Posted: ’13-MAY-04 07:00′
So far, 2004 has brought Reno-based Meridian Gold [MNG] a new high-grade gold discovery at El Peńon, a substantial increase in cash balance, a 15% increase in net income, and a new chairman of the board.
In the meantime, the company hopes to advance toward a production decision for the Rossi JV with Barrick Gold on the Carlin Trend in Nevada.
Dorada Discovery – The discovery of the new high-grade Dorada Vein at El Peńon in Chile was the talk of Meridians analysts meeting. Thus far, drilling has defined a high-grade gold/silver deposit 800 meters along strike and 150 meters dip extent with average grades and thickness of 3.3 meters at 13.2 grams per ton and gold and 577.1 grams per ton of silver(22.16 g/t gold equivalent). Diamond drilling on the new vein will begin in June.
In a news release, Darcy Marud, Vice President of Exploration, said, Gold and silver grades are improving with depth. This discovery confirms our belief that El Peńon is one of the best epithermal districts in the world. During the analysts conference, Meridian President and CEO Brian Kennedy declared the discovery opens up additional potential in the region. Thats what were excited about. Kennedy predicted that the discovery will help achieve a 10-year mine life at the operation.
In a presentation to shareholders at the companys annual general meeting, Kennedy predicted El Peńon will produce 310,000 ounces of gold at a cash cost of $60 per ounce. The 2005-2006 base plan calls for 300,000 ounces of annual gold production at $60-$70 cash costs. During the first quarter of this year, mill throughput at the operation increased 15% quarter over quarter. Vice President of Operations Edgar Smith told analysts that currently El Peńon has 16-17 months remaining for open-pit mining.
Meridian has acquired other properties in northern Chile including one adjacent to El Peńon. Drilling is expected on some properties in the second half of this year.
Financial Results Meanwhile, first-quarter 2004 operating cash flows of $20.7 million increased the balance of cash and cash equivalents from $182 million as of December 31, 2003, to $200 million, including restricted cash as of March 31, 2004. Working capital increased to $182 million, primarily due to the increase in cash balances. Net income for the quarter was reported at $9.8 million or 10-cents per share, an increase of 15% over the $8.5 million or 9-cents per share for the first quarter of 2003. The increase was attributed to a combination of higher gold prices and lower cash operating costs, which were offset by fewer ounces sold due to the sale of the Jerritt Canyon Joint Venture and slightly lower sales from El Peńon.
Cash cost per ounce of gold was $46 during the quarter, up from $44 a year ago. Total gold production for the quarter was 75,446 ounces, up from 74,397 ounces for the first quarter 2003.
Exploration spending this year is expected to be $15 million with half of the budget dedicated to reserve and resource expansion at current projects. The remainder will be aimed toward acquisitions and grassroots exploration in Peru, Mexico, Central America, Chile, Canada, and the U.S. Projected cash requirements for operations this year is estimated at $14.5 million.
In response to questions from analysts, Kennedy said he was not yet ready to talk about the companys controversial Esquel project. However, he said the company continues to look at this project very much from an engineering and feasibility side. The majority of the communitys residents voted against the development of the mine. But, Meridian employs 40 persons in the area who continue discussing the project with local residents. Some redesign [of the project] could make sense, Kennedy conceded. However, redesign could raise the original $100 million estimated capital cost of the project and the projected $100/oz cash cost by 25%, he added.
During the annual general meeting, Meridian executives told shareholders they hope to achieve 1 million ounces of annual gold production within the next five years at a cash cost of $150/0z. The company hopes to have a mine reserve and resource life of 10 years within that time frame.
Meanwhile, Kennedy told analysts that the feasibility study on the Rossi JV is expected to be completed late this year with a production decision to be made in 2005. He added that he hopes the project would begin producing gold in 2005.
Meridian also announced that a critical EPA permit has been granted for the post closure of Beartrack in California.
New Chairman During the annual general meeting, shareholders elected Christopher R. Lattanzi as non-executive chairman of the company, replacing Dr. David S. Robertson, who has retired. Lattanzi is the president of Micon International of Toronto. Geologist Robert A. Horn, a former Vice President of Exploration for FMC Gold, has been elected as a new board member.
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