In announcing its Feasibility Study (FS) results in March 2024, Merdeka Copper Gold confirmed its Pani gold project in Gorontalo province, Indonesia, to be a technically simple, large-scale, multi-decade and low-cost open pit operation.

The FS references an ultimate ore processing capacity of 19Mtpa and peak gold production of approximately 500,000oz per annum, positioning Pani as one of the most significant gold mines in the Asia-Pacific region with a mineral resource of 6.9Moz of gold.

Phased project development commencing with near-term heap leach operation

Project commissioning for Pani is targeted for late 2025, with the first gold pour set for early 2026. Initially, to take advantage of readily leachable oxidised gold ore, Pani will commence operations utilising heap leach recovery by investing a pre-production capex of approximately US$250 million plus ancillary costs. Merdeka brings proven pedigree in heap leach recovery, demonstrated by its mature Tujuh Bukit gold mine in East Java and Wetar copper-pyrite mine in Southeast Maluku. Merdeka can execute Pani construction cost-effectively by engaging in-house construction expertise and combining with local contractors. Construction activities for the heap leach operation are currently progressing according to plan.

The heap leach operation will process 7Mtpa of ore, producing approximately 140,000Oz of gold per annum, designed to maximise near-term cash flow. A second development phase will be introduced in late 2028 that utilises a carbon-in-leach (CIL) recovery circuit to exploit the deeper sulphide gold mineralisation. This second stage will have an initial ore processing capacity of 7.5Mtpa, increasing to 12Mtpa to give the above figure of 19Mtpa from the combined heap leach and CIL operations. The expected future cash flow generated from the heap leach operation is forecast to fund a significant portion of the capital required to construct the CIL mining and processing infrastructure. 

Pani is a large-scale resource offering significant upside for exploration. Numerous prospects have been identified, and drilling has returned encouraging results. The company is confident of further resource expansion, given that the Pani ore body is open in a range of directions and at depth, although its near-term focus is getting Pani into production.

Feasibility Study demonstrates robust Pani project economics

Notwithstanding the need for independent technical studies prepared to a high standard, even prior to the FS completion, there existed a high degree of confidence that Pani was going to be an economic project based on the work already undertaken. Such was the confidence level regarding Pani's credentials that Merdeka commenced project construction, utilising balance sheet strength to fast-track the path to production.

In recent history, Merdeka has invested approximately US$140 million in on-site development, exploration drilling and resource definition and study work. This is in addition to substantial expenditures incurred before Merdeka ownership and excludes Merdeka's acquisition costs for Pani.

Pani is a low sulphidation epithermal gold deposit that is expected to be large-scale and low-cost, benefiting from an estimated strip ratio of ~0.50x resulting in the lowest quartile all-in sustaining cost of approximately US$870/oz over the life of mine (LOM). Leveraging the substantial work that has already taken place, the FS results demonstrate attractive project economics even at gold prices well below the current gold price level of ~US$2,300/oz.

Merdeka: Indonesian pedigree with best-in-class global credentials

While Merdeka operates to an international standard, the company is Indonesian listed, has a majority of Indonesian shareholders, and is regarded as an Indonesian company by Indonesian regulations. Therefore, it is well placed to avoid the issues foreign mining companies may encounter when operating outside their home jurisdiction. The company is well diversified across a portfolio of businesses. It has a track record of operating in various regencies across Indonesia, leveraging its experience from its established nickel and Tujuh Bukit copper and gold projects.

Pani is positioned to be the fourth large-scale mining project Merdeka has brought into production and is expected to provide a meaningful socio-economic boost to the Gorontalo province, a region with a rich history of gold and copper mining. It has not been subject to the stop-start capital raising experience that marks many other mining projects in development. Instead, progress to date has been informed by study work, technical considerations and construction timelines, and this is set to continue as the project advances towards production.

Merdeka's next great revenue generator offers low- risk exposure to gold

Looking ahead, Pani will constitute a new and significant income pillar for Merdeka alongside its nickel mine and processing facilities and its Tujuh Bukit copper-gold porphyry project. Even using conservative assumptions, Pani is forecast to generate over US$500 million EBITDA per annum and over US$6 billion of cumulative free cash flow over the initial LOM.

From a longer-term strategic perspective, Merdeka chairman Andrew Starkey recognises that other high-quality dormant or semi-dormant assets in Indonesia could be progressed and developed to a similarly high international standard and have a good productive life, subject to them being brought into the right ownership structure. To this end, Merdeka is ever alert to the next Pani-type opportunity.