<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of June, 1998 Commission File Number: 001-12003
MERIDIAN GOLD INC.
(Name of Registrant)
5011 Meadowood Way
Reno, Nevada 89502
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the SEC
pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [X] No [ ]
Meridian Gold Inc. [LOGO OF MERIDIAN GOLD INC.
5011 Meadowood Way APPEARS HERE]
Reno, Nevada 89502
Phone: 702-850-3765
Fax: 702-850-3733
<PAGE> 2
STRENGTH
LEADERSHIP
GROWTH
[MERIDIAN GOLD INC.]
Annual Report
97
MERIDIAN GOLD
<PAGE> 3
[GRAPHIC OF WORLD GLOBE]
1.Highlights 2.Message to Shareholders 6.Corporate Responsibility 8.Project
Review 20.Management Discussion and Analysis 21.Auditors' Report and Management
Responsibility for Financial Statements 23.Financial Statements 27.Notes to
Financial Statements 38.Supplementary Data 40.Directors & Officers
IBC.Shareholder Information
CORPORATE PROFILE
Meridian Gold Inc. is an exploration-focused gold producer which
produced 203,000 ounces of gold in 1997 from two producing properties:
Beartrack in Idaho (100 percent interest and operator) and Jerritt
Canyon in Nevada (30 percent interest). At year-end 1997, the Company
had proven and probable mineable reserves of 1.9 million ounces of
gold and 14.4 million ounces of silver.
Meridian and its predecessor organization, FMC Gold Company, have been active in
exploration, mine development, and mine operations since 1981. As a result of
successfully operating gold mines, Meridian is in a strong financial position,
with $54 million in cash and no debt.
Meridian's major objective is to grow production and reserves
through a focused strategy which includes:
o Developing the advanced-stage exploration projects of El
Penon and Rossi
o Pursuing an aggressive acquisitions program
o Continuing a "grass-roots" exploration program focusing on
Nevada and South America
With its proven, experienced management team, cash resources, and
cash-generating operations, Meridian's goal is to continue to
grow the Company to be a profitable 500,000-ounce gold producer
by the year 2000.
The Company's common shares are traded on The Toronto Stock
Exchange (MNG), as well as the New York Stock Exchange (MDG).
ALL CURRENCY IN THIS ANNUAL REPORT IS EXPRESSED IN U.S. DOLLARS
Front and back covers: panoramic view of the El Penon project area, Chile
<PAGE> 4
1997
HIGHLIGHTS
[MERIDIAN GOLD INC.]
RESERVES INCREASED BY 35%
The addition of reserves at El Penon in Chile led to 1997 year-end
proved and probable reserves of 1.9 million ounces of gold and 14.4
million ounces of silver, versus 1.4 million ounces of gold at
year-end 1996.
EL PENON FEASIBILITY STATUS WAS ENCOURAGING
The El Penon feasibility study continued positively, outlining a 2,000
tonne-per-day mining and milling operation with proven and probable
mineable reserves of 894,000 ounces of gold and 14,402,000 ounces of
silver. Average annual production is estimated at 130,000 ounces of
gold and 1,900,000 ounces of silver, with an average life-of-mine cash
cost of $160 per ounce after co-product silver credits. Following the
receipt of Engineering, Procurement, and Construction (EPC) bids, a
decision as to whether or not to proceed to construction will be made
in the second quarter.
GOLD PRODUCTION WAS SLIGHTLY BETTER THAN 1996, CASH COSTS WERE
SIGNIFICANTLY LOWER
Gold production was 203,000 ounces, and cash costs fell from $239 per
ounce to $205 per ounce, placing Meridian in the lowest quartile of
cash costs of gold production in the western world.
A ONE MILLION OUNCE RESOURCE WAS ANNOUNCED AT ROSSI
For the Rossi Project, on the Carlin Trend in Nevada, the Company announced in
the third quarter a geologic resource of nearly 1.1 million ounces, grading 12.7
grams/tonne.
ENVIRONMENTAL AND SAFETY PERFORMANCE AT BEARTRACK WAS AGAIN EXEMPLARY
In January of 1998, Beartrack completed a full year without a lost-time
accident. In addition, the mine was the recipient of a Special Project Award
from the Idaho Land Board for the continuing reclamation work around Napias
Creek.
MERIDIAN'S BALANCE SHEET REMAINED STRONG
Cash and marketable securities stood at $54.3 million at year-end, and Meridian
has no debt outstanding.
<PAGE> 5
MESSAGE TO SHAREHOLDERS
MERIDIAN GOLD INC.
1997 was a year to remember for the gold industry, as the price of gold dropped
to below $300 per ounce and matched 18-year lows. Meridian has endured this
significant downturn better than many due to its strong financial position, with
$54 million in cash, no debt, and a low cash cost position at both of its
operating mines. As a result, Meridian is in a position to take advantage of the
opportunities such a low-gold-price environment creates. When the market turns,
Meridian will be able to capitalize on the considerable upside of its strong
portfolio of gold properties.
<PAGE> 6
DRILL RIGS AT WORK ON THE EL PENON PROPERTY
This does not mean, however, that we are sitting still and "waiting it out" with
regards to our current operations. We have accelerated, as warranted by the
sternest of all teachers - the market - a focused campaign to reduce costs at
our Beartrack operation in Idaho, and are working at our joint venture at the
Jerritt Canyon mine in Nevada to do the same.
1998 will be a growing year, a year to solidify Meridian's base for future
growth and success. We look forward to it.
OPERATIONS
For 1997, gold production was 203,000 ounces at an average cash cost of $205 per
ounce. When compared to 1996, gold production was essentially even, but cash
costs declined by 14%. This places Meridian's cash operating costs in the lowest
quartile of cash operating costs in the western world.
At our 100%-owned Beartrack Mine near Salmon, Idaho, we produced 107,000 ounces
of gold in 1997 at a cash cost of $202 per ounce. Based on the current low price
of gold, reserves at Beartrack have been restated and a new mine plan developed
at a long-term average gold price of $350 per ounce. In 1998, we expect to
produce 100,000 ounces at an average cash cost of $230 per ounce. Meridian's
hedging program has locked in a minimum price of $400 per ounce for 32,000
ounces of Beartrack's production in the fourth quarter of 1998 through put
options.
The consultation process concerning certain environmental matters at the
Beartrack Mine, described in note 13 to the financial statements included in
this report, is still ongoing. On February 18, 1998 the U.S. National Marine
Fisheries Service (NMFS) provided a draft biological opinion to the Forest
Service and other federal agencies for review and comment. The Forest Service
has requested of NMFS that the comment period be extended to May 19, 1998.
At Jerritt Canyon, where we own a 30% interest, 1997 production and cash costs
improved versus 1996 - 96,000 ounces of gold at $209 per ounce. In the third
quarter of 1997, we took a non-cash provision of $26.2 million against the
assets of Jerritt Canyon to account for the low price of gold. As with
Beartrack, a new mine plan has been developed for Jerritt Canyon. We expect 1998
production of 100,000 ounces of gold at an average cash cost of $220 per ounce.
Due to our relatively low-cost production, we will still generate significant
positive cash flow from our operations in 1998. This cash will be used to
continue building our foundation for future growth.
GROWTH STRATEGY
Last year we outlined a four-part growth strategy for Meridian. A report on how
well we implemented that strategy in 1997 follows.
DEVELOP THE ADVANCED-STAGE EXPLORATION PROPERTIES OF
EL PENON AND ROSSI
El Penon (located in the Atacama desert in northern Chile) - 1997 was focused on
completing work for the feasibility study, through in-fill drilling, the
completion of the underground decline and crosscuts, mine planning, plant
engineering, and capital and operating cost estimation.
An encouraging status report on the feasibility study was released in early
March of 1998, and confirmed our long-held view that El Penon is one of the
stronger gold projects in South America. Proven and probable mineable reserves
stand at 0.9 million ounces of gold and 14.4 million ounces of silver. Initial
capital costs are expected to fall within the range of $75-$90 million, and
annual production is expected to be 130,000 ounces of gold and
[PICTURE]
David S. Robertson
Chairman of the Board
[PICTURE]
Brian J. Kennedy
President & Chief Executive Officer
3
<PAGE> 7
1,900,000 ounces of silver. Average life-of-mine cash costs (including silver
credits based on a silver price of $6/oz) are expected to be $160 per ounce of
gold. Requests for Engineering, Procurement and Construction bids will be sent
in late April of 1998 to several international engineering firms, and after
review of these bids a decision as to whether or not to proceed to production at
this time will be made.
Based on our successes to date, we anticipate that further drilling will
eventually convert a significant portion of the estimated 1.0 million ounces of
mineralized material to proven and probable mineable reserves, and we will
continue to explore further on our 600 square kilometer land position
surrounding the currently known orebodies.
Rossi (located on the Carlin Trend in Nevada) - In the 3rd quarter of 1997 we
published a resource estimate for our Rossi property, which is located on the
prolific Carlin Trend in Nevada. At a cutoff grade of 6.8 grams/tonne, the
inferred geologic resource at Rossi is 1,069,000 ounces of gold, contained in
2.8 million tonnes averaging 12.7 grams/tonne. We are presently reviewing all of
our options regarding this promising property, including the possibility of a
joint venture.
EXPLORE FOR NEW RESERVES AT EXISTING MINES
Reserves at our existing mines declined from 1.4 million ounces of gold at the
end of 1996 to 1.0 million ounces of gold at the end of 1997, as a result of the
revaluation of our reserves at a $350 long-term gold price versus a $400
long-term gold price and 1997 mining activities.
Beartrack - In March and April of 1997, Meridian acquired the Musgrove, Arnett
Creek and Humbug properties near the Beartrack mine, with the expectation that
these properties would add to Beartrack's overall mineable reserves. Results to
date have been disappointing, and it has been determined that these properties,
if developed, would not provide acceptable rates of return to Meridian's
shareholders at current low gold prices.
Additional targets on the Beartrack property were drilled in 1997 as well.
However, we were unable to replace the reserves which were depleted due to 1997
production.
Jerritt Canyon - Exploration successes at Jerritt Canyon in 1997 nearly offset
the decline in the reserve base occasioned by 1997 production, but could not
make up for the decline in reserves caused by the revaluation at $350 gold.
Highlights included the expansion of the high-grade SSX orebody and the further
definition of the Coulee resource. SSX will go into production in 1998, ahead of
the original schedule. Drilling will continue in 1998 on several prospective
areas at Jerritt Canyon, which has been in continuous production since 1981.
PURSUE AN AGGRESSIVE ACQUISITIONS PROGRAM
Our objective is to become a low-cost, 500,000-ounce-per-year gold producer by
the year 2000. We believe that such a size will provide us with the critical
mass necessary for sustainable long-term growth in profitability and cash flow.
In order to achieve this strategic objective, we are aggressively pursuing
opportunities which will be accretive to existing Meridian shareholders and
which will provide us with a further platform for long-term growth. Our primary
geographic focus is the Western Hemisphere, specifically Nevada and Latin
America. Meridian offers known, strong leadership with sound technical and
financial skills to the shareholders of any acquisition or merger candidate.
CONTINUE A "GRASS-ROOTS" EXPLORATION PROGRAM FOCUSED ON NEVADA AND CHILE
Because of the intensity of our focus at El Penon in Chile, grass roots
exploration work in South America was held to a minimum in 1997, with minor
drilling work taking place on the Las Tinajas property in Chile.
[MEETING PICTURE]
[LOBBY PICTURE]
TOP: A TEAM AT WORK, CONSISTING OF (L TO R): MIKE HOUSE, BOB BOZZUTO, MELISSA
BARRY, JOHN PIERSON AND WILL STRONG.
BOTTOM: MERIDIAN GOLD'S WAITING AREA, WITH BOARD ROOM ON THE LEFT AND MURAL WALL
ON THE RIGHT.
PROVEN AND
PROBABLE GOLD RESERVES
at December 31
(thousands of ounces)
<TABLE>
<CAPTION>
94 95 96 97
<S> <C> <C> <C>
1,769 1,422 1,419 1,909
</TABLE>
<PAGE> 8
Grass roots exploration continued, however, in Nevada, with the signing of an
option agreement with Gerle Gold (U.S.) Inc. on the Happy Creek (Buff Peak)
property in the Jackson Mountains of northwest Nevada. Under the agreement,
Meridian can earn a 60% interest in the property, which hosts an epithermal
quartz vein system with the potential for gold mineralization similar to that
found at El Penon. Gerle Gold (U.S.) Inc. is a Nevada Corporation and a
wholly-owned subsidiary of Gerle Gold Ltd., a British Columbia, Canada
corporation.
In 1998, grass-roots exploration will continue in Nevada, and will expand
considerably in South America. Over its history, Meridian Gold (formerly FMC
Gold) has discovered five "grass-roots" deposits, containing over 5.8 million
ounces of gold. We hope to continue this kind of discovery success in the
future.
FINANCIAL REVIEW
Meridian Gold recorded a loss of $69.2 million or $0.94 per share for 1997,
primarily as a result of expensing all of an aggressive exploration program
($31.1 million) and non-cash charges relating to Jerritt Canyon and Beartrack
due to low gold prices ($36.4 million). At the same time, however, the Company
has built a platform for significant long-term profitable growth at El Penon
and Rossi. This growth program and its corresponding negative impact on
short-term earnings is completely consistent with our stated intentions at the
time of our secondary offering in July 1996. Since the growth platform was
established in 1997, 1998 exploration expenditures will be adjusted to about $10
million.
Revenues in 1997, driven by lower realized gold prices, decreased by 10% to
$68.7 million on total production of 203,000 ounces of gold. Cash flow from
operating activities was ($7.3) million, $22.7 million less than in 1996, due to
our significant exploration expenditures and lower realized gold prices.
BOARD APPOINTMENTS
1997 saw the resignation of one board member and the addition of two new board
members.
Michael Callahan, CFO of FMC Corporation, resigned in August.
Patrick J. Mars, President of P.J. Mars Investments Ltd. and Chairman of Chivor
Emerald Corporation Ltd., joined our board in April. Malcolm W. MacNaught, who
recently completed a successful career with Fidelity Investments, became a
member of our board in December. Both Mr. Mars and Mr. MacNaught bring
tremendous experience and expertise to our board, and we look forward to the
benefit of their experience.
In February of 1998, John C. White resigned from the board to pursue the
pleasures of retirement. We thank John for his contributions to Meridian.
1998 PRIORITIES AND OUTLOOK
For 1998, we expect to produce approximately 200,000 ounces of gold at an
average cash cost of $225 per ounce. We also anticipate that a decision will be
made as to whether or not the economics of the El Penon project justify placing
El Penon into production at this time.
Exploration expenditures are planned at less than $10 million, and we will
continue to evaluate acquisition candidates to build Meridian. We look forward
to a challenging and successful 1998.
On behalf of the Board of Directors
February 28, 1998
(signed) David S. Robertson
David S. Robertson
Chairman of the Board
(signed) Brian J. Kennedy
Brian J. Kennedy
President & Chief Executive Officer
5
<PAGE> 9
CORPORATE
RESPONSIBILITY
[MERIDIAN GOLD INC.]
<PAGE> 10
NAPIAS CREEK, NEAR THE BEARTRACK MINE
"Honesty, integrity, and a strong commitment to high standards of moral, ethical
and lawful conduct are among Meridian's proudest and most important traditions
... As we globalize and expand our activities, our common goal and continuing
commitment must always be to maintain equally high standards wherever we are
..."
This statement, taken from Meridian Gold's Code of Ethics, is not merely a
noble-sounding platitude. It represents how we have done business in the past,
and how we will continue to do business in the future. We are very proud of our
reputation, and we believe it is the essential foundation for sustainable,
long-term success.
ENVIRONMENTAL RESPONSIBILITY
One of the first issues critics of the mining industry point to is the
environment. Our response to such issues is quite frank - we aren't going to
pretend that we are not in the mining business to make money and to increase
shareholder value, but we take our environmental responsibilities seriously, and
our track record proves that.
Our Beartrack mine has received awards from the State of Idaho for its
continuing efforts to improve the surrounding environment. We have even taken on
the responsibility of rehabilitating areas damaged by previous miners in the
area, the most notable of these being Napias Creek, the work on which earned the
mine a 1997 Special Project Award from the Idaho Land Board. When the Beartrack
mine reaches the end of its life, we will reclaim the areas we have disturbed,
just as we have done in the past - at Austin, and currently at Royal Mountain
King, where we have already spent in excess of $9 million in reclamation
activities.
RESPONSIBILITY TO OUR SHAREHOLDERS
As all corporations do, we operate under a serious mandate - to invest the money
of our shareholders wisely and earn them a good return on their investment. Our
shareholders are the reason we are in existence, and we fully accept the
responsibility to put forth our best efforts toward being successful in this
business and to be honest about the results of those efforts. We will continue
to honor the integrity of our mandate.
RESPONSIBILITY TO OUR EMPLOYEES
Our employees, of course, from the President to our geologists to our equipment
operators to our accountants, are what make this company perform. That is why we
believe in creating a positive, safe working environment, in rewarding hard work
and achievement, and in providing personal development opportunities to our
employees.
At Beartrack, for instance, a "Bright Ideas" program has been developed to
reward any employee or group of employees who come up with ideas to improve the
efficiency and safety of our operations. On another important note, the
Beartrack mine, which we operate, completed in January of 1998 a full year
without a lost time accident.
Of course, the fact is not lost on us that attracting, developing and retaining
quality employees who work hard and enjoy working for Meridian is good for all
of us, including our shareholders. We have a strong team, and we will continue
to grow stronger.
[PICTURE OF SIGN]
[PICTURE OF DEER]
[PICTURE OF HORIZON]
[PICTURE OF LAKE]
TOP: VIEW OF A PORTION OF THE RECLAIMED AREA AROUND NAPIAS CREEK, NEAR
BEARTRACK.
SECOND FROM TOP: WILDLIFE NEAR BEARTRACK.
SECOND FROM BOTTOM: ONE OF THE MAN-MADE LAKES AT ROYAL MOUNTAIN KING.
BOTTOM: VIEW OF THE FORMER AREA FOR TAILINGS DISPOSAL AT ROYAL MOUNTAIN KING.
7
<PAGE> 11
BEARTRACK
[MERIDIAN GOLD INC.]
<PAGE> 12
ORE PRODUCTION AT BEARTRACK
The 100-percent owned Beartrack mine, an open pit, heap leach operation, is
located approximately 11 miles west of Salmon, Idaho on approximately 27 square
miles of patented and unpatented mining claims. Beartrack produced 107,000
ounces of gold in 1997, down slightly from 109,000 ounces in 1996.
Ore production in 1997 was 3.8 million tonnes, at an average grade of 0.89
grams/tonne (cyanide soluble). Cash costs for the year were better than
budgeted, at $202 per ounce of gold produced, and were slightly higher than 1996
cash costs of $190 due to lower throughput resulting from the planned heap leach
pad expansion. Cost savings efforts at Beartrack in 1997 had a measurable effect
on performance, and those efforts will continue in 1998.
SAFETY AND THE ENVIRONMENT
Beartrack was the recipient in 1997 of a Special Project Award from the Idaho
Land Board for improving a 36-acre wetlands area around Napias Creek, continuing
a strong tradition of environmental concern that has been evident from the
beginning of the project. Beartrack's environmental manager, John Lawson, was
also recognized in the award.
Beartrack also continues to be one of the safest mines in the United States,
with a total reportable accident rate of 1.59, compared to the latest available
national average (1996) of 8.06. In January of 1998, the mine completed a full
year without a lost-time accident.
CONSTRUCTION ACTIVITIES
Over two million square feet of leach pad area was constructed in 1997 at a cost
of $4.6 million, with approximately 50% of the work being done in-house. This
expansion provides the necessary capacity to process the mine's remaining
reserves, and loading of the new pad area began in late August.
EXPLORATION
Drilling of the newly-acquired Arnett Creek and Musgrove properties, located
near the Beartrack property, yielded disappointing results amidst the low gold
price environment. Drilling on the Beartrack property itself yielded some
increases to the overall resource, but these increases were unable to offset the
loss in reserves due to 1997 production and a new reserve estimation calculated
at a $350 gold price (versus $400 in 1996).
As of December 31, 1997, proven and probable reserves at Beartrack stood at 13.8
million tonnes of ore grading 1.22 grams/tonne gold (fire assay basis), for
545,000 contained ounces of gold.
1998 OUTLOOK
A new mine plan, based on the new reserve estimation, is being implemented in
1998. Based on this plan, 1998 gold production is expected to be 100,000 ounces
at an average cash cost of $230 per ounce.
[PICTURE OF CONSTRUCTION]
CONSTRUCTION ACTIVITIES ON THE
HEAP LEACH PAD AT BEARTRACK.
[PICTURE OF WORKMAN IN SUIT]
GOLD POUR AT BEARTRACK.
SUMMARY
o 1997 production of 107,000 ounces of gold
o 1997 cash costs of $202 per ounce
o Heap leach pad expanded
o Expected 1998 production of 100,000 ounces of gold at $230 per ounce
9
<PAGE> 13
JERRITT
CANYON
[MERIDIAN GOLD INC.]
<PAGE> 14
PLANT FACILITIES AT JERRITT CANYON
The 30-percent owned Jerritt Canyon mine, located 57 miles northwest of Elko,
Nevada, is a joint venture with Independence Mining Company, Inc., a
wholly-owned subsidiary of Minorco (USA) Inc., who is the operator. Since the
discovery of Jerritt Canyon by Meridian geologists in 1972, the mine has
produced in excess of 4.8 million ounces of gold from various orebodies within
the 120-square-mile claim block.
Historically, the various orebodies at Jerritt Canyon have been discovered in
the erosional windows through the upper plate of the Roberts Mountains Thrusts,
following mineralized structures. Over the past few years, however, several
discoveries have been made following the mineralized structures beneath this
upper plate. These include the Murray mine, currently in production, with
year-end 1997 reserves of 1.3 million tonnes grading 14.0 grams/tonne; the SSX
project, containing approximately 1.1 million tonnes grading 13.2 grams/tonne;
and the Coulee resource, with 0.8 million tonnes grading 10.4 grams/tonne (all
of the above stated on a 100% basis).
1997 PERFORMANCE
Production at Jerritt Canyon in 1997 was 96,000 ounces of gold, versus 1996
production of 93,000 ounces. The increase in production was largely due to 65%
higher grades which more than offset the 42% lower mill throughput resulting
from the shutdown of the wet mill early in the year. Cash costs of production
were also better than 1996, at $209 per ounce versus $297 per ounce, due largely
to the higher grades.
In April 1997 the Dash open pit orebody went into production. In addition, the
SSX project was placed on an accelerated schedule in 1997, and should reach full
production in the second half of 1998.
Due to the current low price of gold, the carrying value of the Jerritt Canyon
mine on Meridian's balance sheet was reduced by $26.2 million in the third
quarter of 1997. This was a one-time, non-cash item, and will improve the
Company's earnings in the future.
EXPLORATION
During 1997, exploration was focused on in-fill drilling at Coulee and step-out
drilling at SSX. Presently, SSX contains proven and probable reserves
(Meridian's 30% share) of 138,000 ounces of gold at 13.2 grams/tonne.
As of December 31, 1997, proven and probable mineable reserves at Jerritt Canyon
(Meridian's 30% share) stood at 1.9 million tonnes grading 7.6 grams/tonne gold,
for 470,000 contained ounces of gold. Other mineralized material for Meridian's
account at Jerritt Canyon amounted to 6.6 million tonnes grading 6.8 grams/tonne
gold, for 1,458,000 contained ounces of gold.
1998 OUTLOOK
The mine plan for Jerritt Canyon forecasts 1998 production of 100,000 ounces of
gold at an average cash cost of $220 per ounce. Capital expenditures of
approximately $8 million will go primarily toward the development of the
high-grade SSX mine. Exploration will focus on several promising new targets.
[PICTURE OF MACHINE OPERATOR]
UNDERGROUND MINING AT JERRITT CANYON.
<TABLE>
<CAPTION>
Cash Operating Costs Gold Production
($US/oz) (K oz)
<S> <C> <C>
94 283 98
95 250 98
96 297 93
97 209 96
98 220 100
</TABLE>
*estimated
SUMMARY
o 1997 production of 96,000 ounces of gold
o 1997 cash costs of $209 per ounce
o SSX development accelerated
o $26.2 million asset impairment taken in the third quarter
o Expected 1998 production of 100,000 ounces of gold at $220 per ounce
11
<PAGE> 15
[MERIDIAN GOLD INC.]
EL PENON
Most of 1997 was focused on completing work for the feasibility study. That work
included further surface drilling, the completion of the underground decline and
underground reserve definition drilling, metallurgical testing, mine planning
and plant design. The engineering firm contracted for the feasibility study was
Kvaerner Metals.
<PAGE> 16
DRILL RIGS AT EL PENON
FEASIBILITY RESULTS
Though the final feasibility study has not been completed, pending Engineering,
Procurement and Construction bids on the mill from several engineering
companies, the status of the study to date is encouraging. The mine plan calls
for mining and milling at 2,000 tonnes per day (tpd), with proven and probable
mineable reserves of 894,000 ounces of gold and 14,402,000 ounces of silver. The
mine plan assumes the development of additional mineralized material containing
249,000 ounces of gold and 3,489,000 ounces of silver contiguous to the proven
and probable reserves. Production would average about 130,000 ounces of gold and
1,900,000 ounces of silver per year, with average cash costs after co-product
silver credits (using a $6/oz silver price) of $160 per ounce of gold over the
life of the mine.
Based on favorable metallurgical testing of the ore, Kvaerner has recommended a
standard processing circuit: three-stage crushing, a gravity circuit, cyanide
leach, Merrill Crowe zinc precipitation, and a refinery. The feasibility work
indicates recoveries of 95% of the gold and 87% of the silver. Mill operating
costs are projected to be $12 per tonne of ore.
The mine plan indicates 85% of the reserves being mined by underground methods
from two declines: the first at Quebrada Orito producing at about 600 tpd; and
the second at the Orito Sur zone (which comprises the southern portion of the
Quebrada Orito deposit) producing at about 800 tpd. An overhand cut-and-fill
method has been used for the plan, with budgetary contract mining quotes of
about $33 per tonne mined. Average underground grades are 7.2 g/tonne gold and
94.1 g/tonne silver for Quebrado Orito and 6.7 g/tonne gold and 110.4 g/tonne
silver for Orito Sur.
The open pits at Quebrada Orito and Cerro Martillo would feed the mill at about
600 tonnes per day. The Quebrada Orito pits would have an average strip ratio of
9.4:1 with an average grade of 4.7 g/tonne gold and 64.3 g/tonne silver. Cerro
Martillo would have an average strip ratio of 9.2:1 with an average grade of 2.5
g/tonne gold and 81.4 g/tonne silver. Budgetary quotes for open pit contract
mining are about $1.38 per tonne mined.
Bid packages will be sent in late April of 1998 to several international
engineering firms for the construction of the plant, and bids will be reviewed
during the second quarter of 1998. Following the review of these bids, Meridian
will make a decision as to whether or not the economics of the project justify
placing El Penon into production at this time.
SURFACE WORK
Surface drilling started at El Penon in February and continued until
mid-December. 356 holes were drilled during the year, including 48 core holes in
the known resource areas. The emphasis was on reserve definition or development
drilling. There were as many as seven drill rigs active on the property at one
time, and more than $12 million was spent on surface drilling.
Early in the year, 51 `condemnation' holes were drilled to confirm that areas
tentatively planned for future mine dumps and facilities were not located above
potential mineralization. This work was completed by March.
Previous resource estimates included gold and silver resources at Quebrada
Orito, Orito Sur, Orito Norte, Cerro Martillo, and Discovery Wash. 1997 drilling
confirmed that the first three resource areas are actually connected - they are
part of the same deposit localized by the same mineralized fault zone. This
entire deposit is now referred to as Quebrada Orito, and was the focus of the
surface and underground exploration work for most of the year.
[PICTURE OF DESERT]
AERIAL VIEW OF THE EL PENON PROJECT, IN THE
ATACAMA DESERT OF NORTHERN CHILE.
EL PENON PROPERTY
[AREA MAP]
SUMMARY
o Feasibility status encouraging
o Proven and probable mineable reserves of 894,000 ounces of gold and
14,420,000 ounces of silver
o 2,000 tonne-per-day mill being planned
o Production estimates of 130,000 ounces per year gold and 1,900,000 ounces per
year silver at $160 per gold ounce.
13
<PAGE> 17
EL PENON PLANNED DEVELOPMENT
[PICTURE OF TERRAIN]
EL PENON RESERVES AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Proven and Probable Mineable Ore Gold Silver Contained Ounces
Tonnes Grade Grade Gold Silver
(mils) (g/t) (g/t) (K oz) (K oz)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Quebrada Orito Deposit(1) 4.0 6.6 98.8 834 12,473
Cerro Martillo Deposit 0.7 2.6 84.1 60 1,929
- ----------------------------------------------------------------------------------------
Total Reserves 4.7 6.0 96.2 894 14,402
</TABLE>
(1) Includes both the Quebrada Orito and Orito Sur zones.
EL PENON OTHER MINERALIZED MATERIAL AT DECEMBER 31, 1997
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
Ore Gold Silver Contained Ounces
Tonnes Grade Grade Gold Silver
(mils) (g/t) (g/t) (K oz) (K oz)
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Other Mineralized Material 3.6 8.3 146.0 964 16,903
- ----------------------------------------------------------------------------------------
</TABLE>
<PAGE> 18
Surface drilling at Quebrada Orito included 38 diamond core and 148 reverse
circulation holes. Most of this work was completed on the southern end of the
deposit where the orebody is covered by gravel and unmineralized rocks. Nearly
all of the drill holes confirmed the previously estimated resource and served to
decrease the drill hole spacing for reserve calculation. Individual assays
ranged up to more than 400 g/t gold, and the structure continues to the south
where the mineralization remains open at depth over a major portion of the
strike length.
Cerro Martillo also received significant surface drilling with ten core and 46
reverse circulation holes. Reserve definition was the primary purpose, as at
Quebrada Orito, and additional samples for metallurgical testing were also
obtained. More than 300,000 ounces of mineralized material at Cerro Martillo
exist, so additional drilling has the potential to increase proven and probable
reserves.
Other mineralized material at El Penon totals 3.6 million tonnes grading 8.3
g/tonne gold and 146 g/tonne silver, for 964,000 ounces of gold and 16,903,000
ounces of silver.
UNDERGROUND WORK
The decline into the Quebrada Orito deposit that was initiated late in 1996
was completed around mid-year 1997. The work consisted of a 750 meter long, 4.25
x 4.75 meter decline, six cross-cuts totaling 341 meters, 55 meters of drifts in
ore, and 44 underground diamond core holes. The underground program was
successful in confirming the continuity and tenor of the mineralization in
Quebrada Orito, and additional samples were obtained for metallurgical and
geotechnical data. All of the data from the underground program were
incorporated into the feasibility study, and the decline will also provide a
production-scale access to a high-grade portion of the deposit.
EXPLORATION SUCCESS
Because of the emphasis on reserve definition for the feasibility study, there
were only 63 true exploration holes drilled on the El Penon property in 1997.
However, this limited work was successful in discovering a new zone of
mineralization at Doncella, where gold and silver mineralization occurs in a
geological setting similar to the known deposits.
The mineralization occurs along a large geophysical anomaly starting at depths
of 125 meters. Though the drilling has been limited, several holes have
confirmed a zone of ore grade mineralization up to 12 meters wide containing 5.2
g/t gold and 125 g/t silver over a strike length of at least 60 meters. The core
of the zone is higher grade, with up to 6 meters true width of 8 g/t gold and
264 g/t silver. The Doncella zone remains open in both directions along strike
and at depth.
In 1998, the full potential of Doncella will be tested, along with additional
areas north of Discovery Wash and between Doncella and Cerro Martillo, where
ore-grade intercepts over mineable widths have been encountered. Geophysical
programs will also continue on the El Penon property, along with drill testing
of new anomalies and targets.
PERMITTING
All permitting to enable development of a possible mining project has been
initiated with the proper Chilean authorities. This process is proceeding on
schedule.
[PICTURE OF WORKMAN]
A SECTION OF CORE FROM EL PENON DRILLING.
EL PENON PROCESS FLOWSHEET
RECOVERY 95% GOLD AND 87% SILVER
[FLOWSHEET GRAPHIC]
15
<PAGE> 19
MERIDIAN GOLD INC.
ROSSI
& OTHER
US EXPLORATION
ROSSI GEOLOGIC RESOURCE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Cutoff grade Ore tonnes Gold grade Contained Gold
(g/t) (mils) (g/t) (ozs)
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
6.8 2.8 12.7 1,069,000
- -------------------------------------------------------------------------------
</TABLE>
<PAGE> 20
DRILLING AT ROSSI, ON THE CARLIN TREND
Two drill campaigns totaling 20 holes and 11,174 meters were completed at Rossi
in 1997. The drilling was concentrated in the STORM Resource area, on Dunphy
Road, and at a new target to the southwest of the STORM Resource. In the third
quarter, a geologic resource estimate of 2.8 million tonnes averaging 12.7
grams/tonne, for 1.1 million contained ounces of gold, was completed. The
estimate was made using a cut-off grade of 6.8 grams/tonne.
The resource estimate of the STORM Resource area included the construction of a
three dimensional model. This model used 78 drill holes and placed strong
structural and stratigraphic controls on the mineralization. In addition, no
mineralization was extended more than 50 or 37 meters, depending on the
orientation. The resource starts at a depth of approximately 215 meters below
the surface and is open to expansion.
Although disappointing results were received at Dunphy Road, a new zone
of significant mineralization was encountered southwest of the STORM Resource in
three drill holes. The best of the holes encountered 68 meters of 2.5
grams/tonne gold starting at 368 meters depth. This hole did not intersect the
structural intersection targeted, so additional drilling will be necessary to
further evaluate the potential of the zone.
The resource estimate at Rossi represents the results of detailed deep drilling
on only a small portion of the property, and the resource is open to expansion.
Meridian is currently reviewing all of its options regarding the property.
OTHER U.S. EXPLORATION
In 1997, Meridian conducted grass-roots exploration in the U.S., primarily in
the Great Basin of Nevada. The targets of this program were high grade
volcanic-hosted vein systems and structurally controlled high-grade sediment
hosted systems. Two early stage properties were acquired and detailed surface
evaluation activities are currently underway. Both are low-sulfidation,
quartz-adularia vein systems with many geological and geochemical
characteristics similar to El Penon. Drilling is planned on at least one of
these properties in 1998.
Preliminary Underground Program
Rossi STORM Resource
Looking Southwest
[UNDERGROUND MAP]
Rossi Property
[MAP]
SUMMARY
o Rossi geologic resource of 1.1 million ounces of gold announced
o Full review of options regarding Rossi is proceeding
o Grass-roots program conducted in Nevada
17
<PAGE> 21
STATISTICAL SUMMARY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Milling Operations
TONNES OF ORE PROCESSED (thousands)
Jerritt Canyon (Meridian Gold share) 419 726 802 806 849
Royal Mountain King -- -- -- 635 1,210
Paradise Peak -- -- -- -- 533
GOLD ORE GRADE (grams per tonne)
Jerritt Canyon 7.4 4.5 4.4 4.1 4.4
Royal Mountain King -- -- -- 1.8 1.8
Paradise Peak -- -- -- -- 3.9
GOLD RECOVERIES
Jerritt Canyon 91% 88% 86% 88% 89%
Royal Mountain King -- -- -- 73% 77%
Paradise Peak -- -- -- -- 89%
Leaching Operations
TONNES OF ORE MINED (thousands)
Beartrack 3,764 3,969 3,539 733 --
Paradise Peak -- -- -- -- 3,554
GOLD ORE GRADE (grams per tonne)
Beartrack (cyanide soluble grade) 0.9 0.9 1.2 1.2 --
Paradise Peak -- -- -- -- 0.9
GOLD RECOVERIES
Beartrack 86% 90% 90% -- --
Paradise Peak -- -- -- -- 82%
Production (thousands of ounces)
GOLD
Jerritt Canyon (Meridian Gold share) 96 93 98 98 108
Beartrack 107 109 49 -- --
Paradise Peak -- -- 4 39 158
Royal Mountain King -- -- -- 26 55
---- ---- ---- ---- ----
Total Gold 203 202 151 163 321
Total Silver 60 38 27 154 863
---- ---- ---- ---- ----
CASH COST OF PRODUCTION
(United States $ per gold ounce)
Jerritt Canyon 209 297 250 283 240
Beartrack 202 190 166 -- --
Paradise Peak -- -- 155 124 117
Royal Mountain King -- -- -- 296 336
Average 205 239 221 246 194
</TABLE>
CAUTIONARY STATEMENT
Certain statements in this Annual Report constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Company, or other future events, to be materially different from any future
results, performances or achievements or other events expressly or impliedly
predicted by such forward-looking statements. Such risks, uncertainties and
other factors include, but are not limited to, factors associated with
fluctuations in the market price of precious metals, mining industry risks,
recent operating losses, uncertainty of title to properties, risk associated
with foreign operations, environmental risks and hazards, proposed legislation
affecting the mining industry, litigation, governmental regulation of the mining
industry, properties without known mineable reserves, uncertainty as to
calculations of ore reserves, mineral deposits and ore grades, requirement of
additional financing, uninsured risks, risk of hedging strategies, competition,
dependence on key management personnel, potential volatility of market price of
common shares, dilution and certain anti-takeover effects.
<PAGE> 22
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal public trading markets for Meridian Gold common shares are The
Toronto Stock Exchange and the New York Stock Exchange. The quarterly high and
low trading prices of Meridian Gold common shares as reported on the Toronto and
New York Stock Exchanges and cash dividends paid for years ended December 31,
1997 and 1996 are set forth in the table of Supplementary Data on page 38.
Year-end 1997 market prices of Meridian Gold shares were $2.94 on the New York
Stock Exchange and CDN $4.00 per share on The Toronto Stock Exchange.
Meridian Gold had 440 shareholders of record as of December 31, 1997.
SELECTED FINANCIAL DATA
The following selected financial data, for the years 1993 through 1997, have
been derived from the consolidated financial statements of Meridian Gold Inc.,
including the consolidated balance sheets at December 31, 1997 and 1996 and the
related consolidated statements of operations, consolidated statements of cash
flows, and changes in stockholder's equity for each of the years ended December
31, and the notes thereto.
<TABLE>
<CAPTION>
(in millions of United States dollars, except share and per share data)
- ------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Summary of Earnings
Sales $ 68.7 $ 76.2 $ 57.4 $ 63.4 $ 118.9
Costs and expenses
Cost of sales 55.0 56.2 30.1 38.8 78.6
Depreciation, depletion,
and amortization 23.3 21.0 21.2 15.3 18.5
Exploration costs 31.1 13.4 10.8 10.9 14.2
Selling, general and
administrative expenses 6.2 6.4 5.1 6.5 6.9
Provision for impairment of
mining properties 26.2 -- -- -- 60.6
--------- --------- --------- --------- ---------
Total costs and expenses 141.8 97.0 67.2 71.5 178.8
--------- --------- --------- --------- ---------
Operating loss (73.1) (20.8) (9.8) (8.1) (59.9)
Interest income 3.7 4.9 5.9 8.7 8.3
Gain on sale of assets 0.2 -- 1.7 -- --
--------- --------- --------- --------- ---------
Income (loss) before
income taxes (69.2) (15.9) (2.2) 0.6 (51.6)
Income tax expense (benefit) -- -- (4.5) (2.1) 2.2
--------- --------- --------- --------- ---------
Net income (loss) $ (69.2) $ (15.9) $ 2.3 $ 2.7 $ (53.8)
--------- --------- --------- --------- ---------
Earnings (loss) per
common share $ (0.94) $ (0.22) $ 0.03 $ 0.04 $ (0.73)
--------- --------- --------- --------- ---------
Weighted average
common shares
outstanding (thousands) 73,601 73,563 73,484 73,484 73,484
--------- --------- --------- --------- ---------
TOTAL ASSETS AT DECEMBER 31 $ 147.9 $ 214.6 $ 225.2 $ 235.1 $ 238.6
--------- --------- --------- --------- ---------
TOTAL DIVIDENDS $ -- $ 1.5 $ 3.7 $ 3.7 $ 3.7
--------- --------- --------- --------- ---------
</TABLE>
<PAGE> 23
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
FINANCIAL REVIEW
SALES AND EARNINGS
As a reflection of lower realized gold prices, sales for 1997 decreased to $68.7
million, from $76.2 million in 1996. Gold production was 203,000 ounces, versus
202,000 ounces in 1996, and the average realized price of gold was $334 per
ounce, compared to $392 per ounce in 1996. Sales in 1997 include a gain of $0.9
million on put options covering 33,000 ounces.
Cost of sales in 1997 was lower than in 1996, at $55.0 million versus $56.2
million, due largely to lower costs at Jerritt Canyon resulting from higher ore
grades. Average cash costs declined to $205 per ounce of gold from $239 per
ounce in 1996, as a result of lower operating costs and increased ore grades at
Jerritt Canyon. Beartrack cash costs increased to $202 per ounce from $190 per
ounce due to slightly lower recoveries and the heap leach pad expansion. At
Jerritt Canyon, cash costs per ounce were driven lower by the higher grades,
which more than offset lower throughput, to $209 per ounce, versus $297 per
ounce in 1996.
Exploration spending of $31.1 million in 1997 was significantly higher than the
$13.4 million spent in 1996, owing to the significant amount of preliminary
development work that was completed at El Penon. The Company's policy is to
expense the cost of this work immediately, until the property is deemed capable
of commercial production. Exploration spending was also focused on defining a
resource at Rossi, and on increasing reserves at the Beartrack and Jerritt
Canyon operations. Selling, general and administrative expenses decreased to
$6.2 million in 1997, from $6.4 million in 1996.
In the third quarter of 1997, the Company recorded non-cash charges totaling
$36.4 million relating to Jerritt Canyon and Beartrack due to the low gold price
environment.
Meridian's net loss for the year was $69.2 million, compared with a net loss of
$15.9 million in 1996. The Company did not recognize a tax benefit in either
1996 or 1997.
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. At December 31, 1997, cash and cash equivalents totaled $54.3
million, and primarily took the form of short-term Euro deposits which have
varying maturities and are payable on demand.
Capital expenditures increased to $19.0 million in 1997, from $13.9 million in
1996. 1997 expenditures related to Jerritt Canyon were $13.1 million, up from
$9.0 million in 1996, as a result of increased mine development. At Beartrack,
the heap leach pad expansion was completed in 1997, representing the major
portion of Beartrack's $5.7 million of capital expenditures in 1997, which
compares to expenditures of $4.7 million in 1996.
Expected cash requirements for 1998 include approximately $10.3 million for
planned capital expenditures, primarily directed toward further mine development
at Jerritt Canyon. Exploration spending in 1998 is expected to be approximately
$9.0 million. The Company expects to fund these cash requirements from cash flow
from operations and existing cash reserves.
Should the Company decide to develop any of its exploration and development
properties, significant capital will be required. The Company believes that
these capital requirements could be funded by existing cash reserves and by
borrowings from third parties.
The Company has and will continue to address all risk implications with regard
to the Year 2000 issue relating to its business and operations. All operating
systems will be shut down and tested during 1998 running a test Year 2000
environment. All critical customers and suppliers have been requested to verify,
in writing, any implications resulting from Year 2000 before year-end 1998. It
is the Company's opinion that there will be no material operating or financial
impact to the Company due to the arrival of the new millennium.
OUTLOOK
Gold production is estimated to be approximately 200,000 ounces in 1998, based
upon the continued operation of the Beartrack and Jerritt Canyon mines. Cash
costs should be approximately $225 per ounce, with Beartrack producing at $230
per ounce due to lower ore grades and Jerritt Canyon producing at $220 per
ounce. Exploration at both operations will continue in 1998, although at
somewhat lower levels than before, and exploration at El Penon and in South
America will continue.
<PAGE> 24
INDEPENDENT AUDITORS' REPORT
THE BOARD OF DIRECTORS AND STOCKHOLDERS, MERIDIAN GOLD INC.:
We have audited the accompanying consolidated balance sheets of Meridian Gold
Inc. and subsidiaries as of December 31, 1997 and 1996, and the related
consolidated statements of operations, cash flows, and changes in stockholders'
equity for each of the years in the three-year period ended December 31, 1997
which, as described in Note 1, have been prepared on the basis of accounting
principles generally accepted in Canada. These consolidated financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these consolidated financial statements based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in Canada and in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Meridian Gold Inc.
and subsidiaries as of December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997 in conformity with accounting principles generally
accepted in Canada.
(signed)KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Denver, Colorado
February 9, 1998
<PAGE> 25
MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS
The accompanying consolidated financial statements and all of the data included
in this annual report have been prepared by and are the responsibility of the
management of the Company. The consolidated financial statements have been
prepared in accordance with accounting principles generally accepted in Canada
and reflect management's best estimate and judgements based on currently
available information. The Company has developed and maintains systems of
internal accounting controls in order to assure, on a reasonable and
cost-effective basis, the reliability of its financial information, and that its
assets are safeguarded from loss.
The Board of Directors is responsible for ensuring that management fulfills its
responsibilities for financial reporting and internal control. The Board
exercises its responsibilities through the Audit Committee of the Board which
meets with the external auditors to satisfy itself that the management's
responsibilities are properly discharged and to review the financial statements
before they are presented to the Board of Directors for approval.
The consolidated financial statements have been audited by KPMG Peat Marwick
LLP. Their report outlines the scope of their examination and their opinion on
the consolidated financial statements.
(signed)Brian J. Kennedy (signed)Edward H. Colt
Brian J. Kennedy Edward H. Colt
President & Chief Executive Officer Vice President, Finance &
Chief Financial Officer
February 9, 1998
<PAGE> 26
CONSOLIDATED STATEMENTS OF OPERATIONS
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
(in thousands of United States dollars, except per share data)
- -------------------------------------------------------------------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Sales $ 68,740 $ 76,230 $ 57,438
Costs and expenses
Cost of sales 54,945 56,216 30,065
Depreciation, depletion, and amortization 23,346 21,068 21,253
Exploration costs 31,107 13,357 10,826
Selling, general and administrative expenses 6,242 6,397 5,070
Provision for impairment of mining properties 26,233 -- --
--------- --------- ---------
Total costs and expenses 141,873 97,038 67,214
--------- --------- ---------
Operating loss (73,133) (20,808) (9,776)
Interest Income 3,788 4,953 5,857
Gain on sale of assets 178 -- 1,680
--------- --------- ---------
Loss before income taxes (69,167) (15,855) (2,239)
(note 8) Income tax expense (benefit) -- -- (4,512)
--------- --------- ---------
Net income (loss) $ (69,167) $ (15,855) $ 2,273
--------- --------- ---------
(note 1) Earnings (loss) per common share $ (0.94) $ (0.22) $ 0.03
--------- --------- ---------
</TABLE>
See notes to consolidated financial statements
<PAGE> 27
CONSOLIDATED BALANCE SHEETS
December 31
<TABLE>
<CAPTION>
(in thousands of United States dollars)
- -------------------------------------------------------------------------------------------------------------
1997 1996
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
(note 1) Cash and cash equivalents $ 54,321 $ 82,570
Trade receivables 1,249 1,768
(note 3) Inventories 9,982 16,763
Other current assets, less allowance of $2,000 in 1997 and 1996 3,359 2,717
-------- --------
Total current assets 68,911 103,818
(note 4) Property, plant and equipment, net 75,687 106,634
(notes 1 and 12) Other assets 3,349 4,115
-------- --------
Total assets $147,947 $214,567
======== ========
Liabilities and Shareholders' Equity
CURRENT LIABILITIES:
Accounts payable, trade and other $ 5,272 $ 7,549
(note 6) Accrued and other liabilities 8,878 10,709
-------- --------
Total current liabilities 14,150 18,258
-------- --------
(note 7) Other long-term liabilities 21,235 14,597
(note 1) SHAREHOLDERS' EQUITY:
Series 1 preferred shares, no par value, authorized unlimited
shares, 10,000 issued and outstanding in 1997 and 1996 100 100
Common shares, no par value, authorized unlimited shares,
73,601,495 and 73,597,495 issued and outstanding in 1997 and 1996 68,449 68,432
Additional paid-in capital 3,658 3,658
Retained earnings 40,355 109,522
-------- --------
Total shareholders' equity 112,562 181,712
-------- --------
Total liabilities and shareholders' equity $147,947 $214,567
======== ========
</TABLE>
See notes to consolidated financial statements
Signed on behalf of the Board of Directors:
(signed) David S. Robertson (signed) Brian J. Kennedy
David S. Robertson Brian J. Kennedy
Director Director
<PAGE> 28
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
(in thousands of United States dollars)
- -----------------------------------------------------------------------------------------------
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (69,167) $ (15,855) $ 2,273
--------- --------- ---------
ADJUSTMENTS TO RECONCILE NET INCOME (LOSS) TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
Provision for depreciation, depletion and amortization 23,346 21,068 21,253
Gain on sale of asset (178) -- (1,680)
Impairment of mining properties 26,233 -- --
Provision for reclamation, net of costs incurred 5,548 7,331 96
Provision for doubtful note receivable -- 1,700 --
Issuance of preferred stock as compensation -- 100 --
(INCREASE) DECREASE IN ASSETS:
Trade receivables 519 3,391 (3,363)
Inventories 6,781 (1,971) (9,171)
Other current assets (642) (621) (2,538)
Other assets 766 2,497 --
(DECREASE) INCREASE IN LIABILITIES:
Accounts payable, trade and other (2,277) 441 (4,002)
Accrued and other liabilities (1,831) 3,400 (1,716)
Amounts due to FMC Corporation -- (2,275) 1,681
Other long-term liabilities 3,590 (3,847) (2,781)
--------- --------- ---------
Net cash provided by (used in) operating activities (7,312) 15,359 52
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital spending (18,959) (13,882) (36,943)
Disposal of property, plant and equipment 505 172 4,645
Increase in other assets -- -- (1,791)
--------- --------- ---------
Net cash used in investing activities (18,454) (13,710) (34,089)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock 17 560 --
Dividends paid -- -- (3,674)
Repayments of long-term debt (2,500) (1,000) (1,500)
Capital contribution/return of
capital related to the reincorporation -- 2,186 --
--------- --------- ---------
Net cash provided by (used in) financing activities (2,483) 1,746 (5,174)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents (28,249) 3,395 (39,211)
Cash and cash equivalents, beginning of year 82,570 79,175 118,386
--------- --------- ---------
Cash and cash equivalents, end of year $ 54,321 $ 82,570 $ 79,175
--------- --------- ---------
</TABLE>
Supplemental disclosure of cash flow information:
Cash paid (and refunds received) for income taxes
during 1997, 1996, and 1995 were $2,193, ($1,454), and ($2,857), respectively
- --------------------------------------------------------------------------------
See notes to consolidated financial statements
<PAGE> 29
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
YEAR ENDED DECEMBER 31
<TABLE>
<CAPTION>
(in thousands)
- -----------------------------------------------------------------------------------------------------------------------------
Number of
Number of Meridian Meridian Meridian Meridian
FMC Gold Gold Gold FMC Gold Gold Gold Additional
Common Preferred Common Common Preferred Common Paid-in Retained
Shares Shares Shares Shares Shares Shares Capital Earnings
--------- --------- -------- -------- --------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE
DECEMBER 31, 1994 73,484 $ 735 $ -- $ -- $ 68,609 $126,778
Net income 2,273
Cash dividend
($0.05 per share) (3,674)
------ ------ ------ ------- ------ -------- -------- --------
BALANCE
DECEMBER 31, 1995 73,484 735 68,609 125,377
Issuance of shares
upon exercise of
stock options 113 1 559
(note 1) Reincorporation (73,597) 73,597 (736) 69,904 (69,168)
Net loss (15,855)
(note 1) Return of capital in
connection with
the reincorporation (1,472)
(note 1) Capital contribution
related to the
reincorporation 3,658
Preferred shares
issued 10 100
------ ------ ------ ------- ------ -------- -------- --------
BALANCE
DECEMBER 31, 1996 -- 10 73,597 -- 100 68,432 3,658 109,522
Net loss -- (69,167)
Issuance of shares
upon exercise of
stock options -- 4 17
------ ------ ------ ------- ------ -------- -------- --------
BALANCE
DECEMBER 31, 1997 -- 10 73,601 $ -- $ 100 $ 68,449 $ 3,658 $ 40,355
------ ------ ------ ------- ------ -------- -------- --------
</TABLE>
See notes to consolidated financial statements
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31
NOTE 1 PRINCIPAL ACCOUNTING POLICIES
NATURE OF OPERATIONS AND BACKGROUND
Meridian Gold Inc. ("Meridian") is an exploration-oriented gold
producer.
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Meridian and its predecessor, FMC Gold Company ("FMC
Gold"), and all majority-owned subsidiaries (collectively referred
to as "the Company"). The accounts of joint ventures in which the
Company holds an interest are consolidated on a pro rata basis.
All significant intercompany accounts are eliminated in
consolidation.
Meridian commenced operations in July, 1996 upon completion of a
series of transactions in which the Company was reincorporated in
Canada and became the successor to the business of FMC Gold ("the
Reincorporation"). In connection with the Reincorporation, FMC
Gold shareholders received one share of Meridian common stock, and
a $0.02 per share return of capital totaling approximately $1.5
million, in exchange for each common share held in FMC Gold. The
accompanying statement of stockholders' equity for the year ended
December 31, 1996 includes adjustments to give effect to the
Reincorporation. Additionally, FMC Corporation ("FMC") sold its 80
percent interest in Meridian through a public offering of
Meridian's common stock. Concurrent with FMC's sale of its
interest in Meridian, FMC made a capital contribution to Meridian
totaling approximately $3.7 million. FMC Gold shares were
subsequently cancelled.
As a result of the Reincorporation as a Canadian company, in 1996
the Company began reporting its financial statements in accordance
with Canadian GAAP, which differs in some respects from U.S. GAAP.
Differences between U.S. and Canadian GAAP do not have a material
effect on the financial statements presented. The accompanying
consolidated financial statements are presented in U.S. dollars.
USE OF ESTIMATES
The preparation of financial statements in conformity with
generally accepted accounting principles ("GAAP") requires
management to make estimates and assumptions that affect the
reported amount of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amount of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Meridian considers all highly liquid marketable securities with
original maturities of fewer than 91 days to be cash equivalents.
Marketable securities consist of Euro-time deposits with major
commercial banks and totaled approximately $54.3 million at
December 31, 1997. The book value of the marketable securities
approximates fair value.
INVENTORIES
Inventories are stated at the lower of the average cost or market,
and include labor, materials, other production costs and
depreciation. No inventory value is assigned to stockpiled ore,
except for in-process leach-pad ore where cost includes labor,
materials and other production costs.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, including development costs and
capitalized interest associated with the construction of certain
capital assets, is recorded at cost. Depreciation and amortization
for financial reporting purposes is provided on a units of
production basis or on the straight-line basis
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
over the shorter of the estimated lives of the assets or the
estimated proven and probable recoverable reserves. Gains and
losses are reflected in income upon sale or retirement of assets.
MINERAL EXPLORATION AND DEVELOPMENT COSTS
Mineral exploration costs are expensed as incurred. Development
costs applicable to mineralized properties deemed capable of
commercial production are capitalized and then amortized using the
units of production method.
RECLAMATION
Reclamation and shutdown costs to be incurred following mine
closures are estimated and accrued over the life of each mine
using the units of production method.
REVENUE RECOGNITION
Sales are generally recognized upon shipment of gold and silver
dore to third parties.
INCOME TAXES
The Company adopted the asset and liability method of accounting
for income taxes in 1997, and elected to apply the new method
retroactive to January 1, 1995. The retroactive application of the
new method of accounting for income taxes had no effect on the
financial statements for 1996 or 1995.
Under the asset and liability method of accounting for income
taxes, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and
liabilities and their respective tax bases and operating loss and
tax credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable
income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
FORWARD SALES AND HEDGING
In order to reduce its exposure to decreasing prices for future
gold production, the Company has hedged portions of future gold
production by entering into put option contracts. Costs associated
with open contracts were $1.8 million as of December 31, 1997 and
$3.3 million as of December 31, 1996 and are included in other
assets. The costs of the contracts are deferred and recognized as
a reduction of sales when the hedged production is sold. Proceeds
received upon the exercise of put options are recorded as sales
when the hedged production is sold.
EARNINGS (LOSS) PER COMMON SHARE
Earnings (loss) per common share have been computed based on the
weighted average number of shares of common stock outstanding
during the year (73,600,788 shares in 1997, 73,563,087 shares in
1996 and 73,484,395 shares in 1995).
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1997, the book value of the Company's financial
instruments approximates their fair value except as disclosed in
Note 12.
RECLASSIFICATIONS
Certain amounts in the prior years' financial statements have been
reclassified to conform to the current year's presentation.
<PAGE> 32
NOTE 2 ACQUISITIONS AND DIVESTITURES
On November 30, 1995, the Company's 100 percent interest in
Paradise Peak Corporation was sold to Arimetco Inc. for $4
million, including $2.0 million in cash and a note receivable for
$2.0 million, resulting in a $1.7 million gain on the sale of the
assets and the reversal of $4.5 million of accrued reclamation
costs through cost of sales. In January 1997, Arimetco Inc.
declared bankruptcy under Chapter 11. During the year ended
December 31, 1996, the Company recorded a provision of $2.0
million for the promissory note that was due in November 1996.
In June 1994, the Company agreed to purchase the remaining 14
percent interest in the Beartrack joint venture from Minex for
$6.0 million. Installments of $1.5 million each were paid to Minex
in June 1994 and June 1995, and two installments of $1.0 million
each were paid in June 1996 and June 1997. The balance payable to
Minex is due in two $0.5 million installments in 1998 and 1999.
NOTE 3 INVENTORIES
Inventories (at cost) consist of the following:
<TABLE>
<CAPTION>
(in thousands)
- -----------------------------------------------------------------------------
1997 1996
------- -------
<S> <C> <C>
Gold and silver $ 11 $ 1,863
Leach-pad ore 8,964 12,750
Materials and supplies 1,007 2,150
------- -------
Total $ 9,982 $16,763
------- -------
</TABLE>
Gold and silver inventories are in the form of dore, which is
delivered to precious metal treatment facilities for further
processing.
Leach pad ore inventory includes the cost of loading ore on the
heap leach pads at the Beartrack mine, and includes labor,
materials and other production costs. At December 31, 1997, there
were approximately 12.0 million tonnes of ore under leach
containing approximately 58,000 ounces of gold.
NOTE 4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
(in thousands)
- ---------------------------------------------------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Land and land improvements $ 15,792 $ 26,370
Less accumulated depreciation (5,682) (3,374)
------------ ------------
10,110 22,996
------------ ------------
Buildings 12,829 12,754
Less accumulated depreciation (6,396) (4,090)
------------ ------------
6,433 8,664
------------ ------------
Machinery and equipment 118,537 119,900
Less accumulated depreciation (89,265) (75,016)
------------ ------------
29,272 44,884
------------ ------------
Development costs 93,574 72,270
Less accumulated depletion (75,411) (48,490)
------------ ------------
18,163 23,780
------------ ------------
Construction in progress 11,709 6,310
------------ ------------
Net property, plant and equipment $ 75,687 $ 106,634
------------ ------------
</TABLE>
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Allocated to the projects as follows:
<TABLE>
<CAPTION>
(in thousands)
- ---------------------------------------------------------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Beartrack mine $ 53,149 $ 60,627
Jerritt Canyon mine 15,339 38,889
Rossi project 5,500 5,500
El Penon project 501 355
Royal Mountain King property 449 449
Administrative offices 749 814
------------ ------------
Net property, plant and equipment $ 75,687 $ 106,634
------------ ------------
</TABLE>
NOTE 5 JOINT VENTURE
The Company's 30% interest in the Jerritt Canyon Joint Venture is
reflected in the consolidated financial statements on a pro rata
basis. The Company's share of the joint venture's assets,
liabilities, revenues and expenses included in the accompanying
financial statements are as follows:
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------------------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Current assets $ 2,065 $ 2,832 $ 5,126
Property, plant and equipment, net 15,339 38,889 40,384
Investments and other assets 561 649 2,467
------------ ------------ ------------
Total assets 17,965 42,370 47,977
------------ ------------ ------------
Current liabilities 2,219 3,171 4,356
Long-term liabilities 9,720 4,565 2,907
Other -- 315 --
------------ ------------ ------------
Total liabilities 11,939 8,051 7,263
------------ ------------ ------------
Equity in Joint Venture $ 6,026 $ 34,319 $ 40,714
------------ ------------ ------------
Revenue $ 30,559 $ 35,781 $ 37,622
Expenses
Cost of sales 29,060 27,524 24,605
Depreciation, depletion and amortization 10,053 10,316 16,498
Impairment of assets 26,233 3,225 896
------------ ------------ ------------
Net loss $ (34,787) $ (5,284) $ (4,377)
------------ ------------ ------------
Cash provided by (used in) operating activities $ 11,403 $ 9,932 $ 9,307
Cash used in investing activities (12,737) (8,821) (10,093)
Cash provided by (used in) financing activities -- -- --
------------ ------------ ------------
</TABLE>
NOTE 6 ACCRUED AND OTHER LIABILITIES
Accrued and other liabilities consist of the following:
<TABLE>
<CAPTION>
(in thousands)
- --------------------------------------------------------------------------------
1997 1996
------- -------
<S> <C> <C>
Shutdown and reclamation accrual (notes 1 and 7) $ 3,356 $ 4,615
Notes payable (note 2) 500 2,500
Accrued bonus and payroll 1,354 1,228
Other 3,668 2,366
------- -------
Total $ 8,878 $10,709
------- -------
</TABLE>
Included in notes payable at December 31, 1996 are short-term
borrowings of $1.5 million incurred during the Reincorporation.
The note was paid in full in January 1997.
<PAGE> 34
NOTE 7 OTHER LONG-TERM LIABILITIES
Other long-term liabilities consist of the following:
<TABLE>
<CAPTION>
(in thousands)
- ---------------------------------------------------------------------------
1997 1996
------- -------
<S> <C> <C>
Shutdown and reclamation accrual (notes 1 and 6) $18,453 $11,707
Notes payable (note 2) 500 1,000
Other 2,282 1,890
------- -------
Total $21,235 $14,597
------- -------
</TABLE>
Shutdown and reclamation accruals represent estimated costs of
earthwork, including detoxification and recontouring,
revegetation, and stabilization. The costs of heap-leach
encapsulation and facility decommissioning are also included in
these accrued costs.
In determining the estimated costs, the Company considers such
factors as changes in laws and regulations, the likelihood that
additional permits will be required, and requirements under
existing operating permits. Such analyses are performed on an
ongoing basis.
In the fourth quarter of 1996, a new closure estimate to complete
reclamation of the Royal Mountain King mine was developed by an
outside engineering firm. Based on the new estimate, the
reclamation liability was increased by $5.6 million, reflecting
increasingly stringent environmental regulations, changing project
conditions, and increased costs. The Royal Mountain King mine was
shut down in July 1994.
Although the ultimate amount of reclamation obligations to be
incurred is uncertain, as of December 31, 1997, Meridian has
estimated these costs for all of its properties to be $33 million,
and at December 31, 1997, accrued reclamation costs, including the
current portion, were $21.8 million for all properties. The
provision for reclamation costs charged to operations was $9.7
million, $8.9 million and $1.9 million in 1997, 1996 and 1995,
respectively. Actual reclamation expenditures were $4.2 million,
$1.6 million, and $1.8 million in 1997, 1996 and 1995,
respectively.
NOTE 8 INCOME TAXES
In 1995 and prior to the Reincorporation in 1996, the Company was
included in FMC's consolidated federal income tax return. Under a
tax-sharing agreement with FMC, the Company paid to FMC amounts
generally equal to the tax the Company would have been required to
pay had it filed a separate return, and FMC paid to the Company
amounts generally equal to any tax benefits the Company would have
realized on a separate return basis which were realized by FMC.
Under the terms of the agreement, the Company is obligated to
reimburse FMC for any amounts, including penalties and interest,
that it may be assessed upon an examination of the consolidated
returns by the IRS, to the extent that the additional income taxes
are attributable to the Company's operations prior to the
Recapitalization. The Company believes that it has adequately
provided for any amounts that may ultimately be payable to FMC
under the agreement.
On July 31, 1996, the Company received a $1.7 million settlement
under the tax sharing agreement, which amount was reflected as a
recovery of taxes in the financial statements for the year ended
December 31, 1995.
In connection with the Reincorporation, Meridian and FMC jointly
agreed to elect to treat the disposition of the shares of Meridian
by FMC as an asset sale. As a result, Meridian's assets were
adjusted to their fair market value for income tax purposes.
Accordingly, the Company's net
<PAGE> 35
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
operating loss and alternative minimum tax credit carryforwards
remained with FMC. The income tax benefit in 1995 represents the
intercompany tax allocation under the tax sharing agreement,
including the $1.7 million settlement. There was no tax provision
in 1997 and 1996.
The income tax provision (benefit) differs from that computed by
applying the United States applicable federal statutory rate of
approximately 34 percent to income before taxes for the following
reasons:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands)
- --------------------------------------------------------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Income tax provision (benefit)
calculated using statutory tax rates $(23,516) $ (5,391) $ (784)
Increase in valuation allowance for
net deferred tax assets 23,441 5,371 765
Other 75 20 19
-------- -------- --------
ACTUAL TAX PROVISION (BENEFIT) $ -- $ -- $ --
-------- -------- --------
</TABLE>
The significant components of the Company's deferred tax assets
and liabilities at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------
1997 1996
-------- --------
<S> <C> <C>
Inventory $ -- $ 1,068
Reclamation reserves 5,969 2,186
Property, plant and equipment 27,145 5,860
Net operating loss carryforwards 340 923
Other, net 680 --
-------- --------
Total deferred tax assets 34,134 10,037
Valuation allowance (31,634) (8,193)
-------- --------
Deferred tax assets, net of allowance 2,500 1,844
-------- --------
Property, plant and equipment (2,500) (1,844)
-------- --------
Total deferred tax liabilities (2,500) (1,844)
-------- --------
Net deferred tax assets $ -- $ --
-------- --------
</TABLE>
At December 31, 1997, the Company had a Canadian net operating
loss carryforward of approximately $1.0 million, of which $0.6 and
$0.4 million will expire in 2003 and 2004, respectively.
NOTE 9 GEOGRAPHIC SALES AND SALES TO MAJOR CUSTOMERS
Sales to unaffiliated customers by destination of sale are as
follows:
<TABLE>
<CAPTION>
Year ended December 31 (in thousands)
- ----------------------------------------------------------------------
1997 1996
------- -------
<S> <C> <C>
USA $17,545 $ --
Western Europe 51,195 75,724
------- -------
Total $68,740 $75,724
------- -------
</TABLE>
The Company's gold and silver dore production is purchased and
refined by several European and United States refiners. Sales were
to three refiners in 1997 and to two refiners in 1996, each
representing 10 percent or more of consolidated sales. Sales to
these companies amounted to $68.7 million in 1997, and $75.7
million in 1996. The Company believes that several other refiners
would be willing to purchase the Company's production should any
of the current refiners discontinue buying the Company's
production.
<PAGE> 36
NOTE 10 EMPLOYEE PLANS
Prior to July 31, 1996, all Company employees were covered by
FMC's retirement plan, post retirement health care and life
insurance benefit program, the costs of which were included in the
amounts paid under the management services agreement discussed in
Note 14.
The Company has a defined benefit pension plan covering
substantially all salaried employees. Pension benefits are
generally based on years of service and final average yearly
earnings. The plan was separated from the FMC Corporation pension
plan during 1996, and $1.5 million of FMC's plan assets were
transferred to the Company's plan effective January 1, 1997. The
Company's funding policy is to contribute the minimum amount
required by applicable regulations. The following table represents
the plan's funded status at December 31, 1997 and 1996:
<TABLE>
<CAPTION>
(in thousands)
- ------------------------------------------------------------------------------------------------
1997 1996
------- -------
<S> <C> <C>
Projected benefit obligation $ 1,897 $ 1,130
Market value of plan assets 1,875 1,480
------- -------
Projected benefit obligation in excess of or (less than) plan assets 22 (350)
Unrecognized net gain 288 350
------- -------
Accrued pension cost 310 --
------- -------
Actuarial assumptions:
Weighted average discount rate 8.25% 8.25%
Weighted average rate of compensation increase 6.90% 6.90%
</TABLE>
NOTE 11 SHARE CAPITAL
The authorized share capital of the Company consists of an
unlimited number of preferred shares without par value and an
unlimited number of common shares without par value. Preferred
shares are issuable in series. The Board of Directors is
authorized to fix the designation, rights, privileges,
restrictions and conditions attaching to the shares of each
series. The preferred shares rank prior to the common shares with
respect to dividends and return of capital on dissolution. Except
with respect to matters as to which the holders of preferred
shares as a class are entitled by law to vote, the holders of
preferred shares are not entitled to vote.
The Company has outstanding 10,000 shares of Series 1 preferred
stock at December 31, 1997 and 1996. The shares are redeemable by
the Company at any time and are subject to mandatory redemption by
the holder on July 26, 2001 at $10 per share. Dividends at 5% per
annum payable on the preferred shares are recorded as compensation
expense.
In 1989, the stockholders of FMC Gold Company approved the FMC
Gold Company 1988 Long-term Incentive Compensation Plan (the "1988
Plan"), which authorized the Board of Directors to grant stock
options to key employees of the Company. Under the terms of the
1988 Plan, options were granted at the fair market value of the
common stock as of the date of grant. Stock options granted in
1988 have an exercise price ranging from $9.625 to $10.625 and
expire May 6, 1998. During 1992, additional options were granted
to purchase 223,000 shares of common stock at an exercise price of
$4.25, with an expiration date of April 2007. In connection with
the Reincorporation, FMC Gold stock options granted under the 1988
Plan were converted to options to purchase a like number of common
shares of the Company.
During 1996, the Company's shareholders adopted the Meridian Gold
Inc. 1996 Stock Option Plan (the "1996 Plan"), which provides for
the granting of stock options to certain directors, officers and
employees of the Company. A maximum of 3,750,000 shares of common
stock are
<PAGE> 37
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
reserved for issuance under the 1996 Plan. Options are granted at
exercise prices equal to the fair market value of the common stock
at date of grant, for a term of ten years. The options vest over
periods of one to five years.
At December 31, 1997 options to purchase 2,574,075 common shares
were outstanding with terms ranging up to ten years as detailed in
the following table:
<TABLE>
<CAPTION>
Number of Option Price
Common Shares U.S. $ per Share
-------------- ----------------
<S> <C> <C>
Outstanding, December 31, 1994 396,300 4.250 - 10.625
Surrendered in 1995 (65,500) 4.250 - 10.625
-------------- --------------
Outstanding, December 31, 1995 330,800 4.250 - 10.625
Granted in 1996 1,544,150 3.650 - 4.500
Exercised in 1996 (113,100) 3.650 - 4.500
Surrendered in 1996 (81,900) 3.650 - 10.625
-------------- --------------
Outstanding, December 31, 1996 1,679,950 3.650 - 10.625
Granted in 1997 932,900 2.250 - 5.250
Exercised in 1997 (4,000) 4.250
Surrendered in 1997 (34,775) 3.650 - 4.250
-------------- --------------
Outstanding, December 31, 1997 2,574,075 2.250 - 10.625
-------------- --------------
Exercisable, December 31, 1997 174,800 4.250 - 10.625
-------------- --------------
</TABLE>
In July 1996, the Company established a Shareholder Rights Plan.
The Plan has a term of three years and expires on July 31, 1999.
In implementing the Plan, one Right was distributed for each
common share outstanding on July 31, 1996, as well as each common
share to be issued prior to the Separation Time. The "Separation
Time" is defined as the eighth trading day after the earlier of
(i) the first date of public announcement that a person or group
other than certain exempt persons (an "Acquiring Person"),
together with affiliates or associates, has acquired, or obtained
the right to acquire, 20% or more of any class of voting shares of
the Company; or (ii) the date of commencement or announcement of a
Take-over Bid (as defined in the Shareholder Rights Plan
Agreement). A "Take-over Bid" means an offer to acquire voting
shares of the Company (or securities convertible into such shares)
which, if successful, would result in the person making such an
offer ("the Offeror") beneficially owning 20% or more of any class
of the voting shares of the Company.
The Shareholder Rights Plan Agreement provides that, until the
Separation Time, the Rights will be transferred with and only with
the common shares. After the Separation Time, separate Rights
Certificates will be mailed to holders of record of the common
shares as of the Separation Time. After the Separation Time and
prior to the Expiration Time, the Rights are exercisable by the
holders. Each Right will entitle the holder to purchase one common
share for the Exercise Price (as defined in the Shareholder Rights
Plan Agreement).
NOTE 12 HEDGING CONTRACTS
The Company has hedged portions of future gold production by
entering into put option contracts. At December 31, 1997, the
carrying value of the remaining options (at cost) was $1.8 million
($2.5 million at December 31,1996). The estimated market values of
the put options as of December 31, 1997 and 1996, were
approximately $9.2 million and $3.3 million, respectively.
The options are exercisable at a strike price of $400 per ounce.
The value of these options varies with changes in the market price
of gold. The options are exercisable according to the following
schedule:
<PAGE> 38
<TABLE>
<CAPTION>
Options (ounces) Exercise Date
- ---------------- -------------
<S> <C>
33,000 12/29/98
32,000 12/29/99
32,000 12/27/00
27,000 12/27/01
</TABLE>
NOTE 13 COMMITMENTS AND CONTINGENT LIABILITIES
The Company leases office and warehouse space in Reno, Nevada and
Santiago, Chile, as well as various types of equipment (primarily
mobile mining equipment at the Beartrack mine) under operating
leases. Total rent expense under all operating leases amounted to
$1.9 million, $2.1 million and $1.1 million for 1997, 1996 and
1995, respectively. Minimum future rentals under noncancellable
leases aggregated approximately $9.0 million as of December 31,
1997, and are estimated to be payable $2.0 million in 1998, $2.0
million in 1999, $2.0 million in 2000, $2.0 million in 2001, $0.6
million in 2002, and $0.3 million thereafter. During 1997 the
Company closed its office in Vancouver, B.C., consolidating its
functions into the Reno office.
In October 1994, the Sierra Club Legal Defense Fund, Inc.
("Sierra"), on behalf of certain other organizations, filed a
lawsuit in Federal District Court for the Western District of
Washington at Seattle against the National Marine Fisheries
District ("NMFS") and other federal agencies for violation of the
Endangered Species Act (the "Act"), alleging the NMFS' biological
opinion failed to satisfy the requirements of the Act. Sierra, the
federal agencies and the Company, as intervenor, each filed a
motion for summary judgment. In November 1995, the Court ordered
the federal agencies to reinitiate consultation under Section 7 of
the Act on the potential environmental impacts of the Beartrack
Mine Project (the "Project") on threatened salmon or the
designated critical habitat for salmon. The plaintiffs did not
seek, and the court did not impose, any injunction or other
restriction on the operation of the Beartrack Mine pending
completion of such consultation. On November 17, 1995, the court
closed the case but retained jurisdiction to resolve any disputes
that may arise concerning the reinitiated consultation schedule or
to resolve issues once the reinitiated consultation is completed.
On January 1, 1997, the Forest Service formally reinitiated
consultation by submitting a revised biological assessment to
NMFS. Under Section 7(d) of the Act, the Forest Service may
require Meridian to cease an activity associated with mining
operations if that activity could preclude the development of
reasonable and prudent alternatives to the project pending the
completion of the reinitiated consultation. On July 3, 1996, the
Forest Service completed its Section 7(d) determination for the
Beartrack mine operations and determined that, for the following
12 months from that date, all ongoing and planned significant
activities at the mine could continue pending the reinitiated
consultation, with exception of: (1) proposed reconstruction of
the leach pad run of the mine road, and (2) proposed use of the
soil stockpile area associated with development of Phase III of
the heap leach pad. The Forest Service recognized that these
latter two activities may be authorized upon further review by the
Forest Service prior to completion of the reinitiated
consultation. The Forest Service renewed its Section 7(d)
determination in July 1997 to run through February 1998. Under the
Act's regulations, consultation must be completed within 135 days
of the date consultation is initiated. An extension of 60 days can
be imposed by the agencies. In September 1997, NMFS and the Forest
Service extended the consultation until December 15, 1997 based on
the listing of steelhead as a threatened species under the Act.
The reinitiated consultation is still ongoing as of February 9,
1998. Under the relevant statutory and regulatory authorities, the
results of a consultation can range from no impact to modest or
significant impact on the activities under review. In an extreme
situation, a consultation could result in the cessation of
activities altogether, a potential result which the Company
believes to be remote in the case of the Beartrack Mine, which has
been in operation
<PAGE> 39
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
and production since mid-1995. The Company believes that the
ongoing operation of the Beartrack Mine will not jeopardize
threatened species or adversely modify or destroy designated
critical habitat, and that upon completion of the reinitiated
consultation, the mine will be permitted to continue operation.
The Company is exposed to certain other contingent liabilities
resulting from litigation, claims and commitments incident to the
ordinary course of business. Management believes that the
resolution of such matters will not materially affect the
financial position, results of operations or cash flows of the
Company.
NOTE 14 RELATED PARTY TRANSACTIONS
Prior to July 31, 1996, 80 percent of the outstanding common stock
of FMC Gold Company was held by FMC, and the Company had entered
into certain agreements concerning income taxes (Note 8) and
management services.
Under the management services agreement, the Company was charged
at FMC's direct and indirect cost, including allocated overhead,
for certain general, administrative and other services provided by
FMC. The overhead allocations of $0.8 million in 1996 and $1.0
million in 1995 were based generally on the ratio of the Company's
sales to consolidated FMC sales. The Company's management believes
that all determinations with respect to direct and indirect costs,
including allocated overhead, were made in a reasonable and
consistent manner.
The agreement also provided for borrowings of up to $50 million
between the parties on a short-term basis. All borrowings were
payable on demand with interest at a floating rate equal to FMC's
current weighted average rate on borrowings under its credit
facilities, or its investing rate, for the relevant period.
On July 31, 1996, FMC repaid its total borrowings and accrued
interest, totaling $79.1 million, to the Company. Total interest
received in 1996 on loans to FMC through July 31, 1996 was $3.1
million.
Also on July 31, 1996, FMC paid $3.658 million to Meridian Gold in
conjunction with the Reincorporation, which was recorded as a
capital contribution.
The following schedule summarizes the activity of indebtedness to
and from FMC in 1996 and 1995.
<TABLE>
<CAPTION>
(in thousands)
- -------------------------------------------------------------------------------
Loan due Amounts due
from FMC from (to)FMC
------------ ------------
<S> <C> <C>
BALANCE DECEMBER 31, 1994 120,326 (594)
Increase in amounts loaned 51,500 --
Interest charges -- 5,737
Payments made by FMC for Meridian Gold -- (18,480)
Charges from FMC for services and materials -- (1,808)
Payments made by Meridian Gold -- 19,040
Payments received by Meridian Gold (91,000) (6,170)
------------ ------------
BALANCE DECEMBER 31, 1995 80,826 (2,275)
Increase in amounts loaned 39,500 --
Interest charges -- 3,107
Payments made by FMC for Meridian Gold -- (5,801)
Charges from FMC for services and materials -- (1,176)
Payments made by Meridian Gold -- 9,868
Payments received by Meridian Gold (120,326) (3,723)
------------ ------------
BALANCE DECEMBER 31, 1996 $ 0 $ 0
------------ ------------
BALANCE DECEMBER 31, 1997 $ 0 $ 0
------------ ------------
</TABLE>
<PAGE> 40
FMC continues to be obligated under a $75 million issue of
exchangeable senior subordinated debentures payable by FMC. The
debentures bear interest at 6 3/4% and are exchangeable, at $15
1/8 per share, subject to adjustment, into Meridian Gold Inc.
common stock. In conjunction with the Reincorporation, FMC was
granted a right, exercisable during the period beginning January
31, 1998 and ending April 30, 1998, to purchase at the then fair
market value, an option from the Company to buy up to an aggregate
of $75 million of the Company's common shares until January 16,
2000 at an exercise price of $15.125 per share. Such option may
only be exercised by FMC to satisfy its obligation to the holders
of the exchangeable debentures described above, to the extent that
those holders elect to exercise their right of exchange.
In consideration for services rendered by Brian J. Kennedy during
the Reincorporation, the Company issued to Mr. Kennedy 10,000
shares of Series 1 Preferred Stock. The shares were valued at the
Canadian dollar equivalent of $100,000, determined immediately
prior to the closing of the Reincorporation.
<PAGE> 41
SUPPLEMENTARY DATA
(IN MILLIONS OF US DOLLARS EXCEPT SHARE AND PER SHARE DATA)
QUARTERLY RESULTS AND STOCK MARKET DATA
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
1997 1996
4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr. 4th Qtr. 3rd Qtr. 2nd Qtr. 1st Qtr.
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales(1) $ 20.4 $ 17.5 $ 16.9 $ 14.0 $ 20.0 $ 20.1 $ 18.3 $ 17.8
--------- ------- ------- ------- ------- ------- ------- -------
Operating loss(1) (9.2) (48.2) (8.8) (7.0) (12.0) (3.5) (3.0) (2.3)
Gain on sale
of assets(1) (0.2) 0.4 -- -- -- -- -- --
Interest income
and taxes(1) 0.9 0.9 1.0 1.0 1.1 1.4 1.2 1.2
------- ------- ------- ------- ------- ------- ------- -------
Net loss(1) (8.5) (46.9) (7.8) (6.0) (10.9) (2.1) (1.8) (1.1)
Loss per
common share(1) (0.12) (0.64) (0.11) (0.08) (0.15) (0.03) (0.02) (0.1)
Return of capital
per common
share -- -- -- -- -- 0.02 -- --
Common stock prices:(2)
NYSE
High $ 4 15/16 $ 5 $ 5 1/2 $ 5 1/4 $ 4 1/2 $ 4 5/8 $ 6 3/4 $ 6 1/2
Low $ 1 15/16 $ 3 7/8 $ 4 3/8 $ 3 3/4 $ 4 $ 4 $ 4 1/2 $ 4 3/8
TSE (CDN$)
High $ 6.80 $ 6.95 $ 7.70 $ 7.00 $ 6.10 $ 6.75 -- --
Low $ 2.75 $ 5.05 $ 6.05 $ 5.00 $ 5.40 $ 5.45 -- --
--------- ------- ------- ------- ------- ------- ------- -------
</TABLE>
(1) Quarterly figures may not sum to full-year amounts due to rounding.
(2) As of July 31, 1996, Meridian Gold shares are traded on both The Toronto
Stock Exchange ("TSE") and the New York Stock Exchange ("NYSE").
<PAGE> 42
MERIDIAN GOLD INC. RESERVES AND OTHER MINERALIZED MATERIAL
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------------
December 31, 1997 December 31, 1996
Ore Grade Contained Ounces Ore Grade Contained Ounces
Ore tonnes Gold Silver Gold Silver Ore tonnes Gold Silver Gold Silver
(mils) (g/t) (g/t) (K oz) (K oz) (mils) (g/t) (g/t) (K oz) (K oz)
---------- ----- ------ ------ ------ ---------- ------- ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BEARTRACK
Proven and probable 13.8 1.2 -- 545 -- 23.0 1.1 -- 848 --
JERRITT CANYON (30% SHARE)
Proven and probable 1.9 7.6 -- 470 -- 2.5 7.0 -- 571 --
Other mineralized material 6.6 6.8 -- 1,458 -- 8.4 6.4 -- 1,721 --
EL PENON
Proven and probable 4.7 6.0 96.2 894 14,402 -- -- -- -- --
Other mineralized material 3.6 8.3 146.0 964 16,903 7.9 7.2 141.0 1,790 34,712
ROSSI
Other mineralized material 2.8 12.7 -- 1,069 -- -- -- -- -- --
TOTAL - MERIDIAN's SHARE
Proven and probable 1,909 14,402 1,419 --
Other mineralized material 3,491 16,903 3,511 34,712
----- ------ ----- ------
</TABLE>
<PAGE> 43
DIRECTORS
DAVID S. ROBERTSON
Independent Consultant in the Mining Industry
Chairman of the Board of Directors, Meridian Gold Inc.
Dr. Robertson's distinguished career in the mining industry has spanned over 30
years. Dr. Robertson is noted for his extensive knowledge and research on
reserve classification, mineral evaluation and economic geology, and has acted
as a consultant on several mining projects. He has served as a director for
several mining companies, and as president of the Canadian Institute of Mining,
Metallurgy and Petroleum.
JOHN A. ECKERSLEY
Private Investor
Mr. Eckersley most recently held the position of Vice-President, Secretary and
General Counsel of Placer Dome Inc., from which he retired in 1995 after 22
years of service. He holds a B.Sc. (Geology) and LLB from the University of
British Columbia.
BRIAN J. KENNEDY
President and Chief Executive Officer, Meridian Gold Inc.
Mr. Kennedy holds an MBA from Harvard University and serves as a director for
both the Gold Institute and the Nevada Mining Association. In July, 1996 Mr.
Kennedy guided Meridian Gold Inc. through a successful secondary offering of
shares that resulted in the independence of Meridian Gold from its former parent
company, FMC Corporation.
MALCOLM W. MACNAUGHT
Private Investor
In 1996, Mr. MacNaught culminated a highly successful 28-year career with
Fidelity Investments, where he managed the Fidelity Select Precious Metals and
Minerals fund and the Fidelity Select American Gold Portfolio fund. He also
acted as Manager of Fidelity Advisor Global Resources. Mr. MacNaught received
his bachelors degree in economics at Yale College and his MBA from Northeastern
University in Boston, Massachusetts.
PATRICK J. MARS
President, P.J. Mars Investments Ltd.
Chairman, Chivor Emerald Corporation Ltd.
Mr. Mars was formerly President and CEO of Bunting Warburg Inc. His 29-year
career in the Canadian investment industry includes extensive involvement in
mining research, financing and advisory work. Mr. Mars has B. Communications and
MBA degrees from McGill University, and is also a Chartered Financial Analyst.
OFFICERS
BRIAN J. KENNEDY
President and Chief Executive Officer
CHRISTOPHER D.S. BATES
Vice-President, Business Development
DONALD L. BECKWITH
Vice-President, Operations
EDWARD H. COLT
Vice-President, Finance and Chief Financial Officer
RICHARD C. LORSON
Vice-President, Exploration
EDEN M. OLIVER
Corporate Secretary
MERIDIAN GOLD BOARD MEMBERS
[PICTURE]
Meridian Gold Inc. Board of Directors: left to right
David S. Robertson, Patrick J. Mars, Malcolm W. MacNaught,
Brian J. Kennedy, John A. Eckersley
MERIDIAN GOLD OFFICERS
[PICTURE]
Brian J. Kennedy
[PICTURE]
Donald L. Beckwith
[PICTURE]
Christopher D.S. Bates
[PICTURE]
Edward H. Colt
[PICTURE]
Richard C. Lorson
<PAGE> 44
SHAREHOLDER INFORMATION
CORPORATE OFFICES
9670 Gateway Drive
Reno, NV 89511
Telephone: (800) 572-4519 (worldwide) or (702) 850-3777
Fax: (702) 850-3733
REGISTERED OFFICE
Ladner Downs
1200 Waterfront Centre
200 Burrard Street
P.O. Box 48600
Vancouver, B.C. V7X 1T2
ANNUAL MEETING
The Company's annual shareholder meeting will be held at 4:00 p.m. on Wednesday,
June 3, 1998 in the Main Dining Room of the National Club, 303 Bay Street,
Toronto, Ontario. Business attire is required.
INVESTOR RELATIONS
For public and media inquiries, or copies of the Company's annual information
form, annual report or quarterly reports, please contact Wayne M. Hubert at
(702) 850-3730, or visit the Company's web site at www.meridiangold.com. The
Company's filings with the U.S. Securities and Exchange Commission can be
accessed at the SEC's web site: www.sec.gov. The Company's filings with the
Ontario Securities Commission can be accessed on SEDAR at www.sedar.com.
TRANSFER AGENT AND REGISTRAR
The Trust Company of Bank of Montreal
105 St. Jacques Street West, 3rd Floor
Montreal, Quebec, H2Y 1L6
Attention: Shareholder Services
Telephone: (514) 877-2500
AUDITORS
KPMG Peat Marwick LLP
Denver, Colorado
STOCK EXCHANGE LISTINGS
The Company's common shares are listed and traded on The Toronto Stock Exchange
under the symbol "MNG" and on the New York Stock Exchange under the symbol
"MDG."
<PAGE> 45
Designed by Craib Corporate Graphics Inc. Printed in Canada.
<PAGE> 46
MERIDIAN GOLD INC.
MANAGEMENT PROXY CIRCULAR
THIS MANAGEMENT INFORMATION CIRCULAR AND PROXY STATEMENT (THE "CIRCULAR") IS
FURNISHED IN CONNECTION WITH THE SOLICITATION OF PROXIES BY THE MANAGEMENT OF
MERIDIAN GOLD INC. (THE "CORPORATION") FOR USE AT THE ANNUAL AND SPECIAL MEETING
OF SHAREHOLDERS (OR ANY ADJOURNMENTS THEREOF) OF THE CORPORATION (THE "MEETING")
TO BE HELD AT 4:00 P.M. ON WEDNESDAY, JUNE 3, 1998, IN THE MAIN DINING ROOM OF
THE NATIONAL CLUB, 303 BAY STREET, TORONTO, ONTARIO (BUSINESS ATTIRE REQUIRED)
FOR THE PURPOSES SET FORTH IN THE ACCOMPANYING NOTICE OF MEETING. The
solicitation will be primarily by mail, but proxies may also be solicited
personally by regular employees of the Corporation for which no additional
compensation will be paid. In addition, the Corporation has retained The Proxy
Solicitation Company to assist in the solicitation of proxies in Canada and the
United States, respectively, for total estimated fees of CDN$15,000. The cost of
preparing, assembling and mailing this Circular, the Notice of Meeting, the form
of proxy and any other material relating to the Meeting has been or will be
borne by the Corporation. It is anticipated that copies of this Circular and
accompanying proxy will be distributed to shareholders on or about April 30,
1998.
Shareholders who are not able to attend the Meeting in person should complete
and sign the enclosed proxy and return it to The Trust Company of Bank of
Montreal, the Corporation's registrar and transfer agent, in the pre-addressed
envelope. Please ensure that your completed proxy is received no later than 5:00
p.m. (Eastern Time) on June 2, 1998. TO BE EFFECTIVE, PROXIES MUST BE RECEIVED
BEFORE 5:00 P.M. (EASTERN TIME) ON JUNE 2, 1998 BY THE TRUST COMPANY OF BANK OF
MONTREAL, 129 ST. JACQUES STREET WEST, LEVEL B NORTH, MONTREAL, QUEBEC H2Y 1L6.
APPOINTMENT OF PROXYHOLDER
ANY SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON (WHO NEED NOT BE A
SHAREHOLDER) OTHER THAN THE PERSONS DESIGNATED IN THE ENCLOSED FORM OF PROXY TO
ATTEND AND TO VOTE AND TO ACT FOR AND ON BEHALF OF THE SHAREHOLDER AT THE
MEETING. IN ORDER TO DO SO, THE SHAREHOLDER MAY INSERT THE NAME OF SUCH OTHER
PERSON IN THE BLANK SPACE PROVIDED IN THE PROXY, OR USE ANOTHER FORM OF PROXY.
<PAGE> 47
-2-
EXERCISE OF VOTE BY PROXY
The shares represented by the proxy which is hereby solicited will be voted or
withheld from voting in accordance with the instructions of the shareholder on
any ballot that may be called for and, if the shareholder specifies a choice
with respect to any matter to be acted upon, the shares shall be voted
accordingly. WHERE A SHAREHOLDER FAILS TO SPECIFY A CHOICE WITH RESPECT TO ANY
MATTER REFERRED TO IN THE NOTICE OF MEETING IN A PROXY APPOINTING A MANAGEMENT
NOMINEE (THE NOMINEES SPECIFIED IN THE PROXY ENCLOSED WITH THIS CIRCULAR) AS
PROXYHOLDER, THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED FOR OR IN FAVOR
OF THE MATTER.
THE ENCLOSED PROXY CONFERS DISCRETIONARY AUTHORITY WITH RESPECT TO ANY
AMENDMENTS OR VARIATIONS TO THE MATTERS REFERRED TO IN THE NOTICE OF MEETING AND
ANY OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
REVOCATION OF PROXY
In addition to revocation in any other manner permitted by law, a shareholder
who has executed a proxy has the power to revoke it by depositing an instrument
in writing executed by the shareholder (or the shareholder's attorney authorized
in writing): (i) at the registered office of the Corporation at any time up to
and including the last business day preceding the day of the Meeting (or any
adjournment of the Meeting), or (ii) with the Chairman of the Meeting on the day
of the Meeting (or any adjournment of the Meeting).
VOTING SHARES AND PRINCIPAL HOLDERS
At April 14, 1998, there were outstanding 73,541,506 common shares of the
Corporation. Holders of record of common shares at the close of business on
April 14, 1998 are entitled to one vote for each common share held, except to
the extent that subsequent transferees become entitled to vote by complying with
the Canada Business Corporations Act.
<PAGE> 48
-3-
The following table shows, as of April 14, 1998, each person who, to the
knowledge of the Corporation, its directors or officers, beneficially owns,
directly or indirectly, or exercises control or direction over, in excess of 10%
of any class of voting securities of the Corporation:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF
CLASS OF SECURITIES BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS
------------------- ---------------- -------------------- ----------------
<S> <C> <C> <C>
Common Royal Trust Investment 11,029,900 14.99%
Management Holdings, Inc. Shared Voting and
P.O. Box 7500 Dispositive Power
Station A
Toronto, Ontario
Common Fidelity Management and 8,349,400* 11.34%
Research Corporation Sole Dispositive Power
82 Devonshire Street
Boston, MA *Total shares owned is
8,349,400, which
includes the sole voting
power shares of 532,900
</TABLE>
ELECTION OF DIRECTORS
Under the Articles of the Corporation, the Board of Directors consists of a
minimum of three members and a maximum of ten members; the number of directors
within this range is determined by the Board. The number of directors is
currently fixed at five.
THE PERSONS NAMED IN THE ENCLOSED FORM OF PROXY INTEND TO VOTE FOR THE ELECTION
OF THE FIVE NOMINEES LISTED IN THE FOLLOWING TABLE, ALL OF WHOM ARE NOW MEMBERS
OF THE BOARD OF DIRECTORS AND HAVE BEEN FOR THE PERIODS INDICATED. IT IS NOT
ANTICIPATED THAT ANY OF THESE NOMINEES WILL BE UNABLE TO SERVE AS DIRECTORS, BUT
IF THAT SHOULD OCCUR FOR ANY REASON PRIOR TO THE MEETING, THE PERSONS NAMED IN
THE ENCLOSED FORM OF PROXY SHALL BE ENTITLED TO VOTE FOR ANY OTHER NOMINEES IN
THEIR DISCRETION.
Each director elected will hold office until the next Annual Meeting of
Shareholders or until his or her successor is elected or appointed.
<PAGE> 49
-4-
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
<TABLE>
<CAPTION>
NAME AGE DIRECTOR SINCE SHARES OWNED(1)
- ---- --- -------------- ---------------
<S> <C> <C> <C>
John A. Eckersley (4) 53 1996 4,500
West Vancouver, British Columbia
Mr. Eckersley is a private investor. Prior to October 1995, he was a Vice-President, Secretary and General Counsel of
Placer Dome Inc., a mining company.
Brian J. Kennedy 54 1996 4,700(2)
Reno, Nevada
Mr. Kennedy has been President and Chief Executive Officer of the Corporation since April 1996. He was President of FMC
Gold Company, a predecessor of the Corporation, from May 1987 until June 1996. Mr. Kennedy is also a director and officer
of certain subsidiaries of the Corporation.
Malcolm W. MacNaught (3) 60 1997 10,000
Duxbury, Massachusetts
In 1996, Mr. MacNaught culminated his career with Fidelity Investments where he managed the Fidelity Select Precious
Metals and Minerals fund and the Fidelity Select American Gold Portfolio fund. He also acted as Manager of Fidelity
Advisor Global Resources. Mr. MacNaught is a private investor.
Patrick J. Mars (4) 57 1997 4,000
Toronto, Ontario
Mr. Mars is President of P.J. Mars Investments Ltd., a private investment company, and Chairman of Chivor Emerald Corporation Ltd.,
a mining company. From June 1997 to March 1998, he was President and Chief Executive Officer of Anvil Range Corporation, a mining
company. Prior to April 1994, he was President and Chief Executive Officer of Bunting Warburg Inc., an investment dealer.
David S. Robertson (3)(4) 74 1996 5,000
North York, Ontario
Dr. Robertson is an independent consultant in the mineral industry.
</TABLE>
NOTES
(1) Information as to shares beneficially owned, directly or indirectly, or
over which control or direction is exercised, is not within the knowledge
of management and has been furnished by the respective nominees, as of
April 14, 1998.
(2) Mr. Kennedy also holds 10,000 non-voting Preferred Shares, Series 1 of
the Corporation.
(3) Member of Compensation Committee.
(4) Member of Audit Committee.
<PAGE> 50
-5-
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Board of Directors
The Board of Directors is responsible for the supervision of the management of
the Corporation's business and affairs. It has the statutory authority and
obligation to protect and enhance the assets of the Corporation in the interest
of all shareholders. The Board of Directors believes in the principles of
maintaining an independent and effective board of directors, assumption by the
board of stewardship of the Corporation and compliance, to the extent
practicable for the Corporation, with the guidelines adopted by the Toronto
Stock Exchange Committee on Corporate Governance (the "TSE Guidelines").
While management is responsible for day-to-day operations, the Board of
Directors has assumed the stewardship of the Corporation. This includes
responsibility for (i) adoption of a strategic planning process, (ii)
identifying principal risks of the Corporation's business and ensuring
implementation of appropriate systems to manage those risks, (iii) succession
planning, including appointing and monitoring senior management, (iv) a
communications policy and (v) integrity of the Corporation's internal control
and management information systems.
New directors are provided with substantial reference material relating to the
Corporation's strategies, business plan, and recent performance, as well as
their responsibilities as directors. Specific briefing sessions from appropriate
senior management personnel are a regular item at meetings of the Board of
Directors.
The Board of Directors met six times in 1997.
Board Composition and Independence from Management
The Corporation's policy is that a majority of the members of the Board of
Directors be "unrelated", within the meaning of the TSE Guidelines, meaning
independent of management and free from any interest and any business or other
relationship which could, or could be perceived to, interfere with a director's
independence. In its determination as to whether a particular director is a
"related director", the Board of Directors examines the individual circumstances
of each director and the relationship of the director to management and to the
Corporation. The Board is of the view that four of the five present directors
are independent of management and unrelated for purposes of the TSE Guidelines,
the exception being Mr. Brian J. Kennedy, the President and Chief Executive
Officer of the Corporation. At the Meeting, a slate of five members is being
proposed for shareholders' consideration. Four of the nominees would qualify as
unrelated directors.
<PAGE> 51
-6-
The Corporation's policy is to maintain a non-executive Chairman of the Board of
Directors, to ensure that the Board can function independently of management.
The current Chairman of the Board of Directors, David S. Robertson, qualifies as
an unrelated director.
The current composition of the Board of Directors reflects a breadth of
background and experience that are important for effective governance of a
company in the mining industry. Additional nominees to the Board of Directors
would be expected to possess backgrounds and/or experience to compliment that of
the Board.
Board Committees
The Audit Committee, on behalf of the Board, has the responsibility for: (a)
reviewing the financial statements of the Corporation and recommending whether
such statements should be approved by the Board; (b) reviewing and approving
interim financial statements of the Corporation; (c) recommending to the Board
annually or as they may otherwise determine, a duly qualified auditor; (d)
reviewing the scope of the audit to be conducted by the external and internal
auditors of the Corporation; (e) reviewing the auditors' fees and assessing the
performance of external and internal auditors and the nature and cost of other
services provided by such auditors; (f) reviewing all public disclosure
documents containing financial information before release; (g) reviewing all
post-audit or management letters containing material recommendations of the
external auditor and management's response or follow-ups of any identified
material weakness; and (h) having such other duties, powers and authorities as
the Board may delegate to the Committee from time to time. The members of the
Committee have the right, for the purpose of performing their duties, of
inspecting all the books and records of the Corporation and its affiliates and
of discussing such accounts and records and any matters relating to the
financial position or condition of the Corporation with the auditors of the
Corporation or its affiliates.
The Committee is composed of three (3) directors. This Committee, which met as
the entire Board during 1997, has the following members beginning in February
1998: John A. Eckersley (Chairman), Patrick J. Mars and David S. Robertson.
<PAGE> 52
-7-
The Compensation Committee, which was created in February 1998, has
responsibility for: (a) fixing the compensation of the President and CEO and
approving the compensation of the other officers of the Corporation; (b)
exercising the powers conferred on it by the Board with respect to option and
share purchase plans; and (c) reviewing annually, or more often if it deems
appropriate, succession for key executives, performance appraisal (having regard
to the criteria referred to under "Executive Annual Incentive Plan") and
development of senior officers, senior management organization and reporting
structure, contingency plans in the event of the unexpected disability of key
executives, and performance and funding of pensions and other benefits.
The Committee is composed of three (3) directors. This Committee has the
following members beginning in February 1998: David S. Robertson (Chairman),
Malcolm W. MacNaught and a director to be named. During 1997, the entire board
had the responsibility for compensation for the Corporation.
As additional members join the Board of Directors and as the needs of the
Corporation change, the Board will review the need for (and establish as
appropriate) additional committees.
Decisions Requiring Board Approval
Approval of annual budgets and major acquisitions, investments and expenditures,
as well as all significant matters outside the ordinary course of business and
matters requiring such approval under applicable law, are subject to review and
approval by the Board of Directors.
Board Performance
The Chairman of the Board of Directors provides leadership to the effective
performance of the Board of Directors.
Shareholder Communications
The Corporation maintains shareholder communications through an investor
relations program.
<PAGE> 53
-8-
The Board's Expectations of Management
The Board of Directors through the Compensation Committee conducts an annual
performance evaluation of the President and Chief Executive Officer and
establishes a list of objectives for the ensuing year.
The Board of Directors expects management to provide information and maintain
processes which enable the Board of Directors to identify issues, challenges,
and opportunities for the Corporation and otherwise discharge its
responsibilities.
This statement of corporate governance practices has been developed and approved
by the Board of Directors.
<PAGE> 54
-9-
STATEMENT OF EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets forth, for the periods indicated, information
concerning compensation earned during such periods by the Corporation's Chief
Executive Officer and by the Corporation's four other most highly compensated
executive officers who were serving as executive officers on December 31, 1997
(the "Named Executives").
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------
SECURITIES
OTHER ANNUAL UNDER OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(2) GRANTED COMPENSATION
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Kennedy(3)(4) 1997 283,976 105,000 7,099 235,000 nil
President and 1996 170,728 105,000 2,675 250,000 250,000
Chief Executive Officer
- ---------------------------------------------------------------------------------------------------------------------------
Donald L. Beckwith(4) 1997 146,433 79,308 3,661 65,000 nil
Vice President, Operations 1996 128,394 48,769 22,342 113,300 105,000
- ---------------------------------------------------------------------------------------------------------------------------
Richard C. Lorson 1997 134,797 69,286 3,370 55,000 nil
Vice President, Exploration 1996 108,215 30,012 500 113,300 nil
- ---------------------------------------------------------------------------------------------------------------------------
Edward H. Colt(2)(5) 1997 127,083 81,333 51,510 55,000 nil
Vice President, Finance and 1996 15,376 3,125 nil 113,300 65,000
Chief Financial Officer
- ---------------------------------------------------------------------------------------------------------------------------
Christopher D.S. Bates 1997 153,750 82,170 nil 50,000 nil
Vice President, 1996 75,000 25,875 nil 105,000 nil
Business Development
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTES:
1. All figures, other than numbers of options granted, are expressed in U.S.
dollars, except for those relating to Mr. Bates, which are expressed in
Canadian dollars. Mr. Bates joined the Company on July 1, 1996 and Mr.
Colt joined the Company on November 18, 1996.
2. Consists of matching payments to a 401(k) Thrift Plan established by a
subsidiary of the Corporation. Excludes any perquisites and other
benefits not greater than the personal lesser of Cdn. $50,000 and 10% of
the Named Executive Officer's total annual salary and bonus. Relocation
expenditures for Mr. Colt of $48,333 are also included in "Other". In
1996, Mr. Beckwith received payments for unused vacation entitlements.
3. On July 31, 1996, Mr. Kennedy was issued 10,000 non-voting Preferred
Shares, Series 1 of the Corporation, with a face amount of U.S. $100,000,
which amount is included under 1996 "All Other" compensation.
4. "All Other" 1996 compensation includes, in the case of Messrs. Kennedy
and Beckwith, certain incentive payments made in 1996 by the former
parent of FMC Gold Company, the Company's predecessor.
5. "All Other" 1996 compensation for Mr. Colt consists of certain payments
in connection with his hiring.
<PAGE> 55
-10-
Long-Term Incentive Plan
There were no awards or payouts to the Named Executive Officers during the
financial year ended December 31, 1997 under any arrangements of the Corporation
which would constitute a long-term incentive plan.
Grants of Options
The following table provides information concerning grants of options under the
Corporation's 1996 Stock Option Plan to the Named Executive Officers during the
financial year ended December 31, 1997.
<TABLE>
<CAPTION>
OPTIONS % OF EXERCISE VALUE AT
NAME GRANTED TOTAL PRICE(1) GRANT DATE(2) EXPIRATION DATE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Brian J. Kennedy 235,000 25.5 4.31 4.31 September 4, 2007
Donald L. Beckwith 65,000 7.0 4.31 4.31 September 4, 2007
Richard C. Lorson 55,000 6.0 4.31 4.31 September 4, 2007
Edward H. Colt 55,000 6.0 4.31 4.31 September 4, 2007
Christopher D.S. Bates 50,000 5.4 6.05 6.05 September 4, 2007
</TABLE>
NOTES:
1. Exercise Prices are expressed in U.S. dollars, except for those relating
to Mr. Bates, which are expressed in Canadian dollars. All exercise
prices are the closing price of the Common Shares of the Corporation on
either the Toronto or New York Stock Exchanges on the trading day prior
to the grant.
2. The figure is the closing price of the Common Shares of the Corporation
on either the Toronto or New York Stock Exchanges on the trading day
prior to the grant.
Option Exercises and Year-End Option Values
The following table provides information concerning (i) options exercised by any
Named Executive Officer during the financial year ended December 31, 1997; and
(ii) the number and the value at December 31, 1997 of unexercised options held
by the Named Executive Officers. In the table, "exercisable" options are those
for which the vesting period or conditions, if any, have been met, and "in the
money" options are those where the exercise price was less than the market price
of the Common Shares of the Corporation at December 31, 1997.
<PAGE> 56
-11-
<TABLE>
<CAPTION>
Value of Unexercised
Options Exercised Unexercised Options In-the-money Options
----------------- ------------------- --------------------
Securities Aggregate Not Not
Name Acquired Value Exercisable Exercisable Exercisable Exercisable
- ---- -------- ----- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Brian J. Kennedy 4,000 3,000 105,800 485,000 nil nil
Donald L. Beckwith nil nil 29,000 178,300 nil nil
Richard C. Lorson nil nil 600 168,300 nil nil
Edward H. Colt nil nil nil 168,300 nil nil
Christopher D.S. Bates nil nil nil 155,000 nil nil
</TABLE>
NOTE:
All figures relating to "value" are expressed in U.S. dollars.
Pension Plans
The Named Executive Officers are covered by a defined benefit pension plan of
Meridian Gold Company, the Corporation's principal operating subsidiary. The
following table provides information concerning the total annual retirement
benefit payable under these arrangements at retirement (normally age 65).
YEARS OF SERVICE
----------------
<TABLE>
<CAPTION>
Final Earnings 10 15 20 25 30
- --------------
<S> <C> <C> <C> <C> <C>
100,000 13,444 20,165 26,887 33,609 40,331
150,000 20,944 31,415 41,887 52,359 62,831
200,000 28,444 42,665 56,887 71,109 85,331
250,000 35,944 53,915 71,887 89,859 107,831
300,000 43,444 65,165 86,887 108,609 130,331
350,000 50,944 76,415 101,887 127,359 152,831
400,000 58,944 87,665 116,887 146,109 175,331
</TABLE>
NOTE:
All figures are expressed in U.S. dollars.
Compensation covered by this plan includes only the remuneration appearing in
the "Salary" and "Bonus" columns in the Summary Compensation Table. Benefits are
not subject to any deduction for social security or other offset amounts. The
Named Executive Officers have the following number of years of service credited:
Mr. Kennedy, 24, Mr. Bates, 2, Mr. Beckwith, 18, Mr. Colt, 1 and Mr. Lorson, 16.
Credited years of service, in the case of Messrs. Kennedy, Beckwith and Lorson,
include service with FMC Gold Company, the Corporation's predecessor.
Employment Contracts
Each of the Named Executive Officers has entered into an employment contract
with the Corporation or Meridian Gold Company. Each of these contracts has a
term of five years, with an automatic renewal for five years. Compensation is
comprised of base salary, bonus
<PAGE> 57
-12-
and stock options, generally at the discretion of the Board of Directors of the
Corporation, together with certain benefits. The employment contracts also
provide for certain payments to the employee upon certain defined events of
termination of employment (including termination or a change of responsibility
after a change of control of the Corporation). These payments range from 18
months to 24 months of the employee's regular monthly compensation.
Composition of the Compensation Committee
In 1997, the full Board of Directors of the Corporation performed the functions
of determining compensation of the Corporation's executive officers, including
the Named Executive Officers. The report of the Board of Directors on these
matters is set forth below:
As noted elsewhere above, Brian J. Kennedy, one of the directors, is President
and Chief Executive Officer. Mr. Kennedy generally absented himself from the
discussions of the board which related to his compensation and did not
participate in the board's determinations in this area. None of the other
members of the Board of Directors of the Corporation are or were officers or
employees of the Corporation or its subsidiaries (with the exception of the
Chairman of the Board of Directors, who is deemed to be an officer of the
Corporation). None of the directors of the Corporation serves as a director or
member of the compensation committee (or similar committee) of any other issuer
where an executive officer of the other issuer serves as a director of the
Corporation.
<PAGE> 58
-13-
Report on Executive Compensation
Compensation Philosophy
The Corporation's principal goal is to create value for its shareholders. The
Corporation believes that directors, officers and employees should have their
benefits aligned with both short and long term interests of the shareholders.
The compensation of the Corporation's executive officers is comprised of three
components; base salary, annual cash bonus, and long-term incentive in the form
of stock options. It is structured to be competitive with a select group of
comparative North American gold mining companies.
Cash bonuses and stock options are directly related to company performance and
the individual's contribution. The Corporation strongly believes that annual
incentives and stock options play an important role in increasing shareholder
value.
Base Salary
To ensure that the Corporation is capable of attracting, motivating and
retaining individuals with exceptional executive skills, cash compensation is
reviewed and adjusted annually, based primarily on individual and corporate
performance and compensation practices of similar gold mining companies.
In determining 1997 executive compensation levels, the Board of Directors
commissioned a report of an independent consultant. On the basis of this report
and the board's own determination and discussion, the Board of Directors
approved salaries and a bonus plan for the Corporation's executives for 1997 and
subsequent years, based on the recommendations of management and the
Compensation Committee of the Board (which recommendations were endorsed by the
Board of Directors), which were in turn based on enumerated and weighted
objectives for each. In all such cases, Mr. Kennedy absented himself from the
Board's discussions and determinations of compensation of the Corporation's
President and Chief Executive Officer.
Stock Options
The purpose of the Corporation's stock option plan is to develop the interest
and incentive of eligible employees, officers and directors in the Corporation's
growth and development by giving an opportunity to purchase Common Shares on a
favorable basis, thereby advancing the interests of the Corporation, enhancing
the value of the Common Shares for the benefit of all shareholders and
increasing the ability of the Corporation to attract and retain skilled and
motivated individuals.
<PAGE> 59
-14-
Stock options are granted in accordance with the stock option plan approved by
the shareholders at not less than the closing price of the Common Shares on the
business day immediately prior to the date of grant.
Chief Executive Officer
In 1997, Mr. Brian Kennedy provided leadership and strategic direction that has
enabled the Corporation to position for future growth. In determining Mr.
Kennedy's compensation, the Board of Director's relied on the report of an
independent consultant comparing compensation practices of similar gold mining
companies. The Board of Directors also considered other factors such as Mr.
Kennedy's contribution to the business performance and anticipated future
performance.
In consideration of Mr. Kennedy's contribution to the Corporation, Mr. Kennedy
received a salary of $283,976, was awarded a cash bonus of $105,000 and options
to purchase 235,000 Common Shares. In February 1998, Mr. Kennedy was awarded
options to purchase an additional 90,000 Common Shares in lieu of a higher cash
bonus.
The Board of Directors has also approved those executive officers of the
Corporation and its subsidiaries who will be eligible to participate in the
Bonus Plan in 1998, together with enumerated and weighted objectives for each of
these executive officers for 1998. Each of these sets of objectives includes a
component of the Corporation's share performance, which will be calculated by
comparing the trading prices of the Corporation's common shares against a
weighted basket of shares of a list of comparable companies.
Going forward, the Board of Directors, or the Compensation and Human Resources
Committee, established in December, 1997, will address other issues relating to
executive compensation, including the relative emphasis on the components of
executive compensation, including compensation for the Corporation's President
and Chief Executive Officer.
<PAGE> 60
-15-
Presented by the Board of Directors: D.S. Robertson (Chairman), J.A. Eckersley,
B.J. Kennedy, P.J. Mars, M.W. MacNaught.
PERFORMANCE GRAPH
The following graph charts performance of an investment in the common shares of
the Corporation against each of the TSE 300 Stock Index and the TSE Gold and
Precious Metals Sub-Index assuming an investment of $100 on January 1, 1997. No
dividends were paid by the Corporation during this period.
<TABLE>
<CAPTION>
7/31/96 12/31/97
------- --------
<S> <C> <C>
Meridian 100.00 70.80
TSE 300 100.00 135.91
TSE Gold & Silver 100.00 57.04
</TABLE>
<PAGE> 61
-16-
COMPENSATION OF DIRECTORS
The non-executive Chairman of the Board of Directors receives an annual retainer
of U.S. $50,000; other directors of the Corporation who are not employees of the
Corporation or its affiliates receive an annual retainer of U.S. $20,000, plus
an additional U.S. $2,500 for each committee for which such director serves as
chairman. All directors of the Corporation receive a fee of U.S. $1,000 for
attending each meeting of the Board of Directors or a committee thereof, plus
reimbursement of expenses. Directors are also eligible to receive grants under
the Corporation's 1996 Stock Option Plan. The aggregate compensation paid to the
directors of the Corporation during 1997 was U.S. $150,084, and the directors as
a group (excluding Mr. Kennedy) were granted 20,000 options.
DIRECTORS' AND OFFICERS' INSURANCE
The Corporation maintains directors' and officers' liability insurance for the
benefit of the directors and officers of the Corporation and certain
subsidiaries. The current annual policy limit is U.S. $25,000,000. Protection is
provided to directors and officers for wrongful acts or omissions done or
committed during the course of their duties as such. Under the insurance
coverage, the Corporation is reimbursed for payments which it is required or
permitted to make to its directors and officers to indemnify them, subject to a
deductible of U.S. $250,000 per loss. Individual directors and officers are
reimbursed for losses incurred in their capacities as such, which are not
subject to a deductible. The annual premium for the period January 1, 1997 to
December 31, 1997 was U.S. $247,917, all of which was paid by the Corporation.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
None of the directors or officers of the Corporation, nor any proposed nominees
for election as directors, nor any associate or affiliate of any such person,
has been indebted to the Corporation or any of its subsidiaries at any time
since January 1, 1997, other than amounts owing for purchases subject to usual
trade terms, for ordinary travel and expense advances and for other transactions
in the ordinary course of business.
INTERESTS IN MATERIAL TRANSACTIONS
None of the directors or officers of the Corporation, nor any proposed nominees
for election as directors, nor any associate or affiliate of any such person,
had any direct or indirect material interest, since January 1, 1997, in respect
of any matter that has materially affected or will materially affect the
Corporation or any of its subsidiaries.
<PAGE> 62
-17-
APPOINTMENT OF AUDITORS
Unless otherwise instructed, the persons named in the enclosed form of proxy
intend to vote such proxy in favor of the reappointment of KPMG Peat Marwick LLP
as auditors of the Corporation to hold office until the next annual meeting of
shareholders and the authorization of the Board of Directors to fix their
remuneration. KPMG Peat Marwick LLP have been auditors of the Corporation since
July, 1996.
Representatives of KPMG Peat Marwick LLP will attend the Meeting, will have the
opportunity to make a statement if they desire to do so and will respond to any
appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE IN FAVOR OF THE
APPOINTMENT OF KPMG PEAT MARWICK LLP.
AMENDMENTS TO THE ARTICLES OF THE CORPORATION
The articles of the Corporation provide that the registered office of the
Corporation is to be situated in the City of Vancouver, province of British
Columbia. The shareholders are asked to approve a special resolution, attached
as Exhibit I, amending the articles of the Corporation to provide that the
registered office of the Corporation is to be located at the City of Toronto,
Province of Ontario. The Corporation has closed its Vancouver office, and it is
intended that the Corporation's registered office be located at the Toronto
office of the Corporation's solicitors.
The articles of the Corporation also provide that the number of directors of the
Corporation shall be a minimum of three directors and a maximum of ten
directors. The number of directors is currently fixed at five directors, and
five directors are nominated for re-election at the Meeting.
The Canada Business Corporations Act states that if the articles so provide, the
directors of a corporation may appoint one or more directors, who shall hold
office for a term expiring not later than the close of the next annual meeting
of shareholders, but the total number of directors so appointed may not exceed
one third of the number of directors elected at the previous annual meeting of
shareholders.
The shareholders are asked to approve a special resolution, attached as Exhibit
II, amending the articles of the Corporation to provide that the Board of
Directors may appoint from time to time one or more directors within the limits
provided in the Canada Business Corporations Act. This amendment to the articles
will enable the Board of Directors to appoint additional
<PAGE> 63
-18-
directors from time to time as they consider appropriate to hold office until
the next following annual meeting of shareholders, subject to the restrictions
in the Canada Business Corporations Act and the articles of the Corporation. As
a result, the Board of Directors would have the ability to obtain the benefit of
qualified candidates for directors from time to time without having to wait
until the following annual meeting of shareholders for them to take office.
The special resolutions require the approval of not less than two-thirds of the
votes cast by shareholders.
GENERAL
The information contained in this Circular is given as of April 14, 1998 and is
expressed in United States dollars, except as otherwise indicated.
Management knows of no matters to come before the Meeting other than the matters
referred to in the Notice of Meeting. If any matters which are not known should
properly come before the Meeting, proxies will be voted on matters in accordance
with the best judgment of the person voting.
The Corporation's 1997 Annual Report is being mailed to shareholders with the
Notice of Meeting and this Circular. The Corporation will provide to any person,
upon written request, a copy of the Corporation's latest Annual Information Form
("AIF"), any documents incorporated in the AIF by reference, interim financial
statements for periods after December 31, 1997 (when available), as well as a
copy of this Circular. Written requests for these documents should be addressed
to Investor Relations, Meridian Gold Inc., 9670 Gateway Drive, Reno, Nevada
89511. If the person requesting the documents is not a shareholder, he or she
may be required to pay a reasonable charge for the document.
The Corporation's registered office is located c/o 1200 Waterfront Centre, 200
Burrard Street, P. O. Box 48600, Vancouver, British Columbia V7X 1T2.
DIRECTOR'S APPROVAL
The contents and sending of this Circular have been approved by the Board of
Directors of the Corporation.
(signed) Eden M. Oliver
Eden M. Oliver
Secretary
<PAGE> 64
EXHIBIT I
SPECIAL RESOLUTION OF THE SHAREHOLDERS
OF MERIDIAN GOLD INC.
CHANGE OF REGISTERED OFFICE
WHEREAS the articles of the Corporation provide that the registered office
of the Corporation is to be situated in the City of Vancouver, Province of
British Columbia;
AND WHEREAS the Corporation desires to amend the articles of the
Corporation to provide that the registered office of the Corporation is to be
situated in the City of Toronto, Province of Ontario;
NOW THEREFORE BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The articles of the Corporation be amended to change the place in Canada
where the registered office of the Corporation is to be situated from the
City of Vancouver, Province of British Columbia to the City of Toronto,
Province of Ontario.
2. Any director or officer of the Corporation is authorized and directed to
take all such action and execute all such documents, including the
execution and filing of Articles of Amendment, as such director or officer
deems necessary or advisable in order to complete the matters provided for
herein.
<PAGE> 65
EXHIBIT II
SPECIAL RESOLUTION OF THE SHAREHOLDERS
OF MERIDIAN GOLD INC.
EMPOWERING THE DIRECTORS TO
APPOINT DIRECTORS
WHEREAS the articles of the Corporation provide that the number of
directors of the Corporation shall be a minimum of three directors and a maximum
of ten directors;
AND WHEREAS subsection 106(8) of the Canada Business Corporations Act
states that if the articles so provide, the directors of a corporation may
appoint one or more directors, who shall hold office for a term expiring not
later than the close of the next annual meeting of shareholders, but the total
number of directors so appointed may not exceed one third of the number of
directors elected at the previous annual meeting of shareholders;
NOW THEREFORE BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. Section 5 of the articles of the Corporation be amended, by adding the
following:
The directors may appoint from time to time one or more directors
within the limits provided in the Canada Business Corporations Act.
2. Any director or officer of the Corporation is authorized and directed to
take all such action and execute all such documents, including the
execution and filing of Articles of Amendment, as such director or officer
deems necessary or advisable in order to complete the matters provided for
herein.
<PAGE> 66
[MERIDIAN GOLD LOGO]
MERIDIAN GOLD INC.
NOTICE OF MEETING
The Annual and Special Meeting of Shareholders (the "Meeting") of Meridian Gold
Inc. (the "Corporation") will be held at 4:00 p.m. on Wednesday, June 3, 1998 in
the Main Dining Room of the National Club, 303 Bay Street, Toronto, Ontario
(business attire required), for the following purposes:
1. to receive the consolidated financial statements of the Corporation for
the financial year ended December 31, 1997 and the auditors' report on
the financial statements;
2. to elect directors of the Corporation;
3. to reappoint KPMG Peat Marwick LLP as auditors of the Corporation and to
authorize the Board of Directors to fix their remuneration;
4. to amend the Articles of Incorporation of the Corporation to change the
place in Canada where the registered office is to be situated from the
City of Vancouver, Province of British Columbia to the City of Toronto,
Province of Ontario;
5. to amend the Articles of Incorporation of the Corporation to provide that
the directors may appoint from time to time one or more directors within
the limits provided in the Canada Business Corporations Act; and
6. to transact any other business that may properly come before the Meeting.
Only shareholders of record at April 14, 1998 will be entitled to notice of and
to vote at the Meeting. If you cannot attend the Meeting in person, please
complete and return the enclosed proxy in the envelope provided. Proxies must be
received by the Corporation's registrar and transfer agent, The Trust Company of
Bank of Montreal, 129 St. Jacques Street West, Level B North, Montreal, Quebec
H2Y 1L6, by 5:00 p.m. (Eastern Time) on June 2, 1998. If a return envelope is
not enclosed with your proxy form, please mail your proxy form to The Trust
Company of Bank of Montreal, P. O. Box/CP 6002, Montreal, Quebec H2Y 9Z9.
TORONTO, APRIL 30, 1998
BY ORDER OF THE BOARD
Eden M. Oliver
Secretary
<PAGE> 67
[MERIDIAN GOLD LOGO]
TO: SHAREHOLDERS OF MERIDIAN GOLD INC.
If you own shares of Meridian Gold Inc. that are held by and registered in the
name of an intermediary (Trust Company, Broker, Bank, etc.) and you do not
already receive our interim financial statements, you may do so by adding your
name and address to our supplemental mailing list. If you are interested, simply
complete and return this form to The Trust Company of Bank of Montreal, 129
Saint-Jacques Street, Level B North, Montreal, Quebec H2Y 1L6.
In order to maintain your name on the supplemental mailing list, you will be
required to complete and return, on an annual basis, a request form or similar
document.
REQUEST FOR INTERIM REPORTS
TO: MERIDIAN GOLD INC.
I hereby certify that I am a non-registered owner of shares of Meridian Gold
Inc. and request that my name and address be placed on your supplemental mailing
list to receive Interim Reports.
- --------------------------------------------------------------------------------
NAME (PLEASE PRINT)
- --------------------------------------------------------------------------------
STREET ADDRESS
- --------------------------------------------------------------------------------
CITY PROVINCE (STATE) POSTAL CODE
LANGUAGE PREFERENCE ENGLISH [ ] FRENCH [ ]
(if available)
- --------------------------------------------------------------------------------
DATE SIGNATURE
<PAGE> 68
MERIDIAN GOLD INC.
PROXY
THIS PROXY IS SOLICITED BY MANAGEMENT OF MERIDIAN GOLD INC. (THE "CORPORATION")
FOR USE AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS (THE "MEETING") OF THE
CORPORATION TO BE HELD ON JUNE 3, 1998.
The undersigned shareholder hereby appoints Dr. David S. Robertson, Chairman of
the Board of Directors, or in his absence, Mr. Brian J. Kennedy, President and
Chief Executive Officer of the Corporation, or instead of either of them,
_________________________________________ (see note 1 below), as proxyholder of
the undersigned, with full power of substitution, to attend, vote and act for
the undersigned at the Meeting, and at any adjournment or adjournments of the
Meeting. The undersigned undertakes to ratify and confirm all of the actions of
the proxyholder pursuant to this proxy, and revokes any proxy previously given.
The proxyholder designated above is specifically directed to vote (or withhold
from voting) all of the shares registered in the name of the undersigned as
specified below (see note 2 below):
1. TO VOTE [ ] TO WITHHOLD FROM VOTING [ ]
in the election of the nominees proposed by management as directors of the
Corporation.
2. TO VOTE [ ] TO WITHHOLD FROM VOTING [ ]
in the appointment of KPMG Peat Marwick LLP as auditors of the Corporation
and to authorize the Board of Directors to fix their remuneration;
3. FOR [ ] AGAINST [ ]
the amendment to the Articles of Incorporation of the Corporation to change
the place in Canada where the registered office is to be situated from the
City of Vancouver, Province of British Columbia to the City of Toronto,
Province of Ontario.
4. FOR [ ] AGAINST [ ]
the amendment of the Articles of Incorporation of the Corporation to provide
that the directors may appoint from time to time one or more directors within
the limits provided in the Canada Business Corporations Act.
Please see the Notice of Meeting and Management Proxy Circular accompanying this
proxy for further information. See note 3 below for instructions on completing
this proxy.
Dated this day of , 1998.
------------- -------------------------------
Signature of Proxyholder
---------------------------------------------------
NOTES:
1. A shareholder has the right to appoint, as his or her proxyholder, a person
(who need not be a shareholder) other than the nominees designated above by
inserting the name of that other person in the space above.
2. If no choice is specified, the nominees designated above will vote for that
item. If any amendments or variations of the matters referred to above or
to any other matters identified in the Notice of Meeting are proposed at
the Meeting (or any adjournment) or if any other matters which are not now
known to management should properly come before the Meeting (or any
adjournment), this proxy confers discretionary authority on the proxyholder
to vote on such amendments, variations or other matters in the best
judgment of the proxyholder.
3. Please complete, date and sign this proxy and return it as soon as possible
in the envelope provided. Executors, administrators, trustees, attorneys or
guardians should so indicate when signing and provide proof of appointment.
Where shares are held in the names of two or more persons, each person must
sign. If the shareholder is a corporation, this proxy must be signed by an
authorized officer or attorney of the corporation with clear indication of
his/her title. If this proxy is not dated, it shall be deemed to bear the
date on which it was mailed. Any resident of Quebec who signs this proxy
confirms the express wish that this proxy and the documents relating to
this proxy be drawn up in English.
<PAGE> 69
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: June 3, 1998 MERIDIAN GOLD INC.
By: /s/ Brian J. Kennedy
--------------------------------------
Brian J. Kennedy
President and Chief Executive Officer
