Meridian Gold looks south to Chile for best dig sites

With exploration operations spread across North and South America, Reno-based Meridian Gold thinks its best possibilities are within walking distance of its existing gold mine, the El Penon property in Chile.

"We are in the midst of a major discovery at El Penon," says Brian Kennedy, Meridian's president and chief executive officer.

The company during the first quarter expanded its land position around the mine in the Chilean desert, and it paid $7.5 million to buy out the interest of Gold Field Chile in a joint venture on nearby property.

The exploration, which included extensive drilling programs, cost Meridian about $4.9 million during the first quarter.

That's up $1.1 million from year-earlier figures.

While most of the exploration is centered on Chile, Kennedy said the company also is looking at prospects in Nevada,Mexico, Nicaragua and Peru.

Meridian has about $20 million budgeted for exploration this year.

The company plans to spend another $10 million to develop one of the deposits it's discovered near El Penon.

With some $230 million in cash on its books, Meridian easily will expense both its exploration and the capital projects.

Kennedy told investment analysts last week that the company doesn't believe it will need to invest heavily in boosting mill capacity to handle more ore at El Penon.

"We have a very good infrastructure in place at El Penon," he said.

The mine during the first quarter produced 76,200 ounces of gold at an average cash cost of $47 an ounce.

A year earlier, production totaled 75,300 ounces at an average cash cost of $46 an ounce.

The mine is projected to produce about 300,000 ounces of gold at an average cost of $50 to $60 an ounce this year.

"We are taking our profits the old-fashioned way by producing gold at a profit," Kennedy said.

For the quarter,Meridian earned $9.8 million on revenues of $32.2 million.

This compares with earnings of $9.8 million on revenues of $22.9 million in the comparable quarter a year ago.

It sold gold for an average of $429 an ounce during the quarter compared with $410 in the first three months of 2004.