Growth of Glamis' reserves shows effect of gold price surge

With gold prices surging past $550 an ounce, the mining properties of Reno-based Glamis Gold look a lot more attractive.

The company's executives said last week that the amount of gold they can profitably mine when prices are above $500 is about 16 percent higher than the amount that made sense to mine when prices were at $400 an ounce.

Factoring in only deposits that can be reached by surface mining, Glamis said higher prices boosted its reserves by about 20 percent.

The higher gold prices come as Glamis' production is rising sharply as the result of new mines in Guatemala and Mexico.

In the fourth quarter of last year, Glamis produced 140,377 ounces of gold compared with production of 84,506 ounces a year earlier.

When that higher production is combined with higher prices, Glamis generated revenues of $70.7 million and net income of $15.1 million in the fourth quarter. A year earlier, it earned $6.1 million on revenues of $33.4 million.

Wall Street has noticed. The company's common stock was up about 60 percent in 2005 and was the best-performing precious metals stock on the New York Stock Exchange.

While most of the increase in gold production comes from Glamis' projects in Mexico and Central America, President Kevin McArthur said production is steadily increasing at the Marigold Mine 35 miles southeast of Winnemucca.

Glamis' two-thirds share of production from the mine is expected to be 118,000 ounces of gold this year, 133,000 ounces in 2007 and 146,000 ounces in 2008, McArthur said. (Barrick Gold Corp. owns the other one-third interest in the mine.)

McArthur noted, however, that the Marigold Mine feels cost pressures as the price of fuel, chemicals, and tires all continue to rise. The cash cost of producing gold at the mine is projected to run more than $200 an ounce, compared with an 2006 average of $160-$170 an ounce company-wide.

Elsewhere in Nevada, McArthur said Glamis will spend about $4 million in exploration this year. Much of that will be spent at the Dee Mine project about 25 miles northwest of Carlin. Glamis has a 40 percent stake in that project. Barrick Gold holds the controlling interest.