KEY POINTS
- Cabaçal has a $2.09bn after-tax NPV at base-case prices.
- The project requires $322m in initial capital.
- First-five-year production is forecast at 183,526 gold-equivalent ounces a year.
London- and Toronto-listed Meridian Mining has confirmed a $2.09-billion after-tax net present value for its Cabaçal copper-gold project in Brazil, even under its base-case commodity price assumptions.
The company released a definitive feasibility study for the project on September 22, showing strong projected returns and a short payback period.
At base-case prices of $3,570 an ounce for gold, $5.03 a pound for copper and $50.17 an ounce for silver, the Cabaçal project has an estimated internal rate of return of 108%. The project is expected to recover its initial investment within 10 months.
The study estimates an initial capital requirement of $322 million and annual production of 183,526 gold-equivalent ounces during the first five years of operation.
Cabaçal is expected to produce those volumes at an all-in sustaining cost of $1,056 an ounce.
Higher prices lift project value
The project’s economics improve further under a spot-price scenario. At gold prices of $4,394 an ounce, copper at $6.53 a pound and silver at $64.14 an ounce, the project’s after-tax NPV rises to $2.9 billion.
Its internal rate of return increases to 134%, while the payback period falls to eight months.
Over its 14-year mine life, Cabaçal is expected to generate about $2.9 billion in after-tax free cash flow.
Meridian advances project development
Meridian CEO Gilbert Clark said the project’s NPV-to-capital expenditure ratio of 6.5 times demonstrates its economic potential.
He also said the feasibility study was based on what the company described as a conservatively engineered mine design that can be financed and built.
Clark said the project’s economics improve further when current spot commodity prices are applied.
He described Cabaçal as having the potential to become a near-term volcanogenic massive sulphide gold and copper mine.
Pre-construction work underway
Meridian has already started making pre-construction investments as it advances the project towards development.
The company has committed $15.9 million under capital contracts, while permitting for the installation licence and financing activities for construction are progressing.
The definitive feasibility study provides the latest economic assessment of the project as Meridian works towards the next stages of development.
The combination of a relatively low initial capital requirement, short payback period and projected free cash flow forms the basis of the company’s assessment of Cabaçal’s development potential.
