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| The junior mining stock market is notoriously inefficient. |
| That means some companies with tremendous real and potential value can be simply overlooked for quite a while...until some event suddenly sparks the market’s attention. |
| This is what’s happening right now with Meridian Metals (MNO.TO; MRRDF.OTC), as investors have just begun to discover the remarkable economic potential of its Cabacal project in Brazil. |
| Simply put, this project boasts stunning economics at last year’s metals prices. At today’s metals prices, it blows the doors off any normal project.
In light of these numbers, there seems little doubt that Meridian Mining will be significantly re-rated by the market, because that re-rating has just begun.
The exciting part is that Meridian and Cabacal remain dramatically undervalued...and with a 50-kilometer belt rife with look-alikes, there’s the chance to find much, much more. |
| A Nearly Billion-Dollar Valuation |
| Earlier this month, Meridian put out a prefeasibility study on an open-pit mining operation at Cabacal. The numbers were nothing short of stunning: |
| • Using base case metal prices of $2,119/oz. gold and $4.16/lb. copper, the study shows Cabacal having a net present value (NPV), discounted at 5 percent, of $980 million.
• Its internal rate of return (IRR) is an eye-popping 61.2%...and the life-of-mine revenue is a robust $3.05 billion.
• Cabacal would produce 141,000 ounces of gold equivalent a year for eleven years — and do so at low gold equivalent all-in sustaining costs (AISC) of just $742/oz. |
| Again, these robust numbers are based on a gold price fully $900 lower than today’s price. |
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| Click image to enlarge Meridian Mining’s Cabacal project lies near exceptional infrastructure in the Brazilian State of Mato Grosso. |
| It gets even better: Thanks to the supportive topography and nearby infrastructure (including hydro power), initial capital expense to build the project is a very manageable $248 million.
The capital payback period is just 17 months, and even at these conservative metals prices, the projected NPV is almost four times the projected capex.
In short, Cabacal is a literal and figurative gold mine. |
| The Economics Get Even Crazier
At Current Metal Prices |
| It bears repeating: All of those stunning economic returns are based on metals prices far, far lower than today’s.
As the chart below shows, the economics absolutely explode higher when today’s prices are factored in. |
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| Click image to enlarge Meridian’s Cabacal project is wildly profitable at current gold and copper prices — boasting an IRR of nearly 80% and an NPV of over $1.4 billion. |
| At the spot prices used at the time of the study’s release ($2,917/oz. gold and $4.55/lb. copper), Cabacal’s NPV jumps to $1.41 billion and its IRR jumps to 79.5%.
Assuming both copper and gold markets stay hot, those numbers balloon to a $1.76 billion NPV and a 92.9% IRR at long-term metals prices of $3,500/oz. and $5.00/lb. |
| With Much More Along Trend... |
| Those impressive economics are just assuming Cabacal gets mined on its own.
The company is also working on outlining a deposit on the Santa Helena target, located 10 kilometers to the southeast of the Cabacal deposit. |
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| Located 10 kilometers southeast of the Cabacal deposit, Meridian Mining’s
Santa Helena target promises to become a satellite mine. |
| Santa Helena has the potential to become another high-grade open-pit mine, based on historical and recent drill results.
Meridian’s current best estimates for Santa Helena give it a low range of 3.2 million tonnes hosting 306,000 ounces of gold-equivalent and a high range of 7.3 million tonnes hosting 763,000 ounces gold-equivalent.
Management believes it could develop this mine under a hub-and-spoke model, where the ore from Santa Helena would get shipped to the plant at Cabacal for processing.
Meridian should have a definitive resource for Santa Helena sometime in the second quarter, providing yet another potential re-rating catalyst for the company. |
| A 50-Kilometer Belt To Explore |
| And yet, there’s more...as Santa Helena is just one of a number of targets identified on the 50-kilometer Cabacal belt that Meridian controls with its extensive land package.
As it moves Cabacal and Santa Helena along the development curve, the company will have the opportunity to test even more targets as potential satellite deposits.
Remember, that blue-sky upside comes in a project that already has established value of at least four times Meridian Mining’s current market cap using conservative metals prices. |
| With a project that glaringly profitable, there’s little wonder why Meridian has focused on advancing Cabacal and put the tremendous further exploration potential of its property on the back burner. |
| But now, with a full treasury and an amazing pre-feasibility study completed, testing the potential for more Cabacals along that 50-kilometer trend will provide even more fuel for the fire. |
| The Starting Gun Has Fired |
| Meridian Mining’s share price began to advance this month after the release of its extraordinary pre-feasibility study alerted investors to this under-the-radar opportunity.
But this seems to be just the beginning, as the company continues to trade at a steep discount to Cabacal’s inherent value. |
| With gold broaching the $3,000/oz. level and copper well over $5.00/lb in the futures market, Meridian’s tremendous economic potential is only getting better by the day. |
| In short, the starting gun has fired and the race is on to get in on this opportunity. If you’re considering adding Meridian Mining to your portfolio, you’ll want to start doing your research on the company now. |
| CLICK HERE
To Learn More about Meridian Mining UK S |
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