Meeka Metals has outlined its pathway to gold production, with plans to mine 400,000 ounces during an initial nine-year mine life at its Murchison project following the release of a definitive feasibility study (DFS).
The operation, near the town of Meekatharra in Western Australia’s Murchison region, hosts a mineral resource of 1.2 million ounces at 3 grams per tonne gold, with an ore reserve of 2.5 million tonnes at 3.8g/t for 305,000 ounces.
The DFS has outlined detailed project economics based on a conservative gold price of $3250 per ounce, in addition to figures using a potential gold price at $3500 per ounce – which is closer to, but still below the current rate. Today’s gold price in Australia has been sitting near the $3540 mark.
At $3250 per ounce, Meeka estimates an undiscounted pre-tax cash flow of $485 million at a net present value (NPV) of $284 million and an after-tax free cash flow of $348 million with an NPV of $202 million.
Using that lower gold price, the company’s DFS shows an internal rate of return (IRR) of an impressive 103 per cent pre-tax and 84 per cent post-tax. Importantly, once process plant commissioning has been completed, management expects a payback period of just eight months to recoup the initial startup capital of $44 million.
The study also shows EBITDA of $717 million throughout the initial nine-year mine life at $3250 per ounce and an all-in sustaining cost (AISC) of $1804 per ounce.
At the higher predicted gold price of $3500 per ounce, the DFS reveals a pre-tax IRR of 127 per cent with a NPV of $344 million. Post-tax, Meeka expects an IRR of 100 per cent, and a NPV of $244 million.
The payback period then drops down to only seven months with an EBITDA of $809 million across the nine years at an AISC of $1817 per ounce.
The company’s latest study outlines a predicted peak mine production of 64,000 gold ounces in the fourth year, with gold sales expected to reach a maximum of 55,000 ounces in year six.
Meeka Metals managing director Tim Davidson said: “Since we released the initial restart Study for Andy Well in 2021 the gold price has appreciated by ~$1,000/oz and the Company is now in a position to realise the value that this project delivers in an elevated gold price environment. The Company has also identified opportunities to expand on the production plan through increasing the processing capacity.”
The Murchison project sits on a combined 281-square-kilometre area and includes the Turnberry, Andy Well and St Anne’s deposits. Turnberry holds a 685,000-ounce gold resource going 2g/t and lies only 12km south of the St Anne’s 25,000-ounce gold mineral resource, while Andy Well contains an impressive gold grade of 8.6g/t for 505,000 ounces.
Management says the project is based on the recommissioning the 500,000 tonnes per annum Andy Well carbon-in-leach processing plant, with metallurgical recovery grades at an average of 97.5 per cent. The plant is expected to process 3.4 million tonnes during the nine-year mine life at an average feed grade of 3.7g/t gold.
Of the predicted $44 million in start-up costs, $10 million will be spent on site infrastructure and camp facilities, $21 million will be used to recommission the Andy Well plant, $7 million will go towards open pit mining and $4 million is allocated to capitalised operating costs. A further $3 million will be held back for contingencies.
In addition to its impressive financial outlook based on a comprehensive DFS, management believes the Murchison project also holds strong potential to extend into the underground, highlighting another possible string to its bow. That view appears to have been confirmed from previous deeper scout drilling where high-grade intersections below the planned pit include high-grade lode up to 62.8g/t gold from 366m.
It includes 61,000 ounces from an underground ore reserve announced last year that is not included in the production plan as the mill is at full capacity.
Meeka has outlined an impressive pathway to production with its predicted figures based on only a modest gold price, equating to a rapid payback for capital costs. When looking at the current gold price, the company seems to have outlined a minimal capital outlay for a hefty return over nine years.
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By Michael Philipps
