Last week we caught up with the management team at Toronto-listed Cerrado Gold TSXV:CERT, which is working on some interesting projects in South America, both 100% owned. The first is the Monte de Carmo development project in Brazil (Tocantins State) while the second is the producing Minera Don Nicolas mine in Argentina.
We focused most of our conversation on the Monte de Carmo project where the company is rapidly advancing its Serra Alta deposit, which it says is expected to be a high margin and high return project with significant exploration potential. A PEA it published in 2021 showed excellent economics for the mine, including a 95% IRR and NPV (5%) of USD 617m with cash costs in the first four years at US$431/oz and LOM AISC of US$612/oz.
The company told us that a Bankable Feasibility Study in expected later this month and that construction at Monte de Carmo is expected to commence this year. First gold should be out Q1 2025 if the project stays on track.
Monte de Carmo is an 82,541 hectare concession package with an M&I of 9.1 Mt at 1.85 g/t Au. The inferred resource here is 13.2 Mt at 1.84g/t Au. It has an AISC of US$612/oz over eight years – we note US$431/oz quoted on the first five years. The PEA also cites a capex (initial) of US$126m including a $25m contingency.
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Monte de Carmo has key infrastructure in place with 69Kv of power running through the site and a paved road 2km west of the deposit. It sports over 30km of mineralised trends across the land package and the management team told us they expect it to be “one of the lowest cost operations globally.” They reckon they could be looking at district potential here, with peer leading economics, making it potentially the strongest return on investment of any gold project.
Just focusing on Monte de Carmo, the economics stack up favourably against the likes of Eskay Creek (Skeena Resources) or Ikkari (Rupert Resources). Those two quoted projects have considerably higher market caps but much higher P/NAV. Cerrado reckons it is looking at an IRR of 98% on Monte de Carmo against, for example, 56% for Eskay Creek. This could be very interesting for investors given the still relatively cheap entry price for Cerrado Gold.
Cerrado Gold’s producing Argentina project
At the Argentine site Cerrado Gold is maximising its asset value through continued operational optimisation and further production growth, aiming for 70,000 ounces in 2023, and 90,000 in 2024. Costs should be declining at the same time. An extensive campaign is also being carried out to further explore a hefty 330,000 hectares of land in the Deseado Masiff.
Q1 2023 production numbers out of Minera Don Nicolas saw 13,951 gold equivalent ounces. Mark Brennan, the CEO of Cerrado Gold, said he wanted to unlock “the significant resource growth potential” at Minera Don Nicolas. The consolidation of mine sequencing and exploration work to upgrade and define new sources of resources remains the key focus given the early stage of development at the Argentine site.
Operationally, Cerrado Gold said in April it was commencing heap leaching at its inaugural heap leach project at Las Calandrias in Santa Cruz, Argentina. This is expected to add 25,000 ounces per annum of gold production capacity, commencing in June. This is the first of two heap leach projects that the company has been planning for this year, with the second at Martinetas (the latter will bring another 20,000 ounces in 2024, Cerrado said).
Cerrado also just confirmed it will acquire Voyager Metals as of last week (subject to a final order from the Ontario Superior Court of Justice). Voyager brings into the Cerrado fold the vanadium-rich Mount Sorcier project, located just outside of Chibougamau in Quebec.
