Low costs at El Peon buoy Meridian (July 18, 2002)

Meridian Gold (MNG-T) has posted net income of US$11.3 million for the second quarter of 2001, as its El Peon gold mine in Chile remains one of the world’s lowest-cost producers.

Meridian’s earnings, which amount to US15 per share, came on revenues of US$34.3 million. In 2001, Meridian made US$10 million on revenues of US$27.8 million in the second quarter.

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 US$318 in the quarter, up from US$277 a year before, and mine production 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 of 2001 (when Meridian was mining slightly lower grade ore).

Cash costs at El Peon, which are pushed down by byproduct credits from silver production, were 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 per oz. from US$101 a year before.

At Jerritt Canyon in Nevada, where Meridian holds a 30% share, total production rose to 94,000 oz. from 83,000 oz. in the second quarter of last year. 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, total production cost is now US$295 per oz.

The company closed its takeover of London-listed Brancote Holdings on July 3. 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.