Welcome, ladies and gentlemen, to Commodity TV and a new episode of our online interview series. We want to get an update after the terrific news from Meridian Mining, and Gilbert Clark, the CEO, is here with us. Before I say hello, I just want to do the disclaimer for BCS: this program is on behalf of and paid for by Meridian Mining. So, let's get started. A wonderful good day to you, Gilbert — you must be very happy after that news yesterday.
Yeah, it was a tremendous effort by our team in Brazil, by our shareholders who financed this activity, and also I think it's a really strong testament to the engagement by the government in Mato Grosso. They want a modern mining industry, they see us as direct foreign investment, and they really did a fantastic job in granting the preliminary license for the Caspas project.
Yeah, well, that's fantastic. I mean, preliminary license means it is preliminary, but is that something like really final, or is there still something that can go wrong? And what else is needed?
Okay. Well, the preliminary license is actually your most important license. What it does is say that your project has the technical capacity for production. It says it is beneficial for the socioeconomic activity of the communities, our stakeholders, and the environmental impact assessment basically says the impact is manageable and it's positive. You cannot proceed in Brazil if you don't have the preliminary license. So we started this: two years of data collection, 12 months of technical and public consultation, then we have a period of follow-up questions back and forth, additions, supplementary studies, and then they make a decision. And we had a unanimous decision by the, I think it's 27 authorities that come together to review mining activities, and it was unanimous. And that was a fantastic result for the team in Brazil, but also — well, this is a team of mine builders, mine operators who've been with our company now for many years who coordinated this. So this is one of the great things. I can remember our first interviews; I talked about the ability to execute in Brazil, to build in Brazil, to move forward in Brazil, and that's what Meridian has.
Okay, so that means from the communities, from the surrounding environment, everything is clean and clear, that is all fine — which is always important, because as I always say, you need to have the people, your neighbors, working with you there, the locals; you need to have them on your side, because then I think you have almost done 90% of the project. So you have that permit, I would call it that. But what does it mean that the installation license application is also advancing towards submission? What is that different license?
Okay. Well, as I said, the PL is the economic activity, the social impact, the environmental impact — it is passed. The installation license is your engineering diagram. You know, here's the plan of the open pit, the mill, the waste, the dry-stack tailings, your access road, your power easements. So what it is is your construction diagram, essentially.
So they then look at the construction, the file that you submit, they cross-reference it to what you said in the preliminary license, and once that's granted that triggers project finance — you go — and that's very important. So this will take... we'll submit that in Q1 next year, towards the end of Q1. It will take a period, that's up to the authorities to review this, and we're looking to be at FID by the end of Q4. That's where we'd like to be. Now, along the way, we actually have already started the data collection and preparation for the installation license. We were confident in what we were going to do, because remember this is not — although we got tremendous greenfield exploration, this was once a mining district. So with the preliminary license being granted, what we've actually done is relaunched a very prospective mining district back towards the road of production.
Okay, super. So that means the definitive feasibility study is also done next year. That means you then have really everything in hand. Let's assume project finance goes very smoothly and very easily. When would be your final production decision then, next year?
FID, we want to be at the end of Q4 next year, and so we'll release and publish the DFS in the second half of the year. And as soon as that installation license is granted we go straight to FID. We want to have the project finance all lined up. We've had a lot of tremendous interest from ECAs, from conventional project finance banks, we've had it from the specialist groups, the specialist project financiers. They've all looked at our financial model and they've all reflected our own internal assumptions on how much the debt-to-equity ratio will be, and it's very interesting. And then we look at some of the other groups interested in the offtake, and their propositions are in excess of what we need. But at the end of the day, when we look at that FID, that project finance, it's not just 'oh, this was the quickest money' — we have to look at what is the project finance structure that is in the best interest of the shareholders.
That — yeah, you have to look at these things. Yeah, exactly, because I saw that you have a low initial capex of $248 million. Let's put that to $300, then we have all inflation scenarios inside and some contingency. But $300 million US is not really that much. On the other hand, you have gold, silver, copper, so I could imagine that you also could do, let's say, a stream somewhere, or you can pre-sell maybe some byproducts. To me, what I mean is, you could basically do this all with debt, right? Or let's say a small portion of equity.
We certainly — there's a strong possibility we could do the entire thing with that. The capex figure, when you evaluate it using not $4,000 gold or not $5 copper, when you look at it, say, with $1,900 gold and $3.50 copper — just look at the downside — it still carries the possibility to carry a full 100% debt. That's quite clear. But there are banking mandates where they say, 'look, we're not going to carry you the full 100% debt,' and there are the other specialty groups who say, 'actually, we can carry the full 100% debt on this,' but then they'll say, 'but we need this carrot, we need this little bit.' So what we want to do is look at all these aspects and say, well, what is the best structure for the company's shareholders?
We've deployed our capital very focused — we've been very focused, management all work 100% for the company, and we're focused on the structure to move the project into production. And we've been rewarded by the market for our execution. We've seen that just in the recent days — I think we're up 11% — with the preliminary license.
And that's, I guess, very much maybe the Australian coming out in me. We like to build mines, take them into production. Yeah.
So what also catches my attention is that you have very low all-in sustaining costs of $742. Let's make it, for calculation reasons, $1,000 — that makes it easier. And if I take a gold price of $4,000, and if I take this as a gold-equivalent price, if you want to do it like that, then you will produce in the first five years 178,000 ounces gold equivalent per annum. So times $3,000 is $534 million. You can easily pay it off within whatever.
Yeah. Hold on. The cash flow available to service debt on this is astounding. And again, our capex is very low because our metallurgy is so good. And in our presentation, which you can download from the website, we've actually put a table across there of all the projects that have been built in Brazil. You can see how we sit right in the middle of the capex for comparable-size mines in Brazil. But take the time to look at the coarse nature of our grind and also how quickly we process the ore to produce the product. You can see some there, they have to treat the ore for 30, 35, 36 hours to get out the metal. We treat our ore in one hour — that's how quick it is. And that then impacts the size of the equipment you need to extract the payable metals.
