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Glamis Gold Ltd (GLG)

Q4 2005 Earnings Conference Call

February 13th 2006, 3:00 PM.

Executives:

Jeff Wilhoit, Director of Investor Relations

Kevin McArthur, President and Chief Executive Officer

Jim Voorhees, Executive Vice President and Chief Operating Officer

Charlie Ronkos, Vice President, Exploration

Cheryl Maher, Chief Financial Officer

Chuck Jeannes, Executive Vice President, Administration

Analysts:

John Bridges, JP Morgan

Elliott Glazer, DuPasquier

Tony Lesiak, UBS

Andrew O'Connor, Wealth Capital Management

Steve Butler, Canaccord Capital

Mike Jalonen, Merrill Lynch

Al Brooks, Private Investor

Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2005 Glamis Gold Ltd. Earnings Conference Call. My name is Nicca and I will be your coordinator for today. At this time, all participants are in a listen-only mode. We will be facilitating a question-and-answer session towards the end of today's conference. At that time, if you wish to ask a question please press “*” followed by “1” on your touchtone telephone. If at anytime during the call you require assistance, press key “*” followed by “0” and coordinator will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's conference Mr. Jeff Wilhoit, Director of Investor Relations. Please proceed, sir.

Jeff Wilhoit, Director of Investor Relations

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

Before turning the call over to Kevin McArthur, I will add that we will be making detailed information about our resources available on our website as soon as possible following the conclusion of this call. I would now like to turn the presentation over to Kevin McArthur, President and CEO of Glamis Gold Ltd.

Kevin McArthur, President and Chief Executive Officer

Thanks Jeff, and welcome to all of you. As always, thank you for participating in our conference call and webcast presentation. Joining me today in the room in addition to Jeff are Chuck Jeannes, EVP Administration; Jim Voorhees, Chief Operating Officer; Cheryl Mayer, our Chief Financial Officer; Charlie Ronkos, Vice President Exploration; and Joe Danni, Vice President Corporate Relations. In the next minutes I would like to summarize our fourth-quarter and year-end financial and operating highlights and how that past performance positions us to continue to excel in 2006 and beyond. As usual, I would like to reserve most of our time to address your questions and discuss the issues you believe are important regarding Glamis and its activities.

We had a very good year and an excellent fourth quarter. Of course, our gold price matters, that it also helps to deliver record quarterly and annual gold production into our favorable market. We produced over 430,000 ounces of gold in 2005, which is a record for this Company, as is the fourth quarter production of over 140,000 ounces at a total cash cost of $181 per ounce. Earnings were $0.12 for the quarter and $0.21 per share for the year and cash flow for 2005 amounted to $89 million. This was a banner year. Glamis was the top performing stock among precious metals mining companies on the New York Stock Exchange with our share price appreciating over 60%. Underpinning all of this was a rock solid first full year of gold production at El Sauzal in Mexico; a steady performance at Marigold in Nevada; and the commencement of commercial production at the Marlin Mine in Guatemala. And because we remain 100% unhedged, our shareholders enjoyed the maximum positive effect of this rise in gold market.

Our 2005 gold production by quarter is a very revealing visual. We set our marks early in 2005 and then proceeded to hit them as the year progressed. We saw production building toward a very strong fourth quarter and as the chart most of you are looking at on the webcast depict, that is exactly what happened. I would like for you to keep in mind this chart for two reasons. One, you will see a somewhat similar pattern this year primarily because Marlin will continue to ramp up from 3000 tons per day to 5000 tons per day during the first six months of 2006. And two, it will remain our unrelenting focus to deliver on our promises. In 2005, we demonstrated a good track record of hitting our forecasts and I don't intend to deviate from that track record in 2006.

On to the balance sheet. At the end of 2005 we had cash and equivalents of $32.1 million, working capital of 36.7 million and our debt was a very manageable $80 million. This is very strong, given that we had two brand-new mine startups and completion of the Marigold expansion within a very short twelve-month period. As you'll see in a moment, our very robust cash flow this year and in subsequent years will provide us a great deal of flexibility and by flexibility I mean we can vigorously address or even erase that debt, and continue to grow the company or both. The chart most of you are looking at now, this is perhaps my favorite. In my opinion there are three basic requirements necessary to grow our gold mining company and reward our shareholders. They are number one, increase reserves, number two, increase productions, and number three, decrease cash costs. There can be little doubt that we're nailing the last two. Given a $500 gold price, our result in cash flow is expected to approach $200 million in 2006 and surpass that mark in 2007. With that kind of momentum on the cash flow and production front, we can now redouble our attention to increasing reserves on the very prospective districts we now control.

It's no secret. We have been very busy building mines and not just any mines but excellent performers in districts with significant reserves growth potential. Last year we grew the Company's total resources and you'll see the details of resource growth in this year's annual information form. It is now time to move our geologic potential along the curve into reserves and it is our goal to grow proven and probable reserves over the next three years to over 10 million ounces through discovery of new reserves, conversion of resources to reserves or through accretive acquisitions.

On to production growth. I'm not aware of any other company that can point to such a dramatic growth profile with a corresponding plunge in cash costs. Last year we grew production 85% and we are projecting 670,000 gold ounces this year or another 50% growth. At the same time, we expect total cash costs to decrease significantly to between 160 and $170 per ounce of gold. Remember this is real growth from mines already constructed and underway and the potential upside like Cerro Blanco and other expansions are not included.

Of course, grade matters. Certainly Marlin and El Sauzal bear witness to that. But great mines must be complemented by corporate culture to succeed. Strong management delivers by working through the many operational, political and other day-to-day challenges, and obviously we have such people on the ground. These are people who contribute greatly to the results you see so graphically depicted in front of you. I have already touched upon the projected quarter-over-quarter growth in 2006. As you can see, we expect a nice steady climb from the first quarter to the fourth quarter. This will be primarily due to the gradual increase of production at Marlin and seasonal production results at Marigold. As previously announced, we expect Marlin to produce around 254,000 ounces of gold in 2006, followed by El Sauzal at 217,000 ounces, Marigold at 118,000 ounces, which is our two-thirds share; and San Martin at 81,000 ounces of gold.

Most of you are familiar with this next slide, which depicts our current operations and active exploration activities all located in the Americas. Very quickly let me give you a summary of both. Starting in Nevada and working south, Marigold enjoyed a good, steady year and forth quarter producing over 30,000 ounces of gold in the quarter and 137,000 ounces for the year. Cash costs for the quarter and year were $193 and $216 per ounce respectively. All mining is now taking place in the Millennium expansion area. We expect Marigold production to be lower in 2006 due to waste mining requirements and longer haul distances from Millennium. We will resume drilling at Marigold in the first quarter concentrating our efforts to the north in the pediment areas.

Also in Nevada most of you know there are currently four drill rigs operating at the companies 40% owned Dee joint venture in order to further define the new Arturo discovery, and Barrick is currently responsible for that work. In Mexico, El Sauzal's first full year of production was nothing short of stellar. The mine produced over 61,000 ounces of gold in the fourth quarter at a total cash cost of $121 per ounce. El Sauzal was by far our top producing mine in 2005 and the top producing gold mine in all of Mexico, producing nearly 192,000 ounces of gold. We expect an even better year in 2006 with production coming in at a projected 217,000 ounces.

We continue to explore at El Sauzal on a number of targets identified on our large concession area. The current focus is on drilling extensions to the Trini Zone and a 20-hole drill program at the Guayacan target which is now currently underway. As you know, at San Martin mine in Honduras we have transitioned to run of mine heap leaching even though production will continue to decline in the last couple of years of mine life, capital costs will be minimal and we expect strong cash flows. San Martin is expected to produce approximately 81,000 ounces of gold this year. At Marlin, we commenced commercial production last December, producing nearly 24,000 ounces of gold in the waning days of 2005. Production gradually increases throughout the year, working through typical startup and training procedures as we move from 3000 to 5000 tons per day by mid year. Marlin has a 10-year mine life of over 250,000 ounces of gold and 3.5 million silver ounces in each of those 10 years.

As we stated in our press release, recent discoveries at Marlin strongly indicate the potential to add to the mine's expected life. We discovered two new mineralized veins during the year which don't yet appear in our resources and drilling on these Vero and Rosa veins is continuing. At Cerro Blanco, there is nothing new to add to what is already a very exciting story. As you know, the mineral resource now includes 1.27 million ounces of gold in the indicated category at an average rate of 15.7 grams of gold per ton. There is an additional inferred resource of 0.67 million ounces at an average grade of 15.3. Four drill rigs are active on the site to expand this open-ended resource, which includes a gold soil anomaly extending two kilometers to the north of the known deposit. Feasibility completion is still targeted for year-end and a positive feasibility study would allow us to move resources into the proven and probable category by year end.

Finally I should add that we continue to actively consult and work toward building trust within local communities, government, business sector, and religious organizations. We delivered our first royalty check to the community of San Marcos next to Marlin two weeks ago and we fully intend to be a productive part of their community and surrounding communities for years to come. Let me briefly sum up. Last year was a very good year and looking forward we expect an additional 50% growth in our production to 670,000 ounces of gold in 2006. We expect total cash costs to decrease to between $160 and $170 per ounce. We expect to remain unhedged. We expect to move the Cerro Blanco project through feasibility. We expect organic growth on some very exciting mining districts, and we expect to continue to reward shareholders by conducting all aspects of our business profitably and responsibly.

Thanks for your time and attention. So operator, at this time will you please answer the line for questions?

Questions-and-Answer Sesssion

Operator

Yes, sir. Ladies and gentlemen if you wish to ask a question please key “*” followed by “1” on your touchtone telephone. If your question has been answered or you wish to withdraw your question please key “*” followed by “2”. Questions will be taken in the order received. Please key ‘*” “1” to begin. And your first question comes from the line of John Bridges of J.P. Morgan. Please proceed.

Q - John Bridges

I will take the honor. Hi, good morning Kevin and everybody.

A - Kevin McArthur

Hi, John.

Q - John Bridges

I was wondering, if you could fill us in a little bit on how the feasibility for Cerro Blanco is working out?

A - Kevin McArthur

Well, early days, but it of course, looks very positive. The resource continues to grow. So, there is a little bit of a moving target. We have made a new discovery to the far north-end which in our opinion will increase the resource, but that’s going to take some time and there is a lot of drilling activity going on there with similar widths and grades. As far as technical, this year we plan to go underground. We have applied for permits for underground test work. We've got a decline planned. Boy, Jim, you got anything else to fill in on that?

A - Jim Voorhees

Yes. Of course we're doing all the other studies you expect, hydrological work and the like. We are working with contractors right now to start with our portal work and get that underground going. So that's moving along very well. Hopefully we will be under ground here around mid year.

Q - John Bridges

Okay. Kevin, I like your 10 million ounce reserve target. How much of that is likely to come from your properties and how much do you think would come, you know, M&A?

A - Kevin McArthur

Well, there's no answer to that. Of course, we are always working in many arenas. I think that in given time we have the potential for that to come from all of our properties that $10 million mark. I mean you look at Cerro Blanco which is growing at this time it's nearly a 2 million ounce total resource when you throw in inferred and growing. So, there is a pretty good start. We have got excellent potential for growth on the Vero and Rosa veins at Marlin, which looks very good. We are drifting towards other vein targets in the district. We have got lot of potential on the Marlin property, because there has never been historic mining there. So, there is plenty of work to do. Once again as I said in my early comments we are very focused on building a mine, and now the mine is up and running we've got some fine-tuning to do there. We are turning to a lot of exploration work.

So, I think good potential there, at the El Sauzal property in Mexico of course, no new news yet there, we're just now drilling on the Guayacan target, we've got Trini. We are actively looking at a heap leach option for some of the lower grade materials that we're running into in the pit. So, you know, on property position, it is still early days. More material mine Marigold, for the first time this year we did not replace our reserves. We still have a lot more exploration activity to take place down in the pediment area to the north-end of the property. We have some early indications of some very interesting things there, high grade, sulfides, you know, it’s a matter of finding enough tonnage to make a difference, that is our goal right now. So, that, you know – that how do you know as much as I know about the north end of Marigold, but it is just going to take time to develop.

Q - John Bridges

I guess, you know more than that. Presumably, Marigold is pretty sensitive to the gold price there?

A - Kevin McArthur

Yeah, absolutely, I mean that’s -- there are two things there the grade and stripping ratio. Jim, do you have anything to add on that?

A - Jim Voorhees

We have done some testing up to $500 dollar gold price and we see up to a 30% reserve increase. Yeah, it is. Our reserves we have done at 400 but that plus $100 does improve Marigold.

Q - John Bridges

Okay that's helpful. Thanks, guys. Good luck.

A - Kevin McArthur

Thanks, John.

Operator

Your next question comes from the line of Elliot Glazer of DuPasquier. Please proceed.

Q - Elliott Glazer

Hi Kevin, how are you?

A - Kevin McArthur

Hi, how are you? Just great.

Q - Elliott Glazer

Okay. Can you give us couple of details on the joint venture at Dee? What percentage of the drillings and of the development costs if it is developed are paid by Barrick? What percentage by Glamis? What are the indicated resources thus far?

A - Kevin McArthur

Yeah. It’s early days on that, Elliott. We're expecting a resource update from Barrick sometime this quarter. We control 40% of the property. It is a participating interest. And so, Charlie, do you know what the exploration budget is at Dee this year?

A - Charlie Ronkos

The exploration budget, our portion is $1.6 million.

A - Kevin McArthur

Yes, so our portion is 1.6 and that's 40%. There is no resource on the property at this time.

Q - Elliott Glazer

Okay. Originally this was completely owned by Glamis, right?

A - Kevin McArthur

No, when we took over Rayrock in 1989, this agreement was predated us.

Q - Elliott Glazer

Predated, okay. So, presumably therefore if a mine eventually gets built, then Glamis would pay 40% of those development costs?

A - Kevin McArthur

Exactly.

Q - Elliott Glazer

Okay. If gold tonnage is actually delivered in five years or so, what compensation would Glamis get? Would it 40% of the ore? Would it be a fixed amount of money? How would it work?

A - Kevin McArthur

I’m sorry, Elliott, what was it?

Q - Elliott Glazer

Let's say the mine is up and running in five years.

A - Kevin McArthur

Yeah.

Q - Elliott Glazer

How does Glamis gets 40% share?

A - Kevin McArthur

Well, it’s just the net profit, just as our joint venture with Barrick at Marigold.

Q - Elliott Glazer

Got it. Okay. Thank you very much.

A - Kevin McArthur

We would be delivered 40% of the gold.

Q - Elliott Glazer

So, you'd be delivered 40% of the gold? Okay. Thanks a lot.

A - Kevin McArthur

Sure.

Operator

Your next question comes from the line of Hathem Mahdi (phonetic) of Salomon Partners. Please proceed.

Q - Hathem Mahdi

Good afternoon gentlemen, good results.

A - Kevin McArthur

Thanks, Hathem.

Q - Hathem Mahdi

A couple of quick questions for you, Kevin or one of your guys may give the answer. You give us a great graph showing the different year’s production profile, increasing cash flow, decreasing cash costs. Can you go through 2006 and just give us an idea of what you think cash costs would be at this point for the four primary mines for this year?

A - Kevin McArthur

I don't believe we have disclosed that at this time.

Q - Hathem Mahdi

Is it fair to say that the numbers we saw in the fourth quarter aren’t not too far off what we could see in 2006?

A - Kevin McArthur

Well, first of all, the big number there is Marlin, of course, had quite high costs in the fourth quarter, which we expect to improve pretty dramatically as we ramp up. Cheryl, do you have anything to comment on there?

A - Cheryl Maher

I think we are with decreasing production at Marigold going to see an increase in the cash cost at Marigold, that also, of course, leading you into what comes from the new deferred stripping rules that we'll be implementing. But, in San Martin the run of mines. So, yeah, that’s what we’re looking for those little slightly higher costs there, but El Sauzal and Marlin are very low.

Q - Hathem Mahdi

Okay, perfect. A couple more questions while I've got you. I just looking at El Sauzal DD&A in the fourth quarter went down quite a bit from other quarters. Is that a reasonable unit depreciation to use per ounce?

A - Cheryl Maher

In the fourth quarter? Yeah, I mean they should be tracking pretty closely and, you know, as far as our numbers for the next year goes, yes, it should be right in there.

Q - Hathem Mahdi

Okay, perfect. Another question on your balance sheet, you've got other assets, I'm curious what if you have indicated what those are?

A - Cheryl Maher

Yeah, we found -- when you look in the financial statements you will see that. The bulk of that is actually either receivables from the Marlin project. We put it in other assets rather than current assets because it’s going to come back to us over the next two years. So, we categorized it as longer-term rather than short-term.

Q - Hathem Mahdi

Okay. I just have couple more housekeeping issues here. Your G&A for 2006 -- 2005 number a good indicative number?

A - Kevin McArthur

Yeah, one thing about 2005, we had an extraordinary $4 million.

Q - Hathem Mahdi

Outside of that $4 million though, it seems okay?

A - Kevin McArthur

I think so, I mean we’re growing Company, so it is going to move up a small amount. Cheryl, do you have an answer?

A - Cheryl Maher

Yeah, it’s going to be up a couple of million dollars, but really pretty small amount compared to the growth we're experiencing.

Q - Hathem Mahdi

Okay. So, 13 minus 4 plus 2 sort of thing so we are talking about 10 to $11 million range?

A - Cheryl Maher

No, I mean, what we have now in terms of the 13 I would expect that to be around 13 to 15.

Q - Hathem Mahdi

Okay, for next year you mean.

A - Cheryl Maher

Yeah.

Q - Hathem Mahdi

I'm sorry, 2006. One last question actually probably requires a little bit more detail. For 2006, you give us a lump sum number for exploration and development. Can you just outline for starters, break out how much of that number is actually exploration? Total?

A - Kevin McArthur

Charlie?

A - Charlie Ronkos

Of the $25 million total we have about a little over $12 million that is development and the rest is exploration.

Q - Hathem Mahdi

Okay. So just now an accounting issue I guess from the remaining $13 million that goes to exploration, how much of that do you expect to expense and how much do you expect to capitalize roughly?

A - Kevin McArthur

Let me just back up what Charlie said. When he said $12 million is development, that is within the Cerro Blanco budget, but the total budget of Cerro Blanco is $15 million and 12 of that is -- call it development because it is permitting and feasibility and what have you. So all of the remainder is expensed exploration -- all of it is expensed. It's $24.9 million.

Q - Hathem Mahdi

Okay, so just to clarify, $24.9 million less what he outlined specifically was development, which is roughly $12 million, and the remainder of that is fully expensed exploration?

A - Kevin McArthur

Yes.

Q - Hathem Mahdi

Perfect, thank you.

Operator

Your next question comes from the line of Tony Lesiak of UBS, please proceed.

Q - Tony Lesiak

Good afternoon and a quick question on the tax rates. What are you looking for in '06 cash and deferred?

A - Cheryl Maher

You're going to see probably about the same rates. I mean we're about 27% effective now. We're paying cash taxes at a rate of 30% in Honduras. We are generating actually a lot of taxable income there. The rates between El Sauzal and Marlin of course we are not going to see much at Marlin yet. We're still in a loss period, but at El Sauzal, we are at the 28 to 30% range there. So what you see there is going to be pretty indicative going forward.

Q - Tony Lesiak

Okay. Just seeing Marlin's contribution to the bottom line increasing dramatically over the year, would you suggest perhaps the tax rate might be lower than the current one of 27% for the year?

A - Cheryl Maher

No. You still have to provide for future income taxes on those profits for Marlin, okay? So even though it doesn't go into current, it still goes into future.

Q - Tony Lesiak

Okay, so the 20% would be the effective for both?

A - Cheryl Maher

The 27. If you look at the effective, it's about 27%.

Q - Tony Lesiak

And the split would be roughly 20 and 7, or --?

A - Cheryl Maher

No, we've got about 30% at San Martin. You are probably looking at about 25 or so at El Sauzal and then again the 27 to 30 at Marlin. That is how we are looking at it. We have some fine-tuning to do on all of those, because we are still pretty new in production at both El Sauzal and Marlin.

Q - Tony Lesiak

Okay. Just a clarification on Hathem's last question. My understanding was you were going to expense all that $25 million in exploration development costs?

A - Kevin McArthur

Yes, that is entirely expensed.

Q - Tony Lesiak

Okay. As well looking at the production and cash cost chart going forward, I was just hoping you could give us some clarification on why in 2007 the costs are going to be going down? What is going to be the big driver there?

A - Kevin McArthur

Jim?

A - Jim Voorhees

Sure, it is relative production. 2007 we are seeing more -- of course more ounces helps that of course, but those ounces -- a lot of them are coming out of Sauzal going forward, plus we also see Marigold coming back up to a higher gold production level. So is really a volume impact more than anything else.

Q - Tony Lesiak

Okay. What oil price assumptions are you using for those numbers?

A - Jim Voorhees

It varies throughout the mines, specifically by mine, but we are usually in the range of $2 to $2.50 a gallon for diesel fuel prices…..

A - Kevin McArthur

That is reflective of around a $60 per barrel oil price.

Q - Tony Lesiak

I noticed the '08 number -- you're still looking at 700,000 ounces but if you look at the reserves at San Martin, it looks like you are going to be running out of ore there sometime at the end of '07. Does that reflect the potential for Cerro Blanco? Or do you just have San Martin still in there?

A - Kevin McArthur

That is just what you're seeing going forward there is San Martin just as it runs down and recovers ore or gold off the heaps. There is no Cerro Blanco in the numbers at all.

Q - Tony Lesiak

Can you just maybe give us how San Martin might look in '07 and '08 as it runs out?

A - Kevin McArthur

Sure. We're going to be in the mid 70s, 70,000 ounce production level in 2007. Then in 2008 and 2009, we will probably be around the 30,000 ounce mark, 30 or 40,000 ounce mark.

Q - Tony Lesiak

Thanks.

Operator

Your next question comes from the line of Andrew O’ Connors of Wealth Capital Management, please proceed.

Q - Andrew O’ Connors

Hi, Kevin. Nice quarter.

A - Kevin McArthur

Hi, Andy, thanks.

Q - Andrew O’ Connors

I may have missed this, but in the reserves that you have tabulated in the press release, what gold price and what silver price did you guys use?

A - Kevin McArthur

It's $400 gold and $7 silver.

Q - Andrew O’Connor

Okay, and then can you suggest the sensitivity to gold and silver price on your reserves?

A - Kevin McArthur

Sure, we didn't do any silver sensitivity, but on the gold side of it, if we are looking just at the surface mineable reserves with the $500 gold price, it's about a 20 or 21% increase overall in the Company. The underground reserves we really have not evaluated. It's not much of a change other than some minor cutoff rate changes. If you look at the Company as a whole, all reserves, the sensitivity is about 16%.

Q - Andrew O’Connor

Okay, and then its $500 -- about a 20% increase for the overall Company?

A - Kevin McArthur

20% increase for the surface mineable reserves.

Q - Andrew O’Connor

Oh, sorry.

A - Kevin McArthur

And 16% overall.

Q - Andrew O’Connor

Got it. Then I wanted to ask also on your exploration and development expenditures for '06, $25 million, can you apportion the $25 million out to project?

A - Charlie Ronkos

Sure. We have combined 15 million at Cerro Blanco and then we have another $4 million for the rest of Guatemala. We have a couple million for Mexico and then for Nevada we have about $4 million.

Q - Andrew O’Connor

All right, that's all we have. Thanks very much.

Operator

Your next question from the line of Steven Butler of Canaccord Capital. Please proceed.

Q - Steve Butler

Good afternoon guys, excellent Q4. I wanted to also ask a question about Marlin. The implied silver grade you don't really state the grade for silver unless I missed it, but the grade of silver was would have been fairly low for Marlin through the mill. I know that you were struggling with some of the silver recovery issues. Could you elaborate on what you have under works to get the silver recoveries up? Unless they already have been?

A - Kevin McArthur

Sure, Steve. There's a lot of focus going on primarily on the gold side of course. The silver side of it is going to be a refinement in the whole Merrill-Crow circuit and also leach timing, actual retention timing through the leach tanks. So we are seeing that improve over time and I would suspect that we will get up to that 70, 80% silver recovery here by midyear.

Q - Steve Butler

Okay. Was it 83, -- I think was 83, Jim, in the model for feasibility study purposes?

A - Jim Voorhees

I'd have to go back and look at it and see.

A - Kevin McArthur

I thought it was 80. Steve, early on in the open pit, we have got pretty oxidy ore and saw rheology, the gooeyness if you call it that, of the ore is what effects the recovery rate on silver. And so we have oxide ore in the very top that depresses the silver recovery. We have got 72-hour retention time in the leach tanks. We have got startup issues. So the first little bit you're not going to see the best of silver recoveries, but we anticipate we're going to hit that 80 here pretty soon.

Q - Steve Butler

Okay, and you don't have -- could you give us, Kevin, I guess the answer might be no, but do you have grade profile for this year for Marlin or do you stick to the ounces for now and look for more details later?

A - Kevin McArthur

I can give you just a generality. We are ore bound in the pit. It's hard to find waste. It's very good grade. Maybe Jim could just give a little more flavor to that, but we don't have any issues with grade there. We knew that in the very beginning, so our ramp up is quite conservative. Jim, stock pile grades or anything like that?

A - Jim Voorhees

Yes, just looking at -- so much of the information we have is on the gold side of it. I don't have a good number for silver this year.

Q - Steve Butler

I guess either gold or silver, Jim. I guess I'm just trying to understand how is it quite sensitive for us to get this cash cost lower than 196? Obviously there could not have been a heck of a lot of silver credit given the ounces produced were only 156,000. I guess I am just a bit concerned about getting the silver production up and helping getting the cash costs down this year.

A - Kevin McArthur

Yes, Steve and the biggest factor there was a lack of a denominator. We had a lot of costs, but not a lot of production during startup. That will ramp up throughout the year. We're confident in hitting our numbers anyway. Silver certainly is an issue but not a long-term issue.

Q - Steve Butler

Right, okay. Is the 150 announced, Cheryl, an appropriate DD&A per ounce for Marlin?

A - Cheryl Maher

You know you will see that drop during '06. Again the '05 numbers were actually predicated on calculations that we made back really in '04 on the reserves and production and everything and capital costs. So what is going to happen is that you'll see we have actual numbers now going into that and we are projecting that that DD&A should be lower in '06.

Q - Steve Butler

Okay. $100 an ounce, in that range? Or would that be bad?

A - Cheryl Maher

No, a bit higher than that. Probably in the -- probably more in the 120 to 130 range.

Q - Steve Butler

Okay and when will you be cash taxable, fully cash taxable in Mexico?

A - Cheryl Maher

Our people in Mexico tell me not this year. It is definitely going to flow into '07. So that is what we are looking at.

Q - Steve Butler

And that is when we should be applying cash taxes at the 25 --?

A - Cheryl Maher

It will be about 28% I believe the rate will be in Mexico at that time. That is the actual cash rate.

Q - Steve Butler

All right, thanks very much.

Operator

Your next question comes from the line of Michael Jalonen of Merrill Lynch, please proceed.

Q - Mike Jalonen

I just had a question on South Arturo. I noticed you're going to be spending collectively $4 million on the project -- I presume on drilling in 2006. That is -- I guess it doesn't seem too high to me given your partner, third-quarter results really gave it a lot of high profile. My years in the business whenever a company is working on hot properties just at Cerro Blanco they spend a lot of money, a lot more than $4 million. Just wondering what kind of drill results you guys have gotten in the last while because I assume you have got lots of results and just your impressions on the project?

A - Kevin McArthur

Of course that's for Barrick to analyze and comment on. The drilling budget of course is results driven and should we be seeing very strong results, there's a good chance we would move that up. And we're just waiting for Barrick to come back to us and to publicly comment before we get too far out on a limb on Arturo.

Q - Mike Jalonen

I guess if it's -- you just said it's results driven -- does that mean the results in the fourth quarter weren't that great or am I making a leap of faith here?

A - Kevin McArthur

The results were reported back last quarter by Barrick and we had a joint venture meeting, established a budget, and it just is what it is, Mike. We will wait for Barrick to comment.

Q - Mike Jalonen

Okay, thank you.

Operator

Your next question comes from the line of Al Brooks, Private investor. Please proceed.

Q - Al Brooks

First I would like to say congratulations and thank you on a great quarter and a great year. I have three questions I'd like to ask about. Number one is Glamis' position in American capital gold? Number two is Glamis' position in Chesapeake gold? Number three, the status of the Imperial project in California?

A - Kevin McArthur

I'm going to turn that one over to Chuck, because those are all three of his areas. Chuck Jeannes, EVP Administration.

A - Chuck Jeannes

Thanks. American gold capital, we have a remaining amount of escrow shares that are released every six months and we've got another release coming up here in a few weeks I believe to a total of about 2.1 or 2.2 million shares. With respect to Chesapeake, we own approximately 5% of the issued and outstanding shares there and I don't have the number at the tip of my fingers, but we had a warrant for 5% of the shares. We took that warrant down and have not sold the shares. Imperial project, as you probably know, we have filed a NAFTA claim and that is slowly working its way through the arbitration procedure. We just found out that the hearing has been scheduled for March of 2007 and in the meantime there's a lot of discovery and pretrial type motion practice going on.

Q - Al Brooks

I wonder if any of us will live long enough to see that come to a conclusion?

A - Chuck Jeannes

We wonder the same things sometimes. We are going to continue to be diligent in pursuing that claim.

Q - Al Brooks

Thank you.

Operator

We have a question from the line of John Bridges of JP Morgan, please proceed.

Q - John Bridges

Kevin, I just wonder, with the resources coming out shortly, I just wondered if there was any sort of comment you would like to make on them rather than just ordering you up for some clarification, unless it is all footnoted.

A - Kevin McArthur

Yes, you'll see it in the AIF and it has grown. I will just say that. Not by a great amount but net of somewhere around 500,000 ounces of mining. That is a pretty good thing that the actual number has gone up. Other than that, I don't know -- I'm looking around the room to see if anybody has any comments. Do you have any specific questions about it, John?

Q - John Bridges

No, that's fine. I was just wondering if there's anything that might be contentious but it sounds as if you had Charlie in handcuffs most of the year while you were busy building the mines.

A - Kevin McArthur

Yes, just a reflection on our strategy. Once again as you pointed out we were building mines, and so while we had a lot of drilling programs going, we didn't need to focus on growing reserves; knew that we were depleting some reserves. We knew about midway through the year we would not be growing the reserves at Marigold for the first time since 1999. In the meantime we are growing from, say, 250,000 ounces per year to 700,000 ounces per year. There's certainly a great need to grow those reserves now for the future and we are on it. We have got a culture of getting things done, so we are quite satisfied we will be able to grow those reserves especially with Cerro Blanco feasibility moving forward.

Q - John Bridges

Okay. Thanks, Kevin. Well done.

Operator

We have a follow up question from the line of Tony Lesiak, UBS, Please proceed.

Q - Tony Lesiak

Kevin, just one follow-up on Marigold. Is there any way you can give us I guess guidance for production and costs '06, '07 and '08?

A - Kevin McArthur

We haven't disclosed individual mine production going forward. Our goal is to keep that mine running at the 200,000 ounce per year level; take 0.67 times that for us. Jim, maybe you just give a profile of the number of ounces?

A - Jim Voorhees

Actually we are on a growth profile going forward. We're going to see 10 to 20% increases in our production over the next couple of years. Does that help you out there?

Q - Tony Lesiak

Yes. I mean it's the one that we don't have a good sense of comfort with. The numbers that you're looking at now are a good deal different than what I think you were originally looking at when you went ahead with the Millennium expansion. That's why I was just hoping you could provide us with a little more guidance in the ballpark.

A - Kevin McArthur

A little color on that. We made a discovery of a new ore zone where we intended to build a new leach pad, which created very long hulls for us due to permitting issues more than anything else. And in addition to that of course a fair amount of inflation that I guess if we had been smart we would have seen it coming a long ways but here we go. Oil price is increasing, so we've optimized the mine as much as we could. Our early goal was to get this mine up to 250,000 ounces per year. We just didn't get it there this year or next. As far as going forward, we are talking our portion of production of 118,000 ounces in 2006, 133 in 2007. It gets up to 146 in 2008 and unfortunately we used to say $150 cash cost, but that is not going to happen mainly because of the big inflation that we have seen not only in fuel prices, but also spare parts, chemicals, tires, you name it. So we are in that cash cost anywhere from 200 to 250 long-term for this mine.

Q - Tony Lesiak

That's helpful. Thank you.

Operator

At this time, gentlemen, I'm showing no further questions.

Kevin McArthur, President and Chief Executive Officer

Okay. I appreciate that. Thank you very much for attending. We had a great end of the quarter. We're now working hard on the New Year and look forward to releasing results for the first quarter and speaking to you again in May. Thank you very much.

Operator

Once again ladies and gentlemen, we thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Have a great day.

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Source: Glamis Gold Ltd Q4 2005 Earnings Conference Call Transcript (GLG)
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