-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QXFaY2zImmylbEmCI3MADfUfWhKjq9Vgo7ttC0jbY3jnwUHFMboXSmYiiejE3wB8 /svkmU3b5Ckk8tlUbFjEZA== 0000891020-99-001911.txt : 19991115 0000891020-99-001911.hdr.sgml : 19991115 ACCESSION NUMBER: 0000891020-99-001911 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991112 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLAMIS GOLD LTD CENTRAL INDEX KEY: 0000782819 STANDARD INDUSTRIAL CLASSIFICATION: GOLD & SILVER ORES [1040] FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-11648 FILM NUMBER: 99750537 BUSINESS ADDRESS: STREET 1: 5190 NEIL ROAD STREET 2: SUITE 310 CITY: RENO STATE: NV ZIP: 89502 BUSINESS PHONE: 7758274600 MAIL ADDRESS: STREET 1: 5190 NEIL ROAD STREET 2: SUITE 310 CITY: RENO STATE: NV ZIP: 89502 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 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, 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 ------------------------------------------------------ (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 10, 1999, was 69,864,832. 2 GLAMIS GOLD LTD. INDEX
Page ---- Part I Financial Statements Item 1. Financial Statements 3 Consolidated Balance Sheets as at September 30, 1999 and December 31, 1998 3 Consolidated Statements of Operations for the three months and nine months ended September 30, 1999 and 1998 4 Consolidated Statements of Retained Earnings for the three months and the nine months ended September 30, 1999 and 1998 4 Consolidated Statements of Cash Flows for the three months and the nine months ended September 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 15 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
2 3 [Part 1 -- Item 1] CONSOLIDATED BALANCE SHEETS (Expressed in thousands of U.S. dollars)
SEPTEMBER 30, December 31, 1999 1998 - ------------------------------------------------------------------------------------------ ASSETS Cash $ 30,242 $ 26,170 Other current assets (note 3) 24,302 12,048 - ------------------------------------------------------------------------------------------ Current assets 54,544 38,218 Plant and equipment and mine development costs, net 112,810 79,655 Other assets 8,626 1,288 - ------------------------------------------------------------------------------------------ $ 175,980 $119,161 ========================================================================================== LIABILITIES Current liabilities $ 9,087 $ 4,062 Long term liabilities 17,377 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: 69,150,632 common shares (1998 -- 38,860,612) 157,639 109,587 Contributed surplus 63 63 Cumulative translation adjustment 69 -- Retained earnings (deficit) (8,255) 709 - ------------------------------------------------------------------------------------------ 149,516 110,359 - ------------------------------------------------------------------------------------------ $ 175,980 $119,161 ==========================================================================================
Prepared by Management without audit Approved by the Directors: /s/ C. KEVIN McARTHUR /s/ A. DAN ROVIG - ------------------------ -------------------------- C. Kevin McArthur A. Dan Rovig Director Director 3 4 CONSOLIDATED STATEMENTS OF OPERATIONS (Expressed in thousands of U.S. dollars) (Except per share amount)
Three months ended September 30, Nine months ended September 30, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Revenue from production $ 15,683 $ 8,244 $38,427 $ 25,388 Cost of production 12,303 5,535 33,867 16,998 - ------------------------------------------------------------------------------------------------------------------- 3,380 2,709 4,560 8,390 - ------------------------------------------------------------------------------------------------------------------- Expense Depreciation & depletion 4,625 2,164 9,050 6,694 Reclamation 321 99 711 350 Selling, general, administration 2,317 600 4,614 1,946 Exploration 143 28 2,104 35 - ------------------------------------------------------------------------------------------------------------------- 7,406 2,891 16,479 9,025 - ------------------------------------------------------------------------------------------------------------------- Earnings (loss) from operations (4,026) (182) (11,919) (635) Interest expense 96 (36) 266 61 Other (income) expense (271) (452) (1,919) (1,345) - ------------------------------------------------------------------------------------------------------------------- Earnings (loss) before income taxes (3,851) 306 (10,266) 649 Provision for (benefit from) income taxes (890) 101 (1,302) 241 - ------------------------------------------------------------------------------------------------------------------- Net earnings (loss) $(2,961) $ 205 (8,964) $ 408 =================================================================================================================== Earnings (loss) per share $( 0.04) $ 0.00 $ (0.14) $ 0.01 ===================================================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (Expressed in thousands of U.S. dollars)
Three months ended September 30, Nine months ended September 30, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------- Retained earnings (deficit) beginning of period $(5,294) $ 2,919 $ 709 $ 2,716 Beginning of period Net earnings (loss) (2,961) 205 (8,964) 408 Dividends -- -- -- -- - ------------------------------------------------------------------------------------------------------------------- Retained earnings (deficit) end of period $(8,255) $ 3,124 $(8,255) $ 3,124
4 5 CONSOLIDATED STATEMENTS OF CASH FLOWS (Expressed in thousands of U.S. dollars)
Three months ended September 30, Nine months ended September 30, 1999 1998 1999 1998 - ------------------------------------------------------------------------------------------------------------------- OPERATING ACTIVITIES Net earnings (loss) $ (2,961) $ 205 $(8,964) $ 408 Adjustment for items not affecting Working capital 5,473 2,310 12,340 7,030 Net changes in non-cash Working capital (4,282) 676 (6,682) 2,706 - ------------------------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATIONS $ (1,770) 3,191 (3,306) 10,144 - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES* Capital expenditures 2,931 (1,776) (5,830) (7,170) Business acquisition (2,861) -- 7,908 -- Other assets (42) -- 3,247 175 - ------------------------------------------------------------------------------------------------------------------- NET INVESTMENT ACTIVITIES 28 (1,776) 5,325 (6,995) - ------------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES Stock issues 347 106 1,134 180 Cumulative translation adjustment (28) (189) 69 (250) Contracts Payable (42) -- 850 -- - ------------------------------------------------------------------------------------------------------------------- NET FINANCING ACTIVITIES 277 (83) 2,053 (70) - ------------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash (1,465) 1,332 4,072 3,079 Cash, beginning of period 31,707 28,660 26,170 26,913 - ------------------------------------------------------------------------------------------------------------------- Cash, end of period $ 30,242 $29,992 $30,242 $ 29,992 ===================================================================================================================
*NON-CASH INVESTING ACTIVITIES The acquisition of all issued and outstanding shares of Rayrock Resources Inc., for consideration as follows: Calculated fair value of assets received $ 94,941 Less: cash and actual plus estimated transaction costs at September 30, 1999 $ 48,022 -------- Consideration paid through the issuance of common shares $ 46,919 ========
5 6 GLAMIS GOLD LTD. Notes to Interim Consolidated Financial Statements (tables expressed in thousands of U.S. dollars) Nine months ended September 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 September 30, 1999 and December 31, 1998 and the consolidated results of its operations and its cash flows for the three months and nine months ended September 30, 1999 and 1998. The results of operations for the nine months ended September 30, 1999 are not necessarily indicative of the results to be expected for the entire 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 6 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 September 30, 1999 but only include the operating results of the acquired operations for the period March-September 1999. 3. OTHER CURRENT ASSETS Included in other current assets are the following inventories:
SEPTEMBER 30, 1999 December 31, 1998 - ------------------------------------------------------------------------------- Finished goods $ 9,020 $ 4,048 Work-in-progress 7,288 5,835 Supplies and spare parts 2,882 746 - ------------------------------------------------------------------------------- $19,190 $10,629 ======= =======
6 7 4. SHARE CAPITAL
Nine Months ended Nine Months ended September 30, 1999 September 30, 1998 - ------------------------------------------------------------------------------------------------------------------- # OF SHARES Amount (in 000's) # of shares Amount (000's) - ------------------------------------------------------------------------------------------------------------------- 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 1,012,200 1,133 23,000 74 Pursuant to agreement to Acquire remaining 40% Interest in La Cieneguita 25,000 106 -- -- Issued upon acquisition of Rayrock (see note 2) 29,277,820 46,919 -- -- ---------- -------- ---------- -------- Balance at End of Period 69,150,632 $157,639 31,270,707 $ 89,830 ========== ======== ========== ========
5. SEGMENT REPORTING As at September 30, 1999 and for the nine months ended September 30, 1999 (in thousands of dollars) (a) Operating segments:
Exploration and Producing Mines Development Gold Copper Properties Corporate Total - ------------------------------------------------------------------------------------------------------------------- 1999 Revenue $ 31,293 $ 6,912 $ 222 $ -- $ 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 1998 Revenue $ 25,388 $ -- $ -- $ -- $ 17,144 Earnings (loss) from operations $ 1,346 $ -- $ (35) $ (1,946) $ (635) Net earnings (loss) $ 1,346 $ -- $ (35) $ (903) $ 408 Identifiable Assets $ 45,972 $ -- $ 19,655 $ 35,097 $ 100,724 - ------------------------------------------------------------------------------------------------------------------- (b) Geographic Information: North America Central & South America Total - ------------------------------------------------------------------------------------------------------------------- 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
As at September 30, 1998 and for the nine months then ended, all revenues, earnings and identifiable assets were in North America. 7 8 6. 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 September 30, 1999 or December 31, 1998, or for the three months and nine months ended September 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 gold the price for the third quarter of 1999 averaging $259 ($273 for nine months) the Company continued to emphasize its cost containment programs at all locations. The Company is actively seeking growth opportunities. In March 1999 the Company acquired Rayrock Resources Inc. ("Rayrock") (refer to note 2 to the Financial statements). The acquisition added three operating gold 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. (The Ivan mine was sold on October 29, 1999 for US$21 million.) 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 September 30, 1999. However, the Company's statement of operations reflects a complete nine months for the Glamis operation, but only seven months (March-September 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 loss for the nine months ended September 30, 1999 of $8.96 million ($0.14 per share) compared to earnings of $0.4 million ($0.01 per share) in the first nine months of 1998. The difference is primarily attributable to a $4.4 million loss from the Ivan mine, $1.0 million from decreased production and higher costs at Rand, as well as $1.0 million reduction in profits resulting from the decline in the realized price in gold. Selling, general and administrative activities were $2.7 million greater during the first nine months of 1999 as compared to same period in 1998. The increase is attributable to staffing changes, relocation and consolidation of corporate functions in the Reno office as well as a $866,000 restructuring charge taken in the third quarter. Other income was positively affected by sales of several investment securities during the first nine months of 1999. Losses for the third quarter of 1999 were $2.96 million compared to a loss of $0.1 million in 1998. The Ivan mine lost an additional $1.3 million in the third quarter. Increases in depreciation and depletion of $2.5 million are a result of on-going re-assessment of the acquired Nevada properties. The increase in selling, general and administrative ($1.7 million) was affected by the restructuring charge of $866,000 in the quarter. These 8 9 losses were offset by improvements in the total costs of production (see production tables). LIQUIDITY AND CAPITAL RESOURCES The Company had working capital of $45.5 million at September 30, 1999, an increase of $11.3 million from December 31, 1998. Long term liabilities were $17.4 million at September 30, 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. The Company continues to have no long-term debt. During the third quarter the sale of the Imperial shovel for $7.0 million and other miscellaneous disposals offset capital expenditures of $4.1 million at other units. The major capital expenditures were $0.5 mine development at Ivan, $1.0 million for deferred stripping at Rand, $1.4 million for the underground project at the Dee mine and $1.4 million at San Martin project. The San Martin project feasibility study was approved by the Board of Directors on October 06, 1999. The third quarter expenditures were for land acquisition, preparation of the feasibility study, engineering and metallurgical test work. All capital expenditures were financed from the Company's working capital. During the first nine months of 1999 the Company's operations used $3.3 million in cash. $2.5 million was used at Ivan, while the Company's gold operations contributed $3.3 million. The significant differences in cash used are attributable to an increase in work-in-process inventories at Rand ($0.5 million), Marigold ($0.6 million) and Daisy ($0.6 million) and an increase in finished goods inventory reflecting gold ounces being leased out or in process at the refineries, ($5.0 million). Materials and supplies inventories increased by $2.1 million over the nine-month period, attributable to the addition of four mines. Positive changes resulted from increases in accounts payable, contracts and royalties payable ($3.2 million) and a decrease in accounts receivable ($0.6 million). Lower gold ($273 average for the nine months) and copper prices continue to negatively impact cash flows. Comparative production highlights of the first three quarters of 1999 and 1998 respectively are as follows: PRODUCTION/REVENUE DATA
For comparative purposes only Nevada gold properties GLAMIS GOLD LTD. acquired from Rayrock NINE MONTHS ENDED Nine months ended - --------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, September 30, September 30, September 30, 1999(1) 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------- Gold Ounces produced 110,582 81,118 131,787 74,398 - --------------------------------------------------------------------------------------------------------------- Average revenue per ounce $ 285 $ 313 $ 292 $ 302 - --------------------------------------------------------------------------------------------------------------- Average Market price Per ounce $ 273 $ 294 $ 273 $ 294 - --------------------------------------------------------------------------------------------------------------- Total cash cost per ounce $ 233 $ 214 $ 234 $ 247 - --------------------------------------------------------------------------------------------------------------- Total prod. Cost per ounce $ 307 $ 296 $ 304 $ 305 - ---------------------------------------------------------------------------------------------------------------
- ---------- (1) includes the results of the Nevada properties' operations for seven months March-September 1999. 9 10
For comparative purposes only Nevada gold properties GLAMIS GOLD LTD. acquired from Rayrock THREE MONTHS ENDED Three months ended - --------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, September 30, September 30, September 30, 1999(1) 1998 1999 1998 - --------------------------------------------------------------------------------------------------------------- Gold Ounces produced 41,574 26,185 41,574 27,133 - --------------------------------------------------------------------------------------------------------------- Average revenue per ounce $ 300 $ 315 $ 300 $ 295 - --------------------------------------------------------------------------------------------------------------- Average Market price Per ounce $ 259 $ 289 $ 273 $ 294 - --------------------------------------------------------------------------------------------------------------- Total cash cost per ounce $ 207 $ 213 $ 207 $ 245 - --------------------------------------------------------------------------------------------------------------- Total prod. Cost per ounce $ 287 $ 270 $ 287 $ 300 - ---------------------------------------------------------------------------------------------------------------
- ---------- (1) includes the results of the Nevada properties' operations acquired in March 1999. 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).
NINE MONTHS ENDED Nine months ended - --------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, September 30, September 30, September 30, 1999 1999 Gold 1998 Cash 1998 Gold MINE TOTAL CASH COST OF ounces cost of ounces OF PRODUCTION produced production produced - --------------------------------------------------------------------------------------------------------------- Picacho $ 173 5,497 $ 144 14,461 - --------------------------------------------------------------------------------------------------------------- Rand $ 248 39,149 $ 229 65,141 - --------------------------------------------------------------------------------------------------------------- Marigold (2) (1) $ 224 (1) 35,208 $ 236 34,892 - --------------------------------------------------------------------------------------------------------------- Daisy (3) (1) $ 204 (1) 20,778 $ 234 14,657 - --------------------------------------------------------------------------------------------------------------- Dee (1) $ 253 (1) 30,321 $ 270 24,849 - ---------------------------------------------------------------------------------------------------------------
- ---------- (1) The Company's share of this production (March-September 1999 only) 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. 1998 data on Marigold, Dee and Daisy for information only. (2) Marigold is 66.7% owned. (3) Daisy was owned 35% January-June 1998 and 100% thereafter.
NINE MONTHS ENDED Nine months ended - --------------------------------------------------------------------------------------------------------------- SEPTEMBER 30, September 30, September 30, September 30, 1999 1999 Gold 1998 Cash 1998 Gold MINE TOTAL CASH COST OF ounces cost of ounces OF PRODUCTION produced production produced - --------------------------------------------------------------------------------------------------------------- Picacho $ 135 1,797 $ 129 4,019 - --------------------------------------------------------------------------------------------------------------- Rand $ 251 11,874 227 21,740 - --------------------------------------------------------------------------------------------------------------- Marigold (2) $ 180 9,681 245 (1) 10,459 - --------------------------------------------------------------------------------------------------------------- Daisy (3) $ 120 9,762 215 (1) 9,226 - --------------------------------------------------------------------------------------------------------------- Dee $ 292 8,460 279 (1) 7,448 - ---------------------------------------------------------------------------------------------------------------
- ---------- (1) 1998 data on Marigold, Dee and Daisy for information only. (2) Marigold is 66.7% owned. (3) Daisy was owned 35% in January-June 1998 and 100% thereafter. 10 11 PICACHO MINE, CALIFORNIA Reclamation continues as well as final gold production. 1,797 ounces were produced in the third quarter of 1999 and 5,497 year to date. Picacho is expected to produce approximately 1,100 ounces of gold in the last quarter of 1999. RAND MINE, CALIFORNIA The production shortfalls anticipated in the budget continue at Rand though slightly larger than expected. The mine produced 39,149 ounces for the nine months ended September 30, 1999 compared to 65,141 ounces produced for a comparable period in 1998. The planned major stripping program has impacted ounces year-to-date, but production is increasing steadily in the fourth quarter. Production is anticipated at 64,000 ounces 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. Seven months of production for Glamis' account from Marigold totaled 23,651 ounces of gold. Marigold performance continues to improve as the third quarter production of 9,681 ounces is expected to increase to close to 12,000 in the fourth quarter. 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. Third quarter development remained behind plan in bringing the North Underground project into production. Open pit operations continued to concentrate on stripping of the Ultimate DX pit. Gold production continues to be off plan with 8,460 ounces produced in the third quarter (23,031 for the seven months of Glamis' ownership). At the end of October, the contract with the existing underground mining contractor was terminated and a contract with a new contractor is being negotiated. The Company expects a cessation of underground mining of approximately three weeks and anticipates production of approximately 9,700 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 third quarter (9,762 ounces) was slightly less than expected. The first seven months (production of 18,420 ounces) were negatively impacted by operations in the Mother Lode pit which was subsequently abandoned. Production has been increasing and a total of 31,000 ounces should be produced for Glamis during 1999. Mining at Daisy is expected to be completed in the fourth quarter with a decision whether to develop the nearby Reward deposit expected in the first quarter of 2000. IMPERIAL PROJECT, CALIFORNIA The Company continues to seek government permits to allow development of the Imperial Project. Completion of an Environmental Impact Statement and final decision by the Bureau of Land Management on Imperial's permit submittals are expected in the first half of 2000. 11 12 CIENEGUITA PROJECT, MEXICO Heap rinsing continued in September and will continue as required based on samples of heap residues taken during the month. Reclamation of the mine is complete; additional work is required at the process facility. 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. Subsequently, on October 29, 1999, the companies that hold the Chilean copper assets (Minera Rayrock Limitada and Minera Dona Isabel) were sold for $21 million. SAN MARTIN PROJECT, HONDURAS The feasibility study was completed and approved by the Board of Directors on October 06, 1999. The Company has commenced certain activities and will enter the construction phase in late fourth quarter subject to delivery of the final permits. The project is expected to have initial capital expenditures of $27 million and produce gold at a total cost of $210 per ounce. CERRO BLANCO PROJECT, GUATEMALA Evaluation of the data from the exploration and drilling programs in the second quarter led to approval of an additional program which began in October 1999. The drilling program is expected to be completed by year-end. 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 only $143,000 for the third quarter. This was limited to certain exploration at or near the Company's Nevada operations, as well as certain exploration properties in Central America. Exploration work at San Martin and Cerro Blanco is capitalized. 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. 12 13 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 was completed 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 serves 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 the safety of our normal transactions with them. We anticipate no extraordinary measures outside of the normal diligence 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 half of 2000. 13 14 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 economic analyses 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 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, 1998, the Company is subject to changes in metals and 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 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 September 30, 1999 and December 31, 1998. Fair values are estimated based on market quotations of the variables based on expected maturity date. 14 15
Positions as at December 31, 1998 (in thousands of U.S. dollars unless indicated) - ----------------------------------------------------------------------------------------------------- Assets: Derivatives: Gold Put Gold Call Gold Call Short-term Gold Forward Options Options Options Investments Sales Purchased Sold Purchased - ----------------------------------------------------------------------------------------------------- Maturity 1999 Investments $23.0 million -- -- -- -- Ounces -- 3,000 -- 10,000 -- Average price per ounce -- $ 294 -- $ 310 -- Fair Market Value $23.0 million $ 17.0 -- Nil -- - -----------------------------------------------------------------------------------------------------
Positions as at September 30, 1999 (in thousands of U.S. dollars unless indicated) - ----------------------------------------------------------------------------------------------------- Assets: Derivatives: Gold Put Gold Call Gold Call Short-term Gold Forward Options Options Options Investments Sales Purchased Sold Purchased - ----------------------------------------------------------------------------------------------------- Maturity 1999 Investments $28.0 million -- -- -- -- Ounces -- 23,800 9,500 37,500 3,600 Average price per ounce -- $278 $270 $286 $310 Fair Market Value $28.0 million $(503.1) Nil $(487.5) $21.6 - ----------------------------------------------------------------------------------------------------- Maturity 2000 Investments -- -- -- -- -- Ounces -- 58,000 36,000 19,000 -- Average price per ounce -- $285 $275 $275 -- Fair Market Value -- $(870.0) Nil $(475.0) -- - ----------------------------------------------------------------------------------------------------- Maturity 2001 Investments -- -- -- -- -- Ounces -- -- -- 60,000 -- Average price per ounce -- -- -- $295 -- Fair Market Value -- -- -- $(600.0) -- - -----------------------------------------------------------------------------------------------------
15 16 PART 11 - 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: None ITEM 5 OTHER INFORMATION: None ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K: a) Exhibits Exhibit Number Exhibit Description 27 Financial Data Schedule
b) Reports on Form 8-K: None 16 17 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 12, 1999 /s/ CHERYL S. MAHER ---------------------------------------- Cheryl S. Maher Treasurer (Principal Accounting and Financial Officer) 17 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM GLAMIS GOLD LTD. CONSOLIDATED FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 10-Q 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 30,242 0 4,642 0 19,190 54,544 314,692 201,882 175,980 9,087 0 0 0 157,639 (8,123) 175,980 38,427 38,427 33,867 50,346 (1,919) 0 266 (10,266) (1,302) (8,964) 0 0 0 (8,964) (0.14) (0.14)
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