Meridian hikes Cabaçal gold-copper project value by 71% in Brazil after new study

A feasibility study for Cabaçal is expected to be finished in the first half of next year, Meridian said.

A new report for Meridian Mining’s (TSX: MNO; US-OTC: MRRDF) Cabaçal gold-copper-silver project in west-central Brazil boosts its post-tax net present value (NPV) more than two-thirds over a 2023 study to nearly $1 billion (C$1.44 billion). Shares gained 18%.

The pre-feasibility study for Cabaçal, released Monday, raises the NPV by 71% to $984 million and the internal rate of return (IRR) by about 3% to 61% for the open-pit operation compared with the preliminary economic assessment two years ago. Estimated capital costs are $248 million and all-in sustaining costs are $742 per gold-equivalent ounce. Cabaçal is located in southwest Mato Grosso state, near the border with Bolivia.

“This study is a game-changer for our company,” Meridian CEO Gilbert Clark said in a release. “We have shown these strong results using consensus long-term prices and low operating costs. It is just the beginning of what we can do in this highly prospective gold-copper-silver volcanogenic massive sulphide belt.”

Meridian shares traded for 57¢ apiece at mid-day in Toronto, giving the company a market capitalization of $177.68 million. Its shares traded in a 52-week range of 33¢ to 61¢.

M&A candidate

The study “demonstrates a low cost, larger operation capable of attracting funding for a self-build, and M&A from growth seeking mid-tiers,” SCP Resource Finance analyst Brandon Gaspar wrote in a note on Monday.

He estimates Cabaçal could generate about $160 million in free cash flow per year.

“We see great upside for equity holders and M&A acquirers alike,” Gaspar said. “We estimate (about a) 24% buy and build IRR net of capex given this could be in production by 2028.”

Spot price ups NPV

Cabaçal’s post-tax NPV rises 43% to $1.41 billion and its IRR to 80% assuming spot prices of $2,917 per oz. gold, $4.54 per lb. copper and $32.25 per oz. silver. The actual price of gold continues to touch historic highs, trading for $2,909 per oz. on Monday.

Life-of-mine throughput is expected to ramp up to 4.5 million tonnes per year in the fourth year from 2.5 million tonnes from the start. That’s almost double the 2.5-million-tonnes-per-year estimate in the PEA. 

While the new study cuts Cabaçal’s mine life by about half to 10 years, it increases production by 19% to 141,000 gold-equivalent oz. over the PEA. Output in the first five years is up 37% to 178,000 gold-equivalent ounces.

A feasibility study for Cabaçal is expected to be finished in the first half of next year, Meridian said.