Executives of Reno's Meridian Gold sent strong signals to investors last week that its auditors are likely to write down the value of a stalled mining project in Argentina.
The Esquel project is carried on Meridian's books at a value of $350 million, and represents about 37 percent of the company's assets of $944.4 million.
The project has been stalled since March 2003, when voters near the proposed mine said they didn't like the project.
Since then,Meridian has been working to build trust with nearby residents and has been rethinking its plans for the property that it acquired for about $310 million in 2002 when it purchased Brancote Holdings Plc.
It's spent another $40 million on development of the property.
Brian Kennedy, president and chief executive officer of Meridian, told investors the company still believes it will be able to win approval to mine the gold deposit at Esquel.
But the company said no one knows when the project might begin operation, and auditors are required to examine the value of projects that haven't made headway for three years.
The quarterly earnings report issued by Meridian last week shows the urgency of bringing new gold deposits on line if not at Esquel, then from one of the other prospects the company is working across the Western Hemisphere.
For the quarter, its El Penon mine in Chile produced 75,400 ounces of gold.
That's down from the 79,700 ounces the mine produced a year earlier.
Analysts such as Morningstar's Parvathy Krishnan have noted that Meridian's reliance on a single mine increases the risks that labor strife or an accident could dry up the company's sole revenue stream.
At the same time, Krishnan said in a recent analysis, the El Penon mine is so profitable that Meridian has some room to maneuver.
In the third quarter, the mine produced gold at a cash cost of $44 an ounce, and Meridian sold gold for an average of $441 an ounce.
The company plans to spend about $20 million on exploration next year, including work at some new veins near the existing Esquel mine that Meridian geologists find promising.
In Nevada,Meridian holds a 40 percent interest in a gold project known as the Rossi property.
Barrick Gold Exploration is majority owner of that project about 25 miles northwest of Carlin, and Meridian executives said last week that property might come on line in early 2007.
The company's executives also are keeping a close eye on exploration efforts around existing gold production in central Chile.
Meridian recently signed a deal to invest $5 million during the next 18 months in exploration at the property.
If it likes what it finds, it can pay $100 million in cash to acquire the mining property from Minera Florida, a privately held Chilean company.
For the third quarter,Meridian reported earnings of $9 million on revenues of $32.1 million.
In the same period a year ago, the company earned $9.6 million on revenues of $32.9 million.
