Meridian sets high standards in search for acquisitions

Reno's Meridian Gold would like to fuel

some of its growth with an acquisition, but it

can't find a suitable partner.

Part of the problem, President Edward

Dowling acknowledged, is that Meridian is

picky.

Potential acquisition targets, he told securities

analysts last week,would need to generate

returns of 15 percent to 20 percent.Meridian

figures its internal cost of capital basically,

its opportunity cost at 10 percent.

Companies on Meridian' radar screen need

to be operating in regions with low political

risk,Dowling said.

Meridian also looks for the chance to

increase production, either through discovery

of new deposits or operational improvements,

in acquisition targets.

The combination, Dowling said, is tough to

find particularly at a reasonable price when

the mining industry is booming.

Publicly traded mining companies, he said,

appear to be richly priced.

"We continue the search for value-creating

transactions," he said."The fact that we haven't

pulled the trigger tells you that we haven't

found something that meets our criteria."

Meridian could grow quickly if it were able

to re-start its stalled Esquel project in southern

Argentina. Meridian stopped work in 2003

after 80 percent of voters near the mine property

expressed opposition, and The Supreme

Court of Argentina last month ruled against an

appeal by the Reno company.

But Meridian hasn't entirely given up hope.

"We are not sitting on our hands in regard

to Esquel,"Dowling said. "It remains one of the

best undeveloped gold mines on Planet Earth."

He wouldn't talk much more about the

company's work to get the project re-started,

saying Meridian doesn't want to stir the political

pot in Argentina.

In the meantime,Meridian works at a

pipeline of easier if smaller projects.

In Nevada, production started at the end of

the first quarter from the Rossi/Storm mine

about 25 miles northwest of Carlin.Meridian

owns a 40 percent interest in that mine; Barrick

Gold owns the rest.Meridian's share of the production

from the Rossi/Storm property is projected

to total 25,000 ounces of gold this year.

That helps offset the continued slow

decline of production from Meridian's flagship

mine, El Penon in northern Chile. That mine

produced 55,600 ounces of gold in the first

quarter compared with 68,300 ounces a year

earlier.

And the company spent $6 million during

the first quarter on exploration in Chile, Peru,

Brazil,Mexico and Nevada.

Meridian said it sold gold at an average

price of $630 an ounce during the first quarter

compared with $559 a year earlier.

The company earned $18.9 million on revenues

of $66.4 million in the first quarter.A

year earlier, it earned $17.6 million on revenues

of $55.5 million.