Denver — Reno, Nev.-based
Meridian can earn an initial 51% interest by spending US$2.7 million over the next five years.
Both parties will contribute funding to exploration. Meridian’s share will be US$700,000 in the first three years, whereas Buenaventura will pitch in US$300,000. In years four and five, Meridian will take over all funding obligations, contributing US$2 million toward the work.
After five years, Meridian will have a one-time option to buy an additional 10% stake in the joint venture, giving it a total of 61%, for US$1 million.
Los Pircos is in the newly discovered Sexi-Cirato district, in Cajamarca province, at a moderate elevation of 2,500 metres above sea level. To date, Buenaventura has encountered significant surface values; also, 250 metres of trenching on strike of a vein have returned high-grade gold values. However, no assay results have been released.
Mineralization in this underexplored area consists of low-sulphidation epithermal veining.
Meridian and Buenaventura expect to begin building a 15-km road into the project area, which should be completed by the second half of the year. Drilling should begin once the road has been completed.
Meanwhile, Meridian remains active in Mexico with as many as four exploration projects that could undergo drilling as early as June. In all, the company expects to spend up to US$1.5 million on exploration in Mexico during 2001.
Drilling is about to begin on a follow-up program of as many as 25 reverse-circulation holes at one property, while drilling could begin, as well, at the Guadalupe de Los Reyes district in Sinaloa state.
Meridian optioned the district from Vancouver’s
During the mid-1990s, more than 370 holes were drilled into Guadalupe in an attempt to outline bulk-minable targets. Northern Crown completed a prefeasibility study on the Zapote zone, and the entire project was estimated to host a resource of 550,000 oz. gold and 11 million oz. silver, though the junior would not furnish a grade and tonnage estimate.
Rather than an open-pit project, Meridian sees Guadalupe for its underground potential, like the company’s El Peon mine in northern Chile. Drilling at Guadalupe will concentrate on higher-grade zones at depth.
Meridian has experienced considerable success at El Peon in its first full year of operation. The mine, southeast of Antofagasta, contributed 76,000 oz. gold and 1.2 million oz. silver during the last quarter of 2000 at cash costs of US$45 per oz., net of silver credits. Total production costs, including depreciation, depletion, amortization and reclamation, were US$98 per oz.
For the year, the underground mine produced 289,000 oz. gold at cash operating costs of US$48 per oz. Total production costs were US$96 per oz.
For the fourth quarter, the mill was processing at design capacity of 2,000 tonnes per day, with two-thirds of the production coming from the Quebrada Orito vein, and another third from the Quebrada Colorada vein. Headgrades averaged 13.5 grams gold and 228 grams silver per tonne, with gold recovery at 93% and silver recovery at 89%. Headgrades for the full year were slightly higher for gold and somewhat lower for silver.
The strong operating performance at El Peon helped push Meridian’s operating cash flows to US$63.2 million. This allowed the company to make its third principal payment of US$4 million, while lowering outstanding project debt to US$18 million. Capital costs for the project were US$77 million.
Infill drilling at the mine has been converting resources into reserves, resulting in a 24% increase in proven and probable reserves. At the end of 2000, El Peon had 4.7 million tonnes averaging 10.1 grams gold and 186.6 grams silver per tonne, equivalent to 1.5 million oz. gold and 28.2 million oz. silver.
The property contains another 4.5 million tonnes of 8.4 grams gold and 160 grams silver in the mineralized material category, based on a cutoff grade of 5 grams per tonne.
For 2001, Meridian expects El Peon to contribute 285,000 oz. at cash costs of US$50 per oz., representing more than 60% of the company’s estimated 400,000 oz. of production.
In 2000, the company produced 456,182 oz. gold, with contributions from its 30% interest in the Jerritt Canyon mine in northern Nevada and the Beartrack mine in Idaho, which completed mining during the second quarter.
Meridian’s share of reserves at Jerritt Canyon, operated by
Revenue in the recent fourth quarter reached US$29.6 million, despite the fact that Meridian realized only US$268 per oz. from its gold sales, whereas, in the 1999 fourth quarter, revenue totalled US$24.9 million at a realized price of US$297 per oz. For all of 2000, Meridian generated record revenue of US$128.3 million at a realized gold price of US$279, which was on par with 1999.
Meridian posted a fourth-quarter net income of US$11.8 million (or 16 per share), compared with a net loss of US$1.3 million (2 per share) in the last three months of 1999. For all of 2000, net income amounted to US$40.6 million (55 per share), compared with a net loss of US$13.7 million (19 per share) in 1999.
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