Meridian Gold Reports Third Quarter 2003 Results.Business Editors RENO, Nevada--(BUSINESS WIRE)--Oct. 22, 2003 (All dollar amounts in U.S. currency) Meridian Meridian (mərĭd`ēən), city (1990 pop. 41,036), seat of Lauderdale co., E Miss., near the Ala. line; settled 1831, inc. 1860. Gold is pleased to announce results for the quarter and nine months ended September 30, 2003. The Company had an excellent quarter, with the following highlights: Highlights -- El Penon gold production of 81,000 ounces at a cash operating cost of $60 per ounce ounce, in zoology ounce, in zoology: see leopard. ounce, unit of measurement ounce: see English units of measurement. -- Net income of $7.9 million, or $0.08 per share -- Unhedged realized gold prices increased 16% to $371 per ounce -- Year-over-year cash balances increased 27% to $157 million -- High-grade drill results at Rossi with 15.5 meters of 76 g/tonne gold During the third quarter, Meridian Gold produced 81,000 ounces of gold at a cash operating cost of $60 per ounce, exclusively from El Penon. Meridian Gold's operating performance places it as one of the lowest cost gold producers in the world. Unhedged realized gold prices increased 16% year-over-year as a result of a weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. U.S. dollar, negative real interest rates, and
improving gold market fundamentals. All of Meridian Gold's present
and future gold production is unhedged.As higher gold prices combined with excellent operating performance at El Penon, Meridian Gold was able to generate strong cash flows, increasing cash balances to $157 million, including restricted cash. Working capital increased year over year, from $116 million to $161 million at September 30, 2003. This increase is due to the growth in cash and receivables balances. Although cash flows were strong, net income declined versus the prior year to $7.9 million primarily as a result of a higher overall tax rate on book income, and costs associated with the Esquel project in Argentina ($2.1 million), which were expensed. During the quarter, Phase One of the 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. drill program on the Rossi project was initiated by Barrick Gold Barrick Gold Corporation TSX: ABX NYSE: ABX is the largest pure gold mining company in the world, with its headquarters in Toronto, Ontario, Canada; and four regional business units (RBU's) located in Australia, Africa, North America and South America. Exploration as part of its earn-in under the joint venture agreement. Of the seven holes drilled to confirm existing resources, most had significantly higher grades than those of the 11-12 g/tonne resource published in the 2002 annual report. Two holes were particularly impressive, including the best hole ever drilled at Rossi. It had an intercept intercept in mathematical terms the points at which a curve cuts the two axes of a graph. of 15.5 meters of 76.1 g/tonne gold. The other hole had an intercept of 11.4 meters of 38.4 g/tonne gold. Summary Brian Kennedy There have been several notable people named Brian Kennedy:
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 Meridian Gold, Inc. ("Meridian Gold" or the "Company"), are material. 3rd Quarter 2003 versus 3rd Quarter 2002 Meridian Gold reported net income of $7.9 million for the third quarter of 2003, or $0.08 per share, versus $9.2 million, or $0.10 per share for the third quarter of 2002. This decrease is due to higher tax expense and higher Esquel project related costs. Sales revenue decreased $3.8 million, or 11% over the third quarter as a result of the sale of the Jerritt Canyon property (which contributed $7.8 million in revenues in the third quarter of 2002), which was partially offset by a 16% increase in gold price quarter over quarter. The average realized gold price was $371 per ounce this quarter versus the spot market of $363 and the prior year's $320 per ounce. Quarterly production for the Company totaled 82,000 ounces of gold, including the 957 ounces produced at Beartrack, all of which were sold and realized in the third quarter financial statements. The 22% decrease in gold ounces sold over the prior quarter is due to the sale of Jerritt Canyon on June 30, 2003. Operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased to 54% versus 36% in the third quarter of the prior year, due to higher gold prices (16%), the sale of the high cost Jerritt Canyon mine on June 30, 2002 (which had a 22% operating margin in the third quarter of 2002), and a reduction in the 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. reserve at the Royal Mountain King facility as a result of external reviews resulting in a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. booking of $1.6 million; this was offset by final 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, on the sale of the Jerritt Canyon facility ($1.4 million). Meridian Gold reported a $7.3 million tax expense for the third quarter of 2003, compared to $3.5 million in the third quarter of the previous year when the Company was utilizing its remaining 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 CICA CICA Competition In Contracting Act of 1984 (USA) CICA Canadian Institute of Chartered Accountants CICA Competition In Contracting Act CICA Criminal Injuries Compensation Authority (UK) 3465 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 48% overall effective tax rate during the quarter on book earnings as a result of losses not benefited principally from Argentina, Canada and the U.S. Year to Date 2003 versus Year to Date 2002 The Company recorded higher revenues for the first three quarters of the year of $102.2 million, versus $99.0 million for the same period last year. This is a result of a 15% increase in the realized price of gold year over year ($358 in 2003 versus $311 in 2002), offset by the sale of Jerritt Canyon on June 30, 2003. For the nine months ended September 30, 2003, cash costs per ounce increased slightly to $87 from $85 during the same period of the prior year. Total production costs per ounce increased 5% this year over last from $138 to $145 this year. Net income for the period of $26.4 million is 14% lower than $30.8 million for the same period last year due to the sale of the Jerritt Canyon property last quarter, and higher tax expense, offset by higher gold prices. Cash provided by operating activities for the nine months ended September 30, 2003, was $39.3 million, versus $51.6 million for the same period the prior year. It is 24% lower due to high receivables, increased spending associated with the Esquel property, and an increase in reclamation spending. Meridian Gold reported a $19.8 million tax expense as of September 30, 2003, compared to $10.6 million for the corresponding period of 2002. This increase represents a 43% overall effective tax rate for the year compared to 18.8% in the comparable period of the prior year which reflected the utilization of available tax losses. It is Meridian Gold's policy not to hedge, or sell forward, its gold production, but may hedge some of its silver production dependent on market conditions. For more details, refer to 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." 2 in the Notes to the 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. Consolidated Interim Financial Statements. 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 $12.1 million in the third quarter of 2003, versus $15.1 million in the third quarter of 2002. This decline is due to reclamation spending of $1.8 million and closing costs on the Jerritt Canyon Joint Venture sale of $1.4 million. At September 30, 2003, cash and cash equivalents, including restricted cash totaled $156.8 million, versus $123.4 million as of September 30, 2002. Expected cash requirements for operations for the remainder of 2003 include approximately $1 million for additional underground development of El Penon. Exploration spending in 2003 will be approximately $14 million, of which $11 million has been spent as of September 30, 2003. Exploration efforts for the remainder of 2003 will focus on expanding the Al Este vein to the north and south and will continue to develop the Martillo Flats, Quebrada Colorada Norte and other associated mineral bodies into the indicated and measured resource categories. The Company will fund all of these requirements from operating cash flows Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. and existing cash reserves. Should the Company decide to develop other exploration and development properties, additional capital may 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. may 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 81,000 ounces of gold and 1.0 million ounces of silver at a cash cost of $60 per gold ounce versus 78,000 ounces of gold and 1.2 million ounces of silver at a cash cost of $43 per gold ounce during the equivalent period in 2002. As previously projected, El Penon's cash operating costs operating costs npl → gastos mpl operacionales would total $50-$60 per ounce for 2003. 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 were $113 per gold ounce. The underground mine produced 148,000 tonnes of ore at average grades of 17.8 gpt gold and 256 gpt silver. Open pit operations produced 44,000 tonnes of ore at average gold and silver grades of 13.8 gpt and 82 gpt, respectively, and moved 647,000 tonnes of waste. For the sixteenth consecutive quarter, the mill maximized production by processing ore at designed capacity and improved recovery rates. During the quarter, the pebble crusher crusher, machine used to reduce materials such as ore, coal, stone, and slag to particle sizes that are convenient for their intended uses. Crushers operate by slowly applying a large force to the material to be reduced. was commissioned and, although not completely optimized, it provided the expected incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. capacity. Average mill grade increased during the quarter, to 15.0 g/tonne gold and 193 g/tonne silver versus 13.8 g/tonne gold and 215 g/tonne silver in the third quarter of 2002. Gold recovery increased to 97% this quarter, compared to 95% in the same period last year. Silver recoveries improved to 93% from 90% for the corresponding timeframe. These improvements in recovery are a result of efficient 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. blending, increased retention time, continued optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. and clarification, washing and other unit processes Unit processes Processes that involve making chemical changes to materials, as a result of chemical reaction taking place. For instance, in the combustion of coal, the entering and leaving materials differ from each other chemically: coal and air enter, and . El Penon has continued to set high standards for excellence in safety. During the third quarter, the mine received an award by the Asociacion Chilena de Seguridad (ACHS ACHS Asociación Chilena de Seguridad (Spanish; Santiago, Chile) ACHS Australian Council on Healthcare Standards ACHS Association of College Honor Societies ACHS Australasian College of Health Sciences ) for its constant efforts aimed at the prevention of accidents, industrial illnesses and compliance with the law. ACHS is the medical and safety provider for approximately 37,000 businesses in Chile representing approximately 1.7 million employees. Each year, ACHS presents twenty of these awards. This year, two mining companies in Chile were awarded this distinction, one of them being Meridian Gold. Beartrack Beartrack produced 957 ounces of gold in the third quarter. These ounces of gold were credited 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. Meridian Beartrack Company incurred $1.8 million in reclamation and closure spending for the quarter associated with restoration of the Meridian Beartrack Mine located in Salmon Idaho and Royal Mountain King Mine located in Northern California Northern California, sometimes referred to as NorCal, is the northern portion of the U.S. state of California. The region contains the San Francisco Bay Area, the state capital, Sacramento; as well as the substantial natural beauty of the redwood forests, the northern . Esquel Meridian Gold remains paused with respect to this project, and there are no current timelines This article or section contains self-references. For other uses of "Timeline", see Timeline (disambiguation). The following is an index of timelines found on Wikipedia. for permitting or construction. The Business For Social Responsibility ("BSR BSR Business for Social Responsibility BSR Baltic Sea Region BSR British Society for Rheumatology BSR Bootstrap Router (networking) BSR Bonsoir (French) BSR Bottom-Simulating Reflector ") report was issued to the community of Esquel in August and Meridian Gold is analyzing the report and the concerns of the local citizens. Meridian Gold continues to evaluate all options related to this project to best protect shareholders' interests. Outlook For 2003, Meridian Gold expects to produce 320,000 ounces of gold from El Penon at a cash cost of approximately $50-$60 per ounce; year to date, this property has produced 243,000 ounces at $51 cash operating cost. Jerritt Canyon produced 46,000 ounces at a cash cost of $278 per ounce through June 30, 2003, the date of sale. Exploration Report Rossi - Carlin car·line or car·lin n. Scots A woman, especially an old one. [Middle English kerling, from Old Norse, from karl, man.] Trend, Nevada - New Drill Results The Rossi property spans approximately 28 square kilometers on the northern end of the Carlin Trend, one of the most prolific gold belts in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. . The 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 Rossi is sediment sediment, mineral or organic particles that are deposited by the action of wind, water, or glacial ice. These sediments can eventually form sedimentary rocks (see rock). hosted and occurs in the same structural and stratigraphic stra·tig·ra·phy n. The study of rock strata, especially the distribution, deposition, and age of sedimentary rocks. strat sequence as economic mineralization throughout the Carlin Trend. During 1998, the Company entered into a joint venture with Barrick Gold Exploration, Inc. ("Barrick") on the Rossi property, in which Barrick has the right to earn a 60% interest in the property by spending $15 million by March 31, 2004. At year-end 2002, Meridian Gold published a resource of approximately one million ounces of gold at Rossi, which primarily consisted of three zones: the "49er Zone", the "End Zone" and the "Discovery Zone". All current work on the Rossi property is being funded by Barrick, under the joint-venture agreement with the Company. As part of Barrick's earn-in, $5 million was spent to drive a production-size decline to the existing mineralization. The decline has been fully rehabilitated, and the in-fill drilling program on the 49er Zone was launched on August 27, 2003. Phase One of the in-fill drilling program consists of nine planned drill stations for testing the 49er Zone. These drill stations will facilitate drilling of up to seven holes per station in a fan configuration. Year to date, 12 holes have been completed totaling 831 meters. Results to date have been encouraging with a high-grade mineralized min·er·al·ize v. min·er·al·ized, min·er·al·iz·ing, min·er·al·iz·es v.tr. 1. To convert to a mineral substance; petrify. 2. To transform a metal into a mineral by oxidation. 3. zone being confirmed from Station One. The assay results from Station One are as follows:
Hole From To Intercept(i) Gold
(m) (m) (m) (g/tonne)
---------------------------------------------------------------------
S1-280-1 109.7 111.3 1.5 21.9
S1-280-2 1.5 3.0 1.5 20.8
22.9 35.1 6.1 17.1
46.3 50.6 4.3 14.8
69.6 71.8 2.1 10.2
85.3 86.9 1.5 10.0
S1-280-3 25.9 32.0 6.1 16.7
S1-280-4 nsv nsv nsv nsv
S1-280-5 27.1 42.7 15.5 76.1
S1-280-6 23.6 25.8 2.1 9.6
S1-280-7 26.1 37.5 11.4 38.4
---------------------------------------------------------------------
Note: Distances originally drilled as feet
(i) Drilled widths, not true widths
nsv (equal) no significant values
Underground drilling of the 49er Zone will increase drill density to a 15x15 meter spacing, and preliminary recalculation re·cal·cu·late tr.v. re·cal·cu·lat·ed, re·cal·cu·lat·ing, re·cal·cu·lates To calculate again, especially in order to eliminate errors or to incorporate additional factors or data. of resources should be completed during December. A decision will then be made regarding a new crosscut to allow drilling access to the "End Zone" resource area. La Silla - Sinaloa, Mexico - Update The 100% owned La Silla Project is located in the State of Sinaloa, approximately 55 km north of Mazatlan, Mexico. During the year, Meridian Gold geologists A geologist is a contributor to the science of geology. Geologists are also known as earth scientists or geoscientists. The following is a list of famous or notable geologists. have identified a total of 31 volcanic and intrusive-hosted, low sulfidation epithermal veins in the 14,510-hectare property area. The vein zones range in width from 0.5 to 20.0 meters, with a cumulative strike length in excess of 13.2 km. To date, 75 reverse circulation holes totaling 8,300 meters have drill-tested fourteen veins on the property. A total of 51 holes property-wide have intersected vein/stockwork zones carrying at least 1.5 m @ 1.0 g/t AuEq. Gold-silver mineralization in excess of 1.5 meters @ 5.0 g/t AuEq has been intersected in 22 holes testing seven different veins. Best drill intercepts to-date include 22.1 meters @ 2.49 g/t Au and 35.55 g/t Ag in the Guerra Vein; 3.0 meters @ 22.17 g/t Au and 370.71 g/t Ag in the Quila Vein; 3.0 meters @ 7.21 g/t Au and 25.11 g/t Ag in the Mina Grande Vein; 5.3 meters @ 9.07 g/t Au and 33.40 g/t Ag in the El Oro
Results from Phase One and Two drilling have been encouraging, but further drilling is needed to determine if grade continuity exists within vein ore shoots. Phase Three drilling is designed to test three new vein targets, as well as to follow up on areas of mineralization identified by Phase One and Two work. Road building was initiated in late September, and a 4,000-meter reverse circulation drilling program is scheduled to begin in mid-November. Reid - Central Newfoundland - Recent Acquisition During the quarter, Meridian Gold signed a letter of intent to form a joint venture with Linear Resources for exploration and possible development of the Reid gold property, which consists of 541 claims (13,525 hectares) in the Botwood Basin of Central Newfoundland. Under the terms, Meridian Gold can earn up to an 80% interest in the joint venture. Linear is the operator of the joint venture until at least April 1, 2005. A 910 meter, six hole drill program in early 2003 located gold mineralization in all six holes with gold values hosted in brecciated brec·ci·ate tr.v. brec·ci·at·ed, brec·ci·at·ing, brec·ci·ates To form (rock) into breccia. brec , silicified si·lic·i·fy v. si·lic·i·fied, si·lic·i·fy·ing, si·lic·i·fies v.tr. To convert into or impregnate with silica. v.intr. To become converted into or impregnated with silica. , quartz quartz, one of the commonest of all rock-forming minerals and one of the most important constituents of the earth's crust. Chemically, it is silicon dioxide, SiO2. porphyries and altered (silicified, chloritized) mafic maf·ic adj. Containing or relating to a group of dark-colored minerals, composed chiefly of magnesium and iron, that occur in igneous rocks. volcanics over a 200 meter-plus strike length and 125 meters across strike. Best intersections were 41 meters of 1.1 g/t Au and 10.6 meters of 2.2 g/t Au. The results indicate a strong, mineralized, gold bearing, quartz porphyry Porphyry, Greek scholar Porphyry (pôr`fĭrē), c.232–c.304, Greek scholar and Neoplatonic philosopher. He studied rhetoric under Cassius Longinus and philosophy under Plotinus. system that has intruded in·trude v. in·trud·ed, in·trud·ing, in·trudes v.tr. 1. To put or force in inappropriately, especially without invitation, fitness, or permission: and mineralized the host, mainly mafic volcanic units. This is a newly discovered system in an area where gold mineralization was previously unknown. The size of the associated geophysical ge·o·phys·ics n. (used with a sing. verb) The physics of the earth and its environment, including the physics of fields such as meteorology, oceanography, and seismology. anomaly Abnormality or deviation. Pronounced "uh-nom-uh-lee," it is a favorite word among computer people when complex systems produce output that is inexplicable. See software conflict and anomaly detection. , at a minimum of 300 by 300 meters, and the success of this early phase of exploration, all indicate the presence of a large mineralizing system with the potential for a major gold deposit. An exploration plan has been developed jointly by Linear and Meridian Gold. Field exploration has been initiated with line cutting for access, sampling of rock float, soils, and stream sediments, geologic ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. mapping, and prospecting. Planned work includes regional exploration on the outlying out·ly·ing adj. Relatively distant or remote from a center or middle: outlying regions. outlying Adjective far away from the main area Adj. 1. claims and ground follow up in mineralized areas including further gridding, completion of an airborne magnetic-EM survey initiated in mid-October, follow-up ground geophysics geophysics, study of the structure, composition, and dynamic changes of the earth, its atmosphere, hydrosphere and magnetosphere, based on the principles of physics. , geochemistry geochemistry, study of the chemical changes on the earth. More specifically, it is the study of the absolute and relative abundances of chemical elements in the minerals, soils, ores, rocks, water, and atmosphere of the earth and the distribution and movement of and geological ge·ol·o·gy n. pl. ge·ol·o·gies 1. The scientific study of the origin, history, and structure of the earth. 2. The structure of a specific region of the earth's crust. 3. A book on geology. mapping. This will be followed by trenching and drilling to evaluate the mineralized zone and other anomalous a·nom·a·lous adj. 1. Deviating from the normal or common order, form, or rule. 2. Equivocal, as in classification or nature. areas. Urumalqui - Central Peru - Recent Acquisition The Urumalqui Project is a 50-50 exploration joint venture between Gitennes Exploration Inc. and Meridian Gold, with Gitennes the project operator. The property is located in the Andes Mountains Andes Mountains Mountain system, western South America. One of the great natural features of the globe, the Andes extend north-south about 5,500 mi (8,900 km). They run parallel to the Caribbean Sea coast in Venezuela before turning southwest and entering Colombia. of north central Peru, about 70 road-kilometers east of the port city of Trujillo. The property consists of four contiguous Adjacent or touching. Contrast with fragmentation. See contiguous file. mineral concessions totaling 2,700 hectares. The Urumalqui property hosts a number of volcanic-hosted low sulfidation epithermal veins. Dips vary from near vertical to 75 degrees SW. The primary target is the N60W-trending Urumalqui vein, which can be traced on surface for over 1,700 meters. A 1,000-meter segment of the vein averages 3.0 meters wide with surface samples averaging 3.0 g/t Au and 100 g/t Ag. The La Mariscala, Candual and Penelope structures generally trend east-west, and are typically sheeted vein/silicified zones with anomalous Au-Ag values in surface samples. During the first half of 2003, exploration work at the property included geological mapping, extensive rock-chip sampling of exposed mineralization, ground geophysical surveys Geophysical survey refers to the systematic collection of geophysical data for spatial studies. Geophysical surveys may use a great variety of sensing instruments, and data may be collected from above or below the Earth's surface or from aerial or marine platforms. and soil sampling for geochemical analyses. Thus far, the property has responded well to standard exploration techniques, and a number of potential drill targets have been identified. Gitennes has proposed a Phase One program totaling 13 core holes, focusing primarily on the Urumalqui Vein. Meridian Gold concurs with the proposed program, as it covers all identified priority drill targets. The drilling contract was signed and drilling was underway in mid-October 2003. Los Pircos - Update The Los Pircos property is a joint venture with Buenaventura, located approximately 100 km east of Chiclayo, in northern Peru. Meridian Gold is currently the joint venture operator, and the Company has the right to earn 51% of the property by spending $2.7 million prior to October 2004. Year-to-date, Meridian Gold has drilled 15 holes testing the Diana, Maribel, Milagros, Juana Sofia and Amelia Vein systems. Although 2003 drill results in the Diana vein system have been encouraging, results from adjacent veins have not yielded ore grade 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 intercepts. The drilling program will be completed in the fourth quarter of 2003, and a full data review will be finalized See finalization. to evaluate the scope of future work on the joint venture. Financial Reporting Measures The Company has historically provided financial measures, some of which are based on 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 (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ), and others that are not prepared in accordance with GAAP (non- GAAP). Recent legislative and regulatory changes encourage the use of GAAP financial measures and require companies to explain why non-GAAP financial measures are relevant to management and investors. To the extent that non-GAAP financial measures are deemed to be relevant, companies are required to reconcile those measures to the most directly comparable GAAP financial measures. As a result of these changes, the Company has conducted a review of its GAAP and non-GAAP financial measures that are presented throughout this press release. In order to meet the requirements under these new regulations, the Company has defined these non-GAAP financial measures and explained how such measures are calculated under the heading "non-GAAP measures". (See Appendix "A") 3rd Quarter Conference Call Meridian Gold is hosting a simultaneous live webcast of its conference call on Thursday, October 23, 2003, at 9:00 a.m. ET through www.viavid.net. 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 under Calendar of Events. 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. For those whose schedules do not permit participation during the call, or for those who would like to hear the discussion again, a replay will be available for one week following the call (toll-free 1-877-519-4471 or international 1-973-341-3080 replay # 4233108) and the webcast will be available for 3 months on the www.viavid.net website. Meridian Gold Inc. is a different kind of gold company because we focus on profitability, and the quality and value of the ounces we produce, not the quantity of ounces produced. Meridian Gold Inc.'s approximately 99 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 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 ) 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 MDG Millennium Development Goals (UNDP) MDG Madagascar (ISO Country code) MDG Medical Group (USAF) MDG Air Madagascar (ICAO code) ). 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. Robert R. Wheatley is a Licensed Professional Geologist (Utah License 5334790-2250), serving as the "Qualified Person" for the Rossi and Reid portions of the Exploration Report of this release as defined by the Ontario Securities Commission National Instrument 43-101. Mark Hawksworth is a Licensed Professional Geologists (Utah License 5334531-2250), serving as the "Qualified Person" for the La Silla and Urumalqui portions of this release as defined by the Ontario Securities Commission National Instrument 43-101. Mr. Wheatley and Mr. Hawksworth have supervised su·per·vise tr.v. su·per·vised, su·per·vis·ing, su·per·vis·es To have the charge and direction of; superintend. [Middle English *supervisen, from Medieval Latin and prepared the technical data contained within this release and certify cer·ti·fy v. cer·ti·fied, cer·ti·fy·ing, cer·ti·fies v.tr. 1. a. To confirm formally as true, accurate, or genuine. b. the data to be accurate based on high standard drilling and sampling techniques, as well as current geologic knowledge of the deposits.
Meridian Gold Inc.
Consolidated Condensed Statement of Operations
(Unaudited and in US$ millions, except per share data)
Three Months Nine Months
Ended Ended
September 30 September 30
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2003 2002 2003 2002
Sales $ 29.8 $ 33.6 $ 102.2 $ 99.0
Costs and Expenses
Cost of Sales 4.7 11.5 24.7 28.9
Depreciation, depletion &
amortization 4.4 5.6 17.3 16.5
Reclamation (1.6) 0.2 (1.2) 0.6
Exploration costs 4.1 2.5 11.3 7.2
Selling, general and administrative 2.2 1.7 7.2 5.2
Other (income) expense (0.2) - (0.3) 0.7
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Total costs and expenses 13.6 21.5 59.0 59.1
Income from operations before
interest, 16.2 12.1 43.2 39.9
taxes and before undernoted
Gain/Loss on sale of assets (1.4) 0.1 1.9 0.1
Interest income, net 0.4 0.5 1.1 1.4
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Income from operations before taxes 15.2 12.7 46.2 41.4
Income tax expense (7.3) (3.5) (19.8) (10.6)
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Net income 7.9 9.2 26.4 30.8
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Basic and diluted income per common
share 0.08 0.10 0.27 0.37
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Number of common shares used in
earnings per share computations
(millions) - basic 99.2 96.2 99.2 82.6
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Number of common shares used in
earnings per share computations
(millions) - diluted 99.2 96.2 99.2 82.6
Meridian Gold Inc.
Operating Data (Unaudited and dollar amounts in U.S. currency)
Three Months Ended Nine Months Ended
September 30 September 30
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2003 2002 2003 2002
El Penon Mine
Gold Production 81,303 77,976 243,479 249,728
Silver Production 1,004,438 1,163,278 3,207,797 4,036,669
Tonnes ore mined (thousands) 193 138 542 446
Mill tonnes processed
(thousands) 174 185 515 529
Avg. mill gold ore grade
(grams/tonne) 15.0 13.8 15.2 15.5
Avg. mill silver ore grade
(grams/tonne) 193 215 210 262
Mill gold recovery 97% 95% 97% 95%
Mill silver recovery 93% 90% 92% 91%
Cash cost of production/ ounce $ 60 $ 43 $ 51 $ 31
Total production cost/ ounce $ 113 $ 93 $ 107 $ 78
Jerritt Canyon Joint Venture
Gold production (Meridian Gold's
30% share) 24,322 45,604 72,789
Tonnes ore mined
(100%, thousands) 264 512 750
Mill tonnes processed (100%,
thousands) 358 662 966
Avg. mill ore grade
(grams/tonne) 8.0 8.1 8.9
Mill recovery 88% 88% 87%
Cash cost of
production/ ounce $ 285 $ 278 $ 270
Total production cost/ ounce $ 362 $ 351 $ 343
Beartrack Mine
Gold production - heap leach
(ounces) 957 1,620 3,506 6,416
Company Totals
Ounces of gold produced 82,260 103,918 292,589 328,933
Ounces of gold sold 82,438 106,283 292,913 328,539
Avg. realized price/ ounce $ 371 $ 320 $ 358 $ 311
Cash cost of
production/ ounce $ 60 $ 101 $ 87 $ 85
Total cost of
production/ ounce $ 113 $ 157 $ 145 $ 138
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Key Business Indicators - Q3 2003 Capital Depreciation Reclamation
El Penon 3.7 4.3 -
Jerritt Canyon - - -
Esquel - - -
Corporate 0.1 0.1 (1.6)
Other 0.1 - -
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Total 3.9 4.4 1.6
$ / tonne ore
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Operating Cost Detail - Q3 2003 UG OP Process G&A
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El Penon 35.22 31.02 13.36 5.54
Jerritt Canyon - - - 5.85
Average Realized Gold Prices - The average realized gold price of $371 per ounce was calculated by taking revenues adjusted for refining refining, any of various processes for separating impurities from crude or semifinished materials. It includes the finer processes of metallurgy, the fractional distillation of petroleum into its commercial products, and the purifying of cane, beet, and maple sugar costs divided by gold ounces sold, excluding Beartrack ounces. Average Realized Silver Price was $5.02 for the quarter. Note: Cash and total cost per gold ounce are net of silver by-product by·prod·uct or by-prod·uct n. 1. Something produced in the making of something else. 2. A secondary result; a side effect. by-product Noun 1. credits.
Meridian Gold Inc.
Consolidated Condensed Balance Sheets
(Unaudited and in US$ millions)
September 30 December 31
2003 2002
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Assets
Current Assets
Cash and cash equivalents $ 142.9 $ 121.9
Restricted cash 13.9 13.8
Trade & other receivables 13.9 3.6
Inventories 5.8 5.9
Deferred tax asset 0.6 3.4
Other current assets 4.8 1.6
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Total current assets 181.9 150.2
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Property, plant and equipment, net 540.4 549.3
Other assets 6.5 3.8
Total Assets $ 728.8 $ 703.3
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Liabilities and Shareholders'
Equity
Current Liabilities
Accounts payable, trade & other $ 5.9 $ 7.3
Accrued and other liabilities 14.8 14.8
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Total current liabilities 20.7 22.1
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Deferred tax liability 170.7 159.1
Other long-term liabilities 16.3 28.9
Shareholders' equity 521.1 493.2
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Total liabilities and shareholders'
equity $ 728.8 $ 703.3
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Meridian Gold Inc.
Consolidated Condensed Statements of Retained Earnings
(Unaudited and in US$ millions)
Three Months Nine Months
Ended September 30 Ended September 30
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2003 2002 2003 2002
Retained earnings, beginning of
period $ 126.7 $ 88.3 $ 108.2 $ 66.7
Net Income 7.9 9.2 26.4 30.8
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Retained earnings,
end of period $ 134.6 $ 97.5 $ 134.6 $ 97.5
Meridian Gold Inc.
Consolidated Condensed Statements of Cash Flows
(Unaudited and in US$ millions)
Three Months Nine Months
Ended September 30 Ended September 30 Ended December 31
2003 2002 2003 2002
Net Income $ 7.9 $ 9.2 $ 26.4 $ 30.8
Provision for depreciation,
depletion and amortization 4.4 5.7 17.3 16.6
Provision for reclamation (3.4) - (4.8) -
Gain on sale of assets 1.4 (0.1) (2.0) (0.1)
Stock compensation expense 0.2 0.5 1.2 1.5
Deferred taxes 6.0 - 17.6 -
Changes in current assets and
liabilities, net (6.2) 3.1 (15.7) 4.9
Changes in long-term assets and
liabilities, net 1.8 (3.3) (0.7) (2.1)
Net cash provided by operating
activities 12.1 15.1 39.3 51.6
Cash flow from investing
activities
Capital spending (3.9) (20.2) (18.5) (30.1)
Cash acquired in purchase of
Brancote
Holdings, PLC - 0.4 - 0.4
Cumulative translation (0.7) (0.6)
Net cash used in investing
activities (4.6) (19.8) (19.1) (29.7)
Cash flow from financing
activities
Deposit of restricted funds for
collateral - (10.5) - (10.5)
Proceeds from sale of common
stock 0.6 3.5 0.8 4.2
Net cash used in financing
activities 0.6 (7.0) 0.8 (6.3)
Increase in cash and cash
equivalents 8.1 (11.7) 21.0 15.6
Cash and cash equivalents,
beginning of period 134.8 124.6 121.9 97.3
Cash and cash equivalents, end of
period $142.9 $112.9 $142.9 $112.9
Meridian Gold, Inc. Notes to Consolidated Condensed Interim Financial Statements 1. Basis of Presentation The unaudited interim period consolidated condensed financial statements have been prepared by the Company in accordance with Canadian generally accepted accounting principles. 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 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 . The accompanying unaudited consolidated financial statements should be read in conjunction with the Company's audited consolidated condensed financial statements for the year ended December 31, 2002, 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 Canadian Institute of Chartered Accountant char·tered accountant n. Chiefly British Abbr. CA A member of one of the institutes of accountants granted a royal charter. for interim reporting. These unaudited interim consolidated condensed 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 Meridian Gold's policy is not to hedge its gold production, and the Company closed out all of its forward contracts during 1999. However, under applicable accounting standards, Meridian Gold was required to defer de·fer 1 v. de·ferred, de·fer·ring, de·fers v.tr. 1. To put off; postpone. 2. To postpone the induction of (one eligible for the military draft). v.intr. recognition of these revenues in its financial statements until the expiry of the contracts. Hence, during the third quarter, the Company recognized $478,000 of the deferred revenue on expiring gold hedge contracts in the accompanying Consolidated Statement of Operations See Income statement. . To mitigate mit·i·gate v. To moderate in force or intensity. mit  i·gation n. the risk associated with the silver market and secure
the loan with Standard Bank of London in 1999, the Company entered into
silver forward contracts. Recently, with the sharp rise in silver price,
the Company entered into additional silver contracts for 2003 and 2004
silver production. At this time, the Company has committed 726,000
ounces of silver at an average $5.04 for 2003 and 3,792,000 ounces at an
average $5.21 for 2004. All remaining future production for the Company
remains unhedged.3. Jerritt Canyon Meridian Jerritt Canyon Corp. completed the sale of its 30% interest in the Jerritt Canyon Joint Venture ("JCJV") property to Queenstake Resources USA Inc. ("Queenstake"), as of June 30, 2003, which concludes the Purchase and Sale Agreement (the "Agreement") signed by the parties on June 2, 2003, that was preceded by Queenstake's unsolicited un·so·lic·it·ed adj. Not looked for or requested; unsought: an unsolicited manuscript; unsolicited opinions. unsolicited Adjective offer to acquire the property, located in Nevada. The terms and conditions of the Agreement include a payment, by Queenstake to the JCJV, of $1.5 million and 32 million Queenstake common shares upon closing of the transaction. The Agreement also stipulates $6.0 million in installment payments Installment payments Distribution of plan assets to beneficiaries based upon a regular schedule. over 12 months and approximately $4.0 million in future royalty payments. Meridian Jerritt Canyon Corp. is entitled 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: to its 30% share of the consideration for the sale of the JCJV. Queenstake has accepted full closure and reclamation as well as other assumed liabilities as described in the Agreement. The operating permits of the mine were transferred to Queenstake effective June 30, 2003. Meridian Jerritt Canyon Corp. received its share of cash from the transaction on July 1, 2003 along with a share certificate for 9.6 million shares in Queenstake Resources Ltd. at a market price of $0.28 Canadian dollars Noun 1. Canadian dollar - the basic unit of money in Canada; "the Canadian dollar has the image of loon on one side of the coin" loonie dollar - the basic monetary unit in many countries; equal to 100 cents per share. At September 30, 2003, this investment will be carried by the Company at its cost in Other Current Assets Other Current Assets A balance sheet item that includes the value of non-cash assets due within one year. Notes: Examples are things like prepaid expenses and accounts receivable. . The Company has also reported a long-term receivable for its share of the installment payments of $1.8 million and has not valued the royalty payments at this time. Income (loss) from Meridian Gold's 30% interest in the JCJV for the three and six months ended September 30, 2003 and 2002 were as follows:
Three months ended Nine months ended
September 30 September 30
2003 2002 2003 2002
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(Unaudited and in US$ millions)
Revenues $ - $ 7.8 $ 15.8 $ 23.0
Income (loss) before taxes $ (1.4) $ 1.7 $ 7.2 $ (3.1)
Tax expense $ - $ - $ (3.0) $ -
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Income (loss) from JCJV $ (1.4) $ 1.7 $ 4.2 $ (3.1)
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During the quarter, the Company recognized a reduction in the gain associated with the sale of the asset of $1.4 million associated with final closing costs. The sale of JCJV resulted in a gain of $1.9 million as follows:
(Unaudited and in US$ millions)
Assets $ 11.3
Liabilities (10.7)
---------------------------------------------
Net assets $ 0.6
Proceeds from the sale of JCJV,
net of closure costs 2.5
---------------------------------------------
Net gain on sale of JCJV $ 1.9
---------------------------------------------
---------------------------------------------
4. Stock-based Compensation The Company accounts for stock options granted to employees and directors of the Company under 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. 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, the pro-forma net income and the pro-forma net income per common share would have been the amounts indicated in the following table:
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
2003 2002 2003 2002
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(Unaudited and in US$ millions, except per share data)
Net income
- as reported $ 7.9 $ 9.2 $ 26.4 $ 30.8
Compensation
expense -
current period
option grants $ 0.1 $ (0.1) $ 0.2 $ (.1)
Net income -
pro forma $ 7.8 $ 9.1 $ 26.2 $ 30.7
Net income per
common share -
as reported $ 0.08 $ 0.10 $ 0.26 $ 0.37
Net income per
common share -
pro forma $ 0.08 $ 0.09 $ 0.26 $ 0.37
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:
Three Months Ended Nine Months Ended
September 30, 2003 September 30, 2003
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Expected volatility 43.0% 48.8%
Expected dividend yield 0% 0%
Risk free interest rate, average 1.29% 1.29%
Expected life of options granted 4.4 years 4.4 years
Future 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 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 Expense
September 30 2003 2003 2002
(In U.S. millions)
2003 $ 0.4 $ 0.2
2004 $ 0.8 $ 0.5
2005 $ 0.3 $ 0.5
2006 $ 0.1 $ 0.3
5. Property Valuation In accordance with Canadian generally accepted accounting principles, the Company will be reviewing the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of its properties during the upcoming quarter. This will include a complete review of all projects including the Mineral El Desquite Track listing
6. Income Taxes: The Company computes income taxes in accordance with CICA HB. 3465, "Income Taxes." CICA HB. 3465 requires an asset and liability approach which results in the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of those assets and liabilities, as well as operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. and tax credit carryforwards, using enacted tax rates in effect in the years in which the differences are expected to reverse. The Company's tax expense arises principally from its Chilean operations. The Company has recognized the balance of its acquired deferred tax assets related to the acquisition of Pacific Rim Pacific Rim, term used to describe the nations bordering the Pacific Ocean and the island countries situated in it. In the post–World War II era, the Pacific Rim has become an increasingly important and interconnected economic region. Resource Ltd. and its wholly owned subsidiaries Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , which included Inversiones Mineras Del Inca S.A. The Company has Canadian loss carryforwards Loss Carryforward An accounting technique with which a company applies net operating losses of the current year to future year's profits in order to reduce tax liability. Notes: of approximately $7.2 million which expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. between the years 2003 through 2010 and U.S. loss carryforwards of approximately $ 61.7 million which expire between years 2018 and 2022. Management believes that sufficient uncertainty exists regarding the realization of certain deferred tax assets and that a valuation allowance is required. The change in valuation allowance reflects management's assessment regarding the future realization of Canadian, U.S. and foreign deferred tax assets and estimates of future earnings in these jurisdictions as of September 30, 2003. Appendix "A" Non-GAAP Measures Meridian Gold has included measures of earnings called "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. ", and "operating margins" in this document. This document also includes the terms "cash cost" and "free cash flow". Return on sales is defined as net income divided by sales for the reporting period. Operating margin is defined as 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. divided by sales. Cash costs are determined according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. the Gold Institute Standard and consist of site costs for all mining (except deferred mining and deferred stripping costs), processing, administration, resource taxes, and royalties but do not include capital, exploration, depreciation and financing costs. Total cash costs are reduced by by-product silver credits, and are then divided by payable gold ounces to arrive at net cash cost of production per ounce. Free cash flow is defined as the net cash provided by operating and investing activities. Average realized gold price is defined as the average gold price the Company received for the sale of its gold ounces during the reporting period, and is included in Sales on the accompanying Consolidated Condensed Statements of Operations. Finally, real interest rates are defined as the 30-day treasury bill rate, less the consumer price index (CPI (1) (Characters Per Inch) The measurement of the density of characters per inch on tape or paper. A printer's CPI button switches character pitch. (2) (Counts Per I ). The Company believes that in addition to conventional measures, prepared in accordance with Canadian generally accepted accounting principles (GAAP), certain investors use this information to evaluate the Company's performance and its ability to generate cash flow. These non-GAAP performance measures do not have any standardized standardized pertaining to data that have been submitted to standardization procedures. standardized morbidity rate see morbidity rate. standardized mortality rate see mortality rate. meaning prescribed pre·scribe v. pre·scribed, pre·scrib·ing, pre·scribes v.tr. 1. To set down as a rule or guide; enjoin. See Synonyms at dictate. 2. To order the use of (a medicine or other treatment). by GAAP and therefore, are unlikely to be comparable to similar measures presented by other companies. Accordingly they are intended to provide additional information and should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP. The calculation for these non-GAAP measures is explained below.
(Unaudited and in US$ Millions Except for Ratios and Cash Cost
per Ounce)
Three Months Nine Months
Ended Ended
September 30 September 30
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2003 2002 2003 2002
Return On Sales
Sales $ 29.8 $ 33.6 $ 102.2 $ 99.0
Net Income $ 7.9 $ 9.2 $ 26.4 $ 30.8
ROS 27% 27% 26% 31%
Net Income/Sales(equal)
Return On Sales (ROS)
Operating Margins
Sales $ 29.8 $ 33.6 $ 102.2 $ 99.0
Operating Income $ 16.2 $ 12.1 $ 43.2 $ 39.9
OM 54% 36% 42% 40%
Operating Income/Sales
(equal)Operating Margins (OM)
Cash Costs
Cash Operating Costs (1) $ 10.0 $ 16.4 $ 41.0 $ 47.2
Silver Revenue $(5.2) $(6.1) $(16.0) $(19.7)
Gold Production $0.081 $0.103 $ 0.289 $ 0.323
Cash Costs (2) $ 60 $ 101 $ 87 $ 85
1. Cash Operating Cost(equal)Cost of
Operations-(Depreciation+Reclamation
Accruals)
2. Cash Operating Costs - Silver
Revenue/Gold Production(equal)Cash Cost
Free Cash Flow
Net cash provided by operating
activities $ 12.1 $ 15.1 $ 39.3 $ 51.6
Net cash used by investing
activities $(4.6) $(19.8) $(19.1) $(29.7)
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Free Cash Flow $ 7.5 $ (4.7) $ 20.2 $ 21.9
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