Meridian Gold Reports First Quarter 2002 Results.Business Editors 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.--(BUSINESS WIRE)--May 7, 2002 Meridian Meridian (mərĭd`ēən), city (1990 pop. 41,036), seat of Lauderdale co., E Miss., near the Ala. line; settled 1831, inc. 1860. (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) ) (TSE See Tokyo Stock Exchange. TSE 1. See Tokyo Stock Exchange (TSE). 2. See Toronto Stock Exchange (TSE). :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 .) (All dollar amounts in U.S. currency) Highlights -- El Penon gold production of 88,000 ounces at a record cash cost of $25 per ounce -- Net income of $10.3 million, or $0.14 per share -- Gold production of 110,588 ounces at a cash cost of $78 per ounce, a 13% improvement over cash costs in the first quarter last year -- Operating cash flows of $12.9 million increased available cash balances to $105.7 million -- Meridian Gold Inc. and Brancote Holdings plc agree to merge forming the leading intermediate gold producer -- New El Penon exploration results at Vista Norte -- Meridian plans to drill five new grass-roots exploration projects starting in May -- The company remains unhedged in gold 1st Quarter Results Meridian Gold, Inc. generated net income of $10.3 million, or $0.14 per share for the quarter. Margins remained strong with a return on sales Return on sales A measurement of operational efficiency equalingnet pre-tax profits divided by net sales expressed as a percentage. return on sales The portion of each dollar of sales that a firm is able to turn into income. of 33%. These results were a result of production from El Penon, which produced 88,000 ounces of gold at a record cash operating cost of $25 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. of gold. These cash costs are one of the lowest ever reported by a North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. gold company and are a result of improved grades. For the first quarter, Meridian produced a total of 110,588 ounces of gold at a respectable cash cost of $78 per ounce. These cash costs include higher costs associated with normal seasonality at Jerritt Canyon. Net free cash flow was strong increasing cash balances to $105.7 million. For the quarter, exploration spending of $2.0 million was expensed. As a result of exploration drilling over the last six weeks, the company further extended the 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. 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. at Vista Norte to over 500 meters along strike. Late in the quarter, several deeper holes have intersected mineralization displaced displaced see displacement. to the east by low-angle faults at Vista Norte, consistent with the displacement displacement, in psychology: see defense mechanism. Same as offset. See base/displacement. seen on the Diablada zone at Quebrada Orito. Exploration drilling continues in the Vista Norte zone along strike and at depth. On April 4th 2002, Meridian Gold, Inc. and Brancote Holdings plc, signed an agreement to merge based on a pre-conditional offer to be made to Brancote shareholders. Each Brancote share will be exchanged for 0.1886 Meridian shares. The only pre-condition is the Registration Statement by the SEC becoming effective. Following the Registration Statement becoming effective, the offer document will be mailed to the Brancote shareholders, which is expected in the Second Quarter of this year. The UK rules require responses within 20 business days. Both companies' Board of Directors recommend the transaction, and Meridian has received binding undertakings from 19% of Brancote shareholders. Summary Brian Kennedy There have been several notable people named Brian Kennedy:
Exploration Report El Penon Both surface and underground exploration drilling started by the end of February February: see month. ; by the end of March there were two surface and one underground drill rigs exploring the property. The surface drilling focused on Vista Norte has extended and confirmed the high-grade nature of the mineralization. Of the 41 holes drilled that have encountered mineralization since late in the fourth quarter of 2001, the average intercept intercept in mathematical terms the points at which a curve cuts the two axes of a graph. had a true width of 2 meters and gold grade of 14.3 g/tonne gold and 148.3 g/tonne Ag. A continuous zone of high-grade shallow mineralization has been confirmed by drilling. The zone extends for at least 500m along strike, has a vertical extent of from 75 to 100m, and averages about 2.0m in true width. The deeper portions of the mineralization below a depth of 100 to 175m are offset by low-angle faults, but ore-grade mineralization has been locally confirmed in the deeper offset portions of the vein on at least three different sections. This overall scenario is similar to the Diablada mineralization on the Quebrada Orito structure 100 to 300m to the west, which was discovered in 2001. Additional drilling is in progress to confirm the full limits and extent of the mineralization. In the underground exploration program, core drilling started late this quarter and only a limited amount of work has been completed to date. Chile A joint venture agreement was signed for an 80% interest in a project near Copiapo. Meridian can earn the 80% interest by making a total of $3.5 million in payments and spending $3.0 million over a four-year period. Fieldwork field·work n. 1. A temporary military fortification erected in the field. 2. Work done or firsthand observations made in the field as opposed to that done or observed in a controlled environment. 3. has started on the project and drilling is expected to start later in the second quarter of this year. Peru During the quarter, Meridian acquired the rights to purchase 51% of the outstanding shares of Gold Hawk hawk, name generally applied to the smaller members of the Accipitridae, a heterogeneous family of diurnal birds of prey, such as the eagle, the kite, the Old World vulture, and the secretary bird. Resources, Inc. in order to explore the Machacala Project, a low sulfidation vein district in Peru (please see footnote Text that appears at the bottom of a page that adds explanation. It is often used to give credit to the source of information. When accumulated and printed at the end of a document, they are called "endnotes." #3 for further discussion). Fieldwork has already started, and drilling is expected to begin in July July: see month. . Meridian will carry out a substantial drilling program this year. A surface access agreement was signed for the Los Pircos-Cirato joint venture (Buenaventura Buenaventura (bwā'nävānt  `rä), city (1993 pop. 194,727), W Colombia, a port on the Pacific Ocean. ). Buenaventura has started the access road,
which should be completed in the second quarter and drilling will start
as soon as drill sites are prepared.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. Surface work was initiated on the 100% owned La Silla Silla Kingdom of ancient Korea that in AD 668 consolidated other polities on the Korean peninsula under the Unified Silla dynasty (668–935). Traditionally believed to have been founded by Hyokkose in 57 BC, Silla emerged as a full-fledged kingdom in the 6th century. project in Mexico, another low sulfidation vein target. Ore-grade mineralization over mineable widths (locally bonanza Bonanza saga of the Cartwright family. [TV: Terrace, I, 111–112] See : Wild West grades), has been encountered in surface sampling on 11 of the 15 different veins sampled. Targeting is completed, and drilling is expected to start early in the 2nd quarter on this previously un-drilled property. Reconnaissance  This article or section needs copy editing for grammar, style, cohesion, tone and/or spelling.You can assist by [ editing it] now. efforts continued in Peru, Mexico, Chile, and 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. . 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 the Company, are material. Sales and Net Income Meridian reported net income of $10.3 million for the first quarter of 2002, or $0.14 per share, an increase of $0.05 on a per share basis from the first quarter of last year. Sales revenue increased about 19% over the prior year reflecting the increased production from El Penon and higher realized gold prices. The average realized gold price was $294 per ounce versus $276 per ounce in the prior year. Of the quarterly production of 110,588 ounces of gold, 109,362 ounces were sold and realized on the financial statements. Gold ounces sold were 8% higher than the prior year reflecting increased production at El Penon. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: improved significantly to 40% versus 27% realized in the first quarter of the prior year primarily reflecting higher gold prices of about $18 per ounce and lower cash costs of about $12 per ounce. Although the Company is not expected to regularly pay cash taxes until 2003, 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 FAS 109 and specifically, the guidance concerning intraperiod tax allocations, the Company is required to recognize tax expense evenly throughout the year, including the recognition of the $8.4 million deferred tax credit on Chilean income. Therefore, the Company is recognizing $2.8 million net tax expense for the first quarter. Liquidity and Capital Resources Cash to meet the Company's operating needs, to finance capital expenditures and to fund exploration activities 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 was $12.9 million in the first quarter of 2002, slightly higher than $11.5 million in the first quarter of 2001. At March 31, 2002, cash and cash equivalents totaled $105.7 million, versus $72.2 million as of March 31, 2001, a 46% increase. Capital expenditures were $2 million higher than the same period in the prior year, and totaled $4.8 million. This was the result of increased underground development at El Penon and Jerritt Canyon, and the purchase of Gold Hawk Resources, Inc. for CAD CAD: see computer-aided design. (Computer-Aided Design) Using computers to design products. CAD systems are high-speed workstations or desktop computers with CAD software. $1.3 million. Expected cash requirements for operations for 2002 include approximately $15 million for planned capital expenditures primarily directed toward additional underground development of the El Penon and Jerritt Canyon mines. Underground development at the El Penon mine of $12 million includes driving a drift drift, deposit of mixed clay, gravel, sand, and boulders transported and laid down by glaciers. Stratified, or glaciofluvial, drift is carried by waters flowing from the melting ice of a glacier. to the newly discovered Diablada zone. Exploration spending in 2002 is expected to be approximately $10 million. The Company will fund all of these requirements from cash flows from operations and existing cash reserves. Should the Company decide to develop other exploration and development properties, additional capital could be required. The Company believes that these capital requirements Capital requirements Financing required for the operation of a business, composed of long-term and working capital plus fixed assets. could be funded by existing cash reserves and by borrowing from third parties, although no assurance can be given that such borrowings will be available at rates acceptable to the Company. Discussion of Properties El Penon During the first quarter, the mine produced 88,000 ounces of gold and 1.5 million ounces of silver at a cash cost of $25 per gold ounce versus 72,000 ounces of gold and 987,000 ounces of silver at a cash cost of $50 per gold ounce in the prior first quarter. Total 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 , amortization, and reclamation Reclamation A claim for the right to return or the right to demand the return of a security that has been previously accepted as a result of bad delivery or other irregularities in the delivery and settlement process. were $69 per gold ounce. For the ninth consecutive quarter, the mill processed ore at excellent 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. and recovery rates. The first quarter average mill grade was 17.0 g/tonne gold and 295 g/tonne silver versus 13.0 g/tonne gold and 189 g/tonne silver in the first quarter of 2001. The higher grades for this quarter are a result of better grades than anticipated in the mine plan and reduced dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. . Gold recovery remained level at 95% in both this quarter and the first quarter of the prior year. Silver recoveries improved to 91% from 89%. These increased recoveries were as a result of continued improvements in the processing circuit. Jerritt Canyon During the first quarter, Meridian's share (30%) of Jerritt Canyon production was 20,000 ounces of gold at a cash cost of $308 per gold ounce versus cash costs of $213 per gold ounce for the first quarter of last year. The increase in cash costs this quarter was due to extremely wet weather in the early part of this year, which lowered mill throughput to 3,300 tons per day versus the usual 4,000 tons per day of throughput. Typically, performance at Jerritt Canyon is seasonal, with the summer months of the year outperforming the first few months, reflecting the difficulty of handling wet ore. 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 averaged 8.9 g/tonne gold. Beartrack For the first quarter, Beartrack produced 2,500 ounces of gold. These ounces of gold were taken against the reclamation and closure accruals Accruals Accounts on a balance sheet that represent liabilities and non-cash-based assets used in accrual-based accounting. These accounts include, among many others, accounts payable, accounts receivable, goodwill, future tax liability and future interest expense. , as will all future Beartrack production. Residual production from rinsing of the pad should continue to produce recoverable gold over the next three quarters on a declining basis. Year-to-Date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. Results For the three months ended March 31, cash costs per ounce decreased 13% to $78 from $90 last year largely due to higher production and grades at El Penon. Total production costs per ounce decreased 13% this year over last from $147 to $128 this year. Year-to-date gold production of 110,588 is higher than the prior year, by approximately 9%. Higher revenues for the period, of $31.1 versus $26.2 million for the same period last year, are due to increased production at El Penon, and a higher realized gold price of $294 versus $276, respectively. Net income for the period of $10.3 million is higher than $6.4 million for the same period last year due mainly to lower cash costs and a higher realized gold price. Cash provided by operating activities for the three months ended March 31, 2002, of $12.9 million, versus $11.5 million for the same period the prior year, is higher due to increased net income. Outlook For 2002, Meridian expects to produce more than 300,000 ounces of gold from El Penon at a cash cost of less than $50 per ounce; and 100,000 ounces from Jerritt Canyon at a cash cost of $220 per ounce. 1st Quarter Conference Call Meridian is hosting a simultaneous live webcast of its conference call on Wednesday, May 8th, 2002, at 9:00 AM ET through www.viavid.com. If you would like to listen to our conference call on the web, go to the home page on www.meridiangold.com and click on the link. There will be a slide show available in conjunction with the call, which will also be available for viewing on the Meridian Gold website. You will need to have Windows Media Player Digital jukebox software for Windows from Microsoft that plays a variety of audio, video and streaming formats including MP3, WMA, CD audio and MIDI. Starting with Version 6.2 in 1999, the Windows Media Rights Manager was added for securing copyrighted content. installed on your computer, and you will also be required to complete a registration page in order to logon See login. 1. (jargon) logon - login. 2. (networking) logon - In ACF/VTAM, an unformatted session-initiation request for a session between two logical units. to the webcast. Meridian Gold Inc. is a different kind of gold company because we focus on the quality of the ounces as measured by the profitability per ounce sold at spot prices, not the quantity of ounces produced. Meridian Gold Inc.'s 75.9 million common shares are traded on The Toronto Stock Exchange Toronto Stock Exchange (TSE) Canada's largest stock exchange, trading approximately 1,200 company stocks and 33 options. (MNG) and the New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (MDG). Safe Harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. Statement under the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. 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: Statements in this release that are 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. are subject to various risks and uncertainties concerning the specific factors identified above and in the corporation's periodic filings with the Ontario Securities Commission The Ontario Securities Commission (OSC) is a regulatory agency which administers and enforces securities legislation in the Canadian province of Ontario. The OSC is an Ontario Crown corporation which reports to the Ontario legislature through the Minister of Finance. and the U.S. Securities Exchange Commission. 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 corporation does not intend to update this information and disclaims any legal liability to the contrary. A "Qualified Person", as defined by the Ontario Securities Commission National Instrument 43-101, within Meridian Gold, has reviewed the exploration results contained within this release.
Meridian Gold Inc.
Consolidated Condensed Statement of Operations
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(Unaudited and in US$ millions, except per share data)
Three Months
Ended March 31
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2002 2001
Sales 31.1 26.2
Costs and Expenses
Cost of Sales 8.8 8.8
Depreciation, depletion & amortization 5.4 5.1
Reclamation 0.2 0.2
Exploration costs 2.0 3.5
Selling, general and administrative 1.7 1.3
Other expenses/(income) 0.3 0.1
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Total costs and expenses 18.4 19.0
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Operating income 12.7 7.2
Interest income 0.4 0.2
Gain on Sale of Fixed Assets - 1.8
Tax Benefit (expense) (2.8) (2.8)
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Net income 10.3 6.4
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Income per common share basic 0.14 0.09
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Income per common share fully diluted 0.13 0.09
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Number of common shares used in earnings
per share computations (millions)-Basic 75.9 74.6
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Number of common shares used in earnings
per share computations (millions)-Fully Diluted 77.4 75.5
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See accompanying notes to consolidated interim financial
statements.
Meridian Gold Inc.
Operating Data (Unaudited)
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Three Months Ended
Mar. 31
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2002 2001
El Penon Mine
Gold Production 87,898 72,272
Silver Production 1,456,877 986,796
Tonnes ore mined (thousands) 162 177
Mill tonnes processed (thousands) 169 182
Avg. mill gold ore grade (grams/tonne) 17.0 13.0
Avg. mill silver ore grade (grams/tonne) 295 189
Mill gold recovery 95% 95%
Mill silver recovery 91% 89%
Cash cost of production/ ounce $25 $50
Total production cost/ ounce $69 $105
Jerritt Canyon Joint Venture
Gold production (Meridian Gold's 30% share) 20,227 23,350
Tonnes ore mined (100%, thousands) 218 191
Mill tonnes processed (100%, thousands) 268 337
Avg. mill ore grade (grams/tonne) 8.9 8.1
Mill recovery 87% 89%
Cash cost of production/ ounce $308 $213
Total production cost/ ounce $383 $276
Beartrack Mine
Gold production - heap leach 2,463 5,648
Company Totals
Ounces of gold produced 110,588 101,270
Ounces of gold sold 109,362 101,318
Avg. realized price/ ounce $294 $276
Cash cost of production/ ounce $78 $90
Total cost of production/ ounce $128 $147
Note: Cash and total cost per gold ounce are net of silver
by-product credits
Meridian Gold Inc.
Consolidated Condensed Balance Sheets
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(Unaudited and in US$ millions)
March 31 December 31
2002 2001
Assets
Current Assets
Cash and cash equivalents $105.7 $97.3
Trade & other receivables 5.8 1.7
Inventories 7.0 7.3
Deferred tax asset 11.1 14.9
Other current assets 2.3 1.5
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Total current assets $131.9 $122.7
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Property, plant and equipment, net 91.2 93.5
Other assets 2.9 1.3
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Total Assets $226.0 $217.5
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable, trade & other 8.4 5.2
Accrued and other liabilities 17.3 22.8
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Total current liabilities $25.7 $28.0
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Deferred tax liability 6.2 6.5
Other long-term liabilities 35.8 35.8
Shareholders' equity 158.3 147.2
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Total liabilities and shareholders'
equity $226.0 $217.5
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See accompanying notes to consolidated interim financial
statements.
Meridian Gold Inc.
Quarterly Comparative Statements of Retained Earnings
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(Unaudited and in US$ millions)
March 31 December 31
2002 2001
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Retained earnings at the beginning of
period $66.7 $28.0
Net Income $10.3 $38.7
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Retained earnings at the end of period $77.0 $66.7
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Meridian Gold Inc.
Consolidated Condensed Statement of Cash Flows
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(Unaudited and in US$ millions)
Three Months
Ended March 31
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2002 2001
Net Income (loss) $10.3 $6.4
Provision for depreciation, depletion and
amortization 5.4 5.1
Gain on Sale of Assets - (1.8)
Stock compensation expense 0.5 0.3
Changes in current assets and
liabilities, net (3.1) (3.1)
Changes in long-term assets and
liabilities, net (0.2) 4.6
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Net cash provided by operating activities 12.9 11.5
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Cash flow from investing activities
Capital spending (4.8) (2.8)
Proceeds from sale of assets - 1.8
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Net cash used in investing activities (4.8) (1.0)
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Cash flow from financing activities
Repayment of long-term borrowings - (1.9)
Proceeds from sale of common stock 0.3 0.4
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Net cash used in financing activities 0.3 (1.5)
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Increase in cash and cash equivalents 8.4 9.0
Cash and cash equivalents, beginning of period 97.3 63.2
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Cash and cash equivalents, end of period $105.7 $72.2
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Notes to Consolidated Condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. Interim Financial Statements 1. Basis of Presentation The unaudited interim period consolidated financial statements Consolidated Financial Statements The combined financial statements of a parent company and its subsidiaries. Notes: Because consolidated financial statements present an aggregated look at the financial position of a parent and its subsidiaries, they enable you to gauge have been prepared by the Company in accordance 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 . The preparation of financial data is based on accounting policies and practices consistent with those used in the preparation of the audited annual consolidated financial statements. The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements for the year ended December 31, 2001 as certain information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Ontario Securities Commission for interim reporting. These unaudited interim consolidated financial statements reflect all normal and recurring re·cur intr.v. re·curred, re·cur·ring, re·curs 1. To happen, come up, or show up again or repeatedly. 2. To return to one's attention or memory. 3. To return in thought or discourse. adjustments, which are, in the opinion of management, necessary for a fair presentation of the respective interim periods presented. 2. Hedging During the first quarter, the company recognized $485,000 of the deferred revenue on expiring ex·pire v. ex·pired, ex·pir·ing, ex·pires v.intr. 1. To come to an end; terminate: My membership in the club has expired. 2. gold hedge contracts in the accompanying Consolidated Statement of Operations See Income statement. . Additionally, as of April 19, 2002 the company fixed its silver lease rates in accordance with hedge program for all 2002 deliveries and early 2003 deliveries netting the Company an additional 25,000 ounces of silver. 3. Recognition of deferred tax credit from IMDI IMDI International Management and Development Institute acquisition As of December 31, 2001, the Company had a net deferred tax credit of $8.4 million. This entire credit is being recognized in the FAS 109 estimated tax Federal and state tax laws require a quarterly payment of estimated taxes due from corporations, trusts, estates, non-wage employees, and wage employees with income not subject to withholding. provision for 2002. This results in an effective tax rate of 19.2% on Chilean and Barbados income, and an overall corporate effective tax rate of 26.5%. In accordance with FAS 109 and specifically, the guidance concerning intraperiod tax allocations, the Company will record tax expense based on these rates evenly throughout the year. 4. Purchase of Gold Hawk Resources, Inc. On March 25, 2002, Meridian signed an agreement to purchase 6.5 million common shares of Gold Hawk Resources, Inc. ("Gold Hawk") for CAD$1.3 million. Meridian also received 6.5 million warrants, which entitle en·ti·tle tr.v. en·ti·tled, en·ti·tling, en·ti·tles 1. To give a name or title to. 2. To furnish with a right or claim to something: the holder to acquire one common share of Gold Hawk at a price of CAD$.20 for a period of 18 months. Additionally, Meridian will advance CAD$1.3 million for a term of 12 months for a convertible secured debenture debenture (dəbĕn`chər), document acknowledging indebtedness. In Great Britain a debenture is practically the same as a bond, and debenture stock is similar to preferred stock. of Gold Hawk, convertible at the option of Meridian into 6.5 million common shares of Gold Hawk, representing a conversion price of CAD$0.20 per share. Upon conversion, each common share will be accompanied by one warrant, which entitles the holder to acquire one additional common share of Gold Hawk at a price of CAD$0.20 for a period of two years from the date of the issuance of the debenture. Of the CAD$1.3 million from the issuance of the common shares, CAD$1.1 million will be spent by Meridian and Gold Hawk on the exploration and development of the Machacala Project, a high grade gold and silver vein system in Northern Peru. The work will be managed by Meridian. The remaining CAD$.2 million will be retained by Gold Hawk for general working capital. If Meridian exercises the right to convert the CAD$1.3 debenture, CAD$1.2 million will be spent by Gold Hawk on the Machacala project, and the remainder will be added to Gold Hawk's working capital. In the event that Meridian should convert the debenture and exercise all warrants, it will have invested an aggregate of CAD$5.2 million in Gold Hawk and own 26 million shares, or 51% of the outstanding shares of the company. |
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