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| Sometimes the market needs a clean, simple milestone before it finally “gets” a story.
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| Drill results — good ones — are the classic catalyst for share-price increase.
When those results add up to a resource and an eye-popping pre-feasibility study, well, that’s another step up.
A major financing is another.
But in the junior mining sector, few events have the power to reset a valuation overnight like adding a lot of gold to the bottom line in one fell swoop.
That’s exactly what just happened with Meridian Mining (MNO.TO; MRRDF.OTCQX).
You’ve already seen the foundation:
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| Meridian’s Cabaçal deposit in Brazil has shown stunning economics: Its pre-feasibility study outlined an after-tax net present value of about US$984 million with an eye-popping 61.2% internal rate of return based on gold at just $2,119.
That level of profitability is rarely seen in the mining sector. But, as you’re about to see, those numbers absolutely catapult higher at anywhere near current gold prices.
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| Meridian, and its shareholders, have been rewarded as the company has advanced its Cabaçal deposit to its status as one of the world’s premier pre-development gold projects.
That status is so accepted that the company was able to attract C$50 million in investor financing in August — enough money to fully fund it through a definitive feasibility study and a construction decision.
This was a major de-risking step that’s resulted in a company that’s “locked and loaded” for very profitable gold production down the road.
So how do you make such a great story even better?
You add more gold instantly to the bottom line.
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| More Gold, More Potential
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| As remarkable as the numbers already are for Cabaçal, there’s lots of upside too, as gold keeps rising and the company’s current market value doesn’t come near its projected value at even today’s gold price.
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| But Meridian just showed the world much more upside.
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| And here’s the important point: That resource estimate transformed potential into reality...and opened the door to the potential of the entire belt.
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| A Major Transformation
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| Just a few days ago, on January 20th, Meridian issued a data-packed news release that completely opened up the potential for not only Cabaçal, but the entire belt.
As noted, they released the first-ever resource estimate for the Santa Helena Central deposit — importantly noting that the resource remains open in all directions.
But there was much more:
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| • The company announced a new resource estimate for Cabaçal itself — increasing the measured and indicated gold resource by 39.2%, the copper resource by 14.2% and the silver resource by 19.3%.
• With the Santa Helena resource, the total measured and indicated resource for the Cabaçal VMS belt is now 1.4 million ounces of gold, 600 million pounds of copper, 5.6 million ounces of silver, 217.4 million pounds of zinc and 49.9 million pounds of lead.
• New metallurgical studies have significantly increased metal recoveries — which obviously boosts the already-robust economics of the project.
• The exploration upside has been dramatically increased, with an additional 10 of its mineral title applications, for 64,490 hectares, having been granted. This alone more than doubled the area of granted exploration licenses.
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| Click image to enlarge
Drilling at Santa Helena has delivered consistent, high-grade gold and copper — and the first-ever resource estimate has hinted at the potential of the belt.
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| As you can see from the map above, Cabaçal — as rich as it is — is merely Meridian’s first step in an entire district.
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| Just The Beginning...
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| In our earlier Golden Opportunities pieces, we showed how Cabaçal alone looked dramatically undervalued relative to its economic value.
But we also highlighted a few exciting aspects that the market was barely crediting at all:
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| • Santa Helena — the higher-grade VMS asset just 10 kilometers from Cabacal — with drilling results that kept stacking up and stacking up.
• The expansion potential at Cabaçal itself, with significant targets outside of the current resource.
• The fact that the Cabaçal resource in the preliminary feasibility study was calculated at far lower gold prices — and a new calculation nearer to current levels would expand the resource.
• The potential for exploration and development of targets placed like pearls on a string along a prospective 50-kilometer trend controlled by Meridian.
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| And here’s the opportunity: The potential for all of these factors was just unveiled by Meridian...and the market has yet to catch up.
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| As valuable as the Cabaçal deposit and the Santa Helena target may be, they still represent but a fraction of the potential offered by the exciting, 50-kilometer trend controlled by Meridian.
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| All of this is important because, as remarkable as Cabaçal may be, Meridian isn’t trying to build a one-deposit mine. They’re capitalizing on a hub-and-spoke, belt-scale development strategy.
Cabacal is the obvious hub.
Santa Helena is positioned to become the kind of satellite (or even a second processing hub) that can materially improve the overall business case.
Beyond even Santa Helena, this belt features a number of identified gold and copper prospects, including the Cigarra, Sucuri, Alamo, Chiquito, Santa Fé and Alvorada targets.
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| And then there’s this: Meridian’s massive, 1,000-square-kilometer land holding in Brazil spans no less than three parallel greenstone belts — one of the classic geological terrains for big gold deposits.
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| In addition to the Cabaçal belt, this landholding features multiple prospects in the Jauru Belt and the Araputanga Belt, including an exciting seven-kilometer-long copper anomaly.
It all adds up to more optionality, more mine life, more throughput choices, more leverage.
More gold.
And in the midst of an historic bull market.
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| Already One Of The Most Profitable Around
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| Here’s the key: Cabaçal already sports an established pre-feasibility valuation that’s far, far larger than Meridian’s current market value.
At a base-case gold price of just $2,119/ounce for gold and $4.16/pound for copper, the post-tax NPV5 for Cabaçal stands at US$984 million, with a 61.2% IRR.
Those numbers are amazing, but look at what happens to them at a $4,000 gold price and just a $5.00 copper price, the highest metals prices yet projected:
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| The NPV5 value rises to US$1.973 billion and the IRR rises to 101.5%!
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| Again, those prices are still well below spot prices for gold and copper today.
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| The other metrics for Cabaçal are equally remarkable, with a capital expense to build the mine of just US$248 million...an all-in sustaining capital cost of just US$742/ounce of gold...an average annual gold production of 141,000 ounces over a 10-year mine life...and a payback period of only 17 months.
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| And all those numbers are calculated from the low base-case gold price of just $2,119.
This is truly one of the most remarkable gold projects on the planet.
And yet, the reality and potential of Cabaçal are much greater, given the numbers that were just released.
Now, none of these numbers will be factored into the upcoming definitive feasibility study, as that would involve reworking everything and extensive delays.
But the number are already extraordinary...and now the market can get an idea of how much better they could be.
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| Poised For A Re-Rating
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| One of the keys to profiting in a rollicking metals and mining bull market like today’s is to get ahead of the pack on new stories and new developments.
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| And it’s apparent that the pack isn’t yet factoring in the additional gold resources that could eventually hit Meridian’s bottom line.
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| That spells opportunity for those who can read between the lines.
In a red-hot market like today’s...and with so much potential still to be converted to bottom-line value...it’s difficult to imagine a better opportunity than this.
The time to begin looking into Meridian Mining is now.
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| CLICK HERE
To Learn More about Meridian Mining
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