Meridian Gold Reports Third 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)--Oct. 22, 2002 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): Highlights -- El Penon gold production of 78,000 ounces at a cash cost of $43 per ounce -- Net income of $9.2 million, or $0.10 per share -- Unhedged realized gold prices increased 13% to $320 per ounce -- Strong cash flows financed $20 million in capital development primarily at Esquel -- New gold discovery confirmed by drilling at Los Pircos in Peru -- The high-grade Vista Norte zone continues to grow at El Penon Meridian Gold, Inc. generated net income of $9.2 million, or $0.10 per share for the quarter. Earnings per share fell when compared to the prior quarter primarily reflecting the issuance of about 22 million new Meridian shares at the closing of the merger with Brancote Holdings PLC early in the third quarter. During the quarter, Meridian produced a total of 103,918 ounces of gold at a cash cost of $101 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. . As expected, El Penon continued to generate strong cash flows by producing 78,000 ounces of gold at a cash cost of $43 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 27%. For the third quarter, capital of $20 million was invested in the Company's properties including $14 million at 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 . Of the $14 million, about $10 million were closing costs Closing Costs The numerous expenses (over and above the price of the property) that buyers and sellers normally incur to complete a real estate transaction. Costs incurred include loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, associated with the merger and the remaining spending covered land payments, surface rights, and the start of 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. . Following the conclusion of the merger with Brancote Holdings in July July: see month. , Brancote ordinary shares were de-listed from trading in the Alternative Investment Market in August. Exploration spending of $2.5 million was expensed. Considerable exploration efforts were undertaken at El Penon, at the Machacala project in Peru, and at the Los Pircos project. 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. intercepts at El Penon continue to increase the size of the Vista Norte zone. Despite significant additional spending this quarter, cash balances declined only slightly to $123.4 million, as a result of strong cash flows from the El Penon project. Brian Kennedy There have been several notable people named Brian Kennedy:
Esquel Update On September September: see month. 23rd, Meridian started some step-out and limited infill in·fill n. 1. The use of vacant land and property within a built-up area for further construction or development, especially as part of a neighborhood preservation or limited growth program. 2. drilling on the main Galadriel-Julia vein system. Towards the end of October October: see month. , two more drill rigs will be brought in to start drilling the Ungoliant Ungoliant is a supporting character in J.R.R. Tolkien's legendarium. In The Silmarillion, Ungoliant was an evil spirit in the form of a spider who dwelt in Avathar in the First Age. and Antonia Antonia can refer to the girl's name Antonia, which (in English) is pronounced anne-TONE-eeh-yah. It is of Latin origin. It is the feminine form of Anthony, used since classical times, when it was a common Roman feminine family name. vein systems. The Ungoliant vein has been drilled over a strike length of 250 meters with two earlier drill intercepts including 9 meters of 34.3 g/tonne gold and 8 meters of 15.8 g/tonne gold. The Ungoliant vein appears to have strike length of almost 2 kilometers. The feasibility study and permitting process are underway with results expected by early next year. Fluor Signet has been awarded the engineering contract. Meridian expects construction to commence in 2003 with commercial production in 2004. Exploration Report Los Pircos During the quarter, six core drill holes intercepted potential ore-grade 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 the Los Pircos project in Peru with several holes intersecting in·ter·sect v. in·ter·sect·ed, in·ter·sect·ing, in·ter·sects v.tr. 1. To cut across or through: The path intersects the park. 2. bonanza Bonanza saga of the Cartwright family. [TV: Terrace, I, 111–112] See : Wild West grades. Meridian is earning a 51% ownership of the project from Compania de Minas Minas may refer to:
 `rä), city (1993 pop. 194,727), W Colombia, a port on the Pacific Ocean. SAA (Systems Application Architecture) A set of interfaces designed to cross all IBM platforms from PC to mainframe. Introduced by IBM in 1987, SAA includes the Common User Access (CUA), the Common Programming Interface for Communications (CPI-C) and Common Communications by spending $2.7
million in exploration. Meridian may purchase an additional 14% by
paying Buenaventura another $1 million. On October 5th, Meridian by
having invested $0.7 million in the property, became the operator.The Los Pircos property, which is located about 100 kilometers north of Trujillo Trujillo, city, Peru Trujillo (tr hē`yō), city (1993 pop. 256,744), capital of La Libertad dept., NW Peru, in a fertile oasis of the coastal desert. , includes at least 9 veins tracing about 20 kilometers
along the surface. The results show a number of intercepts in the Ramal ramal /ra·mal/ (ra´m'l) pertaining to a ramus. ra·mal adj. Of or relating to a ramus. ramal pertaining to a ramus. vein and in the Diana Diana, in Roman religion Diana (dīăn`ə), in Roman religion, goddess of the moon, forests, animals, and women in childbirth. She was probably originally a forest goddess and a special patroness of women. vein. The current drill holes have intersected both the main vein (Diana) and the parallel veins over a potential strike length of approximately 200 meters. The Diana vein has been trenched along the surface for a strike length of about 1 kilometer kilometer one thousand (103) meters; 3280.83 feet; five-eighths of a mile; abbreviated km. . The detailed drill-hole map can be found on the Company's website: www.meridiangold.com.
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Hole From To Intercept(a) Gold Silver
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(m) (m) (m) (g/tonne) (g/tonne)
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SD-1D 97.6 98.3 0.7 2.4 6.5
107.3 110.2 2.9 0.3 3.3
SD-2D 64.3 66.1 1.8 38.3 203
66.9 70.5 3.6 15.8 154
SD-3D 96 98.7 2.7 7.6 31
109.9 112.5 2.6 80.2 3,728
SD-4D 2.8 3.4 0.6 25.1 118
6.8 7 0.2 32.9 75
24.9 25.1 0.2 9.4 15
28 28.3 0.3 54.7 148
91.2 91.8 0.6 8.2 123
111.1 111.2 0.1 14.2 44
SD-5D 61.1 63.7 2.6 6.2 157
66.7 68.5 1.8 22 317
76.5 76.8 0.3 28.2 26
SD-6D 35.7 37.5 1.8 68 421
45.5 46.3 0.8 24.9 71
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(a) Drilled widths, not true widths
In addition, the first hole drilled in another vein, Veta Maribel There are several meanings to the word Maribel: Name Maribel is a nickname for María Isabel. It is very common in Latin America. Famous bearers of this name include:
in mathematical terms the points at which a curve cuts the two axes of a graph. of 1.55 meters grading 11.9 g/tonne gold and 11 g/tonne silver. During the fourth quarter, another 20 drill holes are planned at Los Pircos to further delineate the potential of this new project. El Penon The new Vista Norte zone has been extended along strike from 700 meters reported in the second quarter to over 850 meters in length. The second quarter report included two holes in a shallow ore shoot at the north end of Vista Norte. During the third quarter this ore shoot has been further defined by the holes shown below:
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Hole From To True Gold Silver
Width
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(m) (m) (m) (g/tonne) (g/tonne)
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PC264(a) 85 87 1.8 13.8 158
PC265(a) 26 29 2.5 49.5 256
PC285 19 23 2.9 4.8 131
PC295 22 25 2.6 9.3 121
PC297 25 27 1.6 258.8 1,989
PC298 35 38 3.3 16.6 103
PC300 52 57 6.1 7.9 41
PC302 49 51 2.4 7.3 161
PC332 87 88 0.9 101.8 265
PC333 90 92 1.9 22.8 226
PX082 46 48 1.2 18.3 86
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(a) Drill holes reported in the Second Quarter report
This ore shoot extends for approximately 150 meters along strike with a vertical extent of at least 70 meters. Further drilling will occur beneath this mineralization during the fourth quarter. Meridian expects the Vista Norte zone to more than replace 2002 production. 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. 3rd Quarter 2002 versus 3rd Quarter 2001 Meridian reported net income of $9.2 million for the third quarter of 2002, or $0.10 per share, versus $10.1 million, or $0.14 per share for the third quarter of 2001, which represents a decrease of 9%. Sales revenue increased $4.2 million, or 14% over the third quarter of the prior year reflecting higher realized gold prices (13%). The average realized gold price was $320 per ounce versus $282 per ounce in the prior year's comparable period. While quarterly production totaled 103,918 ounces of gold, 106,283 ounces were sold and realized in the financial statements. Gold ounces sold were 4% higher than the prior year reflecting increased production at both El Penon and Jerritt Canyon. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 36% versus 33% realized in the third quarter of the prior year, as higher gold prices more than offset the higher costs at Jerritt Canyon. The Company reported a $3.5 million tax expense for the third quarter of 2002. No tax expense for the corresponding quarter of 2001 was reported due to the utilization of available losses. 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 regarding intraperiod tax allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as , the Company has reflected a 29.1% overall effective tax rate during the quarter. Year to Date 2002 versus Year to Date 2001 Higher revenues for the first three quarters of the year, of $99.0 million versus $83.5 million for the same period last year, reflect increased production at El Penon (249,728 ounces in 2002 versus 229,670 in 2001), and a higher realized gold price ($311 per ounce in 2002 versus $277 per ounce in 2001). For the nine months ended September 30, cash costs per ounce remained at $85, which is consistent with the same period of the prior year. Total production costs per ounce decreased 3% this year over last from $142 to $138 this year. Net income for the period of $30.8 million is 17% higher than $26.4 million for the same period last year due mainly to higher gold production and improved gold prices. Cash provided by operating activities for the nine months ended September 30, 2002, of $51.6 million, versus $46.6 million for the same period the prior year, is higher due to increased net income. Meridian reported a $10.7 million tax expense in 2002, compared to $2.8 million for the corresponding period of 2001. This increase is represented by the tax provision of an 18.8% overall effective tax rate, as well as the utilization of available tax losses. 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 $15.1 million in the third quarter of 2002, 15% lower than $17.8 million in the third quarter of 2001 primarily reflecting a decrease in current liabilities Current Liabilities Usually appearing on a company's balance sheet, it represents the amount owed for interest, accounts payable, short-term loans, expenses incurred but unpaid, and other debts due within one year. . At September 30, 2002, cash and cash equivalents totaled $123.4 million, versus $83.5 million as of September 30, 2001, representing a 48% increase. Capital expenditures for the third quarter were $20.2 million, primarily a result of the capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. of Brancote spending. Expected cash requirements for operations for the remainder of 2002 include approximately $5 million for development costs at Esquel, and approximately $4 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 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 Diablada zone. Exploration spending for the remainder of 2002 is expected to be approximately $3 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 third quarter, the mine produced 77,976 ounces of gold and 1.15 million ounces of silver at a cash cost of $43 per gold ounce versus 79,173 ounces of gold and 1.22 million ounces of silver at a cash cost of $38 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 $93 per gold ounce. For the eleventh In music or music theory an eleventh is the note eleven scale degrees from the root of a chord and also the interval between the root and the eleventh. Since there are only seven degrees in a diatonic scale the eleventh degree is the same as the subdominant and the interval 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 third quarter average mill grade was 13.8 g/tonne gold and 262 g/tonne silver versus 14.7 g/tonne gold and 242 g/tonne silver in the third quarter of 2001. 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. Gold recovery remained stable vis-a-vis the second quarter at 95%, slightly higher than the 94% recovery in the third quarter of last year. Silver recoveries improved to 91% from 90% for the corresponding timeframe. This progress is partly explained by the inclusion of an additional 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, which improved residence time. Jerritt Canyon During the third quarter, Meridian's share (30%) of Jerritt Canyon production was 24,322 ounces of gold at a cash cost of $284 per gold ounce versus cash costs of $197 per gold ounce for the third quarter of last year. Cash costs have also increased considerably vis-a-vis the second quarter of this year, primarily as a result of lower ore throughput grade (from 8.5 g/tonne to 7.5 g/tonne) and ensuing en·sue intr.v. en·sued, en·su·ing, en·sues 1. To follow as a consequence or result. See Synonyms at follow. 2. To take place subsequently. production shortfall Shortfall The amount by which the capital required to fulfill a financial obligation exceeds available capital. Notes: Shortfall risk is often combated with an efficient hedging strategy created by a fund, group, institution, or individual. coupled with higher underground mining costs, both of which more than offset the improved gold recovery of 88% versus 87% in the third and second quarters, respectively. Beartrack For the third quarter, Beartrack produced 1,620 ounces of gold. Once sold, these ounces will be 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 two quarters on a declining basis. Management Changes During the quarter, Richard C. Lorson, Vice President Exploration has left the company for personal reasons. Edward Colt COLT. An animal of the horse species, whether male or female, not more than four years old. Russ. & Ry. 416. , Executive Vice President Exploration and Development has assumed his responsibilities. Outlook For 2002, Meridian expects to produce about 320,000 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 $260 per ounce. During the fourth quarter, Meridian will ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale its exploration program in Argentina and conclude its feasibility study on the Esquel mine. Costs will be expensed or capitalized Capitalized Recorded in asset accounts and then depreciated or amortized, as is appropriate for expenditures for items with useful lives longer than one year. where appropriate. 3rd Quarter Conference Call Meridian is hosting a simultaneous live webcast of its conference call on Tuesday, 22 October, 2002, at 5:00 PM 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. Following the completion of the Brancote transaction, Meridian Gold Inc. has a total of 98.9 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. A "Qualified Person," Richard C. Lorson, as defined by the Ontario Securities Commission National Instrument 43-101, acting as a consultant to Meridian Gold, has reviewed the exploration results contained within this release.
Meridian Gold Inc.
Consolidated Condensed Statement of Operations
(Unaudited and in US$ millions, except per share data)
Three Months Nine Months
Ended September 30 Ended September 30
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2002 2001 2002 2001
Sales 33.6 29.4 99.0 83.5
Costs and Expenses
Cost of
Sales 11.5 8.5 28.9 25.9
Depreciation,
depletion
& amortization 5.6 5.9 16.5 17.1
Reclamation 0.2 0.2 0.6 0.6
Exploration
costs 2.5 2.9 7.2 9.0
Selling,
general
and
administrative 1.7 2.2 5.2 5.0
Other
expenses/(income) - - 0.7 (0.1)
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Total
costs and
expenses 21.5 19.7 59.1 57.5
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Operating
income 12.1 9.7 39.9 26.0
Interest
income 0.5 0.4 1.4 1.3
Gain on Sale of
Fixed Assets 0.1 - 0.1 1.9
Tax Benefit
(expense) (3.5) - (10.6) (2.8)
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Net income 9.2 10.1 30.8 26.4
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Income per
common share 0.10 0.14 0.37 0.35
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Number of common
shares used in
earnings per share
computations
(millions) 96.2 74.8 82.6 74.6
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See accompanying notes to consolidated interim financial statements.
Meridian Gold Inc.
Operating Data (Unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
El Penon
Mine
Gold
Production 77,976 79,173 249,728 229,670
Silver
Production 1,163,278 1,224,635 4,036,669 3,332,434
Tonnes
ore mined
(thousands) 138 183 446 538
Mill
tonnes
processed
(thousands) 185 179 529 537
Avg. mill
gold ore
grade
(grams/tonne) 13.8 14.7 15.5 14.1
Avg. mill
silver
ore grade
(grams/tonne) 215 242 262 219
Mill gold
recovery 95% 94% 95% 94%
Mill
silver
recovery 90% 88% 91% 88%
Cash cost of
production/
ounce $43 $38 $31 $45
Total production
cost/ ounce $93 $91 $78 $99
Jerritt Canyon
Joint Venture
Gold production
(Meridian Gold's
30% share) 24,322 26,752 72,789 74,973
Tonnes
ore mined
(100%,
thousands) 264 232 750 618
Mill
tonnes
processed
(100%,
thousands) 358 364 966 1,026
Avg. mill
ore grade
(grams/tonne) 8.0 8.9 8.9 8.6
Mill recovery 88% 86% 87% 88%
Cash cost of
production/
ounce $285 $197 $270 $207
Total
production
cost/
ounce $362 $265 $343 $272
Beartrack Mine
Gold
production
- heap
leach 1,620 3,817 6,416 12,443
Company Totals
Ounces of
gold
produced 103,918 109,742 328,933 317,086
Ounces of
gold sold 106,283 110,945 328,539 316,160
Avg.
realized
price/
ounce $320 $282 $311 $277
Cash cost
of
production/
ounce $101 $78 $85 $85
Total cost of
production/
ounce $157 $135 $138 $142
Note: Cash and total cost per gold ounce are net of silver by-product
credits
Meridian Gold Inc.
Consolidated Condensed Balance Sheets
(Unaudited and in US$ millions)
September December 31
2002 2001
----------------------------------------------------------------
Assets
Current
Assets
Cash and cash equivalents 112.9 97.3
Restricted cash 10.5 -
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Total cash and cash
equivalents 123.4 97.3
Trade & other receivables 7.2 1.7
Inventories 4.7 7.3
Deferred tax asset 3.5 14.9
Other current assets 2.6 1.5
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Total current assets $141.4 $220.0
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Property, plant and equipment,
net 499.4 93.5
Other assets 2.7 1.3
----------------------------------------------------------------
Total Assets $643.5 $314.8
----------------------------------------------------------------
----------------------------------------------------------------
Liabilities and Shareholders'
Equity
Current Liabilities
Accounts payable, trade &
other 8.3 5.2
Accrued and other
liabilities 17.5 22.8
----------------------------------------------------------------
Total current liabilities $25.8 $28.0
----------------------------------------------------------------
Deferred tax liability 102.2 6.5
Other long-term liabilities 33.9 35.8
Shareholders' equity 481.6 147.2
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Total liabilities and
shareholders' equity $643.5 $217.5
----------------------------------------------------------------
----------------------------------------------------------------
See accompanying notes to consolidated interim financial statements.
Meridian Gold Inc.
Quarterly Comparative Statements of Retained Earnings
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(Unaudited and in US$ millions)
September 30 September 30
2002 2001
-------------------------------------------------------------------
Retained earnings at the
beginning of period $ 66.7 $ 28.0
Net Income $ 30.8 $ 26.4
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Retained earnings at the end
of period $ 97.5 $ 54.4
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Meridian Gold Inc.
Consolidated Condensed Statement of Cash Flows
(Unaudited and in US$ millions)
Three Months Nine Months
Ended September 30 Ended September 30
-------------------------------------------------------------------
2002 2001 2002 2001
Net Income (loss) $9.2 $10.1 $30.8 $26.4
Provision for
depreciation,
depletion and
amortization 5.7 5.9 16.6 17.1
Gain on sale of
assets (0.1) - (0.1) (2.0)
Stock compensation
expense 0.5 0.4 1.5 1.0
Changes in current
assets and
liabilities, net 3.1 (1.6) 4.9 (3.0)
Changes in long-term
assets and
liabilities, net (3.3) 3.0 (2.1) 7.1
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Net cash provided
by operating
activities 15.1 17.8 51.6 46.6
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Cash flow from
investing activities
Capital spending (20.2) (6.5) (30.1) (14.9)
Cash acquired in
purchase of
Brancote Holdings,
PLC 0.4 0.4
Proceeds from sale
of assets - - - 2.0
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Net cash used in
investing
activities (19.8) (6.5) (29.7) (12.9)
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Cash flow from financing
activities
Repayment of long-term
borrowings - (9.5) - (18.0)
Deposit of restricted
funds for
collateral (10.5)
Proceeds from sale
of common stock 3.5 2.9 4.2 4.6
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Net cash used in
financing activities (7.0) (6.6) 4.2 (13.4)
-------------------------------------------------------------------
Increase in cash
and cash
equivalents (11.7) 4.7 26.1 20.3
Cash and cash
equivalents,
beginning of period 124.6 78.8 97.3 63.2
-------------------------------------------------------------------
Cash and cash
equivalents,
end of period 112.9 83.5 123.4 83.5
Restricted
cash, end
of period 10.5 - - -
-------------------------------------------------------------------
Total cash and cash
equivalents, end of
period $ 123.4 $ 83.5 $ 123.4 $ 83.5
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Meridian Gold, Inc. 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 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 third 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 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 tax provision for 2002. This results in an effective tax rate of 17.3% on Chilean and Barbados income, and an overall effective tax rate on book earnings of 26.8%. In accordance with accounting guidance concerning intraperiod tax allocations, the Company will record 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: Net assets acquired: In millions Cash $ 0.4 Receivables 0.8 PP&E, net 393.9 Current liabilities (1.0) Deferred income taxes (96.1) Minority interest (1.0) Total Consideration $297.0 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). . This will be adjusted as necessary to reflect final acquisition costs. For further information please see Meridian's F-4 filing with the SEC on April 19, 2002. 5. Restricted cash At September 30, 2002, the Company had $10.5 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 Nine Months Ended
September 30, 2002 September 30, 2002
(In millions) (In millions)
Net income - as reported $ 9.2 $ 30.8
Compensation expense - current
period option grants (.1) (.1)
Net income - pro forma $ 9.1 $ 30.7
Net income per common share -
as reported $ .10 $ .37
Net income per common share -
pro forma $ .09 $ .37
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 nine months ended September 30, 2002: Expected volatility 65.5% Expected dividend yield 0.0% Risk free interest rate, average 3.3% 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 $ .2
2003 .5
2004 .5
2005 .3
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