Transcript: Cabral Gold (CBR) - End of Year Update & Investor Meetings, London

Morgan Leighton
November 26, 2021

Cabral Gold is a publicly traded company focused on advancing the flagship, district-scale Cuiú Cuiú gold project in Brazil. The company’s strategy is to focus on growing the exisiting resource by updating the 2011 resource estimate, trenching, sampling and consequently drilling.  In addition to Cuiú Cuiú, Cabral Gold has three other projects in the Tapajos Region of Para, Brazil.

This region was historically the site of the world’s largest ever gold rush, the largest placer gold province in Brazil, and the third largest in the world. With the Cuiú Cuiú project estimated to have produced 2M oz placer gold as the largest garimpo in Tapajos, the region itself is estimated to have produced 20 – 30M oz of placer gold.

Cabral Gold benefits from having a 100% interest in the Cuiú Cuiú gold project with an existing resource, supportive local communities with ample shared infrastructure, and a management team with extensive experience in Brazil.

We Discuss:

00:00 – Company Overview

00:48 – Recent Activities, Anti-Dilute Free Measure & Metallurgical Results

04:47 – Gold Deposits, Free Money & Capital    

08:33 – Hard Rock Project, Press Releases & Stock Price

1:57 – Clearing Out Positions, State Highlight & Consolidations

15:52 – Liabilities, Monetization & Disrupting Cycles

18:24 – Outro

Alan Carter: My name is Alan Carter, I'm the President and CEO of Cabral Gold. Cabral Gold is a TSX-Venture listed company. We have an advanced exploration Gold Project in Brazil. We currently have 2 Gold deposits that contain around about 1Moz in resources within an 8km radius of those 2 deposits. We have 43 targets where we've got outcropping veins with high-grade Gold. We currently have 5 rigs turning, so we are generating a lot of news. We are anticipating drilling between 25 to 30,000m through to mid-2022. And we're right next door to an advanced development project which has just been acquired by G Mining from Eldorado Gold for $110M and that will be Brazil's 3rd largest Gold mine.

Matthew Gordon: Alan, good to see you in the flesh.

Alan Carter: Yes, finally.

Matthew Gordon: Well, you're closer than most. You've been down in Italy for parts of this. You've been obviously over in Brazil, Canada. How was it?

Alan Carter: Well, first, it slowed me down a little bit but yeah, I mean, life goes on, doesn't it? You've got to keep going. We've got 5 drill rigs turning so we've been pretty busy as a team. We did shut the project down last year for 3-months but since July last year, Matt we've been hard at it.

Matthew Gordon: Lovely to see you. You're here for a conference meeting investor, new investors and some potential investors I suspect. How has that gone for you?

Alan Carter: Very well, it's been a good week actually. I think there's a real optimism around Gold and Gold price and actually equities, particularly in the exploration sector right now. So very positive reception, nice to see.

Matthew Gordon: And also people looking at Brazil again.

Alan Carter: I mean, yeah, there's a lot going on in Brazil. A lot of people drilling, a lot of people exploring, as you know some of the world's biggest Gold miners have big mines there. Kinross is largest Gold mine is in Brazil, Yamana is there, AngloGold Ashanti is there, Equinox have 4 mines in Brazil. So yeah, there's a lot going on.

Matthew Gordon: I want to talk about this oxide blanket, we talked about in the last couple of times, but I want to see how quickly you're advancing things because that feels like money on the ground so what have you been doing?

Alan Carter: This is tremendously exciting. So as I said in the introduction, we have two hard rock gold deposits, which are about 5km apart. We've known about those for about 3-years now, actually a bit longer than that. Earlier this year in April, we discovered 1 of these 2 Gold deposits has a blanket on top of it of oxide material and that is all unconsolidated material and it's mineralized. So we're talking about soil, sand and mud up to 50m thick. The first blanket is now 36 hectares in size and it's still growing. It's resulted from the over millions of years from the erosion of the underlying hard rock deposit in the granite. So it's a road and it's formed like a sort of a bit of a mushroom on top if you like. It's quite exciting, a lot of it is low-grade material, it has a high-grade core to it. We still don't have a resource on it yet but this is we only discovered this one in April. And as you probably know, we now have a second one. The interesting thing about the second one, which is about 6km away is we haven't found the stem to the mushroom yet. So we're drilling for the stem to the mushroom i.e. the underlying hard rock deposit. But this oxide material, it looks like there's quite a lot of it. It looks like there's several of these blankets within our project area and it has massive implications.

Matthew Gordon: Right, and I want to be clear with you. I want to focus on this. I know you've got the 2 core hard rock projects, and we'll talk about them in a second. But the reason I want to focus on this is because it possibly is a sort of anti-dilution measure for shareholders in the sense that, yes, it's low-grade and yes, it's kind of dirt on the ground, but it's easy processing and could provide the money to do what you want it to be doing is going off this high-grade stuff. But where are you at in that process? Have you looked at the metallurgy, how quickly is this thing advancing?

Alan Carter: It's advancing really, really quickly. I mean, as I said, we only discovered the 1st blanket back in April, so that's a little over 6-months ago. Since then we've got a 2nd one. We've drilled probably within the 2 blankets, well over 100 holes now. We've just collected 450kg of material that we're going to be sending for metallurgical testing. So that is kind of key because we want to know what the processing route is. Now on the object, we should have the metallurgical results back on this material, at least from the 1st blanket during the 1st quarter of next year of 2022. That will allow us to, that will tell us whether this material is amenable to heap leach, very cheap if it’s heap leach. Or if not, then it will probably be a combination of CIL and or gravity which is still cheap.

Matthew Gordon: Because you're not crushing and grinding.

Alan Carter: That’s right, most Gold deposits are in hard rock. So the vast majority people at the conference that I've just been in, a lot of them have Gold deposit, but most of them are in very hard rock. Some of its deep, you've got to it's very costly to get the stuff. This stuff by contrast is sitting at surface. There's no drilling or blasting required, you just move in with front end loader, scoop it up and either put it on a pad or put it through a gravity plant. Very cheap.

Matthew Gordon: And easy.

Alan Carter: Nothing's too easy in this business Matt but look, these things are quite rare. We think we might have a 3rd one and tremendously exciting. So the steps are get the met results back. We're obviously working very hard on permitting, we've got trial mining licences over the 1st blanket. We own the land; we've obviously got the exploration claims as well. The permitting, I think is advancing tremendously quickly. There's lots of great things happening on permitting front. So I expect to have the permits to actually commence with a trial mining on both of these blankets within the next 3-months. And then the met work, probably middle of the next quarter, 1st quarter, and then we'll do a Scoping Study on it. So we could be looking potentially at a construction decision on a smaller plant for this oxide material within the next 9 to 12-months.

Matthew Gordon: Right, this is why I keep labouring the point because it feels like free money sitting. I get this small Capex here. It's free money, at surface which will pay for the core focus on the hard rock stuff, right? But there's an arbitrage, you got to play off and say, do you know what, is it better for me to go to market, draw more equity down out of the market and get on with the high-grade hard rock stuff? Or does it make sense just spend a little bit of time and do something slightly anti-dilutory, which is process this. It’s not the core business but it's easy money to make. So that balance is one that you must think about?

Alan Carter: Yeah, I do think about it all the time. Look, the exploration programme, we've got 5 rigs turning and the exploration programme will continue. It's not focus. The oxide blankets drilling off those oxide blankets, the 2 blankets, it's largely done. We are now drilling a 3rd one with 1 rig, but we've got 4 other rigs turning. They're all continuing to test high-grade targets within the district and that process will keep going. We're not going to stop exploring. But as you've said, the identification of these oxide blankets, we should be able to develop these at a fraction of a cost of what a hard rock operation would require in terms of capital. So that is very, very exciting. It's very unusual. You've been meeting with companies here in London over the last few weeks, I'd be interested to know how many other companies have sat here who have Gold projects who have a nice oxide cap on surface. It’s probably a very short number, if there's any. So it does open up that pathway to potentially fund all the exploration that's required on the district going forward. I mean, it is a district scale play. There are 43 really, really good targets, some of which we've got a little bit drilling on, some of which has high-grade veins sticking out the ground within this sort of 8km radius. There's no doubt it's a district with multiple deposits here. The question as for us as a small little company is, well, how do you best sort of advance that and explore all these things and drill test all these things without blowing up the capital structure and continually diluting, diluting.

Matthew Gordon: Exactly, my point.

Alan Carter: And as you know, I'm the largest shareholder in this so I've got $1.7M of my own money at stake in that, which is a massive amount of my personal net worth. So it is something that I lay awake at night, thinking about?

Matthew Gordon: I'm glad I asked, impassioned response. It's why I kind of labour this point is because small companies when they talk the game of we’ve got district wide opportunity, most of them haven't got a clue how they're going to come at it. Because they know they're going to have to dilute the heck out of themselves and their shareholders to advance the team and make a discovery, let alone actually produce cash at the end of this thing. So that's why I keep coming back to what I say is something quite exciting. I'm not sure the market has entirely woken up to the significance of having this oxide blanket at surface. So I made the point, I want people to understand that and pay attention to that. Let's get back to what the main course here which is obviously the hard rock projects, the high-grade project which have been headline grabbing project for you. You got what you say 3 or 4 drills turning now?

Alan Carter: 5 on the whole area. So there's 1 that's still doing the oxide.

Matthew Gordon: Seen press release coming out, it seems to come and keep giving. Again, how do you play that game?

Alan Carter: Well, look, having a district is really exciting. And you're right there's a lot of companies will say, well, we have a district but actually having a large land position does not mean that you have a district.

Matthew Gordon: It's also potentially a liability.

Alan Carter: That's right, you can blow your brains out as I just mentioned, continually drilling a few holes here, drilling few holes there, etc, etc. But the fact that we've now got this oxide material that we could potentially come up to a construction decision next year on and build an operation there, albeit a modest size operation for a fraction of the cost of what much bigger hard rock operation cost really gives us the opportunity to be self-funding here. So that we're not dependent on continually going back to the market, raising capital diluting; it gives us a completely different avenue. But it's one we're going to explore aggressively.

Matthew Gordon: Absolutely, I think for existing shareholders that perhaps understand that but for people looking in new, that's what you're walking into, potentially a small Capex raise for whatever heap leach or…

Alan Carter: Yes whatever that is, I mean, we won't know until we get Scoping Study but based on similar sort of operations, that there are very few of those but we've got a bit of an idea of what the likelihood costs would be. We'll need to do a little bit more work on it.

Matthew Gordon: What does that look like in relation to your stock price at the moment?

Alan Carter: Well, I think my capital costs on this is going to be modest. I can't without a Scoping Study give you any numbers, but I can tell you it will be a fraction of what a much bigger operation would be.

Matthew Gordon: Right, maybe we'll know a little bit more, what’s the timing on the site? I know in the next 12 months it could be up and running.

Alan Carter: Metallurgical results during Q1 2022, permitting also by or during Q1.

Matthew Gordon: Why have you got such confidence on the timing of permitting, usually that's a problematic area.

Alan Carter: Because we’re already well advanced and we have 2 permits on the MG blanket already. We'd like to get the permits are on the PDM blanket. And as I said, Now, there's a 3rd possibility, which is above 1 of the 2 hard rock deposits there. So there could be 3 blankets here that we could have fully permitted here for trial mining, at least during Q1 2022.

Matthew Gordon: So it gives you a bit of a clue about where you position all this, where you place the process. So pretty advanced. So, again, so back to the main project, if you don't mind, which is coming back to the context of district conversations small 100, sub $100M market cap companies talking the district game. Have you learned a bit in the last couple of years about how you need to position that part of the story?

Alan Carter: Yeah, look, I mean, where we are in northern Brazil, there's not been a lot of big Gold mines in this part of the Brazil. Most of Brazil's largest Gold mines are quite a lot further south. As you're aware, there's a deal just been announced on the project next to us. That was close to the end of October whereby there's a Canadian company public company called G Mining is acquiring the project next door from Eldorado for US$110M. That just closed…

Matthew Gordon: Are you saying next door, literally?

Alan Carter: The claims contiguous. So our 2 deposits, the southernmost deposit MG to their deposits, about 20km.

Matthew Gordon: Okay. Yes, I think they're coming on the show. Good group, I think they'll get the eyes on Brazil, I think people have been looking at Brazil, but I think it kind of puts a spotlight on your particular state.

Alan Carter: Yeah, it does particularly the western part of Pará state, which hasn't had a lot going on. The eastern part, of course, is very famous in around the world for having the Carajas Iron ore district. So there's a lot of big Iron ore. Now, Copper mines on the eastern side and in the western side of Tapajós, not so much. But let's not forget the Tapajós in Western Pará state is the site of the world's largest ever recorded Gold rush. But during the 1980s, there was a million people rushed into this area and were washing Gold from the streams. The government of Brazil estimates there were 20 to 30Moz of placer Gold extracted from the streams during the 1980s. I've been obsessed, as you know, with where that placer Gold has been eroded from, where the hard rock sources are. Cuiú Cuiú which is our key project was the biggest placer camp during the Gold rush. So we think there's a very good chance but because it had such a massive footprint in terms of the amount of placer Gold that was produced during the 1980s, there should be a lot more Gold there in the hard rock. And so with the 2 hard rock deposits that we found so far, we think they explained about 10% of the placer Gold. You can see that the streams draining these deposits have been mined and all the rest of it. But there's lots more streams that are draining different parts of the property area. So the question is, where's the other 90% of the placer Gold being eroded from? So it's tremendously exciting.

Matthew Gordon: Yeah, I think it’s interesting. I think the G Mining thing, again, I think it's a bigger deal than people realise because they are good guys, they know what they're doing. People are interested in that district, but then kind of leads on to the next obvious question, which is, do you think there's going to become consolidation in the region because there's a lot of smaller mining groups in and around and they're doing okay. But there's a lot of money being produced out there at the moment by the producers. Do you think a bit of consolidation coming up?

Alan Carter: I think that could well be. I think in the case of G Mining next door, they are redoing the Feasibility Study, apparently by the end of Q1, the next 3 or 4-months, they will have a revised Feasibility Study. I think the capital cost is likely to come in between US$400M and 450M based on what Eldorado’s Feasibility was, which was a bit higher than that. So yes, I do think there is potential for consolidation moving forward both in Brazil and in the sector in general. I think you're starting to see that. I mean, there's bigger deals in the industry, industry wide that are really starting to make the headlines.

Matthew Gordon: So where's the company like you, you've got a district? Like I said, can be a liability in the sense that you could sit there for years and not touch most of it, right? And you've got players like G Mining, and others and some of the big names that you've mentioned that where you could do deals with those guys, you could spin out, you could give up parts of your district to those guys; is that part of the consideration in terms of funding going forward?

Alan Carter: It's something that we look at. I’ve been looking at Gold projects for decades, longer than I care to imagine, really, but I've seen hundreds of Gold projects. I can't ever look or can't ever recall looking at a Gold Project like Cuiú Cuiú. It's very unusual. It's unusual, because there's so much Gold come out of the streams and there's so many veins and different targets here. We've got boulders running multi ounce numbers, not just in one part of the property, in a dozen places. I mean, is very, very unusual, Matt. So, the question, as you said it, that could be a liability because you've got so many targets. I mean, I certainly don't want to be sat here in 5-years’ time, 10-years’ time still talking about exploration because we need to aggressively move forward and test all these things, as best we can and get to 80 to 20 on the district that is 80% certainty that we've tested all these things.

Matthew Gordon: Or let someone else tackle some of the property, right? Because otherwise, because there's only so much money. There's only so much drilling and so much time that you as a company can apply here. You could be on this thing for next 50-years, right? So how do you monetize that today? I get it some of your money and try and work out a little bit of what's going on and then flip it out? Or do you get someone in now and just get tough on the negotiation in terms of where that contract looks like?

Alan Carter: Yeah, I mean, look, that's something that I think there is an opportunity for us with this oxide mineralization to break that cycle. So that rather than keeping going back saying, yes, we've got some exploration results here but we need another chunk of cash to see us through the next 12-months to drill another half a dozen targets. I mean, if we actually produce from this oxide material, it will allow us to self-fund it, and probably make some money as well. So it does give us the opportunity to sort of like, disrupt that kind of cycle if you like.

Matthew Gordon: Yeah, true. Alan, I'm going to shake your hands, lovely to see you in the flesh again. It’s been too long. A lot going on, busy year next year for you guys, heavily going into quite a positive precious metal market. Come back and let us know how you get on with some of these deliverables. Certainly, in metallurgy I'd be fascinated to see what that throws up.

Alan Carter: Yes, absolutely. Thanks for having me, Matt.

To find out more, go to the Cabral Gold website.