Meridian Mining (MNO) - Technical Analysis

Meridian Mining is focused on becoming the next mid-tier Copper-Gold developer and producer with a focus on Brazil. The company's priority is on the Cabaçal project, an advanced stage VMS (Volcanogenic Massive Sulphide) district-scale Copper-Gold asset located in the state of Mato Grosso, Brazil.

Merlin-Marr Johnson caught up with Gilbert Clark, Executive Director and Chairman, and Dr. Adrian McArthur, CEO, Meridian Mining. 

Mr. Clark has over 20 years of international experience within the natural resources industry. He was formerly a Partner with Sentient Equity Partners. He also served as a Senior Investment Advisor and Director of Sentient Asset Management Canada. His portfolio covered base and precious metals with investment companies in Greenland, South America, and Europe. Gilbert's natural resource business experience spans continental Europe, Eastern Europe, the Americas, Africa, South East Asia, Greenland, and Australia. His educational credentials include a Bachelor's degree in Geology from Macquarie University. 

Dr. Adrian has over 2 decades of experience in exploration, resource delineation, and project generation roles for industrial minerals, gold, and base metals. He currently leads a team of 13 geologists in a multi-commodity exploration program for Meridian Mining which has confirmed a new style of hydrothermal manganese mineralization and identified a number of emerging gold and tin targets. His educational credentials include a B.Sc, Hons, and a Ph.D. from Monash. Dr. Adrian is a fellow of AusIMM (Australasian Institute of Mining and Metallurgy). 

Company Overview

Meridian Mining is a Copper-Gold development company focused on the Cabaçal Copper-Gold Project in Brazil. The company was founded in 1980 and is headquartered in the United Kingdom. It is listed on the Toronto Stock Exchange (TSX-V: MNO), the OTC Markets (OTCQB: MRRDF), and the Frankfurt Stock Exchange (FSE: 2MM). The company's asset portfolio includes the Espigão Copper-Gold Polymetallic Project, the Ariquemes Tin Exploration Project, and the Cabaçal Copper-Gold Project. 

Meridian Mining has been working on the Cabaçal Copper-Gold Project for over a year. This project has been transformational for the company. There are currently 3 drill rigs employed at the project site. Earlier this week, the company put out drill results of 64m at 1.9% copper equivalent ounces. 

The company recently drilled a hole that carried grades of 20m at 5% copper at the bottom of the intersection. This hole was drilled in the Central Copper zone over the historical Cabaçal Gold mine. Notably, Cabaçal operated this selective room and pillar style underground mine at a 3g/t gold cut-off grade. During the historical mining operations, under a million tons were extracted from the project area. 

As part of the metallurgical program, Meridian Mining has drilled holes into the 3 principal copper zones in the mine environment along with the Northwest extension. Notably, a significant high-grade extension is building up from the mine area, extending 800m-900m to the northwest. 

Underlying Geology

Meridian Mining also drilled a hole between the workings. This hole was drilled through a number of levels where the gold was previously extracted. Since this was small-scale in nature, the hole was drilled with a continuous column of HQ size, a large diameter core, and a significantly wide continuous copper zone. It was found that the lower part of the package tended to be higher in copper, gold, and silver. The company also found an unexpected high-grade basal zone. It was confident about the availability of reasonable mineralization, but discovering such high grades came as a surprise. This project has shown to contain more intersected coarse gold. 

During the historic operations, there were limited platforms for underground grade control. As a result, not all development was systematically drilled off with tight spacings. This left an opportunity for Meridian Mining for significantly high-grade mineralization in addition to the extensive copper mineralization. 

Notably, the historic resource at the mine was estimated at 22Mt with relatively low grades of 0.6% copper and 0.6% gold. This extension from the old mine was found alongside some limited shoots that were modelled off to the northwest. The company found much wider and more significant packages along with mineralization in the Northwest extension. The historical drilling was done on very wide 100m spacings to the northwest and the vertical holes. 

Meridian Mining’s Board of Advisors comprises a number of geologists that have historically worked on this project. The advisors alerted the company that the land package featured both very shallow between-loads mineralization and the original VMS (Volcanogenic Massive Sulphide) package with late-stage cross-cutting, sub-vertical structures. 

The company has purposefully drilled angled holes in the northwest. It was found that the package mineralization effect in this sector is much wider in many areas. The company found much higher grades which was a result of picking up both the flatline package and steeper cross-cutting structures. For the core dense information around the mine environment, the bandwidth has been extended by 500m-550m. The minimal part of the resource extended past the range, but the company was successful in building the mineralized envelope in both directions beyond the previous limits. 

The rocks found here are metamorphic in nature. Being a high strain build, very strong foliation was found on a structural level. The package appears to be inverted from its original flatlining and upwards-pointed state to a tilted and overturned state. The company drilled through the lower-grade copper dominant mineralization and string packages first. Here, the mineralization was found to be somewhat dispersed and disseminated through the host rock. Moving downwards, the company found an environment that gets progressively rich. The original mine development is also based in this area, as part of the sulphide accelerative pile was found here. However, the lower contact with the package turned out to be a shear zone. It was concluded that part of the original strategic mount has been a structural contact. This question was originally raised in a contemporaneous study back in the 90s. It was based on a part of the massive sulphide that is now dislocated from the deposit. This question is a part of the company’s ongoing exploration pursuits. 

The deposit appears to be missing the characteristic alteration with the metamorphic overprint. The structure played a significant role in affecting the course, setting up the copper sulphide mineralization and the coarsening and redistribution of the gold. From a metallurgical perspective, the company anticipates that this structure played an important role in the excellent gold recoveries during historic operations. 

Conventional VMS models are often non-economical at 600m-800m vertical depths. Furthermore, bulk mineralization cannot be commercialised. However, the root system at Cabaçal has been officially put on-site and brought to the surface, giving the company a large mass of 1%-1.1% copper equivalent material. This tonnage will lead to an interesting resource statement. 

Database, Equipment, and Surveys

It is important to note that the actual limitations of the Cabaçal deposit were pre-defined. The company is currently carrying out infill drilling. It was aware that this deposit was a large flatline northwest-trending mineralized envelope. An in-depth investigation of the deposit led the company to copper-gold mineralization at the surface which was up to 100m thick in some areas. The company found an incredibly high-grade overprint of sub-vertical gold that was structurally controlled. 

Meridian Mining has had access to all the archival records of the deposit. This features thousands of pages of scanned data along with historical geophysical information and drill assays. Some of the company’s recent success with the Northwest extension and the industry prospects are evolving in regional exploration. The company has built a very good base of work which is built on the initial work carried out by BP Metals, the original founder of the Greenstone belt. At present, Meridian Mining has an extremely sound, systematic, and well-constructed database. 

One of the company’s geologists actually worked on the original projects back in the 1980s. This has allowed the company to gain deeper insight into the project, leading to the highly-promising results in recent times. In addition, the company has bought state-of-the-art geophysical equipment along with an in-house geophysical crew. It is also utilising a downhole electromagnetic probe and surface electromagnetic tools to look for copper-rich reserves in the VMS family. The company is using IP (Induced Polarisation) equipment that helps identify additional massive sulphide or disseminated sulphide. 

Furthermore, the company recently purchased equipment that will enable it to assess the deposit’s structural architecture. In essence, the company is working on a wide range of geophysical levels to gradually build a project database. In terms of vectors, the company currently has a database of 600 holes that have been drilled in the Cabaçal sphere alone, providing enormous amounts of data. The data-rich environment along with the broader space drilling in and around the mine has provided clues for additional targets. 

The company currently has geochemical anomalies that are yet to be tested. In addition, the company has structural trends that can be predicted from the mine. Interestingly, the northwest extension was discovered by systematic follow-up of the collected data. The company continues to build and develop its ideas and map the trends with the data.  The amount of historic information available on Cabaçal played a major role during the project’s acquisition. The data will enable the company to leverage both the Cabaçal asset and the regional targets that are in the early stages of development and evaluation. 

Meridian Mining was successful in expanding the mineralized envelope. The density of the envelope was similar to a resource drill operation. The company utilised the historic data to conclude that the past operator did not find the envelope, as it was focused on defining the zone of mineralization that featured 3g gold. This was the criteria for delineation drilling, leading the company to seek the VMS’s commercial attributes. 

Drilling operations and discussions with the geologists led the company’s team to drill angled holes back to the northeast that progressed out to the northwest. The company has identified a high-grade gold overprint that was missed during vertical and sub-vertical drilling. In essence, it was found that the high-grade gold and VMS are continuous. Notably, the high-grade gold overprint was identified in 1988, while the drill program concluded in 1986. The program was never revisited. Since the drill program was in the wrong orientation for a flatline copper-gold VMS system, it did not lead to any results. Targeting the high-grade sub-vertical gold overprinting has led to quite substantial numbers.

It is apparent from the map that the concentration of the historic drilling was targeted toward the centre. The historic operation progressed towards the northwest as this was the only area where gold was found. The grades were 3m at 300g gold, which was a result of the past operator drilling down in one of the veins. Meridian Mining followed one of these structures to the northwest. Here, the company drilled angled holes back to the northwest, continually hitting high grades.

In the standard variation and distribution of gold, there are often zones that go up to 300g-400g and then drop to lower grades. However, in one of these structures, the company found a 950m continuous structure with astounding grades. This structure was identifiable because the sub-vertical feature had an elevated signature in the background. The company’s VMS currently stands at 50km. Within this area, the company has hybrid gold at Cabaçal, which is one of the company’s seven targets. The company is certain about the presence of a gold overprint here. Based on the historic data, the company is looking to add another mine 11km to the southwest, if a VMS sequence is found. 

There are 2 VMS sequences where the company has identified high-grade gold overprinting along the entire strike length. By utilising key soil techniques with the basic ones, the company found gold in soil, copper, and zinc systematically. Based on the geochemistry conducted on the rock mass, the company is developing a comprehensive and systematic database. 

Notably, the high-grade gold sits within a much broader copper envelope. The company wasn’t expecting to find mineralization in a lot of drilled holes because the initial assays and past scope did not provide any indications. Since the area was barren, it hadn’t been previously sampled. 

Through drilling and continuous sampling, the company was able to identify the sites which led to the sulphide footprint extensions. The company also took the previously sampled regions and systematically assayed them. Significant coverage gaps were found, particularly in the higher copper zone. 

A part of the company’s resource-building program is focused on covering the gaps in the previously modelled holes. There have been quite substantial changes to the position of the envelope. The company anticipates that revisiting the historic drill hole assays will provide additional tonnage for the project. 

Drill Operations

Meridian Mining has drilled a selection of metallurgical holes. The company initially embarked on a 10,000m drill program. This program was later expanded as the company was on the high-grade trends of the historical drill operations in the northwest extension. This area was left on sample by the previous operator. The company realised that expanding the drill program by 15,000m would allow adequate coverage of the area. In the middle of the program, the company selected 8 holes that were being assayed. This data is planned to be sent to Canada. 

As part of the drill program, the company was largely in the infill drilling phase. As a result, a lot of the drilling in the Northwest extensions is pending. The company drilled along the line and trend while progressively stepping across the strike length to build out the scope. The company is using an analog model to find a range of these high-grade gold structures that are planned for drilling. 

The vertical drilling from BP demonstrates 25m-30m spacings between vertical holes for every 100m drilled. Hole 54 featured grades of 54.4m at 2.6g/t Gold, 0.4g.t Copper, and 1.7g/t silver. These grades are made up of all the very high-grade veins that are sub-verticals. These veins were completely missed by the previous operator. Meridian Mining anticipates that the land package features other structurally continuous high-grade gold zones as well. Although the structures will be continuous, variable gold distribution is expected where some areas will carry low grades, average grades, and even barren zones. The company is looking to drill this zone down to a 25m by 25m spacing. In the north, the company has zones that feature 26m at 21g within a copper envelope of 0.2, There are other zones that feature up to 1% copper. Since this is a bulk tonnage near-surface operation, the large mineralized envelope is ideal for open-pit development as it features an optimal geometry. 

Meridian Mining anticipates that it will have multiple parallel zones trending northwest of high-grade gold overprinting the flatline VMS sequence. Currently, the company has 3 rigs on-site, out of which 2 are deployed on the northwest extension. The company is currently testing across strike length to the west. It has 2 holes in the sector where elevated gold is indicated. Here, the company is looking to conduct follow-up work. 

The system is open to the south, east, and southeast parts of the VMS package. The VMS package has a very gentle angle beneath post mineralization. Although the geochemistry becomes subdued, reconnaissance drilling some of the holes has led to intersections. The company is looking to conduct additional work along the trend to the southeast and the northwest. Building the extensions is as important as building the resource. In addition, the company is also looking to carry out some close-off work in the eastern copper zone and the uptick part of the deposit. This area also saw limited drilling by BP. Meridian Mining has conducted very shallow drilling here, however, it plans to work on area expansion. 

Targets 2022 and Beyond

Meridian Mining is looking to publish its first resource statement by the end of Q2 or early Q3. This could be an open-pit operation at some stage, but currently, the company is looking to calculate the resource and conduct a resource update later on. Notably, this resource update will also include the first resource for the Santa Helena site. 

The company has already completed in-house studies. It has a very good operations team along with mining engineers and geologists. The company has commenced the in-house external valuation of the project. Following this, the company is planning to conduct a PFS (Preliminary Feasibility Study). It anticipates that this asset has open pit potential for a 2000m strike length which is 800m across, and 280m in depth. 

The asset has a very limited saprolite layer. In fact, the crystalline rock is found just after 15m-20m. This means that the open pit will go through the gravity circuit. Based on the actual production data, the company is looking at 94% copper and gold recoveries along with 86%-87% silver recoveries. The company is looking to produce gold on-site. A copper-gold-silver concentrate is expected to contain around 26% copper, 20g gold, and around 160g-180g silver. This data will be available in the PFS that is expected for release in Q3, 2022.

It is estimated that 55% of the gold will go to the gravity circuit. The other 45% recoverable gold will go into the copper concentrate. As per the company, there isn’t a need for reagents to make the copper float. Flotation may be needed for 12-15 minutes to recover the remaining copper, leading to a 100% recovery. The grind size would be very coarse at 120 microns. Chalcopyrite mineralization is known to be incredibly coarse, and it does not feature delirious elements such as mercury. The zinc present in the mineralization flakes off separately in its entirety. Zinc is not considered a penalty element in the Cabaçal concentrate. Meanwhile, lead flows separately, and as a result, it hasn’t been in elevated or recoverable states. 

At the Santa Helena mine, the gravity makes the zinc and copper concentrate flow to the tailings dam. There is a small amount of lead in the zinc concentrate where elevated iron was identified. Santa Helena has been rich in silver historically. Based on the concentrate's historical data, it carried grades of 600g-800g/t silver. Given the silver’s market prices, the grades make it a highly-prospective mine. The estimated All-in mining cost for the concentrate is estimated at $27-$28 per ton at an NSR (Net Smelter Return) cut-off grade. The rock is currently at a $100/ton value. Even if the commodities come off by 30%-40% in equities due to the cyclical nature of the mining industry, the operations would still be cash flow positive. 

The strip ratio is expected to be under 2.5:1. The company is planning to target a particular zone in the Northwest extension where high-grade gold starting at 3m was found at a 200m strike length. The company is looking to focus its initial production from the mill feed on this high-grade gold. The company is prioritising paying off the CapEx (Capital Expenditure) and the debt components at the earliest. 

Project Scale

Meridian Mining is focused on a 2.5Mt potential resource to support the initial 20-year mine life. The company is planning to run scalability on the asset. 2km down the road, the company has found a 3,500m copper-gold-zinc anomaly. The company also has high-grade satellite projects down the road including Santa Helena. In addition, the company has another satellite deposit 15km down the road, which is within trucking distance from Alamos. It features a 4,000m conductivity trend, some of which is associated with copper, gold, zinc, and silver. The company also has projects to the northwest. 

Notably, Meridian Mining acquired the project on a purchase agreement mandating that a mine should be built. Based on the work carried out so far, the company realised that the mine has perfect resource delineation. For VMS systems, the equity component should be focused on mine building due to the presence of the banking debt. This way, the project is financed but the equity component is not diluted to the shareholders. 

Meridian Mining is targeting a resource by Q2 end or early Q3. The company has a very high standard of technical excellence which it is looking to employ in the upcoming resource. 

The company has plans to conduct further exploration. It is also focused on the development and follow-up of intersections and anomalies. It has plans to build a mine. At the same time, the company is looking to carry out infill drilling to convert indicated resources. The company intends to define the complete footprint of the mineralized envelope and get the critical parts into the minimum indicated resources. 

As per the company’s CEO, the first resource has justifiable analogies on the Lassonde curve of valuation in equity growth. This is a very good curveball for the investors to follow and it works very well for companies with a single asset. Due to the presence of multiple discoveries, the Lassonde curve won’t have an influence on the build-scale of the VMS camp. The company is also looking to develop 7 hydrothermal centres. As per the company, the Lassonde curve doesn’t apply here as the project is built-to-scale and has ongoing discoveries.  Notably, the company already has its next resource target for the fall season, the Santa Helena mine. 

Meridian Mining has 50km in the Cabaçal build along with a large footprint of parallel builds to the west. These builds feature the exact same stratigraphy, and range of anomalies, along with geophysical and geochemical anomalies that were defined in the first year of BP’s work. Meridian Mining anticipates that this project has a multi-decade exploration and discovery proposition.

To find out more, go to the Meridian Mining website