Meridian to use cash for exploration

With $200 million in its coffers, Meridian Gold isn't shopping for an acquisition.

Instead, executives of the Reno-based company said last week Meridian will continue to focus on an exploration program in Nevada and South America.

"The most profitable growth we can generate for this company is organic growth with our projects and our geologists," said Brian Kennedy, Meridian's president and chief executive officer.

If Meridian buys anything, he said, it's likely to look for early-stage exploration projects that the company can develop into full-blown mines.

That's a strategy with some risk after all, exploration projects don't always pan out but Kennedy said it allows the company to add significant value for its shareholders.

This year, Meridian has budgeted some $15 million for exploration half of it to expand current projects, half to fill the pipeline with new mines.

As Meridian continues its own exploration, the company said last week it discovered a significant new high-grade vein at its El Penon mine in Chile.

About 25 miles northwest of Carlin, meanwhile, Meridian and Barrick Gold Corp.

expect to make a decision later this year whether to launch a new mine on a joint venture known as the Rossi Mine.

And in Chile, Kennedy said the company is expanding its land positions.

Even as the exploration activity continues, the risks involved with the company's strategy continue to be demonstrated at its Esquel project in southern Argentina.

Meridian suspended development of that mine in early 2003 after residents of the area voiced strong opposition.

Kennedy told analysts the company continues to work with the community to allay its concerns, but the project remains on hold.

An analyst with Toronto's Canaccord Capital cautioned last week that Meridian ultimately may be faced with writing down the value of its investment in Esquel a property it acquired for about $300 million in stock in 2002.

Meridian has acknowledged it made substantial mistakes in its relationship with residents around Esquel, and its quarterly earnings report last week devoted nearly a full single-spaced page to detailing its social and environmental work at other mining communities.

Among the accomplishments: More than 250 educational scholarships to the children of workers at El Penon and the donation of 90 trees to the mine's workers.

Financially, the company reported earnings of $9.8 million for the quarter ended March compared with $8.5 million a year earlier.

It produced 75,000 ounces of gold at a cash cost of $46 an ounce during

the quarter.