All right, welcome back to Mining Stock Daily. We continue our coverage here during the London Metals Exchange week in London, and no trip to London would be complete without running around town hunting down Gilbert Clark of Meridian Mining. They do trade on the LSE and the TSX with the symbol MNO, and on the OTCQX in the US with MRRDF.
This is our first update, Gilbert, since we kind of broke the news of that definitive feasibility study back launching the Beaver Creek precious metals summit. It's well received; that was a catalyst for your stock and all things moving forward here with next steps for Cabaçal. But as we kind of digest the last month of this information, of the economics of Cabaçal, give me a rundown of how it's kind of been digested by everybody, and I'm sure your phone's been ringing off the hook.
Hi Trevor, it's always good to catch up here and have a coffee in your hotel. Yeah, look, LME week has been — the response and the engagement by the traders and smelters here at LME week, it's the same vibe, the same excitement that we received at the Beaver Creek conference. Sorry, LME week. So, no, it's been really good. We have, as our shareholders and followers know, we've had a structured approach over the last three, four years to get to this point, particularly in July when we put out the blister copper results. Here we're showing the blister copper to the interested parties; we give them the press release, the data. So with Cabaçal, as we know, we're into that advancement on the silver works, and we hope to be into pre-construction next year. We are going to produce the world's best copper concentrate for blending. It is sensational, and that's what's the attraction at the moment.
Yeah. So you have a competitive — you feel like you have a competitive advantage here.
Absolutely. When copper is in a deficit, the demand is increasing, and when you have something that can be used to blend with inferior quality concentrates of a quantity that is of some importance, that really gives Meridian the upper hand in the negotiations and how our shareholders are going to benefit from this. We're really talking about medium to long-term commercial agreements.
You actually have your blister copper sample in your hand here. Beautiful specimen. And so you actually have something tangible here. Not very many development stage companies have something tangible to show. But I mean, how significant is this physical, you know, blister copper piece in your hand right now?
Well, I kind of put it on the table. I kind of just tap my fingers on it as we have these discussions because it is exactly what the smelter groups want. They want to be able to blend this, what the trading houses want to put in. When I explained to them that, you know, we could in a smelter we could probably get this blister copper above 90%, 99% purity. It can go 2, 3 oz of gold. It can go 10, 12 ounces of silver. The sulfur is clean. It is what you want in the industry today.
Okay. So we look back at the economics here for people who maybe have forgotten. Cabaçal's feasibility study did come with an after-tax NPV of just over $2 billion and an IRR of 108%. That was base case here. We take those economics here and just — what's happened since then? Obviously, it was well enjoyed by the market. Your stock was up, I think, 20, 30% on the day after that, and kind of still hovers around those levels. What's been the hardest question you've had to ask here in the last 30 days?
The hardest question posed to me: how soon can you get to cash flow? We'll be in dry ramp up by the end of 2028, with wet ramp up soon after, and we will be generating free cash flow in 2029.
And then, yeah, of course, we've now got to have offtake agreements settled, debt discussions that will advance, and now I think that in the medium term, almost certainly next year, the executive and the board will sit down, we'll start talking about dividend policy. This is what mining companies do, and this is what they should do, and that's very much where we're going in the near term.
You know, a lot of those institutions that provide financings don't really look at anything until a definitive feasibility study. How many doors have been opened in the last 30 days since you've announced this report?
Well, we actually, pre the report, we probably had canvassed over 30, 35 people and groups interested, and we'd done an initial discussion. Since the DFS has been published, probably increased to 40. There are many additional smelter trading groups, and we've been selecting some subsequent. We closed off the other offer date; one or two have dropped out. But overall, the strength of the groups and the robustness of what they're proposing is what you would love to see. If you're, I know, an established mid-tier, but an emerging producer like us to be offered these terms is a reflection very much of the ability for us to execute in Brazil, the quality of the asset, and the economics that it delivers.
Okay. I can't remember if you and I chatted about the potential makeup of what a financing deal looks like for Cabaçal, but I have had a few of these conversations, really, and that would be the attractiveness of debt over equity right now, just based on the margins of these proposed studies and the economics. And it almost seems like, you know, especially with Cabaçal, the payoff is super, super quick at current levels. Is it — what you're seeing right now, is it something where, from your seat, debt is more attractive than dilutive equity?
We will have a combination at some point — a combination of debt or equity. Look, you've got the project finance, you have a cost of own facility which you may or may not draw, working capital needs, and we really want to start arcing up, lifting that expenditure for exploration. And at the moment, the market's in a little bit of a dip. We're seeing some buying coming back into the stock, which is of course what we expected. I'm not too concerned about how we're going to structure the finance, because fundamentally, at the end of the day, the structure of the project finance has to be in the interest of the shareholders. So it may not be the cheapest, it certainly won't be the most expensive, but we want to make sure that we get the right partner.
Yeah. Okay. On the side of Cabaçal, you also have Santa Helena. What's the latest going on there while you continue to move forward with the Cabaçal decisions?
We've got a couple of rigs down there drilling at the moment. It's going quite handy. We've got some scout exploration works going on at Espigão, so we're pretty happy about that. Really, when you think about it, the last five years probably averaging less than a million Canadian in exploration. We were focused on Cabaçal, and it's interesting — there was a lot of criticism. I saw people saying, 'Exploration doesn't give you an NPV of $2 billion.' That's complete nonsense. It's risk. So what we're doing now is ensuring that as we spend the money, we do it methodically so we don't waste and take too much risk in our exploration. So a lot of ground mapping, geophysics, structural drilling is always important. We have to understand the subsurface, and then next year, the year after, I can see a double, a treble in expenditure on exploration.
