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Meeka Gold Ltd (ASX: MEK) released the results of a scoping study on its Murchison gold project in WA which yielded a strong financial result, repaying the project’s seed capital as well as a significant internal rate of return ( TRI) on the life of mine.
The study considers underground mining at Andy Well, in addition to surface and underground mining at Turnberry.
Study results
- Undiscounted pre-tax free cash flow of $ 182 million ($ 131 million after-tax) at the gold price of A $ 2,400 / ounce (approximately A $ 100 / ounce below the current spot price)
- The project offers a NPV5% of $ 124 million and an IRR of 46%
- EBITDA of $ 457 million
- Average gold production of approximately 50,000 ounces per year
- Total mining production of 4.9 million tonnes at 2.8 g / t gold for 443,000 ounces
- 422,000 ounces of gold sold to AISC (all-in sustaining cost) of AU $ 1,655 / ounce
- 8 years of mine life
- Processing operations last 9 years to completely exhaust stocks
- $ 52 million pre-production capital required and 23 month payback period
- 72% of gold production comes from measured and indicated resources (28% inferred)
Go to the pre-feasibility level
Meeka’s study assumes that the existing Andy Well mill will be redeveloped with a replacement ball mill, gravity circuit, and some elution circuit components, which were removed by project suppliers before the company took over. possession of the asset.
A small proportion of the ore produced by the project will be contracted by a processing facility owned by a third party.
The strong fundamentals of the project outlined by the scoping study give the company the confidence to move the project forward to the pre-feasibility level while continuing to drill tests for possible extensions of the existing 1.1 million resource. ounces.
Project economics at various gold prices in AUD.
“First step towards the return to production of the Murchison gold project”
Commenting on the results of the study, Meeka CEO Tim Davidson said, “Completing this study is the first step towards returning the Murchison gold project to production.
“We are extremely satisfied with the solid fundamentals of the project demonstrated by this work and this gives us confidence to move on to the next phase with the start of the pre-feasibility level study with immediate effect.
“The study demonstrates that the project is capable of generating significant value for shareholders, well beyond the acquisition cost of the project and the estimated capital required to restart production.
“We also have a clear plan in place to systematically drill and test possible expansions of the large 1.1 Moz resource, which has the potential to further enhance the value of the project.”
Project cash flow at a gold price of A $ 2,400 / oz.
Next steps
The study successfully described Meeka’s preferred mining and processing plans, likely production and cash flow profile, development schedule, and capital requirements.
However, the level of detail associated with the activities envisaged during the first years of the study is considered by the company to be at a level above that which would normally be considered standard for this level of preliminary study.
The following work programs are required to advance parts of the study to the pre-feasibility level or above:
- Additional drilling to improve confidence in the deeper portions of Turnberry’s mineral resource expected to be mined by underground mining methods – this is currently underway as part of the Phase 2 drilling program started in September 2021
- Further grinding and metallurgical testing covering the fresh rock portion of Turnberry Mineral Resources – expected to take place at T3FY22
- Hydrogeological and environmental studies completed at Turnberry to support permit applications
- Presentation of the updated mining proposal, project management plan and mine closure plan
