Meridian Gold Announces Record Second Quarter 2006 Results.RENO Reno (rē`nō), city (1990 pop. 133,850), seat of Washoe co., W Nev., on the Truckee River; inc. 1903. Tourism has been the major industry since gambling was legalized in Nevada in 1931. , Nev. -- (All dollar amounts in U.S. currency) Meridian Meridian (mərĭd`ēən), city (1990 pop. 41,036), seat of Lauderdale co., E Miss., near the Ala. line; settled 1831, inc. 1860. Gold Inc. ("Meridian Gold" or the "Company") (TSX TSX Toronto Stock Exchange (TSE before April, 2002) TSX Transfer from Stack Pointer to Index TSX True Space Extension :MNG MNG Multiple-image Network Graphics (PNG-like image format supporting multiple images, animation and transparency) MNG Mongolia (ISO Country code) MNG Multinodular Goiter MNG Meet 'n Greet )(NYSE NYSE See: New York Stock Exchange :MDG MDG Millennium Development Goals (UNDP) MDG Madagascar (ISO Country code) MDG Medical Group (USAF) MDG Air Madagascar (ICAO code) ) is pleased to announce record results for the quarter ended June June: see month. 30, 2006. Meridian Gold continues its commitment to organic growth, with a focus on returns and a dedication to responsible mining, which are reflected in the second quarter results as follows: HIGHLIGHTS: --Record quarterly net earnings of $18.8 million, or $0.19 per share --Record operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. of $25.1 million for the quarter; increased cash investment balances to $329.8 million, including cash, restricted cash, short and long term investments --Discovered two new high-grade High-grade Credit quality of AAA or AA. high-grade Of, relating to, or being a bond with little risk of default on the part of the issuer. High-grade is usually reserved for bonds rated AAA or AA by the rating services. veins within the El Penon camp --Gold production of 57,800 ounces at a net cash cost of negative ($124) per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. using net revenue from silver production of 1.8 million ounces as a credit against cash cost. --On a gold equivalent basis, Meridian produced 92,400 ounces at a cash cost of $155 per ounce --Acquired Minera Minera (Welsh: Mwynglawdd) is a small village in the county borough of Wrexham in north-east Wales. It borders Coedpoeth to the east and Bwlchgwyn to the west. Florida Florida, state, United States Florida (flôr`ĭdə, flŏr`–), state in the extreme SE United States. A long, low peninsula between the Atlantic Ocean (E) and the Gulf of Mexico (W), Florida is bordered by Georgia and S.A. effective as of July July: see month. 1 --Expanded the two new discoveries at Minera Florida Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. J. Kennedy, President and Chief Executive Officer, commented: "We continue to manage El Penon for sustained cash flow, as higher gold and silver prices have resulted in record earnings and record cash flows. Despite this record result, El Penon is in a year of transition as we move to newer areas in the mine and expand plant capacity. At the El Penon core area, we are now expanding the district to the northeast “Northeastern” redirects here. For the Boston college, see Northeastern University, Boston. Northeast or north east is the ordinal direction halfway between north and east. It is the opposite of southwest. See boxing the compass. with the discoveries of Al Este Este, Italian noble family Este (ĕs`tā), Italian noble family, rulers of Ferrara (1240–1597) and of Modena (1288–1796) and celebrated patrons of the arts during the Renaissance. and Angosta. I am also delighted to be expanding our Chilean base with the acquisition of Minera Florida, bringing our portfolio to two operating mines which we believe will make a significant contribution to Meridian's growth profile." Exploration Report El Penon Exploration continues at El Penon with four drill rigs defining the Al Este and Angosta discoveries and assisting in the program to convert resources to reserves at Providencia Prov·i·den·ci·a n. A genus of motile, peritrichous, nonsporeforming, aerobic or facultatively anaerobic bacteria containing gram-negative rods; it includes the species that can occur in urinary tract infections. and Dominador. Renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. testing of the Al Este vein marks the return of exploration rigs to the eastern margin of the El Penon core area. An additional 35 drill holes have extended mineralization Mineralization The process by which the body uses minerals to build bone structure. Mentioned in: Rickets mineralization, n the bioprecipitation of an inorganic substance. along 1.4 kilometers of strike length and 150 meters of dip dip, in agriculture, method of treating animals (chiefly livestock) infested with skin parasites such as mites, ticks, and warbles. The animal is dipped into or forced to swim through a tank filled with an insecticide solution. length. Three principal ore ore, metal-bearing mineral mass that can be profitably mined. Nearly all rock deposits contain some metallic minerals, but in many cases the concentration of metal is too low to justify mining the ore. shoots have been defined with the northern most shoot being the most continuous along strike and dip Strike and dip refer to the orientation or attitude of a geologic feature. The strike of a stratum or planar feature is a line representing the intersection of that feature with the horizontal. . Some of the better intersections are shown in the table below:
Al Este
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AuEq(x)
Hole North(m) Intercept(m) Length(m) Au g/t Ag g/t g/t
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SPA0010 7305569 290-294 4 16.23 831.1 32.21
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SPA0011 7305100 370-374 4 11.62 891.5 28.76
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SPA0016 7305940 406-408 2 25.75 27.9 226.29
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SPA0017 7305814 295-299 4 5.5 338.5 12.01
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SPA0025 7306000 333-337 4 46.91 533.3 57.17
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(x)AuEq equals Au plus Ag/52
The newly discovered Angosta vein is located 6 kilometers to the north of the Cerro Martillo mine, further expanding the economic potential of the district. Although continuous mineralization has been defined only over a strike length of 400 meters and dip of 150 meters, this vein remains open in all directions. The drill intersections defining this mineralization are shown below:
Angosta
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AuEq(x)
Hole North(m) Intercept(m) Length(m) Au g/t Ag g/t g/t
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SDX0002 7311380 192-194 2 22.40 17.1 22.72
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SDX0007 7311381 90-93 3 33.60 68.3 34.91
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SDX0027 7311440 157-159 2 10.65 14.2 10.92
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SDX0028 7311500 160-162 2 9.90 75.9 11.36
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SDX0034 7361120 125-127 2 7.60 205.0 11.54
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All of the current drill holes and their corresponding assays for both Al Este and Angosta are reflected on long-sections posted on Meridian's website www.meridiangold.com Minera Florida Drilling continues to extend mineralization of the Peumo stockwork Stock´work` n. 1. (Mining) A system of working in ore, etc., when it lies not in strata or veins, but in solid masses, so as to be worked in chambers or stories. 2. (Geol. zone up-dip and along strike with favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. grades and widths similar to previously reported holes. At the Tribuna Tribuna is a newspaper that focuses largely on industry and the energy sector; it is owned by Russian media holding Gazprom Media. vein, drilling has extended mineralization in all directions along the plane of the vein and locally intersected very high- grade results shown below:
Tribuna
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Elevation Intercept Length AuEq(x)
Hole (m) (m) (m) Au g/t Ag g/t g/t
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ALH013 850 479.2-481.6 2.37 28.07 17.0 28.40
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ALH042 1000 142.3-143.6 1.30 15.73 20.0 16.11
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ALH074 885 179.0-182.2 3.20 40.8 17.0 41.13
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Qualified Person William William, crown prince of Germany William or Frederick William, 1882–1951, crown prince of Germany, son of William II. In World War I he commanded (1914) an army on the Western Front and was nominal commander in the German attack H. Wulftange, P. Geo., has supervised su·per·vise tr.v. su·per·vised, su·per·vis·ing, su·per·vis·es To have the charge and direction of; superintend. [Middle English *supervisen, from Medieval Latin the preparation of the technical data contained within this release and serves as the "Qualified Person" as defined by National Instrument 43-101. Other Exploration Exploration drilling at the Mercedes Mercedes (mĕrsā`thēs), city (1996 pop. 39,139), capital of Soriano dept., SW Uruguay, a port on the Río Negro. An agricultural and livestock center, the city has a shipyard and several fine beaches and resorts. property in Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. , the Natividad project in Nicaragua Nicaragua (nĭkärä`gwä), officially Republic of Nicaragua, republic (2005 est. pop. 5,465,000), 49,579 sq mi (128,410 sq km), Central America. , and the Amancaya property in Chile Chile (chĭl`ē, Span. chē`lā), officially Republic of Chile, republic (2005 est. pop. 15,981,000), 292,256 sq mi (756,945 sq km), S South America, west of the continental divide of the Andes Mts. were initiated in the second quarter and assays are pending. Meridian will provide updates as information becomes available. Rossi Rossi is an Italian surname, in fact the most frequent in Italy. Due to Italian immigration to many other countries, is also very common in the United States, Brazil, Argentina, Uruguay and Chile. Rossi is the plural of Rosso, meaning the color red in Italian language. The Board of Directors has approved the final development plans for the Rossi joint venture with Barrick Gold Barrick Gold Corporation TSX: ABX NYSE: ABX is the largest pure gold mining company in the world, with its headquarters in Toronto, Ontario, Canada; and four regional business units (RBU's) located in Australia, Africa, North America and South America. Corporation. The Company's portion of the capital budget for the next three years is expected to be $5.8 million, with $2.6 million of this amount to be spent in the remainder of 2006. As production ramps up in 2007, Meridian expects their 40% ownership of Rossi will yield approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 25,000 ounces of gold during the first year at a cash cost of about $275 per ounce of gold. In 2007, Barrick's mill, through a toll processing agreement, is expected to process 56,000 tonnes of ore at an average grade of 16 grams per tonne tonne measure of weight or mass; 1 tonne=1000 kg. See also ton. gold and 50 grams per tonne silver. Meridian's share of ongoing gold production is expected to be in the 30,000-40,000 ounces of gold annually at an average cash cost of about $290 per gold ounce. Barrick's mill is expected to process over 80,000 tonnes of ore annually at an average grade of 13 grams per tonne gold and 50 grams per tonne silver. Meridian believes the exploration program at Rossi may result in additional resources being discovered as the Discovery Zone is clearly open at depth. Future potential exploration targets will be tested once the underground mine workings are complete. Esquel Esquel is a town in the northwest of the province of Chubut, in the Argentine Patagonia. It is located in the Futaleufú, of which it is the head town. The town's name derives from a Mapuche term meaning "thorn", which refers to the characteristics of the local flora, including On July 21st, the Governor of Chubut Chubut (ch  bt`), river, c.500 mi (805 km) long, rising in the Andes of SW Argentina and flowing E across Chubut prov. , Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. , officially
ratified rat·i·fy tr.v. rat·i·fied, rat·i·fy·ing, rat·i·fies To approve and give formal sanction to; confirm. See Synonyms at approve. the legislation to suspend all mining activity within designated areas of the province for three years; which includes Meridian Gold's Esquel property. This project, written down to its fair market land value at the end of 2005, is estimated to contain over 2.5 million ounces of gold at an average grade of 14 grams per tonne. The Company will continue to evaluate its alternatives with the Esquel project. MANAGEMENT'S DISCUSSION AND ANALYSIS Management's discussion and analysis (MD&A) A report from management to shareholders that accompanies the firm's financial statements in the annual report. It explains the period's financial results and enables management to discuss topics that may not be apparent in the financial The following discussion is limited to matters that, in the opinion of management of Meridian Gold Inc. ("Meridian Gold", "Meridian" or the "Company"), are material, and represents management's knowledge through the date of this press release, July 25, 2006. OPERATIONS El Penon During the second quarter of 2006, El Penon delivered another positive quarter with strong cash flows and low costs, due to continued processing of high silver grades and high metal prices. During the quarter the plant continued to process lower gold grades in combination with lower tonnage TONNAGE, mar. law. The capacity of a ship or vessel. 2. The act of congress of March 2, 1799, s. 64, 1 Story's L. U. S. 630, directs that to ascertain the tonnage of any ship or vessel, the surveyor, &c. as the expansion projects continued. The mine produced 57,800 ounces of gold and 1.8 million ounces of silver, at a net negative cash cost of ($124) per gold ounce versus 76,300 ounces of gold and 1.2 million ounces of silver at a net cash cost of $47 per gold ounce during the second quarter of 2005. Total net production costs including depreciation, depletion depletion n. when a natural resource (particularly oil) is being used up. The annual amount of depletion may, ironically, provide a tax deduction for the company exploiting the resource because if the resource they are exploiting runs out, they will no longer be able and amortization were ($43) per gold ounce for the quarter, compared to $98 per gold ounce in the second quarter of 2005. The decrease in gold ounces produced is related to processing lower ore grades Ore grade is a measure that describes the concentration of a valuable natural material (such as metals or minerals) in its surrounding ore. Ore grade is used to assess the economic feasibility of a mining operation: the cost of extracting a natural material from its ore is directly in order to minimize In a graphical environment, to hide an application that is currently displayed on screen. For example, in Windows and Mac, the application's window is removed from the screen and represented by an icon on the Windows Taskbar. In the Mac, the icon is placed in the Dock. See Win Minimize windows. recovery losses during the capital expansion projects and subsequent testing periods. Once again, El Penon has established a new record low quarterly net cash cost and total net production cost reported by operations. This decrease in net cash cost and total net production cost is driven by the increase in silver production due to higher silver grades coming from the Dorada and Cerro Martillo sections of the underground mine, coupled with the recent higher silver prices. (The measurements for net cash cost and total net production cost are non-GAAP measurements. An explanation and reconciliation of these measurements can be found at the end of the management's discussion and analysis section of this report.) All mine production is from the underground mines, sourcing ore from the Cerro Martillo, Dorada, Quebrada Colorada and Quebrada Orito vein structures. Production from these structures provided 224,500 tonnes of ore at an average grade of 8.8 grams per tonne of gold and 239.7 grams per tonne of silver during the second quarter of 2006. This production demonstrates a continuance The adjournment or postponement of an action pending in a court to a later date of the same or another session of the court, granted by a court in response to a motion made by a party to a lawsuit. of the increased levels of output, with an average rate for the second quarter of 2006 of 5,268 tonnes per day including ore, development and non- non- word element [L.]not . non- pref. Not: noninvasive. mineralized min·er·al·ize v. min·er·al·ized, min·er·al·iz·ing, min·er·al·iz·es v.tr. 1. To convert to a mineral substance; petrify. 2. To transform a metal into a mineral by oxidation. 3. material, an improvement of 15% compared to the second quarter rate for 2005, which produced an average of 4,600 tonnes per day. We continue to focus on development of the underground mine to improve mine flexibility to support the expansions occurring in the mill. Drilling work continues to define the Fortuna Fortuna (fôrt `nə), in Roman religion, goddess of fortune. Worshiped under several forms, she appears to have originally been a goddess of fertility. vein while permitting
and planning continues. Permitting has been granted to commence the
construction of the underground access, which will commence during the
third quarter. All additional permitting is expected to be received
during the third quarter, with production anticipated in early 2007.During the quarter, the two access tunnels The following are lists of tunnels:
Mill throughput The speed with which a computer processes data. It is a combination of internal processing speed, peripheral speeds (I/O) and the efficiency of the operating system and other system software all working together. 1. at El Penon was 221,000 tonnes or 2,427 tonnes per day for the second quarter of 2006, slightly lower than production for the second quarter of 2005 of 223,000 tonnes or 2,449 tonnes per day. The slight decrease in throughput resulted from lower volumes processed as a result of the expansion projects under way in the plant. During the quarter the new leach leach v. leached, leach·ing, leach·es v.tr. 1. To remove soluble or other constituents from by the action of a percolating liquid. 2. tank was completed along with modifications to the clarifier clar·i·fy v. clar·i·fied, clar·i·fy·ing, clar·i·fies v.tr. 1. To make clear or easier to understand; elucidate: clarified her intentions. 2. . These additions have been in a ramp-up phase and will be brought into full production by the end of 2006. In addition, expansion work will commence on the filtration filtration: see sewerage; water supply. Filtration The separation of solid particles from a fluidsolids suspension of which they are a part by passage of most of the fluid through a septum or membrane that retains most of the solids circuits during the second half of 2006, with the majority of the work planned to be performed during late third quarter to early fourth quarter. As planned average gold mill head grades decreased during the quarter to 8.5 grams per tonne of gold versus 11.0 grams per tonne of gold in the second quarter of 2005 and average silver mill head grades increased to 270 grams per tonne of silver from 185 grams per tonne of silver in the second quarter of 2005. FINANCIAL RESULTS Second quarter 2006 vs. Second quarter 2005 Meridian Gold reported net earnings for the three months ended June 30, 2006 of $18.8 million ($0.19 per share), compared to net earnings of $9.1 million ($0.09 per share) for the same period in 2005. This marks the second quarter in a row in which Meridian has reported record net earnings. These increases are explained in the following paragraphs. Total revenue of $57.3 million in the second quarter of 2006 increased $16.4 million or 40% over the second quarter revenue, in 2005 of $40.9 million. Gold revenue increased 11% from $32.4 million in the second quarter of 2005 to $36.0 million for the second quarter 2006. The higher realized gold price versus the previous year's quarter ($629 per ounce realized versus $425 per ounce), was offset by a 24% decrease in gold ounces sold (57,500 ounces versus 76,100 ounces). The decrease in ounces produced and sold was due to a 23% decrease in the gold grade from 11.0 grams per tonne of gold in the second quarter of 2005 to 8.5 grams per tonne of gold in the same period of 2006, as explained in the operating section. The silver revenues increased 152% from $8.5 million to $21.4 million due to higher realized silver prices versus the previous year's quarter ($12.19 per ounce realized versus $7.03 per ounce) coupled with a 43% increase in silver ounces sold (1.75 million ounces versus 1.22 million ounces). The increase in silver production is due to an increased proportion of ore coming from higher silver grade sectors of the mine, mainly Dorada and Cerro Martillo. In the second quarter of 2006, cost of sales equaled $14.9 million, an increase of $2.2 million or 17% compared to cost of sales in the second quarter of 2005 of $12.7 million. This increase in cost is due to higher reagent reagent /re·a·gent/ (re-a´jent) a substance used to produce a chemical reaction so as to detect, measure, produce, etc., other substances. re·a·gent n. and materials cost, higher consumption of key reagents due to increased silver grades, and a weaker dollar compared to the previous year's period. Additionally, depreciation, depletion and amortization increased $0.7 million to $4.7 million reflecting increased depletion due to mine production occurring in higher capital areas of the mine. Exploration expense in the second quarter of 2006 of $7.1 million was slightly lower than the second quarter 2005 expense of $7.7 million. The exploration spending results from continued aggressive exploration activities in Chile focused on the Providencia and Fortuna vein systems and other district targets at El Penon, regional reconnaissance  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. work and Minera Florida. Meridian Gold also continues its exploration programs in Nicaragua at the Natividad project and in Mexico at the Mercedes property. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: in the second quarter of 2006 were 47%, compared to operating margins of 34% in the second quarter of 2005. This increase is primarily a result of higher revenues due to higher realized average metals prices and higher silver production. Income tax expense in the second quarter of 2006 was $12.1 million or an effective rate of 39% compared to $6.7 million or an effective tax rate of 42% in the second quarter of 2005. The decrease in the effective rate is due to an increase in earnings in Chile. The Company's statutory tax rate in Chile, including the newly created mining tax or royalty Compensation for the use of property, usually copyrighted works, patented inventions, or natural resources, expressed as a percentage of receipts from using the property or as a payment for each unit produced. , is approximately 36%. During the second quarter of 2006, Meridian Gold paid $7.0 million in cash taxes. Net earnings in the second quarter of 2006 were 33% of revenue, compared to 22% in the second quarter of 2005. This increase is primarily a result of the higher revenues due to higher realized average metals prices, somewhat offset by increased cost of sales, depreciation and income taxes. Meridian Gold produced gold, using by-product by·prod·uct or by-prod·uct n. 1. Something produced in the making of something else. 2. A secondary result; a side effect. by-product Noun 1. method of accounting, for a negative ($124) net cash cost per gold ounce in the second quarter of 2006 compared to $47 per ounce net cash cost in the same period of 2005. (The measurement for net cash cost is a non-GAAP measurement. An explanation and reconciliation of these measurements can be found at the end of the management's discussion and analysis section of this report.) First six months of 2006 vs. First six months of 2005 Net earnings for the six months ended June 30, 2006 were $36.4 million ($0.36 per share) compared to net earnings of $18.9 million ($0.19 per share) for the same period of 2005. Total revenue of $112.8 million for the six months ended June 30, 2006 increased $30.0 million or 36% over the same period in 2005 of $82.8 million. Gold revenues increased 12% from $65.0 million in the first six months of 2005 to $72.9 million for the same period in 2006. The higher realized gold price versus the previous year's six months ($591/oz realized versus $427/oz), was offset by a 19% decrease in gold ounces sold (123,600 ounces versus 152,400 ounces). The decrease in ounces produced and sold was due to a 23% decrease in the gold grade from 11.5 grams per tonne of gold in the six months ended June 30, 2005 to 8.9 grams per tonne of gold in the same period of 2006. The silver revenues increased 124% from $17.8 million to $39.9 million due to higher realized silver prices versus the same period for the previous year ($11.02 per ounce realized versus $7.04 per ounce) in addition to a 43% increase in silver ounces sold (3.62 million ounces versus 2.54 million ounces). The increase in silver production is due to an increased proportion of ore coming from higher silver grade sectors of the mine, mainly Dorada and Cerro Martillo. For the six months ended June 30, 2006, cost of sales equaled $29.5 million, an increase of $3.4 million (13%) compared to cost of sales in the same period of 2005 of $26.1 million. This increase in cost is due to higher reagent and materials cost, higher consumption of key reagents due to increased silver grades, and a weaker dollar. Additionally, depreciation, depletion and amortization increased $1.7 million to $10.0 million reflecting increased depletion due to mine production occurring in higher capital areas of the mine. Exploration expense in the first six months of 2006 of $11.8 million was $0.8 million less than exploration expense in the same period of 2005 of $12.6 million, primarily due to lower exploration spending at the Natividad project in Nicaragua. Tax expense in the first six months of 2006 was $24.9 million or an effective rate of 41% compared to $14.3 million or an effective tax rate of 43% in the first six months of 2005. The decrease in the effective rate is due to an increase in earnings in Chile. During the first six months of 2006, the Company paid $12.7 million in cash taxes. Net earnings in the first six months of 2006 were 32% of revenue compared to the same period of 2005 of 23%, primarily as a result of increased revenues driven by the increase in metal prices. LOOKING AHEAD For 2006, Meridian Gold is revising its previous estimate and expects to produce approximately 260,000 ounces of gold and 7.0 million ounces of silver from El Penon at a negative net cash cost of approximately ($75) per ounce, assuming an $11.02 silver price and budgeted production. Since we account for silver revenue as a by-product when calculating net cash cost, the net cash cost is sensitive to the fluctuations in the price of silver. The decrease in gold ounces as compared to previous forecasts is due to the sequencing of mining certain lower grade portions of the mine along with a planned decrease in mill head grade to minimize potential recovery losses while the plant is undergoing expansion. It is expected that the capital expansion projects will continue through the third quarter and conclude mid to late fourth quarter. This production decrease in gold ounces is partially offset by production of an additional 1 million ounces of silver. Meridian Gold will continue to focus on optimizing sustained cash flow from the El Penon mine. Minera Florida S.A. Purchase Meridian Gold sent a letter to the owners of Minera Florida S.A. (Minera Florida) on May 2, 2006 notifying no·ti·fy tr.v. no·ti·fied, no·ti·fy·ing, no·ti·fies 1. To give notice to; inform: notified the citizens of the curfew by posting signs. 2. them of its decision to exercise the option to purchase 100% of Minera Florida. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the purchase option agreement Meridian will acquire 100% of this company for $100 million. Meridian acquired Minera Florida's production and costs effective as of July 1, 2006 with the transaction finalizing on July 31, 2006. Minera Florida S.A. is a privately held mining operation in Chile which has been in operation for nearly 20 years. More recent historical production has been approximately 65,000 - 70,000 ounces of gold per year with additional by-product production of silver and zinc zinc, metallic chemical element; symbol Zn; at. no. 30; at. wt. 65.38; m.p. 419.58°C;; b.p. 907°C;; sp. gr. 7.133 at 25°C;; valence +2. Zinc is a lustrous bluish-white metal. It is found in Group 12 of the periodic table. . Historical net cash costs have averaged less than $200 per ounce of gold using a by-product method of accounting. Meridian Gold has been exploring the property for 11 months under an option agreement that was signed in August of 2005. Meridian Gold is currently interpreting in·ter·pret v. in·ter·pret·ed, in·ter·pret·ing, in·ter·prets v.tr. 1. To explain the meaning of: interpreted the ambassador's remarks. See Synonyms at explain. the existing and new exploration drilling results and expects to present a resource report with the third quarter results of 2006. The Company expects the mine and plant to continue to produce at the historic levels for the foreseeable fore·see tr.v. fore·saw , fore·seen , fore·see·ing, fore·sees To see or know beforehand: foresaw the rapid increase in unemployment. future. Liquidity Cash balances, including restricted cash, short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. and long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. investments, increased to $329.8 million as of June 30, 2006 due to strong cash flows from strong operating performance and increased silver production at El Penon, and higher gold and silver prices. Working capital increased to $289.2 million at June 30, 2006 from $262.9 million at December December: see month. 31, 2005, primarily due to the growth in cash and short-term investment balances. Cash to meet the Company's operating needs, finance capital expenditures and fund exploration activities during the quarter was provided from operations and from existing cash reserves Cash reserves See: Cash investments cash reserves Investment funds that are held in short-term assets such as Treasury bills and certificates of deposit until more permanent investment opportunities are available. . Cash provided by operating activities, including changes in non-cash working capital and other operating amounts, was $25.1 million in the second quarter of 2006 compared to $10.5 million in the first quarter of 2005. Capital Resources Anticipated cash requirements for the full year 2006 include approximately $35 million for planned capital expenditures at El Penon (which includes approximately $13 million in mine development, as the mine continues with the project of expanding its mining production rate from 2000 to 2800 metric tonnes per day) as well as developing accesses to the Providencia structure, and development of the Fortuna project. An additional estimated $5 million will be required to fund capital expenditures at other Meridian Gold projects and locations. The Company expects to draw down $100 million of its cash on hand to complete the transaction for the purchase of the property owned by Minera Florida S.A. Exploration is at the heart of Meridian Gold's growth strategy and will continue to be an important focus throughout the year. Meridian Gold plans to spend approximately $25 million in 2006 to fund exploration. The Company believes that the planned capital and exploration requirements will be funded by existing operating cash flows, current cash and investments. Should the Company decide to develop other exploration and development properties, additional capital may be required. If additional funds are necessary, management believes they may be borrowed from third parties or raised by issuing shares of the Company; however, no assurance can be given that such transactions will be available at terms and conditions acceptable to Meridian Gold, if at all. Changes in Accounting Policies and Presentation Silver Revenue and Refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar Costs Commencing January January: see month. 1, 2006, the Company recognizes silver sales as part of its revenue due to the increase in silver ounces mined and the significant increase in the price of silver. The Company previously recognized silver sales as a by-product and reported its silver revenue with cost of sales. The Company has also changed its classification of refining cost from netting against revenue to including with cost of sales. Commencing January 1, 2006, both of these changes have been adopted on a retroactive Having reference to things that happened in the past, prior to the occurrence of the act in question. A retroactive or retrospective law is one that takes away or impairs vested rights acquired under existing laws, creates new obligations, imposes new duties, or attaches a basis and revenue and cost of sales before depreciation, depletion and amortization for the three months and six months ended June 30, 2005 have been increased by $9.0 million ($8.5 million silver revenue, $0.5 million refining expenses) and $18.7 million ($17.8 million silver revenue, $0.9 million refining expenses), respectively, from the amounts previously reported.
Summary of Quarterly Results
(Unaudited and expressed in millions of US dollars, except per share
data)
2006 2005
--------------- ----------------------------------
Q2 Q1 Q4 Q3 Q2 Q1
-- -- -- -- -- --
Revenue $ 57.3 $ 55.5 $ 49.3 $ 42.2 $ 40.9 $ 41.9
Pre-impairment net
earnings(1) 18.8 17.6 12.3 9.0 9.1 9.8
Net earnings (loss) 18.8 17.6 (374.3) 9.0 9.1 9.8
Basic earnings
per share,
pre-impairment(2) $ 0.19 $ 0.18 $ 0.12 $ 0.09 $ 0.09 $ 0.10
Diluted earnings
per share
pre-impairment 0.19 0.17 0.12 0.09 0.09 0.10
Basic earnings
(loss) per
share(2) $ 0.19 $ 0.18 $ (3.73) $ 0.09 $ 0.09 $ 0.10
Diluted earnings
(loss) per share 0.19 0.17 ($3.73) 0.09 0.09 0.10
(1) Pre-impairment net earnings is a non-GAAP measure and is equal to
net earnings (loss) before impairment of mineral properties and
other in the net amount of $386.3 million recorded in the fourth
quarter of 2005.
(2) Quarterly amounts do not sum to full year amounts due to rounding.
2004
-----------------
Q4 Q3
-- --
Revenue $ 41.1 $ 40.8
Pre-impairment net
earnings(1) 7.5 9.6
Net earnings (loss) 7.5 9.6
Basic earnings
per share,
pre-impairment(2) $ 0.08 $ 0.10
Diluted earnings
per share
pre-impairment 0.07 0.10
Basic earnings
(loss) per
share(2) $ 0.08 $ 0.10
Diluted earnings
(loss) per share 0.07 0.10
(1) Pre-impairment net earnings is a non-GAAP measure and is equal to
net earnings (loss) before impairment of mineral properties and
other in the net amount of $386.3 million recorded in the fourth
quarter of 2005.
(2) Quarterly amounts do not sum to full year amounts due to rounding.
Outstanding Share Data As of June 30, 2006 and as of the date of this report, there were 100,825,296 common shares outstanding (December 31, 2005 - 100,233,173) and there were 1,007,648 stock options outstanding issued to directors and employees with exercise prices ranging between US$2.25 and US$26.79 per share, of which 538,922 were exercisable with expiry dates expiry date expire n → date f d'expiration; (on label) → à utiliser avant ... expiry date expire n → Ablauftermin m between December 2006 and March 2016. Non-GAAP Measures Meridian Gold has provided measures of "net cash cost per gold ounce", "total net cost per gold ounce", "cash cost per gold equivalent ounce" and "total cost per gold equivalent ounce", which are included in this document. Net cash costs are determined according to the Gold Institute Standard and consist of site costs for all mining (except deferred mining and deferred stripping costs), processing, administration, resource taxes and royalties Not to be confused with Royal family. Royalties (sometimes, running royalties) are usage-based payments made by one party (the "licensee") to another (the "licensor") for ongoing use of an asset, most typically an intellectual property (IP) right. (the Chilean royalty tax is not included as it is considered an income tax), net of silver by-product credits, but do not include capital, exploration, depreciation and financing costs. Total net cash costs per gold ounce are total net cash costs divided by gold ounces produced. Total net cost consists of "total net cash cost" plus depreciation, depletion and amortization expenses. Total net costs per gold ounce are total net costs divided by gold ounces produced. Cash costs are equivalent to net cash cost adding back the silver by-product credit. Cash cost per gold equivalent ounce is total cash cost divided by the total to the gold ounces plus silver ounces converted to an equivalent amount of gold as determined by the ratio of the gold price per ounce divided by the silver price per ounce. Total cost consists of "total cash cost" plus depreciation, depletion, and amortization expenses. Total cost per gold equivalent ounce is "total cost" divided by the gold equivalent ounces produced. The Company believes that in addition to conventional measures, prepared in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), stakeholders Stakeholders All parties that have an interest, financial or otherwise, in a firm-stockholders, creditors, bondholders, employees, customers, management, the community, and the government. use this information to evaluate the Company's performance and its ability to generate cash flow. These non-GAAP performance measures do not have any standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by GAAP, and therefore, may not be comparable to similar measures presented by other companies. Accordingly, they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The calculation for these non- GAAP measures is explained below.
(Unaudited and in millions of US dollars, except for gold production
in ounces and cash costs per ounce)
Three Months Ended June 30 Six Months Ended June 30
2006 2005 2006 2005
----------------------------------------------------------------------
By-Product method
of calculating cost
per ounce
--------------------
Cost of sales (Before
depreciation,
depletion and
amortization) $14.9 $12.7 $29.5 $26.1
Silver revenues (21.4) (8.5) (39.9) (17.8)
Other (0.6) (0.5) (1.1) (1.1)
----------------------------------------------------------------------
Total net cash costs (7.1) 3.7 (11.5) 7.2
Gold production in
ounces from active
properties 57,766 76,288 126,059 152,500
----------------------------------------------------------------------
Total net cash costs
per gold ounce ($124) $47 ($92) $47
----------------------------------------------------------------------
----------------------------------------------------------------------
Total net cash costs (7.1) 3.7 (11.5) 7.2
Depreciation, depletion
and amortization from
operations 4.7 4.0 10.0 8.3
----------------------------------------------------------------------
Total net cost ($2.4) $7.7 ($1.5) $15.5
Gold production in
ounces from active
properties 57,766 76,288 126,059 152,500
----------------------------------------------------------------------
Total net cost
per gold ounce ($43) $98 ($13) $99
----------------------------------------------------------------------
----------------------------------------------------------------------
Gold equivalent ounce
method of calculating
cost per ounce
-----------------------
Gold production in
ounces from active
properties 57,766 76,288 126,059 152,500
Silver Ounce
conversion Factor: 51.6 60.5 53.6 60.7
Gold Price $629 $425 $591 $427
Silver Price $12.19 $7.03 $11.02 $7.04
Silver Ounces from
active properties 1,784,659 1,223,694 3,706,420 2,544,380
Converted Silver Ounces
(ounces/factor) 34,586 20,226 69,150 41,917
----------------------------------------------------------------------
Gold Equivalent Ounces 92,352 96,514 195,209 194,417
----------------------------------------------------------------------
----------------------------------------------------------------------
Cost of Sales $14.9 $12.7 $29.5 $26.1
Other (0.6) (0.5) (1.1) (1.1)
----------------------------------------------------------------------
Total Cash Cost 14.3 12.2 28.4 25.0
----------------------------------------------------------------------
Total cash cost per
gold equivalent ounce $155 $126 $145 $129
----------------------------------------------------------------------
----------------------------------------------------------------------
Total Cash Cost $14.3 $12.2 $28.4 $25.0
Depreciation, depletion
and amortization from
operations 4.7 4.0 10.0 8.3
----------------------------------------------------------------------
Total Cost 19.0 16.2 38.4 33.3
----------------------------------------------------------------------
Total Cost per gold
equivalent ounce $206 $168 $197 $171
----------------------------------------------------------------------
----------------------------------------------------------------------
CAUTIONARY STATEMENT Certain statements in this 2006 second quarter announcement, financial statements for the period ending June 30, 2006 and management's discussion and analysis constitute "forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. " within the meaning of the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995 and Canadian securities legislation. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company, or other future events, including forecast production, earnings and cash flows, to be materially different from any future results, performance or achievements or other events expressly or implicitly im·plic·it adj. 1. Implied or understood though not directly expressed: an implicit agreement not to raise the touchy subject. 2. predicted by such forward-looking statements. When used herein, words such as "anticipate", "estimate", "believe", "expect", "predict", "plan", "should", "may", "could" and other similar expressions are intended to identify forward-looking statements. Such risks, uncertainties and other factors include those set forth in the Company's Annual Information Form and other periodic filings. Important factors that could cause actual results to differ materially from those expressed or implied Inferred from circumstances; known indirectly. In its legal application, the term implied is used in contrast with express, where the intention regarding the subject matter is explicitly and directly indicated. by such forward-looking statements include, but are not limited to, factors associated with fluctuations in the market price of precious metals Precious Metals Valuable metals such as gold, iridium, palladium, platinum, and silver. Notes: Investing in precious metals can be done either by purchasing the physical asset, or by purchasing futures contracts for the particular metal. , changes in the dollar exchange rate, mining industry risks, uncertainty of title to properties, risk associated with foreign operations, environmental risks and hazards
Hazards is an independent, union-friendly magazine based in Sheffield, England, which has won major international awards. , proposed legislation affecting the mining industry, litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. , governmental regulation of the mining industry, properties without known reserves, uncertainty as to calculations of reserves, mineral deposits and grades, requirement of additional financing, uninsured risks, risk of impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. of assets, risk of hedging hedging, in commerce, method by which traders use two counterbalancing investment strategies so as to minimize any losses caused by price fluctuations. It is generally used by traders on the commodities market. strategies, competition, and dependence on key management personnel. Such information contained herein represents management's best judgment as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" based on information currently available. The Company does not intend to update this information and disclaims any legal liability to the contrary. The Company's filings with the securities regulatory authorities Noun 1. regulatory authority - a governmental agency that regulates businesses in the public interest regulatory agency administrative body, administrative unit - a unit with administrative responsibilities in Canada Canada (kăn`ədə), independent nation (2001 pop. 30,007,094), 3,851,787 sq mi (9,976,128 sq km), N North America. Canada occupies all of North America N of the United States (and E of Alaska) except for Greenland and the French islands of are available at www.sedar.com and its filings with the U.S. Securities and Exchange Commission are available at www.sec.gov See .gov and GovNet. (networking) gov - The top-level domain for US government bodies. through EDGAR Edgar or Eadgar (both: ĕd`gər), 943?–975, king of the English (959–75), son of Edmund, king of Wessex. In 957 the Mercians and Northumbrians rebelled against Edgar's brother Edwy and chose Edgar as their king. . Qualified Statement All drill samples sent for assay ASSAY. A chemical examination of metals, by which the quantity of valuable or precious metal contained in any mineral or metallic mixture is ascertained. 2. By the acts of Congress of March 3, 1823, 3 Story's L. U. S. 1924; of June 25, 1834, 4 Shars. cont. Story's L. U. S. at El Penon and Minera Florida are subject to a rigorous Quality assurance and a Quality control Program that conforms to NI 43-101 standards. Duplicate DUPLICATE. The double of anything. 2. It is usually applied to agreements, letters, receipts, and the like, when two originals are made of either of them. Each copy has the same effect. reverse circulation drill samples are collected at 2 or 1 meter meter, unit of measure meter, abbr. m, fundamental unit of length in the metric system. The meter was originally defined as 1/10,000,000 of the distance between the equator and either pole; however, the original survey was inaccurate and the meter was later intervals, depending on type of drill target. One sample is sent for assay, and the duplicate is stored on site for verification See verify. verification - The process of determining whether or not the products of a given phase in the life-cycle fulfil a set of established requirements. and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. metallurgical met·al·lur·gy n. 1. The science that deals with procedures used in extracting metals from their ores, purifying and alloying metals, and creating useful objects from metals. 2. purposes. Round Robin verified ver·i·fy tr.v. ver·i·fied, ver·i·fy·ing, ver·i·fies 1. To prove the truth of by presentation of evidence or testimony; substantiate. 2. blind standards are inserted in·sert tr.v. in·sert·ed, in·sert·ing, in·serts 1. To put or set into, between, or among: inserted the key in the lock. See Synonyms at introduce. 2. into the sample stream along with barren bar·ren adj. 1. Not producing offspring. 2. Incapable of producing offspring. barren see infertility. barren adjective Gynecology Infertile, sterile, fruitless, inconceivable , duplicate and unmineralized samples that test sample preparation procedures, accuracy and precision of results and check for sample contamination contamination /con·tam·i·na·tion/ (kon-tam?i-na-shun) 1. the soiling or making inferior by contact or mixture. 2. the deposition of radioactive material in any place where it is not desired. at the lab. All core or diamond drill samples are sawed or mechanically split with one half of the sample stored on site and the second half sent for assay utilizing the QA/QC QA/QC Quality Assurance/Quality Control procedures. Acme (company, jargon) ACME - /ak'mee/ 1. A Company that Makes Everything. The canonical imaginary business. Possibly also derived from the word "acme" meaning "highest point". 2. A program for MS-DOS. Analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. Laboratories S.A. operates an on site sample preparation lab at El Penon that is closely monitored by the El Penon QA/QC Management. Sample pulps produced on site are sent to Acme Laboratories Acme Laboratories is the home page for a number of open source software products written and maintained by Jef Poskanzer. Major projects maintained at ACME include pbmplus and thttpd. in Santiago, Chile Santiago, officially Santiago de Chile (Spanish: (helpinfo)), is the capital of Chile, and the center of its largest conurbation (Greater Santiago). for analysis. Minera Florida samples are sent directly to Acme Labs in Santiago Santiago, city, Chile Santiago (säntēä`gō), city (1990 est. pop. 4,395,000), central Chile, capital of Chile and of Metropolitana de Santiago region, on the Mapocho River. for preparation work. All samples are assayed using standard Fire/AA procedures (AuAA22, AgAA45). Gold results greater than 5 ppm (Pages Per Minute) The measurement of printer speed. See gppm. PPM - Portable Pixmap (x) are re-analyzed using a gravimetric gravimetric /grav·i·met·ric/ (grav?i-me´trik) pertaining to measurement by weight; performed by weight, as a gravimetric method of drug assay. grav·i·met·ric adj. 1. finish(xx) (Au-GRA22). Silver results greater than 100 ppm are re-analyzed using a complete acid digestion digestion Process of dissolving and chemically converting food for absorption by cells. In the mouth, food is chewed, mixed with saliva, which begins to break down starches, and kneaded by the tongue into a ball for swallowing. (Ag- ag- pref. Variant of ad-. AA62) with silver assays greater than 300 ppm being re-analyzed using a gravimetric finish(xx) (Ag-GRA22). Any assay results that are not deemed statistically acceptable are not entered into the database. (x)parts per million parts per million mg/kg or ml/l; see ppm. (xx)results reported in grams per tonne Second Quarter Conference Call The Company will host its Second Quarter Results Conference Call at 9am ET on Wednesday Wednesday: see week. July 26, 2006. The toll-free conference call dial-in number is 1-866-711-8198 and the international dial-in number is 617-597- 5327; passcode for both dial-in numbers is 35744381. The conference call will be simultaneously si·mul·ta·ne·ous adj. 1. Happening, existing, or done at the same time. See Synonyms at contemporary. 2. Mathematics web cast and archived at www.meridiangold.com in the Investor Center. A replay of the call will be available until August 2, 2006; toll-free at 1-888-286-8010, locally and overseas at 617-801-6888; passcode for both dial-in numbers is 65869635. Bell Ringing at the NYSE The Company will be ringing The Closing BellSM at the NYSE on Thursday Thursday: see week. , July 27, 2006, and the feed will be available beginning at 3:55 pm EST EST electroshock therapy. EST abbr. electroshock therapy . This event will be simultaneously web cast and archived at www.meridiangold.com.
Meridian Gold Inc.
Operating Data
(Unaudited and dollar amounts expressed in U.S. currency)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
------------------------ -----------------------
El Penon Mine
Gold production
(ounces) 57,766 76,288 126,059 152,500
Silver production
(ounces) 1,784,659 1,223,694 3,706,420 2,544,380
Tonnes ore mined
(thousands) 225 256 447 470
Mill tonnes processed
(thousands) 221 223 460 428
Avg. mill gold ore
grade (grams/tonne) 8.5 11.0 8.9 11.5
Avg. mill silver ore
grade (grams/tonne) 270 185 269 201
Mill gold recovery 96% 97% 95% 97%
Mill silver recovery 93% 92% 93% 92%
Net cash cost of
production per
gold ounce $ (124) $ 47 $ (92) $ 47
Total net
production cost
per gold ounce $ (43) $ 98 $ (13) $ 99
Cash cost of
production per
gold equivalent
ounce (GEO) $ 155 $ 126 $ 145 $ 129
Total production
cost per gold
equivalent ounce
(GEO) $ 206 $ 168 $ 197 $ 171
Beartrack Mine
Gold production
- heap leach
(ounces) 209 110 209 200
Company Totals
Ounces of gold
produced 57,975 76,398 126,268 152,700
Ounces of gold sold 57,487 76,098 123,611 152,426
Ounces of silver
sold 1,752,083 1,220,023 3,617,990 2,536,798
Avg. realized gold
price per ounce $ 629 $ 425 $ 591 $ 427
Avg. realized
silver price
per ounce $ 12.19 $ 7.03 $ 11.02 $ 7.04
Net cash cost of
production per
gold ounce $ (124) $ 47 $ (92) $ 47
Total net cost of
production per
gold ounce $ (43) $ 98 $ (13) $ 99
Cash cost of
production per
gold equivalent
ounce (GEO) $ 155 $ 126 $ 145 $ 129
Total production
cost per gold
equivalent ounce
(GEO) $ 206 $ 168 $ 197 $ 171
Average realized
gold prices are
revenues divided by
gold ounces sold.
Net cash cost and
total net cost per
gold ounce are net
of silver by-product
credits.
----------------------------------------------------------------------
----------------------------------------------------------------------
Capital Expenditures
and Depreciation
Detail - Q2 2006 Capital
(in millions of US$) expenditures DD&A
------------------------
El Penon $6.0 $4.7
Other 0.7 -
------------------------
Total $6.7 $4.7
------------------------
------------------------
Meridian Gold Inc.
Interim Consolidated Balance Sheets
(Unaudited and expressed in millions of US dollars)
June 30 December 31
2006 2005
------------ ------------
Assets
Current assets
Cash and short-term investments $ 284.4 $ 267.6
Restricted cash 13.9 13.9
Trade and other receivables 8.2 1.2
Inventory 7.4 7.1
Future income taxes - current 4.3 3.7
Other current assets 9.6 10.0
------------ ------------
Total current assets 327.8 303.5
Mineral property, plant and equipment, net 91.1 89.6
Future income taxes - long-term 0.4 0.4
Other assets 37.5 11.0
------------ ------------
Total assets $ 456.8 $ 404.5
------------ ------------
------------ ------------
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable, trade and other $ 10.3 $ 13.4
Accrued and other liabilities 28.3 27.2
------------ ------------
Total current liabilities 38.6 40.6
Other long-term liabilities 76.2 65.0
Future income taxes 12.8 12.8
Shareholders' equity (note 5) 329.2 286.1
------------ ------------
Total liabilities and shareholders' equity $ 456.8 $ 404.5
------------ ------------
------------ ------------
See accompanying notes to interim consolidated financial statements
Meridian Gold Inc.
Consolidated Statements of Operations
(Unaudited and expressed in millions of US dollars,
except per share data)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
------------------------ -----------------------
(Restated (Restated
- note 2) - note 2)
Revenue $ 57.3 $ 40.9 $ 112.8 $ 82.8
Costs and expenses
Cost of sales before
depreciation,
depletion and
amortization 14.9 12.7 29.5 26.1
Depreciation,
depletion and
amortization 4.7 4.0 10.0 8.3
Exploration 7.1 7.7 11.8 12.6
Selling, general
and administrative 3.2 2.8 6.4 5.7
Other 0.5 (0.3) 0.4 (0.3)
------------------------ -----------------------
30.4 26.9 58.1 52.4
------------------------ -----------------------
Earnings before the
following 26.9 14.0 54.7 30.4
Interest income 4.0 1.7 6.6 2.7
Gain on sale of assets - 0.1 - 0.1
------------------------ -----------------------
Earnings before taxes 30.9 15.8 61.3 33.2
Income tax (expense) (12.1) (6.7) (24.9) (14.3)
------------------------ -----------------------
Net earnings $ 18.8 $ 9.1 $ 36.4 $ 18.9
------------------------ -----------------------
------------------------ -----------------------
Earnings per share
Basic $ 0.19 $ 0.09 $ 0.36 $ 0.19
Diluted $ 0.19 $ 0.09 $ 0.36 $ 0.19
Weighted average
shares outstanding
(in millions)
Basic 100.6 99.7 100.6 99.6
Diluted 101.2 100.4 101.2 100.4
See accompanying notes to interim consolidated financial statements
Meridian Gold Inc.
Interim Consolidated Statements of Retained Earnings (Deficit)
(Unaudited and expressed in millions of US dollars)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
------------------------ -----------------------
Balance at beginning
of period $ (148.8) $ 189.8 $ (166.4) $ 180.0
Net earnings 18.8 9.1 36.4 18.9
------------------------ -----------------------
Balance at end of
period $ (130.0) $ 198.9 $ (130.0) $ 198.9
------------------------ -----------------------
------------------------ -----------------------
See accompanying notes to interim consolidated financial statements
Meridian Gold Inc.
Interim Consolidated Statements of Cash Flows
(Unaudited and expressed in millions of US dollars)
Three Months Ended Six Months Ended
June 30 June 30
2006 2005 2006 2005
----------------------- ------------------------
Cash flow from
(used in) operating
activities
Net earnings $ 18.8 $ 9.1 $ 36.4 $ 18.9
Non-cash items:
Provision for
depreciation,
depletion and
amortization 4.7 4.0 10.0 8.3
Accretion of asset
retirement
obligations 0.3 0.1 0.6 0.2
Stock-based
compensation 0.7 0.8 1.6 1.6
Provision for
pension costs 0.1 - 0.2 0.1
Income taxes 5.8 2.4 12.0 7.8
Deferred revenue - - - -
Changes in non-cash
working capital and
other accounts:
Trade and other
receivables (6.2) (0.1) (7.0) (0.7)
Inventory 0.1 (1.2) (0.3) (1.1)
Other current assets 1.1 0.3 (0.2) 0.9
Other assets (0.5) 1.4 (0.2) (0.3)
Accounts payable,
trade and other 1.8 - (3.1) 0.6
Accrued and other
liabilities (0.4) (4.7) 1.1 (4.2)
Other long-term
liabilities 0.4 - 0.3 -
Reclamation
expenditures (1.6) (1.0) (1.9) (1.8)
Pension contributions - (0.6) - (0.6)
----------------------- ------------------------
25.1 10.5 49.5 29.7
----------------------- ------------------------
Cash flow from (used in)
investing activities
Capital expenditures (6.7) (6.3) (11.5) (17.8)
Proceeds from sale of
assets - 0.1 - 0.1
Short-term investments 72.8 67.4 58.7 48.2
Long-term investments (25.9) - (26.3) 5.0
----------------------- ------------------------
40.2 61.2 20.9 35.5
----------------------- ------------------------
Cash flow from financing
activities
Proceeds from issuance
of share capital 2.7 2.7 5.1 2.7
----------------------- ------------------------
2.7 2.7 5.1 2.7
----------------------- ------------------------
Increase in cash and
cash equivalents 68.0 74.4 75.5 67.9
Cash and cash
equivalents,
beginning of period 65.8 40.8 58.3 47.3
----------------------- ------------------------
Cash and cash
equivalents,
end of period $ 133.8 $ 115.2 $ 133.8 $ 115.2
----------------------- ------------------------
----------------------- ------------------------
Cash and cash
equivalents $ 133.8 $ 115.2 $ 133.8 $ 115.2
Short-term
investments 150.6 122.3 150.6 122.3
----------------------- ------------------------
Cash and short-term
investments $ 284.4 $ 237.5 $ 284.4 $ 237.5
----------------------- ------------------------
----------------------- ------------------------
Cash paid for income
taxes $ 7.0 $ 9.3 $ 12.7 $ 12.1
Cash paid for
interest $ - $ - $ - $ -
See accompanying notes to interim consolidated financial statements
Meridian Gold Inc.
Notes to Interim Consolidated Financial Statements (unaudited)
Three months and six months ended June 30, 2006
1. Basis of Presentation
These unaudited interim consolidated financial statements have
been prepared by the Company in accordance with Canadian generally
accepted accounting principles ("GAAP"). These unaudited interim
consolidated financial statements do not include all information
and note disclosures required by Canadian GAAP for annual
financial statements, and therefore should be read in conjunction
with the Company's audited consolidated financial statements for
the year ended December 31, 2005. The preparation of these
financial statements is based on accounting policies and practices
consistent with those used in the preparation of the audited
annual consolidated financial statements, except as disclosed in
note 2.
2. Changes in Accounting Policies and Presentation
Silver Revenue and Refining Costs
Commencing January 1, 2006, the Company recognizes silver sales as
part of its revenue due to the increase in silver ounces mined and
the significant increase in silver's market price. The Company
previously recognized silver sales as a by-product and reported
its silver revenue as a credit to cost of sales. The Company has
also changed its classification of refining cost from netting
against revenue to including it in cost of sales. Commencing
January 1, 2006, both of these changes have been adopted on a
retroactive basis and revenue and cost of sales before
depreciation, depletion and amortization for the three months and
six months ended June 30, 2005 have been increased by $9.0 million
and $18.7 million, respectively, from the amounts previously
reported. There was no impact on net earnings.
3. Property Impairment
At each reporting period, the Company reviews the carrying value
of its mineral properties in accordance with Canadian GAAP. The
reviews include an analysis of the expected future cash flows to
be generated by the project to determine if such cash flows exceed
the project's current carrying value. The determination of future
cash flows is dependent on a number of factors, including future
prices for gold, the amount of reserves, the cost of bringing the
project into production, production schedules, and estimates of
production costs. For non-producing properties, the reviews are
based on whether factors that may indicate the need for a
write-down are present at each location. Additionally, the reviews
take into account factors such as political, social, legal and
environmental regulations. These factors may change due to
changing economic conditions or the accuracy of certain
assumptions. The Company uses its best effort to fully understand
all of the aforementioned to make an informed decision based upon
historical and current facts surrounding the projects. Based on
this review, management determined additional impairment was not
necessary as of June 30, 2006.
4. Reclamation Liability
The continuity of the reclamation liability for the three months
and six months ended June 30 is as follows:
Three Months Ended Six Months Ended
(in millions of June 30 June 30
US dollars) 2006 2005 2006 2005
------------------------------------------------------------------
Balance, beginning
of period $25.3 $11.1 $25.3 $11.8
Accretion 0.3 0.1 0.6 0.2
Expenditures (1.6) (1.0) (1.9) (1.8)
------------------------------------------------------------------
Balance, end of
period $24.0 $10.2 $24.0 $10.2
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5. Share Capital
Shareholders' equity
June 30, December 31,
(in millions of US dollars) 2006 2005
------------------------------------------------------------------
Share capital $397.8 $390.8
Additional paid-in capital 7.2 7.6
Retained earnings (deficit) (130.0) (166.4)
Cumulative translation adjustment 54.2 54.1
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Total shareholders' equity $329.2 $286.1
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Outstanding share data
As at June 30, 2006 100,825,296 (December 31, 2005 - 100,233,173)
common shares were outstanding and 1,007,648 stock options were
outstanding issued to directors and employees with exercise prices
ranging between US$2.25 and US$26.79 per share, of which 538,922
were exercisable with expiry dates between December 2006 and March
2016.
Stock options and restricted shares
The stock option activity for the three months and six months
ended June 30 is illustrated in the tables below:
Three Months Ended June 30
2006 2005
------------------------------------------------------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Options Price
-------------------------------------------------
Stock options
outstanding at
beginning of
period 1,330,621 $11.86 1,906,151 $9.19
Granted - - 77,500 15.14
Exercised (319,639) 8.56 (472,033) 5.78
Expired and/or
cancelled (3,334) 15.14 (5,101) 16.17
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Stock options
outstanding at
end of period 1,007,648 $12.89 1,506,517 $10.54
------------------------------------------------------------------
------------------------------------------------------------------
Six Months Ended June 30
2006 2005
------------------------------------------------------------------
Weighted Weighted
Number Average Number Average
of Exercise of Exercise
Options Price Options Price
-------------------------------------------------
Stock options
outstanding at
beginning of
period 1,557,481 $11.38 1,932,151 $9.28
Granted 17,500 25.62 77,500 15.14
Exercised (563,999) 9.10 (473,033) 5.77
Expired and/or
cancelled (3,334) 15.14 (30,101) 16.31
------------------------------------------------------------------
Stock options
outstanding at
end of period 1,007,648 $12.89 1,506,517 $10.54
------------------------------------------------------------------
------------------------------------------------------------------
Exercisable stock
options 538,922 $10.48 876,645 $8.37
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------------------------------------------------------------------
Stock options vest in equal annual amounts over 1 to 3 years and
have terms of 10 years
The fair value of stock options granted was calculated using the
Black-Scholes option pricing model with the following weighted
average assumptions used for grants in 2006: dividend yield 0%,
expected volatility of 50.0 percent, risk free interest rate of
4.6 percent, and expected lives of 5 years and with the following
weighted average assumptions used for grants in 2005: dividend
yield 0%, expected volatility of 56.3 percent, risk free interest
rate of 3.5 percent, and expected lives of 5 years.
During the three months and six months ended June 30, 2006, 85,939
and 189,915 stock options, respectively, were exercised that had a
grant date after January 1, 2002, the date the Company adopted the
fair value method of accounting for stock options granted. During
the three months and six months ended June 30, 2006, the Company
transferred $0.6 million and $1.4 million, respectively, from
additional paid-in capital to share capital for the amount
previously recorded as additional paid-in capital for the fair
value of this stock-based compensation.
During the six months ended June 30, 2006, the Company awarded
28,581 restricted shares that had a grant date average fair value
of $18.78 per share. During the six months ended June 30, 2005,
the Company awarded 26,499 restricted shares that had a grant date
average fair value of $14.00 per share. Restricted shares issued
to management vest one-third per year over 3 years and restricted
shares issued to non-executive directors are immediately vested
and remain restricted until the board member retires or ceases to
be a member of the Board.
6. Employee future benefits
For the three months and six months ended June 30, 2006 the total
net defined benefit expense of the Company's pension plan was $0.1
million and $0.2 million, respectively (2005 -- $0.1 million and
$0.1 million).
7. Commitment
Meridian Gold sent a letter of notification of decision to
exercise the option for the purchase to the owners of Minera
Florida S.A. on May 2, 2006. According to the purchase option
agreement Meridian will acquire 100% of this company for $100
million. Meridian acquired Minera Florida's production and costs
effective as of July 1, 2006 with the transaction finalizing on
July 31, 2006.
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