Meeka Metals (ASX: MEK) has secured a $73 million funding war chest, paving the way to finalise the development and production ramp-up at its 100 per cent-owned Murchison gold project in Western Australia.
The funding comprises a $26 million gold loan and a $12 million gold stream from Auramet International, in addition to a $35 million institutional placement that includes a $5 million equity investment from Auramet.
In its placement document, Meeka has explained that the funds will be used to complete the development of its gold project, repay a $2.2 million bridging loan, fund exploration and corporate costs and provide crucial working capital.
To be completed in two tranches, the first stage of the $35 million placement is expected to settle this Friday, while the Auramet funding package has been earmarked for finishing the development of the project. The company says the package was the result of a competitive tender and negotiation process that began in May and technical due diligence that was completed in July.
This is a significant achievement for our team and milestone for the Company, to finalise the funding process for the expanded Murchison Gold Project. The extensive third-party due diligence and subsequent decision by Auramet to make a $5M equity investment in the Company through the Placement provides strong independent validation for the technical and economic outcomes likely to be achieved in the Murchison. It is pleasing to receive this vote of confidence.
Meeka Metals Managing Director Tim Davidson
Davidson also sought to highlight that the gold delivered to Auramet for repayment would represent less than 5 per cent of the initial production plan and less than 25 per cent of the first 12 months of production.
A definitive feasibility study (DFS) completed by the company in May revealed that the project, with a nine-year mine life, is expected to produce 64,000 ounces of gold annually using a 3.7 grams per tonne cut-off grade. With the current elevated Australian gold price exceeding $3705 per ounce, the payback period is now projected to be just eight months – significantly shorter than the 22-month estimate from the 2023 prefeasibility study.
A recent deal to buy a bigger ball mill, which increases capacity by a further 30 per cent to 640,000 tonnes per annum, now also provides the company with the opportunity to not only explore the prospect of an increased annual production rate, but will allow it to process a 600,000-tonne, 2g/t gold stockpile more quickly and give the project an early revenue boost.
Additionally, the upgrade will enable Meeka to include 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.
Consequently, the company is expected to deliver an updated DFS by the end of this quarter. It will incorporate the increased production profile and is expected to reduce the processing cost to below the current forecasted $39 per tonne.
And $21 million in capital costs that are ringfenced for recommissioning Meeka’s Andy Well carbon-in-leach processing plant – which has shown an impressive average metallurgical recovery rate of 97.5 per cent – is not forecast to materially change.
Soon-to-be-producers such as Meeka are in an enviable position in the mining sector right now. Operating costs for gold miners appear to have stabilised and workforce availability is showing mild signs of improvement.
Coupled with gold prices that are still nudging all-time highs, the company should have every reason for feeling excited about its immediate future.
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