Low-cost El Penon drives Meridian earnings

Second-quarter earnings at Meridian Gold (MNG-T) were somewhat lower than in 2002, but low costs at its El Penon mine kept the company well in the black. For the three months ended June 30, Meridian earned US$9.7 million, or US10 per share, on revenues of US$36.5 million.

For the first six months of 2003, Meridian is showing a profit of US$18.5 million, out of US$72.4 million in sales. At the halfway mark of 2002, earnings stood at US$21.6 million and revenues at US$65.4 million. Second-quarter earnings were slightly lower this year than in 2002, when the company earned US$11.3 million while taking in US$34.3 million in revenues.

Meridian’s mainstay, the El Penon mine in northern Chile, produced just under 78,000 oz. gold and just over 968,000 oz. silver during the quarter, down from 84,000 oz. gold and 1.4 million oz. silver in the second quarter of 2002. Cash costs rose to US$48 per oz. from US$29.

Part of the increase in costs can be traced to lower silver grades, which fell to 191 grams per tonne in the recent quarter, compared with 278 grams in the corresponding period of 2002. Lower gold head grades — 14.5 grams per tonne as against 15.7 grams a year earlier — also contributed to the increase in costs. Still, El Penon’s costs are among the thinnest in the industry.

The Jerritt Canyon gold mine in Nevada, which was sold to Queenstake Resources (QRL-T) at the end of the quarter, produced almost 79,000 oz., of which Meridian’s share was just under 24,000 oz. Cash costs there were US$279 per oz., up from US$229 in the second quarter of last year.

Meridian booked a US$3.3-million gain on the sale of its Jerritt Canyon interest and now has cash and current assets of US$171.4 million. Payables and short-term liabilities amount to US$16.1 million.