Glamis' strong cash position funds work

Glamis Gold these days finds itself in an enviable position: Just when it needs money for an aggressive construction program, it's awash in cash.

So awash in cash, in fact, that the Reno-based company may not need to borrow money or sell more stock as it completes two big mining projects during the next couple of years.

The company last week said it earned $18 million in 2003 compared with $13.7 million a year earlier.

Even more important to the company's plans, however, is a balance sheet that showed $126 million in cash and no long-term debt at the end of last year.

The company's strong cash position and the cash flow from its Marigold Mine near Winnemucca and its San Martin Mine in Honduras by themselves may be enough to finance construction, said Kevin McArthur, its president and chief executive officer.

Visiting with analysts after the company announced its earnings, McArthur wouldn't completely rule out an equity offering.

"Never say never," he responded when questioned.

And he said the company is working with the International Finance Corp., a unit of the World Bank, to have a line of credit available in case gold prices dip sharply and limit the cash it has available to build a new mine in Mexico.

But, McArthur added, "It appears we have enough money to achieve all of our goals.

There's no pressure to go rushing to the market."

The goals are big ones.

By the end of next year, Glamis expects to bring its El Sauzal mine in Mexico on line.

By the time it's done, the company expects to have invested about $105 million in the project.

In Guatemala, meanwhile, Glamis will begin work on the Marlin mine, which is expected to start production in 2006.

That project is budgeted at $120 million.

Even though Glamis' gold production dipped a bit last year, the rising price of precious metals more than made up the difference.

The company said it produced 230,294 ounces during 2003 compared with 251,919 a year.

The average price it received for an ounce of gold, however, rose to $368 in 2003 compared with $313 a year earlier.

And by the fourth quarter, the average price received by the company was $402 an ounce.

A big factor in the decline, Glamis said, was technical problems at its San Martin Mine in Honduras, which is the company's biggest producer.

Those problems were resolved late in 2003.

Glamis' share of production at the Marigold Mine 35 miles southeast of Winnemucca totaled 94,796 ounces during the year an average cash cost of $172 an ounce.

A year earlier, the company's share totaled 55,550 ounces at an average cash cost of $180.

Glamis owns two-thirds of the mine; the other third is owned by Barrick Gold Corp.

The companies plan an expansion of the Marigold Mine which will increase production to an estimated 250,000 ounces a year.

McArthur said the company expects a 15 percent increase in gold production next year as the El Sauzal property comes on line.

By 2007, he said the company's goal is production of 700,000 ounces a year at a cash cost of less than $150 an ounce.