Metals Exploration Keeps Nicaragua Build on Track While Dupax and Abra Targets Offer Long-Term Growth

• Nicaragua project tracking on time and on budget at $160M, with commissioning planned for September-October 2026 and first gold targeted for November 2026
• Targeting all-in sustaining costs of $900-1000/oz at Nicaragua versus current $1200-1300/oz in Philippines, positioning company well below industry average
• Philippines operation maintaining 2% annual cost growth versus industry 10-15%, demonstrating superior cost management through owner-operator model
• Copper-molybdenum and copper-gold porphyry targets in Cordillera region with potential to transform company scale, plus VMS discovery potential at Dupax
• Innovative approach to artisanal mining integration and environmental management creating long-term operational stability and community support

Introduction to Metals Exploration & Operations

In an era where gold producers struggle with escalating costs and construction overruns, Metals Exploration (AIM-listed) stands out as a compelling investment case built on operational excellence, disciplined capital allocation, and genuine exploration upside. CEO Darren Bowden leads a company with a producing gold operation in the Philippines and a gold project under construction in Nicaragua, creating a dual-asset platform designed to deliver consistent cash flow while funding aggressive exploration programs.

What sets Metals Exploration apart isn't just its asset base it's the company's demonstrated ability to execute. Over the last five to six years in the Philippines, the company's cost growth has been approximately 2%, compared to industry peers experiencing 10-15% increases with CPI changes. This operational discipline, combined with strategic positioning in two complementary jurisdictions, creates a foundation for sustainable growth.

The Philippines operation provides immediate cash flow and operational know-how, while Nicaragua represents a step-change in production scale and cost structure. Behind these near-term catalysts lies an exploration portfolio that could redefine the company's long-term trajectory, particularly in the highly prospective Cordillera belt where major copper-gold discoveries have historically occurred.

Interview with CEO, Darren Bowden

Project Progress

The Nicaragua construction story exemplifies what disciplined project execution looks like in practice. The earthworks for the processing plant are complete, mine pre-stripping and road construction are advancing, with the tailings facility road 50-60% complete, and virtually all major components have been purchased. The only outstanding item is the transformer, scheduled for procurement within the week.

The company is ahead of schedule in nearly every aspect of the build, with all major tenders awarded including structural steel, steel erection, concrete formation and pour. With engineering nearly finished and procurement substantially complete, the $160 million budget has become increasingly tight and predictable, effectively de-risking one of the primary concerns investors have with development-stage mining companies.

The key to this performance lies in Metals Exploration's owner-operator approach. Rather than outsourcing to major contractors, the company manages the total package itself, handling engineering with Gress Engineering out of Queensland, Australia, while maintaining direct control over procurement, contract management and deliveries. This model provides superior cost control and eliminates the markup typically associated with turnkey EPC contracts, while giving management complete visibility into project execution.

Energy Costs & Operational Efficiency

While many investors focus primarily on capital costs during construction, operational costs ultimately determine a mine's profitability over its life. Energy represents the single largest operational cost driver in Nicaragua, at approximately 21 cents per kilowatt-hour through the government-owned system, accounting for 35-40% of total costs. The material being processed requires significant grinding power the Nicaragua plant will deploy the same 7.2 megawatt grinding system used at the Philippines operation despite having half the capacity.

However, labor costs provide a structural competitive advantage. In Nicaragua, labor represents only about 12% of total costs, compared to 40-50% in developed markets like Australia or Canada. Combined with management's demonstrated cost discipline, this positions the company to maintain industry-leading margins even in an inflationary environment.

The company will produce 50% more ounces than the Philippines operation at roughly the same cost structure, bringing all-in sustaining costs down to around $900-1000 per ounce versus the current $1200-1300. In today's market, where many producers cite $1,400 as the "new normal" for all-in sustaining costs, sub-$1,000 costs represent a genuine competitive moat that translates to operating margins exceeding 60% at current gold prices above $2,600 per ounce.

Artisanal Mining

One of the most innovative aspects of Metals Exploration's approach involves its integration of artisanal mining into a sustainable framework. The mining law requires 1% of resources be offered to small-scale mining, though significantly more small-scale miners operate than this allocation would support. Main production areas including the entire Lindia pit have been cleared of small-scale miners through negotiated agreements with cooperatives, while the company is developing partnerships with in-country companies to manage small-scale operations on lower-priority targets.

The proposed model involves establishing a small-scale processing plant on company property where artisanal miners can sell ore for processing under controlled conditions, eliminating the environmental and human health disasters created when miners crush and process ore in their homes. Revenues from this operation will fund restoration of environmentally damaged areas, creating a system where small-scale mining helps remediate its own historical impacts.

The government actively participates in this framework, recognising both the sustainability benefits and the additional tax revenue generated through formal processing versus informal operations. This collaborative approach builds goodwill with regulators while addressing genuine community concerns a foundation for long-term operational stability that many mining companies fail to establish.

Environmental Challenges & Government Collaboration

The recent six-week suspension at the Philippines operation illustrates both the challenges of operating in developing jurisdictions and the importance of strong government relationships. After successfully relocating approximately 1,500 people from informal mining operations with government support, a small number of miners returned and began using liquid cyanide in underground workings, leading to fatalities when the company was unaware of the unauthorised activity.

The government is now proactively helping prevent further unauthorised access and supporting remediation efforts. The company has implemented protocols for testing and managing any cyanide-contaminated material, designating it for direct CIL processing with planned oxide ore at end-of-mine-life. Despite losing over six weeks of production including circuit replenishment time, the company expects to hit the bottom end of production guidance while maintaining cash flow guidance of $110-120 million, helped by higher gold prices.

Production Updates

The Philippines operation at Runruno continues performing strongly despite the temporary disruption. Prior to the incident, the operation was achieving 90-91% recovery rates through its biotech processing system. While some oxide material has reduced recoveries by 1-2% in recent quarters, the company maintains strong performance above 89-90% for 2025, with expectations to stay above 85-86% even in 2026 as more transitional material enters the mill.

Regarding life-of-mine extension, management is refreshingly candid about limitations. The orebody has remained essentially fixed despite four years of efforts to extend it, with the six-week delay simply shifting production into the following year rather than representing lost ounces given the 18-month remaining mine life.

Rather than chasing marginal extensions at Runruno, management focuses energy on genuine opportunities particularly the Dupax VMS target that could provide new feed for the processing infrastructure and the Abra porphyry targets that represent potential company-making discoveries.

Future Prospects

The exploration portfolio represents where Metals Exploration transitions from a solid mid-tier producer to a potential company-maker story. Most immediately, geophysics has been completed at Dupax, with the first drill rig moving into position for a 300-meter hole targeting a VMS feeder zone between 50 and 300 meters depth. As Runruno's system is decommissioned in September 2026, it will be replaced with flotation circuits to produce copper and zinc concentrates, with the plant undergoing five to six months of reconfiguration to emerge as a base metals concentrator.

The longer-term opportunity at Abra dwarfs near-term targets in potential scale. The main target is a copper-molybdenum porphyry clearly visible at surface, with additional copper-gold porphyries to the north and south in the Cordillera, home to some of the Philippines' largest deposits including the 40-million-ounce Far Southeast deposit. Management characterises Nicaragua and Dupax as "forerunners to give us the cash to move to that next stage" of developing Abra, which CEO Bowden calls the company's "white whale".

The company is working through indigenous peoples' approvals with the government, targeting Q1 2026 for initial drilling with two or potentially three rigs. While cash-flow positive from operations, management is considering a small financing package to ensure Nicaragua construction continues uninterrupted, demonstrating financial sophistication by accessing capital from a position of strength to optimise project timelines.

Investment Thesis for Metals Exploration

• Nicaragua construction on schedule for November 2026 first gold pour $160M budget intact with all major equipment purchased
• Cost advantage of $900-1000/oz all-in sustaining costs positions company 30% below industry average of $1400/oz
• Philippines operation generates $110-120M annual cash flow, fully funding Nicaragua construction without dilution
• Dupax drilling program beginning immediately with potential to extend mine life using existing permitted infrastructure
• Abra "white whale" porphyry target offers tier-one discovery potential in world-class Cordillera copper-gold belt
• Proven management track record: 2% cost growth versus 10-15% industry average over six years demonstrates execution capability
• Strong government relationships in both jurisdictions enable collaborative problem-solving and operational stability
• Self-funded growth eliminates equity dilution risk while maintaining aggressive exploration programs

Metals Exploration represents a compelling investment opportunity that combines near-term execution visibility with legitimate long-term transformation potential. The Nicaragua development, tracking ahead of schedule and on budget toward November 2026 first gold, will transform the company's cost structure and production profile while management's demonstrated ability to control costs provides confidence that projected $900-1,000/oz all-in sustaining costs will materialize.

Beyond Nicaragua, the exploration portfolio offers optionality that could redefine the company's scale. Dupax provides near-term resource growth potential leveraging existing infrastructure, while Abra represents a tier-one porphyry discovery opportunity in one of the Philippines' most prospective terranes. The strategy is elegant: use cash flow from proven operations to fund high-conviction exploration that could create orders-of-magnitude value.

In an environment where many gold producers struggle with costs exceeding $1,400 per ounce and limited organic growth opportunities, Metals Exploration stands out. The combination of disciplined execution, industry-leading cost structure, and genuine exploration upside creates a rare investment profile immediate cash flow supporting patient capital allocation toward potentially transformational discoveries. For investors seeking exposure to operational excellence with asymmetric upside, Metals Exploration warrants serious consideration.

Macro Thematic Analysis: The Strategic Value of Low-Cost Gold Production in an Inflationary Environment

The investment case for Metals Exploration must be understood within the broader context of structural changes reshaping the gold mining industry. Industry-wide all-in sustaining costs have climbed relentlessly over the past five years, driven by labor inflation, energy cost increases, supply chain disruptions, and rising input costs for consumables. What was once considered a "good" cost structure at $800-900 per ounce has shifted dramatically, with many executives now characterizing $1,400 as the "new normal"representing a structural challenge rather than a cyclical phenomenon.

Against this backdrop, gold prices have rallied to record levels above $3,600 per ounce, driven by monetary policy uncertainty, geopolitical tensions, and central bank accumulation. However, the gap between gold prices and production costs determines profitability and free cash flow generation. A company producing gold at $1,400 per ounce earns significantly lower margins than one producing at $900, even at identical gold prices. This margin differential compounds across the mine life, determining how much cash is available for shareholder returns and exploration investment making low-cost production a genuine competitive moat in an inflationary environment.

The industry also faces a critical shortage of organic growth opportunities, with discoveries declining in both number and size while existing mines deplete. Companies with genuine exploration potential in underexplored, highly prospective terranes possess optionality that markets chronically undervalue during development phases. For investors with appropriate time horizons, the combination of near-term cash flow certainty from low-cost operations and long-term discovery potential creates asymmetric return profiles increasingly rare in the modern gold sector, particularly when paired with operational excellence in emerging markets offering structural cost advantages that developed economies cannot replicate.

TL;DR

Metals Exploration (AIM-listed) is delivering on two fronts: a producing gold operation in the Philippines and a $160M gold project in Nicaragua, on track for first gold in November 2026. Nicaragua will produce 50% more ounces than the Philippines at sub-$1,000/oz AISC, well below the industry average of $1,400/oz, creating a durable margin advantage. The Philippines operation continues generating $110–120M cash flow annually, funding Nicaragua without equity dilution. Beyond near-term catalysts, exploration at Dupax and Abra in the Philippines could transform the company’s scale, with Abra offering tier-one porphyry potential. With disciplined execution, government-backed community engagement, and a structural cost moat, Metals Exploration offers both near-term visibility and long-term asymmetric upside.

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