Meridian Gold Reports Fourth Quarter 2002 Results.Business Editors RENO, Nevada----(BUSINESS WIRE)--Feb. 24, 2003 Meridian Meridian (mərĭd`ēən), city (1990 pop. 41,036), seat of Lauderdale co., E Miss., near the Ala. line; settled 1831, inc. 1860. Gold: (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) )(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 .TO): (All dollar amounts in U.S. currency) Highlights -- El Penon gold production of 78,000 ounces at a cash cost of $48 per ounce -- Net income for the quarter of $10.7 million, or $0.11 per share -- Year to date net income of $41.5 million, or $0.48 per share -- Unhedged realized gold prices increased 11% to $329 per ounce -- Cash balances grow by 10% to $135.7 million during the quarter -- Profitability remains strong at 31% of sales revenue -- El Penon pours its millionth ounce on February 20, 2003 El Penon Continues to Generate Superior Earnings and Cash Flow Operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. increased 8% to $12.8 million mainly as a result of higher gold prices. The Company was able to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. these rising gold prices because it remains 100% unhedged. As a result of strong cash flows from the El Penon project, cash balances grew 10% to $135.7 million. Meridian produced a total of 107,400 ounces of gold at a cash cost of $93 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. during the quarter. As expected, El Penon continued to generate strong cash flows by producing 78,000 ounces of gold at a cash cost of $48 per ounce. The Company's net income remains strong with 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 31%. Exploration spending of $3.5 million was expensed. Considerable exploration efforts were undertaken at our new project Esquel in Argentina, El Penon in Chile, La Silla in Mexico, and the Los Pircos project in Peru. 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. 4th Quarter 2002 versus 4th Quarter 2001 Meridian reported net income of $10.7 million for the fourth quarter of 2002, or $0.11 per share, versus $12.3 million, or $0.16 per share for the fourth quarter of 2001, which represents a 13% decrease in net income, reflecting higher tax expenses recognized in the fourth quarter of 2002. The lower fourth quarter 2002 earnings per share is primarily the result of the additional 22 million shares issued for the Brancote transaction. Sales revenue increased $2.7 million, or 8% over the fourth quarter of the prior year reflecting higher realized gold prices. The average realized gold price was $329 per ounce versus $297 per ounce in the prior year's comparable period, an increase of 11%. While quarterly production totaled 107,413 ounces of gold, 107,824 ounces were sold and realized in the financial statements. Gold ounces sold were 6% less than the fourth quarter of 2001 reflecting decreased production at El Penon due to a few days during the quarter when the plant was down for scheduled maintenance. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: remained stable compared to the fourth quarter of 2001. Higher costs realized at Jerritt Canyon and maintenance at the mill were offset by the higher average realized gold price during fourth quarter 2002. The Company reported a $2.6 million tax expense for the fourth quarter of 2002 vs. $0.1 million for the prior year. The Company has reflected a 20% overall effective tax rate during the quarter. Full Year 2002 versus Full Year 2001 Revenues increased 16% over the prior year, to $133.6 million from $115.4 million. This increase reflects a higher realized gold price ($315 per ounce in 2002 versus $283 per ounce in 2001). During 2002, cash costs per ounce increased slightly from $83 to $87, which is due to higher mining costs at Jerritt Canyon. This also caused a 2% increase in total production costs per ounce this year over last, from $138 to $141 this year. Net income for the period of $41.5 million is 7% higher than $38.7 million for last year due mainly to rising gold prices. Cash provided by operating activities for the year of $71 million, versus $70 million last year, is higher due to increased net income. Meridian reported a $13.3 million tax expense in 2002, compared to $2.9 million for the corresponding period of 2001. This increase is represented by the tax provision of a 25% overall effective tax rate for 2002. 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 $71.1 million in 2002, 2% higher than $70.0 million in 2001 primarily reflecting higher net income. At December 31, 2002, cash and cash equivalents totaled $135.7 million, versus $97.3 million as of December 31, 2001, representing a 39% increase. Capital expenditures for the year were $37.5 million, primarily a result of the Brancote acquisition, and development capital at El Pe non and Jerritt Canyon. Expected cash requirements for operations for 2003 include $17.6 million for planned capital expenditures primarily directed toward additional underground development of the El Penon and Jerritt Canyon mines. In addition, Meridian expects to invest $100 million in the Esquel project over the next two years. Underground development at the El Penon mine includes continued development at the Diablada and Vista Norte zones. Exploration spending for 2003 is expected to be approximately $12 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 fourth quarter, the mine produced 78,333 ounces of gold and 1.0 million ounces of silver at a cash cost of $48 per gold ounce versus 88,342 ounces of gold and 1.4 million ounces of silver at a cash cost of $37 per gold ounce during the equivalent period in 2001. 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 $103 per gold ounce. For the twelfth consecutive quarter, the mill processed ore at excellent throughput and recovery rates. The fourth quarter average mill grade was 15.8 g/tonne gold and 220 g/tonne silver versus 16.2 g/tonne gold and 272 g/tonne silver in the fourth quarter of 2001. Stockpile stock·pile n. A supply stored for future use, usually carefully accrued and maintained. tr.v. stock·piled, stock·pil·ing, stock·piles To accumulate and maintain a supply of for future use. levels at the end of the year were 152,000 tonnes. During 2002, 679,000 tonnes were mined from open-pit and underground operations Underground Operations is a Toronto-based independent punk rock record label. Operated by Mark Spicoluk, former Closet Monster member, this label is one of the most cutting edge independent labels in Canada. , with 582,000 tonnes coming from underground (at grades of 18g/tonne), 57,000 tonnes coming from open-pit (a grades of 10 g/tonne), and the remainder consisting of internal waste ore from underground operations). Lower grades for this quarter were expected and factored into the mine plan, which includes production sourced from the lower grade open pit mine at Orito Norte. However, year-over-year, gold grades increased 7% due to improvements made in drill and blast design, including a reduction in the size of a blast. Gold recovery improved to 96%, slightly higher than the 95% recovery in the fourth quarter of last year. Silver recoveries improved to 92% from 91% for the corresponding timeframe. This improvement is the result of the installation of a fifth 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 allowing in increase in retention time from 24 to 36 hours. Jerritt Canyon During the fourth quarter, Meridian's share (30%) of Jerritt Canyon production was 26,843 ounces of gold at a cash cost of $223 per gold ounce versus 23,069 ounces at cash costs of $252 per gold ounce for the fourth quarter of last year. Cash costs have decreased considerably over the fourth quarter of the prior year, primarily as a result of extremely wet weather experienced in December 2001, which lowered mill throughput to 3,400 tons per day versus the usual 4,000 tons per day. 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 8.6 grams/tonne gold. Esquel Information concerning the technical aspects and environmental safeguards of the project has been made available to the public. The Esquel project meets or exceeds Argentine Argentine having some relationship with the country Argentina. Argentine tick margaropuswinthemi. Argentine tortoise geochelonechilensis. mining standards, which have been designed to meet World Bank standards. North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. environmental design by Vector Engineering, Inc. of Grass Valley, California Grass Valley is a city in Nevada County, California, United States. The population was 10,922 at the 2000 census. Geography Grass Valley is located at (39.219215, -121.058414)GR1. and process enhancements by Fluor-Signet of Perth, Western Australia This article is about the metropolitan area of Perth, Western Australia. For the local government area, see City of Perth. Perth is the capital of the Australian state of Western Australia. will ensure that the Esquel project will perform at these high standards. During the fourth quarter, Meridian completed the Argentine equivalent of an Environmental Impact Study (EIS (1) (Executive Information System) An information system that consolidates and summarizes ongoing transactions within the organization. It provides top management with all the information it requires at all times from internal and external sources. ) and submitted it to the provincial 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 of the Chubut Province Chubut is a province in the southern part of Argentina, that lies between the 42nd Parallel South (forming the border with the Río Negro Province) and 46th Parallel South (bordering Santa Cruz Province), the Andes range separating Argentina from Chile, and the Atlantic ocean. . This review is expected to be completed during the second quarter of 2003. Engineering work on the facilities and mine planning continues toward final design and costs. The project continues to be a focus of the region as both supporters and opponents of the project express their opinions. Presently, a mandatory, but non-binding vote on the project will occur in the City of Esquel, while an earlier City Council Ordinance A law, statute, or regulation enacted by a Municipal Corporation. An ordinance is a law passed by a municipal government. A municipality, such as a city, town, village, or borough, is a political subdivision of a state within which a municipal corporation has been proposal to ban cyanide cyanide (sī`ənīd'), chemical compound containing the cyano group, -CN. Cyanides are salts or esters of hydrogen cyanide (hydrocyanic acid, HCN) formed by replacing the hydrogen with a metal (e.g., sodium or potassium) or a radical (e.g. was vetoed. Opponents of the project challenged the Company's legal rights to continue exploration under Provincial permits in the local courts. The local judge has issued a "cease and desist Cease and desist (also called C & D) is a legal term used primarily in the United States which essentially means "to halt" or "to end" an action ("cease") and to refrain from doing it again in the future ("desist"). ruling" on exploration, which was immediately appealed by the Provincial Authorities to the Supreme Court of the Province of Chubut, in addition to a local appeal filed by Meridian. This higher court stayed the "cease and desist ruling" nullifying the lower court and will rule on the case. Meridian believes the judge exceeded his authority on a Provincial legal issue and that all proper and legal environmental permits had been obtained by the Company prior to commencing its work. During the end of February the Federal Governmental Authorities have started a process inviting the United Nations Educational, Scientific and Cultural Organization (UNESCO UNESCO: see United Nations Educational, Scientific, and Cultural Organization. UNESCO in full United Nations Educational, Scientific and Cultural Organization ) representatives and the Office of the Bishop of Comodoro Rivadavia Comodoro Rivadavia (kōmōthō`rō rēvätha`vyä), city (1991 pop. 124,151), Chubut prov., S Argentina, on the Gulf of San Jorge, an inlet of the Atlantic Ocean. to assist the dialog between Meridian Gold and the opponents to the Esquel project. Meridian Gold and the provincial agencies are continuing to move forward with the technical reviews on the Argentine equivalent of an Environment Impact Statement. The public audience scheduled for March 29th could be delayed pending the completion of water studies by Meridian and provincial agencies. The Company's open-pit mine and gold extraction Gold extraction or recovery from its ores may require a combination of comminution, mineral processing, hydrometallurgical, and pyrometallurgical processes to be performed on the ore. facility will be technologically sophisticated and environmentally sensitive to meet all the standards required by Argentine regulations in the Mining Code Exploration work is focused primarily on earlier identified reserves and resources for completion of project feasibility work. Initial results are encouraging. Exploration Report Mexico La Silla is an exploration project we are drilling in the Sinaloa Province. The geology geology, science of the earth's history, composition, and structure, and the associated processes. It draws upon chemistry, biology, physics, astronomy, and mathematics (notably statistics) for support of its formulations. is that of a lower volcanic group andesite andesite Any member of a large family of rocks that occur in most of the world's volcanic areas, mainly as surface deposits and to a lesser extent as dikes and small plugs. typical of the Sierra Madre Sierra Madre, city, United States Sierra Madre (sēĕr`ə mä`drā), residential city (1990 pop. 10,762), Los Angeles co., S Calif., at the foot of Mt. Wilson; inc. 1907. There is some light manufacturing. , with rhyolite rhyolite, fine-grained light-colored acidic volcanic rock. Rhyolite is chemically the equivalent of granite, and is thus composed primarily of quartz and orthoclase feldspar with subordinate amounts of plagioclase feldspar, biotite mica, amphiboles, and pyroxenes. dikes and banded-rhyolite intrusives. The main vein has been faulted in several places to create two major veins, the Quila and the Encima vein zone. Phase II drilling at the La Silla project commenced on December 3, and is approximately 33% complete. This phase will include a total of 38 holes over 4,800 meters. At the end of the fourth quarter, 11 holes totaling 1,661 meters had been drilled in the Quila, Mina Grande, Encima, Guerra and El Oro
To date, our best hole on the project was about 1 meter of 98 g/tonne gold. Peru Los Pircos Meridian is earning a 51% ownership of this project in Peru from Compa nia de Minas Minas may refer to:
The Los Pircos property, which is located about 100 kilometers north of Trujillo in Peru, includes at least 9 veins tracing about 20 kilometers along the surface. Last quarter, Meridian presented the drill results of the first 6 holes which were very encouraging, with bonanza Bonanza saga of the Cartwright family. [TV: Terrace, I, 111–112] See : Wild West grade gold and silver values. During the fourth quarter, an additional 11 holes have been drilled. The results of all drill holes define an area, 150 meters in length and at least 150 meters in depth, that has three subparallel veins with average interpreted true widths of 1.0 to 1.8 meters. The remaining drill results identified additional narrow veins that need further definition. In November, the drill program for the year was completed as the rainy rain·y adj. rain·i·er, rain·i·est Characterized by, full of, or bringing rain. rain  i·ness n.Adj. season commenced. El Penon During the quarter, we completed a drift to the Diablada zone, and we continued development in Vista Norte. In the local targets exploration program, seven different areas were recognized, and targets of highest interest were identified in the Martillo Flat and Pampa Pampa (păm`pə), city (1990 pop. 19,959), seat of Gray co., extreme N Tex. This cow town on the Panhandle plains still ships cattle and wheat and packs meat, but the discovery of oil and gas has made it an industrial center with refineries and Campamento areas. The early results of the Martillo Flat drilling suggest the existence of three separate, subparallel vein structures. 2003 Outlook For the coming year, Meridian expects to produce about 320,000 ounces of gold from El Penon at a cash cost of less than $55 per ounce. Processed tonnes will be 730,000 tonnes at an average grade of 14.7g/tonnes, sourced by 70% from underground, 23% from open-pit, and 7% from stockpile. Meridian expects to produce 90,000 ounces from Jerritt Canyon at a cash cost of $270 per ounce. During first quarter of 2003, Meridian will continue the exploration program in Argentina and finalize fi·nal·ize tr.v. fi·nal·ized, fi·nal·iz·ing, fi·nal·iz·es To put into final form; complete or conclude: "They have jointly agreed ... the feasibility study The analysis of a problem to determine if it can be solved effectively. The operational (will it work?), economical (costs and benefits) and technical (can it be built?) aspects are part of the study. Results of the study determine whether the solution should be implemented. on the Esquel mine. Fixed costs fixed costs, n.pl the costs that do not change to meet fluctuations in enrollment or in use of services (e.g., salaries, rent, business license fees, and depreciation). including exploration and corporate G&A will be similar levels to 2002. 4th Quarter Conference Call Meridian is hosting a simultaneous live webcast of its conference call on Tuesday, February 25, 2003, at 12:00p.m. 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. has a total of 99.0 million common shares trading 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.
Meridian Gold Inc.
Consolidated Condensed Statement of Operations
(Unaudited and in US$ millions, except per share data)
Three Months Twelve Months
Ended December 31 Ended December 31
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2002 2001 2002 2001
Sales $34.6 $31.9 $133.6 $115.4
Costs and Expenses
Cost of Sales 9.9 8.5 37.9 34.4
Depreciation, depletion
& amortization 5.5 5.4 22.8 22.5
Reclamation 0.2 0.2 0.8 0.8
Exploration costs 3.5 3.3 10.7 12.3
Selling, general and
administrative 2.3 2.3 7.5 7.3
Other expenses/(income) 0.4 0.3 1.1 0.2
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Total costs and expenses 21.8 20.0 80.8 77.5
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Operating income 12.8 11.9 52.8 37.9
Interest income 0.4 0.5 1.8 1.8
Gain on Sale of Fixed Assets 0.1 - 0.2 1.9
Tax Benefit (expense) (2.6) (0.1) (13.3) (2.9)
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Net income $10.7 $12.3 $41.5 $38.7
Income per common share $0.11 $0.16 $0.48 $0.52
Number of common shares
used in earnings per share
computations (millions) 99.0 75.8 86.7 75.1
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See accompanying notes to consolidated interim financial statements.
Meridian Gold Inc.
Operating Data (Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
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2002 2001 2002 2001
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El Penon Mine
Gold Production 78,333 88,342 328,061 318,012
Silver Production 1,040,521 1,419,316 5,077,198 4,751,758
Tonnes ore mined
(thousands) 181 169 640 707
Mill tonnes processed
(thousands) 161 178 688 715
Avg. mill gold ore
grade (grams/tonne) 15.8 16.2 15.6 14.6
Avg. mill silver ore
grade (grams/tonne) 220 272 253 232
Mill gold recovery 96% 95% 95% 94%
Mill silver recovery 92% 91% 91% 89%
Cash cost of
production/ounce $ 48 $ 37 $ 35 $ 43
Total production
cost/ounce $ 103 $ 80 $ 84 $ 94
Jerritt Canyon Joint
Venture
Gold production
(Meridian Gold's 30%
share) 26,843 23,069 99,632 98,042
Tonnes ore mined
(100%, thousands) 279 280 1,029 898
Mill tonnes
processed (100%,
thousands) 364 307 1,331 1,333
Avg. mill ore grade
(grams/tonne) 8.6 8.9 8.8 8.7
Mill recovery 89% 88% 88% 88%
Cash cost of
production/ ounce $ 223 $ 252 $ 257 $ 218
Total production
cost/ ounce $ 299 $ 327 $ 331 $ 285
Beartrack Mine
Gold production -
heap leach 2,237 6,088 8,653 18,531
Gold production with
cash costs - - - -
Cash cost of
production/ ounce $ - $ - $ - $ -
Total production
cost/ ounce $ - $ - $ - $ -
Company Totals
Ounces of gold
produced 107,413 117,499 436,346 434,585
Ounces of gold sold 107,824 114,373 436,363 430,533
Avg. realized
price/ ounce $ 329 $ 297 $ 315 $ 283
Cash cost of
production/ ounce $ 93 $ 80 $ 87 $ 83
Total cost of
production/ ounce $ 153 $ 128 $ 141 $ 138
Note: Cash and total cost per gold ounce are net of silver by-product
credits.
Meridian Gold Inc.
Consolidated Condensed Balance Sheets
(Unaudited and in US$ millions)
December December 31
2002 2001
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Assets
Current Assets
Cash and cash equivalents $121.8 $97.3
Restricted cash 13.9 -
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Total cash and cash equivalents 135.7 97.3
Trade & other receivables 3.6 1.7
Inventories 5.9 7.3
Deferred tax asset 3.4 14.9
Other current assets 1.6 1.5
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Total current assets $150.2 $122.7
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Property, plant and equipment, net 549.3 93.5
Deferred charges 1.9 0
Other assets 1.9 1.3
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Total Assets $703.3 $217.5
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Liabilities and Shareholders' Equity
Current Liabilities
Accounts payable, trade & other $7.3 $5.2
Accrued and other liabilities 14.8 22.8
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Total current liabilities $22.1 $28.0
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Deferred tax liability 159.1 6.5
Other long-term liabilities 28.9 35.8
Shareholders' equity 493.2 147.2
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Total liabilities and shareholders' equity $703.3 $217.5
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See accompanying notes to consolidated interim financial statements.
Meridian Gold Inc.
Quarterly Comparative Statements of Retained Earnings
(Unaudited and in US$ millions)
December 31 December 31
2002 2001
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Retained earnings at the beginning of period $66.7 $28.0
Net Income $41.5 $38.7
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Retained earnings at the end of period $108.2 $66.7
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Meridian Gold Inc.
Consolidated Condensed Statement of Cash Flows
(Unaudited and in US$ millions)
Three Months Twelve Months
Ended Ended
December 31 December 31
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2002 2001 2002 2001
Net Income (loss) $10.7 $12.3 $41.5 $38.7
Provision for depreciation,
depletion and amortization 6.2 5.4 22.8 22.5
Gain on sale of assets, net (0.1) 0.1 (0.2) (1.9)
Stock compensation expense 0.2 0.4 1.7 1.4
Changes in current assets and
liabilities, net - 0.1 1.0 9.3
Deferred taxes and other, net 5.4 - 4.3 -
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Net cash provided by operating activities 22.4 18.3 71.1 70.0
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Cash flow from investing activities
Capital spending (7.4) (4.7) (37.5) (24.7)
Proceeds from sale of assets - - - 2.0
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Net cash used in investing activities (7.4) (4.7) (37.5) (22.7)
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Cash flow from financing activities
Repayment of long-term borrowings - - - (18.0)
Deposit of restricted funds for collateral (3.3) (13.8)
Proceeds from sale of common stock 0.6 0.2 4.8 4.8
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Net cash used in financing activities (2.7) 0.2 (9.0) (13.2)
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Increase in cash and cash equivalents 12.3 13.8 24.6 34.1
Cash and cash equivalents,
beginning of period 123.4 83.5 97.3 63.2
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Cash and cash equivalents, end of period 121.9 97.3 121.9 97.3
Restricted cash, end of period 13.8 - 13.8 -
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Total cash and cash equivalents,
end of period $135.7 $97.3 $135.7 $97.3
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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 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 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, 2002 as certain information and note disclosures normally included in financial statements prepared in accordance with Canadian 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 fourth quarter, the company recognized $485,000 in sales of deferred revenue on closed gold hedge contracts in the accompanying Consolidated Statement of Operations See Income statement. . This hedging was required by loan agreements. 3. Recognition of deferred tax credit from IMDI IMDI International Management and Development Institute acquisition During 2002, the Company recognized the remaining tax benefit from the IMDI acquisition. This results in an effective tax rate of 19% on Chilean income, and an overall effective tax rate on book earnings of 25%. In accordance with accounting guidance concerning intraperiod tax allocations, the Company will recorded tax expense based on these expected rates throughout the year. 4. Acquisition On July 3, 2002, the Company announced a wholly unconditional HEIR, UNCONDITIONAL. A term used in the civil law, adopted by the Civil Code of Louisiana. Unconditional heirs are those who inherit without any reservation, or without making an inventory, whether their acceptance be express or tacit. Civ. Code of Lo. art. 878. UNCONDITIONAL. share purchase offer for Brancote Holdings Plc. (Brancote), a London listed company listed company n → compañía cotizable listed company n → société cotée en Bourse listed company list n → on the AIM (Alternative Investment Market). In accordance with the terms of the agreement, the Company purchased all the outstanding shares of Brancote in a share for share exchange wherein where·in adv. In what way; how: Wherein have we sinned? conj. 1. In which location; where: the country wherein those people live. 2. each shareholder of record of Brancote Holdings Plc received .1886 common shares of Meridian Gold Inc. in exchange for each common share of Brancote. The balance sheet and results from operations have been consolidated effective July 3, 2002. The allocation of the purchase price, based on consideration paid, is summarized as follows:
December 31, 2002
in millions
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Net assets acquired:
Cash $0.4
Receivables 0.9
Deferred tax asset 5.9
PP&E, net 453.4
Current liabilities (1.0)
Deferred income taxes (148.5)
Minority interest (1.0)
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Total Consideration $310.1
The acquisition of Brancote has been accounted for under the purchase method of accounting, and as such, the fair value of the consideration given by Meridian was allocated to the assets and liabilities acquired based upon the fair values of such assets and liabilities at the time of purchase. The total consideration includes the value of the 22.0 million shares of common stock issued, which was calculated using a thirty-day average prior to the date of announcement (April 3, 2002), and was valued at $13.56 using the stock price on the day prior to the date of announcement, plus total transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). . Further review of the purchase accounting and the devaluation devaluation, decreasing the value of one nation's currency relative to gold or the currencies of other nations. It is usually undertaken as a means of correcting a deficit in the balance of payments. of the Argentinian peso resulted in an additional deferred tax liability of $52.4 million being recognized in the fourth quarter. For further information please see Meridian's F-4 filing with the SEC on April 19, 2002. 5. Restricted cash At December 31, 2002, the Company had $13.8 million classified as restricted cash. This represents funds on deposit that has been pledged as backing for letters of credit issued for reclamation bonding. 6. Stock-Based Compensation The Company utilizes a fair value method of accounting for employee stock options and similar equity instruments. This method permits an entity to choose to recognize compensation expense by adopting the fair value method of accounting or continue to measure compensation costs using the intrinsic value Intrinsic Value 1. The value of a company or an asset based on an underlying perception of the value. 2. For call options, this is the difference between the underlying stock's price and the strike price. methods. The Company accounts for stock options granted to employees and directors of the Company under the intrinsic value method. Stock options granted to non-employees under the Company's Stock Option Plans are accounted for under the fair value method. Had the Company reported compensation costs as determined by the fair value method of accounting for option grants to employees and directors, net income and net income per common share would have been the pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma amounts indicated in the following table:
Quarter Ended Fiscal Year Ended
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December 31, 2002 December 31, 2002
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(In millions) (In millions)
Net income - as reported $10.7 $41.5
Compensation expense - current
period option grants (.1) (.2)
Net income - pro forma $10.6 $41.3
Net income per common share -
as reported $.11 $.48
Net income per common share -
pro forma $.11 $.48
The fair value of stock options granted was calculated using the Black-Scholes option-pricing model Black-Scholes option-pricing model A model for pricing call options based on arbitrage arguments. Uses the stock price, the exercise price, the risk-free interest rate, the time to expiration, and the expected standard deviation of the stock return. based on the following weighted average assumptions for the quarter and fiscal year ended December 31, 2002: Expected volatility 59.5% Expected dividend yield 0.0% Risk free interest rate, average 2.3% Expected life of options granted 5 years Future pro forma compensation cost by fiscal year, assuming no additional grants by the Company to employees and directors, is as follows:
Fiscal Year Ended Pro Forma Compensation
September 30, Expense
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(In millions)
2002 $ 0.2
2003 0.6
2004 0.6
2005 0.4
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