Meeka Metals (ASX: MEK) has slotted in the final piece of the approvals puzzle from the Department of Energy, Mines, Industry Regulation and Safety (DEMIRS), allowing it to launch full-scale development of its Murchison gold project, 50km north of Meekatharra in Western Australia.
With the green light now shining brightly, Meeka has quickly moved from planning to construction and is targeting its first gold pour by July next year. Management says all of its regulatory hurdles have now been removed on the back of the critical approval for the mining proposal being granted.
Construction activities are now in full swing at the Murchison site, starting with the 20km haul road connecting the processing plant to the open-pit area to allow the company to kick off mining early next year.
Additionally, the move and installation of Sandfire Resources’ former DeGrussa camp and infrastructure package site is making solid progress. The camp, which includes an accommodation village and office infrastructure, should be fully commissioned at Murchison by the end of the year.
This is a major milestone for us. With final approval in place, we can now fully commit to the development of our high-grade Murchison Gold Project. Our teams are already on the ground, with work on the accommodation village and the haul road well underway. We anticipate beginning open-pit mining in early 2025.
Meeka Metals Managing Director Tim Davidson
The company has marked the coming quarter as the deadline for a drilling program to firm up the expansion plans for underground production at the Turnberry mine, as well as improving grade control at the high-grade oxide starter pits at Turnberry and St Anne’s.
Meanwhile, the process plant, which has recently benefitted from a bargain deal to buy a bigger than previously planned 640,000-tonne per annum ball mill at auction for $318,000, is being upgraded and refurbished with plans to be ore-ready by mid-next year.
The first quarter of next year will be particularly important for Meeka as open-pit mining operations start and as it gets stuck into re-accessing its high-grade Andy Well underground mine.
The company’s newly-expanded production plan, which will be handed down in an updated definitive feasibility study (DFS) by the end of this month, is now expected to provide for the processing of a 600,000-tonne, 2 grams per tonne gold stockpile more quickly and give the project an early revenue kicker. Added to that, the upgrade will allow management to access and process an extra 52,000 ounces of gold from a newly-optimised pit shell and 61,000 ounces of 3.3g/t gold ore that is easily accessible in the existing underground mine.
If all goes to plan, Meeka expects to have a fully-operational process plant up and running by June next year, with gold production slated to begin soon after.
The Murchison gold project spans 281 square kilometres and hosts 1.2 million ounces of high-grading gold at 3g/t. The DFS released in May set out plans to restart the processing plant and mining with strong financials on the back of a conservative $3250 gold price. The reported numbers included a net cash flow of $413 million, a net present value (NPV) of $244 million using an 8 per cent discount rate and an internal rate of return (IRR) of 100 per cent across a nine-year production plan.
However, with the current gold price now at about AU$3720 and with production of 64,000 ounces a year, the company has forecast that the project will make an additional $37 million in pre-tax cash flow for every $100 above its DFS assumed price.
In a good example of just how fickle the business of gold mining can be, Murchison was originally owned by Doray Minerals, which started open-pit mining at Andy Well in September 2012 and produced 350,000 ounces at 8g/t. But the project was then placed on care and maintenance in 2017 due to low gold prices.
Doray was subsequently bought out by Silver Lake Resources, which then sold the mine and the adjacent Gnaweeda gold project containing the Turnberry and St Anne’s deposits – later renamed the Murchison gold project – to Meeka for a mere $8 million.
Gold miners need some luck with timing when it comes to producing the yellow metal, but it also helps to make your own.
By acquiring the Murchison project at such a cheap price and then applying a rigorous and well-targeted drilling program before rolling out a robust financial model requiring minimal capital expenditure, Meeka appears to be on the cusp of creating a cash-cow that could eventually help the company achieve its ambitions to become a tier-one producer.
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