Month: June 2021

Recent collapses of bridges and a Florida condo building highlight what can go wrong when basic structural and foundational elements are neglected and allowed to deteriorate.

As corrosion and cracking spread, they may go little noticed at first, with repairs and upgrades put off. Meanwhile, the risks steadily build of a single point of failure leading to catastrophic consequences.

America’s deteriorating infrastructure is badly in need of fixing. On that issue, there is wide bipartisan agreement.

On Monday, President Joe Biden touted a $1 trillion infrastructure deal moving forward in Congress with support among some key Republicans and Democrats.

It’s a rare glimmer of bipartisanship in a starkly divided Washington.

But bipartisanship doesn’t imply fiscal responsibility. Whenever Republicans and Democrats get together and agree on something, you can bet it will entail more spending – and therefore more debt.

Whatever the merits of infrastructure spending (and many politicians have an expansive view of what constitutes “infrastructure”), it won’t be offset by cuts in less essential government expenditures. Instead, lawmakers are proposing tax hikes and more aggressive IRS enforcement actions aimed at bringing home more revenues.

At the end of the day, however, the bulk of any new infrastructure spending will likely be paid for through borrowing. New currency units will be conjured up and pumped into things like concrete and steel.

With building materials and construction costs already surging this year, the government’s stoking of additional demand will only make the problem worse.

A larger inflation problem is brewing. It’s not about supply bottlenecks or surging demand in particular areas, though these phenomena are typically the focus of “inflation” stories in the mainstream media.

What underlies all the recent (and likely future) price spikes is currency depreciation that is being carried out systematically by the Federal Reserve at the best of Congress.

The Fed aims to engineer an inflation rate that averages 2% over time. According to central banker logic, deliberately pushing inflation above 2% is now warranted because of past undershoots.

Inflation is running hotter than the Fed expected. Not to worry because it’s “transitory,” Fed Chairman Jerome Powell insists.

But what if confidence in the U.S. dollar is more permanently broken? Could cracks in the foundation of the world’s reserve currency lead to a sudden and precipitous collapse in its value?

A dollar collapse scenario is certainly possible. But it may play out over many years or even decades rather than all at once.

The result would still be catastrophic for holders of U.S. dollars and bonds. Instead of a dramatic default or devaluation announcement, purchasing power losses would accumulate steadily and relentlessly – perhaps finally accelerating into a crescendo of hyperinflation.

It’s how many governments throughout history have dealt with unsustainable debts.

“I think unsustainable just means that the debt is growing faster than the economy. That’s been the case for a long time,” Powell said in testimony before Congress last week.

“I have no question that the U.S. government will be able to pay its bills for the foreseeable future,” he added. “It’s also true though, that we’re on an unsustainable path.”

If federal finances are unsustainable, then how can Powell be so confident the government will have no problem paying its bills?

An individual or business on an unsustainable path would eventually get cut off by creditors and go broke.

Uncle Sam enjoys the privilege of an unlimited credit line with the Federal Reserve. As he continues to abuse that privilege, currencies with tightly limited supplies and zero counterparty risk – gold and silver – stand to gain in comparison to fiat Federal Reserve note profusions.

Precious metals are infrastructure – monetary infrastructure that instills confidence and stands the test of time.

      

Mainstream analysis sees rising consumer prices and looks for a monetary cause. Also, when it sees an increase in the quantity of dollars, it looks for rising consumer prices.

It is a fact that the quantity of what the mainstream calls money (i.e. the dollar) has risen at an extraordinary rate. The M0 measure has nearly doubled since the start of Covid. It is also a fact that many prices have jumped up significantly.

So only one question is open for debate. Is inflation transitory as Fed apologists claim? Or is it now running away, as Fed critics worry?

The wrong question about inflation

We think this is the wrong question. Bear with us as we review some ideas we’ve discussed previously (though in a new light). We will add some new ideas, and then get back to the present question about prices.

We have written a lot of material about nonmonetary forces that drive up prices. We coined a term for the most common one: useless ingredients. This is when a regulator forces producers to literally or figuratively add stuff to their products, which consumers do not value (and often do not even know about).

For example, a baker bakes bread using the well-know ingredients of flour, water, and yeast. But a regulator forces him to add a preservative. Presto, the price of a loaf jumps 10%. The consumer price index also jumps 10% (assuming that regulators of the other goods in the basket measured by the index are also adding useless ingredients). People say “aah, inflation” and point to a chart of M0 or M3 or whatever, and nod sagely.

This is not a monetary phenomenon.

It was not caused by the Fed. The Fed should not do anything differently from what it was previously doing (ceding, for argument’s sake that the Fed should ever be doing anything, or even exist at all). Interest rates should not change. Investors should not demand higher returns (assuming they weren’t disenfranchised in our regime of irredeemable currency). One should not say that the dollar’s purchasing power is lessened. The dollar is buying just as much as it did before. Only now, some of what it buys is stuff that the consumer does not want, and may not even know is in the bread, i.e. calcium propionate.

We have written that when interest rates fall, it both enables and forces producers to borrow more to increase production. For example, the interest rate is 5%. The baker does not think it will be profitable to borrow to buy more ovens to bake more bread. Then the interest rate drops to 4%. Now it is profitable. So the baker borrows and expands. Unfortunately, so do his competitors. Unless the public increases its appetite for bread, the price must inevitably drop.

The same thing happens with oven manufacturers, and every other producer of goods. Lower interest rates is an incentive to borrow more to build more plant to produce more goods.

It goes against everything taught in mainstream economics, but this is how an increase in the quantity of dollars can cause prices to go down. When those dollars are borrowed by producers, on a downtick in rates. The result is soft prices, if not falling prices. And falling unit margins.

Even if the government doles out free cash to a hundred million people, and tells them to go forth and spend, there is not necessarily rising prices. Sure, demand rises. But so long as interest rates remain the same or continue to fall, producers borrow more to expand capacity to serve this new demand. And while the demand is temporary, depending on political will, the capacity once built is there for a long time.

This also seems counterintuitive. It seems to make sense to think of an increase in the quantity of dollars like dilution. The orphanage has a certain amount of food to put in the soup, but another hungry mouth comes to dinner. They add water. Everyone gets the same volume of soup as before, but the calorie value of it decreases.

Understanding the purchasing power of the dollar

It’s tempting to think of currency like this. And convenient. It’s a simple linear and static model. There is one independent variable—quantity—and one dependent variable—purchasing power. Tempting as it may be to view it this way, this has nothing to do with reality.

OK, one might say, if the extra purchasing power of the welfare beneficiaries who get the free cash does not come out of the purchasing power of everyone else’s dollar, then where does it come from?

It comes from the accumulated capital stock. It robs the savers of their savings. Recall, we just saw that producers, of the things which the free cash crowd purchase, borrowed to expand their bakeries and factories. This does not push up the price of bread and manufactured goods. To reiterate, it robs the savers of their savings. Their savings has gone, not to finance production of goods which are ultimately exchanged for other goods, but goods which just go into the black hole of consumers who produce nothing.

There is no problem with the purchasing power of your dollar. The problem is with the counterfeit credit into which your life savings is lent. And the result is that yield purchasing power for all capital assets keeps dropping.

A Different Era

The 1950’s through 1970’s was a period of rising consumer prices. And this was a monetary phenomenon. Back then, producers did not leisurely wait for a downtick in interest rates. They did not borrow to increase production capacity. They aggressively bid up the rate, to increase their inventory buffers of raw materials and partially completed products.

There was not only a faster rate of buying commodities than consuming finished goods. But the former rate was growing relative to the latter. The most surefire way to increase profits, was to slow down the path from raw materials to finished goods. The longer it took, the greater the profit. This was because prices were incessantly rising.

And look at the incentive offered by the interest rate. Back then, it was rising. That meant that it was harder and harder to justify borrowing to build a plant (now, with a falling rate, it is easier and easier to justify borrowing to build a plant). Indeed, when old plant reached the end of its life, there may not have been a business case to replace it. It may have been economic to shut it down entirely.

Money and credit – it’s just not that simple

We write all of this to make a simple point about a not-so-simple system. To understand the monetary cause of rising or falling prices, one has to see the motion. It’s a dynamic system, with the rate of one process changing relative to the rate of another.

The classic chart of supply and demand is a static snapshot. It can’t tell you whether the rate of increase of supply is outstripping the rate of increase of demand, which may be static or declining. It can’t tell you which way interest rates are going, and what effect that trend will have on supply or demand.

This brings us to today. In our post-Covid (or soon-to-be post-Covid) economy, prices have risen. People call this inflation, point at the increase in the quantity of dollars, and blame the Fed. They debate if this inflation is transitory. By which they mean will the Fed keep printing more and will that printing continue to cause rising prices.

As we discussed above, these are the wrong questions (aside from which, the Fed does not print—it borrows).

So, why are prices rising if not because of inflation?

The question is what caused prices to rise? Let’s call our thesis “lockdown whiplash”. Whiplash is when something is forcefully slammed in one direction, then rapidly accelerated in the opposite direction.

First, governments locked down the economy in response to the Covid virus. This did not just close restaurants. Notably, a significant percentage of the meat packing plants in the US were closed. The immediate result was that ranchers and farmers suffered great losses, as they had to destroy herds. At the same time, the price of meat at the grocery store skyrocketed.

Was this inflation? Cattle and hogs went “no bid.” So the price received by ranchers and farmers was zero. They certainly did not feel any inflation. With supply decimated, consumers paid a lot more. They considered this to be inflation, though it was clearly nonmonetary.

Fast forward a bit. Some plants may have gone out of business. Certainly, some farmers and ranchers did. It doesn’t help that they were already loaded up on debt, thanks to 39 years of falling interest rates luring them to borrow more—pre Covid.

With supply tight for the time being, prices must be higher than before. Is this inflation?

Next, let’s look at the shipping business. During the height of lockdown, shipping from China to America came to a standstill. The ships and the containers were stranded where they happened to be, as the flow stopped.

At the same time, demand also dried up. Retailers were obviously not ordering more merchandise. As people lost their jobs by the millions, they reduced their purchases of stuff. And certainly, nobody was going shopping in retail stores.

With retail now reopened, people are catching up on the things they had put off buying. Much of this buying was not cancelled, just postponed to today.

The problem for the shipping industry—and indeed the whole supply chain—is that it is designed for a steady rate of demand. It is not robust to a prolonged shutdown followed by a spike. Even though total goods bought, manufactured, and shipped may be the same, the industries involved were first laying off workers, going bankrupt never to return, shutting down marginal plant, etc.

Then, later, demand spikes. Most businesses would not be able to handle a year and half worth of volume compressed into a few months, even before Covid. And after, with reduced staff and plant, there is no way.

Add to this, that governments around the world instituted welfare programs to pay people who lost their jobs. In many cases, these former workers prefer to remain unemployed. They are paid as much or more to sit on the couch playing X-Box than to go to work.

Add to this the extra demand due to various kinds of stimulus checks. And then there is the so-called “wealth effect.” This is economists’ term for the increase in consumer spending that comes when the central bank pushes down the rate of interest, and hence pushes up asset prices. Such as home prices.

How many people are buying more stuff, because they feel richer, because their homes went up in value? We don’t know—but we do know that much of the stuff they are buying is competing with other goods to get into the limited container capacity available to bring stuff over from China.

What a mess!

The one thing we can be sure of is that falling interest rates are, even now, stimulating companies in every industry from cattle ranching to meat packing to container manufacturing to borrow more to build more capacity to produce more of these goods, at higher volumes and lower costs.

Of course, there is a lag time to bring new capacity online. But when it does, the 2021 headlines that scream “inflation will skyrocket in the coming years” will look rather silly. The way the ones from 2009 do.

      

Source: The Critical Investor for Streetwise Reports   06/28/2021

The Critical Investor profiles Meridian Mining’s latest drill results and notes that the company recently raised CA$2.73 million from the ongoing exercise of warrants.

Although metal prices and especially the gold price took a breather, Meridian Mining UK S (MNO:TSX.V) remains unfazed and keeps providing investors with solid drill results from its Cabaçal VMS Copper-Gold Project in Brazil, at or even above expectations of management. Its ongoing 10,000-meter field program of diamond drilling returned assays from hole CD-010 to CD-019 in the last few weeks, and as we are almost already getting used to it, almost all holes contained economic mineralization. Highlights were CD-013 (116.5m @ 0.7% copper equivalent [CuEq]), CD-017 (46m @ 1.0% CuEq), and CD-019 (110.7m @ 0.6% CuEq), representing the thickest intervals to date, and all starting close to surface, which means a low overall strip ratio for future open pit potential becomes more and more likely, something pleasing management for sure.

All pictures are company material, unless stated otherwise.

All currencies are in U.S. dollars, unless stated otherwise.

The company is targeting all three zones with the ongoing drill program, being the Eastern Copper Zone (ECZ), Central Copper Zone (CCZ) and Southern Copper Zone (SCZ), using a combination of twin and infill drilling. Over 4,800 meters of drilling has been completed to date, meaning almost half of the program is done.

Here is the most recent map with drill collars to date, zoomed in a bit and with drill holes CD-010 to CD-019 circled orange for more clarity:

As can be seen, after the company targeted the more outer regions of the Southern and Eastern Copper Zone with drill holes CD-001 to CD-009, the last two batches with holes CD-010 to CD-019 focused more on zones within the historical workings around the Central Copper Zone. When looking at the map as a non-geologist, it seems as if the sequence of drill holes appears to be somewhat random instead of systematically exploring zones, something I noticed earlier, so I wondered what the overall strategy behind this particular pattern is, if they want to make sure they have some very good twin holes with every batch, mixed with more high risk infill drill holes which could disappoint of course, or following up on local geological concepts, or mixing some exploration of outer limits with infill each time in order to make efficiency for scale and grade as high as possible, or something else. CEO Adrian McArthur answered that the selection of sites drilled represent a combination of twin and infill holes; the twin holes need to span the range of holes drilled over the course of the project history. The pattern is different to what we would see in a newly discovered body of mineralization that would undergo systematic grid spacings. The program also targets certain high-grade copper zones that were previously unmined, to both the near surface and extensions to the southeast and northwest.

Since drilling within historical underground workings could pose problems when the drill bit hits underground voids, as drill bits could be lost and holes could have to be terminated then, I wondered if management already encountered more of these situations besides the several cases reported like at hole CD-012, and if not, how they manage to work around this, as I am not sure how accurate their underground maps/modelling are of the current situation. McArthur answered the position of the underground room and pillar workings can be seen in plan view in the diagram and is digitized from end-of-mine records. Workings do present a challenge in drilling. When we anticipate voids, we drill vertical holes with larger diameter HQ reducing to NQ diameter, which in good conditions allow us to cross a couple of levels.

It was interesting to read about the deployment of their new deep penetrating EM geophysical equipment, with surveys in progress over VTEM conductors at the Cabaçal West target, followed by surveys at the Cabaçal South conductors, in an attempt to expand the footprint of the known mineralization, well beyond the limits of current underground workings. As per the news release of June 15:

“Extensions to the mineral system will be surveyed by a combination of EM and IP geophysical surveys in the coming weeks. The company’s own modern Induced Polarization equipment is in the field targeting the disseminated and more brecciated styles of Cu-Au mineralization; supplementing the company’s EM equipment that is now surveying and targeting more massive sulphide targets; with first results by late June. First IP and EM results are expected to extend mineralisation out from the mine’s limits and to vector near mine targets, starting with the down plunge Cabaçal West VTEM plates then proceeding to the Eastern-Copper-Zone (ECZ) ~1000 meters south-eastern extension. Once the mine and near-mine upside is defined, the geophysics will expand along the 16.0km long Mine Corridor zone.”

The location of the VTEM conductors at the Cabaçal West target are not indicated at the map provided in the news release, so I asked McArthur to draw them in the map below:

On a side note: a recent soil sampling program confirmed lots of promising exploration potential to the northwest, for about 1,000 additional meters, and management currently has one rig allocated to extending the drill program over this corridor.

The collection of white stars at the right (and south-east of the Eastern Copper Zone) indicates the VTEM anomalies which will be followed upon after the Cabaçal West VTEM plates are surveyed. The narrow VTEM plates located to the south are secondary targets, and will be surveyed together with the VTEM plates at the Cabaçal North West target. These VTEM targets are located much deeper than current drilling and historical workings, as can be seen here in this schematic section, the VTEM targets being visualized by reddish rectangles, extending to about 600m depth:

As these targets are located much deeper, I wondered how this could be related to the geology of the existing VMS mineralization of Cabaçal, and what McArthur hopes/expects to find here. With the current open pit concept as a starter pit, any nearby underground mineralization certainly doesn’t need to be the grade a standalone underground operation would need. He stated that: “The company will be targeting the Cabaçal West conductors for massive copper sulphide mineralization. The conductors are distributed along the “mine corridor” position—the stratigraphic horizon which hosts the Cabaçal Cu-Au-Ag deposit and the St Helena Zn-Pb-Ag-Au deposit. The stratigraphic horizon is tilted and thus has potential for discovery of deposits down-dip. The history in analogue VMS camps is that some deposits are discovered at surface, whilst others are present at depth. The belt has a high degree of deformation—with the lower contact of the Cabaçal mineralization pile being a thrust fault. Targets such as Cabaçal West could potentially represent structural offsets to the Cabaçal system itself, or the various VTEM targets may be related to separate hydrothermal centers.”

So far for the more general concepts of mineralization and exploration, let’s have a look at the recent drill results. The absolute highlights of the latest two batches are the following three assays:

• CD-013: 116.5m @ 0.7% CuEq of cumulative Cu-Au-Ag mineralization from 8.0m; including:
  • 94.0m @ 0.7% CuEq from 8.0m; including 8.5m @ 1.9% CuEq from 54.5m;
  • 22.5m @ 0.7% CuEq from 110.5m; including 5.6m @ 1.6% CuEq from 119.2m
• CD-017:
  • 9.6m @ 3.3% CuEq from 56.0m
• CD-019: 110.7m @ 0.6% CuEq from 12.0m, including:
  • 62.5m @ 0.6% CuEq from 12.0m, including:
    • 2.5m @ 3.1% CuEq from 20.7m;
    • 2.2m @ 3.5% CuEq from 53.5m;
  • 17.2m @ 1.2% CuEq from 130m

I especially like the near surface character of these long intercepts, resulting in a hypothetical strip ratio of 0.07–0.63:1 at these particular collars, which of course isn’t the case at all mineralized intercepts, as the envelope gently dips to the southwest:

Notwithstanding this, an average strip ratio of close to 1–1.5:1 seems to be achievable here, just like an average CuEq grade of about 1%, and this could make this deposit extremely economic. For reference, an open pit gold deposit of 1 gram per tonne (g/t) and a strip ratio of 4:1 is already economic (after-tax internal rate of return [IRR] >20%) at US$1300/oz gold, with a gross metal value of just over US$40/t. At a current copper price of US$4.28/lb Cu, the gross metal value of Cabaçal would be US$94/t at a 1% CuEq grade, so at a much lower estimated strip ratio than 4:1, the economics will certainly be impressive. It is a bit early to go after economics yet, but rest assured, as soon as management seems to get a grip on the size potential, I will set up a peer comparison and derive hypothetical economics for Cabaçal from there.

Back to the drill results. Here are the tables with the complete results, with the highlights in green:

Here is the zoomed in drill collar map again for reference, and keeping you from scrolling up and down again and again:

Holes CD-010 and CD-011 are assay results from the northwestern limit of the CCZ mined area, highlighted the presence of shallow layers of open Cu-Au mineralization providing future drill targets extending to the northwest of the historical workings. As CD-011 didn’t return much economic mineralization, it might indicate the northern end of the Central Copper Zone. CD-010 is much more interesting, with all the stacked layers, solid grade and near surface, it could provide the potential for extension along strike.

CD-012 was designed to twin a zone of Cu-Au mineralization intercepted by BP Mineral’s DDH JUSPD076 that returned (pre-mining) 42.2m @ 0.9% Cu, 0.6 g/t Au and 3.2 g/t Ag from 59.8m. The CD-012 intercept of the same zone returned a favorable 40.0m @ 0.6% Cu, 0.6 g/t Au, 2.2g/t Ag, 0.1% Zn from 59.8m. This excludes the mineralized zone within the 4.0m mining void that was intercepted by CD-012. According to McArthur, accounting for the mining void, the hole shows a good correlation with the historical results.

CD-013 targeted the Eastern Copper Zone and intercepted extensive mineralization starting at 8.0m. The hole confirms that thick high-grade shallow mineralization remains after the selective but short-lived mining in the 1980s and 1990s by BP Minerals and Rio Tinto. The results highlight the potential of the ECZ, for infill resource definition drilling. As CD-013 is located at the edge of historical workings, and starting close to surface, with the mineralized envelope trending upwards to surface, I wondered what the results of historical hole JUSPD150 were:

Continuing at this train of thought, I wondered if management isn’t designing a fence, off-setting the edge of the historical workings by, for example, 50 to 100 meters. I have drawn a light blue line in the above map with the drill collars as an example for such a fence, consisting of, say, 3–4 holes. McArthur answered the Eastern Copper Zone corridor will be targeted by fences of drill holes as part of the ongoing program. The corridor projecting through the decline position is comparatively sparsely drilled—being shallower and more copper-dominant was not a significant focus in the BP/RTZ programs, so there is a need to infill this as part of the resource definition program.

CD-014 was designed to more or less twin JUSPD048 that returned 20.1m @ 0.3% Cu, 0.0g/t Au from 22m, 17.6m @ 0.3% Cu, 0.1g/t Au from 47.4m; 40.9m @ 0.7% Cu, 0.6g/t Au from 68.4m). CD-014 returned comparable results to the upper copper zones of JUSPD048, of 26.4m @ 0.3% Cu, 0.2g/t Au, 0.4g/t Ag from 20m, and 20.5m @ 0.6% Cu, 0.3g/t Au, 0.4g/t Ag from 54m). CD-014 struck a void from 75.1m–78.5m, and was terminated without fully traversing the lower results of JUSPD048. As the void was located above the lower results of JUSPD048, I wondered what those lower results were. McArthur stated the hole terminated without transecting the full interval of 40.9m @ 0.7% Cu, 0.6 g/t Au from 68.4m noted above in JUSPD048. Below the void, we would have anticipated ~30.3m @ 0.8% Cu, 0.7g/t Au as part of this historical JUSPD048 intersection

CD-015 was designed to twin JUSPD068, which historically returned 42.7m @ 0.7% Cu, 0.5% Au from 43.8m in the CCZ. CD015 traversed a mining void between 52.7 and 56.4 meters, and assays returned 20m @ 0.2% Cu, 0.1 g;t Au, 0.7 g/t Ag from 12m, and an aggregate 46m @ 0.4% Cu, 0.6 g/t Au, 1.2 g/t Ag from 37m, comprising 15.7m @ 0.4% Cu, 0.1g/t Au, 0.7g/t Ag 37m above the void, and 30.3m @ 0.5% Cu, 0.9 g/t Au, 1.5 g/t Ag from 56.4m. The lower zone included higher grade intervals of 3.8m @ 1.3% Cu, 0.4 g/t Au, 1.7 g/t Ag from 43m, and 6.1m @ 0.4% Cu, 1.0 g/t Au, 1.0 g/t Ag from 67.2m, 4.5m @ 1% Cu, 3.3 g/t Au, 4.6 g/t Ag from 77.9m. The hole terminated mineralization due to the drilling conditions (the holes was not advancing in mildly fractured ground; not assisted by due in the rod string from the void above].

CD-016 was designed to twin JUSPD280 , which historically returned 8.7m @ 0.3% Cu, 0.4g/t Au from 29m, 11.7m @ 1.3% Cu , 0.9g/t Au from 50m, and the lower limit of sampling terminating in disseminated copper mineralization at 75.2m. CD-016 traversed a mining void between 85.2 and 86.2m but the hole terminated at 87.1m in fractured ground marginal to the void, and assays returned results included 14m @ 0.3% Cu, 0.7 g/t Ag from 20m, 26m @ 0.3% Cu, 0.3 g/t Au, 1.4 g/t Ag from 42.5m.

CD-017 was designed to twin JUSPD265 that returned 23.2m @ 0.8% Cu, 0.4 g/t Au, 3.8 g/t Ag from 44.6m (upper limit of sampling) being collared 4.6m from the historical collar. CD-017 returned 46m @ 0.8% Cu, 0.3 g/t Au, 3.4 g/t Ag from 29.0m, including a higher grade interval of 9.6m @ 2.6% Cu, 0.9 g/t Au, 12.2 g/t Ag, 0.1% Zn from 56m. McArthur told me the positive difference between the two intersections was simply that the JUSPD265 had not been fully sampled, reflecting the historical lack of interest in the broader disseminated mineralization halo—requiring careful scrutiny of the database to identify other areas where mineralization may be under-represented as we move towards an initial resource calculation.

CD-018 was designed to twin BP’s JUSPD301 that returned 29.0m @ 1.8% Cu, 1.0 g/t Au, 8.8 g/t Ag from 36.0m. CD-018 returned 14.2m @ 0.3% Cu, 0.1 g/t Au, 0.8 g/t Ag from 9m (an interval incompletely sampled in JUSPD301), and 12.4m @ 0.3% Cu, 0.3g/t Au, 0.7 g/t Ag from 33m. CD-018 encountered a void from 45.4 to 52.6m and was terminated without replicating the lower results of JUSPD301. This was one of the few disappointing results to me, considering the difference. McArthur explained that the higher grade sector of JUSPD301 was located in the lower sector of the drill hole, with the higher grade stringer and breccia sulphide mineralization located in the lowest parts of the pile. The rock mass in some cases around historical mining cavities can be fractured by the original blasting, and inevitably some holes will not be able to cross the full sequence. We will have sufficient holes in the full program nonetheless to characterize the sequence.

CD-019 was designed to infill the ECZ and its aggregated Cu-Au mineralization returned 110.7m @ 0.64% CuEq of disseminated, stringer and breccia sulphide mineralization. Composed of 62.5m @ 0.5% Cu, 0.1 g/t Au, 0.8 g/t Ag from 12m, 31.0m @ 0.2% Cu, 0.3 g/t Au, 0.1 g/t Ag from 84.0m, and 17.2m @ 0.8% Cu, 0.4 g/t Au, 3.9 g/t Ag from 130m. CD-019 terminated ~72m SE of CD-013 at a depth of 174.1m and results are consistent down dip extension to the CD-013 results. As CD-019 resembles the very long mineralized intercept of CD-013, it is clear to me these two could be connected, and continue along strike of the nearby historical workings, but also parallel to these workings as discussed earlier. Management sees scope for some additional infill in this and other areas of the Eastern Copper Zone, which is less densely drilled than other sectors of the deposit.

The treasury holds approximately C$5 million nowadays, also due to ongoing warrant conversions. On June 3, the company reported C$2.73 million from warrant conversions, and according to Executive Chairman Gilbert Clark, the vast majority of these exercised warrants are in safe hands.

As a reminder, the current drilling is part of the Cabaçal Central 60-70 hole drill program for 8,000 meters, of which 30 holes are twinning holes, in order to verify the 21.7 million tonne (Mt) historical resource estimate. Another 2,000 meters is also budgeted to confirm the already defined near-mine and regional targets of the VMS camp. A third drill rig is operational now, increasing batch sizes but also turnaround times for assaying.

Conclusion

Drilling at Cabaçal keeps returning pretty economic results, now also with local intercepts much longer than anticipated (CD-013 and CD-019). It seems the infill program is proceeding as planned, and the 21.7 Mt historical estimate is becoming a reality, to say the least. With the current results, I don’t rule out a 25–30 Mt resource, and I am looking forward to the potential new targets the VTEM surveys might generate. And these targets are only close by, there are also large VTEM conductive plates further away, indicating even more potential. It is still early days at Cabaçal for Meridian, but already very impressive. And again, I’m looking forward to start estimating economics, when management has developed a grip on eventual size of this already substantial VMS deposit.

I hope you will find this article interesting and useful and will have further interest in my upcoming articles on mining. To never miss a thing, please subscribe to my free newsletter, in order to get an email notice of my new articles soon after they are published.

The Critical Investor is a newsletter and comprehensive junior mining platform, providing analysis, blog and newsfeed and all sorts of information about junior mining. The editor is an avid and critical junior mining stock investor from The Netherlands, with an MSc background in construction/project management. Number cruncher at project economics, looking for high quality companies, mostly growth/turnaround/catalyst-driven to avoid too much dependence/influence of long-term commodity pricing/market sentiments, and often looking for long-term deep value. Getting burned in the past himself at junior mining investments by following overly positive sources that more often than not avoided to mention (hidden) risks or critical flaws, The Critical Investor learned his lesson well, and goes a few steps further ever since, providing a fresh, more in-depth, and critical vision on things, hence the name.

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Disclaimer: The author is not a registered investment advisor and has a long position in this stock. Meridian Mining is a sponsoring company. All facts are to be checked by the reader. For more information go to www.meridianmining.co and read the company’s profile and official documents on www.sedar.com, also for important risk disclosures. This article is provided for information purposes only and is not intended to be investment advice of any kind, and all readers are encouraged to do their own due diligence and talk to their own licensed investment advisors prior to making any investment decisions.

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( Companies Mentioned: MNO:TSX.V,
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