Meridian Mining: Cabaçal’s DFS Delivers Standout Economics

0:16Mining Stock Daily: All right, everybody, welcome into Mining Stock Daily from the Beaver Creek Precious Metals Summit. We do have an exclusive to begin our coverage this week with our friends, longtime friends from Meridian Mining. They do trade on the TSX and the LSE with the symbol MNO and on the OTCQX in the U.S. with MRRDF. The company overnight did publish their definitive feasibility study for the Kavasol project. We're going to go over the numbers, what's changed since the PFS, and all things for people to take a deep dive in here with our friend CEO Gilbert Clark. Gilbert, first off, congratulations. This project moved about as quickly as one could, and not that there were challenges along the way, but this DFS is a testament to what you've done with Cabasol, the team, and just how great this project is.

1:11Mining Stock Daily: It's just the beginning of this belt here. So first off, walk us through the numbers. Okay, Trevor, thanks again for coming in. We're very happy that you're the first off the block to go through the DFS. I'm very happy to. So look, we've always said Caposalla is a very special project. So the base case scenario, we generated a post-tax MPV5 of 2.092 billion US dollars. It's got an IRR of over 107.6%. It gets paid back in 0.9 of a year, so less than a year to pay it back on the base case. And most importantly, that MPV5 to CapEx ratio, it's grown now to be 6.5 to 1. I mean, we are almost talking about some leading industry economics here.

1:57That was based on a gold price of$3 ,570 per ounce, copper at$5.03, and silver at$50.17. Now, look, we take it a spot price, which we took on the 10th of September, and actually the spot price today I think is a bit heavy, a bit higher. that's with a 4 ,394 gold and$6.53 copper 64 silver that generates a 2.9 billion USD post-tax MPV with an IRR that actually grows to be 134 percent and the payback then it just drops down to 0.7 and look we've always said about this project it's an industrial project this is a mining project and this is the exact type of economic returns you want to see for from this emerging mid-tier producing mine.

2:46Look, some of the other numbers, you know, the life of mine, all in sustaining costs, 1 ,056 per ounce of gold equivalent. It generates post-tax free cash flow of some 2.9 billion. This is base case, 2.9 billion US dollars. In those first five years, it's critical for any mine. We generated on average 183 ,526 ounces of gold equivalent. In that first five years, our ASICs is$715 per ounce of gold equivalent.

3:20Mining Stock Daily: I mean, this is what you want to see when you want to build a mine, to generate a mine. CapEx is up a little bit. OpEx is up a little bit. But I just want to make it clear. This is being engineered to be built. This is being engineered to be financed. And our DFS, which was led by SENCO, contributions by GE21, critical ones, and also Norm, who did Metal Age for us, fantastic effort for all three. They've delivered something special to the company and to our shareholders. I would say so. What has changed since the DFS, as far as the technical mining scenario, reserves, resources? What is that number?

4:00Mining Stock Daily: How much material there is actually going to be mined? Well, this is in the permitted, the preliminary licensed pit, which is the same pit as we used in the PFS. That reserve has now grown from some 40 million tonnes to over 56 million tonnes of reserve, which of 98 % is in the proving category. Like I said, we drilled and we drilled. We did the counter-cycle investment. When everyone was talking exploration, we focused on resource development to build the mine. So that's a critical one. Look, we have experienced the change in inflation in Brazil, the change in the exchange rates in Brazil. There's been additional fuel costs, additional electricity costs.

4:39But we weathered those costs because when you've got a strong economic base, a strong reserve base, this is what you want to see in a mine, a mine that can operate and be profitable in any stage of the mining cycle.

4:51Mining Stock Daily: You did mention a little bit that the CapEx did kind of raise a little bit. And you mentioned some of those numbers just now. Is that maybe more exclusive to the higher capex, or what else was kind of rising in cost from that PFS? I think it was the fact that we achieved a lot more detailed engineering went into it. Now, look, we're not dealing in the previous, in the PFS, we're drilling, we're going to process some 41 million tons. So our dry stack tailings was designed for 41 million tons. It's gone to 56 million tons. So, of course, the civil infrastructure to manage all of that had to increase.

5:23the detail, the certainty that you want to go into an engineering study for a DFS. Because we're going to take this out to the project finance banks now, and it's got to be bulletproof. And that's why we took so much time, our own Meridian team in the offices of Asenco in Belo Horizonte, watching each step of the process that's so keen that we've built that Brazilian execution team in Brazil to build this mine.

5:46Mining Stock Daily: I mean, this is the epitome of de-risking a project, right? Getting to this point with these numbers. and we're in a really incredible market here at$4 ,400 gold, give or take,$6.50 copper, give or take, and obviously you see that reflected in the spot price scenario here. And I don't think you and I sitting here would have any doubt that we feel like those prices are maybe going a little bit higher, but this project has to weather bad metals markets as well. Do you feel like CaboSol is set up for something that maybe we don't want to see? No, look, CaboSol, look, I ran the numbers from the PEA, the resource numbers and the exchange rate, and put it into this model.

6:31I ran the resource numbers from the PFS into this model. At each stage, the MPV and the IR increased, even with lower commodity prices. So this is what you want to see. It's always going to be cash flow positive. It's buildable. It's scalable. and then we've got by far, what I can see, one of the best VMS exploration portfolios for South America. So this is what we're seeing. We're seeing the naissance now, the real naissance of emerging mid-tier copper gold producer in Brazil. Okay.

7:01Mining Stock Daily: Has anything changed as far as the final product? What are you going to produce? And maybe what are the conversations like moving forward now with this DFS out? I mean, there's got to be a taker for what you're producing. What do those conversations look like? Absolutely. So one change in the flow sheet is we're not producing gold dore. We're going to recycle the gravity gold into the copper concentrate, and that's going to go up to two ounces of gold in the copper concentrate, three, four, five, six ounces of silver, 29 % copper. We've published just a couple of weeks ago, a couple of months ago now, the results of how this copper concentrate smelts.

7:38We've produced blister copper, almost an anode grade.

7:40Mining Stock Daily: I remember that conversation. I mean, we got a lot of incredible response from traders, from smelter groups, when we put out the fact that this is going to be the next medium-term producer of some of the cleanest, best smelting copper concentrates to the market. That has got high credits of gold and silver, perfect for producing acid, no deleterious. This is the best blending material coming onto the market, and we're going to sell it for a premium. We're going to leverage the quality of this copper concentrate for the benefit of our shareholders. Let's talk about the CapEx. What's that final number come and remind us?

8:17Mining Stock Daily: I don't have it in front of me, but then talk about, you know, obviously this is buildable. I mean, with the market cap of where you guys are sitting, your access to capital, it seems like you're not going to need that much. But what does a potential final finance package look like in your mind right now? Oh, well, the CapEx came in at$322 USD, including contingencies. We have had a lot of interest from debt funds, smelter groups, banking syndicates. When it was back at the CapEx, it was$250, including contingencies. We had offers that were in excess of that. The debt was in excess of our requirements, and I expect that to continue.

8:57It's a very competitive project. It is the project for Brazil. So there's a lot of kudos to actually land that project finance. Because the net free cash flow available to service any debt facility is extraordinary from this project. I think we produce, like I said, 2.9 billion net free cash flow. So yes, the debt will be, the project finance, that's going to be led by our CFO, David Halkyard, with James Aglusis as a team. So I don't have any concerns about the project finance. because remember we put the guidelines of what we wanted to do with project finance. We started thinking about that nearly two years ago.

9:33So always prepare. The decisions and results of what we've achieved today in the DFS, they were laid in process many years ago. And I've got to really put a big shout out to the team in Brazil. Victor, Thiago, Joelle, Adrian for the drilling and the geology, Eric. They've done a fantastic job on this DFS. And this is the key. When you want to have success in Brazil, have it managed, have it guided by Brazilians, because they are world-class mining teams down there. Awesome.

10:05Mining Stock Daily: It sounds like with the CapEx and where your market cap is, the cash you have in the bank, the payback, it sounds like you can be pretty assertive, more leaning on more debt and less equity. I mean, non-diluted. I mean, it sounds like this could potentially be a pretty non-dilutive equity deal. We've got, I think today, a check, I think we've got about circa 90, 94 million USD in the bank account today. We've got more than enough capital to reserve to existing capital works that we've already got in place. Get to FID and not be stressed about what the equity or what the debt structure is going to be.

10:44And we've done that with a really great supportive base of, But not only just very large institutional funds, but a very good and supportive retail base, both in the United Kingdom and across Canada, Europe, and the world.

10:59Mining Stock Daily: So what's next? You published this. The numbers are out there. What does end of Q3 into Q4 look like? Will we see some sort of final investment decision or construction decision for Cabasol in the coming months? The FID, the last brick in the wall that we've got to achieve is the installation licence. That's going to be one of our CPs. We hope to get that this year, but we've always given guidance. It'll be Q1 next year because we work quite closely with my team in Brazil. They work very closely with the authorities in Quiba and Matagroso. So that's a key one for us, the installation licence. And then we're putting everything in place now, anticipating success, so that when we come to Q2, when the wet season's starting to taper off, we're going straight into building.

11:46One thing we will notice is the build has been reduced from 24 months to 18 months. You've got to record, we've already started deploying capital, upgrading roads, preparing for bridges to be built, power easements. We've actually got the installation licence for the construction of the power line to site. Some guys, they had to build hundreds of kilometres of power lines in Brazil. we're next generation it's 24 kilometers and we've actually got the installation license to go ahead

12:14Mining Stock Daily: and build it now so things are things are things have been moving uh behind the scenes and towards that fid one big final question here big numbers uh incredible testament to the team as you mentioned getting into this point you and i've been talking about cabos all for like almost four or five years now uh since you oh shortly after you got your hands on this thing and so it's love watching this story really unfold to this point, but this is just the beginning of this entire belt. What does Cabosol and these numbers really represent with what the entire district could look like, the camp? We've talked about Santolina and these other exploration targets that you're just scratching the surface of, but what does this really mean for the entire belt?

12:59Well, we're going to go into near-term cash flow, and that means all of the future exploration success that we're going to get post-cash flow, the success of the exploration goes straight up to the equity, to the shareholders. So we want to see that discovery, growth, revaluation as a long-term producer. Now, this team took a company back in 2020 when it had a$5 million market cap and a pretty small balance sheet. Now, you can imagine what this team's going to do when it's got$200,$300,$400,$500 million in the bank account, focus exploration. We want to become the next mid-tier copper gold miner on the LSE and on the TSX.

13:38Mining Stock Daily: Gilbert, congratulations man. Really happy for you and the team. Exciting news. And a great way to really start off this conference at the Beaver Creek Precious Metals Summit. So we've got a lot more to come. Again, Meridian Mining trades on the LSE and the TSX with MNO. And they're going to be busy not only the next few days, the next few weeks. So stay tuned. Gilbert, thanks so much. Congratulations. Thanks, Trevor. And as always, any queries, just info at meridianmining.net.br and I'll answer any queries. Thanks, everyone. The information presented should not be considered investment advice.

14:10Mining Stock Daily: Mining Stock Daily and its affiliates are not responsible for any loss arising from any investment decision in connection with the material presented herein. Please do your own research or speak with a licensed financial representative before making any investment decisions.