Glamis quietly raises goals for gold production by 2007

As recently as a year ago, Reno's Glamis Gold promised that it someday would deliver 500,000 ounces of gold annually at a cash cost of less than $150 an ounce.

Quietly, the number was boosted six months ago to 600,000 ounces.

And now Glamis has set the bar higher, promising the Wall Street that it will deliver 700,000 ounces annually by 2007.

That number is coming within reach, executives told investment analysts last week, especially as its long-awaited El Sauzal mine in Mexico comes on line.

"Glamis is now evolving into a far larger and more profitable company," said Kevin McArthur, its president and chief executive officer.

The new mine in Mexico is expected to come into full production this year, and Glamis projects that it will produce about 170,000 ounces of gold during its first full year of operation.

That would go a long way toward doubling gold production for Glamis, which is on pace to produce about 250,000 ounces this year.

Equally important, the mine in Mexico is expected to produce gold less expensively than the $205-an-ounce in cash costs recorded by the company in the quarter ended Sept.

30.

That's worrisome.

Glamis' cash costs have been creeping upward, partly because it's working lower-grade ores at its San Martin mine in Honduras.

Lower grades require more processing.

At San Martin as well as the Marigold Mine 35 miles southeast of Winnemucca, rising fuel costs also are a headache.At Marigold, where Glamis owns a two-thirds stake and Barrick Gold Corp.

owns the other third, rising fuel costs are adding $15 to $20 an ounce to production costs, said McArthur.

Glamis recently completed an expansion of the Marigold mine, which is expected to produce about 100,000 ounces of gold this year, and is exploring further expansion.

The third leg of the company's expansion into a 700,000-ounce producer is coming at its Marlin project in Guatemala.

Glamis is building mining infrastructure and plans to begin production at Marlin late next year.

In the meantime,McArthur said, it continues to search for other gold deposits nearby.

One of those exploration programs includes an area in eastern Guatemala known as Banderas.

Radius Gold Inc., the Vancouver company that owns Banderas, said last week that Glamis signed an option to earn a 51 percent interest in the property by spending $4 million in exploration during the next four years.

Glamis can earn another 25 percent interest by completing a mining feasibility study.

The company will spend about $10 million on exploration this year,McArthur said, and the amount probably will rise in 2005.

In the third quarter, Glamis reported earnings of $2.8 million on revenues of $21 million.

This compares with earnings of $3.4 million on revenues of $19 million in the comparable quarter a year earlier.

The company said it sold 50,631 ounces of gold during the quarter at an average price of $406 an ounce.

A year earlier, Glamis sold 51,110 ounces at an average price of $371 an ounce.