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Meeka Metals Limited (ASX:MEK) has announced a strategic shift in operations at its Murchison Gold Project in Western Australia, ceasing open pit mining to focus on higher-grade underground ore extraction. During the June 2026 quarter, gold production totaled 6,424 ounces, impacted by open pit contractor productivity issues. This prompted the company to conserve its remaining open pit resources and fast-track underground mining expansion across two sites.
Key Points
- Meeka Metals Limited (ASX:MEK) manages the Murchison Gold Project, featuring both underground and open pit gold mining operations in Western Australia.
- Due to ongoing contractor productivity challenges, the company will end open pit mining by July 2026, preserving around 300,000 ounces of in-ground open pit resources at an average grade of 1.4 grams per tonne.
- Gold production for the June 2026 quarter reached 6,424 ounces, with full-year FY26 output at 56.4 kilogrammes (56,400 ounces); underground ore is projected to account for about 40% of the processing blend in the September 2026 quarter.
- Cash reserves dropped to $38 million as of 30 June 2026 from $50 million on 31 March 2026, following $17.5 million invested in growth capital; cash is expected to recover in the September quarter as production rises and costs decrease.
Contractor Productivity Issues Prompt Strategic Shift from Open Pit to Underground Mining
Meeka Metals revealed that persistent underperformance by its open pit mining contractor, first noted in the March 2026 quarter, has significantly impacted mining efficiency and delayed pit development. This shortfall restricted access to high-grade open pit ore, forcing reliance on lower-grade stockpiles to sustain mill feed and limiting production recovery during the June quarter.
Given these operational constraints, substantial surface ore stockpiles, and increased availability of higher-grade underground ore from the Andy Well underground mine, management decided to cease open pit mining operations in July 2026. This preserves the valuable open pit resource of approximately 300,000 ounces at an average grade of 1.4 grams per tonne for potential future extraction, while prioritizing higher-grade underground ore to improve margins.
Expansion of Underground Mining at Andy Well and Turnberry Drives Production Growth
In response to open pit limitations, Meeka Metals is rapidly expanding underground mining capacity at two sites. At Andy Well, underground development advanced with 1,619 metres completed in the June quarter, following 1,397 metres in the prior quarter. By June 2026, development stabilized at about 600 metres per month, with stoping operations starting in late May. This underground ore is now feeding the processing plant at significantly higher grades than the displaced open pit material.
Preparations for the Turnberry underground mine progressed with civil works for surface power infrastructure underway. Portal development is scheduled to begin in September 2026. Managing Director Tim Davidson highlighted that this second underground mine will "further increase the availability of higher-grade underground ore for the processing plant." Underground ore is expected to represent roughly 40% of the mill blend in the September 2026 quarter, with this share rising as Turnberry production commences and Andy Well continues to ramp up.
Higher-Grade Underground Ore Enhances Mill Blend, Boosting Production and Margins
The June quarter marked the introduction of higher-grade underground stope ore into the processing blend, signaling a major shift in feed composition. Underground ore is projected to form an increasing portion of mill throughput, improving head grade and recovered ounces in upcoming quarters.
Processing throughput rose to 128 kilotonnes in the June quarter from 123 kilotonnes in March, with metallurgical recovery averaging 95%. Plant upgrades continue, including the installation of a new ore sorter expected to be commissioned in September 2026. This upgrade aims to optimize ore separation and processing efficiency as underground ore volumes grow.
June Quarter Production Impacted by Contractor Issues but Shows Sequential Gains
Gold output for the June 2026 quarter was 6,424 ounces, a slight increase from 6,083 ounces in March but below company forecasts due to open pit contractor productivity challenges and reliance on lower-grade stockpiles. Mining delivered 11,329 ounces during the quarter, while sales totaled 6,242 ounces, reflecting inventory transitions and mill feed constraints.
For FY26, total mining production was 56.4 kilogrammes (56,400 ounces) with gold sales of 25,427 ounces at an average price of A$6,328 per ounce, generating A$160.9 million in revenue. Closing ore stockpiles at 30 June held 25.4 kilogrammes of gold within 806 kilotonnes of ore at 1.0 grams per tonne, providing feed flexibility as underground production scales and Turnberry development advances.
Financial Performance Reflects Growth Capital Outlays and Contractor Challenges
Meeka Metals reported mine operating cash flow of A$6.4 million in the June quarter, with a net mine cash outflow of A$11.1 million after A$17.5 million in non-recurring growth capital investments for mine development and infrastructure expansion. FY26 net mine cash outflow totaled A$36.4 million following A$74.9 million in growth capital expenditures, reflecting the capital-intensive nature of underground mine and infrastructure development.
Cash reserves decreased to A$38 million at 30 June 2026 from A$50 million at 31 March 2026. Management anticipates cash growth in the September quarter driven by increased gold production and lower costs after ending open pit mining. The company remains unhedged on gold prices and carries no debt aside from equipment financing. All-in sustaining costs (AISC) improved to A$3,589 per ounce in June from A$4,146 per ounce in March, reflecting inventory adjustments and underground ramp-up.
Robust Safety and Environmental Performance Maintained Amid Operational Changes
Despite operational challenges, Meeka Metals maintained strong safety standards with zero Lost Time Injuries (LTIs) in the June quarter, a Lost Time Injury Frequency Rate (LTIFR) of 1.2, and a Total Recordable Injury Frequency Rate (TRIFR) of 12.0. These figures underscore the company’s commitment to workplace safety during significant operational transitions.
Environmentally, the company reported no significant incidents during the quarter, continuing compliance with Western Australia’s mining regulations. The absence of LTIs and environmental events during a period of operational stress highlights the effectiveness of Meeka’s health, safety, and environmental management systems.
Management Expects Strong September Quarter as Underground Focus Intensifies
Managing Director Tim Davidson acknowledged the June quarter’s underperformance but emphasized a clear corrective path. He forecasted a substantial production increase in the September 2026 quarter as the operation shifts from open pit reliance to higher-grade underground ore processing.
Davidson stated, "Higher-grade underground production is ramping up and will comprise an increasing share of the mill blend, enhancing both head grade and recovered ounces." He added that "cash flow is expected to improve in the September quarter due to stronger gold output and higher-margin underground ore." The start of Turnberry underground development in September 2026 is anticipated to further boost higher-grade ore availability, supporting medium-term growth in production and cash generation.
Murchison Gold Project Set for Long-Term Underground Mining Success
Meeka Metals is repositioning the Murchison Gold Project as an underground-focused operation. Preserving the substantial open pit resource of approximately 300,000 ounces at 1.4 grams per tonne reflects management’s view that higher-grade underground ore offers better near-term economics and operational efficiency. The company operates two underground mines: Andy Well, currently ramping up production, and Turnberry, entering development in September 2026.
Expanding underground capacity, increasing higher-grade ore in the mill, process plant upgrades, and eliminating open pit contractor dependency collectively enhance operational resilience and profitability. With 25.4 kilogrammes of contained gold in surface stockpiles and two underground mines supplying higher-grade ore, the operation is positioned for improved production rates and margins. Ending open pit mining removes a significant source of operational risk and unpredictability.
Upcoming Operational Milestones and Production Drivers
Key near-term milestones include commissioning the new ore sorter at the processing plant in September 2026, designed to improve ore sorting and metallurgical recovery. Portal development at the Turnberry underground mine is also scheduled to start in September, marking a pivotal step toward sustaining and increasing higher-grade underground production.
Underground ore is expected to make up about 40% of the mill blend in the September 2026 quarter, rising as Andy Well stoping ramps and Turnberry enters production. These milestones underpin management’s expectations for stronger production and cash flow in the September quarter and beyond, providing clear catalysts for operational and financial improvement.
