The board of Meridian Gold, sitting on about $225 million in cash and watching its cash balances increase each month, figures the company will pay a dividend one of these days.
But before the Reno-based mining company begins regular payouts to shareholders, it needs to make sure that it's reliant on more than a single mine, says Brian Kennedy, Meridian's president and chief executive officer.
Meridian currently relies almost entirely on El Penon, a mine in northern Chile.
It's a good mine it produced 79,600 ounces of gold at an average cash cost of $47 an ounce in the third quarter but Kennedy is looking for some other baskets in which he can keep some of the company's eggs.
Meridian spent about $14 million of its cash hoard on exploration in the first nine months of this year and expects the total to reach $20 million by year-end.
Much of that exploration, Kennedy told investors last week, has come in the neighborhood of El Penon.About 240 holes were drilled at a new high-grade vein about a half mile from the existing mine, and Meridian in September said it has high hopes for another discovery about six miles from El Penon.
That exploration activity in northern Chile, Kennedy said,marks a renewed commitment by the company to a gold-producing region that it's come to understand well during the past decade.
Another strong diversification possibility for Meridian is the Rossi project about 25 miles northwest of Carlin.
Meridian holds a 40 percent interest in the project; Barrick Gold Exploration holds the other 60 percent.
Kennedy said a feasibility study of the project is expected late this year with the possibility that mining will begin in 2005.
The biggest possibility, however, is Meridian's Esquel project in southern Argentina a project that came to a sudden halt in 2003 when neighbors to the proposed mine voted their disapproval.
The company continues to keep Esquel in the cooler.
"We are not addressing a development plan (on Esquel),"Kennedy told investment analysts."We are trying to make the community comfortable.We have to make sure this community does not feel threatened by this project."
Impatient mining analysts, noting the company carries Esquel on its books with a value of $350 million, pushed last week to know whether Meridian might sell the Argentine project to recoup its shareholders' investment.
Wayne Hubert, who manages investor relations for the company, acknowledged that Meridian has received feelers about selling the property.
But he said Meridian still believes it can win the support of nearby residents.
And he said Meridian's auditors last year decided Esquel's prospects were bright enough that they didn't require Meridian to write down the value of the property.
Wherever a new mining project might arise, Kennedy estimated that development costs will consume about half the company's $200 million in cash.
He said Meridian wants to keep a stockpile of cash on hand, too, to take advantage of opportunities without raising capital through the sale of more common stock.
The third priority, he said,would be payment of a regular cash dividend.
Meridian last week reported net income of $9.6 million on revenues of $32.9 million for the third quarter.
This compares with income of $6.1 million on revenues of $29.8 million a year earlier.
Rising gold prices played a big part in boosting revenues.
The company said it sold gold for an average of $406 an ounce in the third quarter compared with $371 a year ago.
For the first nine months of this year, Meridian reported earnings of $29.1 million.
on revenues of $94.3 million.
A year earlier, it earned $24.1 million on revenues of $102.2 million.
