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Meridian Mining — Management Reports 2024
Nov 14, 2024
47387_rns_2024-11-14_17fb34f7-7414-4bbb-b8f1-2de5cb797b42.pdf
Management Reports
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Management's Discussion and Analysis
MERIDIAN
MINING
FORM 51-102F1
MANAGEMENT DISCUSSION AND ANALYSIS
FOR THE THREE MONTHS AND NINE MONTHS ENDED SEPTEMBER 30, 2024
Introduction
This Management Discussion and Analysis (“MD&A”) of the results of operations and the financial condition of Meridian Mining UK Societas (“Meridian” or the “Company”) is the responsibility of management and covers the three-month and nine-month periods ended September 30, 2024, and September 30, 2023. This MD&A takes into account information available up to and including November 14, 2024 and should be read together with the condensed consolidated interim financial statements for the period ended September 30, 2024, the Annual Information Form and audited consolidated financial statements and notes for the year ended December 31, 2023, which are available on the SEDAR+ website at www.sedarplus.ca.
All financial information in this document is prepared in accordance with International Accounting Standard (“IAS”) 34, Interim Financial Reporting as issued by the International Accounting Standards Board (“IASB”). All amounts are in United States (“US”) dollars and all units of measurement are expressed using the metric system, unless otherwise stated. References to “$”, “US$” or “dollars” are to US dollars, and references to “C$” are to Canadian dollars.
Additional information related to the Company is available for view at www.meridianmining.co or on the SEDAR+ website at www.sedarplus.ca.
This MD&A contains forward-looking information, such as statements regarding the Company’s future plans and objectives that are subject to various risks and uncertainties, including those set forth in this document under the headings “Note Regarding Forward-Looking Statements” and “Risk Factors”. The Company cannot assure investors that such information will prove to be accurate, and actual results and future events could differ materially from those anticipated in such information. The results for the periods presented are not necessarily indicative of the results that may be expected for any future periods. Investors are cautioned not to place undue reliance on this forward-looking information.
Business Overview
Meridian is a resource development and exploration company with projects in Brazil. The Company signed a Purchase Agreement on November 6, 2020, to acquire the rights within the Cabaçal copper (“Cu”) – gold (“Au”) – silver (Ag) Volcanic Massive Sulfide (“VMS”) belt (“VMS Belt”), that included the historical(s) Cabaçal Cu-Au-Ag mine (“Cabaçal”), and the separate Santa Helena Cu-Au-Ag and Zn mine (“Santa Helena”) in the state of Mato Grosso, Brazil. The Company has separately secured additional licences across the Project’s Volcanogenic Massive Sulfide (“VMS”) belt, and in the parallel Jaurú and Araputanga greenstone belts to the west of Cabaçal. The Company also has three projects in the State of Rondônia: Espigão Cu-Au polymetallic (“Espigão”), Mirante da Serra Cu-Au (“Mirante da Serra”), and Ariquemes tin (“Ariquemes”); together (“the Portfolio”).
Strategy
Meridian’s vision is to create sustainable value for its stakeholders by developing and exploring for, high quality resource assets. The Company is committed to being a responsible steward of the environment and building collaborative partnerships with communities, governments, and all other stakeholders for mutual success.
The Company’s long-term focus is on the resource development and exploration of Cabaçal while continuing to advance the Portfolio.
Management's Discussion and Analysis
Corporate Outlook
Our priorities are to focus on the Cu-Au potential of the Portfolio, with a focus on resource development through to production and exploration at Cabaçal.
In March 2023, the Company published a Preliminary Economic Assessment on Cabaçal (“PEA”). The Company plans to continue drilling at Cabaçal to update the Mineral Resource Estimate, to advance related engineering and economic studies, and to continue exploration programs to test the numerous regional targets for new discoveries in the Belt. The Company also plans to advance geotechnical and environmental studies at Cabaçal to position for future development scenarios.
The Company is conducting a separate resource development program at Santa Helena, with the plan to publish an inaugural resource estimate. The Company has initiated a metallurgical program for Santa Helena based on the historical metallurgical data and flowsheet but with the inclusion of a gravity circuit for the recovery of any free gold mineralization.
Regional exploration along the VMS Belt is planned to progressively cover over 50km of strike of the prospective geology that is held by the Company under licence. The aim is to identify additional Cu-Au-Ag systems for drilling follow up.
The Company has also initiated geophysical programs at its Espigão polymetallic project to develop Iron Oxide Copper Gold (“IOCG”) targets at depth beneath extensive surface geochemical anomalies.
The Company will continue to develop its Executive Management and Brazilian teams to meet business needs for the continual growth of the principal asset of Cabaçal.
Performance Summary for the three months ended September 30, 2024
Corporate Highlights
- During the three months ended September 30, 2024, the Company issued 37,287 common shares and received proceeds totaling $1,936 related to stock options exercises.
Exploration Highlights
Cabaçal
- On July 8, 2024, the Company announced the infill drilling at Cabaçal included results from the mine, and results from the Cabaçal Northwest Extension (“CNWE”). Highlights from the mine area included CD-481: 2.7m @ 12.3 g/t AuEq / 8.3% CuEq from 65.0m, and CD-495: 7.1m @ 2.1 g/t AuEq / 1.4% CuEq from 52.9m. These results are part of the Cabaçal’s Preliminary Feasibility Study drill program;
- On July 22, 2024, the Company announced further drill results from Cabaçal that returned with strong zones of gold-copper-silver mineralization within the open pit shell, highlighted by CD-492’s 13.4m @ 4.6g/t AuEq / 3.1% CuEq from 73.8m, part of a broader zone grading 35.4m @ 2.2g/t AuEq / 1.5% CuEq from 51.8m. Multiple higher grade zones of Au-Cu-Ag mineralization grading between 17.0 and 18.6g/t AuEq, including zones of visible gold, were also reported; and
- On September 4, 2024, the Company announced further results from Cabaçal. Highlights included: CD-535 returning 21.6m @ 3.1g/t AuEq / 2.1% CuEq, and CD-529 returning 16.1m @ 2.8g/t AuEq / 1.9% CuEq, within the open pit area.
A detailed review of the Cabaçal drill program’s results identified multiple structural inflexions along the 2km strike length of the deposit, within which, the bulk of the Cu-Au-Ag mineralization is found. The Company reviewed its geophysical data, and identified multiple signs for repeats of these structures, down dip of the mine and importantly extending along the 10km Mine Corridor. These new targets can be considered prospective for repeats for Cu-Au and Au only mineralization, and exploration programs to drill test these structures are advancing.
Santa Helena and other targets
- On July 8, 2024, the Company also announced drilling results at Santa Helena. The results returned multiple intercepts of mineralization from shallow open-pitable depths. These included: CD-500: 14.3m @ 3.7 g/t AuEq / 2.5% CuEq from 49.0m, including a zone of 3.0m @ 8.2 g/t AuEq / 5.5% CuEq from 50.2m, CD-497: 5.1m @ 7.2 g/t AuEq / 4.8% CuEq from 41.2m, and CD-479: 6.0m @ 3.5 g/t AuEq / 2.3% CuEq from 37.3m; and
Management's Discussion and Analysis
- On September 23, 2024, the Company announced results from Santa Helena. Highlights included: CD-574, returning 15.9m @ 3.9g/t AuEq / 2.6% CuEq from 58.2m and CD-556: 22.4m @ 3.2g/t AuEq / 2.2% CuEq from 9.2m, amongst many near-surface intersections. These results both extend and infill Santa Helena’s high-grade continuous mineralization and will be included in the pending resource estimate. The Company is also reporting that the results of multiple geophysical programs have been combined to map Santa Helena’s massive sulphides and to identify potential targets for blind extensions to its main mineralized trend.
Subsequent to September 30, 2024:
Corporate Highlights
- The Company issued:
- 3,927,610 common shares and received gross proceeds totalling $200,048 related to the exercise of share purchase stock options;
- 303,029 common shares related to the exercise on a cashless basis (net exercise) of 365,415 share purchase stock options, in accordance with the Company’s omnibus plan; and
- 75,151 common shares and received gross proceeds totalling $19,093 related to the exercise of agent’s compensation options.
Exploration Highlights
Cabaçal
- On October 29, 2024, the Company announced results from Cabaçal. Multiple wide zones of stacked Cu-Au-Ag mineralization overprinted by a later stage gold event, continued to be defined and extended, highlighted by CD-544 assaying: 38.2m @ 3.2g/t AuEq / 2.1% CuEq, CD-595 assaying 12.4m @ 3.3g/t AuEq / 2.2% CuEq, and CD-571 assaying 22.2m @ 1.7 g/t AuEq / 1.2% CuEq. These represent only a small selection of the many results returned to date within the PEA open pit.
Please refer to the Company’s news releases for more information.
Except as disclosed elsewhere in this document there were no other material subsequent events to the date of this report.
Cabaçal Project, Mato Grosso, Brazil
Background
The Cabaçal Cu-Au-Ag camp scale VMS project is located in the Alto Jaurú Greenstone Belt, in the Southwest (“SW”) margin of the Amazon Craton. The Company has an option agreement that provides a 100% ownership with a series of milestone-based payments for licences covering an area of 18,462 Hectares (“Ha”), incorporating an approved mining lease, a mining lease application, and three exploration licences.
On November 6, 2020, the Company entered into a Purchase Agreement with two private Brazilian companies (the “Vendors”), to acquire the rights to the Cabaçal Copper-Gold Project in the state of Mato Grosso, Brazil, (the “Cabaçal Agreement”). The Cabaçal Agreement contemplated that payments can be withheld by the Company in an Indemnification Escrow Fund (the “Escrow Fund”) to guarantee the payment of any losses in connection with certain of the Vendors’ obligations. At the Company’s discretion, the Escrow Fund balance can be used to pay certain Vendors’ obligations.
Under the terms of the Cabaçal Agreement, the Company is required to make staged payments based on milestones achieved below. The Company has determined the Cabaçal Agreement to be an executory contract based on the assessment of its provisions. As a result, as milestones are achieved the respective staged payments are triggered. The measurement of staged payments will be determined at the trigger date and will be capitalized to exploration and evaluation assets as they are deemed to be acquisition related costs:
Amounts triggered and paid as at September 30, 2024:
- $25,000 payable within 5 days of the execution of the option agreement (paid);
- $275,000 payable by October 15, 2021, as the transfers of the mineral rights to Rio Cabaçal were filed with the Agência Nacional de Mineração ("ANM"; Brazil's nation mining agency) (paid);
Management's Discussion and Analysis
- $1,750,000 payable on August 1, 2023, unless accelerated upon completion of an equity financing for gross proceeds of at least $2,500,000, provided completion of a successful drill program and historical geophysics database validation, as well as obtaining certain permits and the access to the surface rights overlapping with the Cabaçal mineral rights (see details regarding payment below); and
- 1,000,000 common shares in the capital of the Company or C$300,000, at the option of the Vendors, within 6 months of the third payment and subject to completion of a technical report on the estimate of the resource in accordance with National Instrument 43-101, whichever occurs later (paid in common shares).
Amounts not yet triggered:
- $1,850,000 plus, at the option of the Vendors, 1,500,000 common shares in the capital of the Company or C$450,000, within 9 months of the fourth payment and subject to the successful completion of the positive economic feasibility study. On January 4, 2024, the Company amended the terms of this fifth payment where the payment will be made by September 30, 2025, but is still subject to the successful completion of the positive economic feasibility study. Additionally, the amended terms now require the Company to advance a total of $250,000, divided in monthly installments, from April 2025 to June 2025, to be deducted from the total amount of the fifth payment;
- $2,250,000 payable plus, at the option of the Vendors, 2,000,000 common shares in the capital of the Company or C$600,000, up to 30 days after the Installation License (“LI”) of the Cabaçal plant is issued by the competent authorities; and
- $2,600,000 payable within 45 days after the signature by the Company of the definitive financing contracts for the construction of the Cabaçal plant.
During the nine months ended September 30, 2024, the Company made payments of $565,820 on behalf of and to the Vendors that have been deducted from the third instalment payment payable amount. As at September 30, 2024, the following remaining balances are recognized in accounts payable and accrued liabilities:
- Third instalment - $110,738
- Fifth instalment - $250,000
There is a 1.5% Net Smelter Royalty associated with the Santa Helena, which is part of Cabaçal Agreement. Cabaçal is located within the buffer zone of Brazil’s frontier (“Border Buffer Zone”). The Border Buffer Zone is a constitutionally protected zone and not an economic exclusion zone. The terms of the Cabaçal Agreement give the Company the option, under certain conditions, to return the mineral rights to the Vendors on a “as is” basis, without any obligation to making any outstanding payments and to complying with other obligations.
In addition to the option agreement area, the Company has lodged or won through the ANM’s auction system additional exploration licence applications in the Cabaçal Belt totalling 33,364 Ha, and in the adjacent Araputanga and Jaurú Belts to the west totalling 53,116 Ha. These applications cover gold and base metal anomalies outlined by geochemical and geophysical exploration by BPM.
Geology and Mineralization Model
The Proterozoic Alto Jaurú Greenstone Belt consists of an association of bimodal volcanic and sedimentary rocks (tholeiitic meta-basalts, felsic volcanics, and meta-sedimentary rocks, intruded by granites, tonalites, and gabbroic dykes).
The discovery of Cabaçal has its origins in the 1980’s gold rush, during which local companies backed by BPM carried out extensive mapping, stream and soil geochemistry, and reconnaissance drilling, which lead to its discovery in 1983. The project operated as an underground mine producing 973,031 t @ 4.91g/t Au and 0.80% Cu over four years up to 1991. Regional exploration by BPM then RTZ Corporation PLC (“RTZ”), now known as Rio Tinto, consisted of >600 drill holes (~70,000 m of drilling), of which 406 holes were drilled at Cabaçal. Underground mining was selective and focused on higher grade trends (>3g/t gold-only cut-off grade). The mine was decommissioned by RTZ after its acquisition of BPM in 1989, which then completed a successful environmental rehabilitation.
The Cabaçal deposit is considered to be a deformed Au rich end member of the VMS deposit style. Globally, such deposits have been major global hosts of base metals, gold, and silver. Deposits tend to form in districts that may contain dozens of periodically spaced mineral centres, related to hydrothermal convection cells on the ancient ocean floor. With tilting, deposits may now be at or below the present-day erosional surface. Whilst VMS deposits are well known for their base metal production, notable examples exist of copper-gold and gold-only end members, including Mt Lyell (Cu-Au) and Henty (Au) of the Mt Read Volcanics (Tasmania, Australia), and LaRonde Penna deposit of the Doyon-Bousquet-LaRonde mining camp (Quebec, Canada).
Management's Discussion and Analysis
The immediate host rocks of the Cabaçal deposit consist of foliated cherts and volcaniclastic rocks, with hydrothermal overprints of variable sericite, biotite, and chlorite alteration. Cu-Au mineralization has been traced over ~1.9km in the mine environment, although much of the historical drilling was focussed over a 750m sector. Mineralization dips moderately, presenting a good geometry for potential open pit development. The targeted mineralization forms a series of stacked sheets, which individually can have widths of ~10-40m and have been traced ~250-500m down-dip.
A second, copper-gold-silver and zinc focused underground mine was developed more recently at Santa Helena, but the mine has been closed since 2008 and the site has ongoing rehabilitation works by the Vendors. The mineralization present in the Santa Helena mine consists of massive, semi-massive and disseminated volcanic sulphides (pyrrhotite, chalcopyrite, sphalerite, and galena), typical of the VMS association.
Exploration
An extensive database of historical geochemical results is available for the VMS Belt, with reconnaissance exploration programs executed by BPM being progressively followed by more detailed work programs which defined a series of target areas. In 1982, semi-detail geological mapping (1: 50,000) accompanied a detailed stream sediment geochemical program with samples analysed for Cu, Lead ("Pb"), Zinc ("Zn"), Nickel ("Ni"), and Au (as gold counts). In 1983-1984, the opening of 400 x 50m soil geochemical grids progressed as a follow up to the stream anomalies generated at the C-4 and C-2 prospects. These were closed on a 100 x 25m grid in areas (C-4A, C-4B, C-2A and C-2B, C-2C, C-5A and C-5B). In 1985 the implementation of a 400m x 50m soil grid survey continued regionally along the VMS Belt (C-6). In the geochemical prospecting work carried out by BPM / RTZ, samples were analysed for Cu, Pb, Zn, Ni and gold counts, and results presented in maps in scales of 1: 10,000, 1: 5,000 and 1: 2,500.
Historical geophysical programs were similarly expansive. In 1982 BPM carried out a survey covering ~6,800 km2, capturing ~2,800-line km of magnetic / electromagnetic data through an INPUT Survey. This delineated the principal volcanic belts and 81 targets, 13 of them in the Cabaçal range area. The INPUT / MAG aerial survey was carried out in September 1982 by Prospec S/A, with the technical supervision of Questor Canada. Terrestrial geophysics was also conducted and as at September 1985, 45 km of gradient array IP arrangement, 13 km of pole-dipole IP, and 163 km of max-min applied potential surveys have been concluded. Results from these programs are presented in a series of maps and plans.
The most recent geophysical program was a VTEM magnetic and conductivity survey undertaken in late 2007 ("Rio Branco Survey") by Microsurvey Aerogeofisica e Consultoria Geofisica Ltda. The survey involved survey lines at spacings of 300m, oriented NE (perpendicular to stratigraphy). At least 20 bedrock anomalies have been modelled from this survey.
A series of near mine and satellite targets have been defined through a combination of geophysical and geochemical methods, with an historical VTEM survey in particular highlighting extensions of the prospective stratigraphic horizon. These will be progressively followed up to test the potential of the 30-kilometre strike length of the prospective belt.
Permitting, Corporate Social Responsibility and Environment
The Company is leveraging its successful "Espigão" social license to operate the Cabaçal project and has established an open and positive dialogue with the local stakeholders. Programs being executed are under an agreement with the local landholders, and under an environmental licence issued by the state environmental agency, SEMA.
Mineral Resource Estimate
The PEA restates the Mineral Resource Estimate for the Cabaçal copper-gold-silver VMS Deposit, comprising Indicated Resources of 52.9 Mt @ 0.6g/t Au, 0.3% Cu & 1.4g/t Ag (1.8Moz AuEq @ 1.1g/t AuEq) plus Inferred Resources of 10.3Mt @ 0.7g/t Au, 0.2% Cu & 1.1g/t Ag (0.3Moz AuEq @ 1.0g/t AuEq) at a 0.3g/t AuEq cut-off grade. H&S Consultants Pty Ltd ("H&SC") used Multiple Indicator Kriging ("MIK") for the gold grade interpolation and Ordinary Kriging ("OK") for the copper and silver grade interpolation. The discovery of extensive gold-dominant mineralization in the CNWE contributed to a significant increase in tonnage and contained metal compared to historical inferred Mineral Resource Estimate of 21.7 Mt @ 0.6g/t Au & 0.6% Cu, centred largely around the historical mine workings.
Gold equivalents are calculated algorithmically as: AuEq(g/t) = (Au(g/t) * %Recovery) + (1.492(Cu% * %Recovery)) + (0.013(Ag(g/t) * %Recovery)), where Au_recovery_ppm = 5.4368 ln (Au_Grade_ppm) + 88.856; Cu_recovery_pct = 2.0006 ln (Cu_Grade_pct) + 94.686; Ag_recovery_ppm = 13.342 ln (Ag_Grade_ppm) + 71.037. Recoveries are based on metallurgical test work on core submitted to SGS Lakefield in 2022.
The resource is near surface, extends over 1.9km, and hosts a prominent shallow gold zone in the Cabaçal North-West Extension. Objectives of ongoing drilling are to complete a broad-spaced 50 x 50m drill pattern to convert inferred and unclassified resources, to commence infill on a 25 x 25m drill pattern in strategic areas, and to test areas dominated by historical vertical drilling for potential bias where steeper late-stage structures may not have been intersected.
Management's Discussion and Analysis
The Santa Helena Mineral Resource has not been updated to account for final mining depletion and changes in metal prices and is therefore not considered a current Mineral Resource. A qualified person has not done sufficient work to classify the historical estimate as current mineral resources or mineral reserves; and the issuer is not treating the historical estimate as current mineral resources. Copper equivalents for Santa Helena are based on metallurgical recoveries from the historical resource calculation, updated with pricing forecasts aligned with the PEA. The metal equivalent formulas presented a copper equivalent rather than a zinc equivalent, based on the Company's current assessment of the metal balance after the past zinc-focused extraction. $\mathrm{CuEq\%} = (\mathrm{Cu\%} * 89\% \mathrm{Recovery}) + (0.67\mathrm{Au(g / t)} * 65\% \mathrm{Recovery}) + (0.318\mathrm{Zn\%} * 89\% \mathrm{Recovery})) + (0.009\mathrm{Ag(g / t)} * 61\% \mathrm{Recovery}))$.
Preliminary Economic Assessment
On March 6, 2023, the Company announced the results of the PEA for Cabaçal led by Ausenco Engineering Canada Inc. ("Ausenco"), and GE21 completing the open-pit optimization and mining schedule. The project returned a base case after-tax $\mathrm{NPV}_5$ of $573M and 58.4% IRR using $1,650/oz gold, $3.59/lb copper, and $21.35/oz silver. High after-tax first year cash flow from starter pits leads to capital repayment in less than a year. The study was based on a 2.5 Mtpa production scenario with a mine life of over 22 years; scope remains for future studies to consider expanded throughput scenarios.
On March 30, 2023, the Company announced the filing of the independent technical report (the "Technical Report") for the PEA results announced by the Company on March 6, 2023 (the "News Release"). There were no material differences between the Technical Report from those in the News Release. The Technical Report dated March 30, 2023, with an effective date of March 1, 2023, entitled "Cabaçal Gold-Copper Project NI 43-101 Technical Report and Preliminary Economic Assessment, Mato Grosso, Brazil" may be found under the Company's profile on SEDAR+ at www.sedarplus.ca and is also available for download on the Company's website at www.meridianmining.co. Readers are encouraged to read the Technical Report in its entirety.
Readers are cautioned that the PEA is preliminary in nature and is intended to provide an initial assessment of the Cabaçal's economic potential and development options. The PEA mine schedule and economic assessment includes numerous assumptions and is based on inferred mineral resources. Inferred resources are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves, and there is no certainty that the PEA results will be realized. Mineral resources are not mineral reserves and do not have demonstrated economic viability. Additional exploration will be required to potentially upgrade the classification of the inferred mineral resources to be considered in future advanced studies. For additional details on the PEA, please refer to the Company's news release dated March 6, 2023.
Summary of activities in the nine months ended September 30, 2024
On January 10, 2024, the Company announced that the Cabaçal Project's current engineering and drill programs will be upgraded to complete a Pre-Feasibility Study ("PFS") on an expanded production case. The PFS mine schedule and financial model will be focused on an initial throughput of $2.5\mathrm{Mt}$ p.a. then expanded to reach a maximum throughput of $4.5\mathrm{Mt}$.
Work completed within the VMS Belt from January to September 2024 included:
Cabaçal
- 113 surface diamond holes for $13,432\mathrm{m}$ for resource definition;
- A total of 41 geotechnical holes at Cabaçal to test planned infrastructure areas: 18 diamond holes, 16 percussion holes and 7 auger holes;
- 4 trenches for $334\mathrm{m}$ and 3 auger holes for sterilization of planned infrastructure area;
Santa Helena
- 45 surface diamond holes for $4,120\mathrm{m}$ for resource definition;
- 7 auger holes to mapping the surface mineralisation projection;
- Further metallurgical test work programs, for which final results are pending;
Management's Discussion and Analysis
Regional Exploration
- 12 surface diamond holes for 1,308m;
- Geophysics, with 26 down hole surveys completed, 25.15 line kilometers of gradient array induced polarization surveys, 7,53 line kilometers of Mise-á-la-Masse bore-hole, and 18.95 line kilometers of fixed-loop transient electromagnetic;
- Surface geochemistry, with 553 soil samples collected; and
- Compilation of historical geochemical data over the regional licence application areas.
Espigão Project, Rondônia, Brazil
Background
The Espigão Project is located in the Proterozoic Rondônia-Juruena Province, in the SW margin of the Amazon Craton. The licences cover an area of 72,800 Ha and incorporate an approved mining lease, mining lease applications, and exploration tenure. Past mining activity has focused on manganese oxide production from colluvial and vein mineralization. Exploration is now focused on testing the polymetallic Cu-Au potential.
The manganese and ferruginous vein systems show a spatial relationship with a series of fractionated granites, marked by an elevated response in Total Count Radiometrics. Geophysical modelling shows the presence of conductivity anomalies and magnetic anomalies underpinning the surface veins. These anomalies remain to be systematically tested at depth. An ongoing exploration objective is to test the potential for vertical and lateral transitions to domains dominated by base metal and precious metal assemblages, as part of the zoned mineral system.
Espigão Polymetallic Potential
The Company believes that the extensive polymetallic soil anomalies, associated pathfinder minerals and co-incident geophysical conductivity anomalies reflect Cu-Au potential and will be evaluated for IOCG or intrusive related porphyry mineralization.
The diverse vein assemblage includes base-metal anomalous manganese oxide veins, iron-oxide breccias, gold-bearing quartz-pyrite veins, and tin-bearing greisen. The Cu-Pb-Zn base metal association in the manganese veins becomes progressively enriched in the northern sector of the project area (with peak assay values in drilling of 0.62% Cu, 6.56% Pb, 0.14% Zn).
In 2019, the Company released the results of the first integrated 3-D modelling undertaken on the airborne magnetic and conductivity data covering the Espigão Project. Multiple magnetic anomaly clusters have been identified. These anomalies underlie the surface expression of the base-metal anomalous manganese vein arrays. Many magnetic anomalies are coincident with the subsurface projection of conductors modelled from electromagnetic survey data. Results point to a much more intricate architecture to the intrusive system than first thought. These anomalies provide targets for future testing of discrete intrusive bodies interpreted to lie at depth and to drive the hydrothermal vein systems and metal assemblage.
The 2015 airborne HeliTEM survey covered an extensive part of the Espigão project and detected 60 plus conductive clusters. To date, only 9 of these clusters have had the data processed and the Maxwell plates modelled. In late 2018 the Company commissioned the processing of related magnetic data that mapped significant magnetic anomalies underlying the modelled Maxwell plates that are in turn co-incident to the mapped, polymetallic soil anomalies.
The Company has continued to review and access the Espigão district's polymetallic potential and believes that a strong exploration project is evolving with the information that is being produced. The Company has budgeted and is executing a gravity survey using a gravity meter purchased to manage in-house programs. The use of the gravity meter acquired in 2021 will assist with Iron-oxide-copper-gold targeting at Espigão. First results from a gravity survey program at the Espigão polymetallic project to develop Cu-Au IOCG targets identified broad gravity anomalies measuring up to 15mgal above background, consistent with the threshold of the anomalies in other IOCG provinces. Regional survey programs are ongoing before infill will be undertaken to define potential drill targets. The gravity survey is being supplemented by a first phase of soil geochemistry over a southern area where coincident magnetic and gravity responses are concentrated.
Permitting, Corporate Social Responsibility and Environment
The Company is well regarded locally – it has been an important employer and has a good reputation for its stewardship of its local operations. The many local initiatives to enhance the Company's social license to operate have been incorporated within its management protocols and have further strengthened the Company's local reputation. Rehabilitation programs are actively continuing through the care and maintenance period. Because of the environment and weather conditions, rehabilitation of mine sites is efficient solely during the dry season.
Management's Discussion and Analysis
Buffer Zone Surrounding Povo Cinta Larga Indigenous Land
The Company has been advised that due to certain Jaburi mineral rights being in close proximity to indigenous title land, Jaburi could be affected by a civil public action (“Ação Civil Pública”) between two Brazilian government departments, namely the Brazilian Federal Prosecutor’s Office (“FPO”) and ANM. The FPO is requesting the ANM to refrain from granting new mining authorizations and to withdraw all existing mining authorizations within the indigenous land of Povo Cinta Larga and surrounding 10km area adjacent to the indigenous land (“Cinta Larga Buffer Zone”). In view of the current court decisions in full force and effect, ANM is no longer granting new mining authorizations within the Cinta Larga Buffer Zone.
If there is a final and non-appealable decision regarding the imposition of a 10km Cinta Larga Buffer Zone, this would have an impact on Jaburi’s mineral rights as some of Jaburi’s mineral rights straddle or are wholly within the proposed 10km of Cinta Larga Buffer Zone. The Company does not have mineral rights within the indigenous land of Povo Cinta Larga.
The Company does not anticipate having additional material impact in the Espigão Project related to the Cinta Larga Buffer Zone.
Ariquemes Tin Project, Rondônia, Brazil
Ariquemes comprises an extensive land package in Brazil’s second largest tin field. Geophysical and geochemical datasets released by the Companhia de Pesquisa de Recursos Minerais (Geological service of Brazil) highlight highly prospective signatures consistent with the tin-bearing granites within the Ariquemes area.
On January 13, 2022, the Company completed its Joint Venture (“JV”) Agreement, with no financial transaction taking place, with Orosur, a South American exploration and development company, for the development of the Ariquemes. On March 5, 2024, Orosur provided notice of their election to terminate the JV Agreement and has provided Meridian with a database from reconnaissance activities undertaken on the project.
Mirante da Serra Project, Rondônia, Brazil
The Company holds mineral rights totalling 55,559 Ha in the Mirante da Serra Project. The licences cover an area with an intracratonic basin in the Amazon Cratin, emplaced over crystalline basement rocks of the Jamari metamorphic complex and Mesoproterozoic Rapakivi granites. Cu-anomalous manganese occurrences and alluvial gold showings are known in the district. Magnetic and radiometric anomalies present targets for geochemical screening for copper-gold potential.
2024 Business Outlook
The Company has well advanced the Cabaçal and Santa Helena projects in 2024. Key events will be the granting of Cabaçal’s Preliminary License, subject to authorities’ review, and the soon-to-be expected publication of the inaugural Santa Helena resource statement. In parallel the Company is advancing the greater VMS Belt’s exploration licenses and keep them in good standing. The Company is looking to achieve this during a period when its principal commodity prices of gold and copper remain robust and an increased interest in natural resource equities is occurring.
The Company will continue the review of the Espigão polymetallic project, the Ariquemes tin project, and the Mirante da Serra Manganese project, all in the State of Rondônia, Brazil with the objective to create a pathway forward for these prospective exploration projects.
Qualified Person
Mr. Erich Marques, B.Sc., FAIG, Chief Geologist of Meridian, is a qualified person as defined by National Instrument 43-101- Standards of Disclosure or Mineral Projects, who has reviewed and verified the scientific and technical information provided in this MD&A and who is responsible for the technical information not directly related to the MRE or PEA in this MD&A.
The PEA was prepared for the Company by independent consulting firm Ausenco Engineering Canada Inc. (“Ausenco”) with contributions from several Qualified Persons (as the term is defined in NI 43-101) with specific subject matter expertise, including: Tommaso Robert Raponi (P. Eng), Principal Metallurgist with Ausenco), Scott Elfen (P. E.), Global Lead Geotechnical and Civil Services with Ausenco), Simon Tear (P. Geo, EurGeol.), Principal Geological Consultant of H&S Consultants Pty Ltd., Joseph Keane (Mineral Processing Engineer; P. Eng), of SGS North America Inc, Marcelo Batelochi, MAusIMM (CP Geo), Geological Consultant of MB Geologia Ltda, and Guilherme Gomides Ferreira (Mine Engineer MAIG) of GE21 Consultoria Mineral.
Management's Discussion and Analysis
Quarterly Financial Summary:
| Qtr 3 Three Months Ended September 30, 2024 $ | Qtr 2 Three Months Ended June 30, 2024 $ | Qtr 1 Three Months Ended March 31, 2024 $ | Qtr 4 Three Months Ended December 31, 2023 $ | |
|---|---|---|---|---|
| Loss for the period | (3,418,492) | (3,779,818) | (2,552,804) | (4,004,881) |
| Total Comprehensive Loss | (3,235,269) | (4,543,872) | (2,834,255) | (3,736,691) |
| Loss per share, basic | (0.01) | (0.01) | (0.01) | (0.02) |
| Loss per share, diluted | (0.01) | (0.01) | (0.01) | (0.02) |
| Qtr 3 Three Months Ended September 30, 2023 $ | Qtr 2 Three Months Ended June 30, 2023 $ | Qtr 1 Three Months Ended March 31, 2023 $ | Qtr 4 Three Months Ended December 31, 2022 $ | |
| --- | --- | --- | --- | --- |
| Loss for the period | (3,551,398) | (1,797,808) | (2,631,771) | (1,733,812) |
| Total Comprehensive Loss | (3,924,861) | (1,454,573) | (2,398,892) | (1,624,037) |
| Loss per share, basic | (0.01) | (0.01) | (0.01) | (0.01) |
| Loss per share, diluted | (0.01) | (0.01) | (0.01) | (0.01) |
Loss and Total Comprehensive Loss in Q3 2023, Q4 2023, Q2 2024 and Q3 2024 were impacted by the increase mainly in the Cabaçal and Santa Helena exploration activities and in Q1 2023, Q4 2023 and Q2 2024 by shared based payments expenses related to issuance of stock options grants.
Discussion of Quarterly Results and Result of Operation:
For the three months ended September 30, 2024:
- Exploration and evaluation expenses increased to $2,762,289 (2023 – $2,230,173). The variance was primarily due to the increase in assay costs compared to the same period in 2023 due to the drilling programs in place 2024 at Cabaçal and Santa Helena. Additionally, the increase was also driven by the ongoing studies part of the PFS, including metallurgical test work and geotechnical holes to test planned infrastructure areas.
- General and administration expenses increased to $720,551 (2023 – $624,519). The variance was mainly driven by an increase in management and directors' fees due to changes in fees and salaries of certain executives in 2024.
- Professional fees decreased to $92,545 (2023 - $258,486). Variance mainly related to legal fees, finance advisory services and audit fees related to the year end audit in 2023.
- Share based compensation expense was $nil (2023 - $137,338). There was no grant of stock options during the three months ended September 30, 2024.
- Foreign exchange was a gain of $117,678 (2023 – loss of $298,463). The foreign exchange gain was incurred mainly due to the fluctuation of exchange rates related to the translation of the Canadian dollars cash balances to US dollars during the quarter.
- The results for the three months period ended September 30, 2024 included other comprehensive income of $183,223 (2023 – loss of $373,463) comprised of foreign currency translation, which related primarily to the translation of the Company's Brazilian operation.
For the nine months ended September 30, 2024:
- Exploration and evaluation expenses increased to $6,820,279 (2023 – $4,527,423). The variance was primarily due to the addition of two drilling rigs in Q2 2024, in both Cabaçal and Santa Helena, increasing all the associated costs related to the drilling program, including assays costs. Additionally, the initiation of certain studies as part of the PFS, including metallurgical test work and geotechnical holes to test planned infrastructure areas.
- General and administration expenses increased to $2,214,144 (2023 – $1,971,423). The variance was mainly driven by an increase in management and directors' fees due to changes in fees and salaries by certain executives.
Management's Discussion and Analysis
- Professional fees decreased to $453,431 (2023 - $738,513). The variance was mainly related to professional fees incurred in connection with the preparation of the short form base shelf prospectus, certain strategic advisory services, and legal fees associated with corporate matters in 2023.
- Share based compensation expense decreased to $118,834 (2023 - $788,754). Variance related to the Company issued 780,000 stock options during the period, compared to 3,920,500 options issued in the same period in 2023.
- Foreign exchange was a loss of $209,139 (2023 – gain of $148,700). The foreign exchange loss was incurred mainly due to fluctuation of exchange rates related to the translation of the Canadian dollars cash balances to US dollars during the nine-month period in 2024 compared to the same period in 2023.
- The results for the period ended September 30, 2024, included other comprehensive loss of $862,282 (2023 – gain of $202,651) comprised of foreign currency translation, which related primarily to the translation of the Company's Brazilian operation.
Liquidity and Capital Management
As at September 30, 2024, the Company reported a working capital of $9,186,649 (December 31, 2023 – $5,079,419) which included cash of $11,164,934 (December 31, 2023 – $7,095,927). Included in current liabilities on September 30, 2024, are accounts payable and accrued liabilities of $1,830,171 (December 31, 2023 – $1,854,349), provisions of $320,127 (December 31, 2023 – $363,330) and taxes and fees payable of $158,664 (December 31, 2023 – $184,647). On April 9, 2024, the Company closed a bought deal offering through the issuance of 57,500,000 common shares at a price of C$0.35 per common share for aggregate gross proceeds to the Company of $14,826,174 (C$20,125,000). The Company paid agent's cash commission totaling $561,170 (C$761,535) and issued 2,101,628 agent compensation options, valued at $302,406 (C$410,565). Each agent compensation options entitles the holder to purchase one common share at an exercise price of C$0.35, expiring April 9, 2026. The Company incurred other share issuance costs of $530,004 on this offering. Total transactions costs incurred and allocated to share premium was $1,393,580.
The Company has historically relied upon capital contributions and debt facilities provided by its shareholders, to maintain an adequate level of cash to satisfy its capital and operating requirements. As of September 30, 2024, the Company does not have any other sources of funding. The Company will continue to assess new sources of financing available and to manage its expenditures to reflect current financial resources in the interest of sustaining long term viability.
To continue as a going concern, the Company will need to secure new funding. The ability of the Company to arrange additional financing in the future will depend, in part, on the prevailing capital market conditions and exploration successes. There can be no assurance that these initiatives will be successful, or sufficient financing, including financing from its majority shareholder, will be available. These material uncertainties cast significant doubt as to the ability of the Company to meet its business plan and obligations as they become due and, accordingly, the appropriateness of the use of accounting principles applicable to a going concern.
Contractual Obligations
As at September 30, 2024, contractual obligations from continuing operations are as follows:
| Less than 1 year | Less than 2 years | 2 years or greater | Total | |
|---|---|---|---|---|
| Accounts payable and accrued liabilities | $ 1,830,171 | $ - | $ - | $ 1,830,171 |
| Provisions | 320,127 | - | - | 320,127 |
| Taxes and fees payable | 158,664 | - | - | 158,664 |
| $ 2,308,962 | $ - | $ - | $ 2,308,962 |
Cash flows used by operating activities
In the nine months ended September 30, 2024, operating activities used $9,030,535 compared to $6,990,986 in the same period in 2023. The variance was driven mainly by the increase in the Cabaçal and Santa Helena exploration activities and the increase in the general and administrative expenses.
Cash flows used in investing activities
In the nine months ended September 30, 2024, investing activities used $690,919 of cash compared to $921,764 in the same period in 2023. The decrease was mainly driven by exploration and evaluation asset acquisition related to lower disbursements of the Cabaçal Agreement where in 2023 a total of $565,820 was paid as opposed to $779,621 in 2024.
Management's Discussion and Analysis
Cash flows generated by financing activities
The Company received proceeds from the bought deal offering net of costs of $13,735,000 (2023 - $12,604,844) in the nine months ended September 30, 2024, and $94,260 (September 30,2023 - $102,589) related to the exercise of stock options, agent's compensation options warrants.
Use of proceeds
(a) May 2023 Offering:
On May 2, 2023, the Company closed a bought deal offering (the "May 2023 Offering") through the issuance of 36,800,000 common shares at a subscription price of C$0.50 per common share, for aggregate gross proceeds to the Company of $13,520,717 (C$18,400,000). The Company paid agent's cash commission totalling $616,146 (C$838,500) and issued 1,677,000 agent's compensation options, valued at $264,153 (C$358,912). The Company incurred other share issuance costs of $299,728 on this offering.
As of September 30, 2024, the net proceeds of the May 2023 Offering have been fully utilized in the activities as demonstrated in the table below. The following table includes a comparison of actual use of proceeds from Prospectus Supplement filed on April 26, 2023 related to the May 2023 Offering to previous disclosures outlining intended use of proceeds made by the Company as at September 30, 2024:
| Intended Use of Proceeds (Estimated) C$ | Actual Use of Proceeds C$ | Over/(Under)-Expenditure at September 30, 2024 C$ | |
|---|---|---|---|
| Advancement of the development of the Cabacal Project including drilling to upgrade the mineral resource estimate, mining and metallurgical studies, scale optimisation, geotechnical and waste studies, environmental studies and preparation for more advanced engineering and economic studies | 10,140,000 | 10,140,000 | - |
| Regional exploration in the Cabacal district exploration of other Brazilian projects (geochemical and geophysical exploration, validation of the Santa Helena database) | 380,000 | 2,120,598 | 1,740,598 |
| Cabacal Project general and administration costs | 950,000 | 1,194,734 | 244,734 |
| Corporate general and administration costs | 2,650,000 | 3,570,668 | 920,668 |
| Unallocated general working capital | 2,906,000 | - | (2,906,000) |
| Remaining in treasury | - | - | - |
| Total Uses | 17,026,000 | 17,026,000 | - |
The above noted allocation and anticipated timing represents the Company's intentions with respect to its use of proceeds based on knowledge, planning and expectations of management of the Company, as at April 26, 2023, the date of the filing of the Prospectus Supplement. Although the Company intended to expend the proceeds from the May 2023 Offering as set forth above, there may be circumstances where, for sound business reasons, a reallocation of funds may be deemed prudent or necessary and may vary materially from that set forth above, as the amounts actually allocated and spent will depend on a number of factors, including the Company's ability to execute on its business plan and sustain its operations for not less than 12 months from May 2, 2023.
(b) April 2024 Offering:
On April 9, 2024, the Company closed a bought deal offering (the "April 2024 Offering") through the issuance of 57,500,000 common shares at a subscription price of C$0.35 per common share, for aggregate gross proceeds to the Company of $14,826,174 (C$20,125,000). The Company paid agent's cash commission totalling $561,170 (C$761,535) and issued 2,101,628 agent's compensation options, valued at $302,406 (C$410,565). Each agent's compensation option is exercisable for one common share at an exercise price of C$0.35, expiring April 9, 2026. The Company incurred other share issuance costs of $530,004 on this offering. Total transactions costs incurred and allocated to share premium was $1,393,580.
Management's Discussion and Analysis
The following table includes a comparison of actual use of proceeds from Prospectus Supplement filed on April 3, 2024 related to the April 2024 Offering to previous disclosures outlining intended use of proceeds made by the Company as at September 30, 2024:
| Intended Use of Proceeds (Estimated) C$ | Actual Use of Proceeds C$ | Over/(Under)-Expenditure at September 30, 2024 C$ | |
|---|---|---|---|
| Advancement of the development of the Cabaçal Project including PFS drilling to upgrade the mineral resource estimate, mining and metallurgical studies, scale optimisation, geotechnical and waste studies, environmental studies and preparation for more advanced engineering and economic studies | 10,235,965 | 2,211,382 | (8,024,583) |
| Regional exploration in the Cabaçal district exploration of other Brazilian projects (geochemical and geophysical exploration, validation of the Santa Helena database) | 300,000 | - | (300,000) |
| Cabaçal Project general and administration costs | 1,400,000 | 153,216 | (1,246,784) |
| Corporate general and administration costs | 3,700,000 | 1,500,190 | (2,199,810) |
| Unallocated general working capital | 2,962,500 | - | (2,962,500) |
| Remaining in treasury | - | 14,733,677 | 14,733,677 |
| Total Uses | 18,598,465 | 18,598,465 | - |
The above noted allocation and anticipated timing represents the Company's intentions with respect to its use of proceeds based on knowledge, planning and expectations of management of the Company, as at April 3, 2024, the date of the filing of the Prospectus Supplement. Although the Company intends to expend the proceeds from the April 2024 Offering as set forth above, there may be circumstances where, for sound business reasons, a reallocation of funds may be deemed prudent or necessary and may vary materially from that set forth above, as the amounts actually allocated and spent will depend on a number of factors, including the Company's ability to execute on its business plan and sustain its operations for not less than 12 months from April 9, 2024.
Related Party Transactions
The Company transacts with key management personnel, who have authority and responsibility to plan, direct and control the activities of the Company and receive compensation for services rendered in that capacity. Salaries, benefits, consulting fees and directors' fees are recorded on a cost basis while share-based compensation is measured at the fair value of the instruments issued, with the expense recognized over the relevant vesting periods.
Key management personnel transactions for the nine months ended September 30, 2024, included compensation paid to the Company's independent Directors (Ms. Susanne Sesselmann, Messrs. John Skinner, Douglas Ford, Neil Gregson, Bruce McLeod, as well as the Company's Chief Executive Officer ("CEO") and Director (Mr. Gilbert Clark), President and Director (Dr. Adrian McArthur), Chief Financial Officer (Ms. Soraia Morais), Senior Vice-President - Strategy and Projects (Mr. Martin McFarlane), and Vice-President of Corporate Development (Mr. James McLucas).
a) Key management compensation
| September 30, 2024 | September 30, 2023 | |
|---|---|---|
| Directors’ fees | $ 92,034 | $ 82,655 |
| Salaries and consulting fees | 934,092 | 766,222 |
| Share-based compensation | - | 506,922 |
| $ 1,035,126 | $ 1,355,799 |
b) Other related party transactions
As at September 30, 2024, the Company had the following balances due to/from entities related by way of common directors and/or management. These amounts, unless otherwise noted, were unsecured and non-interest bearing.
| September 30, 2024 | December 31, 2023 | |
|---|---|---|
| Accounts payable and accrued liabilities | $ 53,426 | $ 41,190 |
Management's Discussion and Analysis
Share Capital
Outstanding Share Data
The Company is authorized to issue an unlimited number of common shares with a par value of €0.01.
As at the date of this MD&A, the Company has 304,774,567 (December 31, 2023 – 242,572,708) issued and fully paid shares outstanding.
Stock Options and Agents’ Compensation Options
The Company has an omnibus incentive plan pursuant to which the Company is able to award stock options, RSUs and DSUs in compliance with the policies, rules and regulations of the Toronto Stock Exchange. The maximum number of shares of the Company available for issuance at any time pursuant to awards granted under the omnibus incentive plan shall equal to ten percent (10%) of the Company’s issued and outstanding shares.
The following stock options and agent’s compensation options were outstanding at the date of this MD&A:
| Number of options and warrants outstanding | Exercise Price (C$) | Expiry Date | ||
|---|---|---|---|---|
| Stock options | 248,016 | 0.10 | June 2, 2025 | |
| 2,515,000 | 0.45 | February 26, 2026 | ||
| 3,615,155 | 1.10 | October 27, 2026 | ||
| 100,000 | 1.10 | February 6, 2027 | ||
| 75,000 | 1.10 | February 24, 2027 | ||
| 390,000 | 0.95 | May 17, 2027 | ||
| 2,676,500 | 0.50 | January 25, 2028 | ||
| 695,000 | 0.50 | July 26, 2028 | ||
| 950,000 | 0.50 | October 11, 2028 | ||
| 1,000,000 | 0.35 | October 27, 2028 | ||
| 4,244,636 | 0.50 | November 28, 2028 | ||
| 180,000 | 0.50 | February 28, 2029 | ||
| 600,000 | (1) | 0.46 | April 29,2026 | |
| Agent’s compensation options | 67,071 | (2) | 0.35 | December 30, 2024 |
| 1,677,000 | (3) | 0.50 | May 2, 2025 | |
| 2,101,628 | (4) | 0.35 | April 9, 2026 |
(1) Granted on April 29, 2024 to a consultant of the Company.
(2) Issued in connection with the December 2022 Offering.
(3) Issued in connection with the May 2023 Offering.
(4) Issued in connection with the April 2024 Offering.
Critical Accounting Estimates
The critical accounting judgments and estimates applied in the preparation of the Company's consolidated interim financial statements are reflected in Note 3 of the consolidated financial statements for the year ended December 31, 2023.
Contractual Obligations
Except as described above, herein or in the Company’s financial statements, the Company had no other material contractual obligations.
Off-Balance Sheet Arrangements
At September 30, 2024, the Company had no material off-balance sheet arrangements.
Management's Discussion and Analysis
Proposed Transactions
Except as elsewhere disclosed in this document, there are no other proposed transactions under consideration.
Risk Factors
Companies in the exploration, development and mining stage face a variety of risks and, while unable to eliminate all of them, the Company aims at managing and reducing such risks as much as possible. The Company faces a variety of risk factors such as project feasibility and practicability, risks related to determining the validity of mineral property title claims, commodities prices, changes in laws and environmental laws and regulations. Management monitors its activities and those factors that could impact them in order to manage risk and make timely decisions.
Significant risk factors have been identified by the Company and are listed below. Further discussion and additional risk factors are also available in the Company’s most recent Annual Information Form, as filed on SEDAR+ at www.sedarplus.ca
Risks and uncertainties the Company considers material in assessing its consolidated financial statements are described below.
Meridian will require additional funding
At September 30, 2024 the Company had positive working capital of $9,186,649, which included cash of $11,164,934, prepaid expenses and other assets of $330,677, and accounts payable and accrued liabilities, taxes and fees payable, and provisions of $2,308,962.
The Company has historically relied upon both equity and shareholder contributions, loan facilities, private placements and offerings to satisfy its capital requirements and will likely continue to depend upon these sources to finance its activities. The Company will require additional capital to carry out planned exploration programs. There can be no assurances that the Company will be successful in raising the desired level of financing.
Meridian is subject to government regulation
The Company’s mineral activities, including exploration, development and mining activities are subject to various laws governing exploration, development, production, taxes, labour standards and occupational health, mine safety, environmental protection, toxic substances, land use, water use and other matters. Failure to comply with applicable laws and regulations may result in civil, administrative, environmental, or criminal fines, penalties, or enforcement actions, including orders issued by regulatory authorities curtailing the Company’s operations or requiring corrective measures, any of which could result in the Company incurring substantial expenditures. No assurance can be given that new rules and regulations will not be enacted or that existing rules and regulations will not be applied in a manner which could limit or curtail exploration, development, or mining operations.
Exploration, development, and mining activities can be hazardous and involve a high degree of risk
The Company’s operations are subject to all the hazards and risks normally encountered in the exploration, development and mining industry, including, without limitation, unusual and unexpected geologic formations, seismic activity, rock bursts, pit-wall failures, cave-ins, flooding and other conditions involved in the drilling and removal of material, any of which could result in damage to, or destruction of, mines and other producing facilities, damage to life or property, environmental damage and legal liability. Milling operations, if any, are subject to various hazards, including, without limitation, equipment failure and failure of retaining dams around tailings disposal areas, which may result in environmental pollution and legal liability.
Meridian may be adversely affected by fluctuations in copper, gold, and other metal prices
The value and price of the Company’s common shares, the Company’s financial results, exploration, development, mining activities of the Company, if any, may be significantly adversely affected by declines in commodity prices. Mineral prices fluctuate widely and are affected by numerous factors beyond the Company’s control such as interest rates, exchange rates, inflation or deflation, global and regional supply and demand, and the political and economic conditions of mineral producing countries throughout the world.
Infrastructure
Exploration, development and ultimately mining and processing activities depend, to one degree or another, on the availability of adequate infrastructure. Reliable air service, roads, bridges, railways, power sources and water supply are significant contributors in the determination of capital and operating costs. Inadequate infrastructure could significantly delay or prevent the Company exploring and developing its projects and could result in higher costs.
Management's Discussion and Analysis
Meridian does not and likely will not insure against all risks
The Company’s insurance will not cover all the potential risks associated with a mining company’s operations. The Company may also be unable to maintain insurance to cover these risks at economically feasible premiums. Insurance coverage may not continue to be available or may not be adequate to cover any resulting liability. Moreover, insurance against risks such as environmental damages, pollution, or other hazards as a result of the exploration and production is not generally available to the Company or to other companies in the mining industry on acceptable terms. The Company might also become subject to environmental liability or other hazards which may not be insured against or which we may elect not to insure against because of premium costs or other reasons. Losses from these events may cause Meridian to incur significant costs that could have a material adverse effect upon its financial condition and results of operations.
Meridian is dependent on key personnel
The Company’s success depends in part on its ability to recruit and retain qualified personnel. Due to its relatively small size, the loss of the services of one or more of such key management personnel could have a material adverse effect on the Company. In addition, despite its efforts to recruit and retain qualified personnel, even when those efforts are successful, people are fallible and human error could result in a significant uninsured loss to the Company.
Meridian’s officers and directors may have potential conflicts of interest
Meridian’s directors and officers may serve as directors and/or officers of other public and private companies and devote a portion of their time to manage other business interests. This may result in certain conflicts of interest. To the extent that such other companies may participate in ventures in which the Company is also participating, such directors and officers may have a conflict of interest in negotiating and reaching an agreement with respect to the extent of each company’s participation. However, applicable law requires the directors and officers to act honestly, in good faith, and in the best interests of the Company and its shareholders and in the case of directors, to refrain from participating in the relevant decision in certain circumstances.
Operations in Brazil and Regulatory Requirements
The Company's principal properties are located in Brazil and mineral exploration and mining activities may be affected in varying degrees by changes in political, social, and financial stability, inflation and changes in government regulations relating to the mining industry. Any changes in regulations or shifts in political, social, or financial conditions are beyond the control of the Company and may adversely affect its business. Operations may be affected in varying degrees by government regulations with respect to restrictions on production, price controls, export controls, income taxes, expropriation of property, environmental legislation, and mine safety. Brazil’s status as a developing country may make it more difficult for the Company to obtain any financing required for the exploration and development of its properties due to real or perceived increased investment risk. Since January 1996, there are no restrictions on the repatriation from Brazil on the earnings of foreign entities, provided that the foreign investments are duly registered before the Central Bank of Brazil. Capital investments registered with the Central Bank in Brazil may similarly be repatriated. The only restrictions to repatriation on the earnings/dividends of foreign entities deriving from Brazilian invested companies are in the cases of subscribed capital not fully paid in by the foreign investor, or in case the Brazilian invested company has accumulated losses registered in its balance sheet. In any case, there can be no assurance that restrictions on repatriation of earnings and capital investments from Brazil will not be imposed in the future.
Permits, licenses, and approvals
In countries where Meridian carries out exploration activities, the mineral rights, or certain portions of them are owned by the relevant governments. These governments have entered into contracts with Meridian or granted permits or concessions that allow it to carry out operations or development and exploration activities there, but government policy could change. Any change that affects Meridian’s rights to conduct these activities could have a material and adverse effect on the Company.
In addition, mineral exploration and mining activities can only be conducted by entities that have obtained or renewed exploration or mining permits and licenses in accordance with the relevant mining laws and regulations. The duration and success of each permitting effort are contingent upon many factors we do not control. In the case of foreign operations, government approvals, licenses and permits are, as a practical matter, subject to the discretion of the applicable governments or governmental officials. There may be delays in the review process. There is no guarantee that we will be granted the necessary permits and licenses, that they will be renewed, or that we will be in a position to comply with all conditions that are imposed.
All mining projects require a wide range of permits, licenses and government approvals and consents. It is not certain that Meridian will be granted these at all, or in a timely manner. If it does not receive them for its mineral projects or is unable to maintain them, it could have a material and adverse effect on the Company.
15
Management's Discussion and Analysis
Risks Inherent in Acquisitions
The Company may actively pursue the acquisition of exploration, development, and production assets consistent with its acquisition and growth strategy. From time to time, the Company may also acquire securities of or other interests in companies with respect to which it may enter into acquisitions or other transactions. Acquisition transactions involve inherent risks, including but not limited to: accurately assessing the value, strengths, weaknesses, contingent and other liabilities and potential profitability of acquisition candidates; ability to achieve identified and anticipated operating and financial synergies; unanticipated costs; diversion of management attention from existing business; potential loss of the Company's key employees or key employees of any business acquired; unanticipated changes in business, industry or general economic conditions that affect the assumptions underlying the acquisition; and decline in the value of acquired properties, companies or securities. Additionally, the legal form of these acquisitions may result in the Company becoming liable for the historical operations of the acquisition.
To acquire properties and companies, the Company may be required to use available cash, incur debt, issue additional Common Shares or other securities, or a combination of any one or more of these. This could affect the Company's future flexibility and ability to raise capital, to explore, develop and operate its properties and could dilute existing shareholders and decrease the trading price of the Common Shares. There is no assurance that when evaluating a possible acquisition, the Company will correctly identify and manage the risks and costs inherent in the business to be acquired. There may be no right for the Company shareholders to evaluate the merits or risks of any future acquisition undertaken by the Company, except as required by applicable laws and regulations.
Other Requirements
Additional information relating to the Company, including its Code of Business Conduct and Ethics, governance policies, and committee charters, is available on SEDAR+ at www.sedarplus.ca and on the Company's website www.meridianmining.co.
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable assurance that material information is gathered and reported to senior management, including the Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"), as appropriate to permit timely decisions regarding public disclosure.
The Company's management, including the CEO and CFO, have as at September 30, 2024, designed Disclosure Controls and Procedures (as defined in National Instrument 52-109 of the Canadian Securities Administrators), or caused them to be designed under their supervision, to provide reasonable assurance that material information relating to the issuer is made known to them by others, particularly during the period in which the interim or annual filings are being prepared; and information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in securities legislation.
Internal Control Over Financial Reporting
The management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, the CEO and CFO, and effected by management and other personnel to provide reasonable assurance regarding the reliability of the Company's financial reporting and the preparation of financial statements for external purposes in accordance with IFRS.
Internal control over financial reporting includes maintaining records that in reasonable detail accurately and fairly reflect the Company's transactions and dispositions of the assets of the Company; providing reasonable assurance that transactions are recorded as necessary for preparation of the Company's consolidated financial statements in accordance with IFRS; providing reasonable assurance that receipts and expenditures are made in accordance with authorizations of management and the directors of the Company; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company's assets that could have a material effect on the Company's consolidated financial statements would be prevented or detected on a timely basis. Because of its inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of the Company's consolidated financial statements would be prevented or detected. Management will continue to monitor the effectiveness of its internal control over financial reporting and disclosure controls and procedures and may make modifications from time to time as considered necessary.
16
Management's Discussion and Analysis
Management adheres to the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) revised 2013 Internal Control Framework for the design of its Internal Control over Financial Reporting ('ICFR'). In accordance with National Instrument 52-109, the evaluation of ICFR under COSO’s 2013 Internal Control Framework was carried out under the supervision of and with the participation of management, including the Company’s CEO and CFO. For the quarter ended September 30, 2024, the CEO and CFO concluded that Meridian’s internal controls over financial reporting are designed to provide reasonable assurance regarding the reliability of its interim financial statements prepared in accordance with IFRS.
There have been no material changes in the Company's internal control over financial reporting or in other factors that could affect internal controls during the three months ended September 30, 2024.
Note Regarding Forward-Looking Statements
This MD&A contains certain statements that may constitute “forward-looking statements” for the purposes of applicable securities laws. Forward-looking statements include but are not limited to, statements regarding future anticipated exploration programs and the timing thereof, and business and financing plans and are based on material factors and assumptions and subject to a variety of risks and uncertainties which could cause actual events or results to differ materially from the forward-looking statements. These include, without limitation, material factors and assumptions relating to, and risks and uncertainties associated with, the availability of financing for activities when required and on acceptable terms, the accuracy of the interpretation of drill results and the estimation of mineral resources and reserves, the geology, grade and continuity of mineral deposits, the consistency of future exploration, development or mining results with our expectations, metal price fluctuations, the achievement and maintenance of planned production rates, the accuracy of component costs of capital and operating cost estimates, current and future environmental and regulatory requirements, favorable governmental relations and support for the development and operation of mining projects, the threat associated with outbreaks of viruses and infectious diseases, risks related to negative publicity with respect to the Company or the mining industry in general, reliance on a single asset, planned drill programs and results varying from expectations; litigation risks, the availability of permits and the timeliness of the permitting process, local community relations, dealings with non-governmental organizations (“NGOs”), the availability of shipping services, the availability of specialized vehicles and similar equipment, costs of remediation and mitigation, maintenance of title to our mineral properties, industrial accidents, equipment breakdowns, contractor’s costs, remote site transportation costs, materials costs for remediation, labour disputes, the potential for delays in exploration or development activities, the preliminary nature of the Cabacal PEA and the Company's ability to realize the results of the Cabacal PEA, timing and successful completion of the Cabacal PFS, the granting of Cabacal’s preliminary license, and the successful advancement of Santa Helena, the inherent uncertainty of production and cost estimates and the potential for unexpected costs and expenses, commodity price fluctuations, currency fluctuations, continuing global demand for base metals, and other risks and uncertainties, including those described under “Risk Factors” in the Company’s most recent Annual Information Form. Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those described in forward looking statements, there may be other factors that cause actions, events or results not to be as anticipated, estimated or intended. The Company provides no assurance that forward looking statements will prove to be accurate. Should one or more of these risks and uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from any conclusions, forecasts or projections described in the forward-looking statements. Accordingly, readers are advised not to place undue reliance on forward looking statements. Except as required under applicable securities law, the Company undertakes no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.
Historical results of operations and trends that may be inferred from this MD&A may not necessarily indicate future results from operations. In particular, the current state of the global securities markets may cause significant reductions in the price of the Company’s securities and render it difficult or impossible for the Company to raise the funds necessary to continue operations.
All of the Company’s public disclosure filings, including its most recent management information circular, Annual Information Form, material change reports, press releases and other information, may be accessed via www.sedarplus.ca.
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