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Glamis Gold Ltd. (GLG)

Q1 2006 Earnings Conference Call

May 3rd 2006, 2:30 PM.

Executives:

Kevin McArthur, Director of Investor Relations

James Voorhees, Executive Vice President and Chief Operating Officer

Jeff Wilhoit, Director of Investor Relations

Tim Miller, Vice President of Central America

Charles Jeannes, Exec. VP of Admin, Secretary and General Counsel

Cheryl Maher, Chief Financial Officer, VP of Finance and Treasurer

Analysts:

David Stein, Sprott Securities

Steve Butler, Canaccord Adams

Don MacLean, Paradigm Capital, Inc.

Barry Cooper, CIBC World Markets

Dr. Martin, Private Investor, Michigan

John Bridges, J.P. Morgan

John Doody, Gold Stock Analyst newsletter

Michael Fowler, Desjardins Securities

Mark Smith, Dundee Securities Corporation

Adam Frank, King Capital

Elliott Glazer, DuPasquier

Mike, Analyst

Gary, Analyst

Kevin McArthur, Director of Investor Relations

Okay, good afternoon everyone, once again. We are web casting the following presentation, so before we begin, I will ask our telephone operator to initiate the proceedings for those joining us by phone and online. Operator?

Operator

Sir, would you like me to give the Q&A instructions?

Kevin McArthur, Director of Investor Relations

Yes please.

Operator

Ladies and gentlemen, that is “*” “1” on your touchtone telephone for questions.

Kevin McArthur, Director of Investor Relations

Okay operator. Thank you. Good afternoon everyone and thanks for joining us on our First Quarter Conference Call. We just completed our annual general meeting here in Toronto. Among the other business matters we handled, Glamis shareholders have reelected the Board of Directors in its entirety. And they join me here, as do the executive officers of Glamis.

In addition, I am also pleased to welcome several shareholders and a number of representatives from the Toronto investment community. Each year we try to conduct our first quarter conference call before a live audience following our AGM. I'm also very happy to be standing here before you on a very important day in the history of Glamis Gold. Just really a short few minutes ago, we officially completed the transaction to acquire Western Silver Corporation and the addition of these world-class assets bring Glamis to a whole new level.

I'm going to start with a discussion of our quarterly performance of course, followed by a review of some of our exploration and development properties. Then I will be asking our Chief Operating Officer, Jim Voorhees to provide an update on the combination with Western Silver and our plans for developing their primary assets called Penasquito in Mexico. Of course, we will follow this with Q&A.

Okay. Before proceeding, I need to caution that this presentation does contain forward-looking statement and future projections -- and projections about future performance may or may not be realized. This slide is found in your handout, if you need a handout here in the audience, Jeff in the back has one; you could just put up your hand. And for those of you attending by phone you can follow on our web site.

The first quarter of 2006 was another record quarter for Glamis. It was right on track, producing a little over 147,000 ounces of gold at a total cash cost of $182 per ounce. Our cash flow for the quarter amounted to $42.4 million and earnings were $0.13 per share. The real story of the first quarter was the start up at Marlin. We spent the better part of the quarter working through typical commissioning, challenges leading to very impressive performance in March where we exceeded 25,000 ounces of gold at a cash cost of less than a $100 per ounce. And certainly the bugs aren't all completely out yet. But we believe that March's performance is more along the line with what we’ll see throughout 2006.

Our Cerro Blanco feasibility continues to move towards completion scheduled for November of this year. And permitting activities are also advancing at a good pace. The shareholder approval of the Western Silver plan of arrangement is actually a second quarter event, but capped off an effort that began well over a year ago. We expect to share some progress on the Penasquito project by way of a revised feasibility study that we expect to be completed in August of this year.

Okay, just a quarterly wrap-up of mine by mine how we did for the quarter. Here you can see that the star of the quarter, once again, was El Sauzal, which enjoyed record performance and very low cash cost. We feel that given our performance to date that our guidance of 670,000 ounces of gold for 2006 at a total cash cost of between $160 and $170 ounce is very achievable. And a little illustration of this is on the next slide that shows our quarterly ramp-up. You can see the quarterly trend that we experienced in 2005. At that same time last year, El Sauzal was building up from a 3,000 to 4,000 ton per day rate, working through employee training, commissioning and startup issues. And the same thing is happening this year, only with Marlin starting up. We forecasted a similar quarter-by-quarter production growth as Marlin builds up a team during the year.

Okay, on to the balance sheet. At the end of the quarter, we remained disciplined while building Marlin, using debt instead of issuing new equity without hedging a single ounce of gold or silver. Now with construction completed cash balances have begun to grow and will continue to do so throughout 2006.

Going to turn now to a quick review of Marlin progress, and then, of course, as I said turn to some exploration and development updates property by property basis and then Jim will touch on Penasquito. A photograph here of Marlin. This year we expect to produce over 250,000 ounces of gold, about 3 million ounces of silver. So far, things look very promising, as the startup has gone quite smoothly with the usual commissioning and training issues as I spoke of earlier. This is a world-class mine built with the highest of international environmental standards, with well over 500 employees in an area of Guatemala's highlands where full-time employment is somewhat of a new concept, and a concept that we find is very popular indeed.

Marlin is comprised of an open pit of 4,000 ore tons per day and an underground mine of 1,000 tons per day. Both will operate concurrently over the mine 10-year mine life providing us a great deal of flexibility in the way we operate. The beauty of Marlin is, of course, the very high-grade ore at the top end of the open pit and what we call the Rubble zone. This open pit provides the lions-share of the mill feed as the underground ramps up toward the goal of 1,000 tons per day this year. The mill is designed for 5,000 tons per day. We started up at 3,000 and moved towards full production by mid-year. And in fact, the first quarter experienced a number of 5,000 ton days already and we are very satisfied that things are on track.

Exploration is the key to Marlin. Our goal is to feed our targets. Of course, to prove ourselves, to our neighbors, and to find ways to move beyond our 10-year mine life and of course, those of you that have been following Glamis for some time know that this is what we do quite well. You can see the gold-bearing veins here in this slide that have been identified in the immediate Marlin area, we view Marlin of course as much more than one mine entity but rather a gold mining district with a lot of potential.

In the first quarter of this year, we continued to test a new vein structure, discovered in our underground ramp, this is called the Rosa vein. And we drove across the upper end of the Rosa vein and are cutting 1.6 meters of 9.1 grams of gold per ton and 137 grams of silver, and we actually drove along the vein and did some mining. We are starting an underground exploration-drilling program at Rosa very soon. We hope to have a resource to find by the end of this year. And this is one of the new veins, that of course, that we've discovered.

Another one, just today, we released updated results at West Vero. This shows a very strong potential. This is a long section of the West Vero drill intercepts showing that the vein is open in each direction and most notably to depth. This vein is similar to Marlin, same rock type, same mineralogy, big robust vein. And if it's at all like Marlin, we will have a vertical dimension of 500 meters on this. Because topography is difficult, it's at the bottom of a canyon and the vein is vertical, a deeper surface drilling is very difficult to accomplish. So, we are now making plans to drift over to Vero for some more underground drilling. And this is about 700 meters away.

Also in Guatemala, feasibility at Cerro Blanco is progressing towards November 2006 completion. We have an underground mining contractor in place. This is the same contractor who drove the initial Marlin decline. And we continue to evaluate some compelling geothermal resource possibilities at Cerro Blanco, very interesting.

Next slide is a gold soil anomaly map of Cerro Blanco. This 1.94 million ounce resource is contained in that area of the lower part of the slide called the main zone. We are now drilling up to the north in the far north and the Salinas targets. Things are looking very promising here. No big discoveries yet, but good indications. We are all anxious to build a mine at Cerro Blanco, as is a certain official who stopped in last month to check on our progress. This is the President of the country, Oscar Berger, who just dropped in, gave an impromptu, had talked to our local geologist and then he was on his way. Indicative of how Guatemala works, the great support we are receiving from the Government of Guatemala.

In Nevada, our 60% partner at Dee Barrick continues to highlight the potential of the property with special emphasis on the Arturo zone. And I believe they will be providing an update sometime today, or at least some comments in their conference call. We are a 40% participating interest in the Dee. We're more than happy to continue funding the development of this newest discovery in the Carlin trend. This of course is from one of Barrick slides. It's the drill hole data released to-date by Barrick. Clearly, there are a few million ounces of gold here. The big question is, how many millions of ounces and of course, is it economic? The deposit is still open to the east toward the parallel zone called the hinge zone that is being drilled on. So, we need a lot more drilling here before we can answer those questions and Barrick is very interested in this project and working very diligently to get this thing to the bottom line.

The next slide shows our exploration budget of nearly $25 million this year. About $14 million of that is earmarked for Cerro Blanco. This is the feasibility, the permitting, the driving of the underground drift. With all of that spending, of course expense, until we complete the feasibility study which we expect to have in front of the board by November. Our newest project of course is Penasquito in Mexico. You don't see the numbers for Penasquito here. This is of course made possible by our merger with Western Silver. And I'm now going to ask our EVP and Chief Operating Officer, Jim Voorhees to discuss this exciting new development for the company. Jim?

James Voorhees, Executive Vice President and Chief Operating Officer

Thanks Kevin, and thanks to everyone in the room and on the phone for joining us. As the deal for Western Silver came together, I was excited just envisioning the scope of what we had at the Penasquito deposits and also in the potential – in the surrounding region. Penasquito has all the elements that make it easier for us operators to sleep at night, it has got good access, road, rail, win your smelters; win your towns, good labor force. So, really exciting location for what's going to be a large mine for us.

And although it's not next door to our El Sauzal operation, we will certainly be taking advantage of our country's presence, consolidating of our talent that we already have in countries. And of course, watching as our profile in Mexico grows exponentially with this new large project.

An additional advantage at Penasquito is the very flat topography in sharp contrast to what we saw at El Sauzal, where we had of course, challenges of very vertical terrain and experienced a lot of work on access, challenges to get to the project. This is very different for us. And, of course, this concession is close to a very mining savvy community. It's in a mining state. And of course, in a country that has a rich heritage of mining going back hundreds of years.

Here you see the data from Western Silver's November 2005 feasibility. The executive summary by the way is available on our web site. This is an open pit operation with deep leaching of oxide ores for gold and silver. And also milling and flotation of gold, silver, lead, zinc, sulphide ores for large open pit operation, the ore grades are quite good yielding very low production costs as shown here. Interestingly, if you were to net all of the metals against the gold production costs, the total cash cost at Penasquito would be about $193 mines value. So that's with fairly old metals prices. So, clearly a very, very valuable deposit.

As Kevin mentioned we are revising the feasibility study to reflect the new drilling and to reflect the higher throughput that we think possible for this growing resource. What I'd like to do now is spend just a few moments describing the deposits, as we know them. First of all, Penasquito project is composed of two main deposits. There's the Chile Colorado and the Penasco deposits. And recent drilling has focused mainly on the Penasco deposit shown here to the north.

This slide very effectively conveys some of the upside we are seeing at Penasco. Note, the box in the upper left, which provides the average grade of the November feasibility deposits. Now, since this feasibility study was completed, assays from approximately 90 more holes have been received representing over 57,000 meters. And three things stand out from this drilling. First, confidence in the resource has been enhanced, which should be to conversion of resources to reserves within the pit shell. Secondly, droving to the southwest of Penasco and to a lesser degree to the northeast, has identified significant zone extensions that will clearly add resources and reserves into the project. And then third, the gold and silver grades in the new extensions are higher than the average grades of the deposits. And you can see this in the drill hole example listed there on the lower left box. Clearly, looking at the section A&A prime to the Penasco pit, you will be able to see these concepts on the next slide.

Here's a cross section through the pits. The drill holes shown are only those drill post feasibility. The grade blocks are inferred material that was not valued, one establishing the optimum pit in the feasibility study nor was accounted in the reserves. And you can see the southwest drilling to the left of the pit. It's these higher-grade intercepts that drove Glamis to engage with Western Silver and to complete the merger because we believe that we can pull a large portion of this resource into the open pit reserve. And a reserve that is much bigger than that of the original feasibility study. Of course, there's a lot of work to accomplish along the way here. We've got more exploration drilling on the fast track and planning an updated feasibility testing the doubling of the 50,000-ton per day mill throughput.

We are very focused on Penasquito. But this shows some additional targets here that we did not really value during our due diligence. Early activity at Nochebuena to the north has shown some promise and to the south we see indications of a low temperature gold system. Clearly, Cerro Blanco exploration VP has his work put out ahead of in here so we've got a lot of interesting ground to cover. We are building on an excellent foundation for productive relationship with our communities. Looking long-term, we're working hard to complete our feasibility update by August, leading to startup in 2009, and then full production by the year 2010. And with that, I would like to turn things back over to Kevin.

Kevin McArthur, Director of Investor Relations

Okay, thanks Jim. This is really great news and very exciting. This slide is pretty interesting. This thing has always been about one thing, and that's gold leverage. Simply put for 25% more shares, we gain 86% more proven and probable reserves. And the net result of that is our proven and probable gold reserves increased by 46%. This illustrates why this transaction makes so much sense. And once again, this is on the very conservative base case that was in the November feasibility.

Now Glamis will go to work at what it does best. And that's getting the exploration done on the property that's already known of. It's building the mine, operating it responsibly, growing those reserves, putting that gold leverage to work for both sets of shareholders, which have now joined as one as Glamis shareholders. This will also be a very, very valuable exercise for our Mexican team and also the communities around Penasquito.

In addition to gold leverage, this transaction is also expected to place us amongst the largest silver producers in the world. This comes through proven and probable silver reserves growth of over 500% on a per share basis. Of course, we acquire other metals with a true value of $10.7 billion at the time of announcement on February 24th. And then if you look at the next bar, you've got a value of the base case reserves at today's metal prices, a 30% increase in a mere two-month period. This is made possible by just the price of metals moving up over that two months. And then in all end total resource value at current prices is shown here. This is our challenge now is to move as much of this resource into proven and probable reserves over the next few years. This is truly a tip of the iceberg situation for Glamis. And it couldn't have landed into better hands to get the job done.

I mentioned tip of the iceberg. Here are the tip of the iceberg elements. And I'm not going to bother to read all of these. As Jim alluded to, the upside possibilities at Penasquito are tremendous, not only in the new Penasco zone, but in the grade upside that we are seeing to the southwest. And in addition to the little tested targets such a Nochebuena, we also acquire a 35% share in San Nicolas project. This is a very large base of precious base metals and precious metals deposits also located in Zacatecas State another world-class deposit.

We are focused on delivering long-term shareholder value as evidenced by Glamis's five-year share price performance shown here. Glamis was built on very smart tip of the iceberg acquisitions at fair prices, applying our proven permitting and construction skills and operating the mines responsibly. The simple strategy has served us well and will serve us very well in the future.

Every transaction shown here is bigger and better than the one prior. And this last one, Penasquito, promises even to eclipse the Francisco Gold merger, which I'm sure many in this room will acknowledge to be the best deal done in the last 20 years in this industry. So, it's a very exciting time. That concludes my prepared remarks. Thank you for attending today. The Glamis team will now be happy to entertain questions from the audience as well as those participating by web cast. Now I'm going to hand it over to Jeff Wilhoit in the back of the room to manage the Q&A session. Jeff?

Jeff Wilhoit, Director of Investor Relations

Thanks Kevin. Thank you, Kevin. While the telephone queue is being assembled, we would like to begin with a few questions from the audience assembled on the floor.

Question-and-Answer Session

Operator

Operator Instructions

Q - David Stein

David Stein, Sprott Securities. My question is, with your production guidance and cash cost guidance for this year, what silver prices were you using?

A - James Voorhees

Those slides that you saw were based on $500 gold and $7 silver, seems a little conservative today.

Q - David Stein

Yeah, certainly does, but, no that’s good. Thanks. That's it for now.

A - James Voorhees

Yeah, thanks David.

A - Jeff Wilhoit

Any other questions from the floor?

Q - Steve Butler

Hi, Steve Butler of Canaccord Adams. Congratulations guys. Question for you, what got going so well I guess Kevin in the March month at Marlin in terms of getting those cash cost down and production? Is it all great it seems for most or what else?

A - Kevin McArthur

Well, I think Tim Miller, the manager of the project is here. VP of Central America.

A - Tim Miller

The quarter we are getting our production levels on a day-to-day basis at the target levels of 5,000 ton a day. We also had some very good grade. We had some pleasant surprises in the rebel zone in the open pit as well as some higher unexpected grades at the underground. Underground was ramping up as well. So, we were getting through some of the commissioning problems that we were encountering late in the quarter. Still, got a few things to do but it's improving quite nice.

A - Kevin McArthur

As you will remember, Steve, from our tour there back in December that we had quite a high confidence level because of the rubble zone ore at the surface. We knew that we could trip our way through a few months of startup, just like else's are but we felt that we could make the whole 250,000 ounces because of grade. And clearly that's what we've been doing is good grades in the surface ore. Poor rheology, so it's very tough to get it through the mill. Because it's kind of gooey and very oxidi, very low grade silver. And, we're working our way through that, but things look good.

Jeff Wilhoit

Don, in the back.

Q - Don MacLean

Jim, Don MacLean with Paradigm Capital. You’ve mentioned the additional drilling was giving higher than average grades for the studies. Can you give us a rough sense of how much higher they are on an equivalent basis? What the strip ratio was in the Q? How do you feel?

A - James Voorhees

Here, the grade improvement we're seeing with the more recent drilling has a lot to do with cutoff numbers used. Good idea is 10% to 20% increase overall would pay on the grade in the southwest region. And then the second part of your question was strip ratio, just under 2 to 1, I think it was 1.9 to 2, what was in the feasibility study.

Jeff Wilhoit

Mike.

Q – Mike

Just wondering, you talked before in the past about the amount of silver that’s coming out of Marlin or expected somewhat of Marlin. And then, you would consider hedging from the silver but obviously you want to keep the gold exposed to the spot. Any thoughts on silver, obviously we've seen some pretty spectacular prices recently we had. Is this a bit a temptation to hedge from silver so far?

A - James Voorhees

Yes and we continue to resist the temptation that had hedged over. We think that silver is going to be in a good market environment for some time. And we are not hedging silver. We will look at all opportunities on the base metal side.

Operator

Operator Instructions

Q – Gary

My question was twofold. Firstly on Marlin for the month of April, what sort of average in all throughput have you had for the month and can you talk a little bit about the underground production in the month of April?

A - Kevin McArthur

Yes. We are generally around 4,000 tons per day on average. We have had a few shutdowns; we've got vibration in the sag mill we are working on right now. When we are up and running we’ve seen we’re doing 4000 to 4500 ton a day, up or over 200 tons an hour. So, we are getting right towards our 5,000-ton a day goal. The underground has been increasing our tonnage rate through the first quarter and through April. We are up around between 500 and 600 tons a day right now coming out of the underground. We have that schedule to ramp up to get to our 1,000 tons per day into the third quarter.

Q - Gary

Okay thanks, Kevin. And just one other question Kevin. Can you give us the silver production for the next two years like you did in the gold production?

A - Kevin McArthur

Oh boy, silver production moves up above 3.5 million ounces, I believe for the next two years. Yeah. And really the only silver production we have of any consequence is from Marlin. They are minor amounts that come out of Marigold and El Sauzal and San Martin but not much. I don't have those exact numbers, Gary.

Q - Gary

That's fine, Kevin. 3.5 million ounces a year is where we're heading for right now in the next couple of years.

Jeff Wilhoit

Yeah, Barry.

Q - Barry Cooper

Barry Cooper, CIBC World Markets. Jim, just looking at that section that you show where the drilling is taking place in the southwest zone, it kind of looks like have not expanded it but that would come, any higher grade gold would come very late in the sequencing of the mine. But anyway you can get that brought forward or is that a wrong interpretation that I have?

A - James Voorhees

It’s really; we're working on the modeling right now. So it's a little bit premature to go too far. But certainly people have been talking about, well, is there some underground aspect here that might make sense overall. But not going there yet and just focusing on the surface mining. Yeah, there are some areas that are deeper with the higher grade, certainly. I don't recall some of the earlier numbers out of the feasibility where we are producing that 150,000 to 200,000 ounce a year level on gold. And indeed in the feasibility, say it increased in the later years, that highest. It’s just a little early for me to really answer with the new pit work and the new mine planning what we might be able to pull out of it. Certainly what will happen is that, if we are seeing a better gold grade, then of course the whole pit optimized on the full metal content that if there was a better gold grades start swinging us into that area of the pit earlier on, I guess that could bring some of those ounces forward. So sorry, kind of a rambling answer there. Just a little bit too early to tell how we will be able to mine that. Charlie?

A - Charles Jeannes

On that section, it shows as being deeper. But most of the new hole results on the southwest end are much shallower than most of the deposit and it starts at about 80 meters depth where the rest of deposits are about 200. So, actually it's going to improve economics a lot, I think.

Q - Barry Cooper

The Marigold deposit, you found a zone between two other zones. Can you just elaborate a little bit of what you’re finding there? What’s the depth, is it oxide material? Do you have a potential of spending those two zones into one large pit there or flush it out a little bit there?

A - James Voorhees

I think there is a lot of potential to expand it into one big zone. What we are getting there is oxide. It's good grade. And it's quite a distance from the pit edges. So, I think it really looks good.

Q - Barry Cooper

That would be type of typical grade or different grade that you will be having.

A - James Voorhees

A lot better than the average grade.

Q - Barry Cooper

Okay, good. And then just for Cheryl doesn't feel left out. Some of that what I refer to not as holding but your mature assets there, the depreciation rate has jumped up quite a bit, is that a good number on a per ounce going forward to use?

A - Cheryl Maher

Yes it is. And it's not so much the mature funds. Of course with Marlin and El Sauzal both in production now, we are amortizing that purchase price that’s what you are seeing, is it something that DD&A number. And you're going to see that number continue at about that 125 to 130 rate per ounce going forward.

Q - Barry Cooper

Sorry, I was referring more to San Martin and Marigold.

A - Cheryl Maher

But on the San Martin and Marigold, Marigold you’ve got amortization of course of a lot of the capitalized stripping. Over the last few years, you do see that, San Martin's DD&A rate is not terribly high. I don't have the exact number right now. But when you're really seeing the DD&A rate jump up is for Marlin and El Sauzal.

A - James Voorhees

San Martin was about 150 an ounce.

Q - Barry Cooper

Thanks.

Jeff Wilhoit

Yes?

Q -Martin

I am Dr. Martin, I am a shareholder from Michigan. I have a question about corporate strategy in the future. Glamis seems to have historically been largely if not exclusively a gold mining company. Now we are becoming a significant silver producer. Is part of the corporate strategy to become a multi-metal producer in the future and any changes down the road?

A - James Voorhees

Yeah, just a little bit of serendipity here. We were following the Western Silver Penasquito drilling for a couple of years. And honestly, not all that intrigued by it until the latest round of drilling. I mean we were following it and keeping track and developing relationships. And then the latest round of drilling the gold value started increasing pretty dramatically. And so, it was right in our cross hairs. It's in Mexico, in the Americas, big open pit deposit that Glamis knows how to operate. The very good gold values, I like to tell it a precious metals mine. I think it is one-third gold, one-third silver, one-third zinc. Take the lead and use it as a byproduct with the gold. And that seems to make pretty good sense, and the more we saw of the drilling, the more we realized this thing is becoming a big gold mine with byproduct metal. And but as the value of zinc goes up, all of a sudden the revenues get turns towards zinc. And Phase I is to acquire this project and get it running, get it up and running and Phase II would be what can we do with that zinc and that lead, and all of the complication that’s going to come to our company having the deal to concentrate. This is a big zinc mine too. And I'm not afraid to say that. It's just like I said, serendipity. We will still concentrate on being a gold mining company. We will probably account for the zinc separately. And if we can find a way to use those zinc values to acquire more gold assets and gold streams, that's what we will intend to do.

Jeff Wilhoit

Okay. We would like to take a question from one of our telephone participants. If the operator has one in queue.

Operator

Yes sir, your first question is from John Bridges of J.P. Morgan.

Q - John Bridges

Hi Kevin and everybody.

A - Kevin McArthur

Hi, John.

Q - John Bridges

When you were on the road show talking about Western Silver, before the deal you were bit coy on what you saw there, now the deal is closed. Can you give us a sense as to some of the key points that got you excited? Things that weren't disclosed already in the feasibility study?

A - Kevin McArthur

Well actually, anyone that had done the modeling would know this, because I think very few people actually did the real hard work of modeling the ore body which we of course have in-house capabilities of doing. Found that when you take that resource, that Western Silver had, and do floating coin analysis that include the resource numbers we inferred, it's much bigger than just what the 43-101 requirements call for. And so, I can't call out numbers here other than to say that the indications are by the recent drilling, that this will get larger. We can't define what that is at this point until we get a resource done -- a reserve done. But the most exciting part is how large this resource has the potential to be when you include the newest drilling, which is indeed open ended today. Secondly, as Jim responded is the grades in the southwest portion where we are seeing many, many holes of over gram per ton when the average grade of the deposit is 25 grams per ton. And significant silver and zinc grades that might add. These are the two points, not only that. Of course what Jim went through is a mining community, in a mining state, in a mining country. These are all key points to consider. And I think the Western Silver people were very sharp about who they chose to do business with. They found a company after quite a selection process I might add, that is capable of building mines. And operating in Mexico and doing it right. And it's also a company that you put a big asset like that into Glamis is going to have a very significant impact on where Glamis heads in the future.

Q - John Bridges

Could you give us a bit of a better guidance as to what's likely to happen to the strip ratio assuming these resource numbers come in? Are we looking at a significantly lower one?

A - Kevin McArthur

Well, first of all in the November feasibility that was completed, there's a fair amount of inferred resource within those pit shell that was counted as waste. And so if you took that same pit shell after some infill drilling, and assuming that the infill drilling is positive which it tends to look like, naturally that pit shell, the ultimate pit shell that was used in the original reserves would in that case have a lower stripping ratio because of inferred turning into proven and probable. As we drill to the southwest, there is -- it looks like the strip ratio increases. But some of the hole that Charlie pointed out are actually coming -- the ore zones are coming closer to the surface. So, there's kind of a raging internal debate within our group as we think that's where the starter pit is going to be is this higher grade zone over to the southwest and indeed what will the strip ratio do, until we get the reserves done, it's too hard for me to tell right now.

Q - John Bridges

Okay. That's helpful. Thanks a lot and good luck.

A - Kevin McArthur

Thank you.

A - Jeff Wilhoit

We will now entertain another question from the telephone queue.

Operator

Sir, your next question will come from John Doody of Gold Stock.

Q - John Doody

Hi good afternoon gentlemen, it’s Gold Stock Analyst Newsletter. I want to congratulate you on really a truly great acquisition, I believe. I guess you do.

A - James Voorhees

Thanks John.

Q - John Doody

My question is, how are you going to treat this deposit in terms of reporting cash cost per ounce? Is this is going to be a gold mine that you report, basically a negative cash cost per ounce of gold because of all the byproduct credits?

A - James Voorhees

Yeah, that's up in the air right now. As Jim said, if we account for everything as byproduct credits, our cash cost is in the feasibility level numbers is negative $192 per ounce negative. And, you know, that's not really reflecting reality. If you do it on a co-product basis, it would be as a cash cost of production, the zinc would be about $0.40 per pound a little over $0.40. The production of silver would be a little over $4.0 per ounce. And gold production would be 1.60 or so per ounce of gold. And that's using a byproduct with the lead because most of the gold shows up in the lead comp. And that's using a 25% lead price per pound. We are not sure yet at this point in time. There's some elements that are interesting. We just do it on a byproduct basis such as others do and I think those of us that want to run the business appropriately are thinking we are going to do some form of co-products accounting.

Q - John Doody

Okay that would be in keeping with the gold institute standards.

A - James Voorhees

I think the gold institute standard would be byproduct accounting.

Q - John Doody

Not if it's over 10%.

A - James Voorhees

Yeah okay.

Q - John Doody

Okay great. Thanks. Congrats again.

A - James Voorhees

Thank you.

A - Jeff Wilhoit

Next question from the telephone queue?

Operator

And your next question is from Michael Fowler of Desjardins Securities. Please Proceed.

Q - Michael Fowler

Yes guys, in terms of -- can you just go a little bit on the permitting, the Penasquito, Kevin, what kind of timelines do you see and what are some of the issues that you have to get through?

A - Kevin McArthur

Jim?

A - James Voorhees

Yeah sure, we already answered that, Michael.

Q - Michael Fowler

Okay.

A - James Voorhees

The current timeframe right now is looking for approval of the MIA in the first half of next year. That's a little bit open right now in terms of the specific date. We are still working on that. But that's what we are shooting for. Obviously earlier in the first half of next year as opposed to later. And that generates the time of the overall schedule that shows the sulfide, you know, startup in 2009. Of course, the oxide portion of the deposits is something that we will be pushing forward at a faster rate just because of the access to the oxide ores early and also the facilities to process the oxide ores earlier. So, we like to see something even in 2008 perhaps, minor production then of maybe some gold maybe in 2008. 2009 really is the key when we startup. As far as any hurdles in the permitting, we are not really seeing any at this point. There is a lot of studies underway. Hydrology is in progress right now. Securing up rights for the water supply for the project. But the site itself is really clean as far as any T&E species – we don't have any issues there. So pretty clean permitting process ahead of us.

Q - Michael Fowler

And, what about things like tailings, waste dumps, interaction with population infrastructure?

A - James Voorhees

The site itself is pretty sparsely populated. There's a small community there of Penasquito that maybe has 10 or 12 families. Certainly, we’re working with them to see how they would like to relocate if there is building homes for them. There is a community about 12 kilometers away near named Mazapio (phonetic) and there is certainly an opportunity that they might want to take an offer from us to move into housing there. But really not a lot on site. It's really a clean project from that standpoint.

Q - Michael Fowler

And you got good sites for tailings, waste dumps and flow of water doesn't go into anywhere like drinking water and anything like that?

A - James Voorhees

Yeah, exactly. There is really no running water on the site or anything like that, that might come down from a thunderstorm in the summer. Lots of flat ground. It's really kind of a miner’s dream.

A - Kevin McArthur

Yeah back to the old days of Glamis, Mike, after building three mines that we’re quite different, this is back to a net evaporation environment, which is very positive for operations of this style.

Q - Michael Fowler

Just, also carrying on, Jim, a question here on the capital costs. I guess you are redoing the feasibility study. But there's a capital cost here of $334 million. Is there a contractor in there or where does that figure come from?

A - James Voorhees

Were you referring to contract mining in that figure?

Q - Michael Fowler

Well, I was just thinking of the 334 million, just as my gut feel seem to be a bit on the low side for that kind of operation.

A - James Voorhees

That was for the -- that's initial capital for 50,000 ton a day, and that did include the mining equipment, you know we’re looking at doubling our sizes of the throughput. So I expect the vast majority, the capitals of double likewise. We will be looking of course at the mine schedule and what's the prudent rate to grow the project up to that doubling of size. So a lot of work yet to be done. But we will have it together here in the feasibility study. But certainly we will be spending some more capital than what's been published at this point.

Q - Michael Fowler

Right. Okay. Thanks very much guys. Thanks.

A - Jeff Wilhoit

We have a couple more questions from the telephone participants. Can we go ahead?

Operator

Yes sir. Your next question is from Mark Smith of Dundee Securities. Please Proceed.

Q - Mark Smith

Hi guys. Just a couple of quick questions. First one, just wanted to confirm, when you were earlier talking about scheduling of development and ultimately production from Penasquito, you were talking about sulfide production or the sulfide plant operating in 2010. Is that correct you are now looking at 2009 for that?

A - Kevin McArthur

Yeah. The right schedule there it will actually startup in late 2009 of the sulfide mill and then --

Q - Mark Smith

Also commercial production in 2010.

A - Kevin McArthur

Full production in 2010.

Q - Mark Smith

Okay. And then next question is more philosophical one, I know Jim you have had a quite a lot of time to look at this and muse about what things would look like. Presuming you move towards the doubling of production levels, clearly, this would incorporate quite a bit of lower grade material as you were pushing higher volume through. And since this is going through a floatation plant and being treated in that manner, could you sort of elucidate what sort of impact that this would have on just the general -- the per ton cost -- there's an order of magnitude impact to strip ratio. And then I guess most importantly that lower grade material, what it would do to recoveries and TCRCs?

A - James Voorhees

Actually I don't really see any lower grade material coming into the mine plant honestly on this market, really the increase that we're forecasting in the reserves and resources is more due to the new drilling than anything else. Grades there are good if not better than most cases. So probably not accurate to expect any change in the actual grade of throughput to the mill. As far as operating costs are concerned, big float plant like this, I don't think we will see anything significant change in that $3 or $4 kind of per ton figure for the float plant. So much of the fixed cost there is its hovered agents and labor is a very small component. So the only place we might see some improvement on a per ton basis would be perhaps in areas like G&A and that’s a fairly minor component for the whole project. So I think the cost basis will stay pretty much where it has been. It's going to be really just an increase in size that's going to have a great impact on the MPV of the project.

Q - Mark Smith

So, the best thing for us to do from a modeling standpoint is just they are doubling production or looking at doubling production, and then using the same sort of cost base in TCRCs that were outlined in the feasibility study?

A - James Voorhees

Yeah I wouldn't mess with the operating costs. And of course the capital costs are still a bit up in the air right now. But, the number two is good to use when you are multiplying.

Q - Mark Smith

Okay that’s pretty good. Thanks very much.

A - James Voorhees

Okay.

Jeff Wilhoit

Okay, we will take another question from the telephone.

Operator

And your next question is from Adam Frank of King Capital (phonetic).

Q - Adam Frank

Yes, good afternoon. Thank you for taking my call. Could you all speak to your drill plans for the Nochebuena area?

A - Kevin McArthur

Charlie?

A - Charles Jeannes

Yeah right now we are going to do a lot of surface work there and maybe towards the end of the year, start drilling holes in the Nochebuena area. We still have a lot of groundwork to do before we start that.

A - Kevin McArthur

We are going to concentrate on the area where we see the best benefit. And of course we see that as being both the southwest and the northeast edges of the Penasco pit and also infield drilling, and searching around for connections between the Penasco and the Chile Colorado pit.

Q - Adam Frank

Okay. Not being a mining expert guys, if you were to find mineralization of significant quantity between Chile Colorado and Penasco, could this turn into one very large pit versus I think the initial plans were two separate pits?

A - Kevin McArthur

Are you saying between Penasco and Chile Colorado?

Q - Adam Frank

Yes.

A - James Voorhees

Yeah, Charlie has got his theories on that. There is some possibilities there.

Q - Adam Frank

Okay. Thank you.

A - James Voorhees

You're welcome. Thanks.

Jeff Wilhoit

Do we have one final question from the telephone queue?

Operator

Yes, sir. Your last question is from Elliott Glazer of DuPasquier. Please proceed.

Q – Elliot Glazer

Kevin, you clearly stated that total company gold productions forecast in 2006 is 670,000 ounces and that has it now Penasquito start producing 2009, can we assume company's production is down a little overall in 2007 and 2008 for picking up again in 2009?

A - Kevin McArthur

No. We grow to 700,000 ounces by 2007, by 2008 it's -- I 'm honestly at a loss, somewhere in that 650,000 to 700,000 ounce range depending on when Cerro Blanco comes in. And we feel that we will be filling, in filling there with Cerro Blanco towards the end of 2008.

Q – Elliot Glazer

Great.

A - Kevin McArthur

So we will have a steadily increasing profile, it gets a little flat for the next of couple years until Penasquito comes on.

Q – Elliot Glazer

And what kind of guess would you have as to the initial year Penasquito in 2009? About 100,000 before moving up dramatically in 10?

A - Kevin McArthur

Yeah, it all depends on when we get it permitted and that is the wild card, once you get it permitted, the pre-stripping can start as long as you got equipments. And right on the surface is the oxide ore. Depends on how quickly we can get the oxide ore under leech and start making ounces there and within that pre-stripping job of course we would focus on higher grade oxides and trying to make as much gold as we could to start the pay back. I really, it’s too early to answer that.

Q – Elliot Glazer

Okay.

A - Kevin McArthur

You know that Glamis will try to maximize that, I just don’t know. I don't have numbers for you on that one.

Q – Elliot Glazer

And you’ve already guessed to as my last question, which is what kind of difficulty if any are you having in obtaining the equipment that you need in '06, '07, '08?

A - James Voorhees

Yeah I'll go ahead and answer that Elliot. At this point probably the longest lead-time item is the SAG mill, which is at 92 weeks. Doesn't impact our schedule overall really but that’s the number one item that we are right now and finish up the evaluations for placing that order. Mining equipment – it seems depend on who you talk to. There is a whole range there between one and two years, depend on which supplier and which manufacturer and which vendor you talk with. So, at this point I think the mining equipment isn't going to be an issue. Certainly as we come in with a fairly substantial order for what could be the largest mine in Mexico, certainly I think that we will get some more attention there. And I don't think that we are going to have too much of a hold up.

Q – Elliot Glazer

Great, thank you very much and congratulations.

A - James Voorhees

Thanks Elliot.

Jeff Wilhoit, Director of Investor Relations

Before turning it back to Kevin for closing comments, I will ask one more time to our assembled audience if there are any additional questions. Kevin?

Kevin McArthur, Chief Executive Officer, President

Okay. Thanks. Thanks again for everyone for attending. Just a little concluding paragraph on where we're headed here. We are working very hard on -- we have been working on reserves, we need to get some more drilling results in, we’re going to focus on that effort. We suspect that sometime by late June or so, we will have at least the resource and reserve number that we can now feed into a feasibility study. Meanwhile, as Jim has alluded to the feasibility study is cranking along at 100,000 ton per day operations. Starting at 50,000 and ramping up to 100 in few years. And we expect that we will have that work in front of the board by August of this year. And given substantial metals markets and given the numbers that we already see, I'm anticipating now that's going to be a very solid feasibility report that the board can't say no to it. But we will wait and see. Given the robust nature of what we're seeing now, this appears to be a very good project for Glamis. And, I'm looking and talking internally to everybody. This is doubling Glamis, doubling the size of our employees, the number of employees, hopefully not the size of our employees. And just our whole workforce is having to accommodate this; it's a very exciting development. And as I said in the prior program, you just couldn't find a better team to put this one into action. So, I will conclude with those remarks. Thank you very much for those on the phone and that will end our 1Q earnings call. Thank you.

Operator

Ladies and gentlemen, thank you for your participation in today’s conference. This concludes your presentation and you may now disconnect. Have a wonderful day.

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Source: Glamis Gold Ltd. Q1 2006 Earnings Conference Call Transcript (GLG)
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