Silver sales boost Meridian's profit

Like many mining companies, Reno-based Meridian Gold Inc. historically treated the silver production at its El Penon Mine in Chile as a mildly interesting byproduct.

Some byproduct.

With silver prices rising to about $14 an ounce, Meridian's top executive said last week that proceeds from silver sales at El Penon are more than paying for the costs of running the mine.

That means that Meridian essentially got the 68,300 ounces of gold produced by El Penon during the first quarter for free, said Brian Kennedy, Meridian's president and chief executive officer.

And silver sales will continue to cover the production costs at El Penon so long as silver prices stay about $9.25 an ounce, Kennedy said.

With both silver and gold prices on the rise, Meridian earned $17.6 million on revenues of $55.5 million in the first quarter. A year earlier, it earned $9.8 million on revenues of $41.9 million.

The company also reported last week that it will exercise an option to buy the owner of a Chilean mine, Minera Florida S.A., for $100 million.

Darcy Marud, vice president of exploration, noted that Meridian had $289.2 million in cash on its books as of March 31.

"We're turning our cash balances into gold," he said.

The mine owned by Minera Florida has been producing 60,000 to 70,000 ounces of gold a year at an average cost of $200 an ounce. Meridian estimates the mine has at least eight to 10 years of remaining life.