<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 June 30, 1999
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.
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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)
5190 Neil Road, Suite 310, Reno, Nevada, 89502
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(Address of Principal Executive Offices)
775-827-4600
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(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 August
6, 1999, was 68,889,432.
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GLAMIS GOLD LTD.
INDEX
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<CAPTION>
Page
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<S> <C> <C>
Part I Financial Statements
Item 1. Financial Statements 3
Consolidated Balance Sheets as at June 30, 1999 and December 31, 1998 3
Consolidated Statements of Earnings for the three months and the six months
ended June 30, 1999 and 1998 4
Consolidated Statements of Retained Earnings for the three months and the six
months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows for the three months and the six months
ended June 30, 1999 and 1998 5
Notes to Interim Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations 8
Item 3. Qualitative and Quantitative Disclosures About Market Risk 15
Part II Other Information 17
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 18
Exhibit Index 17
</TABLE>
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[Part I - Item 1]
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars)
<TABLE>
<CAPTION>
JUNE 30, December 31,
1999 1998
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<S> <C> <C>
ASSETS
Cash $ 31,707 $ 26,170
Other current assets (note 3) 21,554 12,048
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Current assets 53,261 38,218
Plant and equipment and mine development costs, net 124,130 79,655
Other assets 8,586 1,288
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$ 185,997 $ 119,161
======================================================================================
LIABILITIES
Current liabilities $ 15,844 $ 4,062
Long term liabilities 17,975 4,740
SHAREHOLDERS' EQUITY
Share capital (note 5):
Authorized:
200,000,000 common shares without par value
5,000,000 preferred shares, $10 par value,
issuable in Series
Issued and fully paid:
68,889,432 common shares (1998 - 38,860,612) 157,292 109,587
Contributed surplus 63 63
Cumulative translation adjustment 97 --
Retained earnings (deficit) (5,294) 709
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152,158 110,359
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$ 185,977 $ 119,161
======================================================================================
</TABLE>
Prepared by Management without audit
Approved by the Directors:
"signed" "signed"
--------------------- ---------------------
C. Kevin McArthur A. Dan Rovig
Director Director
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CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of U.S. dollars)
(Except per share amount)
<TABLE>
<CAPTION>
Three months ended Six months Ended
June 30, June 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Revenue from production $ 14,758 $ 8,189 $ 22,744 $ 17,144
Cost of production 13,522 5,434 20,712 10,620
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1,236 2,755 2,032 6,524
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Expenses
Depreciation & depletion 2,318 2,228 4,425 4,530
Royalties 874 454 1,241 1,094
Selling, general, administration 1,095 668 2,297 1,346
Exploration 1,314 2 1,961 7
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5,601 3,352 9,924 6,977
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Earnings (loss) from operations (4,365) (597) (7,892) (453)
Interest expense 170 87 170 97
Other (income) expense (1,730) (542) (1,647) (893)
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Earnings (loss) before
income taxes (2,805) (142) (6,415) 343
Provision for (benefit from)
income taxes (124) (11) (412) 140
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Net earnings (loss) $ (2,681) $ (131) $ (6,003) $ 203
=============================================================================================
Earnings (loss) per share $ (0.03) $ 0.00 $ (0.10) $ 0.01
=============================================================================================
</TABLE>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
(Expressed in thousand of U.S. dollars)
<TABLE>
<CAPTION>
Three months ended Six months Ended
June 30, June 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Retained earnings
(deficit) beginning of period $ (2,613) $ 3,050 $ 709 $ 2,716
Net earnings (loss) (2,681) (131) (6,003) 203
Dividends -- -- -- --
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Retained earnings (deficit)
end of period $ (5,294) $ 2,919 $ (5,294) $ 2,919
=============================================================================================
</TABLE>
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousand of U.S. dollars)
<TABLE>
<CAPTION>
Three months ended Six months Ended
June 30, June 30,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net earnings (loss) $ (2,681) $ (131) $ (6,003) $ 203
Adjustment for items not
affecting working capital 1,336 2,348 3,928 4,720
Net changes in non-cash working capital (1,449) 666 539 2,030
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NET CASH PROVIDED BY
(USED IN) OPERATIONS (2,794) 2,883 (1,536) 6,953
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CASH FLOWS FROM (USED IN)
INVESTING ACTIVITIES*
Capital expenditures (5,796) (3,307) (8,763) (5,569)
Business acquisition 3,623 -- 10,769 --
Other assets 1,812 -- 3,289 350
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NET INVESTMENT ACTIVITIES (361) (3,307) 5,295 (5,219)
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CASH FLOWS FROM (USED IN)
FINANCING ACTIVITIES
Stock issues 644 -- 787 74
Cumulative translation adjustment 97 (61) 97 (61)
Notes payable (7,734) -- 894 --
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NET FINANCING ACTIVITIES (6,993) (61) 1,778 13
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Increase (decrease) in cash (10,148) (485) 5,537 1,747
Cash, beginning of period 41,855 29,145 26,170 26,913
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Cash, end of period $ 31,707 $ 28,660 $ 31,707 $ 28,660
====================================================================================================
</TABLE>
* NON-CASH INVESTING ACTIVITIES
The acquisition of all issued and outstanding shares of Rayrock Resources
Inc.,for consideration as follows:
<TABLE>
<S> <C> <C>
Calculated fair value of assets received $94,941
Less : cash and actual plus estimated transaction costs at June 30, 1999 48,022
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Consideration paid through the issuance of common shares $46,919
</TABLE>
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GLAMIS GOLD LTD.
Notes to Interim Consolidated Financial Statements
(tables expressed in thousands of United States dollars)
Six months ended June 30, 1999
1. GENERAL
In the opinion of management, the accompanying unaudited consolidated balance
sheet and consolidated statements of operations, consolidated statements of
retained earnings and consolidated statements of cash flows contain all
adjustments, consisting only of normal recurring accruals, necessary to present
fairly, in all material respects, the financial position of Glamis Gold Ltd.
(the "Company") as of June 30, 1999 and December 31, 1998 and the consolidated
results of its operations and its cash flows for the three months and six months
ended June 30, 1999 and 1998. The results of operations for the six months ended
June 30, 1999 are not necessarily indicative of the results to be expected for
the entire fiscal year.
These unaudited interim financial statements should be read in conjunction with
the Company's audited consolidated financial statements and related footnotes
included in the Company's annual report filed on Form 10-K for the year ended
December 31, 1998. Certain of the comparative figures have been reclassified to
conform with the current period's presentation.
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 7 hereof.
2. ACQUISITION OF RAYROCK RESOURCES INC.
In March 1999, the Company completed the acquisition of 100% of the issued and
outstanding shares of Rayrock Resources Inc. ("Rayrock"), an Ontario
corporation. The Company issued 29,277,820 common shares and paid Cdn.
$52,883,007 (approximately U.S. $35.0 million) in connection with the
acquisition. The acquisition was accounted for as a purchase and, accordingly
the financial statements presented herein reflect the consolidated position of
the Company, including Rayrock, as at June 30, 1999 but only include the
operating results of the acquired operations for the period March-June 1999.
3. OTHER CURRENT ASSETS
Included in other current assets are the following inventories:
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
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<S> <C> <C>
Finished goods $ 7,825 $ 4,048
Work-in-progress 5,647 5,835
Supplies and spare parts 2,867 746
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$16,340 $10,629
======= =======
</TABLE>
4. NOTE PAYABLE
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To facilitate the acquisition of Rayrock, the Company negotiated a bridge loan
effective March 1, 1999 of Cdn. $13 million (approximately U.S. $8.7 million) at
the bank's prime rate plus 0.75%. The loan was secured by cash balances and was
payable on or before April 30, 1999. In April 1999 this loan was fully paid.
5. SHARE CAPITAL
<TABLE>
<CAPTION>
Six Months Ended Six Months Ended
June 30, 1999 June 30, 1998
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# OF Amount # of Amount
SHARES (in 000's) Shares (in 000's)
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<S> <C> <C> <C> <C>
Issued and fully paid:
Balance at beginning of period 38,860,612 $ 109,587 31,222,707 $ 89,650
Issued during the period:
For cash consideration
under the terms of
Directors' and
Employee's stock Options 751,000 786 23,000 74
Issued upon acquisition of
Rayrock (see note 2) 29,277,820 46,919 -- --
---------- ---------- ---------- ----------
Balance at End of Period 68,889,432 $ 157,292 31,245,707 $ 89,724
========== ========== ========== ==========
</TABLE>
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6. SEGMENT REPORTING
As at June 30, 1999 and for the six months ended June 30, 1999 (in
thousands of dollars)
(a) Operating segments:
<TABLE>
<CAPTION>
Exploration
Producing and
Mines Development
Gold Copper Properties Corporate Total
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<S> <C> <C> <C> <C> <C>
1999
Revenue $ 18,806 $ 3,716 $ 222 $ -- $ 22,744
Earnings (loss) from operations $ (1,950) $ (2,537) $ (1,063) $ (2,342) $ (7,892)
Net earnings (loss) $ (1,533) $ (2,543) $ (1,062) $ (865) $ (6,003)
Identifiable assets $ 65,931 $ 29,398 $ 48,315 $ 42,833 $ 185,977
1998
Revenue $ 17,144 $ -- $ -- $ -- $ 17,144
Earnings (loss) from operations $ 900 $ -- $ (7) $ (1,346) $ (453)
Net earnings (loss) $ 900 $ -- $ (7) $ (690) $ 203
</TABLE>
(b) Geographic Information:
<TABLE>
<CAPTION>
North America Central & South America Total
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<S> <C> <C> <C>
Revenue $ 19,028 $ 3,716 $ 22,744
Earnings (loss) from operations $ (4,228) $ (3,664) $ (7,892)
Identifiable Assets $ 109,378 $ 76,599 $ 185,977
</TABLE>
As at June 30, 1998 and for the six months then ended, all revenues, earnings
and identifiable assets were in North America.
7. 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 consolidated financial statements as at June 30, 1999 or December 31, 1998,
or for the three months and six months ended June 30, 1999 or 1998.
ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL REVIEW
Glamis Gold Ltd. (the "Company") continues to focus on being a quality,
cost-effective gold producer. With the current depressed world gold market the
Company continues its cost containment programs at all locations.
The Company is actively seeking growth opportunities. In March 1999 the Company
acquired
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Rayrock Resources Inc. ("Rayrock") (refer to note 2 to the financial
statements). This acquisition added three operating mines to the Company with
expected annual output of over 100,000 ounces of gold to Glamis' account as well
as the Ivan copper mine in Chile.
As noted previously, the financial statements of the Company reflect the
acquisition of Rayrock effective March 1999. Accordingly, the Company's
consolidated balance sheet includes the assets and liabilities of Rayrock as at
June 30, 1999. However, the Company's statement of operations reflects a
complete six months for the Glamis operations, but only four months (March -
June 1999) of the newly acquired operations. Certain of the information provided
below is not reflected in the financial statements, but is provided to inform
readers of the performance of the various properties both prior to and
subsequent to the acquisition date.
The Company reported a first half loss of $6.0 million ($0.10 per share)
compared to earnings of $0.2 million ($0.01 per share) in the first six months
of 1998. The difference is attributable to a $2.5 million loss from the Ivan
mine, $0.7 million from decreased production, primarily at Rand, as well as $1.0
million reduction in profits resulting from the decline in the realized price in
gold. Exploration expenses and selling, general and administrative charges (net
of interest income and tax credits) increased approximately $1.7 million in the
first half of 1999 compared to a year earlier. Selling, general and
administrative activities were $1.0 million greater during the first six months
of 1999 as compared to same period in 1998. The increase is attributable to
staffing changes, relocating and consolidation of corporate functions in the
Reno office. Other income was positively affected by sales of several investment
securities during the first half of 1999.
Losses for the second quarter of 1999 were $2.7 million compared to a loss of
$0.1 million in 1998. A $1.3 million loss at Ivan and $1.3 million in
exploration expenses were the primary differences in the performance this
quarter. Lower production at Rand and Picacho along with a lower realized gold
price was offset by sales of investment securities (included in other income).
The selling, general and administrative activities increased $0.4 compared to
the second quarter of 1998. Consolidation of activities in the Reno corporate
office as well as changes in staffing resulting from our Mar-West and Rayrock
acquisitions account for these increases.
LIQUIDITY AND CAPITAL RESOURCES
The Company had working capital of $37.4 million at June 30, 1999, an increase
of $3.2 million from December 31, 1998. Long term liabilities were $18.0 million
at June 1999 compared to $4.7 million at December 31, 1998. This increase is due
almost entirely to reclamation reserves and deferred taxes attributable to the
Rayrock acquisition. As noted, the Company had a bridge loan (to facilitate the
Rayrock acquisition) of $8.7 million outstanding from March 1, 1999 which was
paid off on April 30, 1999.
The Company's capital expenditures for the second quarter of 1999 were $5.8
million. The major expenditures were $0.9 million for deferred stripping at the
Rand mine, $1.5 million spent at San Martin, for land acquisition and the
feasibility study, $1.6 million on the new Dee underground project; and $0.9 for
stripping at Ivan. All capital expenditures were financed from the Company's
working capital. During the first six months of 1999 the Company's operations
used $1.5 million in cash. $2.6
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million was used at Ivan, while the Company's
gold operations contributed $4.2 million. The difference in cash used is
attributable to an increase in finished goods inventory reflecting unsold gold
ounces held by the Company at the end of June 1999, as well as a corresponding
reduction in accounts receivable. Lower gold and copper prices continue to
negatively impact cash flows. Comparative production highlights of the first two
quarters of 1999 and 1998 respectively are as follows:
PRODUCTION/REVENUE DATA
<TABLE>
<CAPTION>
For comparative purposes only.
Nevada gold properties acquired
GLAMIS GOLD LTD. from Rayrock
SIX MONTHS ENDED Six months ended
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JUNE 30, 1999 (1) June 30, 1998 June 30, 1999 June 30, 1998
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<S> <C> <C> <C> <C>
Gold Ounces produced 69,008 54,933 58,412 47,265
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Average revenue per ounce $276 $312 $278 $306
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Average Market price per
ounce $280 $297 $280 $297
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Total cash cost per ounce $243 $214 $235 $248
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Total cost per ounce $305 $298 $295 $308
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</TABLE>
(1) Includes the results of the Nevada properties' operations four months only
for March - June 1999 only.
<TABLE>
<CAPTION>
For comparative purposes only.
Nevada gold properties acquired
GLAMIS GOLD LTD. from Rayrock
THREE MONTHS ENDED Three months ended
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JUNE 30, 1999 (1) June 30, 1998 June 30, 1999 June 30, 1998
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<S> <C> <C> <C> <C>
Gold Ounces produced 44,451 27,596 27,422 23,166
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Average revenue per ounce $267 $297 $267 $307
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Average Market price per
ounce $273 $300 $273 $300
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Total cash cost per ounce $236 $222 $238 $252
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Total cost per ounce $304 $304 $283 $304
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</TABLE>
(1) Includes the results of the Nevada properties' operations acquired in March
1999.
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OPERATIONS REVIEW
MINE PRODUCTION
(Note: The Marigold, Dee and Daisy properties were acquired in March 1999 as
part of the Company's acquisition of Rayrock (see note 2)).
<TABLE>
<CAPTION>
SIX MONTHS ENDED Six months ended
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JUNE 30, 1999 JUNE 30, 1999 June 30, 1998 June 30, 1998
MINE TOTAL CASH COST GOLD OUNCES Cash Cost of Gold Ounces
OF PRODUCTION PRODUCED Production Produced
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<S> <C> <C> <C> <C>
Picacho $191 3,700 $150 10,442
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Rand $248 27,275 $229 43,401
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Marigold (2) (1) $252 (1)25,535 $232 24,433
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Daisy (3) (1) $254 (1)11,016 $267 5,431
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Dee (1) $230 (1)21,861 $266 17,401
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</TABLE>
(1) The Company's share of this production (March - June 1999 only) totals
13,970 ounces from Marigold, 8,658 ounces from Daisy and 14,571 ounces
from Dee; total cash costs are based on March - June 1999 only. 1998
data on Marigold, Dee and Daisy for information only.
(2) Marigold is 66.7% owned
(3) Daisy was owned 35% in 1998, 100% in 1999.
<TABLE>
<CAPTION>
THREE MONTHS ENDED Three months ended
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JUNE 30, 1999 JUNE 30, 1999 June 30, 1998 June 30, 1998
MINE TOTAL CASH COST GOLD OUNCES Cash cost of Gold ounces
OF PRODUCTION PRODUCED production produced
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<S> <C> <C> <C> <C>
Picacho $200 1,462 $159 4,753
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Rand $236 15,375 $235 22,192
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Marigold (2) $256 9,628 $239 (1)12,116
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Daisy (3) $212 7,353 $254 (1)2,761
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Dee $241 10,441 $276 (1)8,289
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</TABLE>
(1) 1998 data on Marigold, Dee and Daisy for information only.
(2) Marigold is 66.7% owned.
(3) Daisy was owned 35% in 1998, 100% in 1999.
PICACHO MINE, CALIFORNIA
Reclamation continues as well as final gold production. 1,462 ounces were
produced in the second quarter of 1999 and 3,700 year to date. Picacho is
expected to produce approximately 2,000 ounces of gold in the second half of
1999, as final rinsing of the heaps will begin in the third quarter.
RAND MINE, CALIFORNIA
The production shortfalls anticipated in the budget continue at Rand though
slightly larger than expected. The mine produced 27,275 ounces for the six
months ended June 30, 1999 compared to 43,401 ounces produced for a comparable
period in 1998. The planned major stripping program impacted ounces in both the
first and second quarters and will somewhat impact the
<PAGE> 12
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third quarter production. Mechanical problems caused production to improve only
slightly to 15,375 ounces in the second quarter. This is well below the 22,192
ounces produced in the second quarter of 1998. Completion of the stripping
programs should increase ounces delivered to the pad and production is still
anticipated at 75,000 for the entire year.
MARIGOLD MINE, NEVADA
The 66.7%-owned Marigold Mine acquired in March as part of the Rayrock
acquisition, is an open-pit mine in central Nevada at the north end of the
Battle Mountain-Eureka Trend. Glamis is the operator at Marigold. Four months of
production for Glamis' account from Marigold totaled 13,970 ounces of gold.
Second quarter ounces of 9,628 for Glamis' account were close to plan. Studies
are underway at Marigold to identify ways to increase processing through put.
Marigold is projected to produce an additional 20,000 ounces for Glamis' account
in the last six months of 1999.
DEE MINE, NEVADA
The Dee Mine was also acquired as part of the Rayrock acquisition. This open-pit
mine is located along the Carlin Trend in northeast Nevada, five miles north of
the Barrick Goldstrike property. On April 15, 1999, the Company approved a $3.4
million underground development program and during the second quarter progress
continued in bringing the North Underground project into production. Ground
conditions have been favorable in all headings. Surface mine operations
continued with the north end of the Ultimate DX pit providing higher than
predicted mill feed and ounces. Gold production was slightly off plan with
10,441 ounces produced in the second quarter (14,571 for the four months of
Glamis' ownership). The Company anticipates production of approximately 25,000
ounces during the balance of 1999.
DAISY MINE, NEVADA
The third Nevada property acquired from Rayrock, the Daisy Mine, is an open-pit
mine in Nye County, Nevada. Daisy's production for the second quarter (7,353
ounces) was slightly better than expected. The first four months (production of
8,658 ounces) were negatively impacted by operations in the Mother Lode pit
which was determined to have less leachable ore than expected and abandoned at
the end of February. Operations appear to be back on course and in line to
produce 22,000 ounces during the last half of 1999.
IMPERIAL PROJECT, CALIFORNIA
Work continues on the permitting for the Imperial Project. Glamis
Representatives met with the Solicitor of the Department of Interior, the Bureau
of Land Management and the Advisory Council on Historic Preservation in
Washington during July. Additional information was presented to these groups in
response to government and public comments and an accurate estimate of the
remaining permit time line was requested.
CIENEGUITA PROJECT, MEXICO
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Because heap performance did not improve during April or May in June,
rinsing of the heap began. The Company is evaluating several options for
proceeding with the Cieneguita project.
MINA IVAN, CHILE
The Ivan Mine is a copper mine acquired in the Rayrock transaction. Ivan is
located in the coastal range of northern Chile, approximately 40 kilometers
north of the major port city of Antofagasta. Mining at Ivan has been from
underground and open-pit workings. Early in the second quarter the Company
determined that the sale of Ivan was in the best interests of the Company, as
copper production is not deemed to be in line with the Company's long-term
objectives. Consequently, a data room has been established and the Company is
soliciting offers for the property.
SAN MARTIN PROJECT, HONDURAS
The Company continues to work on converting its Exploration Concession to a
Mining Concession. In late June, the new director of DEFOMIN (the Honduran
Mining Ministry) was appointed. The vacancy in this position had delayed
administration of the new mining laws, as well as the Company's conversion
application.
A project team was assembled for the project. The existing model of the Rosa
deposit was reviewed and updated. Computer modeling was begun on the Palo Alto
deposit. Work is continuing on land purchases, in-fill and condemnation drilling
at Palo Alto and metallurgical testing on both Rosa and Palo Alto material.
Construction of a community health center in San Ignacio has begun and is
expected to be completed this year. In addition, the Company is working with
CARE on improvements to the community's water system.
The feasibility study is on-track for completion early in the fourth quarter
this year for delivery to the Board of Directors. Subject to delivery of permits
and Board approval, the Company anticipates commencing construction in late 1999
or early 2000.
CERRO BLANCO PROJECT, GUATEMALA
Evaluation of the data from the exploration and drilling programs, to date, has
led to approval of an additional program to begin in the third quarter of 1999.
The Company's goal at Cerro Blanco of providing enough core to do initial
metallurgical test work was completed in the second quarter. Results of the
metallurgical testing are expected during the fourth quarter of 1999, at which
time a scoping study will begin.
EXPLORATION ACTIVITIES
Exploration expense was $1.3 million for the second quarter. This was spent
primarily on exploration at or near the Company's Nevada operations, as well as
certain exploration properties in Central and South America.
<PAGE> 14
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OTHER MATTERS
The Year 2000 issue arises because many computerized systems use two digits
rather than four to identify a year. Date sensitive systems may recognize the
year 2000 as 1900 or some other date resulting in errors when information using
year 2000 dates is processed. In addition similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 issue may be experienced before, on, or after
January 1, 2000, and if not addressed, the impact on certain operations and
financial reporting may range from minor errors to significant systems failure,
which could affect an entity's ability to conduct normal business operations. It
is not possible to be totally certain that all aspects of the Year 2000 issue
affecting the entity, including those related to the efforts of customers,
suppliers, or other third parties, will be fully resolved. The Company is
continuously identifying and managing the risks of its business, including the
potential impact of Year 2000-related problems.
The Company has identified four main areas where it has potential exposure to
Year 2000-related problems.
a) Basic Critical Mine Operating Areas dependent on service
providers (such as utilities). Our normal operating plans always
provide for emergency measures such as in the case of power
interruption, and these issues have been addressed and are not
considered to present unmanageable risk to the Company.
b) Basic Suppliers to the Mining Operations. These include
consumables as well as equipment suppliers. This is the area
where there is ongoing contact with providers where a deemed
"critical" supply or piece of equipment is involved but whose
performance has not yet been satisfactorily "assured" to us. This
does not imply that we will have a problem, only that we have
identified something where we could have a problem and have asked
the supplier for more information so we may address the issue.
This is ongoing and we have complete cooperation from our
suppliers. We have also recently completed identification of
secondary sources of supplies which already conform and who can
be utilized if necessary. Our on-going supplier/vendor assessment
is on track for completion in the third quarter of 1999. We do
not consider ourselves at undue risk from any supplier or
provider in this area.
c) Product security risks: risks regarding production, shipment,
storage or sales. These risks can be mitigated by the Company,
and are on a normal basis. We feel confident that we are not at
risk from Year 2000 problems in these areas at this time.
d) Financial and Accounting Transactions and Recordkeeping. The
Company believes its recordkeeping and reporting systems are
already compliant. The Company has state-of-the-art systems
already in place using relational technology. All network servers
have been certified compliant by their manufacturer. The Company
has planned additional software upgrades, which will underscore
the readiness of the system. Due to the nature of the Company's
business, there are few interconnects and interdependencies to be
of concern. The Company's communications with financial
counterparts have satisfied us as to the safety of our normal
transactions with them. We anticipate no extraordinary measures
outside of the normal due diligence
<PAGE> 15
- 15 -
exercised in transacting financial operations and placing our
investments due to Year 2000-related issues at this time.
As noted at December 31, 1998, the Company has incurred limited Year
2000-specific costs. Due to the consolidation and centralization of the
Company's accounting and reporting functions and the related work done at the
operations, hardware and software upgrades and additions were ongoing in 1998
and to date in 1999. Because these systems have only recently been installed or
upgraded to ensure network compatibility, they were already certified as Y2K
compliant. The planned additional software upgrades involve upgrading the
network to Windows NT to more effectively serve all users. We have not
considered these costs, all of which were capitalized, to be Year 2000 driven.
The latest additions to our information system resulting from our acquisition of
Rayrock in March have all been tested and upgraded where necessary. The Nevada
operations accounting software has been certified Y2K compliant. These systems
(using MAS 90 software) are planned to be switched over to the corporate office
system during the first quarter of 2000.
Because the Company operates primarily basic heap leach operations, (refer to
the annual report at December 31, 1998 on Form 10-K for a complete description
of the process) we consider the material risks to be those described in detail
above. We do not expect a material impact on costs nor on revenues from any Year
2000-related issues identified by us at this time."
FORWARD-LOOKING STATEMENTS
Certain of the information contained herein constitutes "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995 and other applicable laws or regulatory policies. Such forward-looking
statements, involve known and unknown risks, uncertainties and other factors
which may cause the actual results 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 actual results of
current exploration activities, conclusions of feasibility studies now underway,
changes in project parameters as plans continue to be refined, future prices for
gold and other mineral commodities, estimated future production and costs of
production, as well as those factors discussed in the section entitled "Other
Considerations" in the Company's Form 10-K. Although the Company has attempted
to identify important factors that could cause actual results to differ
materially, there may be other factors that cause actual results not to be as
anticipated, estimated or intended. There can be no assurance that such
statements will prove to be accurate as actual results and future events could
differ materially from those anticipated in such statements. Accordingly,
readers should not place undue reliance on forward-looking statements.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
As noted in Item 7 "Other Risks" in the Company's annual report on Form 10K for
the year ended December 31, 1998, the Company is subject to changes in metals
prices, which directly impact its profitability and cash flows. Because the
markets in which the Company sells its products set prices outside of the
Company's control, the Company believes it is important to reduce the impact of
negative price movements through hedging transactions. These hedging
<PAGE> 16
- 16 -
transactions utilize so-called "derivatives", the value of which is "derived"
from movements in the prices or rates associated with the underlying product.
The Company's hedging policy attempts to protect the Company's production by use
of forward contracts, spot deferred contracts, and options, in any combination.
The Company continuously monitors its position with respect to the unrealized
gains and losses and to ensure compliance with Company policy.
The Company also invests cash balances in short-term investments, which are
subject to interest rate fluctuations. Because these investments are in highly
liquid, short-term instruments, any impact of an interest rate change will not
be material.
The table below sets forth the positions of the Company at June 30, 1999 and
December 31, 1998. Fair values are estimated based on market quotations of the
variables based on expected maturity date.
(in thousands of U.S. dollars unless indicated)
As of June 30,
<TABLE>
<CAPTION>
1999 As of December 31, 1998
- ------------------------------------------------------------------------------------------------------
Maturity 1999 Estimated Fair Value Maturity 1999 Estimated Fair Value
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Short-term investments $ 26.3 million $ 26.3 million $ 23.0 million $ 23.0 million
- ------------------------------------------------------------------------------------------------------
Derivatives:
Gold Forward Sales
Ounces 500 $4.4 3,000 $ 17.0
Price per ounce $270 $ 294
- ------------------------------------------------------------------------------------------------------
Gold Put Options Purchased
Ounces 7,200 $167.5 Nil Nil
Price per ounce $286
Ounces 9,000 $244.1
Price per ounce $290
- ------------------------------------------------------------------------------------------------------
Gold Call Options sold:
Ounces 13,500 Nil 10,000 Nil
Price per ounce $ 320 $ 310
Ounces 7,200 Nil
Price per ounce $ 310
- ------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 17
- 17 -
PART II - OTHER INFORMATION
ITEM 1 LEGAL PROCEEDINGS: None
ITEM 2 CHANGES IN SECURITIES: None
ITEM 3 DEFAULTS UPON SENIOR SECURITIES: None
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
The Company held its Annual General Meeting on April 28, 1999. At the
meeting three shareholders holding 6,202 shares were present in person
and 850 shareholders holding 39,842,283 shares were represented by
proxy.
At the meeting, unanimous approval by a show of hands was given with
respect to:
1. Fixing the size of the Board at 7 persons.
2. The election of Messrs. C. Kevin McArthur, James R. Billingsley,
Ian S. Davidson, Jean Depatie, Leonard Harris, Kenneth H.
Williamson and A. Dan Rovig.
3. The appointment of KPMG LLP, Chartered Accountants, as auditors
of the Company.
4. Approval of a resolution to ratify the cancellation and
subsequent re-grant of incentive share purchase options to
certain employees and insiders of the Company under the Company's
Amended Incentive Share Purchase Option Plan.
ITEM 5 OTHER INFORMATION: None
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description
----------- -------------------
<S> <C>
10.58 Services Agreement between the
Company and James S. Voorhees
dated June 01, 1999
27 Financial Data Schedule
</TABLE>
(b) Reports on Form 8-K
(i) Report on Form 8-K-A filed May 14, 1999
amending the Form 8-K filed March 15, 1999
with respect to the acquisition of Rayrock
Resources Inc.
<PAGE> 18
- 18 -
SIGNATURES
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)
Date: August 11, 1999 "signed"
-----------------
DANIEL J. FORBUSH
Chief Financial Officer & Treasurer
(Principal Accounting and Financial
Officer)
<PAGE> 1
- 19 -
Exhibit 10.58
SERVICES AGREEMENT
THIS AGREEMENT made as of June 1, 1999.
BETWEEN:
GLAMIS GOLD LTD., a British Columbia company having an address at 5190
Neil Road, Suite 310, Reno, Nevada, 89502 ("Glamis")
OF THE FIRST PART
AND:
JAMES VOORHEES, of 14429 W. Virginia Drive, Lakewood, Colorado, 80228
("Voorhees")
OF THE SECOND PART
WHEREAS Glamis wishes to engage Voorhees to perform the duties of Vice President
and Chief Operating Officer of Glamis and Voorhees wishes to take on such
duties.
NOW THEREFORE THIS AGREEMENT WITNESSES that the parties mutually agree as
follows:
ENGAGEMENT
1. Glamis hereby engages (the "Engagement") Voorhees as and Voorhees agrees to
serve as Vice President and Chief Operating Officer of Glamis and as Vice
President and Chief Operating Officer of Glamis Gold, Inc. and its subsidiaries
and to perform the duties described in Section 3, on the terms and subject to
the conditions set out herein.
TERM
2. The term ("Term") of the Engagement will commence on June 1, 1999, and will
continue thereafter on a month-to-month basis until terminated by either party
pursuant to the terms hereof.
DUTIES AND OBLIGATIONS OF VOORHEES
3. As Vice President and Chief Operating Officer, Voorhees will perform those
duties and functions (the "Duties") that are described in Schedule A hereto.
<PAGE> 2
- 20 -
PERFORMANCE OF DUTIES
4. Voorhees will perform the Duties as follows:
(a) subject to ill-health and subsection 4(c), Voorhees will perform the
Duties during each day that is a business day in the Term (a business
day being a day, other than a Saturday or a Sunday, on which the office
of Glamis Gold, Inc. in Reno, Nevada is open for the transaction of
business);
(b) subject to subsection 4(c), Voorhees will devote substantially all
of his time and energy during normal business hours on each working day
during the Term to performing the Duties to the best of his skill and
ability; and
(c) notwithstanding subsections 4(a) and 4(b), Voorhees will not be
required to perform the Duties on statutory holidays and during periods
of holidays, which will be not less than four weeks in the aggregate in
respect of each calendar year.
REMUNERATION
(d) In consideration of the performance of the Duties by Voorhees,
Glamis, through Glamis Gold, Inc., will:
(e) pay Voorhees a salary (the"Salary") of U.S. $180,000 (or such other
amount as the parties may mutually agree in writing) per calendar year
during the Term by paying 1/24 thereof on the 15th of each month and
1/24th thereof on the last day of each month or, if such days are not
business days, on the first prior day that is a business day, such
payments to be reduced by the amount of applicable withholding and other
requirements of the Internal Revenue Code (United States) and any other
applicable United States legislation in respect of remuneration paid to
employees;
(f) reimburse Voorhees for all reasonable expenses incurred by Voorhees
in the performance of the Duties and in respect of such Voorhees will
provide to Glamis such particulars as Glamis may reasonable require;
(g) permit Voorhees to participate in medical, dental and other employee
benefit plans of Glamis Gold, Inc. as they are from time to time
initiated, if and to the extent that participation is permitted by the
plans, such plans to include, without limitation, the Glamis Gold, Inc.
Profit Sharing and Retirement Plan and the Glamis Gold, Inc.
Group Insurance Benefits Plan;
(h) indemnify and hold Voorhees harmless from and against any and all
costs, damages or losses resulting from the performance by Voorhees of
the Duties;
(i) provide Voorhees with the holiday entitlement described in
subsection 4(c) provided however, that Voorhees will forfeit, without
compensation, his right to any part of such holiday entitlement not used
in a calendar year;
<PAGE> 3
- 21 -
(j) perform a review of the Salary on an annual basis, as a minimum; (k)
grant to Voorhees share purchase options from time to time on an
aggregate of not
less than 100,000 common shares of Glamis ("Shares") under Glamis'
Incentive Share Purchase Option Plan (the "Plan"), in accordance with
the rules and regulations of applicable regulatory authorities and the
Plan, and subject to the following conditions:
i. the share purchase options shall be priced as of June 1, 1999
but will not be exercisable until approval by the shareholders of
revisions to the Plan at the annual shareholders meeting in April 2000;
ii. subject to the provisions of subparagraph (g)i above, fifty
percent (50%) of the share purchase options will be vested immediately
and the remaining fifty percent (50%) will be vested on June 1, 2000;
and
iii. upon the full exercise of the 100,000 share purchase
options, Voorhees will, subject to the then prevailing policies of
Glamis' Executive Compensation Committee, be granted another share
purchase option in respect of not less than 100,000 Shares.
(l) reimburse Voorhees for relocation expenses from Lakewood, Colorado
to Reno, Nevada in accordance with the Glamis Gold, Inc. Relocation
Expense Policy for transferred employees, a copy of which has been
provided to Voorhees.
TERMINATION OF ENGAGEMENT
5. The following will govern termination under this Agreement:
(a) Voorhees may deliver to Glamis a notice to terminate the Engagement
on a day not less than 60 days after the day of such delivery and the
Engagement will terminate at the expiration of such 60-day or longer
period and in such case any outstanding share purchase options held at
such time by Voorhees will expire on the 30th day after the effective
date of the termination;
(b) Glamis may terminate the Engagement without notice and without any
payment in lieu of notice if
(i) Voorhees is guilty of any wilful act, neglect, or conduct
that causes substantial damage or discredit to Glamis, or
(ii) Voorhees is convicted of any offence involving fraud,
and in such case any outstanding share purchase options held at such
time by Voorhees will expire on the 30th day after the effective date of
the termination;
(c) Except for those matters referred to in subsection 6(b), Glamis may,
at its sole option, terminate the Engagement for cause by providing
three months written notice to Voorhees and in such case any outstanding
share purchase options held at such time by Voorhees will expire on the
30th day after the effective date of the termination;
<PAGE> 4
- 22 -
(d) Glamis may, at its sole option, terminate the Engagement without
cause by notice (the "Termination Notice") to Voorhees, in which case
Voorhees will be paid any remuneration due hereunder to the date of
termination together with an aggregate amount equal to two (2) times the
Salary which is in force at the time of delivery of the Termination
Notice and the cash value of 24 months of full benefit coverage under
subsection 5(c), less applicable withholding and other requirements of
the Internal Revenue Code (United States) and any other applicable
United States legislation in respect of remuneration paid to employees,
and in such case any outstanding share purchase options held at such
time by Voorhees, will expire on the 365th day after the effective date
of the termination;
(e) If Voorhees becomes permanently disabled prior to termination of the
Engagement hereunder the provisions of subsection 6(c) will not apply,
however, Glamis may terminate the Engagement pursuant to subsection
6(d), provided however that such termination will not affect any
benefits which Voorhees would be entitled to as a disabled employee
under the plans described in subsection 5(c). Voorhees will be deemed to
be permanently disabled if he is unable to perform the material and
substantial portion of the Duties because of sickness or injury. For the
purposes hereof "sickness" means an organic disease, including without
limitation mental illness, and the medical or surgical treatment of the
disease and "injury" means bodily injury caused directly by external,
violent and purely accidental means;
(f) On termination of the Engagement, Voorhees will deliver to Glamis in
a reasonable state of repair all property of Glamis used by or in the
possession of Voorhees; and
(g) Termination of the Engagement will not terminate Glamis' obligation
under subsection 5(d), which obligation will survive such termination.
DISCLOSURE
6. Voorhees undertakes to refrain, both during the Term and thereafter, except
so far as may be necessary or proper in performing the Duties, from making
public or disclosing to any person who is not an employee, officer or director
of Glamis or one of its subsidiaries, any information that may come to the
knowledge of Voorhees during the Term respecting the business dealings of Glamis
or its subsidiaries or any of the contractual agreements of Glamis or its
subsidiaries and Voorhees will, at the request of Glamis, enter into a separate
agreement with respect to such matters.
MISCELLANEOUS
7. (a) Each party will, on the request of the other, execute and deliver
such other agreements, deeds, documents and instruments, and do such
further acts and things as the other may reasonably request in order to
evidence, carry out and give full force and effect to the terms,
conditions, intent and meaning of this Agreement.
(b) If any provision of this Agreement is invalid or unenforceable for
any reason whatsoever, such provision will be severable from the
remainder of this Agreement, the
<PAGE> 5
- 23 -
validity of the remainder will continue in full force and effect and
this Agreement will be construed as if it had been executed without the
invalid or unenforceable provision.
(c) No consent or waiver, express or implied, by either party to or of
any breach or default by the other party in the performance by the other
of any or all of its obligations under this Agreement
(i) will be valid unless it is in writing and specifically stated
to be a consent or waiver pursuant to this subsection,
(ii) may be relied upon by the other as a consent or waiver to or
of any other breach or default of the same or any other
obligation,
(iii) will constitute a general consent or waiver under this
Agreement, or (iv) will eliminate or modify the need for a
specific consent or waiver pursuant to this subsection in any
other instance.
(d) Notices, requests, demands or directions to one party to this
Agreement by another will be in writing and will be delivered as
follows:
If to Glamis at: 5190 Neil Road, Suite 310
Reno, Nevada 89502
Attention: C. Kevin McArthur
If to Voorhees at: 14429 W. Virginia Drive
Lakewood, Colorado 80228
Attention: James Voorhees
or to such other address as may be specified by one party to the other
in a notice given in the manner provided in this subsection.
(e) This Agreement is made in the State of Nevada with the intention
that its construction and validity and all other issues related to its
administration will in all respects be governed by the laws prevailing
in that state.
(f) In the event of any dispute between the parties in respect of the
interpretation of this Agreement or any matter to be agreed on, such
dispute will be determined by a single arbitrator appointed and acting
pursuant to the Commercial Arbitration Rules of the American Arbitration
Association and the decision of the arbitrator shall be final and
binding on the parties.
(g) This Agreement constitutes the entire agreement between the parties
and there are no representations or warranties, express or implied,
statutory or otherwise, and no agreements collateral hereto other than
as expressly set forth or referred to herein.
(h) This Agreement may be executed in counterparts, each of which when
delivered (whether in originally executed form or by facsimile
transmission) will be deemed to be an original and all of which together
will constitute one in the same document.
<PAGE> 6
- 24 -
(i) This Agreement will ensure to the benefit of and be binding upon the
respective legal representatives and successors and permitted assigns of
the parties.
(j) None of the parties may assign any right, benefit or interest in
this Agreement without the written consent of the others and any
purported assignment without such consent will be void, save and except
that Glamis may assign any or all of its rights and obligations
hereunder to Glamis Gold Inc.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
first above written.
GLAMIS GOLD LTD.
Per:____________________________________
A. Dan Rovig, Chairman
Per:____________________________________
C. Kevin McArthur, President & CEO
________________________________________
JAMES VOORHEES
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLAMIS GOLD
LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED JUNE 30, 1999
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 31,707
<SECURITIES> 0
<RECEIVABLES> 4,553
<ALLOWANCES> 0
<INVENTORY> 16,340
<CURRENT-ASSETS> 53,261
<PP&E> 331,229
<DEPRECIATION> 207,099
<TOTAL-ASSETS> 185,977
<CURRENT-LIABILITIES> 15,844
<BONDS> 0
0
0
<COMMON> 157,292
<OTHER-SE> (5,134)
<TOTAL-LIABILITY-AND-EQUITY> 185,977
<SALES> 22,744
<TOTAL-REVENUES> 22,744
<CGS> 20,712
<TOTAL-COSTS> 30,636
<OTHER-EXPENSES> (1,647)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 170
<INCOME-PRETAX> (6,415)
<INCOME-TAX> (412)
<INCOME-CONTINUING> (6,003)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,003)
<EPS-BASIC> (0.10)
<EPS-DILUTED> (0.10)
</TABLE>
