Despite write-down, Meridian working on Argentine project

A stalled mining project is off the books at Reno's Meridian Gold, but the project remains alive in the hearts of the company's executives.

Meridian said last week it took a big hit $378.9 million writing down the value of the Esquel property on which it once pinned high hopes.

Voters in the area around the mining property said three years ago they didn't like the Reno company's plans, and Meridian has been trying to win their support ever since. But in the meantime, accounting rules say projects stalled for three years need to be written off.

"It was a cut-and-dried accounting decision," said Meridian President and Chief Executive Officer Brian Kennedy.

But he said Meridian continues to work with community leaders and Argentine officials to resurrect the project, which is estimated to have reserves of 2.6 million ounces of gold. At current prices, that's a resource of about $1.5 billion.

But for now, the publicly traded company is carrying the property on its books at the value of the raw land.

Wall Street had been expecting the write-down, and Meridian's stock rose about 2 percent in the first 24 hours after it made its announcement.

Offsetting the bad news, Kennedy told analysts, has been surprising silver production at Meridian's big producer, its El Penon mine in the high desert of Chile.

Along with 304,000 ounces of gold, the mine produced 5.5 million ounces of silver in the fourth quarter. Better yet, the Meridian president said, the sharply higher production came at a time when silver costs are higher than they have been for years. (It was over $9.50 an ounce last week.)

"This is a gold mine, but we're finding a heck of a lot of silver," Kennedy said. "We don't know why that's happening, but we're not going to throw it away."

With the big write-down, Meridian posted a loss of $374 million in the fourth quarter and a loss of $346 million for the year.

A year earlier, it reported earnings of $7.5 million for the fourth quarter and $36.6 million for the full year of 2004.