<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 March 31, 1998.
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)
GLAMIS GOLD LTD.
(Exact name of Registrant as specified in its charter)
British Columbia, Canada None
(Jurisdiction of incorporation (Identification No.)
or organization) (IRS Employer
5190 Neil Road, Suite 310, Reno, Nevada, 89502
(Address of Principal Executive Offices)
702-827-4600
(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 May 9,
1998, was 31,245,707.
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GLAMIS GOLD LTD.
INDEX
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<CAPTION>
Page
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Part I - Financial Information
Item 1. Financial Statements.................................................... 1
Consolidated Balance Sheets as at March 31, 1998
and December 31, 1997............................................... 1
Consolidated Statements of Earnings for the three months ended
March 31, 1998 and 1997............................................. 2
Consolidated Statements of Retained Earnings for the three months
ended March 31, 1998 and 1997....................................... 2
Consolidated Statements of Changes in Financial Position for the
three months ended March 31, 1998 and 1997.......................... 3
Notes to Interim Consolidated Financial Statements.................. 4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations............................................... 6
Part II - Other Information
Item 1. Legal Proceedings........................................................ 9
Item 2. Changes in Securities................................................... 10
Item 3. Defaults Upon Senior Securities......................................... 10
Item 4. Submission of Matters to a Vote of Security Holders..................... 10
Item 5. Other Information....................................................... 10
Item 6. Exhibits and Reports on Form 8-K........................................ 10
Signatures...................................................................... 11
Exhibit Index .................................................................. 12
</TABLE>
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[Part I - Item 1]
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
ASSETS
Cash $ 29,146 $ 26,913
Other current assets (note 3) 12,195 14,024
-------- --------
Current assets 41,341 40,937
Plant and equipment and mine development costs 57,685 58,074
-------- --------
Other assets 2,601 2,632
-------- --------
$101,627 $101,643
======== ========
LIABILITIES
Current liabilities $ 4,043 $ 4,507
Long term liabilities 4,747 4,707
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:
31,245,707 common shares (1997 - 31,222,707) 89,724 89,650
Contributed surplus 63 63
Retained earnings 3,050 2,716
-------- --------
92,837 92,429
-------- --------
$101,627 $101,643
======== ========
</TABLE>
Prepared by Management without audit
Approved by the Directors:
/s/ C.F. Millar /s/ C. Kevin McArthur
------------------------------ -------------------------------
Director Director
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CONSOLIDATED STATEMENTS OF EARNINGS
(Expressed in thousands of U.S. dollars)
(Except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
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<S> <C> <C>
Revenue from gold production $ 8,955 $ 11,359
Cost of production 5,186 5,549
-------- --------
3,769 5,810
-------- --------
Expenses
Depreciation & depletion 2,302 2,923
Royalties 640 819
Selling, general & administrative 678 810
Exploration 5 33
-------- --------
3,625 4,585
-------- --------
Earnings from operations 144 1,225
Interest expense 10 25
Other (income) expense (351) (356)
-------- --------
Earnings before income taxes 485 1,556
Provision for income taxes 151 405
-------- --------
Net earnings $ 334 $ 1,151
======== ========
Earnings per share $ 0.01 $ 0.04
======== ========
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
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<S> <C> <C>
Retained earnings, beginning of period $ 2,716 $ 12,529
Net earnings 334 1,151
Dividends -- (1,534)
-------- --------
Retained earnings, end of period $ 3,050 $ 12,146
======== ========
</TABLE>
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CONSOLIDATED STATEMENTS OF CHANGES IN FINANCIAL POSITION
(Expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
Three Months Ended March 31,
1998 1997
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<S> <C> <C>
OPERATING ACTIVITIES
Net earnings $ 334 $ 1,151
Adjustment for items not affecting working capital 2,372 3,058
Net changes in non-cash working capital 1,364 (10)
-------- --------
Net cash provided by operations 4,070 4,199
Net investment activities (1,912) (5,819)
-------- --------
FINANCING ACTIVITIES
Stock issues 74 524
Dividends paid -- (1,534)
-------- --------
Net financing activities 74 (1,010)
-------- --------
Increase (decrease) in cash 2,232 (2,630)
Cash, beginning of period 26,913 26,493
-------- --------
Cash, end of period $ 29,145 $ 23,863
======== ========
</TABLE>
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GLAMIS GOLD LTD.
Notes to Interim Consolidated Financial Statements
(tables expressed in thousands of United States Dollars)
Three Months Ended March 31, 1998
1. GENERAL
In the opinion of management, the accompanying unaudited interim consolidated
balance sheet and interim 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 March 31, 1998 and the results of its
operations and changes in its financial position for the three months ended
March 31, 1998 and 1997. The results of operations for the three months ended
March 31, 1998, 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, 1997.
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. Material exchange gains and losses are deferred and included as
a separate component of shareholder's equity.
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.
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3. OTHER CURRENT ASSETS
Included in other current assets are the following inventories:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
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<S> <C> <C>
Finished goods $ 1,947 $ 3,403
Work-in-progress 7,797 8,256
Supplies and spare parts 500 560
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$10,244 $12,219
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</TABLE>
4. SHARE CAPITAL
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1998 March 31, 1997
-------------------------- --------------------------
# of Shares Amount # of Shares Amount
(000) (000)
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Issued and fully paid:
Balance beginning of period 31,222,707 $ 89,650 31,004,707 $ 88,296
Issued during the period:
For cash consideration under
the terms of
directors' and 13,000 74 88,000 524
employees' stock
options
---------- ---------- ---------- ----------
Balance end of period 31,245,707 $ 89,724 31,092,707 $ 88,820
========== ========== ========== ==========
</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.
However, these differences have no material effect on the amounts presented in
the financial statements as at March 31, 1998 or for the three months ended
March 31, 1998 or 1997.
ITEM 2. MANAGEMENT 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 involve known and unknown
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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 activities, conclusions of feasibility studies
now underway, 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.
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 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 for the three-month period ended March 31, 1998 was 27,337
ounces, which produced revenues of $9.0 million. This compares with production
of 32,954 ounces of gold and revenues of $11.4 million for the three-month
period ended March 31, 1997. The gold production for the three-month period
ended March 31, 1998 represents a decrease of 17% over the same three-month
period ended March 31, 1997. The average realized price for gold for the
three-month period ended March 31, 1998 was $328 per ounce compared to $345 per
ounce for the same period of the prior year. The decrease in the price realized
per ounce reduced revenue in the quarter by approximately $0.6 million compared
to last year, while the 5,617 ounce decrease in production decreased revenue by
approximately $1.8 million. The Rand Mine produced 2,304 fewer ounces of gold
during the quarter ended March 31, 1998, while the Picacho Mine experienced a
decrease of 3,679 ounces of gold during the period.
The decrease in production at the Rand Mine was the result of mining lower grade
material during the quarter.
With the cessation of mining at the Picacho Mine, production decreased since a
relatively small amount of new ore was placed on the heap during the quarter.
The Company's cost of production of $5.2 million for the three-month period
ended March 31, 1998 compared to $5.5 million in the quarter ended March 31,
1997. Since production was lower in the current quarter, the result was an
increase in the Company's average cash cost per ounce of production of
approximately $22 ($190 in the first quarter of the current year vs. $168 in the
first quarter of the prior year) with a decrease in the per ounce cash cost of
production being experienced at Picacho and an increase at Rand as noted below.
For the quarter ended March 31, 1998 compared to the same period in 1997,
depreciation and depletion charges and royalties decreased because of the lower
production levels. With the closure of the Vancouver office and the
consolidation of functions at our Reno office during the current period,
administrative expense decreased 16% in the three months ended March 31, 1998
compared to three-month period ended March 31, 1997.
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Net earnings for the quarter ended March 31, 1997 was $0.3 million ($0.01 per
share), compared with $1.2 million ($0.04 per share) for the same period last
year.
OPERATIONS REVIEW
PICACHO MINE, IMPERIAL COUNTY, CALIFORNIA
Production of 5,689 ounces of gold for the three months ended March 31, 1998 was
40% less than the 9,368 ounces of gold produced in the same quarter of fiscal
1997. Average cash cost per ounce of gold produced at the Picacho Mine for the
three-month period ended March 31, 1998 was $113 per ounce, compared to $131 for
the three months ended March 31, 1997 and total costs were $215 per ounce in the
current period compared to $245 per ounce for the same period in 1996. The
reduction in cost on a per ounce basis is a reflection of reduced staffing
levels and the cessation of mining operations as a result of depleting all of
the reserves at the mine during the prior year. During the three months ended
March 31, 1998, 73,100 tons of ore grading 0.035 ounces of gold per ton were
mined compared with 300,200 tons of ore grading 0.041 ounces of gold per ton
mined during the same period in 1997. 14,200 tons of waste was mined during the
period ended March 31, 1998, which produced a stripping ratio of 0.2 tons of
waste to one ton of ore. The stripping ratio in the prior year was 0.7 tons of
waste to one ton of ore.
The Picacho Mine is expected to produce in excess of 13,000 ounces of gold for
the year ended December 31, 1998 from ore already stacked on the heap.
RAND MINE, KERN COUNTY, CALIFORNIA
Production from the Rand Mine was 21,209 ounces of gold for the three month
period ended March 31, 1998 compared with 23,513 ounces for the same period in
1997. The decrease in production at the Rand Mine was the result of mining lower
grade material during the quarter.
Average cash cost per ounce of gold produced at the Rand Mine was $209 per ounce
of gold for the three months ended March 31, 1998 compared with $181 per ounce
of gold production for the same period in 1997. Total cost per ounce of gold
production was $289 for the current quarter compared with $256 for the same
period a year ago. The lower costs in the prior year reflect the capitalization
of waste tons moved in excess of the life of mine strip ratio. Also the decrease
in production from the lower ore grades added to the increase in costs.
During the three months ended March 31, 1998, 1,891,200 tons of ore grading
0.017 ounces of gold per ton compared with 1,391,300 tons of ore grading 0.024
ounces of gold per ton during the same period of the last year were placed on
the heap leach pad. 2,725,600 tons of waste was mined during the period ended
March 31, 1998, which produced a stripping ratio of 1.4 tons of waste to one ton
of ore. The stripping ratio in the prior year was 2.4 tons of waste to one ton
of ore.
It is expected that the Rand Mine will achieve its production target of
approximately 88,000
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ounces of gold for the year ended December 31, 1998.
IMPERIAL PROJECT, IMPERIAL COUNTY, CALIFORNIA
The permitting process continues at the Imperial Project. The comment period for
the Draft Environmental Impact Statement ("EIS") ended on April 13, 1998, after
4 1/2 months. The next step of answering comments in the Final EIS is expected
to require between 150 to 180 days. It is anticipated that the Bureau of Land
Management will issue a Record of Decision in December 1998. Following a 30 day
appeal period after the Record of Decision is issued, construction may begin on
or after February 1, 1999. Based upon a timely conclusion of the permitting
process and assuming gold prices are acceptable, first production from this
project is expected in the second quarter of 1999. In prior periods, the Company
had paid deposits totaling $7.2 million (92% of the total cost of $7.8 million)
on a P&H 4100A electric shovel, stored at the supplier's site. Major capital
expenditures for the Imperial Project have been postponed until all permits are
received and the price of gold improves. Management continues to seek a suitable
buyer for the shovel but does not intend to sell the equipment at a loss.
CIENEGUITA PROJECT, CHIHUAHUA, MEXICO
During the three months ended March 31, 1998, the Company was credited with 439
ounces of gold production compared with 73 ounces of gold during the three
months ended March 31, 1997. During the quarter, the Company reloaded the heap
leach pads at the site with approximately 45,645 tonnes of new ore. It is
expected that the Company will be credited with approximately 1,500 ounces of
production from this project during the year ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $37.3 million at March 31, 1998 compared to
$36.4 million at December 31, 1997. The long-term liabilities consisting of
reserves for reclamation and deferred taxes totaled $4.7 million at March 31,
1998 and December 31, 1997. Included in the working capital at March 31, 1998
was cash of $29.1 million, compared to $26.9 million in cash at December 31,
1997.
The Company's major capital expenditures during the three months ended March 31,
1998 were $1.5 million in construction costs on the Rand leach pad expansion and
$0.3 million spent on permitting activities at the Imperial Project.
During the remainder of 1998, the continuing permitting of the Imperial Project
will require approximately $1.8 million, completing construction of the Rand
leach pad expansion will require approximately $3.5 million and exploration in
the area of the Rand Mine will require approximately $0.7 million.
Estimated cashflow from operations and cash on hand of $29.1 million should be
sufficient to
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fund the capital expenditures for the year ended December 31, 1998.
HEDGING
The Company's current policy adopted during the quarter ended March 31, 1998
allows management to hedge as needed up to 60% of planned production. As at
March 31, 1998, the Company had a put option contract outstanding for 6,000
ounces of gold at $325 per ounce which was exercised during April 1998. The
Company also entered into spot deferred sales contracts at various times during
the quarter for a total of 33,000 ounces of gold averaging $297 with various
value dates through August 1998.
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. The Company is
currently holding settlement discussions with the District. There have been no
other material changes in the matter from that disclosed in Item 3 of the
Company's Form 10-K dated March 23, 1998.
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. An
interim judgment against Mr. Johnson was entered March 5, 1998 which will become
final with the resolution of the Rand Communities Water District suit. For
further details on this matter reference should be made to the disclosure in
Item 3 of the Company's Form 10-K dated March 23, 1998.
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:
(a) Exhibits
Exhibit No. Exhibit Description
27 Financial Data Schedule
(b) Reports on Form 8-K: None
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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)
May 1, 1998
/s/ DANIEL J. FORBUSH
------------------------------------
Daniel J. Forbush
Chief Financial Officer, Treasurer &
Secretary (Principal Accounting and
Financial Officer)
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
- ----------- ----------- --------
<S> <C> <C>
27 Financial Data Schedule 11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLAMIS GOLD
LTD - CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTH PERIOD ENDED MARCH
31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 29,146
<SECURITIES> 0
<RECEIVABLES> 1,337
<ALLOWANCES> 0
<INVENTORY> 10,340
<CURRENT-ASSETS> 41,341
<PP&E> 123,220
<DEPRECIATION> (65,984)
<TOTAL-ASSETS> 101,627
<CURRENT-LIABILITIES> 4,043
<BONDS> 4,747
0
0
<COMMON> 89,724
<OTHER-SE> 3,112
<TOTAL-LIABILITY-AND-EQUITY> 101,627
<SALES> 8,955
<TOTAL-REVENUES> 8,955
<CGS> 5,186
<TOTAL-COSTS> 5,186
<OTHER-EXPENSES> 3,283
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 486
<INCOME-TAX> 152
<INCOME-CONTINUING> 334
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 334
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
