MESSAGE TO SHAREHOLDERS
1998 was a good year for Meridian Gold in many respects. While gold continued to
struggle and ended the year below the $300 level again, Meridian's shares
outperformed the sector, providing a rare oasis of hope amidst the sustained
drought afflicting the goldindustry. Meridian's share price went from C$4.00 to
C$9.00, a gain of 125% and the highest gain within the sector on the Toronto
Stock Exchange. Some of the factors driving this performance included:
GOLD RESOURCES INCREASED 19% WITH THE DISCOVERY OF QUEBRADA COLORADA AT EL PENON
The discovery of the high-grade Quebrada Colorada zone in 1998 will transform
Meridian Gold into one of the lowest cost gold producers over the next couple of
years.
Based on 172 drill holes into the zone, Meridian estimates approximately one
million ounces of gold in resource, grading 27 g/tonne gold and 410 g/tonne
silver, or 33 g/tonne gold equivalent.
CONSTRUCTION AND DEVELOPMENT COMMENCED AT EL PENON
In August, underground mine development began with the Chilean mining
contractor, Constructora Gardilcic. Underground development is progressing well.
In September, we signed a fixed price Engineering, Procurement, and Construction
contract with Fluor-Signet. Engineering and construction are proceeding on
schedule and on budget.
With the addition of Quebrada Colorada, El Penon should become a world class
asset producing approximately 250,000 ounces of gold per year at a cash cost of
about $100 per ounce.
EL PENON DEBT FINANCING WAS ARRANGED
A $50 million financing to complete the construction of El Penon was obtained
through Standard New York and Standard Bank London Ltd., at favorable terms.
FURTHER GROWTH OPPORTUNITIES WITH NEW MINERALIZATION WERE DISCOVERED AT EL PENON
In the second half of 1998, exploration identified two new mineralized
structures with ore-grade mineralization, Playa and Vista Norte. These two areas
will be high priority exploration targets for 1999. With the recent discoveries
of Quebrada Colorada, Doncella, Playa, and Vista Norte, we believe the El Penon
gold system will grow larger than what has currently been delineated. Based on
our experience in exploration in this area, we believe our El Penon property
will eventually become a mining district.
ROSSI PROJECT WAS PUT ON FAST TRACK WITH BARRICK
In September, a joint venture agreement was signed with Barrick Gold Corporation
on our Rossi project on the Carlin Trend in Nevada. Barrick can earn 60% of the
Rossi project by spending $15 million over a four-year period, with $10 million
required to be spent in the first two years. During the first quarter of 1999,
Barrick is expected to initiate a $5 million underground program to confirm and
explore the existing high-grade resource containing about 1 million ounces of
gold. This program will provide the basic infrastructure for a future
underground mine. This underground development, when combined with the
contractual access to Barrick's existing processing facilities, could provide
Meridian with significant growth potential in the near future.
1998 OPERATING PERFORMANCE AT EXISTING MINES MET OR EXCEEDED EXPECTATIONS
Gold production of 215,000 ounces from Beartrack and Jerritt Canyon exceeded
expectations. Cash costs were lower than projected at $204 per ounce, reflecting
the production enhancement and cost reduction programs taking effect at both
mines. Meridian's safety and environmental record remained unblemished - we
operated without any lost time accidents and there were no reportable
environmental incidents.
<PAGE>
FINANCIAL RESULTS
Again, and as expected, Meridian did not produce positive earnings in 1998 as a
result of our growth programs and low gold prices. With an average realized gold
price of $307 per ounce, a $13 million exploration program which was expensed,
and a $20 million asset impairment at Beartrack (reflecting reserves calculated
at $300 gold), Meridian recorded a loss of $39 million, or $0.53 per share. Cash
flows generated from our existing mines were better than expected, reflecting
higher gold production and lower costs than what were budgeted. These cash flows
helped defray some of the additional costs of exploring and developing Quebrada
Colorada.
With all of Meridian's reserves valued at a $300 gold price, and with El Penon
and Rossi being currently developed, the foundation is in place for future
profit growth.
GROWTH GOLD BUSINESS
In 1998, we emphasized our commitment to becoming a growth gold business, in
spite of the current $300 gold environment. Each of these words has an important
meaning to us.
First of all, we are indeed a company committed to GROWTH. The present vehicle
for this growth is El Penon, with excellent potential from Rossi and our grass
roots exploration program. We also intend to grow through acquisition, and to
that end we have been working hard to find and execute a strong, accretive
acquisition. Our efforts have not met with success to this point, but we will
continue our efforts in the acquisition area.
Second, our focus is on GOLD. Over the past 18 years, we have developed an
expertise in the precious metals industry by making five grass roots
discoveries, building five gold mines, and operating these mines efficiently and
profitably. We will continue to leverage this experience in the precious metals
industry.
Third, we are a BUSINESS. That means we run our company with our shareholders in
mind, and we employ sound business principles in everything we do. We strive to
be careful and dedicated stewards of your investment and your trust. Meridian's
growth plan is more than growing production and reserves, but includes growing
cash flows and earnings. With commercial production planned for El Penon for the
first quarter of 2000, Meridian should enter the new century as a profitable
growth business.
BOARD APPOINTMENTS
In February of 1999, Mr. Patrick J. Mars resigned from the board to accept a
position in London with an investment banking concern. We thank Patrick for his
contributions to Meridian.
Also in February of 1999, we welcomed two new members to our board. Mr.
Christopher R. Lattanzi is a mining engineer and President of Micon
International Limited, mineral industry consultants. Mr. Robert G. Matthews
retired as Vice President and Director, Corporate Finance, after 33 years with
RBC Dominion Securities Inc., specializing in the mining industry. Both Mr.
Lattanzi and Mr. Matthews bring valuable experience and insight to our board,
and we look forward to the benefits of their participation.
MANAGEMENT CHANGES
We would like to announce the following changes to Meridian's management which
occurred over the course of 1998. First of all, Mr. Don Beckwith retired as the
Company's Vice President of Operations, effective December 31, 1998. Mr.
Beckwith has been retained through 1999 on a consulting basis to assist with
construction issues at El Penon. Mr. Gonzalo Tufino, previously the General
Manager of El Penon, was promoted in July to Vice President and General Manager
of El Penon. Mr. Pete Dougherty, the Company's Corporate Controller, was elected
an officer of the Company in July, along with Mr. Wayne Hubert, the Company's
Investor Relations Officer. Finally, in August the Meridian team welcomed Mr.
Edgar Smith as Vice President of Operations, North America. Mr. Smith came to us
from Coeur.
<PAGE>
1999 OUTLOOK
Our priorities for 1999 are very easily summarized: We will continue to build
the strength of our gold business, and we will seek to grow - through
grass-roots exploration, through continuing exploration work at El Penon and at
our joint ventures of Rossi and Jerritt Canyon, and through smart acquisitions.
Beartrack's production target for 1999 is 110,000 ounces, with expected cash
costs of $205 per ounce. At Jerritt Canyon we expect to produce 100,000 ounces
at cash costs of $210 per ounce.
Grass-roots exploration will continue in 1999 in Chile and Nevada, and will
expand into Peru and Mexico as we continue to leverage our proven exploration
talent. We have planned expenditures of approximately $9 million in 1999, of
which about half will be spent at El Penon.
The coming year will be an exciting and momentous year in the history of
Meridian Gold. We are proud of our progress since becoming a public company in
July of 1996; we are excited about our future; and we are more determined than
ever to succeed in our endeavors. Thank you for your support and your trust.
On behalf of the Board of Directors, February 18, 1999,
David S. Robertson Brian J. Kennedy
Chairman of the Board President & Chief Executive Officer
CORPORATE RESPONSIBILITY
Meridian continues to show its regard for the environment, and for the health
and happiness of its employees. The Company's policies in these regards are
strongly worded and taken seriously.
ENVIRONMENTAL AND SAFETY PERFORMANCE
Meridian operates the Beartrack mine, situated in the picturesque mountains near
Salmon, Idaho. During 1998, the Beartrack mine achieved its fourth straight year
without any Notices of Violation. This is a direct result of our operating focus
to make mining and processing compatible with environmental responsibility.
1998 was completed without a lost time accident at Beartrack, and January 19,
1999 marked two full years without a lost time accident. The mine received zero
serious citations from the Mine Safety and Health Administration, and once again
qualified to be included in the Holmes Safety Society's "Sentinels of Safety"
award program competition.
MERIDIAN'S ENVIRONMENTAL POLICY
Meridian Gold has a proud history of environmental awareness and achievement.
This is reflected in Meridian's Environmental Policy Statement, which consists
of three parts. The first two parts read as follows:
ENVIRONMENTAL POLICY STATEMENT
It is the policy of Meridian Gold Inc. to integrate protection of the natural
environment and economic growth in exploring for and mining gold at home and
abroad. Meridian will strive to utilize environmental protection measures that
are reasonable as well as economically and technologically feasible.
<PAGE>
ENVIRONMENTAL POLICY OBJECTIVES AND RESPONSIBILITIES
Meridian Gold's Board of Directors and senior management will endeavor to
provide the leadership, support, resources and training necessary to assure that
employee activities are in compliance with this Policy. Each Meridian Gold
employee is expected to carry out his or her responsibilities having due regard
to this Policy.
The third part addresses ongoing policy evaluation. Inasmuch as Meridian Gold
conducts business in a variety of environments, the implementation of this
policy is dynamic. However, the progress of the development of environmental
programs will be evaluated annually by the Board of Directors and on an ongoing
basis by the President/CEO and the Director of Environmental Affairs.
The environmental management program will include: regular evaluations of
environmental performance at each operating facility; analyses of emerging and
applicable environmental issues, identification of solutions, and development of
sound standards; participation in research to develop new processes and
technologies which will minimize environmental impact; environmental and
economic analysis of each new program or operation with a view to minimize
exposure and financial risk; effective environmental monitoring programs; an
environmental awareness education plan for all Meridian Gold employees; and an
annual evaluation of reclamation programs to aid in compliance with governmental
requirements and the Company's environmental policy.
EL PENON
SUMMARY
- - --Rich gold/silver system in Northern Chile.
- - --High grade Quebrada Colorada deposit discovered in May 1998.
- - --Year-end 1998 reserves of 894,000 ounces of gold and 14.4 million ounces of
silver.
- - --Year-end 1998 resources of 1.9 million ounces of gold and 31.6 million ounces
of silver.
- - --Construction and development of the El Penon mine began in August of 1998.
- - --Production of 250,000 ounces of gold and 3.5 million ounces of silver per year
should begin in late 1999 with cash costs of approximately $100 an ounce.
- - --$50 million debt financing secured.
El Penon had a good year, and to some that is an understatement. With the
addition of the new Quebrada Colorada discovery, the El Penon mine will become a
high-quality, highly profitable operation for Meridian.
QUEBRADA COLORADA ("RED DRAINAGE" IN ENGLISH)
Following more than detailed geologic mapping of the core area, the Company's
geologists identified a north-south structure within a drainage to the east of
Quebrada Orito. Rock samples from the surface showed little gold mineralization.
Despite the low surface values, the structure was drill tested as part of a
thorough exploration program on the property.
The first drill hole encountered 12m of 34 g/tonne gold, and spectacular results
followed including three very high grade intercepts - 8 meters of 180 g/tonne
gold and 2,197 g/tonne silver, 16 meters at 39.7 g/tonne gold and 698 g/tonne
silver, and 14 meters at 296.7 g/tonne gold and 1,159 g/tonne silver.
Drilling since the initial discovery has served to confirm and expand this
exciting zone of mineralization. Based on 172 drill holes, 150 reverse
circulation holes and 22 core-holes, Meridian has estimated a resource of 1.1
million tonnes grading 27 g/tonne gold and 410 g/tonne silver. Underground
drilling in 1999 should convert a proportion of resources to reserves as the $10
million underground development is completed. The mineralization at Quebrada
<PAGE>
Colorada still remains open along strike and length at some locations to depth.
Quebrada Colorada transforms the El Penon project into a world class asset - it
is expected to produce about 250,000 ounces of gold per year with an average
cash cost of $100 per ounce.
CONSTRUCTION
A $50 million financing with Standard Bank and current cash balances will be
used to fund construction costs of approximately $77 million at El Penon, $13
million of which was spent in 1998.
Underground development works began with the Chilean underground miner,
Constructora Gardilcic, in August of 1998, and have been progressing well.
Detailed engineering on the plant, by the selected Engineering, Procurement, and
Construction contractor, Fluor-Signet, began in September 1998. The earthworks
and concrete work for the processing facility are essentially complete, and
leach tank assembly was well underway as of December 1998.
All permitting to enable the development and operation of the El Penon mine has
either been completed or initiated with the proper Chilean authorities.
Construction and development activities are on schedule for production ramp-up
to take place in the fourth quarter of 1999. Commercial production is scheduled
for the first quarter of 2000.
EXPLORATION
1998 was an exciting year for exploration, drilling very high-grade material and
further expanding the potential of this project. Ore-grade mineralization was
discovered at Quebrada Colorada, Doncella, Playa, and Vista Norte all within a
kilometer of the mill-site. All of these mineralized areas are open along strike
and require more drilling in 1999. In addition, there are geophysical targets
that will receive drilling later in the year.
Total mineralized material increased from 1.8 million ounces to 2.8 million
ounces of contained gold. Because El Penon is primarily an underground mine,
future reserves will be delineated incrementally from the large resource base.
This will eventually result in a small 2 to 5 year reserve base compared to a
much larger resource base.
With the high grades of Quebrada Colorada, the numerous gold and silver
mineralized intercepts in the core area, and intercepts of up to 15 g/tonne gold
6 km north of the core area at Tres Tontos, the gold system is even stronger
than believed one year ago. In fact, Meridian has more high priority targets for
1999 at El Penon than it had last year at this time, and that's after drilling
286 holes during the year. The property, clearly, has tremendous potential.
<PAGE>
ROSSI
SUMMARY
- - --1 million ounce resource on the prolific Carlin Trend in Nevada.
- - --Joint venture agreement with Barrick Gold Corporation signed in 1998.
- - --Barrick will construct an underground decline into the resource in 1999.
- - --Barrick will also initiate a surface exploration program on the property in
1999 along the Post fault.
1998 presented the Company with the challenge of how to progress the Rossi
project, which in 1997 had been shown to have a resource (the STORM resource) of
over 1 million ounces of deep, high-grade gold. The challenge was met, and
successfully so, with the completion of a joint venture agreement with Barrick
Gold Corporation.
THE JOINT VENTURE AGREEMENT
The Meridian-Barrick joint venture agreement on the Rossi property was announced
on September 14, 1998. The agreement creates an operating and exploration
partnership on the Rossi property, with Barrick bringing substantial underground
experience in similar rock and ground conditions and the constructed facilities
necessary to process Rossi ore. Barrick's proven exploration results and
thorough understanding of Carlin Trend geology should enhance the process of
exploiting the gold potential of this 28 square kilometer claim block.
Barrick will earn a 60% interest in the project by spending $15 million within
four years of receiving all necessary regulatory approvals for all exploration
(including underground) activities. $10 million is guaranteed to be spent within
the first two of the four years, with at least $5 million to be spent on
grassroots exploration outside Meridian's identified STORM resource area. If the
Joint Venture mines ore from Rossi, Barrick will be required to process up to
1,000 tons (short tons) per day at its nearby facilities; and if the venture is
terminated, Meridian retains the right to process up to 500 tons per day of
Rossi ore at Barrick's facilities, on a custom-milling basis.
1999 WORK PLAN
The STORM decline exploration project will consist of a portal located near the
bottom of Rayrock Yellowknife Resources' Dee Pit, with an initial 1,200 meters
of drifting planned for 1999. This initial phase would include drill delineation
to define the mineralization in one of three main zones within the STORM
Resource area. Additional underground exploration drilling would test for
extensions of known mineralization, which occur at depths ranging from 215 to
655 meters below surface. Pending favorable results, additional phases would
further delineate known mineralized zones and begin preliminary mining.
Currently, STORM contains a geologic resource estimated at 2.5 million tonnes
averaging 12.8 grams/tonne, for 1.01 million ounces of contained gold using a
cut-off grade of 6.8 grams/tonne.
A 20-hole surface exploration program is also planned for 1999, to test for
additional high-grade mineralization outside the STORM resource area. Of keen
interest in this program is testing of the projected extension of the Post-Betze
fault through the Rossi property. The drilling will target footwall
mineralization near large structures at depths to 1,250 meters below surface,
using geologic, geochemical, and geophysical data. Merging the datasets of Rossi
and Dee, through Barrick's Exploration Joint Venture with Rayrock, will provide
an outstanding opportunity to best evaluate the 28 square kilometer Rossi land
position.
<PAGE>
BEARTRACK
SUMMARY
- - --1998 performance was better than budgeted with 110,000 ounces of gold produced
at a cash cost of $220 per ounce.
- - --Mining has switched to the higher grade South Pit.
- - --1999 production should be 110,000 ounces of gold at a cash cost of $205 per
ounce.
- - --The mine completed two years without a Lost-Time Accident on January 19, 1999.
Beartrack had a successful year by meeting or exceeding all budgeted production
and financial targets. Production was better than expected, cash costs were in
line with our projections, and the mine is performing well as it enters its
latter phase of production.
1998 PERFORMANCE
Production of 110,000 ounces, 3% higher than in 1997, was accomplished despite
modifications to the mine plan that were required to offset fewer ore tonnes
coming out of the North Pit. This mine plan resulted in mining 27% more tonnes
in 1998 than were budgeted. Cash costs for 1998 were slightly lower than
expected, at $220 per ounce.
In October of 1998 the North Pit was completed and is actively being reclaimed.
Also, the final phase of construction for the leach pad was completed in-house
during 1998. This phase will satisfy the pad volume requirements for the
remaining Beartrack reserves, which are expected to be mined by the end of 2000.
No significant exploration work was done on the Beartrack property or on
surrounding properties during the year.
SAFETY AND ENVIRONMENTAL RECORD
Beartrack continues to be one of the safest mines in the United States, with a
year-to-date reportable incident rate of 1.07 per 100 employees, compared to the
1997 national average for all mines (the latest published) of 8.4. On January
19, 1999, Beartrack completed two years without a lost time accident, a record
of which we are very proud.
Beartrack also continued its outstanding environmental performance, with no
significant reportable incidents. Goals for reducing excess process water were
achieved through newly installed evaporation and recirculation systems.
1999 OUTLOOK
Beartrack is expected to produce 110,000 ounces of gold in 1999 at cash costs of
$205 per ounce. Capital expenditures will be minimal, so cash flow from
Beartrack in 1999 will again be strong.
<PAGE>
JERRITT CANYON
SUMMARY
- - --1998 performance was better than budgeted with 105,000 ounces of gold produced
at a cash cost of $187 per ounce.
- - --Joint venture partner, Minorco's 70% interest was sold to Anglogold in 1998.
- - --1999 production should be 100,000 ounces of gold at a cash cost of $210 per
ounce.
- - --Excellent exploration potential remains on the property.
Jerritt Canyon, a joint venture operated by 70% owner Independence Mining, a
subsidiary of Minorco, had an impressive year by all accounts. Production was
higher than planned, cash costs were lower due to labor reductions, process
improvements and increased productivity, and exploration work continued to find
success in extending the life of this already long-lived mine near Elko, Nevada.
1998 PERFORMANCE
Production at Jerritt Canyon in 1998 was 105,000 ounces of gold, an 8% increase
versus 1997 production of 96,000 ounces of gold. About 1.3 million tonnes of ore
(on a 100% basis) were processed, due to plant availability being 5% better than
budgeted. Process improvements allowed for a significant reduction in strip
circuit reagent use, which contributed to a 9% improvement in cash costs, to
$187 per ounce from $204 per ounce in 1997.
In October 1998 the new SSX mine was dedicated. Total tonnes mined for the year,
including an acceleration in development tonnes, exceeded the budget by 28%,
with ore production at budgeted levels. The Murray mine also performed well,
exceeding expectations for both grade and tonnes. The Dash open pit mine fell
slightly short of its production targets in 1999, but is still expected to be
completed in 1999. After 1999, feed for the mill at Jerritt Canyon will come
from the underground mines and from above ground stockpiles.
EXPLORATION
The Jerritt Canyon property, despite being in production since 1981, has
unexplored areas. Numerous targets were explored in 1998, some of which warrant
follow-up work, and additional new targets have been identified for 1999. Also,
potential still exists to significantly expand both the SSX and Murray
underground reserves.
1999 OUTLOOK
Jerritt Canyon is expected to produce 100,000 ounces of gold in 1999, about the
same as in 1998, at cash costs of approximately $210 per ounce. Consistent with
our experience in 1998, we expect to replace our reserves again in 1999 as we
convert a portion of our large 1.3 million ounce resource into reserves.
1999 should also see the closing of the sale of Minorco's North and South
American gold assets, including Independence Mining, to Anglogold. We look
forward to getting to know our new operating partner.
<PAGE>
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, April 21, 1999
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, 1998 and the auditors' report on the
financial statements;
2. to elect directors of the Corporation;
3. to reappoint KPMG LLP as auditors of the Corporation and to authorize the
Board of Directors to fix their remuneration;
4. to approve the Option/SAR Component of the 1999 Share Incentive Plan;
5. to approve the Bonus Component of the 1999 Share Incentive Plan;
6. to approve the Shareholder Rights Plan; and
7. to transact any other business that may properly come before the Meeting.
Only shareholders of record at March 3, 1999 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 Daylight Time) on April 20, 1999. 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, March 16, 1999
BY ORDER OF THE BOARD
Eden M. Oliver
Secretary
<PAGE>
<TABLE>
STATISTICAL SUMMARY
1998 1997 1996 1995 1994
- - ---------------------------------------------------------------------------------------------------------------
MILLING OPERATIONS
<S> <C> <C> <C> <C> <C>
Tonnes of ore processed (thousands)
Jerritt Canyon (Meridian Gold share) ................... 404 419 726 802 806
Royal Mountain King .................................... -- -- -- -- 635
Gold ore grade (grams per tonne milled)
Jerritt Canyon ......................................... 8.7 7.4 4.5 4.4 4.1
Royal Mountain King .................................... -- -- -- -- 1.8
Gold recoveries
Jerritt Canyon ......................................... 91% 91% 88% 86% 88%
Royal Mountain King .................................... -- -- -- -- 73%
LEACHING OPERATIONS (Beartrack)
Tonnes of ore mined (thousands) ........................ 4,088 3,764 3,969 3,539 733
Gold ore grade (cyanide soluble grams per tonne) ....... 0.8 0.9 0.9 1.2 1.2
Gold recovery .......................................... 90% 90% 90% 90% --
PRODUCTION (thousands of ounces)
Gold
Jerritt Canyon (Meridian Gold share) ................... 105 96 93 98 98
Beartrack .............................................. 110 107 109 49 --
Paradise Peak .......................................... -- -- -- 4 39
Royal Mountain King .................................... -- -- -- -- 26
-------------------------------------------------
Total Gold ............................................. 215 203 202 151 163
Total Silver ........................................... 109 60 38 27 154
-------------------------------------------------
Cash Cost of Production (United States $ per gold ounce)
Jerritt Canyon ......................................... 187 209 297 250 283
Beartrack .............................................. 220 202 190 166 --
Paradise Peak .......................................... -- -- -- 155 124
Royal Mountain King .................................... -- -- -- -- 296
Average ................................................ 204 205 239 221 246
</TABLE>
The calculation of cash costs of production conforms to the standards
recommended by the Gold Institute.
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>
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER 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 such exchanges
for the years ended December 31, 1998 and 1997 are set forth in the table of
Supplementary Data on page XX.
The year-end 1998 market price of Meridian Gold shares was $5 11/16 on the New
York Stock Exchange. At year-end 1998, the shares closed on The Toronto Stock
Exchange at CDN $9.00 per share.
Meridian Gold had 445 shareholders of record as of December 31, 1998.
SELECTED FINANCIAL DATA
The following selected financial data, for the years 1994 through 1998, have
been derived from the consolidated financial statements of Meridian Gold Inc.
<TABLE>
(in millions of United States dollars, except share and per share data)
- - ------------------------------------------------------------------------------------------------------------------------------------
1998 1997 1996 1995 1994
- - ------------------------------------------------------------------------------------------------------------------------------------
Summary of Operations
<S> <C> <C> <C> <C> <C>
Sales ........................................... $ 65.7 $ 68.7 $ 76.2 $ 57.4 $ 63.4
Costs and expenses
Cost of sales ............................... 49.0 54.6 54.3 29.8 38.5
Depreciation, depletion, and amortization ... 22.1 23.3 21.0 21.2 15.3
Exploration costs ........................... 13.1 31.1 13.4 10.8 10.9
Selling, general and administrative expenses 7.2 6.2 6.4 5.1 6.5
Other operating expense (income) ............ (3.6) 0.4 1.9 0.3 0.3
Provision for impairment of mining properties 19.8 26.2 -- -- --
-----------------------------------------------------------------------------
Total costs and expenses ........................ 107.6 141.8 97.0 67.2 71.5
-----------------------------------------------------------------------------
Operating loss .................................. (41.9) (73.1) (20.8) (9.8) (8.1)
Interest income ................................. 2.7 3.7 4.9 5.9 8.7
-----------------------------------------------------------------------------
Gain on sale of assets .......................... -- 0.2 -- 1.7 --
Income (loss) before income taxes ............... (39.2) (69.2) (15.9) (2.2) 0.6
Income taxes .................................... -- -- -- 4.5 2.1
-----------------------------------------------------------------------------
Net income (loss) ............................... $ (39.2) $ (69.2) $ (15.9) $ 2.3 $ 2.7
=============================================================================
Net income (loss) per common share .............. $ (0.53) $ (0.94) $ (0.22) $ 0.03 $ 0.04
=============================================================================
Weighted average common shares
outstanding (thousands) .................... 73,609 73,601 73,563 73,484 73,484
-----------------------------------------------------------------------------
Total Assets at December 31 ..................... $ 110.1 $ 147.9 $ 214.6 $ 225.2 $ 235.1
- - ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL REVIEW
Sales and Earnings
Sales for 1998 decreased to $65.7 million from $68.7 million in 1997, reflecting
lower realized gold prices. Gold production was 215,000 ounces, versus 203,000
ounces in 1997, and the average realized price of gold was $307 per ounce,
compared to $334 per ounce in 1997. Sales in 1998 include a gain of $2.8 million
on put options covering 33,000 ounces; 1997 sales included a $0.9 million gain
on put options, also covering 33,000 ounces.
Cost of sales in 1998 was lower than in 1997, at $48.9 million versus $54.5
million, due largely to lower costs at Jerritt Canyon resulting from higher ore
grades and improved productivity. Average cash costs declined to $204 per ounce
of gold from $205 per ounce in 1997. Beartrack cash costs increased to $220 per
ounce from $202 per ounce due to lower ore grades mined from the North Pit. At
Jerritt Canyon, cash costs per ounce were $187 per ounce, versus $209 per ounce
in 1997.
As planned, exploration expenditures decreased from $31.1 million in 1997 to
$13.1 million in 1998 as work at El Penon progressed from the feasibility phase
into mine development. In addition to continuing efforts to expand reserves and
resources at El Penon, 1998 exploration activities successfully focused on
defining the Rossi resource and on increasing reserves at Jerritt Canyon.
Selling, general and administrative expenses increased to $7.2 million in 1998
from $6.2 million in 1997.
Other operating income for 1998 included $3.5 million in recoverable value-added
tax (VAT) related to the Company's Chilean operations. This amount represents
taxes paid prior to 1998. In November 1998 the Company applied to the Chilean
Ministry of the Economy for recovery of this amount, based upon the start of
development of the El Penon mine and the Company's commitment to export the
mine's precious metals production. Recoveries of value-added taxes paid relating
to current year expenditures are reflected as a reduction of those expenditures.
Meridian's net loss for the year was $39.2 million, compared with a net loss of
$69.2 million in 1997. These losses included non-cash charges for mining
property impairments of $19.8 million relating to the Beartrack mine and $26.2
million relating to the Jerritt Canyon and Beartrack mines in 1998 and 1997,
respectively, due to the continuing depressed gold market. The Company did not
recognize a tax benefit in either 1997 or 1998.
Liquidity and Capital Resources
Cash to meet the Company's operating needs, to finance capital expenditures and
to fund exploration activities was provided from operations and from existing
cash reserves. Cash provided by operating activities was $3.8 million in 1998,
compared to cash used by operating activities of $7.4 million in 1997. The
improvement in 1998 is due to lower operating cash costs and lower exploration
spending. At December 31, 1998, cash and cash equivalents totaled $34.1 million,
vs. $54.3 million as of the previous year end. This decrease is due to capital
development expenditures at El Penon, as well as to continuation of the
Company's successful exploration program.
Capital expenditures increased to $23.8 million in 1998, from $19.0 million in
1997. At El Penon, 1998 expenditures were $12.6 million, marking the
commencement of construction activities. 1998 expenditures related to Jerritt
Canyon were $9.2 million, down from $13.1 million in 1997, reflecting lower
underground development spending. At Beartrack, 1998 expenditures decreased to
$1.3 million to from $5.7 million in 1997 due to the completion of the leach pad
expansion in 1997.
Expected cash requirements for 1999 include approximately $67 million for
planned capital expenditures, primarily directed toward the construction of the
El Penon mine, which is expected to be complete in the fourth quarter.
Exploration spending in 1999 is expected to be approximately $9.0 million. The
Company expects to fund its cash requirements from cash flow from operations,
existing cash reserves and a $50 million fully underwritten bank loan facility.
Should the Company decide to develop other exploration and development
properties, significant capital may be required. The Company believes that these
capital requirements could be funded by existing cash reserves and by borrowings
from third parties, although no assurance can be given that such borrowings will
be available at rates acceptable to the Company.
Prior to December 31, 1998, the Company had agreed in principle to the terms of
a $50 million loan facility with Standard Bank of London Limited. The financing
will be secured by the El Penon assets and by a Corporate guarantee until
commercial production is achieved. Upon reaching commercial production, the
Corporate guarantee will be eliminated and the project assets alone will secure
the loan. The interest rate will be 2.25% over the London Interbank Lending Rate
(LIBOR) through the end of performance testing; thereafter, the rate will be 2%
over LIBOR. The loan is expected to be signed in March, and will mature over a
six-year period ending December 31, 2004, with a one-year initial grace period
<PAGE>
during which interest will accrue, but no payments will be due. In connection
with this financing, the Company has entered into contracts hedging 9.3 million
ounces of silver at a forward price of $5.34 per ounce, and 300,000 ounces of
gold at prices ranging from $294 to $335 per ounce. An additional 150,000 ounces
of gold will be hedged to complete the loan requirements. These contracts mature
over the life of the loan, beginning in January 2000. The total ounces hedged
represent approximately one-third of the project's annual production of gold and
one-half of the annual production of silver for the years the hedges are in
effect.
Preparing for the Year 2000
The Year 2000 issue, which may cause computers and date-sensitive devices which
employ microprocessors to be unable to correctly process data for dates
occurring after 1999, has the potential to impact many businesses. In 1997,
Meridian Gold implemented an action plan to address the impact of potential Year
2000 problems on the Company.
The first phase, inventorying all hardware, software and equipment control
systems at all locations, was completed during 1998. This evaluation included
the operating hardware and software at the Beartrack heap leach operation and
the construction parameters and contracts relating to the construction of El
Penon. The second phase, to test in a Year 2000 environment specific hardware
and software identified in phase one and confirm their compliance or to
reprogram or replace equipment where necessary began in 1998 and is expected to
be completed by September 1999. The Company is also in the process of contacting
key refiners and suppliers to determine whether they are actively managing the
Year 2000 risk and working toward compliance by the end of 1999. Contingent
suppliers and refiners will be contacted for those who do not confirm
compliance.
To date the cost of testing and compliance or upgrade measures has not been
significant at less than $50,000. Based on the work done to date no material
issues have been identified. Future spending is also not expected to exceed
$50,000 to complete compliance, however, subsequent work may lead to discovery
of material issues.
It is currently believed that the Company's critical operating and financial
systems are all Year 2000 compliant. However, it is not possible to be certain
that all aspects of the Year 2000 issue affecting the Company, including those
related to the efforts of customers, suppliers or other third parties, will be
fully resolved. Failures could materially and adversely effect the Company's
results of operations, liquidity and financial condition. The implementation of
the Year 2000 action plan is expected to significantly reduce the uncertainty of
the Year 2000 issue.
Outlook
Gold production is estimated to be approximately 250,000 ounces in 1999. Cash
costs should be approximately $200 per ounce, with Beartrack producing at $205
per ounce due to increased ore grades, Jerritt Canyon producing at $210 per
ounce, and El Penon producing at less than $180 per ounce. Exploration efforts
will be focused on increasing reserves and resources at El Penon, continuing
exploration programs at Jerritt Canyon, and "grass roots" prospecting, primarily
in Latin America. Exploration work is also planned at the Company's Rossi
project in Nevada. Funding will be provided by the Company's joint venture
partner, Barrick Gold Corporation, under the terms of the joint venture
agreement.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders,
Meridian Gold Inc.:
We have audited the accompanying consolidated balance sheets of Meridian Gold
Inc. and subsidiaries as of December 31, 1998 and 1997, and the related
consolidated statements of operations, cash flows, and changes in shareholders'
equity for each of the years in the three-year period ended December 31, 1998
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, 1998 and 1997, and the results of their
operations and their cash flows for each of the years in the three year period
ended December 31, 1998 in conformity with accounting principles generally
accepted in Canada.
KPMG LLP
Denver, Colorado
January 29, 1999
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 estimates 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 LLP. Their
report outlines the scope of their examination and their opinion on the
consolidated financial statements.
Brian J. Kennedy Edward H. Colt
President & Chief Executive Vice President, Finance & Chief
Officer Financial Officer
January 29, 1999
<PAGE>
MERIDIAN GOLD INC.
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended December 31
(in thousands of United States dollars, except per share data)
--------------------------------------------------------------------------------------------------------
1998 1997 1996
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales .................................................... $ 65,676 $ 68,740 $ 76,230
Costs and expenses
Cost of sales .......................................... 48,961 54,544 54,290
Depreciation, depletion, and amortization .............. 22,168 23,346 21,068
Exploration costs ...................................... 13,133 31,107 13,357
Selling, general and administrative expenses ........... 7,172 6,242 6,397
Other operating expense (income) ....................... (3,595) 401 1,926
Provision for impairment of mining properties .......... 19,768 26,233 --
----------------------------------------
Total costs and expenses ................................. 107,607 141,873 97,038
----------------------------------------
Operating loss ........................................... (41,931) (73,133) (20,808)
Interest income .......................................... 2,686 3,788 4,953
Gain on sale of assets ................................... 14 178 --
----------------------------------------
Net loss ................................................. $ (39,231) $ (69,167) $ (15,855)
(note 1) Loss per common share ............................ (0.53) $ (0.94) $ (0.22)
- - ---------------------------------------------------------------------------------------------------------
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
MERIDIAN GOLD INC.
- - --------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
December 31
(in thousands of United States dollars)
- - --------------------------------------------------------------------------------
1998 1997
- - --------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Current assets:
(note 1) Cash and cash equivalents $ 34,122 $ 54,321
Trade and other receivables 8,051 1,249
(note 3) Inventories 6,302 9,982
Other current assets 1,526 3,359
------------------------
Total current assets 50,001 68,911
(note 4) Property, plant and equipment, net 57,515 75,687
(notes 1 and 12) Other assets 2,625 3,349
------------------------
Total assets $110,141 $ 147,947
------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable, trade and other $ 3,894 $ 5,272
(note 6) Accrued and other liabilities 9,652 8,878
------------------------
Total current liabilities 13,546 14,150
------------------------
(note 7) Other long-term liabilities 23,118 21,235
(note 1) Shareholders' equity:
Series 1 preferred shares, no par value
authorized unlimited shares, 10,000
shares issued and outstanding in 1998
and 1997 100 100
Common shares, no par value, authorized
unlimited shares, 73,641,420 and
73,601,495 shares issued and
outstanding in 1998 and 1997,
respectively 68,595 68,449
Additional paid-in capital 3,658 3,658
Retained earnings 1,124 40,355
- - --------------------------------------------------------------------------------
Total shareholders' equity 73,477 112,562
- - --------------------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 110,141 $ 147,947
- - --------------------------------------------------------------------------------
See notes to consolidated financial statements.
</TABLE>
Signed on behalf of the Board of Directors:
Dr. David S. Robertson Brian J. Kennedy
Director Director
<PAGE>
<TABLE>
MERIDIAN GOLD INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31
(in thousands of United States dollars)
- - --------------------------------------------------------------------------------------------
1998 1997 1996
- - --------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(39,231) $(69,167) $(15,855)
Adjustments to reconcile net loss to
net cash provided by (used in)
operating activities:
Provision for depreciation,
depletion and amortization .................. 22,168 23,346 21,068
Gain on sale of asset ........................... (14) (178) --
Provision for impairment of mining properties ... 19,768 26,233 --
Provision for reclamation, net of costs incurred 972 5,487 7,174
Provision for doubtful note receivable .......... -- -- 1,700
Issuance of preferred stock as compensation ..... -- -- 100
Accrued pension cost ............................ 172 310 --
(Increase) decrease in assets:
Trade and other receivables ..................... (6,802) 519 3,091
Inventories ..................................... 3,680 6,781 (1,971)
Other current assets ............................ 1,833 (642) 1,379
Other assets .................................... 616 680 2,497
(Decrease) increase in liabilities:
Accounts payable, trade and other ............... (1,378) (2,277) 441
Accrued and other liabilities ................... 870 1,428 (610)
Amounts due to FMC Corporation .................. -- -- (2,275)
Other long-term liabilities ..................... 1,173 82 (1,380)
-------------------------------------
Net cash provided by (used in)
operating activities ....................... 3,797 (7,398) 15,359
-------------------------------------
Cash flows from investing activities:
Capital spending ................................ (23,774) (18,959) (13,882)
Disposal of property, plant and equipment ....... 132 591 172
-------------------------------------
Net cash used in investing activities ........... (23,642) (18,368) (13,710)
-------------------------------------
Cash flows from financing activities:
Proceeds from sale of common stock .............. 146 17 560
Repayments of long-term debt .................... (500) (2,500) (1,000)
Capital contribution, net of return of
capital related to the reincorporation ..... -- -- 2,186
-------------------------------------
Net cash provided by (used in)
financing activities ....................... (354) (2,483) 1,746
-------------------------------------
Increase (decrease) in cash and cash
equivalents ................................ (20,199) (28,249) 3,395
Cash and cash equivalents,
beginning of year .......................... 54,321 82,570 79,175
-------------------------------------
Cash and cash equivalents, end of year .......... $ 34,122 $ 54,321 $ 82,570
-------------------------------------
Supplemental disclosure of cash flow information:
Cash paid and (refunds received) for income taxes during 1998, 1997,
and 1996 were ($1,450), $2,324, and ($1,454), respectively.
See notes to consolidated financial statements
</TABLE>
<PAGE>
<TABLE>
MERIDIAN GOLD INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Year ended December 31
(in thousands of U.S. Dollars)
- - ----------------------------------------------------------------------------------------------------------------------
Number of 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, 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
Net loss (39,231)
Issuance of shares
upon exercise of
stock options 40 146
- - ----------------------------------------------------------------------------------------------------------------------
Balance
December 31, 1998 10 73,641 $ $ 100 $ 68,595 $ 3,658 $ 1,124
- - ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
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 shareholders' 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 remaining
maturities at date of purchase of fewer than 91 days to be cash equivalents.
Cash equivalents consist primarily of Euro dollar time deposits with major
commercial banks and totaled approximately $33.5 million and $54.3 million at
December 31, 1998 and 1997, respectively. The book value of cash equivalents
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, are
recorded at cost. Depreciation, depletion and amortization for financial
reporting purposes are provided on a units of production basis or on the
straight-line basis 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 recognized upon shipment of gold and silver dore to third parties.
<PAGE>
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 1997 or 1996.
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. 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.
LOSS PER COMMON SHARE
Loss per common share has been computed based on the weighted average number of
shares of common stock outstanding during the year (73,608,853 shares in 1998,
73,600,788 shares in 1997 and 73,563,087 shares in 1996).
FAIR VALUE OF FINANCIAL INSTRUMENTS
At December 31, 1998 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.
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, consisting of $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; installments of $1.0
million each were paid in June 1996 and June 1997 and an installment of $0.5
million was paid in June 1998. The balance payable to Minex at December 31, 1998
is $0.5 million, due in 1999.
note 3 INVENTORIES
- - --------------------------------------------------------------------------------
Inventories (at cost) consist of the following:
(in thousands) 1998 1997
- - -----------------------------------------------------------------
Gold and silver $ 220 $ 11
Leach pad ore 5,262 8,964
Materials and supplies 820 1,007
- - -----------------------------------------------------------------
Total $ 6,302 $ 9,982
- - -----------------------------------------------------------------
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 labor, materials, and other production
costs of loading ore on the heap leach pads at the Beartrack mine. At December
31, 1998, there were approximately 16.1 million tonnes of ore under leach
containing approximately 34,000 ounces of gold. At December 31, 1997
approximately 12.0 million tonnes of ore were under leach, containing
approximately 58,000 ounces of gold.
<PAGE>
note 4 PROPERTY, PLANT AND EQUIPMENT
- - --------------------------------------------------------------------------------
Property, plant and equipment consists of the following:
(in thousands) 1998 1997
- - ----------------------------------------------------------------
Land and land improvements $ 20,804 $ 15,792
Less accumulated depreciation (12,303) (5,682)
- - ----------------------------------------------------------------
8,501 10,110
- - ----------------------------------------------------------------
Buildings 13,087 12,829
Less accumulated depreciation (9,281) (6,396)
- - ----------------------------------------------------------------
3,806 6,433
- - ----------------------------------------------------------------
Machinery and equipment 109,584 118,537
Less accumulated depreciation (90,867) (89,265)
- - ----------------------------------------------------------------
18,717 29,272
- - ----------------------------------------------------------------
Development costs 98,317 93,574
Less accumulated depletion (88,891) (75,411)
- - ----------------------------------------------------------------
9,426 18,163
- - ----------------------------------------------------------------
Construction in progress 17,065 11,709
- - ----------------------------------------------------------------
Net property, plant and equipment $ 57,515 $ 75,687
================================================================
Allocated to the projects as follows:
- - ----------------------------------------------------------------
(in thousands) 1998 1997
- - ----------------------------------------------------------------
Beartrack mine $ 19,562 $ 53,149
Jerritt Canyon mine 17,893 15,339
Rossi project 5,500 5,500
El Penon project 12,920 501
Royal Mountain King property 449 449
Administrative offices 1,191 749
- - ----------------------------------------------------------------
Net property, plant and equipment $ 57,515 $ 75,687
================================================================
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>
- - --------------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- - --------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current assets $ 1,071 $ 2,065 $ 2,832
Property, plant and equipment, net 17,893 15,339 38,889
Investments and other assets 492 561 649
- - --------------------------------------------------------------------------------------
Total assets 19,456 17,965 42,370
- - --------------------------------------------------------------------------------------
Current liabilities 3,657 2,219 3,171
Long-term liabilities 12,530 9,720 4,565
Other -- -- 315
- - --------------------------------------------------------------------------------------
Total liabilities 16,187 11,939 8,051
- - --------------------------------------------------------------------------------------
Equity in Joint Venture $ 3,269 $ 6,026 $ 34,319
- - --------------------------------------------------------------------------------------
Revenue $ 30,506 $ 30,559 $ 35,781
Expenses
Cost of sales 20,791 29,060 27,524
Depreciation, depletion and amortization 6,617 10,053 10,316
Impairment of assets -- 26,233 3,225
- - --------------------------------------------------------------------------------------
Net operating income (loss) $ 3,098 $ (34,787) $ (5,284)
- - --------------------------------------------------------------------------------------
<PAGE>
Cash provided by operating activities $ 14,297 $ 11,403 $ 9,932
Cash used in investing activities (9,184) (12,737) (8,821)
Cash provided by (used in) financing activities -- - -
- - --------------------------------------------------------------------------------------
</TABLE>
note 6 ACCRUED AND OTHER LIABILITIES
- - --------------------------------------------------------------------------------
Accrued and other liabilities consist of the following:
(in thousands) 1998 1997
- - --------------------------------------------------------------------------------
Shutdown and reclamation accrual (notes 1 and 7) $ 3,265 $ 3,356
Notes payable (note 2) 500 500
Accrued bonus and payroll 2,707 1,354
Other 3,180 3,668
- - --------------------------------------------------------------------------------
Total $ 9,652 $ 8,878
- - --------------------------------------------------------------------------------
note 7 OTHER LONG-TERM LIABILITIES
- - --------------------------------------------------------------------------------
Other long-term liabilities consist of the following:
(in thousands) 1998 1997
- - --------------------------------------------------------------------------------
Shutdown and reclamation accrual (notes 1 and 6) $ 19,521 $ 18,453
- - --------------------------------------------------------------------------------
Accrued pension cost (note 10) 482 310
Notes payable (note 2) - 500
Other 3,115 1,972
- - --------------------------------------------------------------------------------
Total $ 23,118 $ 21,235
- - --------------------------------------------------------------------------------
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.
Although the ultimate amount of reclamation obligations to be incurred is
uncertain, as of December 31, 1998 Meridian has estimated these costs for all of
its properties to be $34.8 million, and at December 31, 1998, accrued
reclamation costs, including the current portion, were $22.8 million for all
properties. The provision for reclamation costs charged to operations was $4.2
million, $9.7 million, and $8.9 million in 1998, 1997 and 1996, respectively.
Actual reclamation expenditures were $3.2 million, $4.2 million, and $1.6
million in 1998, 1997 and 1996, 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.
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 operating loss and alternative
minimum tax credit carryforwards remained with FMC at the time of the
Reincorporation.
<PAGE>
On October 26, 1998, the Company entered into foreign investment contracts under
Chilean Decree Law 600 ("DL600"), under which all prior spending in Chile by the
Company was consolidated. Under the provisions of these DL600 contracts, the
Company has elected to have its earnings taxed at a rate of 42% based on Chilean
tax statutes in effect as of the date of the contracts. As provided for in the
statutes governing the DL600 contracts, the Company retains the right to elect
that future earnings be taxed at the statutory rate rather than the rate
provided in the DL600.
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 as follows:
<TABLE>
Year ended December 31
- - ------------------------------------------------------------------------------------------------------
(in thousands) 1998 1997 1996
- - ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Income tax benefit calculated using statutory tax rate (13,339) (23,516) (5,391)
Increase in valuation allowance for future income tax assets 13,125 23,441 5,371
Other 214 75 20
- - ------------------------------------------------------------------------------------------------------
Actual tax provision (benefit) $ - $ - $ -
======================================================================================================
</TABLE>
The significant components of the Company's future income tax assets and
liabilities at December 31, 1998 and 1997 are as follows:
(in thousands) 1998 1997
- - --------------------------------------------------------------------------
Future income tax assets:
U.S.:
Property, plant and equipment $ 18,304 $ 14,780
Reclamation reserves 6,920 5,969
Net operating loss carryforwards 2,278 340
Other, net 1,290 340
Chile:
Property, plant and equipment 1,902 7,888
Net operating loss carryforwards 12,988 1,598
Other, net 360 225
Other foreign:
Net operating loss carryforwards 1,098 875
Other, net - _
- - --------------------------------------------------------------------------
Total future income tax assets 45,140 32,015
Valuation allowance (42,640) (29,515)
- - --------------------------------------------------------------------------
Future income tax assets, net of allowance 2,500 2,500
- - --------------------------------------------------------------------------
Future income tax liabilities - U.S.:
Other, net (2,500) (2,500)
- - --------------------------------------------------------------------------
Total future income tax liabilities (2,500) (2,500)
- - --------------------------------------------------------------------------
Net future income tax assets $ - $ -
- - --------------------------------------------------------------------------
At December 31, 1998, the Company and subsidiaries included in these
consolidated financial statements had available U.S. loss carryforwards of
approximately $6.7 million which expire in the years 2018 and 2019, a Chilean
net operating loss carryforward of approximately $39.4 million, which may be
carried forward indefinitely, and Canadian net operating loss carryforwards of
approximately $3.2 million which will expire between the years 2003 and 2005.
<PAGE>
note 9 GEOGRAPHIC SALES AND SALES TO MAJOR CUSTOMERS
- - --------------------------------------------------------------------------------
Sales to unaffiliated customers by destination of sale are as follows:
Year ended December 31
- - --------------------------------------------------------------
(in thousands) 1998 1997 1996
- - --------------------------------------------------------------
USA $ 56,115 $ 17,545 $ -
Western Europe 9,561 51,195 75,724
- - --------------------------------------------------------------
Total $ 65,676 $ 68,740 75,724
- - --------------------------------------------------------------
The Company's gold and silver dore production is purchased and refined by
European and United States refiners. Sales were to two refiners in 1998 and
1996, and to three refiners in 1997, each representing 10 percent or more of
consolidated sales. Sales to these companies amounted to $62.9 million in 1998,
and $67.8 million in 1997, and $75.6 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.
note 10 EMPLOYEE PLANS
- - --------------------------------------------------------------------------------
The Company has a defined benefit pension plan covering substantially all
salaried employees. Pension benefits are generally based on years of service and
average yearly earnings. The Company's funding policy is to contribute the
minimum amount required by applicable regulations. The amortization period for
unrecognized gains and losses is 12 years and is based on the expected average
remaining service life of eligible employees. Net periodic pension expense is
composed of the following:
- - ----------------------------------------------------------------------
Years Ended December 31,
(in thousands) 1998 1997
- - ----------------------------------------------------------------------
Accrual for service cost $ 287 $ 265
Interest cost 156 124
Return on assets (154) (121)
Net amortization and deferral (24) --
- - ----------------------------------------------------------------------
Net periodic pension cost 265 268
- - ----------------------------------------------------------------------
The following table represents the plan's funded status and actuarial
assumptions at December 31, 1998 and 1997:
(in thousands) 1998 1997
- - --------------------------------------------------------------------------------
Projected benefit obligation $2,395 $1,897
Market value of plan assets 2,562 1,875
- - --------------------------------------------------------------------------------
Projected benefit obligation
in excess of (less than) plan assets (167) 22
Unrecognized net gain 649 288
- - --------------------------------------------------------------------------------
Accrued pension cost 482 310
- - --------------------------------------------------------------------------------
Actuarial assumptions:
Weighted average discount rate 8.25% 8.25%
Weighted average rate of compensation increase 6.59% 6.90%
The Company also has a non-qualified unfunded supplementary retirement plan that
provides employees with retirement benefits in excess of qualified plan limits
imposed by law. At December 31, 1998, the projected benefit obligation under
this plan totaled approximately $0.5 million. The projected benefit obligation
(PBO) is determined using the same methods and assumptions as those used for the
calculation of the PBO for the qualified plan discussed above.
<PAGE>
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 had outstanding 10,000 shares of Series 1 preferred stock at
December 31, 1998 and 1997. 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 had an
exercise price ranging from $9.625 to $10.625 and expired 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 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, 1998 options to purchase 3,257,033 common shares were
outstanding with terms ranging up to ten years as detailed in the following
table:
Number of Option Price
Common Shares U.S. $ per Share
- - --------------------------------------------------------------------------------
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
Granted in 1998 1,264,000 3.187 - 4.6250
Exercised in 1998 (39,925) 3.650
Surrendered and expired in 1998 (541,117) 3.650 - 10.625
- - --------------------------------------------------------------------------------
Outstanding, December 31, 1998 3,257,033 2.250 - 5.250
Exercisable, December 31, 1998 448,641 2.250 - 4.250
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).
<PAGE>
note 12 HEDGING CONTRACTS
- - --------------------------------------------------------------------------------
The Company has hedged portions of future gold production by entering into put
option contracts. Hedging gains recognized on put option contracts were $2.8
million in 1998 and $0.9 million in 1997; there was no put option revenue in
1996. At December 31, 1998, the carrying value of the remaining options (at
cost) was $1.3 million ($1.8 million at December 31, 1997), and was included in
other assets. The estimated market value of the put options as of December 31,
1998 and 1997, was approximately $7.5 million and $9.2 million, respectively.
The value of these options varies with changes in the market price of gold.
The options are exercisable at a strike price of $400 per ounce, according to
the following schedule:
Options Exercise
(ounces) Date
-------- --------
32,000 12/29/99
32,000 12/27/00
27,000 12/27/01
note 13 COMMITMENTS AND CONTINGENT LIABILITIES
- - --------------------------------------------------------------------------------
The Company leases office and warehouse space in Reno and Santiago, 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 $2.3 million, $1.9 million and $2.1 million for 1998, 1997 and 1996,
respectively. Minimum future rentals under noncancellable leases aggregated
approximately $8.4 million as of December 31, 1998, and are estimated to be
payable $2.0 million in 1999, $2.0 million in 2000, $2.0 million in 2001, $0.6
million in 2002, $0.4 million in 2003, and $1.4 million thereafter.
Since November 1995, the National Forest Service and the National Marine
Fisheries Service have been working under court order to complete a reinitiated
consultation under Section 7 of the Endangered Species Act ("the Act") on the
potential impacts of the Beartrack Mine on salmon and their designated critical
habitat listed under the Act. Pursuant to this reinitiated consultation, under
Section 7(d) of the Act, the Forest Service has allowed Meridian to continue all
ongoing activities at the Beartrack Mine. The reinitiated consultation is still
ongoing as of the date of this report. 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 Beartrack Mine, which has been in operation 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 UNCERTAINTY DUE TO THE YEAR 2000 ISSUE
- - --------------------------------------------------------------------------------
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems which use certain dates in 1999 to represent something other than a
date. The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and , if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure which could
affect an entity's ability to conduct normal business operations. It is not
possible to be certain that all aspects of the Year 2000 Issue affecting the
entity, including those related to the efforts of customers, suppliers, or other
third parties, will be fully resolved.
<PAGE>
SUPPLEMENTARY DATA
(in millions of US dollars except share and per share data)
<TABLE>
QUARTERLY RESULTS AND STOCK MARKET DATA
- - ------------------------------------------------------------------------------------------------------------------------------
1998 1997
- - ------------------------------------------------------------------------------------------------------------------------------
4th 3rd 2nd 1st 4th 3rd 2nd 1st
Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr. Qtr.
- - ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Sales(1) $ 21.3 $ 14.2 $ 15.9 $ 14.3 $ 20.4 $ 17.5 $ 16.9 $ 14.0
- - ------------------------------------------------------------------------------------------------------------------------------
Operating loss(1) (21.2) (8.8) (6.0) (5.9) (9.2) (48.2) (8.8) (7.0)
Gain (loss) on sale of
assets(1) -- -- -- -- (0.2) 0.4 -- --
Interest income(1) 0.5 0.7 0.7 0.8 0.9 0.9 1.0 1.0
- - ------------------------------------------------------------------------------------------------------------------------------
Net loss(1) (20.7) (8.1) (5.3) (5.1) (8.5) (46.9) (7.8) (6.0)
Loss per common share(1) (0.28) (0.11) (0.07) (0.07) (0.12) (0.64) (0.11) (0.08)
- - ------------------------------------------------------------------------------------------------------------------------------
Common stock prices(2)
NYSE
High $ 5 13/16 $ 4 7/8 $ 4 1/16 $ 3 15/16 $ 4 15/16 $ 5 $ 5 1/2 $ 5 1/4
Low $ 4 5/8 $ 2 1/4 $ 2 $ 2 13/32 $ 1 15/16 $ 3 7/8 $ 4 3/8 $ 3 3/4
TSE (CDN$)
High $ 9.00 $ 7.35 $ 6.00 $ 5.60 $ 6.80 $ 6.95 $ 7.70 $ 7.00
Low $ 7.20 $ 3.15 $ 2.85 $ 3.50 $ 2.75 $ 5.05 $ 6.05 $ 5.00
- - ------------------------------------------------------------------------------------------------------------------------------------
(1) Quarterly figures may not sum to full-year amounts due to rounding.
(2) Meridian Gold shares are traded on both The Toronto Stock Exchange ("TSE")
and the New York Stock Exchange ("NYSE").
</TABLE>
<TABLE>
MERIDIAN GOLD INC. RESERVES AND OTHER MINERALIZED MATERIAL
- - ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 December 31, 1997
Ore Grade Contained Ounces Ore Grade Contained Ounces
--------- ---------------- --------- ----------------
Ore Gold Silver Gold Silver Ore Gold Silver Gold Silver
tonnes (g/t) (g/t) (K oz) (K oz) tonnes (g/t) (g/t) (K oz) (K oz)
(mils) (mils)
- - ------------------------------------------------------------------------------------------------------------------------------------
BEARTRACK
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Proven and probable(1) 5.7 1.5 --- 284 --- 13.8 1.2 --- 545 ---
JERRITT CANYON (30% share)
Proven and probable 1.9 7.7 --- 479 --- 1.9 7.6 --- 470 ---
Other mineralized material 5.6 7.1 --- 1,259 --- 6.6 6.8 --- 1,458 ---
EL PENON
Proven and probable 4.7 6.0 96 894 14,402 4.7 6.0 96 894 14,402
Other mineralized material 4.7 12.7 209 1,915 31,564 3.6 8.3 146 964 16,903
ROSSI
Other mineralized material 2.8 12.7 --- 1,069 --- 2.8 12.7 --- 1,069 ---
TOTAL - MERIDIAN'S SHARE
Proven and probable 1,657 14,402 1,909 14,402
Other mineralized material 4,243 31,564 3,491 16,903
- - ------------------------------------------------------------------------------------------------------------------------------------
Gold Price Assumption ($/oz) $300 $350
- - ------------------------------------------------------------------------------------------------------------------------------------
(1) Beartrack gold price assumption used for proven and probable reserves for
December 31, 1998 was $325 per ounce.
</TABLE>
<PAGE>
DIRECTORS
Dr. David S. Robertson
Chairman of the Board of Directors
Meridian Gold Inc.
Dr. Robertson is currently a consultant in the mining industry. His
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.
Brian J. Kennedy
President and Chief Executive Officer, Meridian Gold Inc.
Mr. Kennedy has been active in the gold industry since 1981. In 1996, he guided
Meridian Gold Inc. through a successful secondary offering of shares that
resulted in the independence of FMC Gold from its former parent company, FMC
Corporation. Mr. Kennedy olds a BS degree from the US Naval Academy and an MBA
from Harvard University
John A. Eckersley
Mr. Eckersley is a private investor and 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.
Christopher R. Lattanzi
Mr. Lattanzi, elected to the Board of Directors in February 1999, is a mining
engineer and President of Micon International Limited, mineral industry
consultants. He holds a B.Eng. (Mining) from the University of Melbourne, and
has nearly 40 years of experience in the planning and supervision of mining
operations, and as a consultant in the mining industry.
Malcolm W. MacNaught
Mr. MacNaught is a private investor, who culminated a highly successful 28-year
career in 1996 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.
Robert G. Matthews
Mr. Matthews is currently a private investor, who retired in 1990 as Vice
President and Director, Corporate Finance with RBC Dominion Securities where he
specialized in mine financing, mergers and acquisitions. He received a B.Sc.
(Geology) from the University of Toronto. Mr. Matthews serves as a member of the
board of directors for Samax Gold Inc. and Rayrock Resources Inc.
OFFICERS
Brian J. Kennedy
President and Chief Executive Officer
Christopher D.S. Bates
Vice-President, Business Development
Edward H. Colt
Vice-President, Finance and Chief Financial Officer
Peter C. Dougherty
Chief Accounting Officer and Controller
Wayne M. Hubert
Investor Relations Officer
Richard C. Lorson
Vice-President, Exploration
Edgar A. Smith
Vice-President, Operations, North America
Gonzalo F. Tufino
Vice-President and General Manager, El Penon
Corporate Offices
9670 Gateway Drive, Suite 200
Reno, NV 89511
Telephone: (775) 850-3777 or (800) 572-4519
Fax: (775) 850-3733
<PAGE>
ANNUAL MEETING
The Company's annual shareholder meeting will be held at 4 p.m. on Wednesday,
April 21, 1999 in the Main Dining Room of the National Club, 303 Bay Street,
Toronto, Ontario.
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
(775) 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
129 St. Jacques Street, B Level North
Montreal, Quebec
H2Y 1L6
Attention: Shareholder Services
Telephone: (514) 877-7131
AUDITORS
KPMG 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".
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Balance sheet data at December 31, 1998; Statement of income data at
December 31, 1998.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Jan-01-1998
<PERIOD-END> Dec-31-1998
<CASH> 34,122
<SECURITIES> 0
<RECEIVABLES> 8,051
<ALLOWANCES> 0
<INVENTORY> 6,302
<CURRENT-ASSETS> 50,001
<PP&E> 258,857
<DEPRECIATION> (201,342)
<TOTAL-ASSETS> 110,141
<CURRENT-LIABILITIES> 13,546
<BONDS> 0
100
0
<COMMON> 68,595
<OTHER-SE> 4,782
<TOTAL-LIABILITY-AND-EQUITY> 110,141
<SALES> 65,676
<TOTAL-REVENUES> 65,676
<CGS> 48,961
<TOTAL-COSTS> 107,607
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 19,768
<INTEREST-EXPENSE> (2,686)
<INCOME-PRETAX> (39,231)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (39,231)
<EPS-PRIMARY> (0.530)
<EPS-DILUTED> 0
</TABLE>
