Despite heavy investment, Glamis doesn't need lending

Nearing the conclusion of a heavy program of investment that will triple its production, Glamis Gold doesn't think it will need to sell more equity or arrange bank loans to finish its jobs.

"It looks like we've got enough money to make it," Kevin McArthur, president and chief executive officer of the Reno-based mining company, told analysts last week.

The company continues to invest heavily.

Its El Sauzal project, which will be the largest gold mine in Mexico when it starts production late this year, will cost between $100 million and $110 million by the time it's completed.

Another mining project, Glamis'Marlin project in Guatemala, will cost an estimated $140 million to bring on line.

In the meantime, the company is completing a $25 million upgrade of the Marigold Mine 35 miles southeast of Winnemucca.

(Glamis owns two-thirds of that mine; Barrick Gold owns the rest.) The work at Marigold included the purchase of a fleet of larger trucks to haul ore from the open-pit mine.

Glamis this summer signed a deal to borrow $45 million from the International Finance Corp., a unit of the World Bank, to help develop the Marlin project in Guatemala.

But other than that,McArthur said, the company isn't talking with banks.

And the company is about to see the payoff from its investments.

The El Sauzal project in Mexico is projected to produce about 35,000 ounces of gold this year.

Once it's at full speed, the mine is estimated to produce 190,000 ounces a year.

That by itself would nearly double Glamis' current production.

The Marlin Mine in Guatemala is projected to produce another 271,000 ounces of gold a year once it comes on line in early 2006.

And the company's costs at the new mines are expected to give it plenty of room to weather any declines in gold prices.

El Sauzal, for instance, will produce gold for a cash cost of about $110 an ounce.

That compares with a typical cost of about $200 an ounce at most Nevada mines.

While Glamis awaits production from the new mines, its earnings have weakened.

For the second quarter, the company said last week it earned $2.9 million compared with $3.8 million in the same quarter last year.

The culprit? The company sold 47,037 ounces of gold during the quarter compared with 61,575 ounces a year earlier.

Even though the price of gold was up by about $40 from a year ago, it wasn't enough to cover the production decline.

The company's centerpiece mine, the San Martin in Honduras, produced 22,418 ounces during the quarter, down from the 29,159 a year ago.

As mining moves into ores that are somewhat lower quality, the production decline was expected, Glamis officials said.

On the exploration front, Glamis executives told analysts they are continuing work at Nevada's Marigold Mine and expect to find enough new gold to at least replace the amount mined this year.

The company also is working on prospects in Guatemala.