Exploration gets more urgency

The project in Argentina upon which Reno's Meridian Gold staked much of its hopes is in limbo, but company executives said last week they're searching for other opportunities.

Chatting with investment analysts after the company reported its quarterly earnings, Meridian President Brian Kennedy said the company is looking for early-stage mining projects around the world in which it can acquire an interest.

At the same time, he said, the company continues its exploration program and is working to bring mining projects in Mexico and Peru onto line.

The development of new resources has some urgency for Meridian Gold because its Esquel project in Argentina is on hold after nearby residents resoundingly turned thumbs down on the proposed mine in March.

Business for Social Responsibility, a consulting firm based in California, now is working for Meridian in the Esquel area, attempting to learn more about residents' concerns.

While that's going on, Meridian isn't doing anything about developing the mine.

And that means that the company's El Penon mine in Chile is carrying much of the load for Meridian.

That mine produced 78,000 ounces of gold at a cash cost of $48 an ounce during the second quarter of this year.

Although it's among the lowest production costs in the world, the $48-anounce figure is still above the eye-popping $29-an-ounce figure the mine recorded in the same period last year.

And the higher costs, in turn, were a big factor in declining quarterly earnings $9.7 million in the most recent quarter compared with $11.3 a year earlier.

Adding to the decline was a bigger tax bite in Chile.

Meridian's earnings per share, meanwhile, fell to 10 cents a share in the second quarter from 15 cents a year earlier.

That reflects the 22 million additional shares Meridian paid to acquire Brancote Holdings Ltd., the owner of the Esquel property, last year.

The stock transaction was valued at nearly $300 million an amount that is going nowhere unless Meridian can win political support in Argentina.

In other remarks with analysts, Kennedy said Meridian's sale of its 30 percent stake of the Jerritt Canyon mine in northeast Nevada reflected its desire to focus on low-cost mines.

While the Jerritt Canyon mine figured prominently in the early history of Meridian, its cash production costs this year had risen to $278 an ounce.

Even with gold hovering around $350 an ounce, that didn't provide the sort of operating margins 34 percent during the most recent quarter that Meridian seeks.

The company last month completed the sale of the property to Queenstake Resources USA Inc.

The $3.3 million profit on that sale accounted for about 20 percent of Meridian's pre-tax profit for the quarter.

Jerritt Canyon produced 23,569 ounces of gold during the first half of this year.