As outlined by Yamana, if the threeway transaction succeeds, it has the potential to become a 1.4 million-oz/y gold producer by 2009, starting from a combined base in 2006 of about 660,000 oz/y. Production would be drawn primarily from six mines in Brazil, Argentina and Chile. Reserves plus measured and indicated resources of the combined companies would total 27.7 million oz of gold.

The proposal did not meet with enthusiasm from Meridian.

On July 3, Meridian announced that its board of directors had determined that the proposal did not provide a basis for discussions with Yamana and that if a formal offer was initiated the board would review such offer in due course. Also, the Meridian announcement said, “In addition to the heavy base-metals weighting in the proposed combined entity, the complexity of the three-way structure creates further risks and uncertainties.”

The base-metals assets of the new company would include Northern Orion’s 12.5% equity interest in the Alumbrera copper-gold-molybdenum mine in Argentina and its 100% ownership of the nearby Agua Rica copper-gold project, which “has the potential to be developed either as a stand-alone project with annual production projected at approximately 136,000 mt of copper, 130,000 oz of gold, and 7 million lb of molybdenum or on an integrated basis with the Alumbrera complex, which could potentially extend Alumbrera’s mine life through to 2032.”

Yamana’s Chapada open-pit copper and gold mine in Brazil, which achieved commercial production in February 2007, would also add a base-metals component to the combined companies. The mine is expected to produce 130 million to 145 million lb of copper and 189,000 to 205,000 oz of gold this year.

Other mines and projects that would come under the umbrella of the combined companies include: Meridian’s high-grade underground El Peñón gold mine in Chile, which produced 230,100 oz of gold in 2006; Yamana’s underground Jacobina gold operations in Brazil, which produced 62,000 oz gold in 2006, and are building toward production of more than 200,000 oz/y by 2008; Yamana’s São Francisco open-pit gold mine in Brazil, which started up in 2006, and is projected to produce 125,000 to 135,000 oz/y over a mine life of 10 years; and Yamana’s Gualcamayo project in Argentina, which is projected to begin producing 200,000 oz/y of gold by the second half of 2008.

As of mid-July 2007, a number of alternative scenarios to Yamana’s initial proposal were circulating in the financial press. Among them: Meridian might receive a competing bid from another gold producer; or Meridian might go on the hunt to purchase another gold producer; and/or Yamana might come back with a higher bid for Meridian.