Cabral Gold Advances Brazil Mine After Securing $45M US | Alan Carter

Key Concepts

• Kuyu Kuyu Project: Cabral Gold’s flagship project in the Tapajós Region, Brazil, focused on both oxide (weathered) and hard rock gold deposits.
• Phase One: Initial project focused on mining the near-surface weathered (oxide) gold material via open pit, aiming for 18-19,000 ounces of gold per year for six years.
• Phase Two: Future development targeting the deeper, hard rock gold deposits, envisioned as a significantly larger operation (150,000-250,000+ ounces per year).
• Gold Loan: A financing mechanism where the company borrows gold (350 kg) and repays it with interest, rather than traditional debt or equity financing.
• All-in Sustaining Cost (AISC): Total cost of producing an ounce of gold, including operating costs, capital expenditures, and sustaining costs.
• Prefeasibility Study (PFS): A preliminary engineering and economic study used to assess the viability of a mining project.
• Internal Rate of Return (IRR): A metric used to evaluate the profitability of an investment.
• Sapperite: Deeply weathered rock, often rich in iron and aluminum oxides, commonly found in tropical regions and often containing significant gold.

Gold Development in Brazil: Cabral Gold – A Detailed Overview

Introduction

This discussion focuses on Cabral Gold (TSXV: CBR) and its Kuyu Kuyu gold development project in the Tapajós region of Brazil. The conversation highlights the progress of Phase One construction, financing strategies, exploration results, and the long-term vision for the project. The Tapajós region is a prolific gold-producing area, exemplified by G Mining’s Tokatinho mine, currently Brazil’s third-largest gold mine, which extracted 30 million ounces of gold between 1978 and 1995.

Phase One Construction & Financing

Cabral Gold has commenced construction on Phase One of the Kuyu Kuyu project, focusing on mining the weathered (oxide) gold material down to 60 meters. A construction decision was made after securing project financing. The initial Prefeasibility Study (PFS), published in July 2023, modeled the project at a gold price of $2,500/ounce, demonstrating a 78% post-tax rate of return.

Crucially, the company secured $45.1 million USD in financing through a “gold loan” – borrowing 350 kilograms of gold and agreeing to repay it with a 10% interest rate. This innovative approach avoided equity dilution, a common concern in project financing. The loan originated from Cabral Gold’s largest institutional shareholder, fostering a strong relationship and favorable terms. Construction is approximately 12 months in duration, with commercial production anticipated in the fourth quarter of the current year. Approximately 200+ personnel are currently on site, with earthworks largely completed and civil works underway, including power supply installation. A key success factor in construction was proactively improving the access road to accommodate heavy equipment, mitigating potential delays during the rainy season.

Economic Projections & Cost Structure

The PFS estimated all-in sustaining costs (AISC) of around $1,200 per ounce. However, with the current gold price significantly higher (approximately double the PFS assumption of $2,500/ounce), the project’s economics are substantially improved. Modeling at $3,500/ounce suggests an IRR of 150%, and payback is estimated at around four months, compared to the PFS estimate of ten months at $2,500/ounce. The company anticipates generating over $100 million CAD in profit per year during the initial phase.

The low cost structure is attributed to the nature of the oxide material. It is “free digging” – requiring no drilling or blasting – and requires minimal processing. Unlike typical gold mines that involve extensive crushing and milling of hard rock, the weathered material requires only the addition of cement for elomeration, resulting in lower mining and processing costs.

Exploration & Resource Expansion

Cabral Gold is aggressively pursuing exploration to expand the Kuyu Kuyu resource base. Since the last resource update in September 2022 (1.2 million ounces indicated and inferred), approximately 35,000 meters of drilling have been completed, leading to the discovery of at least three new gold deposits (PDM, Mashishi Main, Jerem Sema) and expansion of existing ones.

The exploration strategy prioritizes the hard rock potential (approximately 80% of efforts), aiming to significantly increase the resource base for Phase Two. However, exploration also continues to identify extensions of the oxide material, potentially extending the Phase One mine life and increasing throughput. The company plans to update the global resource estimate later this year, anticipating a substantial increase due to the new discoveries and expanded drilling. The company acknowledges a delay in updating the resource estimate was partly due to historical difficulties in securing capital for exploration and a desire to deliver a significant resource increase.

Phase Two & Long-Term Strategy

Phase Two of the Kuyu Kuyu project envisions a much larger operation focused on mining the hard rock deposits. This phase is projected to produce 150,000-250,000+ ounces of gold per year, a significant increase from the 18-19,000 ounces targeted in Phase One. The company aims to leverage the cash flow generated from Phase One to fund the development of Phase Two without further diluting the capital structure.

Cabral Gold’s strategy mirrors a successful model employed by Australian gold companies – initiating small-scale production to generate cash flow and de-risk the project, then scaling up to larger operations. The Tapajós region, with G Mining’s Tokatinho mine as a successful example, provides a favorable environment for development.

Key Catalysts (Next 12 Months)

• Continued Drill Results: Expect a steady flow of exploration results, particularly from the newly discovered deposits and peripheral targets.
• Phase One Construction Updates: Regular updates on the progress of construction, tracking budget and schedule adherence.
• Commercial Production (Q4): Achieving commercial production in Phase One, marking a significant milestone.
• Resource Update: Release of an updated resource estimate, expected to reflect the recent drilling and discoveries.

Conclusion

Cabral Gold is making significant progress in developing the Kuyu Kuyu gold project in Brazil. The innovative financing strategy, favorable cost structure, and aggressive exploration program position the company for success. The Phase One operation provides a pathway to near-term cash flow, while the long-term vision focuses on unlocking the substantial potential of the hard rock deposits in Phase Two. The company’s strategy, combined with the favorable geological setting and regional infrastructure, suggests a promising future for Cabral Gold.