Replies to post #1980 on Mostly: Classical

[amarksp]

GLG: Merrill

Kevin McArthur, President and CEO, provided an update on the company’s activities to delegates at the Denver Gold Forum.
Analysis
Mr. McArthur reported that the company's operations continue to perform well, its development projects are moving ahead, and it is also enjoying exploration success. The company has three development projects that will form the forecast growth phase in its gold output from 238,000 ozs in 2003E (lowered from 250,000 ozs due to short term leaching problems at San Martin) to over 550,000 ozs by 2006E. Cash costs are forecast to decline from $170/oz to below $150/oz by 2006.

At the 66.7%-owned Marigold mine in Nevada, the expansion is nearly complete and gold output is forecast to rise to 165,000 ozs in 2004 (100%). In its 2Q results, Glamis noted a new discovery called TZN. Drilling continues in order to delineate the full extent of this zone. This zone could allow Marigold to be expanded to over 200,000 ozs per annum The wholly owned El Sauzel project in Mexico recently received all major permits, and construction has commenced on schedule. The mine is scheduled to enter commercial output in early 2005 at an annual output rate of 190,000 ozs of gold and cash cost of $110/oz.

The Marlin project in Guatemala will be Glamis' third new mine, with commissioning expected in late 2005. Marlin is forecast to produce 190,000 ozs of gold at a cash cost of $101/oz. The company believes that it will receive permits in mid-2004, and has provincial government support. Regional exploration work is slated to start in 2004.

Holding $150 million in cash, our analysis indicates Glamis has sufficient capital and cash flow to finance the growth projects above (around $200 million).

What’s New - At the Marlin project, Mr. McArthur noted that local and federal authorities are supportive of the project and he is optimistic that Glamis can beat the permitting schedule (by mid-2004). Recent deep drilling at Marlin has intersected further extensions of the mineralization to the east, hitting 41 grams/tonne over 1.5 metres.

Recommendation
Currently trading at around 2. 4x estimated NAV, Glamis is still within the historical valuation range of 1 to 3 times for the gold producers. Based on 3 times adjusted NAV that we ascribe to gold growth companies, Glamis would be fully valued at $16/sh. Risks of this target not being met include unforeseen operating problems and gold price weakness.