In May, we completed a feasibility study at our Marlin property in Guatemala which is quickly developing into our largest and potentially our most profitable gold asset."

Since then, the Main zone of mineralization has been extended to the west and with five drills turning on the property, a new resource calculation and updated feasibility study is expected by November.