FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
OF THE SECURITIES EXCHANGE ACT OF 1934
Annual Report for the year ended December 31, 2001
GLAMIS GOLD LTD.
----------------------------------------------------
(Translation of registrant's name into English)
5190 Neil Rd., Suite 310, Reno, Nevada 89502
----------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F Form 40-F X
---------- ----------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
---------- ----------
If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): 82-
----------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
GLAMIS GOLD LTD.
Date: May 3, 2002 (Registrant)
By: /s/ Cheryl S. Maher
-----------------------
Cheryl S. Maher
Chief Financial Officer
OUNCE BY OUNCE...
GLAMIS GOLD LTD. 2001 ANNUAL REPORT
4000 BC GOLD FIRST KNOWN TO BE USED IN PARTS OF CENTRAL AND EASTERN EUROPE. 3000
BC EGYPTIANS MASTER THE ART OF BEATING GOLD INTO GOLD LEAF AND ALLOYING IT WITH
OTHER METALS. 1500 BC THE SHEKEL (TWO-THIRDS GOLD) USED AS A STANDARD UNIT OF
MEASURE THROUGHOUT THE MIDDLE EAST. 1091 BC SQUARES OF GOLD ARE LEGALIZED IN
CHINA AS A FORM OF MONEY. 58 BC JULIUS CAESAR SEIZES ENOUGH GOLD IN GAUL
(FRANCE) TO REPAY ROME'S DEBTS. 1100 AD VENICE SECURES ITS POSITION AS THE
WORLD'S LEADING GOLD BULLION MARKET DUE TO ITS LOCATION ASTRIDE THE TRADE ROUTES
TO THE EAST. 1511 KING FERDINAND OF SPAIN SENDS EXPLORERS TO THE WESTERN
HEMISPHERE WITH THE COMMAND TO "GET GOLD". 1717 ISAAC NEWTON, MASTER OF THE
LONDON MINT, SETS PRICE OF GOLD THAT LASTS FOR 200 YEARS. 1787 FIRST US GOLD
COIN IS STRUCK BY EPHRAIM BRASHER, A GOLDSMITH. 1803 NORTH CAROLINA SITE OF
FIRST US GOLD RUSH. THE STATE SUPPLIES ALL THE DOMESTIC GOLD COINED FOR CURRENCY
BY THE US MINT IN PHILADELPHIA UNTIL 1828. 1848 CALIFORNIA GOLD RUSH BEGINS WHEN
JAMES MARSHALL FINDS SPECKS OF GOLD IN TAILRACE OF JOHN SUTTER'S SAWMILL NEAR
THE JUNCTION OF THE AMERICAN AND SACRAMENTO RIVERS. 1850 EDWARD HAMMONG
HARGRAVES, RETURNING FROM CALIFORNIA, PREDICTS HE WILL FIND GOLD IN AUSTRALIA
WITHIN ONE WEEK. HE DISCOVERS GOLD IN NEW SOUTH WALES WITHIN ONE WEEK OF
LANDING. 1886 GEORGE HARRISON, WHILE DIGGING STONES TO BUILD A HOUSE, DISCOVERS
GOLD IN SOUTH AFRICA. 1887 GLASGOW DOCTORS, ROBERT AND WILLIAM FORREST, AND
CHEMIST JOHN S. MACARTHUR PATENT THE PROCESS FOR EXTRACTING GOLD FROM ORE USING
CYANIDE. 1896 TWO PROSPECTORS DISCOVER GOLD WHILE FISHING IN THE KLONDIKE RIVER
IN NORTHERN CANADA, RICHER FINDS WERE RUMORED FARTHER SOUTH IN ALASKA'S YUKON,
SPAWNING THE ALASKA GOLD RUSH IN 1898 - THE LAST GOLD RUSH OF THE CENTURY. 1900
US ADOPTS THE GOLD STANDARD FOR ITS CURRENCY. 1903 THE ENGELHARD CORPORATION
INTRODUCES AN ORGANIC MEDIUM TO PRINT GOLD ON SURFACES. FIRST USED FOR
DECORATION, THE MEDIUM BECOMES THE FOUNDATION FOR MICROCIRCUIT PRINTING
TECHNOLOGY. 1922 KING TUTANKHAMEN'S TOMB (1352 BC) OPENED TO REVEAL A 2,448 LB.
GOLD COFFIN AND HUNDREDS OF GOLD AND GOLD-LEAFED OBJECTS. 1927 MEDICAL STUDY IN
FRANCE PROVES GOLD TO BE VALUABLE IN TREATMENT OF RHEUMATOID ARTHRITIS. 1933
PRESIDENT FRANKLIN D. ROOSEVELT BANS THE EXPORT OF GOLD, HALTS THE
CONVERTIBILITY OF DOLLAR BILLS INTO GOLD, ORDERS US CITIZENS TO HAND IN ALL THE
GOLD THEY POSSESS AND ESTABLISHES A DAILY PRICE FOR GOLD. 1934 ROOSEVELT FIXES
PRICE OF GOLD AT $35 PER OUNCE. 1935 WESTERN ELECTRIC ALLOY #1 (69% GOLD, 25%
SILVER AND 6% PLATINUM) FINDS UNIVERSAL USE IN ALL SWITCHING CONTACTS FOR AT&T
TELECOMMUNICATIONS EQUIPMENT. 1947 THE FIRST TRANSISTOR, THE BUILDING BLOCK FOR
ELECTRONICS, IS ASSEMBLED AT AT&T BELL LABORATORIES. THE DEVICE USES GOLD
CONTACTS PRESSED INTO A GERMANIUM SURFACE. 1960 LASER INVENTED USING GOLD-COATED
MIRRORS TO MAXIMIZE INFRARED REFLECTION. 1961 MODERN-DAY MINING BEGINS IN
NEVADA'S CARLIN TREND, ULTIMATELY MAKING NEVADA THE LARGEST GOLD-MINING STATE IN
THE UNITED STATES. 1968 INTEL INTRODUCES A MICROCHIP WITH 1,024 TRANSISTORS
CONNECTED BY GOLD CIRCUITS. 1968, MARCH 15 CENTRAL BANKS GIVE UP FIXED PRICE OF
GOLD AT $35 PER TROY OUNCE AND LET IT FREE FLOAT. 1969 GOLD COATED VISORS
PROTECT ASTRONAUTS' EYES FROM SEARING SUNLIGHT ON THE MOON (APOLLO 11 MOON
LANDING). 1970 CHARGED COUPLED DEVICE INVENTED, USING GOLD TO COLLECT ELECTRONS
GENERATED BY LIGHT, EVENTUALLY USED IN HUNDREDS OF MILITARY AND CIVILIAN
DEVICES, INCLUDING VIDEO CAMERAS. 1971 THE COLLOIDAL GOLD MARKER SYSTEM IS
INTRODUCED BY AMERSHAM CORPORATION OF ILLINOIS. TINY SPHERES OF GOLD ARE USED IN
HEALTH RESEARCH LABORATORIES WORLDWIDE TO MARK OR TAG SPECIFIC PROTEINS TO
REVEAL THEIR FUNCTION IN THE HUMAN BODY FOR THE TREATMENT OF DISEASE. 1974 ON
DECEMBER 31, US GOVERNMENT ENDS ITS BAN ON INDIVIDUAL OWNERSHIP OF GOLD. 1980
GOLD REACHES INTRA-DAY HISTORIC HIGH PRICE OF $870 ON JANUARY 21 IN NEW YORK.
1986 GOLD-COATED COMPACT DISCS ARE INTRODUCED. 1987 AIRBAGS ARE INTRODUCED FOR
CARS, USING GOLD CONTACTS FOR RELIABILITY. 1996 MARS GLOBAL SURVEYOR LAUNCHED
WITH AN ON-BOARD GOLD-COATED PARABOLIC TELESCOPE-MIRROR THAT WILL GENERATE A
DETAILED MAP OF THE ENTIRE MARTIAN SURFACE OVER A TWO-YEAR PERIOD. 1997 CONGRESS
PASSES TAXPAYERS RELIEF ACT, ALLOWING US INDIVIDUAL RETIREMENT ACCOUNT HOLDERS
TO BUY GOLD BULLION COINS AND BARS FOR THEIR ACCOUNTS AS LONG AS THEY ARE OF A
FINENESS EQUAL TO, OR EXCEEDING, 99.5 PERCENT GOLD.
CORPORATE PROFILE
Glamis Gold Ltd. is a widely recognized intermediate gold producer with low-cost
production, a large reserve base and a strong, consistent growth profile. The
Company's strategy is to grow to an annual gold production rate of 500,000
ounces per year at a total cash cost of less than $150 per ounce. This growth is
planned through execution of disciplined exploration programs, development of
key projects in the pipeline and the continuation of aggressive business
development programs.
Glamis' projects are in stable geographic locations in the Americas. The
Company's business model maximizes long-term shareholder value while minimizing
environmental risk.
With two operating mines in the United States, one in Honduras, and development
projects in Mexico and Guatemala, Glamis has become a successful international
gold producer with over 20 years of operating experience. As a company that is
not hedged, possesses a very strong balance sheet and has no long-term debt, the
Company is in a perfect position to grow and prosper.
The Company's shares trade under the symbol GLG on the Toronto and New York
Stock Exchanges.
CONTENTS
02 FINANCIAL HIGHLIGHTS 04 REPORT TO SHAREHOLDERS 05 2001 ACHIEVEMENTS 05 2002
GOALS 06 2001 PERFORMANCE 08 REVIEW: OPERATING MINES 10 REVIEW: PROJECTS 12
REVIEW: EXPLORATION 12 REVIEW: RECLAMATION 13 INVESTOR RELATIONS 14 MANAGEMENT'S
DISCUSSION & ANALYSIS 21 MANAGEMENT'S RESPONSIBILITY 21 AUDITORS' REPORT 22
FINANCIAL STATEMENTS 25 NOTES TO FINANCIAL STATEMENTS 42 CORPORATE INFORMATION
[ART WORK]
LOAD UPON LOAD...
WE'RE BUILDING ON LAST YEAR'S SUCCESS AND SHAPING OUR NEWEST RESOURCE DISCOVERY.
[ART WORK]
01
FINANCIAL HIGHLIGHTS
2001 2000 1999
---- ---- ----
GOLD OUNCES PRODUCED 230,065 218,390 175,894
AVERAGE REVENUE PER OUNCE $ 272 $ 280 $ 278
AVERAGE MARKET PRICE PER OUNCE $ 271 $ 279 $ 279
TOTAL CASH COST PER OUNCE $ 172 $ 222 $ 219
TOTAL PRODUCTION COST PER OUNCE $ 216 $ 288 $ 297
-------- -------- --------
GOLD PRODUCTION (ounces)
Rand Mine 59,324 99,936 70,978
San Martin Mine 114,216 3,562 -
Marigold Mine 56,525 43,655 37,942
Dee Mine - 61,065 31,154
Daisy Mine - 8,740 28,302
Picacho Mine - 1,432 6,684
Cieneguita Project - - 834
-------- -------- --------
TOTAL 230,065 218,390 175,894
-------- -------- --------
TOTAL CASH COST PER OUNCE OF PRODUCTION
Rand Mine $ 265 $ 176 $ 210
San Martin Mine $ 120 $ - $ -
Marigold Mine $ 179 $ 240 $ 218
Dee Mine $ - $ 287 $ 273
Daisy Mine $ - $ 208 $ 195
Picacho Mine $ - $ 254 $ 172
-------- -------- --------
Company average $ 172 $ 222 $ 219
-------- -------- --------
TOTAL COST PER OUNCE OF PRODUCTION
Rand Mine $ 310 $ 251 $ 299
San Martin Mine $ 169 $ - $ -
Marigold Mine $ 211 $ 290 $ 268
Dee Mine $ - $ 346 $ 315
Daisy Mine $ - $ 299 $ 312
Picacho Mine $ - $ 275 $ 282
-------- -------- --------
Company average $ 216 $ 288 $ 297
-------- -------- --------
WORKING CAPITAL (thousands) $55,390 $ 20,242 $ 61,284
-------- -------- --------
CASH PROVIDED FROM OPERATIONS (thousands) $18,482 $ 6,568 $ 1,667
-------- -------- --------
CASH PROVIDED FROM OPERATIONS (per share) $ 0.25 $ 0.09 $ 0.03
-------- -------- --------
NET EARNINGS (LOSS) FOR THE PERIOD (thousands) $ 4,848 $(48,682) $(21,632)
-------- -------- --------
EARNINGS (LOSS) PER SHARE $ 0.07 $ (0.70) $ (0.33)
----------- ---------- ----------
AVERAGE SHARES OUTSTANDING 73,585,155 70,019,995 64,100,787
All dollar figures throughout this report are stated in U.S. dollars, unless
otherwise stated.
GLAMIS VS. TSE GOLD AND PRECIOUS METALS INDEX
[GRAPH}
Shares Outstanding: 83.3 million NYSE, TSE Symbol: GLG
o Share Price (TSE)
o Gold Price
o TSE Gold & Precious Metals Index
02
BRICK BY BRICK...
WE'RE ESTABLISHING A FUTURE OF PROFITABILITY AND VALUE.
[Picture of Equipment]
03
REPORT TO SHAREHOLDERS
Over the past three years we have positioned the Company for a return to
profitability in a low gold price environment. In 2001 we reached our goal.
Production continues to grow, total cash costs are decreasing, our cash balance
is strong and we have zero debt and zero hedging. With new projects advancing in
the development pipeline, we are perfectly positioned to thrive in improving
gold markets.
With this success, Glamis is now widely recognized as a leader among
intermediate gold producers. Last year we said that the market was taking a
`wait and see' approach on Glamis; in 2001, the market responded - rewarding
stockholders with share appreciation of over 140% on the year while gold prices
only saw a 2% increase.
LEADING THE RETURN TO PROFITABILITY: THE SAN MARTIN AND MARIGOLD MINES
The San Martin Mine in Honduras commenced commercial operations effective
January 1, 2001. Shortly thereafter we made the decision to increase the rate of
production to 120,000 gold ounces per year, which was achieved by the third
quarter. Quarter-on-quarter improvements were recorded at the mine, ending with
a record fourth quarter production of 39,668 ounces of gold at a total cash cost
of $102 per ounce.
At the 66.7% owned Marigold Mine in Nevada, the Millennium deposit has developed
into a major Nevada discovery. Since we began exploration in 1999, ore reserves
have more than tripled to 2 million ounces, and we are targeting growth to 2.4
million ounces in 2002. In November 2001, the Glamis Board of Directors approved
the Millennium project feasibility study to develop the Marigold Mine expansion,
which will grow Marigold to over 180,000 ounces of gold per year by 2005 (100%
basis). Furthermore, an accelerated exploration program on the outlying claim
areas could lead to further expansion in the future.
Both San Martin and Marigold have exceeded our expectations and will continue to
play major roles in the Company's future.
At the Rand Mine in California, the last stripping campaign for the final Yellow
Aster pushback was completed during the year. This mine will contribute healthy
cash flows to the Company during the last year of mining and the rinse-down
phase. Once mining is complete, significant human and capital assets from Rand
will be redeployed to other properties, adding skills and flexibility to our
development projects and reducing capital expenditures.
OUR PROJECT PIPELINE: THE PROMISE OF FUTURE GROWTH
The permitted Cerro San Pedro project in Mexico is poised for development.
Glamis owns 50% of this strategic asset and spent 2001 relocating a village and
converting the permit to run-of-mine leaching instead of crushing. We will
manage expenditures prudently in 2002 in order to keep the project available for
development at the opportune time.
We continued our exploration work on the Cerro Blanco project in Guatemala.
Utilizing a different exploration model, new alteration zones have been
discovered on the concession and will be further explored in 2002. At current
resource levels, a sustained gold price of $300 or better would be required to
initiate this project; however, the economics of the project could change
dramatically if the newly discovered alteration zones turn out to contain
significant additional mineable resources.
On November 23, 2001 the Department of the Interior rescinded the negative
Record of Decision issued by the prior administration for the Imperial project.
We view this action as very positive for Glamis and its shareholders as well as
the mining industry at large. Precedents established by the prior administration
have had chilling effects on exploration and new development in the United
States. It is gratifying that the current administration recognizes the need for
a healthy domestic mining industry.
EXPLORATION REMAINS AN IMPORTANT PART OF GLAMIS' STRATEGY
Last year Glamis spent nearly $3 million for exploration and enjoyed excellent
returns with a major expansion of reserves at Marigold, and substantial resource
additions at San Martin.
Exploration efforts will accelerate at San Martin in 2002, where regional
reconnaissance work has led to the staking of a new concession, Minitas, located
only a few kilometers from the mine. The discovery of a large, low-grade
resource at San Martin and encouraging results from late-year drilling, combined
with the new concession, has us looking forward to the 2002 exploration program.
Our goal is to grow San Martin reserves to maintain the +100,000 ounce
production rate beyond the current eight-year mine-life. A secondary goal is to
grow our regional gold production to over 200,000 ounces per year.
Finally, we continue to pursue M&A opportunities as we have done so successfully
over the past three years. There are many deposits that fall within our niche
that we are actively reviewing, and we remain optimistic that additional
successes will follow.
04
OUNCE BY OUNCE, WE ARE BUILDING THE FUTURE...
Building on each year's success - that is what Glamis has done and will continue
to do. As with the previous three years, 2002 is expected to be another record
production year for the Company. We are projecting total cash costs at $172 per
ounce for the year. We are 100% unhedged, we remain debt free and we have a very
strong balance sheet, entering 2002 with over $50 million of working capital.
The entire Glamis team is focused on delivering shareholder value.
On behalf of the Board of Directors and all of the employees of Glamis Gold
Ltd., we appreciate your support and continued loyalty.
Sincerely yours,
/s/ C. Kevin McArthur
----------------------------------
C. Kevin McArthur, President & CEO
March 1, 2002
2001 ACHIEVEMENTS
--------------------------------------------------------------------------------
Best stock performance among all gold producer stocks in North America, with a
price improvement of over 140% on the TSE.
--------------------------------------------------------------------------------
Expanded San Martin Mine to 120,000 ounce per year rate, producing 114,216
ounces at total cash cost of $120 per ounce.
--------------------------------------------------------------------------------
Generated earnings in every quarter at a $272 gold price.
--------------------------------------------------------------------------------
Set another Company record for gold produced at 230,065 ounces at a total cash
cost of $172 per ounce.
--------------------------------------------------------------------------------
Tripled ore reserves at Marigold Mine with Millennium Project.
--------------------------------------------------------------------------------
Millennium Project: Completed feasibility, financed and initiated development.
--------------------------------------------------------------------------------
Negative Record of Decision for Imperial Project rescinded by U.S. Government.
--------------------------------------------------------------------------------
Maintained a strong debt-free balance sheet, ending the year with over $45
million cash and no debt.
--------------------------------------------------------------------------------
2002 GOALS
--------------------------------------------------------------------------------
Produce 255,000 ounces of gold at a total cash cost of $172 per ounce.
--------------------------------------------------------------------------------
Generate earnings and maintain high leverage to gold price.
--------------------------------------------------------------------------------
Continue successful development of Millennium expansion project at Marigold
Mine. Increase proven and probable reserves to at least 2.4 million ounces of
gold.
--------------------------------------------------------------------------------
Expand exploration effort at San Martin to increase reserves. Maintain +100,000
annual ounce production for a +10-year mine-life. Grow regional production to
200,000 annual gold ounces.
--------------------------------------------------------------------------------
Maximize value of Guatemalan projects.
--------------------------------------------------------------------------------
Identify and acquire the next growth opportunity for the Company.
--------------------------------------------------------------------------------
05
[MAP]
MARIGOLD MINE, NEVADA
CORPORATE OFFICE, RENO
RAND MINE, CALIFORNIA
IMPERIAL PROJECT, CALIFORNIA
CERRO SAN PEDRO, MEXICO
SAN MARTIN MINE, HONDURAS
CERRO BLANCO PROJECT, GUATEMALA
2001 PERFORMANCE
Through sector consolidation, successful exploration and a conservative,
debt-averse management style, the Company has become profitable even as low gold
prices have persisted throughout the year. Having lowered its total cash cost of
production to $172 per ounce of gold, the Company projects continued growth and
profitability under a low gold price scenario but is poised to outperform as
gold markets improve.
06
PROVEN AND PROBABLE (P&P) reserves - Based on $275 gold
(AS OF DEC. 31, 2001)
Tons Grade Contained
(opt) ounces
of gold
--------- ----- ---------
San Martin 38,455,000 0.025 963,000
Marigold (66.7% share) 50,345,067 0.027 1,358,667
Rand 8,530,300 0.023 192,600
Cerro San Pedro* (50% share) 27,142,500 0.029 782,800
Total P&P Reserves 124,472,867 0.026 3,297,067
*Gold equivalent ounces
[GRAPH]
07
REVIEW: OPERATING MINES
SAN MARTIN MINE
The 100% owned San Martin Mine is located in Honduras, 88 kilometers north of
the capital city of Tegucigalpa. Initial gold production commenced in December
2000, and full commercial production began in January 2001. San Martin Mine has
enhanced Glamis' position as a premier intermediate gold producer and is one of
the foundations on which future growth is planned.
Honduras enjoys a stable, pro-business government that passed new modern mining
laws in 1998 to stimulate foreign investment. The climate at San Martin is one
of moderate rainfall, averaging less than one meter per year. Infrastructure and
access are excellent, as the mine is located five km from the town of San
Ignacio from which most of the mine labor force is drawn.
Originally scheduled to produce 80,000 ounces annually, production during 2001
was increased with the addition of a second mining shift, resulting in the
production of 114,216 ounces at a total cash cost of $120 per ounce, the lowest
in the Company. The mine is scheduled to produce 125,000 ounces during 2002 at a
total cash cost of $127 per ounce. This year, increased exploration efforts are
planned for the mine and surrounding areas with the goal to grow reserves that
will enable production of +100,000 ounces of gold per year beyond the current
eight-year mine life.
Glamis has developed a proactive approach to fulfill its social responsibility
in the country by constructing a medical and dental clinic to serve local
communities, working with CARE and providing seed money for a foundation to fund
programs in the communities and the local schools. In addition, the mine has
contributed time and equipment to local projects such as road improvements and
water supply development. This has been extremely important to local residents
who have suffered from the effects of Hurricane Mitch in 1999 and 2000, followed
by a severe drought in 2001.
SAN MARTIN PROFILE (5 yrs)
PROVEN AND PROBABLE RESERVES
963,000 ounces
AVERAGE TOTAL CASH COSTS
$161 per ounce
AVERAGE ANNUAL PRODUCTION
109,000 ounces per year
[PHOTO]
08
MARIGOLD MINE
The Marigold Mine was acquired in 1999 through a strategic acquisition of
Rayrock Resources Inc. Marigold was the value driver for the acquisition, and
has added significant value to Glamis. Marigold is a partnership, owned 66 2/3%
and operated by Glamis, with Barrick Gold Corporation holding the remaining 33
1/3%.
In 2001, Marigold Mine produced 56,525 ounces of gold for Glamis' account at a
total cash cost of $179 per ounce, one of its best performances. For 2002, the
mine will produce 55,000 ounces to Glamis' account at a total cash cost of $182
per ounce, as the mine gears up for a major expansion project involving the
Millennium discovery. Within two years, Marigold is expected to be producing
over 120,000 ounces of gold per year for Glamis' account at very low total cash
costs. Equipment orders have been placed, new 190 ton haul trucks are being
assembled, and pre-stripping will commence in earnest by mid-year.
Proven and probable reserves at Marigold have more than tripled since the
discovery of the Millennium deposit in 2000 and large areas of land still remain
to be explored. The discovery of the Millennium deposit assures that the
Marigold Mine will be a major contributor to the longevity of Glamis and will be
a key asset in forming a solid foundation for future growth.
RAND MINE
Rand Mine produced 59,324 ounces of gold in 2001, most of which came from the
last phase of the Yellow Aster pit which will be completed by summer 2002.
Following completion of the Yellow Aster pit, mining will recommence in the
Lamont pit and will be completed within the next 12 months, at which time
equipment will be available for use elsewhere within the Company. Total
production for 2002 is expected to be around 77,000 ounces of gold, which will
generate strong cash flow as no further capital expenditures are planned. Upon
completion of mining, final rinse-down of the Rand heap will begin and is
expected to take between 18 - 24 months. Production will drop to an average
20,000 ounces per year during the rinsing phase.
MARIGOLD PROFILE (5 yrs)
(Glamis 66.7% share)
PROVEN AND PROBABLE RESERVES
1,359,000 ounces
AVERAGE TOTAL CASH COSTS
$136 per ounce
AVERAGE ANNUAL PRODUCTION
92,000 ounces per year
[PHOTO]
RAND PROFILE (1 yr)
PROVEN AND PROBABLE RESERVES
193,000 ounces
AVERAGE TOTAL CASH COSTS
$220 per ounce
AVERAGE ANNUAL PRODUCTION
77,000 ounces per year
[PHOTO]
09
REVIEW: PROJECTS
MILLENNIUM PROJECT - MARIGOLD MINE EXPANSION
Acquired in 1999 as part of the Rayrock merger, the Marigold Mine property
represents immense potential for the discovery of additional reserves.
Accelerated exploration in 2000 discovered the Millennium ore body in the
southern reaches of this large property holding, and additional follow-up and
in-fill drilling during 2001 proved adequate resources to warrant a final
internal feasibility study. The Millennium Project, an expansion of the existing
Marigold Mine, moved from concept to reality when the Glamis Board of Directors
approved the project in November, 2001.
The Marigold expansion will more than double Marigold Mine production to over
180,000 ounces of gold per year (100% basis) and will reduce the total cash cost
of production to under $150 per ounce of gold. The project is perfectly suited
for the application of very large equipment with corresponding low unit costs.
The expanded mine will possess all the elements of a Glamis-style operation:
very low operating costs, oxidized ore located above the water table, no
crushing, and simple heap-leach processing.
Initial capital spending for the project on a 100% basis will be $55 million
over the first two years, of which $36 million will be Glamis' share. Gold
production will increase over three years, reaching 190,000 ounces in 2005. The
rate of return on the project is over 20% based on a gold price of $275. Project
financing is complete, equipment has already started arriving and pre-stripping
of the Terry Zone pit has commenced.
CERRO SAN PEDRO
Located in central Mexico approximately 400 kilometers north of Mexico City in
the state of San Luis Potosi, the Cerro San Pedro project was purchased from
Cambior Inc. in May 2000. Glamis owns 50% of this project and is the project
manager and operator.
In 2000, Glamis completed an updated feasibility study for the project that
indicates a production rate of 110,000 ounces of gold equivalent per year over
an 8-year mine life. Cerro San Pedro provides Glamis with a strategic asset in
Mexico that is fully permitted. In 2001 a total of $1.6 million was spent to
modify permits and complete work on site to advance the project. Expenditures
for 2002 will be focused on advancing the status of the project such that a
quick startup can be implemented.
Glamis has had a full time staff working at the site since it was purchased. In
addition to project work such as permitting and planning, they have been active
in community relations, preparing for a project that will be beneficial to
Glamis shareholders as well as the local residents.
10
\
CERRO BLANCO
The 100% owned Cerro Blanco Project is located just four kilometers from the Pan
American Highway in southeastern Guatemala. The property was acquired in 1998 as
part of the merger with Mar-West Resources Ltd. Excellent infrastructure exists,
as the project is located near the town of Asuncion Mita with approximately
15,000 residents. Activity on the project during 2001 consisted of land work and
regional soil sampling. Based on a new exploration model, a second high-gold
soil anomaly was discovered only a few kilometers from the project and is the
subject of additional investigation.
Based on preliminary drilling and metallurgical test-work, an internal economic
study completed by Glamis in November 2000 indicated a resource of 1.8 million
equivalent ounces of gold in a mineable configuration. The average resource
grade is 2.3 grams of gold per tonne and 16 grams of silver per tonne.
Test-work indicates that the ore requires milling for adequate gold liberation.
A capital cost of $85 million yields an unleveraged rate of return of 14.9%
using a gold price of $300 per ounce, producing an average of 170,000 ounces of
gold per year. Total cash cost amounts to $146 per ounce. With the potential of
additional ore located on the property, Cerro Blanco remains an important
project in the Company's development pipeline.
IMPERIAL
The 100% owned Imperial Project is located just a few miles west of Glamis'
reclaimed Picacho Mine in the southern California desert. Imperial is proposed
as a run-of-mine heap leach project that will process simple, oxidized ores over
a ten-year mine life. Original economics on the property indicated total cash
costs will be below $200 per ounce. A negative Record of Decision was issued in
the waning hours of the Clinton administration causing the project to be
delayed.
Glamis filed a legal challenge in Federal Court following the issuance of the
negative Record of Decision. In November 2001, the Bush administration issued an
order, signed by the Secretary of Interior Gale Norton, calling for the recision
of the negative Record of Decision for the Imperial Project. This means that the
project will go back to the BLM for final review and possibly the issuance of a
positive Record of Decision.
[PICTURE]
11
REVIEW: EXPLORATION & RECLAMATION
EXPLORATION
Exploration is critical to the long-term success of each mining company and the
industry as a whole. Many in the gold sector have eliminated this most important
element of spending for the sake of short-term gains to the bottom line. Glamis
has not. Exploration remains an important part of our focus, and in fact has
added exceptionally low-cost ounces to our proven and probable reserves. We will
invest close to $3 million for exploration in 2002, and substantial cash
reserves are available for additional funding as needed.
Last year's exploration efforts were concentrated on Marigold Mine in Nevada and
were very successful in delineating and adding reserves at that location. Equal
to the Marigold Mine focus in 2001 will be our exploration efforts in Honduras,
primarily at the San Martin Mine and surrounding vicinity. Our goal will be to
expand reserves to enable continued production at the +100,000 ounce per year
rate beyond the current 8-year mine life. Ultimately, we wish production from
Honduras to reach 200,000 ounces of gold per year over plus-ten years.
With over 54 square miles contained in the original San Martin concession and
numerous gold anomalies already identified, there is much work to do. The
results of the limited program carried out last year were encouraging, as
120,000 gold ounces were added to San Martin's reserves. Late in the season, a
single hole drilled west of the Palo Alto Pit returned 27 meters of greater than
1 gram per tonne overlain by only 9 meters of waste. Follow-up drilling is
planned. Finally, a new concession has been staked within a few kilometers of
the mine that contains a large anomaly with characteristics similar to the Rosa
pit.
In Guatemala, a limited program consisting of soil sampling and land work was
completed in 2001. Utilizing a new exploration model, a new zone of
mineralization only a few kilometers from Cerro Blanco was located, and further
work is planned.
In the Carlin Trend, Barrick Gold Corporation will continue exploration drilling
for the third straight year as part of an earn-in to our Dee property. Through
the expenditure of $6.5 million, Barrick can earn a 60% interest in this
property.
The Company continues to search for prospective acquisition candidates. This
avenue to growth has been extremely successful for Glamis, having brought both
San Martin and Marigold to the Company, as well as an exciting array of
development projects in Mexico and Guatemala.
RECLAMATION
Glamis takes great pride in its accomplishments in restoring and reclaiming the
land where we mine. The Company is a firm believer in concurrent reclamation.
Many times, however, land cannot be restored until an activity is complete -
such as leach pads and active waste rock locations. We are committed to
completing all reclamation in a manner that exceeds levels required by law.
The Company has been innovative in developing new procedures for reclamation in
arid climates. At Picacho, `land-sculpting' has succeeded in replicating the
surrounding topography so that a casual observer would not recognize that a mine
had once operated on the site. The California State Assembly recognized Glamis
for this work. Similar innovative and award-winning work is underway in Nevada
at current and discontinued operations.
The same level of commitment to reclamation and environmental concerns is given
to our operations outside the United States. The San Martin Mine in Honduras is
our first major venture on foreign soil, and our work is setting new standards
of excellence for the mining industry in that country.
1. DEE
2. DAISY
3. PICACHO
[PICTURES}
12
INVESTOR RELATIONS
THE FOLLOWING REFLECTS THE HIGH AND LOW BID PRICES FOR GLAMIS GOLD'S COMMON
STOCK BY QUARTER FOR 2001, 2000, 1999.
Share Trading Information
NEW YORK STOCK EXCHANGE
US$ US$
------------------------------------------------------------
2001 TRADING Share Volume High Low
------------------------------------------------------------
1st Quarter 7,635,100 $1.98 $1.36
2nd Quarter 10,688,100 3.00 1.80
3rd Quarter 10,071,000 3.94 2.81
4th Quarter 10,454,500 3.87 3.05
------------------------------------------------------------
38,848,700
2000 TRADING Share Volume High Low
------------------------------------------------------------
1st Quarter 5,590,800 $2.50 $1.56
2nd Quarter 4,471,900 2.21 1.75
3rd Quarter 3,139,800 1.93 1.43
4th Quarter 4,990,600 1.75 1.25
------------------------------------------------------------
18,193,100
1999 TRADING Share Volume High Low
------------------------------------------------------------
1st Quarter 6,822,000 $2.44 $1.31
2nd Quarter 7,051,900 2.44 1.25
3rd Quarter 5,773,700 2.75 1.50
4th Quarter 7,562,900 3.31 1.63
------------------------------------------------------------
27,210,500
Share Trading Information
THE TORONTO STOCK EXCHANGE
CDN$ CDN$
------------------------------------------------------------
2001 TRADING Share Volume High Low
------------------------------------------------------------
1st Quarter 2,685,952 $3.00 $1.92
2nd Quarter 3,096,837 4.57 2.67
3rd Quarter 5,285,483 5.19 4.30
4th Quarter 9,165,022 6.00 4.85
------------------------------------------------------------
20,233,294
2000 TRADING Share Volume High Low
------------------------------------------------------------
1st Quarter 2,179,418 $3.70 $2.25
2nd Quarter 2,246,386 3.18 2.25
3rd Quarter 1,952,157 2.90 2.15
4th Quarter 1,179,882 2.63 1.90
------------------------------------------------------------
7,557,843
1999 TRADING Share Volume High Low
------------------------------------------------------------
1st Quarter 7,233,752 $3.50 $2.05
2nd Quarter 10,202,903 3.50 1.85
3rd Quarter 2,435,534 3.99 2.22
4th Quarter 4,335,884 4.85 2.40
------------------------------------------------------------
24,208,073
STOCK EXCHANGE LISTINGS Ticker
Symbol
Toronto Stock Exchange GLG
New York Stock Exchange GLG
NUMBER OF REGISTERED SHAREHOLDERS: 3,946
CAPITAL STOCK
Authorized shares:
Preferred - 5,000,000 Par Cdn$10
Common - 200,000,000 N.P.V.
Issued at 12/31/01 - 83,283,462 common
shares
CLOSING PRICE OF SHARES (DECEMBER 31, 2001)
NYSE US$ 3.61
TSE Cdn$5.76
REGISTRAR & TRANSFER AGENT
Computershare Trust Company of Canada
510 Burrard St.
Vancouver, BC
Canada V6C 3B9
Toll Free:
1-888-661-5566
Fax: (604) 683-3694
CO-REGISTRAR & CO-TRANSFER AGENT
Computershare Investor Services
19th Floor, 88 Pine St.
New York, NY USA 10005
Tel: (212) 701-7600
Fax: (212) 701-7664
13
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This management's discussion and analysis of the financial condition of the
Company and the results of the Company's operations for the years 1999 through
2001 should be read in conjunction with, and is qualified by, the consolidated
financial statements and notes thereto (the "financial statements") which form a
part of this report. This financial information was prepared in accordance with
accounting principles generally accepted in Canada. Reference should be made to
Note 16 of the financial statements for a reconciliation of Canadian and U.S.
generally accepted accounting principles.
The following discussion contains statements that are not historical facts, and
by their nature are considered "forward looking statements" within the meaning
of the United States Private Securities Litigation Reform Act of 1995. See also
"Forward Looking Statements" at the end of this discussion.
OVERVIEW
The Company's strategy to acquire and develop low-cost gold mines and to return
to profitability was realized as the San Martin Mine in Honduras produced
114,216 ounces of gold at $120 per ounce total cash cost in its first year of
production. Overall the Company's continued emphasis on cost-effective
production paid significant benefits as the average London Bullion Market price
dropped to $271 per ounce in 2001 from $279 per ounce in 2000 and 1999. The San
Martin production and Marigold Mine, which saw dramatically improved costs,
lowered the Company's average total cash cost of production to $172 per ounce of
gold from $222 in 2000. The Company's total cost of production per ounce of gold
dropped to $216 in 2001 from $288 in 2000, resulting in the Company's first
profitable year since 1996.
The Company continues to look for ways to expand with low-cost production
through both exploration and acquisition. Exploration efforts at the Marigold
Mine resulted in the addition of almost 700,000 contained ounces of gold to the
Company's reserves. The Marigold Mine came to the Company as part of the
acquisition of Rayrock Resources Inc. ("Rayrock") effective February 26, 1999.
This acquisition brought immediate benefits by way of three producing gold mines
in Nevada. Although the Dee and Daisy mines were short-lived producers for the
Company, they helped assure continued growth in production while the Company
prepared for its next expansion.
The Company raised $33.2 million during the year in a successful common share
offering. The Company intends to use the proceeds for the Marigold Mine
expansion.
On May 9, 2000, the Company acquired 100% of the issued and outstanding shares
of Cambior de Mexico S.A. de C.V. ("Cambior de Mexico") from Cambior Inc. for
$7.2 million in cash. Other transaction costs associated with this acquisition
totaled $0.3 million. Cambior de Mexico was subsequently renamed Glamis de
Mexico, S.A. de C.V. ("Glamis de Mexico"). Glamis de Mexico has interests in a
number of mineral properties in Mexico, the most advanced of which is the Cerro
San Pedro Project in San Luis Potosi state.
RESULTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 2001, 2000 AND 1999
SUMMARY
The Company returned to profitability in 2001 with net earnings of $4.8 million,
or $0.07 per share. For fiscal 2000, the Company incurred a net loss of $48.7
million ($0.70 per share) including writeoffs of $41.9 million net of tax ($0.60
per share) as compared to the 1999 net loss of $21.6 million ($0.33 per share)
including write-offs of $8.2 million ($0.13 per share). The 1999 results
included a nonrecurring loss of $5.1 million attributable to the Ivan copper
mine, acquired as part of the Rayrock acquisition in March 1999, which was sold
in October 1999.
The Company continues to generate positive cash flows from operations. Cash
flows from operations (before changes in non-cash working capital and
reclamation expenditures) grew to $18.5 million for 2001 from $6.6 million in
2000 and $1.7 million in 1999. The Company's working capital was $55.4 million
at December 31, 2001, including cash and equivalents of $45.9 million. This
compares to working capital of $20.2 million at December 31, 2000 and cash of
$13.3 million. The Company spent $14.8 million in capital expenditures and $1.7
million in exploration costs in 2001, all from internally generated funds.
Capital expenditures and exploration costs in 2002 are budgeted at $22.6
million.
Gold Production
The Company produced 230,065 ounces of gold from three mines during 2001, as
compared to 218,390 ounces of gold in 2000 from six mines, including the first
shipment from the San Martin Mine of 3,562 ounces of gold. In 1999, the Company
produced 175,894 ounces of gold from five mines. Although the number of mines
has decreased, increased production at both San Martin and Marigold have more
than offset the closures of the Dee, Daisy and Picacho mines.
14
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
Following is a discussion of the Company's gold production during 2001:
SAN MARTIN MINE
The mine began commercial production in January 2001 and produced 114,216 ounces
of gold during 2001 at a total cash cost per ounce of $120. Mining operations at
the San Martin Mine commenced in August 2000, and heap-leaching operations began
in October 2000. The first shipment of 3,562 ounces of gold in December 2000 was
the culmination of a focused and aggressive construction program that brought
the mine from permitting to production within one year. San Martin is budgeted
to produce over 125,000 ounces of gold during 2002.
MARIGOLD MINE (66.7% GLAMIS-OWNED)
The Company is the operator at the Marigold Mine, a joint venture operation with
Barrick Gold Corporation (successor to Homestake Mining Co.). Marigold had a
very successful year with production for the Company's account of 56,525 ounces
of gold at a total cash cost of $179 per ounce. Marigold, acquired in March
1999, produced 43,655 ounces of gold for the Company's account in 2000 at a
total cash cost per ounce of $240, and 37,942 ounces of gold at a total cash
cost per ounce of $218 produced for the Company's account for the ten months
ended December 31, 1999. The exploration program at Marigold resulted in an
increase to reserves of almost 700,000 contained ounces for the Company's
account. Permitting of the Marigold expansion is underway. The Company expects
approximately 55,000 ounces to be produced for its account in 2002.
RAND MINE
Production in 2001 for the Rand Mine decreased to 59,324 ounces of gold at a
total cash cost per ounce of $265 for the year ended December 31, 2001 from
99,936 ounces at a total cash cost per ounce of $176 for the year ended December
31, 2000. Production was 70,978 ounces of gold for the year ended December 31,
1999 at a total cash cost of production of $210 per ounce. The last major
stripping program planned for Rand took longer than expected and negatively
impacted 2001 production. Although Rand had a record year in 2000, revaluation
of the reserves at a price of $275 per gold ounce in the fourth quarter 2000
resulted in a write-down of $14.4 million (net of tax) of the mine assets. Rand
is expected to finish mining in 2002, although gold is planned to be produced
through 2004. Rand's planned production in 2002 is approximately 77,000 ounces
of gold.
PROJECTS
CERRO SAN PEDRO PROJECT, SAN LUIS POTOSI, MEXICO
At the Cerro San Pedro Project, acquired as part of the May 2000 purchase of
Cambior de Mexico (renamed Glamis de Mexico), expenditures during 2001 were
focused on preparing for future development, and consisted primarily of expenses
for several minor construction and development projects, relocation of a 1.5km
road, fencing and property holding costs.
IMPERIAL PROJECT, CALIFORNIA
On March 12, 2001, the Company filed an appeal of the Record of Decision issued
by the U.S. Department of the Interior on January 16, 2001 that denied the
Company's plan of operations for the Imperial Project. On October 23, 2001 the
Solicitor of the Department of the Interior issued a legal opinion rejecting the
previous Solicitor's opinion. Based upon this legal opinion, on November 23,
2001 the Secretary of the Interior issued an order vacating the previous Record
of Decision. Consequently, the Company voluntarily dismissed its lawsuit.
The Company has recently been advised that in connection with the recommenced
permitting process for the Imperial Project, the Bureau of Land Management
("BLM") has recommenced a validity examination of the unpatented mining claims
comprising the project. Although the Company believes that its claims are valid
and intends to pursue the permitting process with the BLM, the Company cannot
predict at this time what will be the result of the validity examination or how
long it may take for the BLM to issue a new Record of Decision.
CERRO BLANCO PROJECT, GUATEMALA
Limited work was done at the Cerro Blanco Project during 2001. Recently, a
second high-gold soil anomaly was discovered near the property and is the
subject of additional investigation.
RECLAMATION ACTIVITIES
The Company continues with reclamation and closure activities at the Dee, Daisy
and Picacho mines. Substantial work was completed at all three properties with
Daisy and Picacho expected to be completed early in 2002. The Company spent $2.6
million on reclamation activities during 2001, and plans to spend approximately
$2.0 million in 2002. Prior to 2001, reclamation expenditures have not been
significant.
15
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
REVENUES
Revenues from production increased slightly to $64.3 million for the year ended
December 31, 2001 from $61.6 million for the year ended December 31, 2000 and
$56.7 million for the year ended December 31, 1999. The increase is a result of
an increased number of ounces produced and sold offset by a lower realized gold
price ($272 per ounce in 2001 compared to $280 in 2000 and $278 in 1999).
Revenues in 1999 included $8.5 million from the Ivan copper mine that was sold
in October 1999. All revenues in 2001 and 2000 were from the Company's gold
production.
COST OF PRODUCTION
The Company's total cash cost of production includes mining, processing, direct
mine overhead costs and royalties, and excludes selling, general and
administrative costs at the corporate level, depreciation and depletion costs
and end-of-mine reclamation accruals. Total production costs include
depreciation and depletion and end-of-mine reclamation accruals.
The Company's total cash costs of production for the year ended December 31,
2001 was $40.5 million, a significant reduction from $47.9 million and $47.7
million, respectively, for the years ended December 31, 2000 and 1999. Total
cash costs for the gold production in 1999 totaled $37.9 million, while the
costs at the Ivan copper mine were $9.8 million.
These costs reflect the impact of almost 50% of the production coming from the
low-cost San Martin Mine as well as the improved performance at the Marigold
Mine.
The average total cash cost per ounce of gold produced decreased markedly to
$172 per ounce of gold from $222 in 2000 and $219 in 1999. In 2001 the average
total cost of production per ounce of gold dropped to an average of $216 from
$288 in 2000 and $297 in 1999, again, attributable to the production at the San
Martin and Marigold mines.
OTHER INCOME AND EXPENSES
Depreciation and depletion charges totaled $12.7 million during 2001 compared to
$13.6 million during 2000 and $14.2 million in 1999. Changes in the depreciation
and depletion expense are attributable to changes in the reserve base as well as
production volumes, as charges are made on a "unit of production" basis. Gold
production was the basis for all depreciation and depletion expenses in 2001 and
2000, while in 1999 gold production costs accounted for $11.9 million of the
expense. Expenses relating to copper production, at the since-divested Ivan
mine, were $2.3 million.
Exploration expense was $1.7 million during 2001. Of the balance, $0.5 million
of exploration expense was incurred in the U.S. and $1.1 million was divided
between projects in Mexico, Guatemala, Panama and El Salvador. Costs for the
year ended December 31, 2000 were $2.9 million and $4.0 million for 1999. Year
2000 exploration focused on the Marigold property in the U.S. ($0.9 million),
other U.S. projects ($0.6 million), the Cerro Blanco Project in Guatemala ($0.6
million) and the Glamis de Mexico projects ($0.4 million). 1999 exploration
expense was incurred in Central America ($2.2 million) and Nevada ($1.2 million)
as a result of the Company's acquisitions of Mar-West and Rayrock.
Selling, general and administrative expenses decreased again in 2001 to $4.4
million from $5.2 million in 2000 and $6.0 million in 1999. The 1999 expense
included a restructuring charge of $0.9 million in the third quarter and
significant relocation expenses, staffing changes and consolidation of corporate
office functions in the Reno office during the year which were a result of the
Mar-West acquisition in late 1998 and the Rayrock acquisition in early 1999.
The Company had no write-downs during 2001, but recognized a recovery of $1.3
million relating to over-accruals of reclamation and site closure liabilities.
The Company incurred write-downs of $46.0 million during 2000 ($41.9 million net
of tax). The major items in 2000 included the third quarter write-off for
closure of the Dee Mine ($4.3 million), the fourth quarter write-down of the
Marigold mill complex (the Company's portion equaling $0.9 million) and the
write-down in the carrying value of the Rand Mine ($16.3 million) due to
revaluation of the reserves at a $275 per ounce gold price. On non-producing
properties, the carrying value of a crusher acquired as part of the Cerro San
Pedro Project was reduced by $1.3 million to its estimated market value of $1.2
million. In addition the $8.0 million carrying value of the Cerro Blanco Project
in Guatemala was written off. Finally, based upon the Department of the
Interior's decision in January 2001 to deny the permits for the Imperial
Project, the Company wrote off its investment of $14.3 million as at December
31, 2000. Other miscellaneous properties totaling $0.9 million were also written
off.
Total write-downs of $8.2 million during 1999 consisted primarily of $6.8
million of mine development costs written off at the Rand Mine when reserves
were revalued at $300 per ounce of gold, $1.0 million related to closing the
Cieneguita project and $0.3 million of miscellaneous property costs.
16
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
The amount of interest and other income/expense recognized by the Company
declined to $1.1 million in 2001 from $2.0 in 2000 and $2.9 million in 1999. The
2001 amount includes a payment of $0.8 million on share appreciation rights made
to a former Rayrock officer, gains on disposals of assets of $0.5 million, and
interest and miscellaneous other income of $1.4 million. The decline from 1999
to 2000 was primarily a result of losses on the disposal of certain investments
acquired on the acquisition of Rayrock as well as foreign exchange losses.
Overall, interest income increased as interest from certificates of deposit
placed as collateral for reclamation bonding requirements increased slightly,
while interest on the Company's working cash balances declined as cash was
utilized to construct the San Martin Mine. In 1999, the Company incurred gains
on disposal of certain investments as well as gains from foreign exchange while
interest on substantial cash balances increased interest income.
Interest expense and amortization of financing costs for the year ended December
31, 2001 was only $6,000 and in 2000 was $22,000, all of which consisted of
interest on capital leases at Marigold. This compares to the $160,000 incurred
in 1999 for interest on mortgages and loans acquired with Rayrock, interest on
capital leases for equipment at Marigold, and financing costs for letters of
credit backing reclamation bonds.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL AND CASH FLOW
The Company's working capital position improved significantly at December 31,
2001 to $55.4 million. $33.2 million of this increase was a result of the common
share offering in October 2001, and the balance due to positive cash flows from
the operating units net of capital expenditures. Working capital of $20.2
million at December 31, 2000 was significantly lower than the $61.3 million at
December 31, 1999. This reduction was directly attributable to use of the
Company's cash balances to construct the San Martin Mine. Long-term liabilities
consisted of reserves for reclamation of $10.4 million at December 31, 2001,
compared to $13.0 million at December 31, 2000. Cash expended on site closure
and reclamation costs totaled $2.6 million in 2001. The future income tax
liability was increased from $8.3 million at December 31, 2000 to $9.4 million
at December 31, 2001 as a result of tax-effecting the earnings from San Martin.
Cash flow from operations (before changes in non-cash working capital and
reclamation expenditures) was $18.5 million in 2001, compared to $6.6 million in
2000 and $1.7 million in 1999. The increase was due most directly to profitable
operations at the mines. Net cash provided by operating activities, which
includes the changes in non-cash working capital and cash expenditures on the
reclamation properties, also increased to $11.8 million in 2001 compared to $4.0
million in 2000 and $6.2 million in 1999. The decrease between 1999 and 2000 was
primarily a function of increased work-in-process inventories.
CAPITAL RESOURCES
On October 22, 2001, the Company received final receipts for a short form
prospectus from the securities regulators in Canada. Concurrently, a final
prospectus was filed in the United States. Pursuant to an underwriting agreement
dated October 10, 2001, the Company sold 10,000,000 common shares at a price of
Cdn$5.00 per share, less a commission of Cdn$2.25 million. Subsequently the
underwriters exercised their over-allotment option for an additional 1,500,000
common shares, at the same price, for additional net proceeds of approximately
Cdn$7.2 million. Other transaction costs totaled Cdn$2.4 million resulting in
aggregate net proceeds to the Company of Cdn$52.5 million (US$33.2 million).
There were no acquisitions in 2001 or 2000 where shares of the Company were
issued (the acquisition of Cambior de Mexico was paid entirely in cash).
However, in consideration for advisory services rendered to the Company in
connection with the acquisition of Cambior de Mexico, the Company granted to its
investment advisor warrants to purchase up to 300,000 shares of the Company's
common stock at an exercise price of US$2.00 per share. The warrants are
exercisable at any time until June 25, 2003.
On February 26, 1999, the Company completed the acquisition of 100% of the
issued and outstanding shares of Rayrock Resources Inc. The Company issued
29,277,820 common shares and paid Cdn$52,883,000 (approximately US$35,000,000).
The Company acquired interests in three open-pit gold mines in Nevada as well as
the Ivan copper mine in Chile.
No dividends are planned to be declared or paid in 2002 due to the losses
incurred in prior years. No dividends were paid or declared in 2001, 2000 or
1999.
17
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
In the course of its business, the Company may issue debt or equity securities
to meet the growth plans of the Company if it determines that additional
resources could be obtained under favorable financial market conditions. No
assurance can be given that additional funding will be available or, if
available, will be on terms acceptable to the Company.
CAPITAL EXPENDITURES
The Company's capital expenditures decreased dramatically in 2001 to $14.8
million from the $47.6 million expended on capital projects in the year ended
December 31, 2000. The largest use of funds in 2000 was the construction of the
San Martin Mine, followed by the purchase of the Cambior de Mexico properties.
During the year ended December 31, 1999, a total of $17.6 million was expended
on capital projects and investments.
Major capital expenditures during the fiscal year 2001 were as follows:
(in millions)
--------------------------------------------------------------------------------
San Martin Mine development and purchase of equipment $ 5.6
Cerro San Pedro (Glamis de Mexico) acquisition and development 1.6
Rand Mine deferred stripping and purchase of equipment 4.1
Marigold Mine development and purchase of equipment 3.4
Other 0.1
--------------------------------------------------------------------------------
$ 14.8
================================================================================
Included in the above were $2.0 million of exploration expenditures which were
capitalized relating to the expanded reserves at Marigold. Capital expenditures
and funds for exploration in 2002 are estimated to be approximately $22.6
million. The primary capital expenditures are expected for leach pad expansion
at the San Martin Mine in Honduras ($4.0 million), and equipment purchases and
development for the Marigold Mine expansion ($15.7 million). Exploration is
planned at both the Marigold and San Martin mines as well as other properties in
Latin America. The Company believes that estimated cash flows from operations
and current cash reserves will be sufficient to fund these anticipated
expenditures.
HEDGING
At December 31, 2001, the Company had no ounces hedged. At December 31, 2000,
the Company had no ounces sold forward, had sold 62,000 ounces of gold call
options for 2001 at an average strike price of $294 per ounce, and owned no put
options. Based on a spot price of $272.65 per ounce at December 31, 2000, the
call option positions had nominal value. As at December 31, 1999, the Company
had sold forward 65,000 ounces of gold for delivery during 2000 at an average
price of $288 per ounce, as well as 79,000 ounces of gold call options at strike
prices averaging $290 per ounce expiring during 2000 and 2001. The Company also
held put options on 36,000 ounces of gold that were exercisable at an average
price of $275 per ounce at various dates during 2000.
ENVIRONMENTAL, REGULATORY AND OTHER RISK FACTORS
RECLAMATION AND ENVIRONMENTAL
The Company is required to mitigate long-term environmental impacts on its
properties by stabilizing, contouring, reshaping and re-vegetating various
portions of a site once mining and processing are completed. Reclamation efforts
are conducted in accordance with detailed plans that have been reviewed and
approved by the appropriate regulatory agencies. Whenever feasible, reclamation
is conducted concurrently with mining operations.
Standard leaching techniques have been designed to comply with environmental
requirements imposed by regulatory authorities. Due to the impervious qualities
of the heap leach pad and the closed nature of the leaching system, the Company
believes that its mining operations have no materially adverse effect on the
environment, however, the Company cannot guarantee that this will not occur.
18
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
Tailings impoundments have been constructed at the Company's Dee and Marigold
mines. Milling operations have been suspended indefinitely at the Marigold Mine
and its tailings are expected to be reclaimed in 2002. At the Dee Mine, milling
operations were completed early in 2001 and reclamation of the tailings
impoundment commenced. Tailings impoundments pose certain risks to the
environment including the potential for groundwater contamination and wildlife
mortalities. The Company operates its tailings facilities in substantial
compliance with applicable rules and regulations. Tailings facilities will be
reclaimed in accordance with state-approved reclamation plans.
Though the Company believes that its mining operations are in material
compliance with all present health, safety and environmental rules and
regulations, there is always some uncertainty due to the complexity and
application of such rules and regulations. The Company does not anticipate that
the cost of compliance with existing environmental laws and regulations will
have a material impact on its earnings in the foreseeable future. However,
possible future health, safety and environmental legislation, regulations and
actions could cause additional expense, capital expenditures, restrictions and
delays in the activities of the Company, the extent of which cannot be
predicted. The Company made no material capital expenditures for environmental
control facilities during the current year, except for expenditures for the
leach pad construction at San Martin. During the year ended December 31, 2000
expenditures were made for leach pads at San Martin and expansion of the pads at
Marigold. During the year ended December 31, 1999, there were no material
expenditures other than for design of monitoring systems for expansion of the
leach pad at the Rand Mine. The Company estimates that it will make no material
capital expenditures in this area during the year ending December 31, 2002,
other than monitoring systems incorporated into leach pad construction and
expansion programs. At the corporate level, an Environmental Policy has been
established to assure measurable standards for internal environmental audits for
review by the Audit and Environment Committee of the Board of Directors. The
Committee has been active and is satisfied the Company is complying with
regulatory parameters.
As of December 31, 2001 the Company had in place $5.0 million in letters of
credit ($2.7 million at December 31, 2000) backed by certificates of deposit and
$4.3 million in reclamation bonds ($4.5 million at December 31, 2000) issued as
security for future reclamation costs.
LEGAL AND REGULATORY
Legislation has been introduced in prior sessions of the U.S. Congress to make
significant revisions to the U.S. General Mining Law of 1872 that would affect
the Company's unpatented mining claims on federal lands, including a royalty on
gold production. It cannot be predicted whether any of these proposals will
become law. Any levy as proposed would only apply to unpatented federal lands
and, accordingly, would have an insignificant impact on the Rand Mine's
production from the Yellow Aster Pit. However, should a royalty become law, it
could adversely affect the profitability of portions of the gold production from
the Marigold Mine, and all production from the Imperial Project, if it were to
be developed.
In the last days of the Clinton administration, several regulatory initiatives
were issued which could adversely affect the future development of minerals on
public lands in the United States. These included new Surface Management Rules
which govern BLM's approval process for mineral development (known as the "3809"
rules), a Solicitor's opinion on the use of mill sites and mining claims for
activities ancillary to mining, and various BLM Instructional Memoranda relating
to the same. Many of these new initiatives are the subject of various legal
challenges and have been or are being reviewed by the new federal
administration. In particular, the new 3809 rules have been re-proposed with
certain changes that would have less of an adverse impact on new mining
development in the United States. It is uncertain how these initiatives will
ultimately be finalized. The Company does not believe that they would adversely
impact any of the Company's current mining operations. However, they could
adversely impact the Company's ability to gain the necessary approvals to
develop new mineral resources on public lands in the United States, including
the Millennium expansion project at the Marigold Mine.
OTHER RISK FACTORS
The Company's mining operations are subject to the normal risks of mining, and
its profits are subject to changes in the price of gold, which fluctuates
widely, as well as other numerous factors beyond the Company's control.
The Company's mining operations are subject to health, safety and environmental
legislation and regulations, changes in which could cause additional expenses,
capital expenditures, restrictions and delays in the Company's activities, the
extent of which cannot be predicted. Certain of the Company's properties have
not been surveyed and therefore in accordance with the laws of the jurisdiction
in which the properties are located, their existence and area could be in doubt.
In addition to the United States, the Company now has interests in Mexico,
Honduras, and Guatemala that may be affected by changes in the political and
economic environment in these countries.
19
MANAGEMENT'S DISCUSSION & ANALYSIS
RESULTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2001, 2000 AND 1999
The imposition of a gross royalty on all production from federal lands in the
United States, which has been proposed in the past, if enacted, would adversely
affect the profitability of the operations of the Rand and Marigold mines and,
assuming commencement of production, the Imperial Project.
The Company's mineral development and mining activities and profitability
involve significant risks due to numerous factors outside of its control
including, but not limited to: the price of gold, changes in the regulatory
environment, various foreign exchange fluctuations, and risks inherent in
mining. The Company also invests cash balances in short-term investments that
are subject to interest rate fluctuations. Because these investments are in
highly liquid, short-term instruments, any impact of an interest rate change
would not be material.
A major external factor that has a marked effect on liquidity, either positive
or negative, is the price of gold bullion in international markets. Because the
Company has no production hedged, any sustained changes in the price of gold
over or under these levels will appreciably affect the Company's general
liquidity position, and could substantially increase or decrease revenues,
earnings and cash flow.
FORWARD-LOOKING STATEMENTS
Safe Harbor Statement under the United States Private Securities Litigation
Reform Act of 1995: Except for the statements of historical fact contained
herein, the information presented constitutes "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements, including but not limited to those with respect to
the price of gold, the timing and amount of estimated future production, costs
of production, capital expenditures, reserve determination, costs and timing of
the development of new deposits, the Company's hedging practices, permitting
time lines, and the timing and possible outcome of pending litigation involve
known and unknown risks, uncertainties and other factors which may cause the
actual results, performance or achievements of the Company to be materially
different from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such factors include, among others,
the actual results of current exploration activities, actual results of current
reclamation activities, conclusions of economic evaluations, changes in project
parameters as plans continue to be refined, future prices of gold, as well as
those factors discussed above in the section entitled "Environmental, Regulatory
and Other Risk Factors". Although the Company has attempted to identify
important factors that could cause actual results to differ materially, there
may be other factors that cause results not to be as anticipated, estimated or
intended. There can be no assurance that such statements will prove to be
accurate as actual results and future events could differ materially from those
anticipated in such statements. Accordingly, readers should not place undue
reliance on forward-looking statements.
20
MANAGEMENT'S RESPONSIBILITY
The accompanying consolidated financial statements and all of the data included
in this annual report have been prepared by and are the responsibility of
management of the Company. The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Canada
and reflect management's best estimates and judgements based on currently
available information. The Company has developed and maintains systems of
internal accounting controls in order to assure, on a reasonable and
cost-effective basis, the reliability of its financial information, and that
assets are safeguarded from loss.
The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The Board
exercises its responsibilities through the Audit Committee of the Board which
meets with the external auditors to satisfy itself that management's
responsibilities are properly discharged and to review the financial statements
before they are presented to the Board of Directors for approval.
The consolidated financial statements have been audited by KPMG LLP Chartered
Accountants. Their report outlines the scope of their examination and opinion on
the consolidated financial statements.
/s/ C. Kevin McArthur /s/ Cheryl S. Maher
--------------------- -------------------
C. Kevin McArthur Cheryl S. Maher
President & Chief Vice President Finance,
Executive Officer Chief Financial Officer
February 8, 2002 February 8, 2002
AUDITOR'S REPORT TO THE SHAREHOLDERS
We have audited the consolidated balance sheets of Glamis Gold Ltd. as at
December 31, 2001 and 2000 and the consolidated statements of operations,
retained earnings (deficit) and cash flows for each of the years ended December
31, 2001, 2000 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with Canadian generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31, 2001
and 2000 and the results of its operations and its cash flows for each of the
years ended December 31, 2001, 2000 and 1999 in accordance with Canadian
generally accepted accounting principles. As required by the Company Act
(British Columbia), we report that, in our opinion, these principles have been
applied, after giving retroactive effect to the changes in the methods of
accounting for income taxes as explained in note 2(j) to the financial
statements, and of calculating earnings per share as explained in note 2(k) to
the financial statements, on a consistent basis.
/s/ KPMG LLP
Chartered Accountants
Vancouver, Canada
February 8, 2002
21
CONSOLIDATED BALANCE SHEETS
Expressed in thousands of United States dollars, as at December 31 2001 2000
-------------------------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 45,852 $ 13,278
Accounts receivable 1,096 680
Taxes recoverable 615 934
Inventories (note 4) 12,725 13,503
Prepaid expenses and other 631 322
-------------------------------------------------------------------------------------------------
60,919 28,717
Plant and equipment and mine development costs (note 5) 80,970 77,530
Other assets (note 6) 6,849 6,294
-------------------------------------------------------------------------------------------------
$ 148,738 $ 112,541
=================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 5,529 $ 8,475
Reserve for site closure and reclamation costs (notes 6 and 15(b)) 10,427 12,997
Future income taxes (note 10) 9,416 8,299
-------------------------------------------------------------------------------------------------
25,372 29,771
Shareholders' equity:
Share capital (note 7):
Authorized:
200,000,000 common shares without par value
5,000,000 preferred shares, Cdn. $10 par value, issuable in Series
Issued and fully paid:
83,283,462 (2000 - 70,097,382) common shares 194,793 159,045
Contributed surplus 63 63
Deficit (71,490) (76,338)
-------------------------------------------------------------------------------------------------
123,366 82,770
-------------------------------------------------------------------------------------------------
$ 148,738 $ 112,541
=================================================================================================
Commitments and contingencies (notes 5, 6, 13 and 15)
See accompanying notes to consolidated financial statements.
APPROVED ON BEHALF OF THE BOARD:
/s/ C. Kevin McArthur /s/ A. Dan Rovig
Director Director
22
CONSOLIDATED STATEMENTS OF OPERATIONS
Expressed in thousands of United States dollars, years ended December 31 2001 2000 1999
-----------------------------------------------------------------------------------------------------------------------
Revenue $ 64,262 $ 61,560 $ 56,727
Cost of goods sold 40,452 47,884 47,698
-----------------------------------------------------------------------------------------------------------------------
23,810 13,676 9,029
Expenses:
Depreciation and depletion 12,703 13,610 14,156
Site closure and reclamation 1,240 819 1,273
Exploration 1,659 2,887 4,002
General and administrative 4,440 5,166 5,989
Write-down (recovery) of investments and properties (note 8) (1,336) 45,963 8,223
-----------------------------------------------------------------------------------------------------------------------
18,706 68,445 33,643
-----------------------------------------------------------------------------------------------------------------------
Earnings (loss) from operations 5,104 (54,769) (24,614)
Interest and amortization of financing costs (6) (22) (160)
Interest and other income (note 9) 1,088 2,045 2,890
-----------------------------------------------------------------------------------------------------------------------
Earnings (loss) before income taxes 6,186 (52,746) (21,884)
Provision for (recovery of) income taxes (note 10):
Current 271 36 60
Future 1,067 (4,100) (312)
-----------------------------------------------------------------------------------------------------------------------
1,338 (4,064) (252)
-----------------------------------------------------------------------------------------------------------------------
Net earnings (loss) for the year $ 4,848 $ (48,682) $ (21,632)
=======================================================================================================================
Basic earnings (loss) per share $ 0.07 $ (0.70) $ (0.33)
Diluted earnings (loss) per share $ 0.07 $ (0.70) $ (0.33)
Weighted average common shares 73,585,155 70,008,059 62,159,235
=======================================================================================================================
See accompanying notes to consolidated financial statements.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS (DEFICIT)
Expressed in thousands of United States dollars, years ended december 31 2001 2000 1999
-----------------------------------------------------------------------------------------------------------
Retained earnings (deficit), beginning of year:
As previously reported $(76,338) $(20,923) $ 709
Adjustment for future income taxes (note 2(j)) -- (6,733) --
-----------------------------------------------------------------------------------------------------------
As restated (76,338) (27,656) 709
Net earnings (loss) for the year 4,848 (48,682) (21,632)
-----------------------------------------------------------------------------------------------------------
Deficit, end of year $(71,490) $(76,338) $(20,923)
===========================================================================================================
See accompanying notes to consolidated financial statements.
23
CONSOLIDATED STATEMENTS OF CASH FLOWS
Expressed in thousands of United States dollars, years ended december 31 2001 2000 1999
-----------------------------------------------------------------------------------------------------------
Net cash provided by operating activities (note 11) $ 11,828 $ 4,037 $ 6,191
Cash flows from (used in) investing activities:
Business acquisitions, net of cash acquired (note 3) -- (7,092) 874
Proceeds from sale of assets acquired on
business acquisition (note 3(b)) -- 284 32,560
Proceeds from sale of equipment (note5(b)(ii)) -- -- 7,204
Purchase of plant and equipment, net of disposals (5,229) (19,005) (3,440)
Mineral property acquisition and mine development costs (9,295) (19,895) (11,953)
Proceeds from sale of investments 82 35 351
Purchase of other assets (560) (583) (792)
-----------------------------------------------------------------------------------------------------------
(15,002) (46,256) 24,804
Cash flows from (used in) financing activities:
Proceeds from issuance of common shares 35,748 328 2,211
Repayment of mortgage payable and capital
lease obligations acquired (note 3(b)) -- -- (4,207)
-----------------------------------------------------------------------------------------------------------
35,748 328 (1,996)
-----------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents during the year 32,574 (41,891) 28,999
Cash and cash equivalents, beginning of year 13,278 55,169 26,170
-----------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of year $ 45,852 $ 13,278 $ 55,169
-----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid (received) during the year for:
Interest $ (695) $ (1,661) $ 160
Taxes (375) (666) (616)
===========================================================================================================
Non-cash financing and investing activities (note 12)
See accompanying notes to consolidated financial statements.
24
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
1. NATURE OF OPERATIONS:
The Company and its wholly owned subsidiaries are engaged in the exploration,
development and extraction of precious metals principally in the States of
California and Nevada in the United States of America, Honduras, the State of
San Luis Potosi, Mexico and Guatemala.
2. SIGNIFICANT ACCOUNTING POLICIES:
(a) GENERALLY ACCEPTED ACCOUNTING PRINCIPLES:
These consolidated financial statements have been prepared in accordance
with accounting principles and practices that are generally accepted in
Canada, which conform, in all material respects, with those generally
accepted in the United States, except as explained in note 16.
(b) PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its direct and indirect wholly owned subsidiaries and its proportionate
share of the accounts of joint ventures in which the Company has an
interest. All material intercompany transactions and balances have been
eliminated.
Investments in other companies are carried at cost less provisions for
impairment in value.
(c) CASH EQUIVALENTS:
Cash equivalents are highly liquid investments, such as term deposits with
major financial institutions, having a maturity of three months or less at
acquisition, that are readily convertible to contracted amounts of cash.
(d) INVENTORIES:
(i) Finished goods inventory is stated at the lower of cost or market.
(ii) Work-in-progress inventory, which is ore on leach pads, consists of
mining costs related to the ore being processed and is stated at the
lower of cost or net realizable value. These costs are charged to
operations and included in cost of goods sold on the basis of ounces
of gold recovered. Based upon actual gold recoveries and operating
plans, the Company continuously evaluates and refines estimates used
in determining the costs charged to operations and the carrying value
of costs associated with the ore on the leach pads.
(iii)Supplies and spare parts inventory is stated at the lower of cost,
using the first-in, first-out method, or replacement cost.
(e) PLANT AND EQUIPMENT:
Plant and equipment is stated at cost less accumulated depreciation. Leach
pads are depreciated on a unit-of-production basis over estimated reserves
expected to be processed from the leach pad. Certain mining equipment is
depreciated based on hours used over their estimated useful lives. All
other asset categories are depreciated using the straight-line method over
their estimated useful lives. Estimated useful lives for mining equipment
and major asset categories range from three to seven years. Replacements
and major improvements are capitalized.
(f) MINE DEVELOPMENT COSTS:
(i) Property acquisition and mine development costs are recorded at cost
and amortized by the unit-of-production method based on recoverable
gold reserves. Pre-production expenditures and revenues are
capitalized until the commencement of commercial production. If it is
determined that the deferred costs related to a property are not
recoverable over its productive life, the unrecoverable portion is
charged to operations in the period such determination is made.
(ii) Mine development costs for current production are charged to
operations as incurred. Mining costs associated with waste rock
removal are deferred and charged to cost of goods sold on the basis of
life-of-mine average stripping rates for the mine. Mine development
costs incurred to expand operating capacity, develop new ore bodies or
develop mine areas in advance of current production are deferred and
then amortized on a unit-of-production basis. General and
administrative costs are expensed as incurred.
25
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(iii)Expenditures incurred on non-producing properties identified as
having development potential are deferred on a project basis until the
viability of the project is determined. If a project is abandoned or
it is determined that the deferred costs may not be recovered based on
current economics or permitting considerations, the accumulated
project costs are charged to operations in the period in which the
determination is made. Exploration expenditures on properties not
advanced enough to identify their development potential are charged to
operations as incurred.
(g) SITE CLOSURE AND RECLAMATION COSTS:
Minimum standards for site closure and mine reclamation have been
established by various governmental agencies that affect certain operations
of the Company. A reserve for future site closure and mine reclamation
costs has been established based upon the estimated costs to comply with
existing reclamation standards. Site closure and mine reclamation costs for
operating properties are accrued using the unit-of-production method.
(h) REVENUE RECOGNITION:
Revenue is recognized when metal is delivered and title passes. Costs
incurred or premium income received on forward sales, call options or put
options contracts are recognized in revenue when the contracts expire or
production is delivered. Changes in the fair value of the related asset or
liability are recognized in earnings.
(i) STOCK-BASED COMPENSATION:
The Company has a stock option plan and a stock-based management incentive
plan, both of which are described in note 7(b). No compensation expense is
recorded for the stock-based plans when the options or incentives are
granted. Any consideration paid by employees or directors on exercise of
stock options is credited to share capital. Any compensation liability
under the stock-based management incentive plan is accrued as compensation
expense.
(j) INCOME TAXES:
During 2000, the Company retroactively adopted the new recommendations of
the Canadian Institute of Chartered Accountants (the "CICA") for accounting
for income taxes, which requires the use of the asset and liability method.
This change was applied retroactively without restatement of the 1999
financial statements. Under this method of tax allocation, future income
tax assets and liabilities are determined based on differences between the
financial statement carrying values and their respective income tax bases
(temporary differences). Future income tax assets and liabilities are
measured using the tax rates expected to be in effect when the temporary
differences are likely to reverse. The effect on future income tax assets
and liabilities of a change in tax rates is included in operations in the
period in which the change is enacted or substantively enacted. The amount
of future income tax assets recognized is limited to the amount of the
benefit that is more likely than not to be realized.
Prior to adoption of the new recommendations, income tax expense was
determined using the deferral method of tax allocation. Under this method,
future income tax expense was based on differences in the recognition of
revenues and expenses for income tax and financial reporting purposes.
The cumulative effect of this change in accounting for income taxes of
$6,733,000 was determined as of January 1, 2000 and is reported separately
in the consolidated statements of retained earnings (deficit) as a
restatement, increasing the opening deficit at that date. The effect of
this change on the 2000 consolidated financial statements is detailed in
note 10. The 1999 consolidated financial statements have not been restated
to apply the provisions of the new accounting policy for income taxes.
(k) EARNINGS PER SHARE:
During 2001, the Company retroactively adopted the new recommendations of
the CICA for accounting for earnings per share, which requires the use of
the treasury stock method for calculating diluted earnings per share. Prior
to the adoption of the new recommendations, the imputed earnings approach
was used to determine the dilutive effect of options, warrants and
equivalents. In the Company's case, this change had no effect on previously
reported amounts as the Company reported a loss in each of 2000 and 1999.
26
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(l) TRANSLATION OF FOREIGN CURRENCIES:
The Company's Canadian operations and Honduran operations, starting from
the commencement of commercial production in January 2001, are considered
self-sustaining operations for the treatment of foreign exchange
translation gains or losses arising from consolidation. Accordingly, the
Company uses the current rate method to translate the accounts of its
self-sustaining operations to United States dollars as follows:
(i) Assets and liabilities at the rate of exchange in effect at the end of
the period;
(ii) Revenues and expenses at the average exchange rate during the period;
(iii)Material exchange gains and losses arising from translation are
deferred and included as a separate component of shareholders' equity.
The Company's subsidiaries and joint ventures outside of the United States
with non-producing properties, are treated as integrated operations and the
related accounts are translated into United States dollars as follows:
(i) Revenues and expenses at the average exchange rate during the period;
(ii) Monetary items at the rate of exchange in effect at the end of the
period;
(iii)Non-monetary items at historical exchange rates; and
(iv) Exchange gains and losses arising from translation are included in the
determination of net earnings (loss) for each period, except for
exchange gains or losses relating to non-current monetary assets or
liabilities, which are deferred and amortized over the remaining life
of the asset or liability.
(m) ESTIMATES:
The preparation of financial statements in conformity with Canadian
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Significant areas requiring the use
of management estimates relate to the determination of mineral reserves,
reclamation and environmental obligations, impairment of assets, useful
lives for depreciation, depletion and amortization, measurement of
work-in-process and finished goods inventories and valuation allowances for
deferred tax assets. Actual results could differ from those estimates.
(n) COMPARATIVE FIGURES:
Certain of the prior years' comparative figures have been reclassified to
conform to the presentation adopted for the current year.
3. BUSINESS ACQUISITIONS:
(a) CAMBIOR DE MEXICO S.A. DE C.V.:
Effective May 9, 2000, the Company acquired 100% of the issued and
outstanding shares of Cambior de Mexico S.A. de C.V. ("Cambior de Mexico")
from Cambior Inc., a Canadian public company, for $7.2 million in cash.
Cambior de Mexico was subsequently renamed Glamis de Mexico, S.A. de C.V.
Cambior de Mexico's principal asset was the right to acquire a 50% interest
in the Cerro San Pedro Project in the State of San Luis Potosi in Mexico
(note 5(b)(ii)), as well as interests in a number of other properties in
Mexico. The Company also acquired a crusher system from Cambior Inc. for an
additional $2.5 million in cash that was intended for use at the Cerro San
Pedro Project. Other transaction costs associated with this acquisition
totaled $0.3 million. In addition, in consideration for advisory services
rendered to the Company in connection with the acquisition, the Company
granted to its investment advisor warrants to purchase up to 300,000 shares
of the Company's common stock at an exercise price of $2.00 per share (note
7(c)). Management considers the fair intrinsic value of the warrants at the
time of issuance to be nominal. The warrants are exercisable at any time
until June 25, 2003, but are not transferable prior to June 26, 2001.
27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
The acquisition of Cambior de Mexico was accounted for by the purchase method
and is summarized below:
Net assets acquired, at fair value:
Cash and cash equivalents $ 98
Net non-cash working capital 78
Plant and equipment 838
Mineral properties 6,446
----------------------------------------------------------
$7,460
==========================================================
Consideration given:
Cash $7,176
Transaction costs 284
----------------------------------------------------------
$7,460
==========================================================
(b) RAYROCK RESOURCES INC.:
Effective February 26, 1999, the Company completed the acquisition of
Rayrock Resources Inc. ("Rayrock"), a Canadian public company. The terms of
the acquisition gave the shareholders of Rayrock the right to receive
either 2.4 common shares of the Company or 1.6 common shares of the Company
and Cdn$3.00 for each Rayrock share held. BlackRock Ventures Inc.
("BlackRock"), a significant shareholder of Rayrock and a company that
Rayrock was a significant shareholder of, agreed to acquire the shares of
Magin Energy Inc. ("Magin"), a company that Rayrock held as a long term
investment, in lieu of a portion of the common shares of the Company
otherwise issuable to BlackRock. Rayrock was principally engaged in the
exploration for and the mining, production and sale of gold from mines in
Nevada, USA, and copper from a mine in northern Chile.
The transaction was accounted for by the purchase method and is summarized
below:
Net assets acquired, at fair value:
Cash and cash equivalents $ 45,960
Net non-cash working capital 2,287
Mineral properties 43,337
Magin shares 6,364
Investments and other assets 17,636
--------------------------------------------------------------
115,584
Mortgage payable and capital lease obligations (4,207)
Accrued reclamation and site restoration costs (10,566)
Future income taxes (2,442)
--------------------------------------------------------------
$ 98,369
==============================================================
Consideration given:
Cash and cash equivalents $ 35,073
Issue of 29,277,820 common shares of the Company 46,919
Magin shares 6,364
Transaction costs 10,013
--------------------------------------------------------------
$ 98,369
==============================================================
Subsequent to the acquisition of Rayrock, the Company disposed of the shares of
and loans to the subsidiary that held the Chilean copper mines, and disposed of
the BlackRock investments and certain of the investments and other assets for
total net proceeds of $32,560,000 during 1999. In addition, the Company paid the
mortgage payable and settled the capital lease obligations assumed with the
acquisition of Rayrock.
28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
4. INVENTORIES:
=======================================================
2001 2000
-------------------------------------------------------
Finished goods $ 1,626 $ 3,696
Work-in-progress 9,193 8,934
Supplies and spare parts 1,906 873
-------------------------------------------------------
$12,725 $13,503
=======================================================
5. PLANT AND EQUIPMENT AND MINE DEVELOPMENT COSTS:
=================================================================
2001 2000
-----------------------------------------------------------------
Producing properties, net $68,866 $15,094
Non-producing properties, net 12,104 62,436
-----------------------------------------------------------------
$80,970 $77,530
=================================================================
(a) PRODUCING PROPERTIES:
2001:
=========================================================================================================================
Rand San Martin Marigold
California Honduras Nevada Other Total
-------------------------------------------------------------------------------------------------------------------------
Plant and equipment $ 53,570 $ 24,025 $ 4,237 $ 670 $ 82,502
Mineral property acquisition costs 14,119 13,362 9,181 -- 36,662
Mine development costs 25,195 21,704 3,251 -- 50,150
-------------------------------------------------------------------------------------------------------------------------
92,884 59,091 16,669 670 169,314
Accumulated depreciation, depletion and write-downs (86,080) (7,477) (6,281) (610) (100,448)
-------------------------------------------------------------------------------------------------------------------------
$ 6,804 $ 51,614 $ 10,388 $ 60 $ 68,866
=========================================================================================================================
2000:
==============================================================================================================================
Rand Picacho Marigold Dee Daisy
California California Nevada Nevada Nevada Other Total
------------------------------------------------------------------------------------------------------------------------------
Plant and equipment $ 53,875 $ 5,965 $ 4,557 $ 2,498 $ 2,419 $ 672 $ 69,986
Mineral property acquisition costs 14,119 5,799 9,181 2,035 1,058 -- 32,192
Mine development costs 21,102 9,276 402 3,922 135 818 35,655
------------------------------------------------------------------------------------------------------------------------------
89,096 21,040 14,140 8,455 3,612 1,490 137,833
Accumulated depreciation,
depletion and write-downs (84,437) (21,007) (4,131) (8,455) (3,612) (1,097) (122,739)
------------------------------------------------------------------------------------------------------------------------------
$ 4,659 $ 33 $ 10,009 $ -- $ -- $ 393 $ 15,094
==============================================================================================================================
At December 31, 2001 and 2000, all of the Company's producing properties are
held 100%, except for the Marigold Mine, which is 66-2/3% held. The Company's
producing properties are subject to royalties pursuant to the terms of the
underlying acquisition, option or lease agreements, that range up to 7% of net
smelter returns and provide for minimum payments which vary with the price of
gold aggregating approximately $1,000,000 per year.
(i) San Martin Project:
The San Martin Project was acquired in 1998 and at that time, was an
advanced-stage gold property consisting of a 100% interest in a mineral
concession in Central Honduras. During 1999, the Company completed a
feasibility study on the project and commenced permitting and construction
of the mine, which was completed in 2000. The Company shipped its first
gold from the San Martin Mine in December 2000, which has been reflected as
recoveries during start-up, and commenced commercial production in January
2001.
29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(b) NON-PRODUCING PROPERTIES:
2001:
--------------------------------------------------------------------------------------------------------------------
Cerro Cerro
San Pedro Imperial Blanco
Mexico California Guatemala Other Total
--------------------------------------------------------------------------------------------------------------------
Plant and equipment $ 103 $ 132 $ 53 $ 2,503 $ 2,791
Mineral property acquisition costs 7,460 3,330 8,000 -- 18,790
Mine development costs 3,285 10,860 -- -- 14,145
--------------------------------------------------------------------------------------------------------------------
10,848 14,322 8,053 2,503 35,726
Write-downs -- (14,322) (8,000) (1,300) (23,622)
--------------------------------------------------------------------------------------------------------------------
$ 10,848 $ -- $ 53 $ 1,203 $ 12,104
====================================================================================================================
2000:
--------------------------------------------------------------------------------------------------------------------
San Martin Cerro Cerro
Honduras San Pedro Imperial Blanco
(note 5(a)(i)) Mexico California Guatemala Other Total
--------------------------------------------------------------------------------------------------------------------
Plant and equipment $ 17,132 $ 660 $ 132 $ 65 $ 2,500 $ 20,489
Mineral property acquisition costs 13,362 7,460 3,330 8,000 -- 32,152
Mine development costs 22,530 989 10,860 -- -- 34,379
Recoveries during start-up (962) -- -- -- -- (962)
--------------------------------------------------------------------------------------------------------------------
52,062 9,109 14,322 8,065 2,500 86,058
Write-downs -- -- (14,322) (8,000) (1,300) (23,622)
--------------------------------------------------------------------------------------------------------------------
$ 52,062 $ 9,109 $ -- $ 65 $ 1,200 $ 62,436
====================================================================================================================
(i) Cerro San Pedro Project
The Cerro San Pedro Project was acquired in 2000 (note 3(a)) and is an
advanced-stage gold-silver property located in the state of San Luis
Potosi, Mexico. The Company completed its earn-in of a 50% interest in the
project by funding $2.0 million during the remainder of 2000 and $2.0
million during 2001. Under the terms of the agreement with the Company's
joint venture partner, the Company is the operator of the work program on
the project. Expenditures subsequent to the earn-in, but before the
commencement of construction, are to be shared equally, subject to certain
limited exceptions.
(ii) Imperial Project:
The Imperial Project consists of a 100% interest in certain unpatented
mining claims located in eastern Imperial County in the State of
California. Gold production will be subject to a net smelter return
royalty of 1-1/2%. During 1996, the Company entered into an agreement for
the purchase of equipment totaling approximately $7,800,000 of which
$7,001,000 was paid as a deposit. During 1999, the equipment was sold for
$7,204,000.
Due to the U.S. Department of Interior decision to formally deny the
operating permit for the Imperial Project on January 16, 2001, the $14.3
million of deferred costs on the project were written down at December 31,
2000. In November 2001, the denial of the project was formally vacated by
the Department of the Interior, and the Company continues to pursue
approval of the project.
(iii) Cerro Blanco Project:
The Cerro Blanco Project was acquired in 1998 and is an advanced-stage
gold property consisting of a 100%interest in one granted concession and
eight concession applications in southern Guatemala. Based on economic
conditions at the time and uncertainty over the recoverability of the
deferred costs, the Company wrote-down the costs to a nominal amount in
2000.
30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(c) INTERESTS IN JOINT VENTURES:
The Company's 66-2/3% interest in the Marigold Mine, which was acquired in
February 1999 (note 3(b)), and 50% interest in the Cerro San Pedro Project,
which was acquired in May 2000 (note 3(a)), are reflected in these
consolidated financial statements on a proportionate basis. The Company's
share of the joint ventures' assets, liabilities, revenues and expenses
included in the consolidated financial statements are as follows:
--------------------------------------------------------------------------------
2001 2000
--------------------------------------------------------------------------------
Total assets $20,550 $15,409
Total liabilities 5,159 4,861
================================================================================
--------------------------------------------------------------------------------
2001 2000 1999
--------------------------------------------------------------------------------
Revenue from production $ 15,303 $ 12,196 $ 13,716
Expenses 12,566 14,442 13,189
--------------------------------------------------------------------------------
Income (loss) from operations $ 2,737 $ (2,246) $ 527
================================================================================
Cash provided by operations $ 5,009 $ 587 $ 2,739
Cash used in investing activities (5,004) (3,267) (1,135)
================================================================================
6. OTHER ASSETS:
--------------------------------------------------------------------------------
2001 2000
--------------------------------------------------------------------------------
Restricted deposits (see note below) $6,093 $5,727
Investments in other companies (quoted market value
$277,000; 2000 -- $316,000) 44 49
Sales taxes recoverable 496 304
Other 216 214
--------------------------------------------------------------------------------
$6,849 $6,294
================================================================================
RESTRICTED DEPOSITS -- ENVIRONMENTAL BONDS:
The Company provides financial guarantees to regulatory authorities as
security for future site closure and reclamation costs for the Company's
operations. As at December 31, 2001, the Company had $4.3 million in
reclamation bonds outstanding (2000 -- $4.5 million), for which the Company
has provided collateral in the form of certificates of deposit totaling
$1.1 million (2000 -- $1.1 million). Additional letters of credit issued as
security are collateralized with certificates of deposit totaling $5.0
million (2000 -- $2.7 million) that earn interest at fixed rates between
1.14% and 2.12% (2000 -- 5.62% and 6.45%). Fees on the bonds and letters of
credit range from 0.5% -- 2.5% (2000 -0.5% -- 2.5%).
31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
7. SHARE CAPITAL:
(a) ISSUED AND FULLY PAID:
--------------------------------------------------------------------------------
Number
of shares Amount
--------------------------------------------------------------------------------
Balance as at December 31, 1998 38,860,612 $ 109,587
Issued during the year:
For cash consideration under the terms of directors'
and employees' stock options 1,726,400 2,211
Issued upon acquisition of Rayrock Resources
Inc. (note 3(b)) 29,277,820 46,919
--------------------------------------------------------------------------------
Balance as at December 31, 1999 69,864,832 158,717
Issued during the year:
For cash consideration under the terms of directors'
and employees' stock options 232,550 328
--------------------------------------------------------------------------------
Balance as at December 31, 2000 70,097,382 159,045
Issued during the year:
For cash consideration under the terms of directors'
and employees' stock options 1,686,080 2,577
Issued for cash consideration of Cdn$5.00 per share
pursuant to an underwriting agreement
dated October 10, 2001 11,500,000 33,171
--------------------------------------------------------------------------------
Balance as at December 31, 2001 83,283,462 $ 194,793
================================================================================
(b) STOCK OPTIONS AND STOCK APPRECIATION RIGHTS:
The Company has a stock option plan that allows it to grant options to its
employees, officers and directors to acquire up to 7 million common shares.
The exercise price of each option equals the closing price for the common
shares on the Toronto Stock Exchange on the last trading day before the
date of the grant. Options have a maximum term of five years and, subject
to certain specific exceptions, terminate one year following the
termination of the optionee's employment. Once approved and vested, options
are exercisable at any time.
The continuity of directors' and employees' stock options is as follows:
-------------------------------------------------------------------------------------------------------------------
2001 2000 1999
------------------------- ------------------------- -------------------------
Weighted Weighted Weighted
average average average
Number exercise Number exercise Number exercise
of options price (Cdn$) of options price (Cdn$) of options price (Cdn$)
-------------------------------------------------------------------------------------------------------------------
Outstanding, beginning of year 5,141,945 $3.30 5,153,995 $3.25 2,610,500 $5.49
Granted during the year 470,000 3.89 545,000 2.91 1,994,500 2.68
Granted on conversion of
Rayrock employees' and
directors' stock options -- -- -- -- 4,470,145 3.25
Exercised during the year (1,686,080) 2.38 (232,550) 2.06 (1,726,400) 1.90
Cancelled during the year (646,750) 3.70 (324,500) 2.69 (2,194,750) 6.46
-------------------------------------------------------------------------------------------------------------------
Outstanding, end of year 3,279,115 $3.78 5,141,945 $3.30 5,153,995 $3.25
===================================================================================================================
Exercisable 3,109,115 5,126,945 4,813,995
===================================================================================================================
32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
Details of the options outstanding as at December 31, 2001 are as follows:
--------------------------------------------------------------------------------
Range of Number Weighted average Weighted average
exercise prices (Cdn$) outstanding remaining life exercise price (Cdn$)
--------------------------------------------------------------------------------
$1.99 - $2.21 309,185 2.4 years $ 2.19
$2.50 - $3.00 1,773,400 2.5 years 2.73
$4.55 - $4.89 120,050 3.1 years 4.66
$5.60 - $5.90 1,076,480 1.1 years 5.85
--------------------------------------------------------------------------------
3,279,115 2.1 years $ 3.78
================================================================================
The Company also has a stock-based management incentive plan that allows it
to grant rights for a holder to receive the appreciation in the value of
the stock-based right over the stated base price in cash. As at December
31, 2000, the Company had 165,000 (1999 - 200,000) stock appreciation
rights outstanding at a base price of Cdn$4.80 per share that expire July
14, 2003 as well as 600,000 stock appreciation rights at a base price of
Cdn$2.22 per share that expire February 26, 2002. The 600,000 stock
appreciation rights were granted to a former officer of Rayrock through
continuance of Rayrock stock appreciation rights. Total expense incurred by
the Company in 2001 upon exercise of stock appreciation rights was $0.8
million (2000 - nil; 1999 - $0.1 million). As at December 31, 2001, the
Company had 43,500 stock appreciation rights outstanding at Cdn$4.80 per
share that expire July 14, 2003.
(c) SHARE PURCHASE WARRANTS:
As at December 31, 2001 and 2000, the Company had 300,000 share purchase
warrants outstanding exercisable at $2.00 per share to June 25, 2003 that
were issued in connection with the acquisition of Cambior de Mexico (note
3(a)).
8. WRITE-DOWN (RECOVERY) OF INVESTMENTS AND PROPERTIES:
During 2001, the Company updated its estimated costs and reversed the
overaccrued portion of site closure and reclamation costs. During 2000 and 1999,
the Company wrote-down certain of its investments and properties as follows:
--------------------------------------------------------------------------------
2001 2000 1999
--------------------------------------------------------------------------------
Producing properties (note 5(a)):
Rand $ -- $ 15,510 $ 6,824
Marigold -- 880 --
Dee (988) 4,036 --
Cieneguita -- -- 1,050
Daisy (348) -- --
Non-producing properties (note 5(b)):
Imperial -- 14,322 --
Cerro Blanco -- 8,000 --
Other non-producing properties -- 603 349
Equipment -- 1,300 --
Inventories -- 1,251 --
Other current assets -- 61 --
--------------------------------------------------------------------------------
$ (1,336) $ 45,963 $ 8,223
================================================================================
9. INTEREST AND OTHER INCOME:
--------------------------------------------------------------------------------
2001 2000 1999
--------------------------------------------------------------------------------
Interest and other income $ 702 $ 2,550 $ 1,822
Foreign exchange gain (loss) (99) (242) 221
Gain (loss) on sale of other assets 485 (263) 847
--------------------------------------------------------------------------------
$ 1,088 $ 2,045 $ 2,890
================================================================================
33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
10. INCOME TAXES:
In 2000, the Company retroactively adopted the asset and liability method of
accounting for income taxes in accordance with the new Recommendations of the
Canadian Institute of Chartered Accountants. The effect of the change in
accounting policy on the 2000 financial statements was to increase (decrease)
the following:
--------------------------------------------------------------------------------
Deficit at January 1, 2000 $ 6,733
Loss from operations (2,194)
Plant and equipment and mine development costs, at December 31, 2000 1,369
Future income tax liability, at December 31, 2000 5,908
--------------------------------------------------------------------------------
The 1999 financial statements have not been restated for the change.
The provision for income taxes differs from the Canadian federal and British
Columbia provincial statutory rate as follows:
-------------------------------------------------------------------------------------------------
2001 2000 1999
------------------ ------------------ ------------------
Amount Rate % Amount Rate % Amount Rate %
-------------------------------------------------------------------------------------------------
Income tax benefit computed
at statutory rates $ 2,759 44.6 $(24,052) (45.6) $ (9,821) (45.6)
Foreign tax rates different
from statutory rate (1,863) (30.1) 9,472 18.0 1,974 9.2
Benefit of losses not reflected
in the accounts 2,504 40.4 10,910 20.7 7,844 36.4
Other (2,062) (33.3) (394) (0.8) (249) (1.2)
-------------------------------------------------------------------------------------------------
$ 1,338 21.6 $ (4,064) (7.7) $ (252) (1.2)
=================================================================================================
(a) FUTURE INCOME TAX ASSETS AND LIABILITIES:
The significant components of the Company's future income tax assets and
liabilities at December 31, 2001 and 2000 are as follows:
------------------------------------------------------------------------------------------------------------------
2001 2000
------------------------------------------------------------------------------------------------------------------
Future income tax assets:
U.S. and Canada: Plant and equipment and mine development costs $ 12,783 $ 16,567
Reclamation and other liabilities 3,144 2,562
Losses carried forward and Alternative Minimum Tax credits 8,558 6,228
Mexico: Plant and equipment and mine development costs 1,564 1,008
Losses carried forward 4,561 4,467
Other foreign: Plant and equipment and mine development costs 688 588
Losses carried forward 1,668 1,567
------------------------------------------------------------------------------------------------------------------
Total future income tax assets 32,966 32,987
Valuation allowance (32,923) (32,037)
------------------------------------------------------------------------------------------------------------------
Future income tax assets, net of allowance 43 950
Future income tax liabilities:
U.S. and Canada: Plant and equipment and mine development costs 2,442 2,391
Other 43 950
Honduras: Plant and equipment and mine development costs 6,974 5,908
------------------------------------------------------------------------------------------------------------------
Total future income tax liabilities 9,459 9,249
------------------------------------------------------------------------------------------------------------------
Net future income tax liabilities $ 9,416 $ 8,299
==================================================================================================================
34
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(b) POTENTIAL FUTURE TAX BENEFITS:
At December 31, 2001, the Company has Canadian tax pools of approximately
Cdn$25 million, United States operating losses of approximately $12
million, Honduran operating losses of approximately $24 million, Mexican
operating losses of approximately $13 million, and certain Guatemalan tax
deductions available which may be carried forward and used to reduce
certain taxable income in future years. The Canadian tax pools are without
expiry, and the U.S., Mexican and Honduran losses and the Guatemalan
deductions expire at various dates prior to 2016. With the exception of the
Honduran operating losses, the potential income tax benefits related to
these items have not been reflected in the accounts as a valuation
allowance has been provided for these benefits.
(c) FUTURE INCOME TAXES:
In 2001, the future income tax of $1,067,000 was due primarily to
tax-effecting the earnings from the San Martin Mine.
In 2000, the future income tax recovery of $4,100,000 was due primarily to
tax-effecting the write-downs of plant and equipment and mine development
costs.
Prior to fiscal 2000, future income taxes were determined by the deferral
method of tax allocation, with future income tax expense (recovery) arising
from reporting expenses for tax purposes at amounts differing from those
charged to earnings. The significant differences, as previously reported,
are as follows:
--------------------------------------------------------------------------------
1999
--------------------------------------------------------------------------------
Depreciation, depletion and amortization $(1,577)
Exploration and development cost 455
Revenue not recognized for tax purposes, net 111
Other 699
--------------------------------------------------------------------------------
$ (312)
================================================================================
11. RECONCILIATION OF NET EARNINGS (LOSS) TO NET CASH PROVIDED BY OPERATING
ACTIVITIES:
The computation of net cash provided by operating activities is as follows:
------------------------------------------------------------------------------------------
2001 2000 1999
------------------------------------------------------------------------------------------
Net earnings (loss) for the year $ 4,848 $(48,682) $(21,632)
Non-cash items:
Depreciation and depletion 12,703 13,610 14,156
Reserve for site closure and reclamation costs 1,240 819 1,273
Write-down (recovery) of investments and properties (1,336) 44,641 8,223
Future income taxes 1,067 (4,100) (312)
Other (40) 280 (41)
------------------------------------------------------------------------------------------
18,482 6,568 1,667
Changes in non-cash operating working capital:
Accounts receivable (416) 254 1,214
Taxes recoverable/payable 319 (709) (10)
Inventories (685) (1,668) 2,933
Prepaid expenses and other (309) 117 1,167
Accounts payable and accrued liabilities (2,946) 853 (251)
Site closure and reclamation expenditures (2,617) (1,378) (529)
------------------------------------------------------------------------------------------
Net cash provided by operating activities $ 11,828 $ 4,037 $ 6,191
==========================================================================================
35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
12. NON-CASH INVESTING ACTIVITIES:
During the year ended December 31, 1999, the Company issued common shares
pursuant to the following transactions:
The acquisition of all the issued and outstanding shares of Rayrock for
consideration as follows (also see note 3(b)):
--------------------------------------------------------------------------------
Fair value of assets acquired $ 98,369
Cash and transaction costs paid (45,086)
--------------------------------------------------------------------------------
$ 53,283
================================================================================
Non-cash consideration consisted of:
Consideration paid through the issuance of common shares $ 46,919
Consideration paid through the transfer of Magin shares 6,364
--------------------------------------------------------------------------------
$ 53,283
================================================================================
There were no non-cash investing activities during 2001 or 2000.
13. FINANCIAL INSTRUMENTS AND FINANCIAL RISK MANAGEMENT:
(a) HEDGING:
In order to protect against the impact of declining gold prices, the
Company has a policy enabling it to enter into forward sales and option
contracts to effectively provide a minimum price for a portion of
inventories and future production. Contracted prices on forward sales and
options are recognized in revenues as designated production is delivered to
meet commitments.
As at December 31, 2001 the Company had no forward sales or option
contracts outstanding.
As at December 31, 2000, the Company had sold call options on 62,000 ounces
of gold at an average price of $294 per ounce expiring in 2001. At December
31, 2000, the unrealized loss in respect of these call options was not
significant.
As at December 31, 1999, the Company had sold call options on 79,000 ounces
of gold at an average price of $290 per ounce expiring during 2000 and
2001, had put options on 36,000 ounces of gold exercisable at an average
price of $275 per ounce expiring through December 2000, and had forward
sales contracts for 65,000 ounces of gold for delivery during 2000 at an
average price of $288 per ounce. At December 31, 1999, the unrealized
position in respect of open forward sales contracts was a loss of
approximately $552,000 and in respect of open call option contracts was a
gain of approximately $1,241,000, which reflects the strike price compared
to the quoted gold price. The fair value of the Company's put options at
December 31, 1999 was nominal.
(b) CARRYING VALUE AND FAIR VALUE OF FINANCIAL INSTRUMENTS:
Except as disclosed elsewhere in these consolidated financial statements,
the carrying amounts for the Company's financial instruments approximate
fair values due to the short term to maturity of such instruments.
(c) CREDIT RISK:
The Company monitors the financial condition of its customers and
counterparties to contracts and considers the risk of material loss to be
remote.
(d) FOREIGN CURRENCY RISK:
The Company is exposed to fluctuations in foreign currencies through its
foreign operations primarily in Honduras, Mexico and Canada. The Company
monitors this exposure, but had no hedge positions at December 31, 2001,
2000 or 1999.
36
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
14. SEGMENTED INFORMATION:
(a) OPERATING SEGMENTS:
The Company has determined its operating segments to be producing
properties and non-producing properties, based on the way management
organizes and manages its business. The accounting policies of all segments
are consistent with those outlined in note 2 - significant accounting
policies. The Company has not allocated general and administrative expenses
from the corporate segment.
------------------------------------------------------------------------------------------
Producing Non-producing
2001 properties properties Corporate Total
------------------------------------------------------------------------------------------
Revenue $ 64,262 $ -- $ -- $ 64,262
Cost of production 40,452 -- -- 40,452
Depreciation and depletion 12,611 25 67 12,703
Other operating expenses 662 1,181 4,160 6,003
------------------------------------------------------------------------------------------
Income (loss) from operations 10,537 (1,206) (4,227) 5,104
Other income 25 755 302 1,082
------------------------------------------------------------------------------------------
Income (loss) before taxes $ 10,562 $ (451) $ (3,925) $ 6,186
==========================================================================================
Capital expenditures $ 12,928 $ 1,596 $ -- $ 14,524
==========================================================================================
Identifiable assets $ 96,873 $ 11,671 $ 40,194 $148,738
==========================================================================================
-------------------------------------------------------------------------------------------------
Producing Non-producing
2000 properties properties Corporate Total
-------------------------------------------------------------------------------------------------
Revenue $ 61,560 $ -- $ -- $ 61,560
Cost of production 47,884 -- -- 47,884
Depreciation and depletion 13,301 49 260 13,610
Write-down of investments and properties 21,666 22,997 1,300 45,963
Other operating expenses 1,861 1,636 5,375 8,872
-------------------------------------------------------------------------------------------------
Loss from operations (23,152) (24,682) (6,935) (54,769)
Other income (expense) 337 (137) 1,823 2,023
-------------------------------------------------------------------------------------------------
Loss before taxes $ (22,815) $ (24,819) $ (5,112) $ (52,746)
=================================================================================================
Capital expenditures $ 2,845 $ 41,208 $ 2,513 $ 46,566
=================================================================================================
Identifiable assets $ 27,865 $ 66,761 $ 17,915 $ 112,541
=================================================================================================
--------------------------------------------------------------------------------------------
Producing
properties
-------------------- Non-producing
1999 Gold Copper properties Corporate Total
--------------------------------------------------------------------------------------------
Revenue $ 47,745 $ 8,485 $ 497 $ -- $ 56,727
Cost of production 37,360 9,805 533 -- 47,698
Depreciation and depletion 10,140 2,320 164 1,532 14,156
Write-down of investments
and properties 6,824 -- 1,221 178 8,223
Other operating expenses 1,615 1,545 2,509 5,595 11,264
--------------------------------------------------------------------------------------------
Loss from operations (8,194) (5,185) (3,930) (7,305) (24,614)
Other income 406 50 175 2,099 2,730
--------------------------------------------------------------------------------------------
Loss before taxes $(7,788) $ (5,135) $ (3,755) $ (5,206) $(21,884)
============================================================================================
Capital expenditures $ 7,744 $ 1,860 $ 7,797 $ 248 $ 17,649
============================================================================================
37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(b) GEOGRAPHIC INFORMATION:
--------------------------------------------------------------------------------
United States & Latin
2001 Canada America Total
--------------------------------------------------------------------------------
Revenue $ 33,962 $ 30,300 $ 64,262
Income (loss) from operations (2,958) 8,062 5,104
Income (loss) before taxes (1,703) 7,889 6,186
Identifiable assets 45,490 103,248 148,738
================================================================================
--------------------------------------------------------------------------------
United States & Latin
2000 Canada America Total
--------------------------------------------------------------------------------
Revenue $ 61,560 $ -- $ 61,560
Loss from operations (44,409) (10,360) (54,769)
Loss before taxes (42,249) (10,497) (52,746)
Identifiable assets 45,780 66,761 112,541
================================================================================
--------------------------------------------------------------------------------
United States & Latin
1999 Canada America Total
--------------------------------------------------------------------------------
Revenue $ 47,755 $ 8,972 $ 56,727
Loss from operations (17,799) (6,815) (24,614)
Loss before taxes (15,229) (6,655) (21,884)
================================================================================
15. COMMITMENTS AND CONTINGENCIES:
(a) OPERATING LEASES:
The Company has entered into operating leases for office premises and
equipment. Minimum annual lease payments required are approximately as
follows:
--------------------------------------------------------------------------------
Minimum lease
Fiscal year payments
--------------------------------------------------------------------------------
2002 $ 407
2003 411
2004 251
2005 35
2006 179
--------------------------------------------------------------------------------
$1,283
================================================================================
(b) RESERVE FOR SITE CLOSURE AND RECLAMATION COSTS:
The Company's operations are affected by federal, state and local laws and
regulations concerning environmental protection. Under current regulations,
the Company is required to meet performance standards to minimize
environmental impact from operations and to perform site restoration and
other closure activities. The Company's provisions for future site closure
and reclamation costs are based on known requirements. It is not currently
possible to estimate the impact on operating results, if any, of future
legislative or regulatory developments.
(c) CAPITAL EXPENDITURES:
At December 31, 2001, the Company had committed to contracts for equipment
totaling $12.7 million (Company's share $8.5 million) to be used in the
expansion at the Marigold Mine.
38
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
16. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES:
Accounting practices under Canadian and United States generally accepted
accounting principles, as they affect the Company, are substantially the same,
except for the following:
(a) ACCOUNTING FOR INCOME TAXES:
United States accounting principles require the use of the asset and
liability method of accounting for income taxes, which is comparable to the
Canadian standard adopted in 2000. However, as a result of the Company
electing to adopt the Canadian standard without restating prior years, a
difference arises effective January 1, 2000 between Canadian accounting
principles and United States accounting principles. Canadian accounting
principles allow the Company to charge opening deficit with the $6,733,000
additional future income tax liability required to be recognized on
adoption of the new Canadian standard. Under United States accounting
principles, this charge would have been recorded as an increase to the San
Martin and Cerro Blanco mineral properties at the time of the business
acquisition. As a result of this difference, the write-down of the Cerro
Blanco property costs in 2000 would be $10,194,000 under United States
accounting principles.
Under United States accounting principles, at December 31, 2001, plant and
equipment and mine development costs for the San Martin Project would be
increased by $3,795,000 (2000 - $4,539,000) over the amount presented under
Canadian accounting principles, with a corresponding reduction in deficit,
and at December 31, 1999, future income taxes payable would be increased by
approximately $6,733,000 over the amount presented under Canadian
accounting principles, with a corresponding increase to the carrying value
of the San Martin and Cerro Blanco mineral properties. Under United States
accounting principles, the amount reported for loss for the December 31,
1999 fiscal year would be the same as that presented under Canadian
accounting principles.
The tax effect of the Company's temporary differences that gave rise to the
future tax balance as at December 31, 1999 were future tax assets of
$8,013,000 primarily for losses carried forward, Alternative Minimum Tax
credit carry forwards, inventory and the reserve for reclamation costs, for
which a valuation allowance of $4,654,000 was applied, and future tax
liabilities of $7,707,000 primarily for plant and equipment and mine
development costs and revenue not recognized for tax purposes.
(b) ACCOUNTING FOR INVESTMENTS IN DEBT AND EQUITY SECURITIES:
Statement of Financial Accounting Standards No. 115, "Accounting for
Investments in Debt and Equity Securities", requires that portfolio
investments that have readily determinable fair values and are held
principally for sale in the near term be presented at fair value with their
unrealized holding gains and losses included in earnings. Investments that
have readily determinable fair values and, while not held principally for
sale in the near term, are available-for-sale, must also be presented at
fair value with their holding gains and losses reported in a separate
component of shareholders' equity until realized. Both of these types of
investments are presented on a cost basis under Canadian accounting
principles.
Under United States accounting principles, other assets and unrealized
holding gains in shareholders' equity at December 31, 2001 would each be
increased by $233,000 (2000 - $267,000; 1999 - $239,000).
(c) ACCOUNTING FOR LONG-LIVED ASSETS:
Under United States accounting principles, the portion of the write-down of
investments and properties relating to producing mineral properties would
have been calculated using discounted estimated future cash flows. Under
such calculation methods, using a discount rate of 5%, an additional
$500,000 write-down would have been recorded during 1999. The 1999
increased write-down under United States accounting principles would result
in a reduction in the carrying value of assets as at December 31, 1999,
which would reduce depreciation and depletion expense for 2000 and the
write-down of producing properties for 2000 under United States accounting
principles. However, the effect of these reductions was not significantly
different than the amounts presented under Canadian accounting principles.
United States accounting principles require long-lived assets held for
resale to be disclosed as such. The impact of this would be to reclassify
$1,200,000 of plant and equipment from non-producing properties to assets
held for resale for each of 2001 and 2000.
39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(d) STOCK BASED COMPENSATION:
Under generally accepted accounting principles in the United States,
stock-based compensation is accounted for based on a fair value
methodology, although the effects may be disclosed in the notes to the
financial statements rather that in the statement of operations, which the
Company has elected to do. The fair value of stock options granted to
directors, officers and employees during 2001 was estimated to be $550,000
(2000 - $522,000; 1999 - $453,000), of which $155,000 (2000 - $nil; 1999 -
$100,000) would be deferred and amortized to operations over the vesting
period.
Fair value has been estimated using the Black-Scholes option-pricing model
with the following weighted average assumptions:
o expected dividend yield - 0% (2000 - 0%; 1999 - 0%);
o risk free interest rate - 4.3% (2000 - 5.0%; 1999 - 6.5%);
o expected life - 2.5 years (2000 - 2.1 years; 1999 - 2.3 years); and
o expected volatility over expected life - 72% (2000 - 67%; 1999 - 46%).
Had the Company determined compensation cost based on the fair value at the
grant date for its stock options, the Company's earnings (loss) for the
year, under United States accounting principles, would have changed to the
pro forma amounts indicated below:
--------------------------------------------------------------------------------
2001 2000 1999
--------------------------------------------------------------------------------
Earnings (loss) for the year:
Under United States accounting principles $ 4,104 $(51,223) $(21,785)
Compensation expense under Statement 123 395 622 353
--------------------------------------------------------------------------------
Pro forma earnings (loss) for the year $ 3,709 $(51,845) $(22,138)
================================================================================
Pro forma earnings (loss) per share $ 0.05 $ (0.74) $ (0.36)
================================================================================
The fair value of warrants granted to the Company's investment advisor in
connection with the acquisition of Cambior de Mexico was $123,000. Under
United States accounting principles, this amount would have been treated as
a cost of the acquisition and accordingly the purchase price attributed to
mine development costs would have been increased by this amount.
(e) COMPREHENSIVE INCOME:
Generally accepted accounting principles in the United States require that
a company classify items of other comprehensive income by their nature in a
financial statement and display the accumulated balance of other
comprehensive income separately from retained earnings (deficit) and
additional paid-in capital in the equity section of the balance sheet.
Under United States accounting principles, other comprehensive income
(loss) for the year ended December 31, 2001, which consists of changes in
the unrealized holding gains (losses) on investments, would be a loss of
$34,000 (2000-income of $28,000; 1999 - loss of $271,000).
(f) CHANGE IN REVENUE RECOGNITION ACCOUNTING POLICY:
Under United States accounting principles, the impact of a change in
accounting policy is applied prospectively in the period of the change,
with the cumulative impact on prior periods reflected in operations for the
current period. In 2000, the Company accounted for the change in the method
of accounting for revenue recognition by retroactively restating the
comparative financial statements, as required under Canadian accounting
principles.
Under United States accounting principles, the impact of this change in
accounting policy would be to increase the loss for the year ended December
31, 2000 by $347,000 (1999 - decrease loss by $347,000) compared to the
amounts presented under Canadian accounting principles.
(g) ACCOUNTING FOR START-UP COSTS:
Accounting principles in the United States require expenditures and
revenues recovered during the start-up of operations to be charged to
earnings. Under Canadian accounting principles, these costs and recoveries
may be deferred prior to the commencement of commercial operations. The
impact of this difference for the year ended December 31, 2000 is not
significant.
40
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(TABLES EXPRESSED IN THOUSANDS OF UNITED STATES DOLLARS)
(h) EARNINGS (LOSS) PER SHARE:
United States accounting principles require the treasury stock method for
calculating diluted earnings per share rather than the impacted earnings
method required under Canadian accounting principles to December 31, 2000.
There is no impact of this difference during 2000 or 1999 as the effect of
the shares of the Company reserved for issuance on exercise of options and
warrants would be anti-dilutive. Effective for the 2001 fiscal year, the
CICA has recommended a new earnings per share accounting standard, which
the Company has adopted (note 2(k)), that requires the use of the treasury
stock method, thereby harmonizing Canadian and United States accounting
principles.
(i) ACCOUNTING FOR INTERESTS IN JOINT VENTURES:
Under United States accounting principles, interests in joint ventures are
generally required to either be consolidated or accounted for by the equity
method. However, interests in unincorporated joint ventures in the natural
resources industry may be accounted for by proportional consolidation, as
under Canadian accounting principles. As the Company's 66-2/3% interest in
the Marigold Mine and 50% interest in the Cerro San Pedro project are held
through unincorporated joint ventures, there is no difference between
United States and Canadian accounting principles.
(j) ACCOUNTING FOR ASSET RETIREMENT OBLIGATIONS:
Effective for the Company's 2003 fiscal year, United States accounting
principles will require the Company to change its method of accounting for
asset retirement obligations, which include site closure and reclamation
costs. The new statement requires an enterprise to record the fair value of
an asset retirement obligation as a liability in the period in which it
incurs a legal obligation associated with the retirement of tangible
long-lived assets. The new standard also requires the enterprise to record
the contra to the initial obligation as an increase to the carrying amount
of the related long-lived asset and to depreciate that cost over the life
of the asset. The liability is increased at the end of each period to
reflect the passage of time (as a charge to earnings) and changes in the
estimated future cash flows underlying the initial fair value measurement.
A reconciliation of the loss for the year as shown in these consolidated
financial statements to the loss for the year in accordance with United
States accounting principles, excluding the effects of Statement 123, and
to comprehensive income (loss) for the year using United States accounting
principles, is as follows:
----------------------------------------------------------------------------------------------------------
2001 2000 1999
----------------------------------------------------------------------------------------------------------
Earnings (loss) for the year in these consolidated
financial statements $ 4,848 $(48,682) $(21,632)
Adjustment for income taxes (744) (2,194) --
Adjustment for long-lived assets -- -- (500)
Adjustment for change in revenue recognition accounting policy -- (347) 347
----------------------------------------------------------------------------------------------------------
Earnings (loss) for the year using United States accounting principles 4,104 (51,223) (21,785)
Other comprehensive income (loss), net of tax:
Change in unrealized holding gains on investments (34) 28 (271)
----------------------------------------------------------------------------------------------------------
Comprehensive earnings (loss) for the year
using United States accounting principles $ 4,070 $(51,195) $(22,056)
==========================================================================================================
Basic earnings (loss) per share $ 0.06 $ (0.73) $ (0.33)
==========================================================================================================
Diluted earnings (loss) per share $ 0.06 $ (0.73) $ (0.33)
==========================================================================================================
Shareholders' equity under United States accounting principles would be as
follows:
--------------------------------------------------------------------------------
2001 2000
--------------------------------------------------------------------------------
Shareholders' equity:
Common stock $ 194,793 $ 159,045
Contributed surplus 63 63
Unrealized holding gains 233 267
Deficit (68,229) (72,299)
--------------------------------------------------------------------------------
$ 126,860 $ 87,076
================================================================================
41
CORPORATE INFORMATION
OFFICERS AND DIRECTORS COMMITTEES OF THE BOARD AUDITORS
A. Dan Rovig(3,4) (1) - Audit & Environment Committee KPMG LLP
Chairman & Director (2) - Corporate Governance Committee Vancouver, BC, Canada
(3) - Compensation Committee
C. Kevin McArthur(3,4) (4) - Nominating Committee LEGAL COUNSEL
President, Chief Executive Officer & Lang Michener Lawrence & Shaw
Director HEAD OFFICE Vancouver, BC, Canada
5190 Neil Road, Suite 310
Charles A. Jeannes Reno, Nevada Woodburn and Wedge
Senior Vice President Administration, USA 89502 Reno, Nevada, USA
General Counsel and Secretary Tel: (775) 827-4600
Fax: (775) 827-5044 2001 ANNUAL GENERAL MEETING OF
James S. Voorhees Toll free: 1 800 452 6472 SHAREHOLDERS
Vice President Operations and email: info@glamis.com The Annual General Meeting of Glamis Gold
Chief Operating Officer Website: www.glamis.com Ltd. will take place May 9, 2002 @ 1:30 p.m.
The Fairmont Royal York Hotel
Cheryl S. Maher SAN MARTIN MINE 100 Front Street
Vice President Finance and MINERALES ENTRE MARES Toronto, Ontario, Canada
Chief Financial Officer and Treasurer DE HONDURAS Shareholders are invited to attend.
Vice President, Steven L. Baumann
David L. Hyatt Tegucigalpa, Honduras INVESTOR RELATIONS
Vice President, Investor Relations Tel: 011 504 235 8531 For public and media inquiries, or copies of
Fax: 011 504 235 8504 the Company's annual information form,
Steven L. Baumann annual report or quarterly reports, please
Vice President, Operations, Latin America GLAMIS MARIGOLD MINING COMPANY contact David L. Hyatt at (775) 827-4600, ext.
General Manager, Gary C. Boyle 3109, or visit the Company's website at
James R. Billingsley(1,2) Valmy, Nevada www.glamis.com
Director Tel: (775) 635-2317
Fax: (775) 635-2455 The Company's filings with the Ontario
Ian S.Davidson(1,3) Securities Commission can be accessed on
Director GLAMIS RAND MINING COMPANY SEDAR at www.sedar.com
General Manager, Art B. Champeny
Jean Depatie(1,4) Randsburg, California The Company's filings with the U.S.
Director Tel: (760) 374-2467 Securities and Exchange Commission can be
Fax: (760) 374-2133 accessed through EDGAR at www.sec.gov
Leonard Harris(2,3)
Director CERRO SAN PEDRO PROJECT
MINERA SAN XAVIER, S.A. DE C.V.
Kenneth F. Williamson(1,2) General Manager, William C. Dodge
Director San Louis Potosi, Mexico
Tel: 011 524 811 8916
Fax: 011 524 811 3382
GLAMIS IMPERIAL CORPORATION
Project Manager, Dan J. Purvance
Yuma, Arizona
Tel: (520) 783-1891
Fax: (520) 782-9921
42
4000 BC GOLD FIRST KNOWN TO BE USED IN PARTS OF CENTRAL AND EASTERN EUROPE. 3000
BC EGYPTIANS MASTER THE ART OF BEATING GOLD INTO GOLD LEAF AND ALLOYING IT WITH
OTHER METALS. 1500 BC THE SHEKEL (TWO-THIRDS GOLD) USED AS A STANDARD UNIT OF
MEASURE THROUGHOUT THE MIDDLE EAST. 1091 BC SQUARES OF GOLD ARE LEGALIZED IN
CHINA AS A FORM OF MONEY. 58 BC JULIUS CAESAR SEIZES ENOUGH GOLD IN GAUL
(FRANCE) TO REPAY ROME'S DEBTS. 1100 AD VENICE SECURES ITS POSITION AS THE
WORLD'S LEADING GOLD BULLION MARKET DUE TO ITS LOCATION ASTRIDE THE TRADE ROUTES
TO THE EAST. 1511 KING FERDINAND OF SPAIN SENDS EXPLORERS TO THE WESTERN
HEMISPHERE WITH THE COMMAND TO "GET GOLD". 1717 ISAAC NEWTON, MASTER OF THE
LONDON MINT, SETS PRICE OF GOLD THAT LASTS FOR 200 YEARS. 1787 FIRST US GOLD
COIN IS STRUCK BY EPHRAIM BRASHER, A GOLDSMITH. 1803 NORTH CAROLINA SITE OF
FIRST US GOLD RUSH. THE STATE SUPPLIES ALL THE DOMESTIC GOLD COINED FOR CURRENCY
BY THE US MINT IN PHILADELPHIA UNTIL 1828. 1848 CALIFORNIA GOLD RUSH BEGINS WHEN
JAMES MARSHALL FINDS SPECKS OF GOLD IN TAILRACE OF JOHN SUTTER'S SAWMILL NEAR
THE JUNCTION OF THE AMERICAN AND SACRAMENTO RIVERS. 1850 EDWARD HAMMONG
HARGRAVES, RETURNING FROM CALIFORNIA, PREDICTS HE WILL FIND GOLD IN AUSTRALIA
WITHIN ONE WEEK. HE DISCOVERS GOLD IN NEW SOUTH WALES WITHIN ONE WEEK OF
LANDING. 1886 GEORGE HARRISON, WHILE DIGGING STONES TO BUILD A HOUSE, DISCOVERS
GOLD IN SOUTH AFRICA. 1887 GLASGOW DOCTORS, ROBERT AND WILLIAM FORREST, AND
CHEMIST JOHN S. MACARTHUR PATENT THE PROCESS FOR EXTRACTING GOLD FROM ORE USING
CYANIDE. 1896 TWO PROSPECTORS DISCOVER GOLD WHILE FISHING IN THE KLONDIKE RIVER
IN NORTHERN CANADA, RICHER FINDS WERE RUMORED FARTHER SOUTH IN ALASKA'S YUKON,
SPAWNING THE ALASKA GOLD RUSH IN 1898 - THE LAST GOLD RUSH OF THE CENTURY. 1900
US ADOPTS THE GOLD STANDARD FOR ITS CURRENCY. 1903 THE ENGELHARD CORPORATION
INTRODUCES AN ORGANIC MEDIUM TO PRINT GOLD ON SURFACES. FIRST USED FOR
DECORATION, THE MEDIUM BECOMES THE FOUNDATION FOR MICROCIRCUIT PRINTING
TECHNOLOGY. 1922 KING TUTANKHAMEN'S TOMB (1352 BC) OPENED TO REVEAL A 2,448 LB.
GOLD COFFIN AND HUNDREDS OF GOLD AND GOLD-LEAFED OBJECTS. 1927 MEDICAL STUDY IN
FRANCE PROVES GOLD TO BE VALUABLE IN TREATMENT OF RHEUMATOID ARTHRITIS. 1933
PRESIDENT FRANKLIN D. ROOSEVELT BANS THE EXPORT OF GOLD, HALTS THE
CONVERTIBILITY OF DOLLAR BILLS INTO GOLD, ORDERS US CITIZENS TO HAND IN ALL THE
GOLD THEY POSSESS AND ESTABLISHES A DAILY PRICE FOR GOLD. 1934 ROOSEVELT FIXES
PRICE OF GOLD AT $35 PER OUNCE. 1935 WESTERN ELECTRIC ALLOY #1 (69% GOLD, 25%
SILVER AND 6% PLATINUM) FINDS UNIVERSAL USE IN ALL SWITCHING CONTACTS FOR AT&T
TELECOMMUNICATIONS EQUIPMENT. 1947 THE FIRST TRANSISTOR, THE BUILDING BLOCK FOR
ELECTRONICS, IS ASSEMBLED AT AT&T BELL LABORATORIES. THE DEVICE USES GOLD
CONTACTS PRESSED INTO A GERMANIUM SURFACE. 1960 LASER INVENTED USING GOLD-COATED
MIRRORS TO MAXIMIZE INFRARED REFLECTION. 1961 MODERN-DAY MINING BEGINS IN
NEVADA'S CARLIN TREND, ULTIMATELY MAKING NEVADA THE LARGEST GOLD-MINING STATE IN
THE UNITED STATES. 1968 INTEL INTRODUCES A MICROCHIP WITH 1,024 TRANSISTORS
CONNECTED BY GOLD CIRCUITS. 1968, MARCH 15 CENTRAL BANKS GIVE UP FIXED PRICE OF
GOLD AT $35 PER TROY OUNCE AND LET IT FREE FLOAT. 1969 GOLD COATED VISORS
PROTECT ASTRONAUTS' EYES FROM SEARING SUNLIGHT ON THE MOON (APOLLO 11 MOON
LANDING). 1970 CHARGED COUPLED DEVICE INVENTED, USING GOLD TO COLLECT ELECTRONS
GENERATED BY LIGHT, EVENTUALLY USED IN HUNDREDS OF MILITARY AND CIVILIAN
DEVICES, INCLUDING VIDEO CAMERAS. 1971 THE COLLOIDAL GOLD MARKER SYSTEM IS
INTRODUCED BY AMERSHAM CORPORATION OF ILLINOIS. TINY SPHERES OF GOLD ARE USED IN
HEALTH RESEARCH LABORATORIES WORLDWIDE TO MARK OR TAG SPECIFIC PROTEINS TO
REVEAL THEIR FUNCTION IN THE HUMAN BODY FOR THE TREATMENT OF DISEASE. 1974 ON
DECEMBER 31, US GOVERNMENT ENDS ITS BAN ON INDIVIDUAL OWNERSHIP OF GOLD. 1980
GOLD REACHES INTRA-DAY HISTORIC HIGH PRICE OF $870 ON JANUARY 21 IN NEW YORK.
1986 GOLD-COATED COMPACT DISCS ARE INTRODUCED. 1987 AIRBAGS ARE INTRODUCED FOR
CARS, USING GOLD CONTACTS FOR RELIABILITY. 1996 MARS GLOBAL SURVEYOR LAUNCHED
WITH AN ON-BOARD GOLD-COATED PARABOLIC TELESCOPE-MIRROR THAT WILL GENERATE A
DETAILED MAP OF THE ENTIRE MARTIAN SURFACE OVER A TWO-YEAR PERIOD. 1997 CONGRESS
PASSES TAXPAYERS RELIEF ACT, ALLOWING US INDIVIDUAL RETIREMENT ACCOUNT HOLDERS
TO BUY GOLD BULLION COINS AND BARS FOR THEIR ACCOUNTS AS LONG AS THEY ARE OF A
FINENESS EQUAL TO, OR EXCEEDING, 99.5 PERCENT GOLD.