Meeka Metals has moved to deftly rid itself of a proposed debt facility that would have encumbered its soon to be completed gold mine near Meekatharra. The company has essentially now replaced what would have been a $38m gold loan with $35m in equity from investors who have provided firm commitments for the money.
Remarkably the move will see Meeka bank an additional $40m in free cashflow from the project in the first 12 months alone and sidestep what would have been 12,000 gold call options and 25 million share warrants that attached to the original gold loan and gold stream deal.
Meeka is now fully funded to build its mine with $63m in cash, debt free and notably, has not hedged even an ounce of gold, giving it superb exposure to the current record gold prices.
Meeka managing director Tim Davidson said; “The Company’s ~$63m cash position now also funds the accelerated access and development of our high-grade underground production sources, a key outcome in light of the expanded processing capacity available at the Murchison. The Company is well positioned for first gold and strong cash flow in mid-2025.”
Meeka has flagged that it expects to improve the numbers around its Murchison gold project significantly with the addition of a higher capacity ball mill, expanded plant throughput and an extended starting resource base, which it proposes to incorporate into a new DFS in December for its gold project near Meekatharra in WA.
Ahead of those changes, the existing DFS tabled in May this year showed a stellar set of numbers headlined by a $577m life of mine pre-tax free cash figure.
It shows an NPV8% of A$284 million over the initial 9-year production plan using a A$3250 per ounce gold price, with $44 million in start-up capital, including contingencies, being repaid in just 8 months.
The DFS was based on 400,000 ounces of gold mined over 9 years at a rate of up to 64,000 ounces per year, with ore reserves conservatively run at A$2,200/ ounce.
The May DFS also shows a low-risk restart with 96 per cent of gold production within the first four years and 81 per cent of the expected total gold production underpinned by the operation’s ore reserves of 2.5 million tonnes at a grade of 3.8g/t gold for 305,000 ounces of gold.
In the company’s latest release to market, Meeka Metals has provided an insight into its proposed December update to the May DFS, which reflects a number of significant positive influences and variations arising from the passage of time during which Meeka has been particularly busy attending to the myriad considerations of re-starting the existing plant at the site.
Significantly, today’s gold price has climbed to A$4154 - $904 above the adopted A$3250 spot price used in the May DFS. Additionally, Meeka will build in an expanded mill throughput through its installation of a 750kW ball mill and it is in the throes of adding footings for new leach and adsorption tankage, which will increase plant throughput.
The “Outokumpu” mill is slated to increase plant processing capacity to 640ktpa – a 30 per cent increase on the throughput of the 500kW mill that was included in the May DFS.
Another key flow-on effect from the new ball mill is that the acceleration of its processing schedule will also enable exploitation of additional ore sources, particularly more resistant ores from underground.
The company figures the expanded mill capacity will allow for production and cash flow to be optimised through the processing of its 600,000-tonne ore stockpile of 38,000 ounces of gold at a grade of 2 grams per tonne, which would be built up within the first six years of operation.
It would also enable the inclusion of 52,000 ounces of gold at 1.3g/t from an optimised pit shell within a modelled A$3500 spot gold price, but which was excluded from the May DFS due to the original mill capacity constraints.
And it will now also bring into play a further 61,000 ounces of gold from ore grading 3.3g/t from its 2023 underground ore reserve, which was also excluded from the DFS due to the same mill capacity constraints.
With the inclusion of the additional ore sources made possible by the new mill, Meeka is now re-calibrating its production plan for the increased processing capacity that will be reflected in its December DFS update.
Improvements in the December DFS are expected to positively impact the project revenue, cashflows, pre-tax NPV8%, post-tax NPV8% and pre and the post-tax IRR.
The company’s initial 9-year plan also envisages restarting the Andy Well underground mine and opening of new pits at Turnberry and St Annes. The re-start is expected to be relatively low-cost from an existing decline and an initial 7 years of mining is already planned.
Meeka says mining at Andy Well stopped in 2017 at a gold price around A$1550 per ounce and it expects to re-enter the underground mine in early 2025, with all the lodes remaining open and extensive drilling planned for next year. A big advantage with Andy Well is that three of five lodes can be accessed directly from existing development without incurring mining dilution.
With the accelerated production schedule following expansion of processing capacity, Meeka is looking to begin mining at Andy Well in the first half of next year and enjoying the benefits of 12 months of production from shallow virgin areas, while further growth drilling is being planned for all five lodes which remain open down-plunge, targeting steeply north-plunging high-grade shoots.
Management says additional drilling beneath Turnberry is expected to contribute new resource material too, from zones which drilling to date has not fully closed-off at depth. The company says it has around 8km of drilling scheduled for the Turnberry expansion in four zones which are all open at depth.
Meeka says it plans to mine near-surface, low risk open-pit resources in the first 12 months. Not only does that environment typically offer high-grade, free-milling gold but the resources are often free-dig - or nearly so – and often in weathered oxide mineralised material.
Meeka is in a remarkable position having shed its proposed debt, shied away from doing easy hedging deals and locked in 100 per cent of its capex required to get into production.
In many ways its timing is something of a fairy tale, as is its fully funded, debt free, hedge free financial health.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Doug Bright
