Red Metal has been handed a serious reason to cheer after Maronan Metals, in which it holds a chunky 44 per cent stake, dropped the curtain on a scoping study that screams potential for its namesake silver-lead-copper-gold deposit in northwest Queensland.
The numbers are in, and the message is clear. The shallow Starter Zone at Maronan is shaping up as the real deal, with the findings revealing a compelling economic case for an underground mine development.
The two options of a standalone operation and a toll treatment route were pitted against each other, with standalone processing eventually winning by a nose.
By targeting a juicy silver high-grade core, which could deliver as much as 53 per cent of revenues in the first few years, the free cash flow from early production at the Starter Zone will help repay capex quickly and could set the stage for decades of polymetallic production.
The preliminary assessment showcased a production profile from the starter zone of 1.2 million tonnes per year for 10 years to produce an annual steady state output of 5.4 million silver equivalent ounces at an average all-in sustaining cost of $30.18 per equivalent silver ounce.
Costing a modest $266 million in capex, the project has a net present value of $533 million at current spot prices and is forecast to produce a whopping $917 million in free cash flow across the life of the mine. Payback is expected to be four years.
Importantly, the Starter Zone is just a teaser – representing only 22 per cent of the global silver-lead resource and less than 10 per cent of the copper resource already chalked up at Maronan.
In total, Maronan’s global inventory currently sits at 122 million ounces of silver, two million tonnes of lead, 270,000t of copper and 760,000 ounces of gold.
Management has emphasised that the numbers in the report are just the tip of the iceberg. With further drilling and resource conversion, internal studies suggest there’s serious room to grow the production profile. That could mean bigger economies of scale, fatter margins and a project that looks better and better with every incremental upgrade.
For Red Metal, which retains almost half the register of Maronan, the scoping study marks a crucial milestone. The company has long spruiked the potential of the project and now appears to have the numbers to back the talk.
With silver expected to remain the mainstay, but with the kicker of lead, copper and gold in the mix, Maronan’s Starter Zone looks every bit the foundation stone of something much bigger.
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By James Pearson
