Low costs at El Peon buoy Meridian (July 29, 2002)

The El Peon gold mine in Chile remains one of the world’s lowest-cost producers, enabling Meridian Gold (MNG-T) to post net earnings of US$11.3 million for the second quarter of 2002.

The income, which amounts to US15 per share, came on revenues of US$34.3 million, compared with US$10 million in earnings on US$27.8 million in revenue in the second quarter of 2001.

Lower costs at El Peon contributed to the increase in profits, but so did improved gold prices and higher production rates. Meridian realized an average price of US$318 per oz. in the quarter, up from US$277 a year earlier. Mine production between the two periods rose to 84,000 oz. gold and 1.4 million oz. silver from 78,000 oz. gold and 1.1 million oz. silver in the second quarter. (Meridian was mining slightly lower-grade ore in last year’s second quarter.)

Cash costs at El Peon, which are pushed down by byproduct credits from silver production, amounted to US$29 per oz. in the quarter, compared with US$42 in the corresponding period of 2001. Total costs, including depreciation, fell to US$73 from US$101 per oz.

At Jerritt Canyon in Nevada, where Meridian holds a 30% share, total production rose to 94,000 from 83,000 oz. between the two periods. Cash production costs rose, however, to US$229 per oz. from US$212. At Jerritt Canyon, where AngloGold (AU-N) is the operator and majority partner, the total production cost is now US$295 per oz.

The company closed its takeover of London-listed Brancote Holdings in early July. The deal, which was a friendly, all-share offer, was accepted by just over 90% of Brancote shareholders. Meridian had US$144 million in cash and other current assets at the end of June, against US$23.7 million in current liabilities.