Shares of Meridian Mining (TSE: MNO) are up after its newly released pre-feasibility study for its Brazillian-based Cabaçal gold-copper-silver project boosted its net present value (NPV) by well over two-thirds of its present value.
Released on Monday, the study boosted its NPV by 71 per cent to USD$984 million, and included an internal rate of return (IRR) by 3 per cent to 61 per cent totally for its open-pit operation. All of this was comparable to the preliminary economic assessment released two years ago.
The Cabaçal project, located in southwest Mato Grosso state near the Bolivian border, has estimated capital costs of USD$248 million and all-in sustaining costs of USD$742 per gold-equivalent ounce.
Additionally, Cabaçal’s life-of-mine throughput will increase from 2.5 million tonnes to 4.5 million tonnes per year by the fourth year. This represents nearly a doubling of the 2.5-million-tonne estimate in the PEA.
While the new study reduces the mine life by about half to 10 years, it boosts production by 19 per cent to 141,000 gold-equivalent ounces compared to the PEA. Output in the first five years will rise by 37 per cent to 178,000 gold-equivalent ounces. Meridian expects to complete a feasibility study for Cabaçal in the first half of next year.
“This study is a game-changer for our company,” said Gilbert Clark, Meridian CEO.
“We have shown these strong results using consensus long-term prices and low operating costs. It is just the beginning of what we can do in this highly prospective gold-copper-silver volcanic massive sulphide belt.”
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The mine could generate 160M in annual free cashflow
SCP Resource Finance analyst Brandon Gaspar noted in a Monday report that the study highlights Cabaçal as a low-cost, large-scale operation. It also has the potential to secure funding for self-construction, or position itself as an acquisition target for mid-tier companies.
Furthermore, he projects the mine could generate approximately USD$160 million in annual free cash flow.
Gaspar also sees significant benefits for both equity investors and potential buyers. He estimates a 24 per cent internal rate of return (IRR) if the project reaches production by 2028.
At spot prices of USD$2,917 per ounce for gold, USD$4.54 per pound for copper, and USD$32.25 per ounce for silver, Cabaçal’s post-tax NPV increases by 43 per cent to USD$1.41 billion, while its IRR rises to 80 per cent. The actual price of gold continues to reach historic highs, trading at USD$2,909 per ounce on Monday.
Meridian picked up the Cabaçal and Santa Helena mines through a purchase agreement in November 2020. The company then extended the land tenure to 50 km of strike length. The Cabaçal site had previously hosted two shallow, high-grade underground mines that collectively produced approximately 34 million pounds of copper, 170,108 ounces of gold, 1,033,532 ounces of silver, and 103 million pounds of zinc using conventional flotation and gravity metallurgical processes.
