|
| In a sign of a gold bull market, financings in the junior sector have been coming fast and furious.
|
| Investors are positioning themselves for what looks like a generational opportunity in the yellow metal and are ponying up serious cash to do so.
|
| If the enthusiasm of big-money investors is any judge, perhaps the finest recent example is the major financing Meridian Mining UK S (MNO.TO; MRRDF.OTC) closed on last Thursday.
|
| The LIFE offering raised no less than C$50 million for the company — money that will be put to quick use building tremendous value:
|
| Meridian will use it to advance its rich Cabaçal gold-copper deposit in Brazil to a construction decision...to outline yet another deposit on its Santa Helena zone...and to aggressively explore more high-potential regional targets.
|
| The cash injection will translate into steady news flow for Meridian, keeping it top of mind with investors and potential take-out suitors.
It’s already the target of smart investors, because the conservative, base-case valuation of the Cabaçal deposit is a multiple of Meridian Mining’s current market cap.
Not only does that valuation gap seems likely to close as the company continues advancing its projects and the gold bull market marches on...but there seems to be much more value to be discovered by the drill bit in the days just ahead.
|
| A Big Financial Stamp Of Approval
|
| While it’s not construction financing, the big C$50 million private placement Meridian closed last week should be enough to get Cabaçal through its feasibility study and to a mine construction decision.
|
| The size of the placement indicates that the smart money is betting on Cabaçal becoming a significant gold-copper mine right as these metals are soaring in value.
|
| Again, in addition to taking Cabaçal to feasibility, the money will also allow Meridian to outline a potentially world-class satellite resource at the Santa Helena zone...and to explore a set of highly prospective regional targets.
|
| Cabaçal Offers Massive Leverage
To Rising Metals Prices
|
| All by itself, the company’s recent prefeasibility study on Cabaçal suggests Meridian is one of today’s most undervalued mining plays.
|
| Consider that, using conservative metals prices of $2,119/oz. gold and $4.16/lb. copper, the deposit has a post-tax net present value, discounted at 5%, of US$984 million and a richly rewarding internal rate of return of 61.2%.
This compares against Meridian’s current market value of only about C$280 million.
|
| But that’s just the start. As the chart below makes clear, the project is highly leveraged to higher metals prices:
|
| |
| Click image to enlarge.
Cabaçal is already worth a multiple of Meridian Mining’s current market cap, and offers powerful leverage to higher metals prices.
|
| As you can see, at a gold price of $2,917/oz. and a copper price of $4.55/lb., the project’s post-tax NPV jumps to $1.41 billion and the IRR to 79.2%.
With nearby hydro power and road and rail access, Cabaçal’s initial capex is a very modest US$248 million. This is a project that could be financed and built by a junior company...or bought out for a quick, windfall gain by a major mining company.
|
| Exploration Upside
— Essentially For Free
|
| It gets even better: Meridian also stands to benefit substantially from a potential satellite deposit at Santa Helena, a target on the district-scale property located just 10 kilometers southeast of the Cabaçal deposit.
|
| Previous drilling at Santa Helena has returned near-surface intervals of high-grade gold-equivalent material.
|
| Meridian is currently targeting a potential open pit deposit at Santa Helena of between 3.2-7.3 million tonnes of ore containing between 306,000 and 763,000 ounces of gold-equivalent resources.
|
| |
| The Santa Helena exploration target lies 10 kilometers southeast of the Cabaçal deposit and could potentially be mined as a satellite deposit.
|
| Last week’s big cash injection makes it likely that Meridian will turn that exploration target into a defined resource in the months just ahead.
|
| Right now, the company’s market cap implies it is getting virtually no credit for this asset, which means those who invest near current levels get the upside for this likely satellite deposit essentially for free.
|
| Also free: The other regional targets on the broader Cabaçal belt. Those include the Sante Fé and Cigarra targets, which will see drilling in the weeks directly ahead.
|
| A Tremendous Valuation Mismatch
|
| Bottom line: Meridian Mining looks considerably undervalued given the current value of the Cabaçal deposit...the leverage that deposit provides on rising metals prices...and the exciting exploration potential of Santa Helena and those regional targets.
|
| With a fully stocked treasury thanks to last week’s private placement, Meridian is loaded for bear to take Cabaçal to a construction decision, outline a potential satellite deposit at Santa Helena and test the Cigarra and Sante Fé targets with the drill bit.
|
| All that news flow could soon combine with a continued robust market for gold to generate a big re-rating for Meridian Mining, even before any more drill results.
Add it all up, and this is the time to look into Meridian Mining.
|
| CLICK HERE
To Learn More about Meridian Mining
|
.png)
