Meridian Gold, Incorporated Business Information, Profile, and History

Company Perspectives:

Meridian has established itself as a different kind of gold company. We produce gold and silver ounces to accomplish our objective, but we focus on the quality of these ounces as measured by the profitability per ounce not the quantity of ounces produced. Historically, many gold companies were fixated on just the reverse. We have believed from the beginning that the best way to thrive in this business was to find gold deposits that were capable of making money.

History of Meridian Gold, Incorporated

Meridian Gold, Incorporated mines for gold and silver. Based in Nevada, the company has gone as far as Chile and Kyrgyzstan in search of its fortune. It runs Chile's most productive gold mine, El Peñón. Another record find, at the Beartrack property in Idaho, wound up commercial production in 2001. Formerly the gold production unit of FMC Corp., Meridian was reincorporated in Canada in 1996.

Origins

One of Meridian Gold, Incorporated's precursors was FMC Gold Co., a subsidiary of FMC Corp., the Chicago-based industrial conglomerate. Based at first in Chicago and then in Reno, FMC Gold was active in Nevada; in 1972 the company discovered gold in Jerritt Canyon, near Gabbs in the west central part of the state. Ten years later, FMC discovered gold at nearby Paradise Peak. This mine was owned 30 percent by FMC and 70 percent by the Freeport McMoran Gold Co.

FMC's interests produced 223,500 ounces of gold in 1986. The volcanic rock in the area proved so difficult and expensive to drill, that the company tested hundreds of bits from 12 different manufacturers. The Paradise Peak Mine, on the other hand, was one of the world's lowest-cost producers of gold and silver, noted the Engineering and Mining Journal. Both of these mines were undergoing major expansion programs, and in 1989 they produced 332,000 ounces of gold for FMC.

Spun Off in 1987

In June 1987, FMC floated its gold mining unit as FMC Gold. The parent company was refinancing $1.2 billion in long-term debt at the time. The partial spinoff raised $95 million for FMC Corp., which retained 89 percent of the subsidiary's equity. FMC Gold's sales were $153.3 million that year.

In 1988, FMC added 15 new properties to its 20 already under investigation, including some along Nevada's Carlin Gold Belt. Exploration costs exceeded $13 million for the year. FMC Gold showed a profit of $61.2 million in 1988, up 22 percent.

Another of Meridian Gold Inc.'s predecessors was also having a good year. In November 1988, Meridian Gold Co., then a unit of Burlington Resources Inc., announced the discovery of two million ounces of gold at its Beartrack Joint Venture in Lemhi County, Idaho--the state's largest gold find to date. Colorado-based Canyon Resources Corp. was Meridian's partner in the venture. FMC Gold acquired Meridian Gold from Burlington Resources in a stock trade in May 1990.

FMC's costs per ounce nearly doubled at Paradise Peak in the spring of 1991, while production at Jerritt Canyon rose 24 percent. The company's Royal Mountain King mine in California was producing a modest amount of gold but losing money at it.

In November 1991, Larry D. Brady replaced Robert N. Burt as FMC Gold CEO when Burt was picked to be the CEO of FMC Corp., which then owned 79 percent of FMC Gold Co. Brady also became Burt's second-in-command at FMC Corp. For 1991, FMC Gold posted earnings of $7 million on sales of $139.4 million. More efficient production techniques and other cost-cutting measures helped the company's earnings in 1992.

In the five years since its 1987 spinoff, FMC Gold had suffered from lower gold prices ($340 an ounce; $100 an ounce lower than 1987) as its mines grew emptier. Its attempts to find new sources had proven fruitless, even after drilling hundreds of holes in the ground in Nevada, California, Montana, and New Mexico. The company was waiting for gold prices to recover before developing its Beartrack mine near Salmon, Idaho. Fortunately, the company did have $154 million in cash reserves to fund development and exploration. The dry spell prompted FMC to expand its search to Chile, Mexico, and Russia.

FMC Gold announced it was forming a $20 million joint venture in July 1995 with Kyrgyzstan's largest gold company, Kyrgyz Altyn, to expand an existing mine. FMC's Beartrack mine in Idaho went onstream around the same time and was expected to yield 90,000 ounces of gold a year through 2005.

FMC Gold's annual sales were $57.4 million in 1995; net income rose from $151,000 the year before to $2.3 million. The company was producing 200,000 ounces of gold a year at a cash cost of $200 an ounce. Thirty percent owned Jerritt Canyon, which produced three-sevenths of FMC's total output, had a much higher operating cost than Beartrack: $260 to $285 an ounce. Paradise Peak closed in 1994.

In September 1995, parent company FMC Corp. began looking for a buyer for its 80 percent stake in FMC Gold, in order to focus on its core business. When gold prices rose in early 1996, it began evaluating other options, such as selling just part of the company.

Going North in 1996

FMC Corp. ultimately decided on a unique course of action: relaunching FMC Gold Co. as a Canadian company. FMC Corp. offered 90 percent of its stake in FMC Gold, which was renamed Meridian Gold Inc. at this time. Conditions were somewhat less auspicious than at FMC Gold's 1987 flotation, as gold prices had fallen yet again (trading between $380 and $400 an ounce). The reincorporated company would continue to trade on the New York Stock Exchange while beginning a new listing on the Toronto Stock Exchange, which was considered the financial center of the mining world.

Because of market conditions, FMC Corp. reduced the minimum offering price 30 percent, from $284.6 million (C$370 million) to $201.9 million. The company raised C$267 million from the sale. The underwriters exercised an option to buy FMC Corp.'s remaining 10 percent interest in Meridian, bringing the final proceeds to C$295 million.

Meridian's leader was Brian Kennedy, a former military aviator. A longtime FMC Gold veteran, he aimed to double its

In July 1998, Meridian announced it had struck gold at El Peñón in a big way, finding very high grade deposits. The price of gold had soon fallen to $300 an ounce, but the quality of the find at El Peñón suggested Meridian could mine it for as little as $180 an ounce. The news made Meridian stand out among gold stocks, which were otherwise faring poorly, even though the company had begun to post losses.

El Peñón Opens 2000

El Peñón, located in Chile's Atacama desert, was officially inaugurated on January 21, 2000. It would be the country's most productive mine. In March, Meridian pulled out of the Venturina property in Chihuahua State, Mexico, a joint venture it had developed with International Northair Mines Ltd.

Meridian posted a net income of $40.6 million on sales of $128.3 million in 2000 after losing a combined $53 million in the previous two years. Sales of $128.3 million were greatly increased over 1999's $71.2 million. After hitting a 20-year low two years earlier, gold prices were climbing beyond $300 an ounce at the end of 2001, meaning more good news for Meridian.

Principal Subsidiaries: Compañia Minera Meridian (Chile); Jerritt Canyon Joint Venture (30%); Minera Meridian Peru S.A.C.; Rossi Joint Venture (40%).

Principal Operating Units: Beartrack Mine; El Peñón; Jerritt Canyon; Rossi.

Principal Competitors: Agnico Eagle Mines Ltd.; Barrick Gold Corporation; Kinross Gold Corp.; Newmont Mining Corp.; Placer Dome Inc.; Rio Tinto plc.

Chronology

• Key Dates:
• 1981: FMC Gold begins operations.
• 1982: Gold is discovered at Paradise Peak.
• 1987: Twenty percent of FMC gold is floated on the stock market.
• 1988: Meridian Gold makes Idaho's largest gold find to date at Beartrack.
• 1990: FMC acquires Meridian.
• 1996: FMC Gold is reincorporated in Canada as Meridian Gold Inc.
• 1998: Gold is discovered at El Peñón, Chile.
• 2000: El Peñón operation is inaugurated.
• 2001: Commercial mining winds down at Beartrack.