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Glamis Gold Ltd. (GLG)

Q3 2006 Earnings Call

October 24, 2006 3:00 pm ET

Executives

Jeff Wilhoit - Director of Investor Relations

Kevin McArthur - President and CEO

Chuck Jeannes - EVP, Administration

Jim Voorhees - COO

Cheryl Sedestrom - CFO

Joe Danni - VP, Corporate Relations

Analysts

John Bridges - J.P. Morgan

Victor Flores - HSBC

Haytham Hodaly - Salman Partners

Geoff Stanley - BMO Capital Markets

Kerry Smith - Haywood Securities

Steven Butler - Canaccord Adams

David Christie - TD Newcrest

Barry Cooper - CIBC World Markets

Michael Fowler - Desjardins Securities

Presentation

Operator

Good day, ladies and gentlemen, and welcome to the Third Quarter 2006 Glamis Gold Earnings Conference Call. My name is Cindy and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards the end of the presentation. (Operator Instructions). As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the call over to Mr. Jeff Wilhoit, Director of Investor Relations. Please proceed, sir.

Jeff Wilhoit

Thank you, Cindy, and welcome to the Glamis Gold third quarter 2006 conference call. Before we begin, I need to caution that the following presentation contains statements that are forward-looking in nature. These statements involve known and unknown risks, uncertainties, and other factors that may cause actual results and/or performance of the company to be materially different from predicted results. These statements are discussed in detail in the company's annual information form.

I would now like to turn the presentation over to Kevin McArthur, President and CEO of Glamis Gold.

Kevin McArthur

Okay, thanks Jeff and welcome everyone. Today in the room with us are Chuck Jeannes, EVP, Administration; Jim Voorhees, Chief Operating Officer; Cheryl Sedestrom, our Chief Financial Officer; and Joe Danni, Vice President, Corporate Relations. In light of our pending combination with Goldcorp, I will keep my prepared remarks brief, and I am sure we will have plenty of time at the end of our Q&A.

Overall we produced 145,000 gold ounces in the third quarter, a little more than last quarter and 60% more than the third quarter of last year. Total cash cost was $182 per ounce, versus $231 for the same period last year. Our growth plan is well underway, and although Marlin startup here has presented some challenges, we are encouraged with the steady improvement that we are seeing.

At Marlin, despite some heavy rains during the quarter, throughput and metals recoveries trended upward, due in no small part to the completion of modification to the leach tanks. If you will recall, we replaced all of the bolts on the agitators during the quarter and we believe that we have resolved this design issue.

We also have strengthened our operation staff at Marlin with a special emphasis on productivity improvements in the underground operation. Development work is running behind schedule currently, but we are moving to more productive methods in the stopes ahead of us to get to our 1,300 ton per day target by this time next year.

I mentioned the rains, we are still working to modify our mill feed system. What happens is that precipitation soaks our ore stock piles and these have somewhat sticky characteristics to begin with. Feeding this material frequently results in plug chutes in feeders. We are now moving into the dry season once again, but we are working to ensure that whatever changes are required are in place ahead of next year's rainy season.

These are issues typical of first year operations and we are certainly succeeding in de-bottlenecking Marlin to ensure long-term mining success.

At Marigold in Nevada, we made the scheduled move into the Basalt pit in the latter part of the quarter, which resulted in better grades and better-leaching ore on the pad. Marigold normally comes in with a strong fourth quarter and given what we are seeing currently, we expect to see the same situation this year.

It was a challenge not to lead off my comments with El Sauzal, but once again our Mexican division came through with stellar performance. In the second quarter, the mines had a production record with over 75,000 ounces of gold. This is a record that lasted exactly one quarter, because they produced over 77,000 ounces of gold this latest quarter. It is interesting to recall that not too long ago, El Sauzal was going through its own growing pains and it is gratifying to see this operation blossom into consistent excellence.

Peñasquito, also in Mexico, continues to move forward on schedule. During the quarter, engineering progressed nicely and orders for most of the major mining and processing equipment were completed. We expect to receive our permit for construction of the camp, ancillary facilities, roads and the airstrip by the end of October.

Just as an interesting exercise, just this morning I did the calculations to convert all of the metals at Peñasquito to gold equivalent. This is using current metals prices and this should give you an idea of the scale of this project. Once again, using those current metals prices, the proven and probable reserves that Peñasquito as of our last reserve statement amounts to 50 million gold equivalent ounces. This will be a very big mine with a very long mine life and it appears to be getting bigger.

Six core rigs continue to drill around two primary targets in the current open pit as well as finishing up on some condemnation drilling, and as we have mentioned before, we expect to release drill hole data in early December just before our scheduled analyst tour. We were looking forward to sharing the next stage of our progress at that time.

Back to third quarter results, companywide net income was $0.11 per share for the quarter, which included approximately $2.8 million in Goldcorp transaction costs and $1.6 million in non-cash stock-based compensation expense. Excluding these items brings the EPS numbers to $0.14 for the period. Cash flow from operations amounted to $38 million. This increased our cash and equivalent at quarter end to nearly $86 million.

Before getting on to your questions, I want to provide a brief update of our progress toward closing the Goldcorp transaction. On Thursday, we will hold our special shareholder meeting in Vancouver for the purpose of voting on the combination. We are confident of reaching the two-thirds approval necessary to close this deal. Over the last few weeks, I've had the opportunity to sit down with many investors of both Glamis and Goldcorp. While there are many concerns when contemplating a transaction of this magnitude; both, Ian Telfer and I, were heartened by the support and enthusiasm for this combination. The message we received loud and clear was that this transaction makes good sense. It creates an operating and financial powerhouse that will come out of the gates, more leveraged to gold, with lower cash costs, with superior geographic stability and simplicity, and higher growth than any senior gold producing company on the planet.

Barring any unforeseen circumstances, this may very well be our last opportunity to speak with this audience as Glamis Gold Limited. Some of you on this call have been with Glamis from the beginning and, of course, you celebrated many of our achievements along with us. I walk through this door and all of us in this room walk through this door of this office each morning mindful of the trust that each of our shareholders have placed in it, and we have acted always consistently, transparently and responsibly. And this commitment can best be reflected by our share price performance over the last five years and this has just been dramatic, 1000% appreciation on the New York Stock Exchange over that five-year period.

The Glamis name may be going away, but I'll carry the same commitment to shareholder value with us to Goldcorp, where by the way I have personally witnessed a remarkable similar attitude and a remarkably similar share price performance over the years.

So, with that closing comment, operator, I am now prepared to take questions.

Question-and-Answer Session

Operator

Thank you, sir. (Operator Instructions). And your first question will come from the line of John Bridges of J.P. Morgan.

John Bridges - J.P. Morgan

Hi, Kevin and everybody.

Kevin McArthur

Hi John.

John Bridges - J.P. Morgan

Just wondering if you could go through little bit more detail on what is going on at Marlin, in particular this delay with the underground operation?

Kevin McArthur

Jim, Jim Voorhees.

Jim Voorhees

Hi, John.

John Bridges - J.P. Morgan

Hi.

Jim Voorhees

The underground has been slow in getting the development work done and we are looking at not only increasing some of the equipment levels there at the mine to help with some of the haulage, also looking at some alternate mining methods. And the guys now have a new goal here that next year they want to get to 1,300 tons a day and that’s a bit in recognition to not only what they feel the mine is capable of, but also looking down the road of other, we think, upside with underground reserves and what eventually would be mining as an underground operation there at Marlin. So, it’s been a little disappointing this year, the rate of that growth and we made some management changes, actually multiple management changes at the underground projects and are working steadfastly to get up to where we need to be.

John Bridges - J.P. Morgan

How would you characterize the problems, is it ground conditions or just skills, people skills?

Jim Voorhees

Its -- first of all I would say, the training dealing with the local work force there; of course, underground mining for the vast majority of the people is something new. We do have, of course, a lot of other Latin American talent that we brought in with experience underground also to help us out. The backfill plant had a bit of a ramp up of its own to get going there to help with the mining rate, that hurt us some. And we just find in general that the earlier feasibility study was a little light on the haulage capacity, so we are looking at increasing the number of trucks we have.

John Bridges - J.P. Morgan

Okay. Can you give us a bit of guidance as to what sort of shape this build up is going to be, is it sort of steady or some sort of hockey stick?

Jim Voorhees

I am looking at something pretty darn steady to just ramping up and our goal is this time next year to be up to 1,300 tones a day.

John Bridges - J.P. Morgan

Okay, excellent. Best of luck, Jim.

Jim Voorhees

Thank you.

Operator

And your next question will come from the line of Andrew O'Connor from Wells Capital Management. Please proceed

Andrew O'Connor - Wells Capital Management

Thanks operator. Good afternoon guys.

Kevin McArthur

Hi Andy.

Andrew O'Connor - Wells Capital Management

For Peñasquito, Kevin, I don’t know what else you can share with us at this time but can you elaborate on the exploration of the zone between the southern end of the Penasco pit and the northern end of Chile Colorado pit?

Kevin McArthur

Yes, there is really not a lot to say. We want to kind of save our bullets for when we do our tour, but I can tell you that we have expanded pretty significantly to the southwest of the Penasco pit, also to the northwest of Penasco pit we've found a zone closer to the surface that has very good grade. Also if you look to the north east of the Chile Colorado pit, we are finding a good expansion area. So, we pretty much gave a big arm wave a long time ago that this resource should be on the increase and nothing that we have seen to-date would discourage us from making those statements again.

Andrew O'Connor - Wells Capital Management

Okay, that’s all we had, thanks very much.

Kevin McArthur

You bet.

Operator

And your next question will come from the line of Victor Flores of HSBC, please proceed.

Victor Flores - HSBC

Yes, thanks. I have a couple of questions about El Sauzal, if I could. If you look at the grade coming out of the El Sauzal for the first six months which were reported in the second quarter numbers, that was 4.23 grams per ton. If you look at the third quarter that you just reported, it was 5 grams a ton, but you show a 9-month average of 5.49 grams a ton which is mathematically impossible. So, I am wondering if that’s a typo and if you could provide us with the number which I think is probably somewhere around 4.5 grams?

Jim Voorhees

Yeah. Yeah, Victor that the -- you are exactly right there, Cheryl.

Cheryl Sedestrom

Yes. Victor, it is -- what happened is, we actually had a mislabeling on them. The grade comes from the tons milled, not the tons mined and the actual grade -- excuse me, per ton for the nine months is 4.44 and the grade for the three months is 4.49.

Victor Flores - HSBC

Okay.

Cheryl Sedestrom

Okay.

Victor Flores - HSBC

Okay. Perfect. Now, the second question goes -- this may solve that issue; is there a big difference between the tons mined and the tons processed?

Jim Voorhees

Victor, there is some materials that's being stockpiled for the heap leach pad, when it gets completed next year. So, the stuff below the mill grade, below the 0.8 gram per ton is just going to the stockpile right now or waiting for that pad to be completed.

Victor Flores - HSBC

Okay. Perfect. And then since the numbers aren't provided and if you just use the numbers there, there you end up with recoveries that are somewhere in the mid 70s. I suspect that's because you're actually stockpiling this material. So could you give us a sense of what recoveries have actually been?

Jim Voorhees

We are seeing better than 93% consistently.

Victor Flores - HSBC

Okay. Perfect. So it's just because there is that material that's being mined but not processed until next year?

Jim Voorhees

That's correct.

Victor Flores - HSBC

Okay. Perfect. That answers my question. Thank you.

Kevin McArthur

Thanks, Victor.

Operator

And your next question will come from the line of Haytham Hodaly of Salman Partners. Please proceed.

Haytham Hodaly - Salman Partners

Thank you. Just the first question to touch on John Bridges' question earlier; Marlin talked about getting to 1300 tons per day next -- by this time next year. What's the general ramp up going to be? What are we looking at for the underground for the fourth quarter and then how do you expect transition to go for first and second?

Jim Voorhees

We are hitting consistently now above 500 tons a day, seen some 600 and 700s. So, I suspect that we will see that trend continue here in the fourth quarter. I don’t think we will be at 1000 tons a day by the end of the first quarter; it's probably not really possible given just the timing for development. So, if I was -- I am guessing a bit here, I would say that you will see the first and second quarter of next year be in that 1000 plus kind of a range and then up to the 1500 by this time next year.

Haytham Hodaly - Salman Partners

Okay, so, on average over those two quarters somewhere around 1000 sort of thing?

Jim Voorhees

Yes.

Haytham Hodaly - Salman Partners

Okay. And then I guess just to touch again further on Victor's question on El Sauzal. Looking at the, I guess you -- let's look at it this way, could you refresh my memory as to how many tons do you expect to get on the pad annually and what the grades would be and what the steady-state recoveries are expected to be for the heap leach?

Jim Voorhees

Yes. I don’t have a good number off the top of my head on the tons going on to the pad. The grades are going to be -- it must be 0.6, 0.7 gram per ton kind of material and I believe the recoveries were in the 50% or 60% range.

Haytham Hodaly - Salman Partners

Okay. And just I guess, will overall production you see it -- are you offsetting some declines that we are going to see from the rest of the mining areas or are you -- will overall production go up/down/sideways once the heap leach is actually operating?

Kevin McArthur

We will see production stay pretty flat going out in the next three or four years there with that heap leach coming on. We are in really -- this quarter we saw probably the best grades coming out of the open pit that we will see at El Sauzal. You may recall that there were many people that looked at the properties in underground mine while we just went through that underground mine with surface method, so we had some pretty exciting grades show up. But during October we have seen the grade drop off a little bit, and -- as anticipated -- and so will help offset that going forward of course is some extra ounces from the heap leach.

Haytham Hodaly - Salman Partners

Okay. Just really, you said the recoveries were around 50% plus, is that what you said on the heap leach?

Jim Voorhees

I am sorry. I am speaking out on the exact number on those, it was either 50 some odd percent or 60% and that’s all run-of-mine.

Haytham Hodaly - Salman Partners

Okay. And so, you are expecting eventually how much production roughly when you are at steady state to come out of the heap leach on an annual basis?

Jim Voorhees

It’s 20,000 ounce per year kind of number.

Haytham Hodaly - Salman Partners

Okay. I guess, I'll go on another question I guess just for Marlin, or actually -- maybe I will just go back to the quarterly where you talked about your forecast cash cost of $190, now is that total cash cost or is that cash cost for 2006?

Kevin McArthur

Total cash cost.

Haytham Hodaly - Salman Partners

That is total cash cost, not cash cost?

Kevin McArthur

Right.

Haytham Hodaly - Salman Partners

Okay. So that’s out, okay. So it is just a typo. Secondly, I guess just to -- probably a question for Cheryl, we previously guided to about 14 million in business development and about 11 million in exploration for a total of 25. Where we are at with regards to each of those at this point in time?

Cheryl Sedestrom

Okay. Well, the business development you are referring to is the feasibility work.

Haytham Hodaly - Salman Partners

That’s right, on Cerro Blanco, yeah.

Cheryl Sedestrom

Yes, Cerro Blanco, right. And you know that obviously has been much slower than we had planned and I can let Jim discuss that further. As far as the exploration goes, what has happened is of course we've shifted a lot of the drilling to Peñasquito. So, you are seeing that in the capital cost of capitalized drilling. So, the expense drilling right now is 9.3 million year-to-date. That is only slightly lower than what we are forecasting for the year. Okay. So, what we've done is we switched a lot of it to Peñasquito, and I would suspect that we'll probably have -- see Charlie is not here, I'm not sure what he's going to spend on Peñasquito in the fourth quarter. As Kevin said, we've got six drill rigs running there right now. So that will come out of expensed exploration and really into capital. But the real deviation is on Cerro Blanco, and maybe Tim could add to that, what we’re expensing. I only show about $1 million more of expenditures on Cerro Blanco for the year.

Tim Miller

Yeah, that's about right. I think we've talked about permits there. We are not expecting to see the permits to do our underground decline till next year of this time. So, that has limited some of the original thinking on Cerro Blanco for this year.

Haytham Hodaly - Salman Partners

So, that will make only about, I guess, spend about 4.7 before this to about $5.7 to $6 million for the year on Cerro Blanco?

Cheryl Sedestrom

Yeah. Right now on Cerro Blanco, yeah, we're about -- I would say probably closer to -- probably closer to about 4 million in the capital, and then in terms of expensed exploration, yeah, another 5. So yeah, we'll be at least -- we had planned about 15 million, we'll be closer to probably 8. So with that --

Haytham Hodaly - Salman Partners

Okay, perfect. That’s good for now. Thank you.

Cheryl Sedestrom

Okay.

Operator

And your next question will come from the line of Geoff Stanley of BMO Capital Markets. Please proceed.

Geoff Stanley - BMO Capital Markets

Thank you very much and good afternoon.

Kevin McArthur

Hey Geoff.

Geoff Stanley - BMO Capital Markets

Just had one question regarding the goodwill, looks like it will get on the balance sheet doing a business combination with Goldcorp, do you have a sense for exactly how it's going to split out between goodwill and the various assets? If you can give us some detail on the valuation of the individual assets that would be great, but just want to get a sense of how it's going to come out and watched with respect to the depreciation, amortization etcetera so we can try and put a pin on earnings?

Cheryl Sedestrom

Well, that is a really tough question and Goldcorp personnel are really the ones that are going to have to answer this. They are going to have to do a fair market valuation on all of those producing properties of ours. And then in addition they will look to the value beyond proven and probable at Peñasquito. So it’s a pretty complicated number that you are looking at. I suspect you are going to see quite a bit of it of course on Peñasquito because of the huge resource there, but what that goodwill number is won't be decided until those fair market values are assessed.

Kevin McArthur

We'll tell you from just a -- the view -- from both of our companies viewpoints that we want to minimize the amount of goodwill on the balance sheet, but of course these come down to accounting questions that we don’t have the answers to at this time.

Cheryl Sedestrom

We can't help at all.

Geoff Stanley - BMO Capital Markets

Well, no, -- not really, didn’t get any numbers.

Cheryl Sedestrom

Alright. Until we get those -- until the valuations are completed, okay, and particularly until the resource at Peñasquito is developed at the end of the year, okay, it's very difficult to put a goodwill number on. You are really going to see a lot of this purchase price be allocated to Peñasquito on that value beyond proven and probable.

Geoff Stanley - BMO Capital Markets

I understand the issues, the softer number. Alright, not to worry, we will wait and buy that time and take our own guess. Thanks.

Kevin McArthur

Thanks Jeff.

Operator

Your next question will come from the line of Kerry Smith of Haywood Securities. Please proceed.

Kerry Smith - Haywood Securities

Thanks operator. Kevin how much more will be expensed to the income statement in Q4 from fees incurred as part of the Goldcorp transaction roughly?

Kevin McArthur

Boy.

Kerry Smith - Haywood Securities

Or do you have one.

Kevin McArthur

I don’t have a figure for that. I'm looking over at Chuck.

Kerry Smith - Haywood Securities

Could we just sort of use what you had in Q3 and assume it's going to be somewhere in Q4?

Kevin McArthur

No, we'll add some success fees there in addition there, Kerry, in addition to the legal and other costs that are ongoing and I don’t have a number for you right now.

Chuck Jeannes

It's going to be substantially more than what you saw in the quarter certainly.

Kerry Smith - Haywood Securities

Okay. So would it be less than 15 or more than 15 or --?

Chuck Jeannes

More than 15.

Kerry Smith - Haywood Securities

More than 15, okay. And at Marlin, Kevin, what are the underground costs and the milling costs currently, mining costs on a per ton basis?

Kevin McArthur

Well, I am going to turn to Jim here on this one.

Jim Voorhees

Yeah Kerry, the underground costs we've been seeing in the 40s per ton, that’s total all cost for the underground operation. Milling costs because it has a low throughput, I see numbers in the $14 and $15 per ton kind of a range, hoping to see that drop.

Kerry Smith - Haywood Securities

Okay, but if you were to use sort of 40 a ton on a go forward basis, that would be a reasonable number for the underground as you ramp up?

Jim Voorhees

Yes.

Kerry Smith - Haywood Securities

Okay. And what is the timing on the heap leach at Marlin?

Jim Voorhees

El Sauzal, right?

Kerry Smith - Haywood Securities

El Sauzal, pardon me, pardon me, pardon me.

Jim Voorhees

The timing is to have the construction completed by the end of the first quarter and be producing gold off of it by the end of the second quarter.

Kerry Smith - Haywood Securities

Okay. So by the end of Q2 then?

Jim Voorhees

Yes.

Kerry Smith - Haywood Securities

At 20,000 ounce a year rate?

Jim Voorhees

Right, so, I'd be hoping to see the 10,000 ounce kind of figure next year. We're in the midst of our budget right now, so I'm keeping the numbers fairly broad

Kerry Smith - Haywood Securities

Yeah. No, that’s fine. And at San Martin, you said in this release that ’07 will be the last full year of mining, obviously there will be some residual tonnage that will spill over in to '08, but as the strip ratio drops will there be more tons put on the pad next year than say what you're likely to put on the pad this year there?

Jim Voorhees

Yeah, that’s correct. We are going to get down to about a half-to-one strip ratio there at San Martin and of course, San Martin is limited by mining capacity. So, they'll just get shifted from waste material into ore.

Kerry Smith - Haywood Securities

So, how many tons of the material going to the pad there next year roughly then, Jim?

Jim Voorhees

Well, I don’t have it in front of me here. I would assume it's got to be somewhere around 5 million tons, something like that.

Kerry Smith - Haywood Securities

Okay. And then, whatever is left in the reserve would come out in '08 then.

Jim Voorhees

Yeah. There again, there's the fine tuning going on with the budget right now and I have seen scenarios where there is some swaps over in the first quarter of '08.

Kerry Smith - Haywood Securities

Okay. And at Marigold, can you give me a rough idea of the tons to the pad in ’07 and ’08 as well, do you have those kinds of numbers even in a ballpark number?

Jim Voorhees

10 million. Sorry, I don’t even have any new on that, but given the strip ratio on the mining capability at Marigold again being heap leach it's all about moving the tons and the strip ratio is what 3.81 somewhere around there. It's got to be right around 10 million ton each year going forward.

Kerry Smith - Haywood Securities

To the pad, okay. And jut one last question if you could on Cerro Blanco, you are expecting to get the decline permit, I think you said by Q3 of next year, Jim is that right?

Jim Voorhees

Well, yeah, I would actually I'd like to get the decline permit before then, I don’t think I gave a time specifically. We are working with obviously the government in Guatemala to keep pushing that forward and we will continue there, so I like to be optimistic and say it will happen in the first half of next year, but I really -- I can't predict the future, it's surprised before there.

Kerry Smith - Haywood Securities

Okay. And just can you remind me how long it will take to get the decline put in and get to point where you would have a production decision?

Jim Voorhees

From the point that we start working on the portal to the point that we would get in the ore zone, there is probably a half of year of activity there. And then that would feed into final feasibility study on it. So, you can figure out there is another half year or so. It -- most likely if things go really well, it’s the end of next year that we would see some feasibility results and have a -- an opportunity to commit to go forward.

Kerry Smith - Haywood Securities

Right. And then I guess 18 months to build it or something like that.

Jim Voorhees

Yeah. I guess, sorry Kerry, I don’t have a real timeframe on that, but that’s probably right.

Kerry Smith - Haywood Securities

Yeah. Okay. Okay, that’s great. Thanks very much.

Kevin McArthur

Okay.

Operator

And your next question will come from the line of Steven Butler of Canaccord Adams. Please proceed.

Steven Butler - Canaccord Adams

Yeah. Good afternoon guys, ladies. Question for you on Marlin, because you didn’t give ton as mills, guys. I assume, you are working through the numbers hopefully and for the -- and you have the answers, we are operating still at about only 60% to 70% of capacity at Marlin through the mill.

Kevin McArthur

That's -- yeah. There has been in the mid-60s which of course we still want to target on and improve that.

Steven Butler - Canaccord Adams

Okay. And the target for it is over 80.

Kevin McArthur

Sounds familiar. Yeah.

Steven Butler - Canaccord Adams

Okay, okay. And lastly, what is your surface mining costs at Marlin including the strip ratio?

Kevin McArthur

Cost per each ton at Marlin till year-to-date is about $30 a ton.

Steven Butler - Canaccord Adams

Okay. And the strip right now is obviously quite low. What's the -- I can't remember the life of mine strip for the open pit?

Kevin McArthur

The year-to-date strip ratio is about 2.5 to 1.

Steven Butler - Canaccord Adams

Okay.

Kevin McArthur

And that's a little bit skewed here for the year because, of course, we had some more on top, as you recall that rubble zone. Life of mine strip ratio is about 3.3 to 1.

Steven Butler - Canaccord Adams

Okay. Thanks very much guys.

Kevin McArthur

Thanks.

Operator

And your next question will come from the line David Christie of TD Newcrest. Please proceed. David your line is open.

David Christie - TD Newcrest

Hi guys. Just a couple of quick questions, most of my questions have been answered. First of all just on guidance, I see the overall ounces for the year -- for the remainder of the year and we see Marlin there at 170,000; but just wondering on the other few mines what your guidance is for them for the rest of the year?

Kevin McArthur

Yes, I don't believe we have provided guidance mine-by-mine, the corporate is 610,000 ounces, cash cost of 180.

Cheryl Sedestrom

Yes, it will actually be out in the MD&A, that's where we normally do the update, and we've got El Sauzal, we are expecting that to be in excess of 275,000 for the year. And again at Marlin, we would expect 170,000 or so from Marlin; Marigold, 105,000; and San Martin will be approximately 60,000.

David Christie - TD Newcrest

Okay, that's great. That's all I have for now. Thank you.

Kevin McArthur

Okay, thanks Dave.

Operator

And your next question will come from the line from Barry Cooper from CIBC World Markets. Please proceed.

Barry Cooper - CIBC World Markets

Yes, good day. Just wondering may be a question for Jim. Can you just kind of run us through whether all of the agitative problems there have been rectified at Marlin and is everything running smooth there now with respect to the processing?

Jim Voorhees

Yes, actually, I have good news to report there. By the end of July we have gone through the bolt drama certainly on the leach tanks, and just recently we got the final fixing on the declassification agitator, which is important mostly from a cost standpoint to use the chemicals efficiently on the detox. So, all that stuff mechanically is behind us, and I am not aware of right at this point any of those lingering mechanical issues left at the plant other than, well, really the feed situation that we want to correct to handle to the clay ores during the rainy season.

Barry Cooper - CIBC World Markets

Right. But it's probably fair to assume then that in Q3 you were really hampered still by both situations fairly strongly. Seem that you didn’t get those, the processing line fixed up until September, I guess almost?

Jim Voorhees

Well, what happened is, we pretty well had the mechanical stuff taken care by the end of July. August was not real rainy, although we did have some move system things that we worked on, on the site, it shuts down for a few days. And things were looking pretty sweet by the end of August, but then the rains really hit and September was really impacted by the clay ores.

Barry Cooper - CIBC World Markets

Right, okay. Then may be, Jim, can you just give us an idea of what's the status of the drift that is going across to the coral area and where are you and what have you found?

Jim Voorhees

The coral drift has not made a whole lot of headway in the last quarter as we have been focusing on the development needs for the production and Kevin comes by every now and then kind of beats me on the head about that but we have made some changes and we are back into that drift this quarter and will be adapting it.

Barry Cooper - CIBC World Markets

Okay, good thanks.

Kevin McArthur

Yeah, thanks Barry. Operator I believe we have time for one more question and then we have got to wrap it up.

Operator

Very good sir. Your last question will come from the line of Michael Fowler from Desjardins Securities. Please proceed.

Michael Fowler - Desjardins Securities

Yes, just a quick one. Gold price is lower than the spot realized, what was the reason for that?

Cheryl Sedestrom

Declining prices, I hate to admit as a non-hedger we are just selling as the gold is produced and as you know during the quarter the market was in a pretty much steadily declining throughout the quarter and we just didn't do a good job. That's all to it.

Kevin McArthur

Right. And year-to-date we've done a very good job and so far -- this is minor so it doesn't matter, we are headed again going into this quarter. So I all depends on which way price is going and where we are and I've got to say Mike we have had a pretty darn good history of beating the price quarter-by-quarter. We just got caught with the falling gold price this quarter.

Michael Fowler - Desjardins Securities

Okay actually Kevin, I don't know if you had any time to tour some of the Goldcorp sites, if you have any insights on what you have seen?

Kevin McArthur

Well, of course we have spent a lot of time internally on this and have done a lot of due diligence, very excited by the prospects at combining Red Lake and Campbell, Eleanore is going to be a great mine for the company in the future. I don't want to leave any mines out of course because we have a lot of people listening here. Our combined Mexican operations are going to be very special and they have got the Los Filos getting ready as a startup first quarter next year. We are very excited in combining our two very talented teams, one with very strong underground experience, ours with very strong open pit and heap leaching experience that will be put to use at Los Filos. Just -- all good things coming ahead of us, and that’s probably a good point for me to just segue into closing.

I mentioned earlier that we will be an operating and financial powerhouse. That is going to come from the combination of the two companies that I spoke of. We will be a senior company of course, which is everybody's great fear, producing anywhere from 2 to 3 million ounces of gold per year and that is very positive because we are 100% unhedged as far as gold. Our cash cost will be well below $200 per ounce. We will have 50% growth over the next five-year period and we are operating in very safe jurisdictions with over 70% of our reserves in NAFTA countries. This will be a senior company with the attributes of a premier intermediate company; and because of all those things I think that this will be a very special company going forward.

So that is my closing remark. Sorry to -- I hope you are done with your questions Mike and I believe it's time to close the call. Thank you all very much for attending.

Operator

Thank you for your participation in today's conference. This does conclude the presentation and you may now disconnect your lines. Everybody have a wonderful day.

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Source: Glamis Gold Q3 2006 Earnings Call Transcript
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