10-Q 1 o05102e10-q.txt FORM 10-Q FOR PERIOD ENDING SEPTEMBER 30, 2000. 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, 2000 ------------------ 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 or organization) (IRS Employer Identification No.) 5190 Neil Road, Suite 310, Reno, Nevada, 89502 -------------------------------------------------------------------------------- (Address of Principal Executive Offices) 775-827-4600 ------------ (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 November 9, 2000, was 70,097,382. 2 GLAMIS GOLD LTD. INDEX
PAGE ---- Part I Financial Information Item 1. Financial Statements 3 Consolidated Balance Sheets as at September 30, 2000 and December 31, 1999 3 Consolidated Statements of Operations for the three months and the nine months ended September 30, 2000 and 1999 4 Consolidated Statements of Retained Earnings (Deficit) for the three months and the nine months ended September 30, 2000 and 1999 4 Consolidated Statements of Cash Flows for the three months and the nine months ended September 30, 2000 and 1999 5 Notes to Interim Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 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 and Use of Proceeds 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
2 3 [Part I - Item 1] CONSOLIDATED BALANCE SHEETS (Expressed in thousands of U.S. dollars, except for share amounts)
September 30, December 31, 2000 1999 --------------------------------------------------------------------------------------- Assets Cash $ 18,742 $ 55,169 Other current assets 14,282 14,084 --------------------------------------------------------------------------------------- Current assets 33,024 69,253 Plant and equipment and mine development costs, net 117,622 88,900 Other assets 6,069 5,579 --------------------------------------------------------------------------------------- $156,715 $163,732 ======================================================================================= Liabilities Current liabilities $ 6,836 $ 7,622 Long term liabilities 22,496 17,906 Shareholders' equity Share capital: Authorized: 200,000,000 common shares without par value 5,000,000 preferred shares, $10 par value, issuable in Series Issued and fully paid: 70,097,382 common shares (1999 - 69,864,832) 159,045 158,717 Contributed surplus 63 63 Deficit (31,725) (20,576) --------------------------------------------------------------------------------------- 127,383 138,204 --------------------------------------------------------------------------------------- $156,715 $163,732 =======================================================================================
See accompanying notes to consolidated financial statements Prepared by Management without audit Approved by the Directors: "signed" "signed" ------------------------- ------------------------- C. Kevin McArthur A. Dan Rovig Director Director 3 4 CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in thousands of U.S. dollars, except per share amounts)
Three months ended Nine months ended September 30, September 30, 2000 1999 2000 1999 ------------------------------------------------------------------------------------ Revenue from production $14,694 $15,683 $ 45,812 $ 38,427 Cost of production 12,587 12,303 37,020 33,867 ------------------------------------------------------------------------------------ 2,107 3,380 8,792 4,560 ------------------------------------------------------------------------------------ Expenses Depreciation & depletion 3,340 4,625 9,557 9,050 Reclamation 258 321 670 711 Exploration 767 143 2,483 2,104 Selling, general, administration 1,402 2,317 4,203 4,614 Write-down of investments and 4,345 -- 4,345 -- properties ------------------------------------------------------------------------------------ 10,112 7,406 21,258 16,479 ------------------------------------------------------------------------------------ Loss from operations (8,005) (4,026) (12,466) (11,919) Interest expense 5 96 18 266 Other (income) expense (481) (271) (1,415) (1,919) ------------------------------------------------------------------------------------ Loss before taxes (7,529) (3,851) (11,069) (10,266) Provision for (benefit from) taxes 45 (890) 80 (1,302) ------------------------------------------------------------------------------------ Loss for the period $(7,574) $(2,961) $(11,149) $ (8,964) ==================================================================================== Loss per share $(0.11) $(0.04) $(0.16) $(0.14) ====================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT) (Expressed in thousands of U.S. dollars)
Three months ended Nine months ended September 30, September 30, 2000 1999 2000 1999 ------------------------------------------------------------------------------------ Retained earnings (deficit) $(24,151) $(5,294) $(20,576) $ 709 Beginning of period Loss for the period (7,574) (2,961) (11,149) (8,964) Dividends -- -- -- -- ------------------------------------------------------------------------------------ Deficit, end of period $(31,725) $(8,255) $(31,725) $(8,255) ====================================================================================
4 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of U.S. dollars)
Three months ended Nine months ended September 30, September 30, 2000 1999 2000 1999 ------------------------------------------------------------------------------------ Cash flows from (used in) Operating activities Loss for the period $ (7,574) $(2,961) $(11,149) $(8,964) Adjustment for items 7,634 5,473 14,263 12,340 not affecting working capital Net changes in non-cash 475 (4,282) (798) (6,682) working capital ------------------------------------------------------------------------------------ Net cash provided by 535 (1,770) 2,316 (3,306) (used in) operations ------------------------------------------------------------------------------------ Cash flows from (used in) investing activities Capital expenditures (10,874) 2,931 (30,535) (5,830) Business acquisitions (181) (2,861) (7,153) 7,908 Other assets (520) (42) (1,383) 3,247 ------------------------------------------------------------------------------------ Net investment activities (11,575) 28 (39,071) 5,325 ------------------------------------------------------------------------------------ Cash flows from (used in) financing activities Stock issues 98 347 328 1,134 Notes payable -- (70) -- 919 ------------------------------------------------------------------------------------ Net financing activities 98 277 328 2,053 ------------------------------------------------------------------------------------ Increase (decrease) in cash (10,942) (1,465) (36,427) 4,072 Cash, beginning of period 29,684 31,707 55,169 26,170 ------------------------------------------------------------------------------------ Cash, end of period $ 18,742 $30,242 $ 18,742 $30,242 ====================================================================================
5 6 GLAMIS GOLD LTD. Notes to Unaudited Interim Consolidated Financial Statements (tables expressed in thousands of United States dollars) Nine months ended September 30, 2000 1. GENERAL In the opinion of management, the accompanying unaudited consolidated balance sheets and consolidated statements of operations, retained earnings (deficit) and 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 September 30, 2000 and December 31, 1999 and the results of its operations and its cash flows for the three months and nine months ended September 30, 2000 and 1999. These unaudited interim consolidated 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, 1999. 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. All amounts are stated in U.S. dollars unless otherwise specified. 2. BUSINESS ACQUISITIONS a. 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 1999 comparative financial information herein reflects the consolidated position of the Company, including Rayrock, as at September 30, 1999 but only includes the operating results and cash flows of the acquired operations for the seven months March through September 1999. b. Cambior de Mexico S.A. de C.V. Effective May 9, 2000, the Company acquired 100% of the issued and outstanding shares of Cambior de Mexico S.A. de C.V. ("Cambior de Mexico") from Cambior Inc. for $7.2 million in cash. The Company also acquired a crushing system from Cambior for an additional $2.5 million in cash that was intended for use at the Cerro San Pedro Project. Other cash transaction costs associated with this acquisition totaled $0.3 million. In addition, in consideration for advisory services rendered to the Company in 6 7 connection with the acquisition, the Company granted to its investment advisor warrants to purchase up to 300,000 shares of the Company's common stock at an exercise price of U.S. $2.00 per share. The warrants are exercisable at any time until June 25, 2003, but are not transferable prior to June 26, 2001. Cambior de Mexico has subsequently been renamed Glamis de Mexico S.A. de C.V. ("Glamis de Mexico"). Glamis de Mexico has interests in a number of mineral properties in Mexico, the most advanced of which is the Cerro San Pedro Project in San Luis Potosi state. 3. OTHER CURRENT ASSETS Included in other current assets are the following inventories:
(in thousands of dollars) September 30, December 31, 2000 1999 ----------------------------- Finished goods $4,052 $4,411 Work-in-progress 7,979 6,754 Supplies and spare parts 1,001 1,017 ----------------------------- $13,032 $12,182 ======= =======
4. SHARE CAPITAL
Nine months ended Nine months ended September 30, 2000 September 30, 1999 ------------------------------------------------------------------------------------------ # OF SHARES AMOUNT (IN # of Shares Amount (in 000'S) 000's) ------------------------------------------------------------------------------------------ Issued and fully paid: Balance at beginning of period 69,864,832 $158,717 38,860,612 $109,587 Issued during the period: For cash consideration under the terms of Directors' and Employee's 232,550 328 1,012,200 1,133 stock options Issued upon acquisition of Rayrock (see note 2) -- -- 29,277,820 46,919 Balance at end of period 70,097,382 $159,045 69,150,632 $157,639 ========== ======== ========== ========
7 8 5. SEGMENT REPORTING As at September 30, 2000 and for the nine months ended September 30, 2000 (in thousands of dollars) (a) Operating segments:
Exploration and Producing Mines Development Gold Copper Properties Corporate Total ------------------------------------------------------------------------------------------------ 2000 Revenue $45,812 -- $ 0 $ 0 $ 45,812 Earnings (loss) from operations (6,476) -- (1,612) (4,378) (12,466) Net earnings (loss) (7,460) -- (1,612) (2,077) (11,149) Identifiable assets 47,209 -- 86,024 23,482 156,715 1999 Revenue $31,293 $ 6,912 $ 222 $ 0 $ 38,427 Earnings (loss) from operations (2,085) (4,371) (849) (4,614) (11,919) Net earnings (loss) (773) (4,382) (849) (2,960) (8,964) Identifiable assets 70,177 28,184 41,188 36,431 175,980
(b) Geographic Information:
North America Central & South America Total ------------------------------------------------------------------------------------------- 2000 Revenue $ 45,812 $ 0 $ 45,812 Earnings (loss) from operations (11,502) (964) (12,466) Net earnings (loss) (10,185) (964) (11,149) Identifiable assets 95,595 61,120 156,715 1999 Revenue $ 31,515 $ 6,912 $ 38,427 Earnings (loss) from operations (7,374) (4,545) (11,919) Identifiable assets 121,013 54,967 175,980
6. INCOME TAXES Effective January 1, 2000, the Canadian Institute of Chartered Accountants changed the accounting standard relating to the accounting for income taxes. The Company has adopted the new income tax accounting standard retroactively, without restating the financial statements of any prior periods. As a result, the Company has recorded an increase to plant and equipment and mine development costs of $4.8 million to reflect the remaining net of tax adjustment on prior years' purchase business combinations, and an increase to the future tax liability, formerly the deferred tax liability, of $4.8 million as at January 1, 2000. As the mineral properties to which these adjustments relate are not yet in production and accordingly, have not yet commenced being depleted, applying the new income tax accounting standard had no effect on loss from operations in the nine months ended September 30, 2000 as compared to that determined by applying the previous standard. 8 9 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 investments in equity securities, development of mineral properties and accounting for hedging transactions. However, these differences have no material effect on the amounts presented in the consolidated financial statements as at September 30, 2000 or December 31, 1999, or for the three months and nine months ended September 30, 2000 or 1999. ITEM 2 MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FINANCIAL REVIEW The Company produced a total of 160,433 ounces of gold in the nine months ended September 30, 2000 compared to 110,582 ounces of gold in the same period of 1999. Despite disappointing cash costs at the Dee and Marigold mines, the Company's total cash cost of production continued to improve to $231 per ounce of gold for the nine months ended September 30, 2000 compared to the $233 total cash cost per ounce recorded in the first nine months of 1999. Production for the third quarter 2000 also increased over the comparable quarter of 1999. 52,670 ounces of gold were produced in the third quarter of 2000 compared to 41,574 ounces of gold produced in the third quarter of 1999. Unfortunately, the total cash cost per ounce rose to $240 in the third quarter of 2000 from $207 in the third quarter of 1999. The rise in the total cash cost per ounce at Marigold to $325 per ounce of gold for the period (compared to $180 for the third quarter of 1999) was the single largest factor in the increase. Cash costs were adversely affected by lower than expected ore deliveries to the pad. The third quarter this year was also negatively impacted due to clean-up efforts relating to a pit-wall failure in one of the operating areas. The clean-up was completed late in the third quarter and full production was resumed. The Company continues to actively seek growth opportunities. Effective May 9, 2000 the Company acquired Cambior de Mexico S.A. de C.V. ("Cambior de Mexico") from Cambior Inc. for $7.2 million in cash plus $0.3 million in transaction costs. Cambior de Mexico has been subsequently renamed Glamis de Mexico S.A. de C.V. The Company also acquired a crushing system from Cambior for an additional $2.5 million in cash that was intended for use at the Cerro San Pedro Project. See note 2 (b) of the notes to the consolidated financial statements. 9 10 As noted previously, the comparative financial statements of the Company reflect the acquisition of Rayrock effective March 1999. Accordingly, the Company's consolidated balance sheet included the assets and liabilities of Rayrock as at December 31, 1999 and September 30, 2000. However, the Company's statement of operations and cash flows for 1999 reflects a complete nine months for the Glamis operations, but only seven months (March-September 1999) of the former Rayrock operations. Certain 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 loss for the first nine months of 2000 of $11.1 million ($0.16 per share) compared to a loss of $9.0 million ($0.14 per share) in the first nine months of 1999. The loss in 2000 includes a $4.3 million provision in the third quarter for the closure of the Dee Mine at the end of 2000. The loss in 1999 included a restructuring charge of $0.9 million related to the Rayrock acquisition. The relative improvement in performance in 2000 compared to 1999 is attributable to increased production and profits at the Rand Mine ($2.4 million operating earnings in the first nine months of 2000 compared to a loss of $1.7 million in the first nine months of 1999). Rand's performance was offset by a $3.6 million operating loss at the Dee Mine (in addition to the $4.3 million write-off noted above). Dee generated a small profit ($46,000) for the nine months ended September 30, 1999. The 66.7%-owned Marigold Mine generated a loss of $0.7 million in the first three quarters of 2000 versus a $0.3 million loss in 1999. The 1999 results were also negatively impacted by the performance of the Ivan copper mine, which generated a $4.4 million loss during the period March through September 1999 but which was sold in October 1999. General and administrative expense increased slightly (by $0.5 million for the first nine months of 2000) due to slightly increased staff costs and significant expenditures for tax and accounting work. The 1999 general and administrative expense contained $0.9 million in restructuring charges. Interest and other income decreased $0.5 million compared to the first nine months of 1999 as the Company utilized its cash balances for development of the San Martin Mine and acquisition and development of the Glamis de Mexico properties. The net loss for the three months ended September 30, 2000 was $7.6 million compared to a loss of $3.0 million for the third quarter of 1999. The third quarter results in 2000 include the $4.3 million write-off at the Dee Mine. The 1999 results for the same period include $1.3 million in losses from the Ivan mine in October 1999 as well as a restructuring charge of $0.9 million included in general and administrative expense. Excluding these items, the difference in losses from operations between the third quarter of 2000 and the same period in 1999 is $2.3 million. This difference is directly attributable to increased losses at Dee ($0.7 million loss in 2000 compared to a loss of $0.1 million in 1999), increased losses at Marigold ($0.9 million in 2000 compared to a profit of $0.1 million in 1999), increased exploration expenditures ($0.1 million in 1999, $0.8 million in 2000), and a decline in revenues of $1.0 million as the realized price of gold decreased $21 per ounce. These losses were partially offset by $0.4 million profits contributed by the Rand mine during the third quarter of 2000 compared to losses of $0.7 million during the same period in 1999. 10 11 LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $26.2 million at September 30, 2000, a decrease of $35.4 million from December 31, 1999. This is primarily a result of capital expenditures incurred in the construction of San Martin and the acquisition and development of the Glamis de Mexico properties, notably the Cerro San Pedro project. Long-term liabilities, consisting of future reclamation obligations and future income taxes, were $22.5 million at September 30, 2000, compared to $17.9 million at December 31,1999. The increase is due almost entirely to the change in the future tax liability balance (formerly deferred taxes) as discussed in note 6 of the notes to the consolidated financial statements. The Company continues to have no long-term debt. Capital expenditures for the third quarter of 2000 were $10.9 million ($38.0 million for the first nine months of the year). The major expenditures were $9.7 million spent for the construction at the San Martin Mine and $1.0 million for the development of the Cerro San Pedro project. The Company continues to fund all capital expenditures from working capital and believes it will have sufficient available resources to meet all currently planned capital needs. During the first nine months of 2000 the Company's cash provided from operations was $2.3 million compared to $3.3 million in cash used in operations during the first nine months of 1999. The Company's gold operations provided $6.2 million during the first nine months of 2000 compared to $4.6 million in 1999. The Ivan copper mine represented a use of cash of $2.5 million during the period March through September 1999. Cash flow from operations during the third quarter of 2000 was $0.5 million compared to a use of cash of $1.8 million during the same period in 1999. Cash flow from the gold operations was virtually the same ($0.5 million in 2000, $0.4 million in 1999). The difference was a result of a net positive change across all non-cash working capital accounts. Comparative production highlights of the first three quarters of 2000 and 1999 respectively are as follows: PRODUCTION/REVENUE DATA
GLAMIS GOLD LTD. Three months ended Nine months ended ------------------------------ ------------------------------ SEPTEMBER 30, September 30, SEPTEMBER 30, September 30, 2000 1999 2000 1999(1) ------------- ------------- ------------- ------------- Gold ounces produced 52,670 41,574 160,433 110,582 Average revenue per ounce $279 $300 $286 $285 Average Market price per ounce $276 $259 $282 $273 Total cash cost per ounce $240 $207 $231 $233 Total cost per ounce $306 $287 $293 $307
(1) Includes the results of the Nevada properties' operations for seven months only March - September 1999. 11 12 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 (a)).
THREE MONTHS ENDED Three months ended --------------------------------- --------------------------------- SEPTEMBER 30, SEPTEMBER 30, September 30, September 30, 2000 2000 1999 1999 TOTAL CASH COST GOLD OUNCES Total cash cost Gold ounces MINE OF PRODUCTION PRODUCED of production produced -------------- --------------- ------------- --------------- ------------- Picacho -- -- $135 1,797 Rand $182 25,629 $251 11,874 Marigold (1) $325 8,189 $180 9,681 Daisy $352 1,142 $120 9,762 Dee $279 17,710 $292 8,460
NINE MONTHS ENDED Nine months ended --------------------------------- --------------------------------- SEPTEMBER 30, SEPTEMBER 30, September 30, September 30, 2000 2000 1999 1999 TOTAL CASH COST GOLD OUNCES Total cash cost Gold ounces MINE OF PRODUCTION PRODUCED of production produced -------------- --------------- ------------- --------------- ------------- Picacho $200 389 $173 5,497 Rand $170 74,396 $248 39,149 Marigold (2) $252 31,695 $224 35,208 Daisy (2) $210 8,241 $204 20,778 Dee (2) $321 45,712 $253 30,321
(1) Marigold is 66.7% owned by the Company. (2) The Company's share of this production (March - September 1999) totals 23,651 ounces from Marigold, 18,420 ounces from Daisy and 23,031 ounces from Dee; total cash costs are based on March - September 1999 only. RAND MINE, CALIFORNIA The Rand Mine produced 25,629 ounces during the third quarter 2000 bringing total production to 74,396 ounces of gold for the nine months ended September 30, 2000. This compares to 11,874 ounces produced during the third quarter of 1999 and 39,149 ounces produced for the nine months ended September 30, 1999. Due to increased production in 2000, Rand's total cash cost per ounce of gold has dropped to $170 per ounce of gold for the nine months ended September 30, 2000 from $248 per ounce of gold in the same period in 1999. However, higher fuel and electricity costs continue to adversely impact operating costs with results for the third quarter 2000 showing increased cash costs of $182 per ounce of gold. MARIGOLD MINE, NEVADA The 66.7%-owned Marigold Mine produced 31,695 ounces of gold for the Company's account during the first three quarters of 2000 and 8,189 ounces of gold during the third 12 13 quarter 2000. Cash costs continue to be materially and adversely affected by lower than expected ore deliveries to the pad. The third quarter was also negatively impacted due to clean-up efforts relating to a pit-wall failure in one of the operating areas. The clean-up was completed late in the third quarter and full production was resumed. DEE MINE, NEVADA The Dee Mine produced 17,710 ounces of gold during the third quarter of 2000 at a total cash cost per ounce of $279. Due to continued high costs, the Company announced plans to discontinue operations by the end of 2000 at the Dee Mine. Low ore grades and depressed gold prices made sustained operations impractical. The Company has taken a third quarter charge of $4.3 million to account for the closure of the Dee Mine. Reclamation and remediation activities will continue into 2001. DAISY MINE, NEVADA Daisy's production for the first nine months of 2000 was 8,241 ounces of gold, but only 1,142 ounces were produced during the third quarter. Reclamation work in the mine pits and waste dumps is expected to be completed in the fourth quarter of this year. PICACHO MINE, CALIFORNIA Reclamation continues as well as final gold production. No ounces were produced in the second or third quarter of 2000 and only 389 ounces of gold were produced in the first quarter of 2000. It is anticipated that Picacho will produce a small number of ounces of gold in the fourth quarter of 2000, as reclamation is completed. SAN MARTIN PROJECT, HONDURAS Construction and mine development activities are on schedule. Stacking of ore on the leach pad commenced late in the third quarter. To date, 450,737 tons of run-of-mine ore, with an average grade of 0.024 ounces of gold per ton have been mined and stacked. Recovery of gold from the stacked ore is expected during the fourth quarter. IMPERIAL PROJECT, CALIFORNIA On November 1, 2000 the Company's lawsuit against the Department of Interior and Bureau of Land Management concerning the Imperial Project was dismissed by the U.S. District Court for the Southern District of California. This suit was brought in April and challenged a Department of Interior Solicitor's Opinion that substantially modified the rules applicable to BLM's consideration of the Company's Imperial Project permit application. The Court decided that the suit was premature and that the Company must await the completion of final agency action on the Imperial permit application. The 13 14 Company currently expects a final decision by the BLM by mid-November and the Company believes that the BLM will deny the Imperial permit application. The dismissal of the earlier lawsuit will have no impact on Glamis' right and ability to appeal a negative BLM decision, which the Company would vigorously pursue. The Company cannot predict whether it will ultimately be successful in the litigation. CERRO BLANCO PROJECT, GUATEMALA Exploration drilling and project assessment continues at Cerro Blanco. The February 2000 study has been updated with this year's drilling results. The preliminary analysis indicates the mine would produce approximately 180,000 ounces of gold per year over an 8 year mine life. The Company plans to continue investigating ways to improve the economics of this project during 2001, including conducting additional drilling, as well as optimizing and refining capital and operating costs. GLAMIS DE MEXICO, MEXICO Glamis de Mexico has interests in several exploration and development properties in Mexico. The most advanced of these, the Cerro San Pedro Project in San Luis Potosi state has received its exploitation permit. Glamis de Mexico can earn a 50% interest in this project by spending approximately $4.0 million by the end of 2000 of which $1.3 million had been spent as at September 30, 2000. The Company estimates that the project contains approximately 700,000 ounces of gold and 15,000,000 ounces of silver. The Company is preparing an updated feasibility study which is scheduled to be presented to the Board of during the fourth quarter of 2000. EXPLORATION ACTIVITIES Exploration expense was $0.8 million for the third quarter of 2000 and $2.5 million for the nine months ended September 30, 2000. These expenditures were spent primarily on exploration at or near the Company's Nevada operations, as well as certain exploration properties in Central and South America primarily in Honduras and Guatemala. The Company intends to spend approximately $3.0 million on exploration during 2000. OTHER MATTERS The Company completed its in-house compliance and supplier assessment of the Year 2000 issue in the fourth quarter of 1999. Limited Year 2000-specific costs were incurred by the Company. Hardware and software upgrades were planned based on business requirements; expenditures were not significant. As of November 9, 2000, no operational disruptions related to any Year 2000 systems problems have been noted. 14 15 FORWARD-LOOKING STATEMENTS Safe Harbor Statement under the United States Private Securities Litigation Reform Act of 1995: 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, the timing and amount of estimated future production, costs of production, capital expenditures, reserve determination, costs and timing of the development of new deposits, the Company's hedging practices, permitting time lines, and the timing and possible outcome of pending litigation 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 actual results of current exploration activities, actual results of current reclamation activities, conclusions of economic evaluations, 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 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 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 10-K for the year ended December 31, 1999, 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 has at times acted to reduce the impact of negative price movements through hedging transactions. These hedging transactions utilize so-called "derivatives", the value of which is "derived" from movements in the prices or rates associated with the underlying product. While the Company's hedging policy authorizes action to protect the Company's cash flows from production by use of forward contracts, spot deferred contracts, and options, in any combination, the Company is not currently engaging in new hedging transactions. The Company continuously monitors its existing hedge positions 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 would not be significant. 15 16 The table below sets forth the positions of the Company at September 30, 2000 and December 31, 1999. Fair values are estimated based on market quotations of the variables based on expected maturity date.
Positions as at September 30, 2000 (in thousands of U.S. dollars, except for per ounce amounts) -------------------------------------------------------------------------------- Assets: Derivatives: Gold Put Gold Call Gold Call Short-term Gold Forward Options Options Options Investments Sales Purchased Sold Purchased ----------- ------------ --------- --------- --------- Maturity 2000 Investments $18,002 -- -- -- -- Ounces -- 13,500 9,000 3,000 -- Average price per ounce -- $283 $275 $280 -- Fair Market Value $18,002 $90 -Nil- -Nil- -- Maturity 2001 Investments -- -- -- -- -- Ounces -- -- -- 60,000 -- Average price per ounce -- -- -- $295 -- Fair Market Value -- -- -- -Nil- --
Positions as at December 31, 1999 (in thousands of U.S. dollars, except for per ounce amounts) -------------------------------------------------------------------------------- Assets: Derivatives: Gold Put Gold Call Gold Call Short-term Gold Forward Options Options Options Investments Sales Purchased Sold Purchased ----------- ------------ --------- --------- --------- Maturity 2000 Investments $46,252 -- -- -- -- Ounces -- 65,000 36,000 19,000 -- Average price per ounce -- $288 $275 $275 -- Fair Market Value $46,252 $(552) Nil $(417) -- Maturity 2001 Investments -- -- -- -- -- Ounces -- -- -- 60,000 -- Average price per ounce -- -- -- $295 -- Fair Market Value -- -- -- $(824) --
16 17 PART II - OTHER INFORMATION ITEM 1 LEGAL PROCEEDINGS: (1) On November 1, 2000 the Company's lawsuit against the Department of Interior and Bureau of Land Management concerning the Imperial Project was dismissed by the U.S. District Court for the Southern District of California. This suit was brought in April and challenged a Department of Interior Solicitor's Opinion that substantially modified the rules applicable to BLM's consideration of the Company's Imperial Project permit application. The Court decided that the suit was premature and that the Company must await the completion of final agency action on the Imperial permit application. The Company currently expects a final decision by the BLM by mid-November and the Company believes that the BLM will deny the Imperial permit application. The dismissal of the earlier lawsuit will have no impact on Glamis' right and ability to appeal a negative BLM decision, which the Company would vigorously pursue. The Company cannot predict whether it will ultimately be successful in the litigation. (2) On June 16, 2000 the Company was served with a lawsuit commenced by American Mine Services, Inc. ("AMS") in the Nevada State District Court in Elko, Nevada. The suit involved a contract between a subsidiary of the Company and AMS for underground contract mining at the Dee Mine that was terminated by the Company for non-performance in November 1999. On October 15, 2000 the suit was dismissed. The Company cannot predict whether AMS will attempt to refile the suit, or if refiled, what will be the ultimate outcome. 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 17 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: November 10, 2000 "signed" ------------------------------ CHERYL S. MAHER Chief Financial Officer & Treasurer (Principal Accounting and Financial Officer) 18