<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission file number 0-31986 (82-689)
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GLAMIS GOLD LTD.
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(Exact name of Registrant as specified in its charter)
British Columbia, Canada None.
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(Jurisdiction of incorporation (IRS Employer Identification No.)
or organization)
3324 Four Bentall Centre, 1055 Dunsmuir Street, Vancouver, B.C. Canada, V7X 1L3
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(Address of Principal Executive Offices)
604-681-3541
------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 180 days. Yes X No .
--- ---
The number of shares outstanding of the Registrant's common stock, as of October
31, 1997 was 31,222,707.
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GLAMIS GOLD LTD.
INDEX
<TABLE>
<CAPTION>
Page
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Part I - Financial Information
<S> <C> <C>
Item 1. Financial Statements.................................................... 1
Consolidated Balance Sheets as at September 30, 1997
and December 31, 1996............................................... 1
Consolidated Statements of Earnings for the three months and
the nine months ended September 30, 1997 and 1996.................. 2
Consolidated Statements of Retained Earnings for the three months
and the nine months ended September 30, 1997 and 1996............... 2
Consolidated Statements of Changes in Financial Position for the
three months and the nine months ended September 30, 1997 and 1996..... 3
Notes to Interim Consolidated Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 7
Part II - Other Information
Item 1. Legal Proceedings....................................................... 17
Item 2. Changes in Securities................................................... 17
Item 3. Defaults Upon Senior Securities......................................... 17
Item 4. Submission of Matters to a Vote of Security Holders..................... 17
Item 5. Other Information....................................................... 17
Item 6. Exhibits and Reports on Form 8-K........................................ 17
Signatures...................................................................... 19
Exhibit Index .................................................................. 20
</TABLE>
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CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars)
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<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, December 31,
1997 1996
-------- --------
<S> <C> <C>
Cash $ 28,182 $ 26,493
Other current assets (note 3) 13,555 16,588
-------- --------
Current assets 41,737 43,081
Plant and equipment and mine development costs 59,177 59,898
Other assets 5,263 4,995
-------- --------
$106,177 $107,974
======== ========
LIABILITIES
Current liabilities $ 3,165 $ 4,357
Long term liabilities 3,167 2,729
SHAREHOLDERS' EQUITY
Share capital (note 4):
Authorized:
200,000,000 common shares without par value
5,000,000 preferred shares, $10 par valuable, issuable in Series
Issued and fully paid:
31,142,707 common shares (1996 - 31,004,707) 89,129 88,296
Contributed surplus 63 63
Retained earnings 10,653 12,529
-------- --------
99,845 100,888
-------- --------
$106,177 $107,974
======== ========
</TABLE>
Prepared by Management without audit
Approved by the Directors:
/s/ James R. Billingsley /s/ Ian S. Davidson
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James R. Billingsley, Director Ian S. Davidson, Director
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CONSOLIDATED STATEMENTS OF EARNINGS
(Expressed in thousands of U.S. dollars)
(Except per share amounts)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenue from gold production $ 10,297 $ 12,293 $ 32,748 $ 33,600
Cost of production 7,737 5,915 19,635 17,926
-------- -------- -------- --------
2,560 6,378 13,113 15,674
-------- -------- -------- --------
Expenses
Depreciation & depletion 2,710 2,782 8,549 7,651
Royalties 689 824 2,270 1,960
Selling, general & administrative 714 826 2,418 2,279
Exploration 4 114 905 1,041
-------- -------- -------- --------
4,117 4,546 14,142 12,931
-------- -------- -------- --------
Earnings (loss) from operations (1,557) 1,832 (1,029) 2,743
Interest expense 44 33 94 122
Other (income) expense (453) (112) (955) (249)
-------- -------- -------- --------
Earnings (loss) before income taxes (1,148) 1,911 (168) 2,870
Provision for income taxes (239) 581 174 895
-------- -------- -------- --------
Net earnings (loss) $ (909) $ 1,330 $ (342) $ 1,975
-------- -------- -------- --------
Earnings (loss) per share $ (0.03) $ 0.05 $ (0.01) $ 0.07
======== ======== ======== ========
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Expressed in thousands of U.S. dollars)
- ----------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Retained earnings, beginning of period $ 11,562 $ 9,115 $ 12,529 $ 8,470
Net earnings (loss) (909) 1,330 (342) 1,975
Dividends -- -- (1,534) --
-------- -------- -------- --------
Retained earnings, end of period $ 10,653 $ 10,445 $ 10,653 $ 10,445
======== ======== ======== ========
</TABLE>
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CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(Expressed in thousands of U.S. dollars)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ (909) $ 1,330 $ (342) $ 1,975
Adjustment for items not affecting working capital 2,952 2,796 9,011 7,873
Net changes in non-cash working capital (120) 780 1,840 (621)
-------- -------- -------- --------
Net cash provided by operations 1,923 4,906 10,509 9,227
NET INVESTMENT ACTIVITIES (1,257) (6,330) (8,119) (10,711)
-------- -------- -------- --------
FINANCING ACTIVITIES
Stock issues 325 -- 833 796
Dividends paid -- -- (1,534) --
-------- -------- -------- --------
Net financing activities 325 -- (701) 796
-------- -------- -------- --------
Increase (decrease) in cash 991 (1,424) 1,689 (688)
Cash, beginning of period 27,191 4,898 26,493 4,162
-------- -------- -------- --------
Cash, end of period $ 28,182 $ 3,474 $ 28,182 $ 3,474
======== ======== ======== ========
</TABLE>
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GLAMIS GOLD LTD.
Notes to Interim Consolidated Financial Statements
(tables expressed in thousands of United States Dollars)
September 30, 1997
1. GENERAL
In the opinion of management, the accompanying unaudited interim consolidated
balance sheets and consolidated statements of earnings, retained earnings and
changes in financial position contain all adjustments, consisting only of normal
recurring accruals, necessary to present fairly the financial position of Glamis
Gold Ltd. (the "Company") as of September 30, 1997 and December 31, 1996 and the
results of its operations and changes in its financial position for the
nine-month period ended September 30, 1997 and 1996. The results of operations
for the nine-month period ended September 30, 1997, are not necessarily
indicative of the results to be expected for the entire fiscal year.
The unaudited financial statements presented herein have been prepared in
accordance with the instructions to Form 10-Q and do not include all the
information and note disclosures required by generally accepted accounting
principles for annual financial statements. These financial statements should be
read in conjunction with the Company's audited consolidated financial statements
and related footnotes included in the Company's Form 10-K for the year ended
December 31, 1996.
The financial statements are prepared in accordance with accounting principles
generally accepted in Canada which conform, in all material respects, with
accounting principles generally accepted in the United States, except as
described in note 5 hereof.
2. FOREIGN CURRENCY TRANSLATION
The Canadian operations of the Company are considered "self-sustaining" and its
accounts are translated into U.S. dollars using the current rate method under
which assets and liabilities are translated at the rate of exchange at the end
of the period. Revenues and expenses are translated at the average exchange rate
for the period. Exchange gains and losses are deferred and included as a
separate component of shareholders equity.
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The Mexican subsidiary of the Company is treated as an integrated operation and
its accounts are translated into U.S. dollars using the temporal method whereby
monetary items are translated at exchange rates prevailing at the balance sheet
date and non-monetary items at historical exchange rates. Revenue and expenses
are translated at average exchange rates for the period. Translation gains or
losses are included in the determination of net income.
3. OTHER CURRENT ASSETS
Included in other current assets are the following inventories:
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------ ------------
<S> <C> <C>
Finished goods $ 2,482 $ 4,645
Work-in-progress 9,869 10,811
Supplies and spare parts 597 668
------- -------
$12,948 $16,124
======= =======
</TABLE>
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4. SHARE CAPITAL
<TABLE>
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
------------------------ --------------------------
# of Amount # of Amount
Shares (000) Shares (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Issued and fully paid:
Balance beginning of period 31,004,707 $ 88,296 26,386,707 $ 56,076
Issued during the period:
For cash consideration under
the terms of
directors' and
employees' stock
options 138,000 833 118,000 796
---------- ---------- ---------- ----------
Balance end of period 31,142,707 $ 89,129 26,504,707 $ 56,872
========== ========== ========== ==========
</TABLE>
5. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES
Accounting in these interim consolidated financial statements under Canadian and
United States generally accepted accounting principles is substantially the same
except for accounting for income taxes and investments in equity securities.
(a) Income Taxes:
Under United States accounting principles there would be no deferred income tax
liability at December 31, 1996 and 1995; the amount reported for earnings for
the December 31, 1996 fiscal year would be decreased by $311,000; the amount
reported for loss for the six months ended December 31, 1995 would be increased
by $131,000; the amount reported for earnings for the fiscal year ended June 30,
1995 would be reduced by $86,000; and the amount reported for earnings for the
fiscal year ended June 30, 1994 would be increased by $1,679,000. It is not
expected that there would be a material difference in the consolidated
statements of operations and changes in financial position for the nine months
ended September 30, 1997, if they were prepared under United States generally
accepted accounting principles.
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(b) Accounting For Investments in Equity Securities
United States accounting principles require that investments that have readily
determinable fair values that are not held principally for the purpose of
selling them in the near term, but are available-for-sale, be presented at fair
value with their holding gains and losses reported in a separate component of
shareholders' equity until realized.
Accordingly, under United States accounting principles, other assets would be
decreased by $2,705,000 and would create an unrealized holding loss in
shareholders' equity at September 30, 1997 of the same amount (at December 31,
1996 there was an unrealized gain of $2,672,000).
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
SPECIAL NOTE CONCERNING FORWARD-LOOKING STATEMENTS
Except for the statements of historical fact contained herein, the information
presented constitutes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements, including but not limited to those with respect to the price of
gold, estimated future production, the Company's hedging policy and permitting
time lines, involve known and unknown risks, uncertainties, and other factors
which may cause the actual results, performance or achievements of the Company
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors include,
among others, the factual results of current exploration and development
activities, changes in project parameters as plans continue to be refined,
future prices of gold, as well as those factors discussed in the section
entitled "Other Considerations" in the Company's Annual Report on Form 10-K.
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SUMMARY OF RESULTS OF OPERATIONS
The following information should be read in conjunction with the unaudited
interim consolidated financial statements and related notes included herein
which are prepared in accordance with generally accepted accounting principles
in Canada for interim financial information. In all material respects, they
conform with those principles generally accepted in the United States, except as
described in note 5 of Item 1.
Gold production of 32,705 ounces for the three-month period ended September 30,
1997 represents an increase of 2% over the 32,133 ounces of gold produced during
the same three-month period in the prior fiscal year however, revenues derived
from gold production decreased from $12.3 million for the three-month period
ended September 30, 1996 to $10.3 million for the current period. The average
price for gold realized in the three-month period ended September 30, 1997 was
$315 per ounce compared to $383 per ounce for the same three-month period of the
prior fiscal year. This decrease in the price realized per ounce of gold reduced
revenue in the current three-month period by approximately $2.2 million compared
to the same three-month period in the prior fiscal year, while the 572 ounce
increase in production during the current three-month period increased revenue
by approximately $0.2 million. The Rand Mine produced 2,166 more ounces of gold
during the three-month period ended September 30, 1997, as compared to the same
three-month period in the prior fiscal year, while the Picacho Mine produced
1,819 less ounces of gold during the current period as compared to the same
three-month period in the prior fiscal year.
The downturn in the price of gold during the nine-month period ended September
30, 1997 is of concern to the Company. The Company's fundamental vision is to
remain a low cost profitable producer and, while the Company has achieved
greater production at lower costs, the Company must remain cognizant of the gold
price. In this regard the Company has initiated a cost containment program at
all facilities in an attempt to keep costs to a minimum. During the quarter
ended September 30, 1997, the Company implemented a policy of hedging a maximum
of 50,000 ounces of future gold production and pursuant to this the Company has
acquired put options for 42,000 ounces of gold at a strike price of $325 per
ounce over the next seven months. As at September 30, 1997, the Company also
held call options outstanding for 8,100 ounces of gold at $415 per ounce
expiring through December, 1997. These call
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options were acquired pursuant to a previous banking arrangement.
Gold production of 98,110 ounces for the nine-month period ended September 30,
1997 represents an increase of 13% over the 86,454 ounces of gold produced
during the same nine-month period in the prior fiscal year. The increase in
production during the current nine-month period was primarily due to increased
production of 10,119 ounces of gold at the Rand Mine with an additional increase
of 1,392 ounces of gold produced at the Picacho Mine.
The increase in production at the Rand Mine was the result of increasing the
size of the equipment of the mining fleet and bringing operations to full scale
at the Rand Processing facilities, which resulted in a higher flow rate of leach
solutions. The increase in production at the Picacho Mine was the result of a
better grade of ore being mined and an increase in the recovery rate of gold on
a year-to-date basis. It is expected that mining operations will be completed at
Picacho during the last quarter of 1997.
Revenue for the nine-month period ended September 30, 1997 decreased $0.9
million (3%) from that reported for the nine-month period ended September 30,
1996. The increase in production of 11,656 ounces of gold during the current
nine-month period increased revenues by approximately $3.9 million while the
decrease in revenue realized per ounce of gold from $389 per ounce in the
nine-month period ended September 30, 1996 to $334 per ounce in the current
nine-month period decreased revenues by $4.8 million.
The Company's cost of production of $7.7 million for the three-month period
ended September 30, 1997 increased by $1.8 million (31%) from the $5.9 million
experienced in the three-month period ended September 30, 1996. Production for
the current three-month period was almost the same as that for the same
three-month period of the prior fiscal year, however, there was an increase in
the average cash cost per ounce of production of approximately $53 per ounce, to
the $237 experienced in the three-month period ended September 30, 1997 from
$184 for the same three-month period ended in 1996. Increases in the cost of
production were experienced at both mines and are explained in the discussion of
individual operations.
Production increased by 11,656 ounces (13%) during the current nine-month period
as compared to the same period in the prior fiscal year. This resulted in the
cost of production for the nine-month period ended September 30, 1997 increasing
by $1.7
<PAGE> 12
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million (10%) to $19.6 million as compared to $17.9 million for the
nine-month period ended September 30, 1996. This increase in production
contributed to the decrease in the average cash cost of production to $200 per
ounce from the $207 per ounce experienced in the same nine-month period of the
prior fiscal year.
Exploration expenses for the three-month period ended September 30, 1997
decreased as compared to the same period in 1996 due to a lower level of
exploration activity.
Depreciation and depletion charges increased 12% for the nine-months ended
September 30, 1997 as compared to the same period in fiscal 1996, because of
higher production levels. Royalties during the nine-month period ended September
30, 1997, increased 16% as compared to the same period in 1996, primarily due to
the majority of the ore coming from the Yellow Aster Pit which has a higher
royalty rate compared to other areas at the Rand Mine. Other income increased
$0.7 million for the nine months ended September 30, 1997 as compared to the
same period in fiscal 1996 primarily due to interest income earned on higher
cash balances.
The net loss for the three-month period ended September 30, 1997 was $0.9
million ($0.03 per share) compared with net earnings of $1.3 million, $0.05 per
share for the same period during the prior fiscal year. While the Company
experienced a loss during the three-months ended September 30, 1997, positive
cash flow of $1.9 million was generated by operations.
The net loss for the nine-month period ended September 30, 1997 was $0.3 million
($0.01 per share) compared with net earnings of $2.0 million, $0.07 per share
for the same period in the prior fiscal year. Cash flow generated from
operations during the nine-month period ended September 30, 1997 was $10.5
million.
The Company is continuing its search for a new President and Chief Executive
Officer to replace A. Dan Rovig who retired on August 15, 1997. As at that date
Mr. Rovig's employment contract with the Company terminated without the Company
being liable for severance payments. Notwithstanding the foregoing, Mr. Rovig
has been engaged as a consultant to the Company for a period not to exceed one
year. Mr. Rovig's 100,000 share purchase option terminated on September 15,
1997.
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Effective August 1, 1997, Mr. Kevin McArthur assumed the position of Chief
Operating Officer, North America of the Company and effective August 15, 1997,
Mr. James R. Billingsley, the Company's Vice-President, Administration, assumed
the position of President and Chief Executive Officer of the Company on an
interim basis while the Company searches for a permanent replacement for Mr.
Rovig.
DISCUSSION OF INDIVIDUAL OPERATIONS
PICACHO MINE, IMPERIAL COUNTY, CALIFORNIA
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
For the three-month period ended September 30, 1997, gold production of 8,138
ounces was 18% lower than the 9,957 ounces of gold produced in the same
three-month period of the prior fiscal year. This was as a result of lower
tonnage being mined and a lower recovery rate during the current three months as
compared to the same period in the prior year.
The average cash cost per ounce of gold produced at the Picacho Mine for the
three-month period ended September 30, 1997 was $180 per ounce, compared to $137
for the three-month period ended September 30, 1996. Total costs were $256 per
ounce in the current period as compared to $221 per ounce for the same period in
the prior fiscal year. The increase in the total cost per ounce of $35 is a
function of the decrease in production levels rather than an increase in
operating costs and an increase in the accrual for the reclamation reserve for
the Mine.
During the three-month period ended September 30, 1997, 278,100 tons of ore
grading 0.050 ounces of gold per ton were placed on the heap leach pad compared
with the 425,000 tons of ore grading 0.039 ounces of gold per ton which were
placed on the heap leach pad during the same three-month period of the prior
fiscal year. 90,600 tons of waste was mined during the three-month period ended
September 30, 1997, which produced a stripping ratio of 0.3 tons of waste to one
ton of ore as compared to the stripping ratio in the same three-month period of
the prior fiscal year of 1.5 tons of waste to one ton of ore.
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NINE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
Production of 26,032 ounces of gold for the nine-month period ended September
30, 1997 was 1,392 ounces greater than the 24,640 ounce produced in the
nine-month period ended September 30, 1996. The average per ounce cash cost of
gold production at Picacho Mine for the nine-month period ended September 30,
1997 was $149 per ounce, compared to $154 per ounce for the nine-month period
ended September 30, 1996. Total costs of production for the nine-month period
ended September 30, 1997 were $252 per ounce of gold produced compared to $238
for the nine-month ended September 30, 1997. The increase of $14 per ounce in
the total cost of production was due primarily to an increase in the accrual for
reclamation reserve for the Mine.
During the nine-month period ended September 30, 1997, 904,700 tons of ore
grading 0.048 ounces of gold per ton were placed on the heap leach pad, compared
with the 1,237,200 tons of ore grading 0.034 ounces of gold per ton placed on
the heap leach pad during the same nine-month period in the last fiscal year.
425,900 tons of waste was mined during the current nine-month period, which
produced a stripping ratio of 0.5 tons of waste to one ton of ore as compared to
the stripping ratio in the same nine-month period of the prior fiscal year of
1.81 tons of waste to one ton of ore.
The Picacho Mine is expected to produce in excess of 30,000 ounces of gold for
the year ended December 31, 1997. Mining of the Dulcina Extention ore body,
which is the last known ore body on the property, is expected to be completed in
the last quarter of 1997, which is on target with the Company's projections for
life-of-mine. The Company anticipates that reclamation of the last pit will
begin in the first quarter of 1998. Reclamation is expected to be completed by
the year 2002 with ongoing re-vegetation monitoring thereafter, at a total
estimated net cost of $0.8 million of which $0.4 million has been budgeted for
1998.
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RAND MINE, KERN COUNTY, CALIFORNIA
THREE-MONTH PERIOD ENDED SEPTEMBER 30, 1997
For the three-month period ended September 30, 1997, gold production was 23,933
ounces, which is 10% greater than the 21,767 ounces of gold produced in the same
three-month period in the prior fiscal year.
The average cash cost per ounce of gold produced at the Rand Mine for the
three-month period ended September 30, 1997, was $258 per ounce compared to $205
for the three-month period ended September 30, 1996 and the total cost per ounce
of gold produced was $343 in the current three-month period compared with $290
for the same three-month period in the prior fiscal year.
The increase in the cash cost and total cost per ounce of $53 is due primarily
to the following two factors. Firstly, the waste rock mined during the quarter
was much more abrasive than anticipated resulting in more maintenance being
required on the bucket of the 2250 hydraulic shovel thus increasing the reliance
on the smaller 1550 hydraulic shovel which due to mechanical problems was unable
to maintain production. Secondly, Management determined that in order to
maximize productivity from the large hydraulic shovel at the Rand Mine the size
of the benches had to be increased from 20 feet to 30 feet. As a consequence of
the change, blasting inefficiencies occurred.
Management has taken positive action to remedy the above. A second rebuilt 2250
hydraulic shovel has been ordered at a cost of $2.2 million with delivery
expected in November. The addition of the second 2250 shovel and improved
blasting techniques are expected to increase production rates to planned levels
and should result in lower maintenance costs and less downtime.
During the three-month period ended September 30, 1997, 2,182,200 tons of ore
grading 0.014 ounces of gold per ton were placed on the heap leach pad compared
with the 2,117,100 tons of ore grading 0.018 ounces of gold per ton which were
placed on the heap leach pad during the same three-month period in the prior
fiscal year. 2,854,100 tons of waste was mined during the three-month period
ended September 30, 1997, which produced a stripping
<PAGE> 16
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ratio of 1.3 tons of waste to one ton of ore as compared to the stripping
ratio for the same three-month period in the prior fiscal year of 0.5 tons of
waste to one ton of ore.
NINE-MONTH ENDED SEPTEMBER 30, 1997
Production of 71,110 ounces of gold for the nine-month period ended September
30, 1997 was 10,119 ounces greater than the 60,991 ounces produced in the
nine-month period ended September 30, 1996. This increase in production is the
result of loading significantly more ore on the heap leach pad at the Rand
Facilities over the past year.
The average per ounce cash cost of gold production at the Rand Mine for the
nine-month period ended September 30, 1997 was $218 per ounce compared to $227
per ounce for the nine-month period ended September 30, 1996. Total costs of
production were $297 per ounce of gold produced for the nine-month period ended
September 30, 1997 compared to $314 per ounce for the same nine-month period
during 1996. The lower cost per ounce during the current nine-month period is a
result of the efficiencies experienced at the mine due to the implementation of
the Rand Mine optimization plan announced in the second quarter of 1996 and
implemented in the fourth quarter of 1996 and the current year despite third
quarter issues noted previously.
During the nine-month period ended September 30, 1997, 5,193,000 tons of ore
grading 0.018 ounces of gold per ton were placed on the heap leach pad compared
with the 6,487,300 tons of ore grading 0.018 ounces of gold per ton which were
placed on the heap leach pad during the same nine-month period of the last
fiscal year. 10,216,400 tons of waste was mined during the current nine-month
period, which produced a stripping ratio of 2.0 tons of waste to one ton of ore
as compared to the stripping ratio in the same nine-month period of the prior
year of 0.6 tons of waste to one ton of ore.
It is expected that the Rand Mine will achieve its production target of
approximately 90,000 ounces of gold for the year ended December 31, 1997.
IMPERIAL PROJECT, IMPERIAL COUNTY, CALIFORNIA
The permitting process is continuing at the Imperial Project. During the
three-month period
<PAGE> 17
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ended September 30, 1997, the Company completed revised cultural studies which
the Bureau of Land Management ("BLM") determined were required at the Project
area to facilitate completion of the Company's Environmental Impact Statement
("EIS"). The Draft EIS is expected to be published in the Federal Registry in
late November. The time required to complete the additional work, including the
re-circulation and a 30-day final review period, could delay the Record of
Decision of the BLM to the second quarter of 1998. Project construction is
expected to begin in July of 1998. Gold production is scheduled to commence in
late 1998 or early 1999.
The Company is currently unaware of any additional permitting delays and is
proceeding with project engineering and design.
CIENEGUITA PROJECT, CHIHUAHUA, MEXICO
During the three-month period ended September 30, 1997, the Company was credited
with 634 ounces of gold production (968 ounces of gold for the nine-month period
ended September 30, 1997) compared with 409 ounces of gold for the three-month
period ended September 30, 1996 (823 ounces of gold in the nine-month period
ended September 30, 1996). During July 1997, the Company completed construction
of a third heap leach pad with a capacity of 15,000 tons at the site.
It is expected that the Company will be credited with approximately 1,500 ounces
of gold produced from this project during the year ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $38.6 million at September 30, 1997 compared
to $38.7 million at December 31, 1996. The long-term liabilities consisting of
reserves for reclamation and deferred taxes totalled $3.2 million at September
30, 1997 compared with $2.7 million at December 31, 1996. Included in the
working capital at September 30, 1997 was cash of $28.2 million, while there was
$26.5 million in cash at December 31, 1996.
The Company's major capital expenditures during the three months ended September
30, 1997 were: $0.8 million in progress payments on the electric shovel for the
Imperial Project ($6.2
<PAGE> 18
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million for the nine months ended September 30, 1997); $0.7 million in
permitting costs for the Imperial Project and $0.3 million for the acquisition
of three parcels of land for exploration purposes. For the nine-month period
ended September 30, 1997, $1.5 million was expended for Imperial Project
permitting and engineering in addition to the outlays for the electric shovel.
During the remainder of 1997, capital expenditures at the Rand Mine are
estimated at $3.5 million which includes $2.2 million for the purchase of a
rebuilt hydraulic shovel and $1.1 million for drilling and land acquisition
costs. The Imperial Project will require approximately $0.8 million for ongoing
permitting and design.
The Company recently commenced the first stage of a $1.0 million staged
exploration program on property located at the Rand Mine.
The Company is currently replacing its outstanding Letters of Credit which are
used to provide security for reclamation purposes and swapping them for
reclamation bonds being issued from a bonding company. The Company entered into
an agreement with a bonding company to issue reclamation bonds and must provide
collateral in the form of cash or an Irrevocable Letter of Credit from a
financial institution in an amount equal to 15% of the face value of the bonds
issued.
The Company and its current lending institution have not come to an agreement to
renew the current line of credit. At the present time no credit is available to
the Company. The Company is continuing its dialogue with the lending institution
and is also considering new sources of financing.
Estimated cashflow from operations of $3.0 million and cash on hand of $28.2
million should be sufficient to fund the Company's estimated capital
expenditures for the year ended December 31, 1997 . The Company has no
outstanding debt other than current liabilities. The Company is in good
financial position to continue with its production goals during this period of
low gold prices. Management continuously reviews the effect of the decline in
gold price on the viability of its operations.
<PAGE> 19
-17-
HEDGING
During the three-month period ended September 30, 1997, the Company implemented
a policy to hedge a maximum of 50,000 ounces of future gold production and
pursuant to this the Company has acquired put options for 42,000 ounces of gold
with a strike price of $325 per ounce expiring through April, 1998. As at
September 30, 1997, the Company had call options outstanding for 8,100 ounces of
gold at $415 per ounce expiring through December 1997. These remaining call
options result from previous banking arrangements.
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS:
The Company is defending an action, initiated on September 22, 1995 against Rand
and Glamis Gold, Inc. by Rand Communities Water District in the Kern County,
California Superior Court, for Declaratory and Injunctive Relief. There have
been no material changes in the matter from that disclosed in Item 3 of the
Company's Form 10-K dated March 26, 1997.
David Robert Johnson served Rand and Glamis Gold, Inc. on February 26, 1996 with
notice of an action commenced by him in the Kern County, California Superior
Court against Rand and Glamis Gold, Inc. for injunctive relief and damages.
There have been no material changes in the matter from that disclosed in Item 3
of the Company's Form 10-K dated March 26, 1997.
ITEM 2 CHANGES IN SECURITIES: None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES: None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS: None
ITEM 5 OTHER INFORMATION: None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
<PAGE> 20
-18-
(a) Exhibits
Exhibit No. Exhibit Description
27 Financial Data Schedule
(b) Reports on Form 8-K: A report on Form 8-K filed July 10,
1997 with respect to the retirement of A. Dan Rovig as the
Company's President, Chief Executive Officer and as a
Director, effective August 15, 1997.
<PAGE> 21
-19-
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GLAMIS GOLD LTD.
--------------------------------------------
(Registrant)
October 31, 1997
/s/ Lorne B. Anderson
--------------------------------------------
LORNE B. ANDERSON
Chief Financial Officer & Treasurer
(Principal Accounting and Financial Officer)
<PAGE> 22
-20-
EXHIBIT INDEX
Exhibit No. Description Page No.
- ----------- ----------- --------
27 Financial Data Schedule 21
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) GLAMIS
GOLD LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTH PERIOD ENDED
SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 10Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 28,182
<SECURITIES> 0
<RECEIVABLES> 301
<ALLOWANCES> 0
<INVENTORY> 13,022
<CURRENT-ASSETS> 232
<PP&E> 120,884
<DEPRECIATION> 61,707
<TOTAL-ASSETS> 106,177
<CURRENT-LIABILITIES> 3,165
<BONDS> 3,167
0
0
<COMMON> 89,129
<OTHER-SE> 10,716
<TOTAL-LIABILITY-AND-EQUITY> 106,177
<SALES> 32,748
<TOTAL-REVENUES> 32,748
<CGS> 19,635
<TOTAL-COSTS> 19,635
<OTHER-EXPENSES> 13,187
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94
<INCOME-PRETAX> (168)
<INCOME-TAX> 174
<INCOME-CONTINUING> (342)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (342)
<EPS-PRIMARY> (0.01)
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