Hannam & Partners18 Mar 2025 11:19
Hannam & Partners Research
Plant secured for La India, maintaining momentum towards 2027 production Metals Exploration (“MTL”) has entered into an agreement to acquire a secondhand plant for US$9.7m which will be funded from cash and cashflows with staged payments over the next 6 months. The plant will be re-assembled at the newly acquired La India project in Nicaragua. This is in line with management’s comments and should maintain the momentum towards first production in 2027. The main catalysts should be meeting guidance at Runruno in the Philippines, hitting development milestones at La India, and initial exploration at the Abra and Dupax projects in the Philippines. Our valuation remains GBp13/share. Secondhand plant sourced from Alaska, shipment in H2 MTL has announced it has entered into a definitive agreement with Almaden Minerals to acquire a 7,000t/day plant for US$9.7m with US$2m paid within 14 days, US$3m paid on verification of transport scheduling, slated for March 31st, US$2m paid on final inspection scheduled for 30th April, and US$2.7m paid when the assets are prepared for shipment around August 31st with an adjustment made pending a final inspection. A vessel will be chartered to transport the plant to Nicaragua from its current location in Nome, Alaska, which has an ice free shipping window from late May to early October. The plant was previously at the Rock Creek mine in Alaska where construction commenced in 2006 with start-up in 2008. The mine and plant were subsequently placed on care and maintenance in 2008 and as such the plant has relatively few operating hours. The equipment includes a primary jaw crusher and secondary & tertiary cone crushers, a ball mill, Falcon gravity concentrator, CIL agitator and impellers, a thickener, a gold room, a laboratory and associated pumps, motors and spare parts. Almaden acquired the plant in 2015 for US$6.5m plus approximately C$350k of shares. MTL also acquired a new ball mill as part of the acquisition of Condor that can be integrated into the circuit. This appears to be a good price for this plant, which although old has not been extensively used and was well maintained during storage. The plant itself should only need minor refurbishment once reassembled, however the control and monitoring systems may need to be updated to take account of improvements over the past 20 years. La India should produce 145koz/year from 2027 La India has a M&I resource of 1.14Moz, with a further 1.26Moz of inferred material that should sustain average production of 145koz over at least 12 years, with upside potential from the surrounding exploration leases. The La India project is fully permitted and construction-ready with access to grid power and paved roads, although management has flagged there is work to do on the power connection and final tailings facility location. Average AISC is expected to be US$1,176/oz, and MTL has guided for initial capex US$122m, which we believe can be funded
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