EXPLORATION 1999 – Meridian discovery boosts El Peon

Despite an improvement in operating efficiency at its two gold mines, Reno, Nev.-based Meridian Gold (MDG-N) felt the brunt of low gold prices on its bottom line last year.

The company produced 214,640 oz. gold at an average cash cost of US$204 per oz. and beat budget expectations at both the 30%-owned Jerritt Canyon mine in Nevada and the wholly owned Beartrack mine in Idaho. However, the better-than-expected operating performance was not enough to push Meridian into the black for 1998. The company posted a loss of US$39.2 million (or US53 cents per share), compared with a loss of US$69.2 million (92 cents per share) in 1997.

Meridian expects to produce 250,000 oz. gold this year at an average cash cost of US$200 per oz. from existing operations. The company is developing an underground mine at El Pe~non in Chile, based on proven and probable minable reserves of 4 million tonnes grading 6.6 grams gold and 99 grams silver per tonne in the Quebrado Orito deposit, and 700,000 tons of 2.6 grams gold and 84 grams silver in the Cerro Martillo deposit. El Pe~non has additional resources of 3.6 million tonnes grading 8.3 grams gold and 146 grams silver, which do not include a newly estimated resource at the Quebrada Colorada discovery.

Construction and development at El Pe~non are about 50% complete. Most of the site foundations have been poured, and leach tanks have been placed on their foundations. Underground development and test mining are on track to meet mill-feed requirements by the fourth quarter.

Once in full production, starting in 2000, El Pe~non is expected to produce about 250,000 oz. gold per year at a cash cost of US$100 per oz. But company officials hint that the nearby Quebrada Colorada discovery will boost the mine’s overall economics in the years ahead. Meridian has enjoyed considerable exploration success at Quebrada Colorada, where a resource estimate, based on 172 drill holes, was recently calculated.

Using a gold cutoff grade of 9 grams, Meridian estimates that the deposit contains 1.1 million tonnes grading 27 grams gold and 410 grams silver. Of this total, 180,000 tonnes of 38.5 grams gold and 525 grams silver are classed as indicated. The company expects the high silver content of the deposit to offset the cost of producing gold.

Quebrada Colorada is still open in several directions, and potential extensions along strike will be drilled this year. Other drilling is aimed at converting resources into reserves.

At its American projects, Meridian’s proven and probable reserves declined slightly between 1997 and 1998, reflecting in part the calculation of reserves at US$300 per oz. gold, down from US$350 a year earlier.

At the end of 1998, Beartrack hosted proven and probable reserves of 5.7 million tonnes at 1.5 grams gold (open pit), while the underground Jerritt Canyon mine hosted 1.9 million tonnes at 7.7 grams.