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| A feasibility study is the moment of truth for any mining project.
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| Every potential cost is tallied...every assumption is tested...and independent Qualified Persons sign off on the results.
Plenty of projects come out of that process looking far less exciting than they went in.
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| So when a definitive feasibility study (DFS) shows a mine’s economics looking even better — and even repaying its entire initial capital cost in less than a year — it deserves investors’ full attention.
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| That’s precisely what Meridian Mining plc (MNO.TO; MRRDF.OTC) delivered on September 22 for its Cabaçal gold-copper-silver project in the Brazilian state of Mato Grosso.
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| The study outlines an after-tax net present value (NPV) of $2.09 billion, an internal rate of return (IRR) of 107.6% and a payback period of just 0.9 years.
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| And as you’re about to see, those are the conservative figures.
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| Built To Generate Cash From The Very Start
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| The DFS base case assumes gold at only $3,570 per ounce and copper at just $5.03 per pound. That’s well below the mid-September spot prices of $4,394 gold and $6.53 copper used in the study’s alternate case.
At those spot prices, the after-tax NPV climbs to $2.9 billion, the IRR rises to nearly 135% and payback shortens to 0.7 years.
If these numbers don’t make Cabaçal the world’s most profitable gold-copper mine not yet constructed, it should rank close to the top.
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| The rich economics come from the geometry of the deposit that allows the mine plan to front-load the highest grades. Year 1 mill feed is scheduled to grade 2.8 grams per tonne gold — more than four times the 0.61 g/t life-of-mine average.
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| That means a quick pay-back for the cost of building the mine, and therefore richer economics throughout the entire mine life.
Consider that, over the first five years, Cabaçal is projected to produce an average of 183,526 gold-equivalent ounces per year at an all-in sustaining cost (AISC) of just $715 per ounce, generating average after-tax free cash flow of $413.8 million per year.
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| The DFS cash flow profile shows Cabaçal’s initial capital repaid in less than one year and free cash flow continuing at that level for years to follow.
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| That’s more than the $322 million initial cost of building the mine...every year...on average...for five years.
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| Over the full 13.9-year mine life, the DFS projects $2.9 billion in after-tax free cash flow — with an NPV equal to 6.5 times initial capital.
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| And the foundation is exceptionally solid. Some 98% of Cabaçal’s 56-million-tonne reserve is classified as Proven, the highest-confidence reserve category.
The economics are not only world-class, they are potentially world-leading. And that’s only the start....
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| Simple To Build. Easy To Sell.
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| Cabaçal is a single conventional open pit with a low strip ratio of 1.4, feeding a plant that uses a coarse grind and standard flotation to produce one saleable product.
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| That product is a clean copper concentrate grading 29% copper, with high-grade gold and silver credits and no penalty elements. Recoveries average 89.3% for gold and 92.8% for copper.
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| Ocean Partners UK, engaged by Meridian to assess the market for Cabaçal’s concentrate, concluded it would be very attractive to smelters in Japan, South Korea and Europe.
Laboratory-scale smelting tests in July reinforced that view, producing blister copper grading 98.9% copper with impurity levels better than the industry average for high-quality anode copper.
The infrastructure is already there too, with good road access and 375 MW of hydroelectric generation within 100 km. The license to build a 24 km power line to site has been granted.
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| Two Roads...And Both Lead To Value
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| The DFS gives Meridian two very attractive options.
The first is to build, and Meridian is already well down that road. It holds its Preliminary License, its Installation License application has been under review since May, and it has committed $15.9 million in pre-construction contracts and is already purchasing long-lead items such as the SAG mill.
The company has engaged with up to 30 lending groups on construction financing. And with $95.9 million in cash as of June 30, Meridian describes itself as funded beyond a decision to mine.
The second road runs through the boardrooms of larger producers.
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| Meridian is advancing Cabaçal toward construction on its own.
But view the asset through the eyes of a major hunting for growth: a fully engineered mine, a 98% Proven reserve, early-year AISC of $715 per ounce and capital repaid in under 12 months.
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| That combination would stand out in any producer’s development pipeline.
Visibility is rising as well. Meridian joined the VanEck Junior Gold Miners ETF (GDXJ) effective September 18, a move that is broadening access to institutional investors.
And there’s more beyond Cabaçal. Meridian controls 50 kilometers of the 55-kilometer Cabaçal VMS belt, plus two more greenstone belts — roughly 117,000 hectares in all.
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| Meridian’s roughly 117,000-hectare land package spans three parallel greenstone belts, with Cabaçal at its heart.
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| At Santa Helena, 10 kilometers away, recent drilling hit visible gold in a new layer of mineralization, including 7.2 meters grading 1.4 g/t gold and 24.3 g/t silver along with zinc and lead. A follow-up hole intersected multiple stacked layers that remain open in all directions.
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| The Math The Market Is Still Working Through
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| So what is a project like Cabaçal worth?
The DFS puts it at $2.09 billion after tax at base-case prices and $2.9 billion at spot. Meridian’s market capitalization recently stood at $780 million. That’s less than one-third the spot-level NPV.
With the full NI 43-101 technical report due within 45 days of the DFS release and lender due diligence to follow, investors are about to get their most detailed look yet at Cabaçal.
Meridian has all of the following:
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| • A mine plan that repays its entire capital in less than a year
• An IRR well above 100% at base-case prices, and much higher still at current metals prices
• A projected metals concentrate smelters want
• Well-advanced project permitting
• A district-scale land package still producing new discoveries
• And the kind of economics that make Cabaçal richly valuable whether Meridian builds it or a larger producer comes calling to buy it.
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| With these eye-popping economics just now beginning to reverberate throught the market, now is the time to take a close look at Meridian Mining.
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| CLICK HERE
To Learn More About Meridian Mining
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