A successful startup at the El Peon mine in northern Chile enabled
El Peon entered commercial production Jan. 1 and, during the 3-month period, cranked out 61,000 oz. gold at a cash operating cost of US$71 per oz.
Based on this performance, Meridian expects the mine to produce 250,000 oz. at a cash cost of US$75 per oz. for the year.
Brian Kennedy, CEO of the Reno, Nev.-based company, describes the quarter as a breakthrough: “Recent history has shown that starting up mines entails significant risks. The strong results [from El Penon] proves our ability to reduce those risks for our shareholders.”
The mill at El Peon is processing ore at design capacity of 2,000 tonnes per day. The average head grade for the quarter was 11.1 grams gold and 143 grams silver per tonne. Nearly two-thirds of the ore is coming from the Quebrada Orito underground deposit; the remainder is split between the Quebrada Colorada deposit and stockpiles from the small open-pit.
Gold and silver recoveries were within design specification at 93% and 88%, respectively, though Meridian has already identified opportunities to improve these rates.
By the second half of this year, the company expects to be producing from underground at the daily rate of 2,000 tonnes. It still has 185,000 tonnes of stockpiled ore averaging 10 grams gold and 137 grams silver per tonne.
Meanwhile, in an attempt to reduce overall operating costs, Meridian has launched a reserve expansion program to find the limits of mineralization in the Quebrada Colorada and Quebrada Orito deposits. It will also test extensions of the Orito Sur deposit, which remains open to the south and at depth.
Meridian’s first-quarter revenue was US$32.8 million, or 173% higher than a year ago, whereas cash flow improved to US$12.1 million, bringing cash balances to US$27.5 at the end of the period.
Meridian produced 114,823 oz. gold in the quarter, compared with 49,147 oz. a year earlier, and realized a slightly higher gold price of US$290 per oz.
Cash operating costs fell to US$111 from US$200 per oz., while total production costs dropped to US$175 from US$293 per oz.
Meridian posted positive results from its two other gold operations:
At the Beartrack gold mine in Idaho, cash costs were down 40% to US$123 per oz., while production improved to 28,818 oz. The end of the quarter also marked the completion of mining and crushing at Beartrack, though leaching will continue for the next several years.
Jerritt Canyon
The company also received 25,364 oz. as a result of its 30% interest in the Jerritt Canyon mine in Nevada. The remaining interest is held by the operator, Independence Mining, a wholly owned subsidiary of
Meridian’s exploration efforts are currently focused on advancing the Rossi property in Nevada’s northern Carlin trend. In the fourth quarter of 1999,
Barrick is earning a 60% interest in the property from Meridian by spending US$15 million on exploration.
So far, the major has drilled 23 holes, 11 of which intersected significant mineralization grading greater than 7 grams per tonne. Highlights include 15 metres true width grading 32 grams gold per tonne, and 12 metres of 30 grams, on the 49’er zone. Barrick will use the remainder of its exploration budget to drill new surface targets.
The company recently dropped the Venturina gold property in Mexico, after having spent US$2.4 million in a joint venture with
Meridan’s first quarter earnings total US$8.3 million (or 11 per share), compared with a loss of US$3.1 million (4 per share) in the first three months of 1999. The company has reduced it hedge position to 355,932 oz. gold, the average price being US$312 per oz.
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