Meeka Metals has posted a massively improved definitive feasibility study that places its Murchison gold project in Western Australia firmly on the road to almost doubling its total free cashflow to $1 billion, when it starts producing the yellow metal in Mid 2025.
The report also handed down a 31 per cent boost in ore reserves and a 40 per cent increase in production to 544,000 ounces across a 10-year mine life, with peak annual sales reaching 76,000 ounces in year five.
At a gold price of A$4100 per ounce the study estimates a staggering pre-tax free cash flow of $1b, up from $577 million alongside an impressive net present value of $616m, up 80 per cent from $344m and a 42 per cent improvement in the project’s pre-tax internal rate of return to 180 per cent.
To add icing on its already-impressive cake, every $100 per ounce increase in gold price would deliver $52m extra to pre-tax cash flows.
The project is forecast to achieve an all-in sustaining cost of $1982 per ounce, up a modest 9 per cent on the previous definitive feasibility study’s numbers and 50 per cent below current gold prices, allowing plenty of gross profit margin for gold price volatility.
Further improving the deposit’s integrity, the ore reserves sitting in the measured and indicated categories have grown 31 per cent to 400,000 ounces grading 3.1 grams per tonne (g/t), now accounting for 72 per cent of the production profile across the mine’s life.
With only $46m remaining in startup capital costs, Meeka says the project is well-poised for production and that it is targeting its first gold pour by mid-2025.
Meeka Metals managing director Tim Davidson said: “While we are already well on the way to production in the Murchison, the study highlights the material impact expanded processing capacity has on both production and cash flow. The company is now laser focused on project delivery and first gold by mid-2025, as well as the clearly defined succession of new mines to be developed over the coming 24 months as production ramps up.”
The eye-popping uplift in the definitive feasibility study numbers mainly boils down to Meeka’s fortuitous decision in July to buy an enlarged 750 Kilowatt Outokumpu ball mill at auction for a bargain price $318,000.
The move paid off handsomely by knocking 33 weeks off the company’s mill lead time, allowing it to lift processing output to 640,000 tonnes per annum and saving $1m in capex costs compared to the cost of buying a new mill.
The mill purchase also means Meeka could work on an updated mining schedule and an optimised pit shell.
The company can now do the upfront processing of its 600,000t, 2g/t gold stockpile, delivering an early revenue boost to the project.
The upgraded feasibility study also brings into the equation a further 52,000 ounces of gold grading 1.3g/t that was sitting outside of Meeka’s previous study, together with 61,000 ounces of 3.3g/t gold ore that is easily accessible in the existing underground mine.
With the current price of gold in Australian dollars today hitting an all-time high of $4270, it seems the conditions are perfect to be an explorer.
And they might get even better if you are an explorer in the later stages of becoming a producer.
Since Meeka is now expecting its first gold pour within three months, on top of a substantially improved production profile, resource statement and cash flow forecast, the company appears to have jagged the best possible timing to hit a sweet spot for mining gold.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By James Pearson
