Cabral Gold gets Full Mining License at Cuiú Cuiú, Continues Exploration through Construction Phase

Cabral Gold (TSXV: CBR) CEO Alan Carter says the company has achieved a major milestone with the granting of the Licença Prévia (“LP”) for the Full Mining License at Cuiú Cuiú Gold District, in the state of Pará, Brazil. “The trial mining licenses actually have a limit, so we can only mine about half a million tons a year, or about 1,500 tons a day,” he explained. “With the full mining license, there is no limit, so we can expand this to the full design capacity of 3,000 tons a day and way beyond that.”

“I think there's a good chance we will expand this once we get it up and running in about six months’ time.”

Carter said the company has approximately CAD$40 million in cash, and while they’re spending on the mine construction, they’re continuing to move forward with further exploration as well. “We're building a mine, but we still have our foot on the accelerator in terms of the exploration program,” he said. “We've basically split our workforce in two, so we've got a
dedicated construction team and a dedicated exploration team, and the exploration team is going full-tilt all the way through the construction, and are producing some excellent results.”

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To learn more about Cabral Gold, visit: https://cabralgold.com/

00:00 - Introduction
00:19 - Impact of the Full Mining License
04:23 - Advancement of Phase One
06:14 - Risk Management of Civil Works
07:32 - Critical Path to Commercial Production
08:57 - Advancement of Phase Two
12:01 - Financial Impacts of Iran Conflict on Development
14:03 - Logistical Impacts of Iran Conflict on Development
15:31 - Latest Drill Results
19:17 - Prioritizing and Targeting Exploration 
21:40 - Current Financial Position of the Company
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Transcript

SPEAKER_00 0:07

Hello and welcome to Kitco Mining with me, Paul Harris, where we are looking at gold development in Brazil. Joining me today is Alan Carter, president and CEO of Cabral Gold, which trades on the TSXV under the ticker CBR. Alan, welcome back to Kitco.

SPEAKER_01 0:21

Hi, Paul, nice to be back. Thanks for having me on.

SPEAKER_00 0:24

You're more than welcome. Since we last spoke in February, the company's been very busy at its Cuyu Cuyu project in Brazil's Tapajosh region, including the receipt of your license previous or LP, which is the full mining license. Let's start there, Alan. What is the LP and what does that enable you to do?

SPEAKER_01 0:44

The receipt of the LP, Paul, is the most important step if you're trying to permit a mine in Brazil. It is a very, very important step. It is the um result of an eight-year process. This is a process that we started in 2018. It's involved a whole series of different government agencies and all of our stakeholders, you know, people that live on site, even people that work for us, we've had public audiences. So it is a lengthy step, and it involves a obviously submitting a um an uh environmental impact assessment uh report. Um that that's a fairly lengthy study in itself that spans several years because you have to uh sample fauna and flora uh during the wet season and the dry season. So it is a big deal, and I think anybody that works in the Brazilian mining space knows how important it is. So, what this means for us, Paul, is basically the project, the phase one project that we're building now, under, and that is permitted under trial mining licenses, uh, will now proceed under a full mining license. And um uh that will allow us the trial mining licenses actually have a limit. So we can only mine about half a million tons a year or about 1,500 tons a day. So with the full mining license, we'll be able to, there is no limit. So we can expand this to the full design capacity of 3,000 tons a day and way beyond that if we if we decide to do that. And I think there's a good chance we will expand this once we get it in up and running in uh in about six months' time. So um, you know, very, very important step. Now, the second thing I would say about the LP is because it's for the full mining license, it also means that the second phase is permitted too. Now, the second phase, as you know, is a much larger project which is coming along behind this initial phase one that we're building now. And the second phase is designed and will target it is designed to mine the hard rock material. Most of the gold at Kuyukuyu is in the hard rock material. Phase one is mining the weathered caps down to about 60 meters, which is basically mud. But phase two will be a much larger operation to mine phase two. So, very, very big deal. We're very, very pleased, very lengthy process. Um, and uh we're absolutely thrilled, to be honest, to to have been granted the LP.

SPEAKER_00 3:11

Well, well, congratulations there, Alan to and your team. Now, the my understanding is Brazil's got a three-step permitting process, so where does the LP fit into that?

SPEAKER_01 3:21

Well, the LP is the first step of a three-stage process on the environmental side. So there's actually two things going on. There's a uh the the there's a mining process uh which which uh which is governed by the uh mining agency of Brazil, and then there's environmental licenses. Now, this LP is the big step on the environmental side. Um now after this, we also need a license to construct uh from the environmental agency and a license to operate. Uh, we will make those applications uh later this month in March, uh, and we expect to get those in the next few months. Now, those steps are are uh uh much less involved and and much less time consuming than the LP. Uh the LP is basically, as I said, you've got to involve a whole bunch of different uh stakeholders in in terms of getting that. So um it's a massive step forward.

SPEAKER_00 4:15

Okay. Well, let's go back to the sort of phase one uh development that you're currently engaged in. That's for the golden oxide heap leach uh uh aspect to it. As you mentioned, uh that's the first part of the project that you're developing. How is the advancement going there, Alan?

SPEAKER_01 4:30

It's going very well, Paul. Um uh we put out a press release earlier this month in March, and uh at that time, I think it was the 5th of March, we put out a press release, we were 54% uh done. We're still on budget and on schedule. Um, so we're very pleased with it. We expect to be commissioning uh the plant uh in the third quarter of this year and producing gold in the in in the fourth quarter of this year. So and I think um I think to have um to be on schedule and on budget so far at least um is no mean feat uh given that we are building this in the middle of the rainy season in Brazil. So, you know, we are losing some time through wet weather. Well, we are moving a lot of earth around, um, hundreds of thousands of cubic meters of earth. So um, you know, we did uh assume that there would be some down days uh through wet weather, and of course, we are also building this off a pre-feasibility study uh rather than a bankable feasibility study. Now, the pre-feasibility study was that that was done was a very good one. It was done by Asenco Engineering, one of the world's largest engineering firms, and it was a uh a long way towards getting that full feasibility study. So um, you know, I think those two things are um, you know, uh and the fact that we are on 54, 54% complete um so far are very, very positive.

SPEAKER_00 5:55

Now, Alan, uh the the earth movement works that you mentioned, they're they're civil works, they're typically or often the riskiest part of a project development. And then undertaking those in during the rainy season must um you know potentially increase the risk of that. How are you managing how are you managing that risk profile given that you know the risk is part of the development and you're in wet weather, which increases the risk?

SPEAKER_01 6:20

Yeah, well, we've probably put more on equipment. It look, if every day was a dry day, Paul, we would have less heavy equipment uh on the site. Uh, but you know, we've had to take maximum advantage and and stretch the hours and and stretch everybody's time and equipment uh when we've had dry days. And uh and so um so that's how we've essentially been managing it. It's been all hands to the pump when we've had dry days. So we have a lot more dry days than wet days, but uh you're right. Um one of the biggest risks of building a a mine is is on the earth-moving side and and getting all that done on time and on budget. And uh we've basically pretty much completed the earthworks now. We've pretty much completed all the uh foundations for all the equipment that we need to install on site. So the next two or three months, there'll be a whole bunch of equipment and uh uh steel being erected on site and all the rest of it. So it's changing very, very quickly. The guys have done a great job. I'm very proud of the uh the construction team that we built around our construction manager Luis Solaro. Luis has built several gold mines in Brazil, so um, yeah, it's uh so far so good. It's it's it's going very well.

SPEAKER_00 7:26

Okay, I mean it's great news that you've finished the the earth moving. So, what will be the critical path items now to enable you to deliver your your goal of being uh commercial production at the end of the year on time and on budget?

SPEAKER_01 7:38

Well, there's some key things that have to happen. Um, obviously, we're getting equipment from a whole bunch of different suppliers. Uh, a key component of uh of our operation will be what's called an ADR plant that is being commissioned as we speak in Australia. The construction is finished, so that will be commissioned in Australia over the next couple of weeks, and then it will be uh uh packed up and shipped in a series of containers to Brazil. So, you know, we have to get that on site and on time. Obviously, some of the supply chains, global supply chains are being disrupted currently through you know events which are well way outside of our control, but but we don't anticipate any major delays. Um, there is equipment coming from Germany, there's equipment coming from other places, you know, there's all sorts of equipment that has to arrive on site. But uh the earth moving was one of the key things that uh that we were concerned about. So that risk is, I think as each day progresses, Paul, we're gradually de-risking this project. We do de-risking the sort of um the uh the construction. And as I said, uh we're currently on schedule. So um, yeah, so far so good, as I said.

SPEAKER_00 8:46

Okay, well, let's look a little bit forward now. Um, as we've been talking about, this is phase one. You mentioned the larger phase two, which will be the hard rock mining. How is that part of the plan advancing? What's the timeline there and what needs to happen for you to be able to make that you know construction go decision?

SPEAKER_01 9:04

Yeah, well, the phase two is the much bigger price. It will be a much larger project, and and that will be focused on mining the hard rock, the gold in the hard rock here, um, which is 60 meters below the the surface here and and directly below the weathered cap. So we mine the weathered cap in phase one, and then we build a much larger uh second phase to mine the hard rock material. Now, in order to, we've got a few steps that we have to jump through on phase two. Um, we are aggressively drilling, uh, we've got several drill rigs on site which are designed to increase the global hard rock resource on the project. And we hope to put out an update later this year on the as a resource update. Once we've got that, we will then uh sometime next year, probably the second quarter of next year, look to complete a PEA on phase two, which will be a much, much bigger project. Um, so um, and then from there we will go to, you know, if all goes well, we will go to a PFS uh later next year and a bankable feasibility study and a construction decision probably in 2028. Um, but in the meantime, we've got to get phase one into production. We are looking at expansion opportunities for phase one too right now, so which is pretty exciting. But um, yeah, there's a lot going on.

SPEAKER_00 10:22

Uh you mentioned uh for the phase two development, you you will take that to feasibility. What why are you gonna take that to feasibility when you started phase one on a pre-feasibility?

SPEAKER_01 10:31

Because phase two pool will be a much bigger financial commitment. Uh, we're building phase one, it's only 3,000 tons a day. Um, you know, it's a it's a$40 million or so US uh uh build cost. Uh phase two, we anticipate, will be in the order of three, four, five hundred million. It may be more than that. It'll be a much much bigger mine, probably mining between 150 and 250,000 ounces a year. So a much, much larger. So we'll need to make absolutely sure that we've got everything nailed down. Um but um, you know, obviously having cash flow from a phase one operation, and even with the pullback in the current gold price, um, phase one should make an awful lot of money.

SPEAKER_00 11:12

Okay, um let's talk about uh some of the things that you you you referred to in terms of the broader environment, um, and that of course is the conflict in Iran. Um you mentioned that uh so far you haven't seen any supply uh disruptions for what you're doing, but you know, they're potentially around the corner somewhere. One thing that uh a couple of things that have happened, the gold price, as you mentioned, has pulled back, I think about$500 per ounce since the conflict began. The oil price has increased substantially. If the conflict continues, Alan, um looking ahead and looking at your execution plan, what are the things that you're um really sort of focused on and potentially concerned about in terms of potential impacts on what you're doing? Um, higher fuel costs, potentially getting delays in the shipment of stuff to your site. What are things you're sort of really putting focusing on to make sure that they do happen or that you've got contingencies in place if there are uh interruptions?

SPEAKER_01 12:08

Yeah, fuel uh Paul is a big one. It will have an impact on everybody's uh projects. Um the costs are gonna go up and they are going up. Uh that will impact us. But I think it's important to remember that uh we anticipate that we'll be producing gold at about$1,200 an ounce. Now, with with increased fuel prices, that may be$1,400 or$1,500 an ounce. I mean it's it's difficult to tell, obviously. Um, but the gold price is still, even with this current pullback, the gold price is still around$4,700 an ounce. So there's still a massive margin. Um, when we did the uh a PFS study, we assumed that we would be selling gold at uh$2,500 an ounce. Admittedly, that was our costs were$1,200. So, you know, as I said, our costs are going to go up a bit, there's no doubt about that. But but at$2,500 an ounce, uh, based on the PFS back in July, we had a 78% post-tax rate of return. And at a gold price of$3,500 an ounce, that's still well below where we're at today. The rate of return on this project is about 151% post-tax. So um, so we're fortunate because we are it's open-pit mining, there's no drilling and blasting, so the mining costs are quite low, and the processing costs are quite low because we're not crushing and grinding this material. It is basically mud. Um, so you know, look, as I said, everybody's costs are going to be impact impacted by the the conflict in the Middle East, but we we do have a very, very large margin here, and this will be profitable. Um, this should be profitable, uh, you know, at gold prices of anywhere from sort of$1,400,$1,500 uh dollars an ounce and above.

SPEAKER_00 13:52

Okay, so on the financial side, you're you've got a good cushion to absorb any potential price shocks there. What about on the logistics side? Are there any concerns there? You know, you mentioned the ADR plan, I think you said it's coming from Europe. Um any concerns there on the logistics side of things?

SPEAKER_01 14:07

It's come from Australia. No, no, we don't need to ship through the Middle East. Um, so yeah, it's not like we're sourcing a lot of equipment. I don't think we're sourcing any equipment through the Middle East that that has to go through uh that part of the world. Uh we're certainly, you know, all our fuel is is comes locally. There's no special sort of lubricants or anything that we need that that come from the Middle East. So most of what we need we can we can get locally in Brazil. So, but you know, uh as I said, increase in fuel prices and not just fuel prices, but increase in everything. Let's face it, everything's going up. Uh, and if and you know, food, you know, everything. Um, cost of steel, you know, the oil price basically impacts just about everything that we touch as individuals, so it'll have an impact on all of us. Um, but uh the main impact for us will be fuel prices.

SPEAKER_00 14:58

Okay, let's turn to exploration where you put out a monster hole mid-March of uh 9.5 meters, grading 87.4 grams per ton at uh gerem uh the target, sorry, gerum seemer. Uh what the 830 gram meters there. Sorry, how did you pronounce that?

SPEAKER_01 15:16

Jeremun Sima. Actually, in English it means upper pumpkin. Um so if we were in September, it'd be quite seasonal, but uh, but that's what that's the what the Portuguese translation is.

SPEAKER_00 15:27

I think you should change the name to Upper Pumpkin and uh make it easier for me anyway. Um so what what is the upper pumpkin target and how does it relate to the overall development of Cuyu Cuyu?

SPEAKER_01 15:37

Uh yeah, Paul, I mean that that is quite an unusual drill hole. Um uh I can't ever recall in my career being involved with a uh hole that came back with that sort of grade, nine and a half metres at 87.4 grams, that's almost three ounces a ton over a very wide width. I mean, in feet, that's that's about 30 feet wide. Now that's not the true width, the true width will be less than that, uh, but it is very significant because that hole was drilled um three kilometers away from the nearest gold deposit where we've got a resource. Now we've got several gold deposits at Kuyukuyu. Jeremy Sima is one of four new discoveries that we've made since we last uh updated the resource, which was three years ago, back in 2022. Um, so it it is massive, and um it's not in isolation because the holes immediately to the east and to the west also had very good grade. Um, not the sort of spectacular grade that we got in this whole 372, but um 30 meters to the east, we had 39 meters at five grams, and we had a very good intercept 80 meters to the west. So there is there is clearly a high grade zone there. There is a lot of low-grade mineralization at Jerry Moon Seamer. We've so far traced it, I think, over about 900 meters of strike length. There are three main zones, but this high grade zone obviously could contain an awful lot of gold. And uh we've intercepted it 170 meters downhole. Um, so that true, true sort of depth that's probably about 120, 130 meters deep. So it is a spectacular hole. I mean, I had to read the results probably about three or four times to believe it. In fact, I didn't believe it, and so we double-checked and triple-checked, and um, and there is quite a bit of visible gold in that intercept, but it is a very exciting uh high grade zone that we we uh we didn't know that there was that that sort of grade material involved. So, look, we think it's the next gold deposit there. We've got a lot more drilling to do, there are more results. Uh, as I said, we've got three rigs on site, so more results pending um and and a lot more drilling. So um, hopefully by the end of the year, we can also get a resource on Jeremoon SEMA. It's not just Jeremoon Sima, though, Paul. Uh we have quite a number of other targets with very high grade results. We've got boulder fields in the eastern part of our claim block with big pieces of big boulders of quartz, which are averaging 90 grams a ton, uh, certainly at a project at a target called Alonso. There's another area five kilometres to the northeast of that called Trakashau, where the boulders are averaging about 78 grams a ton. So uh it's not sort of a it's not an isolated thing. One of the things that that makes the Kuyukuyu district so special is there is a lot of this high-grade material. And everybody always has questions around continuity. You know, as I said, we've got a couple of hot one hole either side of this this spectacular hit at Jeremiah Jeremun Sima. But when you look at some of the other gold deposits that we've got, uh, for example, Merera Gomez, which currently contains about half a million ounces, a lot of low-grade material there, a lot of low-grade stockwork mineralization averaging about one gram a ton. But within that stock work zone, there are high-grade veins. And some of these high-grade veins extend over 700, 800 meters. We've traced them from section to section to section. So if this high-grade zone at Jerry Moon CEMA has anything like the continuity at MG, it could be very, very important.

SPEAKER_00 19:09

Now, Alan, with so many sort of targets and getting success at so many targets, how are you prioritizing things? How are you focusing on exploration? Because you know, it's easy to spend money on on everything, but obviously money's a limited resource. How are you focusing? How are you targeting?

SPEAKER_01 19:24

Well, look, yeah it is a district, as you said. We've got over 50 targets here, Paul. So one of the one of the reasons that we're pursuing this two-phase strategy for our project, uh, and phase one is consisting of a relatively modest starter operation doing 3,000 tons a day, is to fund all this drilling and expiration that's required within the broader district. So, you know, there is a series of targets we're trying to test as many as we can, as fast as we can, um, but uh we don't want to be relying on continual dilution of the capital structure in order to fund all that drilling. So so that is a kind of a key part of it. In terms of sort of prioritizing targets, that is a that's moving, that is a moving target, if you'll excuse the pun. But um uh look, what we do know is that the uh the magnetic data here is extremely important for the gold deposits that we have. Most of the gold deposits that we have, in fact, all the gold deposits that we have are associated with magnetic destruction, um, so they form magnetic lows. And uh we've been doing some work with uh drone-based systems, which fly much closer to the ground with a magnetic sensor on it, a magnetometer, and they get they produce data that is a lot higher resolution, which allows you to map map structures in greater detail and get a much, much better grip on the structural controls um within the district on the gold mineralization and where the next gold deposits are. So um, once we get all that drone data back over the next few months, I think that'll be terribly tremendously exciting. And and the test work that we did late last year between the central gold deposit and the PDM gold discovery, which is two kilometers to the northwest, indicates that we found a mineralized structure um linking those two gold deposits. And there's two kilometers, it's two kilometers long between those structures. So as I think as we get more of that drone magnetic data, it will help with the prioritization and the ranking and the order at which we test all these targets that we've got.

SPEAKER_00 21:28

Okay. Um let's finish with a financial question for you, Alan. You mentioned that the development of phase one is on time and on budget. You raised uh more than 45 million US dollars in November last year. Uh being on time and on budget is great. What's the current financial position of the company?

SPEAKER_01 21:45

Uh, Paul, it's it's uh it's approximately 40 million Canadian. Uh so we are spending money. Obviously, we're building a mine. So, but um we still have the foot on the accelerator in terms of the expiration program. You know, as you know, many companies. Once they start building their project, you don't hear anything about the expiration. We've basically split our workforce in two. So we've got a dedicated construction team and a dedicated exploration team. And the expiration team is going full tilt all the way through the construction and as we've just said are producing some excellent, excellent results. So look, we're well financed. Both in terms of continued updates on our progress. As I said, we are more than halfway complete on the build of phase one. They should expect a lot more draw results from Jeremy Moon SEMA and other targets at QUQU. So it's pretty interesting time for us as a company. We are transitioning from a uh pure expiration company. We're now a junior developer. We're soon to be a junior producer, hopefully as of the fourth quarter of this year. And then the focus will be on expanding phase one and uh and proving up the economic viability of the much larger phase two.

SPEAKER_00 23:07

Okay, so 40 million Canadian in cash at the moment. Um later on this year you'll start cash flowing. Where do you anticipate being in terms of your cash position at year end?

SPEAKER_01 23:18

I'd need to check, Paul. I think it it really depends on timing. Um, there are always teething uh issues uh with with starting a mine. Um you know, there are always things that you've got to iron out, um, but it it should be it should be very positive. It it kind of depends a little bit on what's happening with the gold price and and what the margin is and how how profitable the operation is, but we should be well in the black by the end of the year.

SPEAKER_00 23:44

Okay. As a reminder, Cabral Gold trades on the TSXB under the ticket CBR. Alan Carter, many thanks for joining us today.

SPEAKER_01 23:52

Thanks very much, Paul. Thanks for your time.

SPEAKER_00 23:54

And of course, to our viewers, if you like what you see, don't forget to hit that subscribe button. I'm Paul Harris, and this is KitCo Mining.