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Meeka Metals (ASX:MEK) tantalised the market on Thursday with a feasibility update outlining a potential world where it generates $1 billion in cash.
The small-cap company – valued at around $195.7 million through lunch Sydney time – has long been developing its Western Australian-based Murchison Gold Project (MGP), and now the company has the added bonus of record-setting upward momentum in gold prices through 2024.
The company posits it needs an additional $46M to get the MGP up and running with $5M of that going to underground works.
According to the calculus of the updated study, gold sales increased by 40% to 544Koz accounting for “peak annual gold sales of 76Koz in year five” and average sales of 65Koz over the first seven years.
Notably, a lot of the update hinges on the upward price pressure for gold – Meeka wrote on Thursday that “every $100/oz increase in gold prices increases undiscounted pre-tax free cash flow by ~$52M.”
Fortunately, gold probably isn’t going to reverse its YTD gains meaningfully (though this finance journalist doesn’t own a crystal ball, as much as he may pretend otherwise).
As an exercise in reminders, gold has jumped +5.75% over the last month to around US$2,718/oz.
That comes even as the price had something of a correction following the Trump election win which drove people back into Wall Street equities.
Blackstone said on Wednesday it expects this trend to continue – to such an extent its private equity exits could double in 2025. Aggregate short interest in the NASDAQ also dipped -0.8% in late November.
Still, gold tracks inflation, and after nearly half a decade of COVID-borne price pressures affecting just about everything, it would be highly unusual for gold to stage some kind of dramatic reversal.
Which is good news for Meeka – and a point of interest for its shareholders.
Management was fairly bullish on the update, too.
“While we are already well on the way to production in the Murchison, the Study highlights the material impact expanded processing capacity has on both production and cash flow.,” Meeka chief Tim Davidson said.
“The company is now laser focussed on project delivery and first gold by mid-2025, as well as the clearly defined succession of new mines to be developed over the coming 24 months as production ramps up.”
MEK last traded at 8.2cps.
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