Glamis Gold Ltd.
TSX : GLG
NYSE : GLG

Glamis Gold Ltd.

July 31, 2006 08:40 ET

Glamis Gold Reports Second Quarter 2006 Results; Board Approves Penasquito Construction Following Revised Feasibility Study

RENO, NEVADA--(CCNMatthews - July 31, 2006) - Glamis Gold Ltd. ("Glamis") (TSX:GLG)(NYSE:GLG) today reported record net income of $30.3 million, or $0.20 per share, for the quarter ended June 30, 2006.

Second Quarter 2006 Highlights

- Produced 138,637 ounces of gold at a total cash cost of $209 per ounce.

- Generated cash flow from operations of $40.4 million.

- Doubled gold reserves at Penasquito project and completed revised feasibility study.

- Received Board approval for construction of Penasquito.

- Doubled cash and equivalents since the start of 2006.

- Confirmed 2006 gold production forecast of 620,000 ounces at cash costs of approximately $190 per ounce.

"We are successfully working through start-up issues at Marlin mine in Guatemala that impacted our performance during the first half of the year," said Kevin McArthur, President and CEO. "The progress we have made positions Glamis for a strong second half. Modifications to the recovery circuit at Marlin are nearing completion, which should enable the mine to achieve the production performance that we originally planned. Having built two new mines in the last two years is a remarkable achievement, and one that provides us a great deal of confidence as we embark on developing the Penasquito property into a truly world-class mine.

"At Penasquito, we achieved early and significant milestones during the quarter. We announced a doubling of gold reserves, and today we released an updated feasibility study reflecting a much larger project than was originally envisioned. The Board of Directors has approved construction, and we are excited to immediately move the project to the next phase of development."

Financial Review

Higher total gold sales and realized gold prices per ounce led to increased revenue in the second quarter of 2006, totaling $95.0 million compared to $48.7 million in the second quarter of 2005. Glamis sold 145,468 ounces of gold in the quarter at an average realized price of $624 per ounce. By comparison, the Company sold 112,810 ounces of gold in the corresponding period of 2005 at an average realized price of $430 per ounce.

Net income in the quarter totaled $30.3 million, or $0.20 per share, compared to $8.2 million, or $0.06 per share in the same period a year ago. Included in the quarter was exploration expense of $4.6 million. Cash flow from operations (before working capital changes and reclamation expenditures) was $40.4 million compared to $22.1 million in the prior year's second quarter. At June 30, 2006, cash and equivalents were $70.3 million compared to $32.1 million at December 31, 2005.

Operations Review

Total gold production for the second quarter of 2006 was 138,637 ounces at a total cash cost of $209 per ounce. In the second quarter one year ago, production totaled 109,377 ounces of gold at a total cash cost of $190 per ounce.

El Sauzal Mine

El Sauzal achieved a quarterly record 75,372 ounces of gold production at a total cash cost of $99 per ounce, compared to 44,502 ounces of gold at a total cash cost of $150 in 2005. The mine and mill continue to meet or exceed all expectations. Gold production at El Sauzal is now projected at approximately 230,000 ounces for 2006.

Marlin Mine

Production at Marlin in the quarter totaled 28,870 gold ounces and 273,282 silver ounces. Total cash costs amounted to $324 per ounce of gold. The expected ramp-up in production was impacted by a series of start-up issues, including a failure of the leach tank agitators in the Marlin mill. As part of the repair process, each of the six leach tanks required modifications, leading to less-than-optimal metal recoveries, lower throughput and higher costs during the period in which the repairs have been implemented. The modifications are nearing completion, and the mine expects a steady return to planned throughput levels in the second half of the year.

The Marlin underground remains on track toward a throughput goal of 1,000 tonnes per day. The Company is investigating the possibility of employing overhand cut-and-fill stoping and long-hole stoping in portions of the underground mine, which would result in cost reductions at the underground operation. Marlin is now expected to produce approximately 215,000 ounces of gold and two million ounces of silver in 2006.

Marigold Mine (two-thirds owned)

In the second quarter, Glamis' 2/3rds share of gold production from Marigold mine was 17,076 ounces of gold at a total cash cost of $330 per ounce. This compares to production of 41,120 ounces of gold in the second quarter of 2005 at a total cash cost of $187 per ounce. Slow leaching ore from the upper levels of the Millennium Antler pit again impacted gold production at Marigold Mine during the quarter. There remains an additional section of slow leaching ore at Antler, but mining operations have begun to move into more favorable ore zones deeper in the Antler pit. In addition, higher grade ore with better leaching characteristics from the Basalt pit is expected to comprise a greater proportion of overall ore tonnage delivered to the leach pad in the third and fourth quarters of 2006. Glamis' two-thirds share of gold production at Marigold is projected to total approximately 110,000 ounces for 2006.

San Martin Mine

At San Martin Mine, gold production was 17,319 ounces in the second quarter at a total cash cost of $379 per ounce. This compares to production of 23,755 ounces of gold at a total cash cost of $271 per ounce in the second quarter of 2005. San Martin has completed the transition to run-of-mine heap leaching. Production will continue to decline on a year-over-year basis, but capital costs will be minimal, positioning the mine to generate strong free cash flow. San Martin is expected to produce approximately 65,000 ounces of gold in 2006.

Cerro Blanco Project

Following the end of the second quarter, the Company received verbal commitment from a drilling contractor to conduct dewatering testing later this year and pursue the possibility of geothermal power generation at the site. Last quarter, a contractor was selected to drive the underground decline at Cerro Blanco upon the receipt of necessary permitting. Due to delays in retaining the drilling contractor and obtaining the required permits, the Company now expects the Cerro Blanco feasibility study to be delayed until late 2007. Exploration efforts at Cerro Blanco have focused on extensional and infill drilling to convert a portion of the inferred resource to the measured and indicated category.

Exploration

Exploration expenditures at all properties excluding Penasquito are expected to total approximately $25 million in 2006. A total of $4.8 million was spent on exploration in the second quarter, of which $4.6 million was expensed, including $1.7 million at Cerro Blanco. In 2006, approximately $10.5 million will be expended for exploration at Penasquito, and the majority of those costs will be recorded as project capital.

Penasquito

Results of condemnation and exploration drilling continue to add to the overall potential of the Penasquito project. In the month of June, 30 drill holes were completed, representing over 13,000 meters. Five diamond drills are on the property, with plans to add a sixth during the third quarter. As condemnation drilling nears completion, the focus will remain on exploration of the zone between the southern end of the Penasco pit and the northern end of the Chile Colorado pit.

Marlin

The Company has outlined plans to drill extensions at the Rosa vein in order to further define high-grade intercepts identified through previous drilling and to develop a resource for the Rosa vein. The surface drilling exploration program at the West Vero vein discovery is nearing completion. The Company is now studying options for expanding the mineralization at depth. Both the West Vero and Rosa systems consist of quartz-calcite veining with metallurgical characteristics nearly identical to that at Marlin.

El Sauzal

Drilling and assays of the twenty-hole drill program at the Guayacan target were recently completed. The results revealed low grades in general, but confirmed the presence of significant mineralization associated with multiple intrusives. The Company will continue with its systematic exploration program over the entire concession package, including an analysis of the need for subsequent drilling at Guayacan.

Nevada

Three exploration drill rigs continued to operate at Marigold in the second quarter in an effort to further extend mineralization between the two Target pits. Development drilling is also underway in the Terry Zone North area. At the Company's 40 percent-owned Dee joint venture (Barrick 60 percent) in Nevada, four drill rigs continue to operate at South Arturo and other targets.

Penasquito Project

Glamis announced today the completion of the revised feasibility study for its Penasquito project in Zacatecas, Mexico and approval by the Board of Directors to proceed with project construction. An updated reserve and resource calculation issued on June 21 provided the basis for the new feasibility study, which includes initial mill throughput of 50,000 ore tonnes per day, ramping up to 100,000 tonnes per day. Highlights of the revised feasibility study, prepared by M3 Engineering and Technology Corp., are as follows:



Penasquito Feasibility Study - Base Case

Mine life (years) 17
Mill throughput (tonnes per day) 100,000
Initial capital cost ($US millions) $ 882
Sustaining capital ($US millions) $ 327

Average annual payable metal:
Gold (troy ounces) 387,500
Silver (troy ounces) 22,846,000
Lead (tonnes) 71,125
Zinc (tonnes) 137,400
------------ ----------
Total annual production as gold equivalent (troy ounces): 1,339,300

Unit operating costs:
Mining cost per total tonne $ 0.81
Milling cost per ore tonne $ 2.98
G&A cost per ore tonne $ 0.22

Average total cash costs per unit:
Gold (per ounce) $ 125
(lead as by-product)
Silver (per ounce) $ 4.91
Zinc (per pound) $ 0.44
--------------- -------
Total cash cost per ounce gold production $ (378)
(utilizing all other metals as by-products)

Metals price assumptions: Base case Low Case High Case
--------- -------- ---------
Gold (per ounce) $532.74 $ 450 $ 650
Silver (per ounce) $ 8.84 $ 7.00 $ 10.00
Lead (per pound) $ 0.424 $ 0.30 $ 0.43
Zinc (per pound) $ 0.787 $ 0.60 $ 0.86

Project IRR (after tax) 18.7% 10.2% 23.4%
After Tax NPV 0% discount
($US millions) $ 3,256 $ 1,560 $ 4,334
After Tax NPV 5% discount
($US millions) $ 1,521 $ 514 $ 2,161
Payback (years) 5.6 7.6 4.8


The Glamis Board of Directors has approved the advancement of the Penasquito project into detailed engineering and construction. The Company's current timeline calls for completion of permitting by mid-2007, initial production from heap leaching of oxide ore in the second half of 2008, and full operation of the mill and flotation circuit by late 2009. An executive summary providing the details of the feasibility study has been posted at www.glamis.com in the "Company News" section.

Conference Call

Glamis will host a conference call today at 3:00 pm Eastern (12:00 Pacific) to discuss its second quarter operating and financial results. The call can be accessed by dialing 1-800-237-9752 in the United States and Canada or 1-617-847-8706 for calls outside the United States and Canada. The participant pass code is 97259145. The conference call will also be webcast live at www.glamis.com. A replay of the call will be available on the Glamis web site beginning approximately two hours after the conclusion of the live call. An audio-only replay of the call will be available for 10 days after the call by dialing 1-888-286-8010 in the U.S. and Canada or 1-617-801-6888 outside the U.S. and Canada. The replay pass code number is 38890392.

Glamis Gold Ltd. is a premier intermediate gold producer with low cost mines and development projects in Nevada, Mexico and Central America. Plans call for growth to over 700,000 ounces of gold by 2007. The company remains 100 percent unhedged. For more information about Glamis and its operations, visit the Company on the Internet at www.glamis.com.

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. Forward-looking statements, include, but are not limited to those with respect to, the price of gold, the estimation of mineral reserves and resources, the realization of mineral reserves estimates, the timing and amount of estimated future production, costs of production, capital expenditures, costs and timing of the development of new deposits, success of exploration activities, Glamis' hedging practices, permitting time lines, currency fluctuations, requirements for additional capital, government regulation of mining operations, environmental risks, unanticipated reclamation expenses, title disputes or claims limitations on insurance coverage and the timing and possible outcome of pending litigation. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", or "does not expect", "is expected", "budget", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variation of such words and phrases or statements that certain actions, events or results, "may", "could", "would", "might" or "will" be taken, occur or be achieved. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Glamis 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, possible variations in ore grade or recovery rates, failure of plant, equipment or processes to operate as anticipated, accidents, labor disputes and other risks of the mining industry, delays in obtaining governmental approvals or financing or in the completion of development or construction activities, as well as those factors discussed under Item 5 in the section entitled "Risk Factors" in the Company's Annual Information Form. Although Glamis has attempted to identify
important factors that could cause actual actions, events or results to differ materially from those described in forward-looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. There can be no assurance that forward-looking 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 contained herein.



Glamis Gold Ltd.
Financial Highlights
(in millions of
U.S. dollars,
except per
share and per
ounce amounts) Three Months Ended June 30, Six Months Ended June 30,
2006 2005 2006 2005
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Gold ounces
produced 138,637 109,377 286,418 203,098
Gold ounces sold 145,468 112,810 286,674 210,927
Silver ounces
produced 334,388 20,349 697,807 41,026
Silver ounces sold 365,879 19,607 639,585 32,107
Average gold
revenue realized
per ounce $ 624 $ 430 $ 591 $ 429
Average gold
market price
per ounce $ 628 $ 427 $ 590 $ 427
Average silver
revenue realized
per ounce $ 11.73 $ 7.38 $ 11.03 $ 7.29
Average silver
market price
per ounce $ 12.08 $ 7.15 $ 10.96 $ 7.06
Total cash cost
per ounce $ 209 $ 190 $ 196 $ 188
Total production
cost per ounce $ 331 $ 293 $ 319 $ 292
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Production Data:
El Sauzal Mine:
Ore tonnes mined 706,839 431,712 1,385,295 923,945
Waste tonnes
mined 1,250,463 1,191,273 2,324,198 1,773,751
Grade
(grams per tonne) 4.47 3.473 4.23 3.380
Gold ounces
produced 75,372 44,502 137,683 88,037
Total cash cost
per ounce $ 99 $ 150 $ 105 $ 136
Total production
cost per ounce $ 201 $ 265 $ 210 $ 249
Marlin Mine:
Underground ore
tonnes mined 57,110 - 86,705 -
Surface ore
tonnes mined 101,145 - 317,010 -
Waste tonnes
mined 434,103 - 1,130,016 -
Grade
(gold grams
per tonne) 4.81 - 5.65 -
Gold ounces
produced 28,870 - 72,139 -
Silver ounces
produced 273,282 - 594,478 -
Total cash cost
per ounce $ 324 - $ 234 -
Total production
cost per ounce $ 487 - $ 383 -
Marigold Mine
(66.7%):
Ore tonnes mined 1,490,387 1,115,333 2,563,614 2,649,486
Waste tonnes
mined 4,741,523 6,340,946 10,547,805 11,663,416
Grade
(grams per tonne) 0.603 1.041 0.656 0.858
Gold ounces
produced 17,076 41,120 44,296 69,339
Total cash cost
per ounce $ 330 $ 187 $ 298 $ 203
Total production
cost per ounce $ 447 $ 275 $ 426 $ 295
San Martin Mine:
Ore tonnes
processed 1,070,846 1,432,564 2,329,327 2,891,640
Waste tonnes
mined 1,180,367 883,619 2,200,565 2,074,135
Grade
(grams per tonne) 0.742 0.647 0.740 0.639
Gold ounces
produced 17,319 23,755 32,300 45,722
Total cash cost
per ounce $ 379 $ 271 $ 356 $ 266
Total production
cost per ounce $ 519 $ 376 $ 495 $ 370

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Financial Data:
Working capital $ 67.3 $ 29.3 $ 67.3 $ 29.3
Cash provided
from operations $ 40.4 $ 22.1 $ 82.8 $ 38.6
Net earnings $ 30.3 $ 8.2 $ 47.2 $ 10.4
Basic earnings
per share $ 0.20 $ 0.06 $ 0.33 $ 0.08
Average shares
outstanding 154,004,196 131,002,303 143,058,386 130,951,724
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Glamis Gold Ltd.
Consolidated Balance Sheets
(Expressed in millions of U.S. dollars)
June 30, December 31,
2006 2005
(unaudited)
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Assets
Current assets:
Cash and cash equivalents $ 70.3 $ 32.1
Accounts and interest receivable 2.6 2.9
Inventories 35.5 29.4
Prepaid expenses and other 1.6 1.3
--------------------------------------------------------------------
110.0 65.7

Mineral property, plant and equipment, net 2,062.0 630.8
Other assets 27.7 24.7
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$ 2,199.7 $ 721.2
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Liabilities
Current liabilities:
Accounts payable and accrued liabilities $ 25.3 $ 27.2
Site closure and reclamation costs, current 0.8 1.0
Current portion, long term debt 7.5 -
Taxes payable 9.1 0.8
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42.7 29.0

Site closure and reclamation costs 14.7 12.2
Long-term debt 72.5 80.0
Future income taxes 485.2 96.4
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615.1 217.6

Shareholders' equity
Share capital:
Authorized:
Unlimited common shares without par value
5,000,000 preferred shares, Cdn$10 per
share par value, issuable in series
Issued and fully paid:
166,629,643 (2005-131,918,803)
common shares 1,508.7 492.9
Contributed surplus 30.5 12.5
Retained earnings (deficit) 45.4 (1.8)
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1,584.6 503.6
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$ 2,199.7 $ 721.2
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Prepared by management without audit.


Glamis Gold Ltd.
Consolidated Statements of Operations
(Expressed in millions of U.S. dollars, except per share amounts)
Three months ended June 30, Six months ended June 30,
2006 2005 2006 2005
(unaudited) (unaudited)
--------------------------------------------------------------------
Revenue $ 95.0 $ 48.7 $ 176.4 $ 90.8

Costs and
expenses:
Cost of sales 32.5 21.4 62.4 39.2
Depreciation
and depletion 19.5 12.5 39.1 23.2
Exploration 4.6 1.4 9.3 2.5
General and
administrative 4.1 2.0 6.5 8.1
Stock-based
compensation 0.8 1.2 3.1 1.8
Other operating
expenses 0.4 0.6 0.7 0.9
--------------------------------------------------------------------
61.9 39.1 121.1 75.7
--------------------------------------------------------------------
Earnings from
operations 33.1 9.6 55.3 15.1
Interest expense (1.4) - (2.7) -
Interest and
other income 0.5 0.4 1.6 0.6
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Earnings before
income taxes 32.2 10.0 54.2 15.7
Provision for
income taxes:
Current 12.9 2.0 14.7 3.1
Future (11.0) (0.2) (7.7) 2.2
--------------------------------------------------------------------
1.9 1.8 7.0 5.3
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Net earnings $ 30.3 $ 8.2 $ 47.2 $ 10.4
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--------------------------------------------------------------------

Earnings per share:
Basic $ 0.20 $ 0.06 $ 0.33 $ 0.08
Diluted $ 0.19 $ 0.06 $ 0.33 $ 0.08
Weighted average
common shares
outstanding:
Basic 154,004,196 131,002,303 143,058,386 130,951,724
Diluted 156,029,788 132,278,716 144,778,129 132,266,792
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Consolidated Statements of Retained Earnings (Deficit)
(Expressed in millions of U.S. dollars)
Three months ended June 30, Six months ended June 30,
2006 2005 2006 2005
(unaudited) (unaudited)
--------------------------------------------------------------------
Retained earnings
(deficit),
beginning of
period $ 15.1 $ (26.7) $ (1.8) $ (28.9)
Net earnings 30.3 8.2 47.2 10.4
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Retained earnings
(deficit), end
of period $ 45.4 $ (18.5) $ 45.4 $ (18.5)
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Prepared by management without audit.


Glamis Gold Ltd.
Consolidated Statements of Cash Flows
(Expressed in millions of U.S. dollars)
Three months ended June 30, Six months ended June 30,
2006 2005 2006 2005
(unaudited) (unaudited)
--------------------------------------------------------------------
Cash flows
from operating
activities
Net earnings $ 30.3 $ 8.2 $ 47.2 $ 10.4
Non-cash items:
Depreciation
and depletion 19.5 12.5 39.1 23.2
Future income
taxes (11.0) (0.2) (7.7) 2.2
Gain on sale
of properties
and investments - (0.2) - (0.3)
Stock-based
compensation 0.8 1.2 3.1 1.8
Other 0.8 0.6 1.1 1.3
--------------------------------------------------------------------
40.4 22.1 82.8 38.6
Changes in
non-cash operating
working capital:
Accounts
and interest
receivable 1.4 1.0 0.4 1.1
Taxes
recoverable/
payable 7.6 (2.7) 8.3 (2.1)
Inventories (3.6) 0.6 (6.2) (0.5)
Prepaid expenses
and other (0.3) 0.5 (0.3) (0.2)
Accounts payable
and accrued
liabilities 1.8 (3.2) (1.9) (3.1)
Site closure and
reclamation
expenditures (0.3) (0.8) (0.7) (1.3)
--------------------------------------------------------------------
Net cash provided
by operating
activities 47.0 17.5 82.4 32.5
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Cash flows
from (used in)
investing
activities
Western Silver
Corporation
transaction
costs (12.0) - (12.0) -
Purchase of
mineral property,
plant and
equipment, net
of disposals (17.1) (38.6) (34.9) (72.1)
Net proceeds
from sale of
investments and
properties - 0.5 - 0.5
Other assets (3.4) 0.7 (4.2) 1.3
--------------------------------------------------------------------
Net cash used
in investing
activities (32.5) (37.4) (51.1) (70.3)
--------------------------------------------------------------------

Cash flows
from financing
activities
Proceeds from
long-term debt - 20.0 - 35.0
Proceeds from
issuance of
common shares 5.0 0.4 6.9 0.6
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Net cash provided
by financing
activities 5.0 20.4 6.9 35.6
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Increase (decrease)
in cash and cash
equivalents 19.5 0.5 38.2 (2.2)
Cash and cash
equivalents,
beginning of
period 50.8 24.3 32.1 27.0
--------------------------------------------------------------------
Cash and cash
equivalents,
end of period $ 70.3 $ 24.8 $ 70.3 $ 24.8
--------------------------------------------------------------------
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Supplemental
disclosure of
cash flow
information:
Cash paid
(received)
during the
period for:
Interest, net
of interest
amounts paid
and capitalized $ - $ (0.2) $ (1.7) $ (0.3)
Taxes $ 5.5 $ 4.7 $ 6.7 $ 4.8

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Prepared by management without audit.



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