Winnemucca mine gets investment from Glamis

Reno-based Glamis Gold plans to invest heavily in its Marigold Mine 35 miles southeast ofWinnemucca, boosting production at the mid-sized mine steadily through the rest of this decade.

But while the increased production in northern Nevada will help Glamis reach one of the promises it's made to investors, expansion of Marigold hampers the company in its pursuit of another goal.

Here's why: Glamis, which is on track to produce about 400,000 ounces of gold this year, has told the investment world it plans to produce 700,000 ounces by 2007.

About 135,000 ounces of this year's production will come from Marigold, a mine that two-thirds owned by Glamis.

(The other third is owned by Barrick Gold Corp.) Expansion of the mine is under way, and Glamis executives said last week they expect production to rise substantially in coming years.

In fact, the company plans to invest nearly $50 million in Marigold during the next four years.

But the production at Marigold is expensive, especially compared with Glamis mines in Mexico and Central America.

The cash cost of producing an ounce of gold at the Nevada mine is projected at somewhere between $180 and $190 this year.

A new Glamis mine, El Sauzal in Mexico, by comparison is producing gold at less than $150 an ounce, and company officials have high hopes that another new project in Guatemala will be even more efficient when it comes on line this year.

Blending the low-cost production with the higher-cost gold mined in Nevada is important because Glamis has publicly set a goal of reducing its average cash costs to $150 an ounce by 2007.

The effort to boost production at the mine near Winnemucca sustained an odd setback, Glamis executives said last week.

A part of the mine property that was all set for processing operations and storage of waste rock was discovered to be home to gold deposits that might be mined.

Even with that setback, and even though fuel prices have gone through the roof this year, the company said it expects a steady decline in per-ounce costs as Marigold's production rises.

The new production in Nevada and Central America will help offset a continued decline at the San Martin Mine in Honduras, which has been a key part of Glamis' success.

Production at that mine in the first quarter was about 22,000 ounces of gold compared with 29,000 ounces a year ago, and the cash cost rose to $263 an ounce from $174 as lowergrade ores are mined and require heavier amounts of processing.

The big hit on the Glamis' earnings in the first quarter of the year, however,was the $4 million it spent in a failed bid to acquire Canada's Goldcorp.

But even without that charge, the company's earnings for the quarter would have totaled $6.2 million, down from $9.1 million a year ago.