Transcript: Cabral Gold (CBR) - Short Cut to Revenue!
Cabral Gold is a Canadian company which is publicly listed and they have a district scale gold exploration project in Brazil where they already have two gold deposits defined which are 2km apart. Both deposits have significant upside and within 8km of these deposits there are a total of 43 advanced targets, some of which have already been drilled.
The Cuiú Cuiú project is 100% owned by Cabral Gold and is located approximately 20km NW of Eldorado Gold's advanced Tocantinzinho gold project which is fully permitted. This project has just been sold in August for $110M and the deal brings a spotlight on this part of the world which will positively impact on the Cabral Gold project which has enormous potential in an area larger than the Eldorado Gold project.
As this neighbouring project is developed, it will become one of the biggest gold development projects in Brazil and there will be positive implications for Cabral Gold including improved infrastructure in the vicinity.
Cabral Gold currently has 5 rigs operating on a fully funded aggressive drill programme which will continue to the middle of 2022 as Cabral Gold recently completed a $11.5M financing. The expanded drill programme has the principal objective to find the high grade zones and a secondary objective to successfully identify the location of oxide blankets in the district which are a fantastic source of initial revenue for the company.
Cabral Gold has now identified a second oxide blanket in the project area. The company owns the surface rights and already has trial mining licenses over the two blanket areas which means the operation could progress very quickly into development and mining going forward.
0:00 – Company Overview
00:43 – New Updates, Company Options, & Increased Rigs
05:08 – Oxide Blanket Component, Progressing & Strengthening
12:52 – The Blanket Component, Economics, & Sample Differences
19:38 – Components of Decision Making, Market Expectations, & Removing Overburdens
Alan Carter: My name is Alan Carter. I'm the president and CEO of Cabral Gold. Cabral Gold is a Canadian company. It's publicly listed on the Venture Exchange in Canada. We have a district-scale Gold exploration project in Brazil. We already have 2 Gold deposits defined, which are 2kms apart, both have significant upside. Also, within an 8km radius of those 2 Gold deposits we have a total of 43 advanced targets, some of which have had a little bit of drilling and some of which have had no drilling. We currently have 5 rigs operating and we recently completed a USD$11.5M financing. Therefore, we have a fully-funded, aggressive drill program that will continue through to the middle of 2022.
Matthew Gordon: Alan, it is good to have you back on. I think we last saw you in the middle of July. It's time for an update because we noticed that your neighbour has just been acquired by a Canadian company. What can you tell us about that? And what are the implications for you?
Alan Carter: It is big news. As you recall, our claim is contiguous with quite a large amount of claims that are owned by Eldorado Gold. They have an advanced Gold deposit there, the Tocantinzinho Resource of 2.3Moz. It's about 20kms from our project to the southeast. Eldorado had that project for about 11-years. It's fully permitted. Eldorado has not made a construction decision, and on August 9th they announced that they were selling that project to another Canadian company called G Mining for USD$110M in total.
Matthew Gordon: In terms of the scale of that opportunity, it doesn't sound like a lot, but what does that say to you in terms of what the options are for your company? Is that as big as you can hope for.
Alan Carter: I think our project has enormous potential. We're obviously targeting resources that are significantly larger than that. This was an area that was extensively mined by Placer Gold during the 1980s, and the footprint on our area, in terms of the historic Placer production is 10x larger than the area that Eldorado has. We control the whole district, as I said, it's already got 2 Gold deposits on it with tremendous upside and a lot of targets. I think this deal brings a real spotlight to shine on this part of the world, the Tapajos. The company management team of G Mining has a stellar track record of putting big mines into production around the world. These guys are mine builders and this will be one of Brazil's largest Goldmines.
I think there's a big difference for us in terms of having a very exciting exploration project next door to a stranded project, which has been on the back burner of Eldorado Gold, as opposed to having the same exciting, exploration project, which we have, called Cuiu Cuiu, which is suddenly going to be next door to one of the biggest Gold development projects in Brazil. So, yes, obviously it has all sorts of implications for us. For example, infrastructure is going to improve here, big-time grid power will come to within 20kms of our project, roads are going to improve. There are lots and lots of positive implications as a result of this announcement.
Matthew Gordon: The infrastructure aspect is interesting in that it has benefits for you at some point down the line. With regards to the money that you've raised, how have you been spending that? I notice you've increased the number of rigs turning at the moment. What are you trying to do with that?
Alan Carter: Since we last spoke we have increased the number of drill rigs on site to 5. We had 3 onsite in mid-July, we've now got 5, so the program has expanded. The principal object of all that drilling is really to define the high-grade zones. We have an awful lot of high-grade veins and targets. We've got over 90 drilling step-outs above 10g/t. The current resource doesn't reflect that high-grade material in the last resource system we did in 2018. We've done in excess of 20,000m of drilling since then, and over the next 12-months we're going to add another 25,000m to that, or possibly more than that. So there's a lot to do, but as I said, the principal focus is drilling off the high-grade zones within our property and within the 2 deposits we've got. There are a lot of high-grade targets here as well, where we have a lot less information.
We've been finding more and more of this oxide material. It is unconsolidated mineralised material that contains Gold on surface. We've now found a second blanket of that. The first blanket, again, we don't have resources online with these blankets, but that first blanket has expanded as well since we last chatted. So it's been a busy couple of months.
Matthew Gordon: This is what interests me; when we talked last time, we talked about this oxide blanket and I thought, wow, that's a nice way to get into cashflow quickly which, obviously, can then finance the development of the rest of the district. You found a second oxide blanket - great. You're also targeting these high-grade zones. They look good as a headline but in terms of the business, isn't it better for you to really determine the oxide blanket component first? Because that's where the money's going to come from initially.
Alan Carter: We are actually doing both, and with 5 rigs turning we've got the ability to do both. We've got 1 rig we’ve been drilling off. It was a 74-hole grid drill program. Obviously, these are shallow holes because the blanket is up to about 50m thick. We’ve been getting consistent results and we've had some high-grade numbers. I think the best number so far from that initial blanket is 60m at 3.5g. Most of the results are significantly less than that: 1g-1.5g. Then we've got a second one about 5kms away. The interesting thing about this second blanket is that right now we haven't defined an underlying source rule of the Gold in the second blanket, so there is a good chance there could be a hard rock deposit sitting under that, as there is on the first one.
The first blanket, the MG Gold deposit sits right underneath it. But with 5 rigs running we can do both. We've raised USD$11.5M recently, so we are able to do both of those.
Matthew Gordon: I'm trying to work out what I should think about you, because for years you guys were going around the market with about a 1g/t-type grade going on through the project. Then you've gone, actually, no, we've managed to find some high-grade stuff as well. Now you've got this oxide blanket component. So there are a lot of moving parts and I’m trying to figure out what type of company is this? How do these guys move forward in the best possible way, in terms of creating not just shareholder value, but actually getting this thing into production at some point?
Alan Carter: This is a district-scale opportunity. There are multiple deposits at Cuiu Cuiu. Since 2018 we had these 2 new blankets, which in all likelihood are 2 more. We don't have resources on them yet. This is going to be a district that has multiple deposits feeding a central processing facility. In that respect it will be like many of the world's largest Goldmines. There is a central mill and they've been from several open pits, sometimes underground deposits, so it's getting very large. The question is, Matt, at what point do we move forward with a Scoping Study and a Pre-Feasibility Study? How big do we get this resource before we pull the trigger on that? And that is something that we continue to assess.
Obviously, we don't want to move forward with the Scoping Study now on 1Moz when it is likely to be several times larger than that. We don't want to build a smaller mine. In all likelihood, there are enough deposits and enough Gold within this area to support a much, much larger operation. I think part of the problem with our industry is that a lot of people would put a resource out and then immediately go for a Scoping Study. They assume that once you put a resource out, that's all the Gold that you found on your project and now the next real step is to demonstrate the economic viability. But because this is a district with multiple deposits within it, this is going to have a slightly different evolution. The trajectory of this project is going to be different. The resource is going to keep growing in steps. That's the key objective and that's the reason that we haven't as yet progressed with a PEA. Now, we could progress with the PEA and we could initiate one straight away. But as I said, there's a lot more Gold here than the 2018 resource estimate suggests.
The other thing you have to bear in mind is that an estimated 2Moz was just recovered from the sand and gravel there during the Placer mining, all recovered informally. Thus, the hard rock source should be a lot larger than that. We know from Eldorado’s project next door that for every ounce of Placer Gold produced during the Gold Rush, there are 10oz in the underlying granite. There was 200,000oz produced at TZ’s project during that Gold rush. They have a resource of about 2.3Moz, at a ratio of about 1:11. Our project had 2Moz, 10x more Gold produced than during the Gold rush. Now, does that mean that we've got the same 1:11 ratio? Not necessarily, but it's a pretty good indication. There are a lot of streams here that contain Gold and were mined for Placer. We've got 17.9km2 of historic Placer tailings in the streams. We've done no drilling within any of that either. We're still looking for the hard rock sources.
Matthew Gordon: If you look at district-wide plays, companies come at it in different ways, as an investor looking at a company, where you see those gains and how quickly you see those gains as a shareholder, you guys could drill this thing out for next 10-15 years, right? Then a story gets tired and people move on to other things. You've got to put your flag in the sand at some point and go, right, this is good enough for now. If we look at next door, Eldorado had over 2Moz, they decided to sell and take the offer. How do you build up this company, bearing in mind the potential scale of this thing, in stages so that it’s digestible to investors?
Alan Carter: When we get a significant jump on the resource we will then start moving forward with the PEA. The identification of this near-surface mineralisation in these blankets gives us optionality, which then allows us to consider the possibility of near-term production. We already have trial mining licenses over these areas. It allows us to consider the possibility of getting into production much quicker than we otherwise would. So that is an option that we will continue to look at.
We will be doing some metallurgical work on this unconsolidated material, but it is a game changer. I think a lot of people are looking at the results from this blanket, scratching their heads and saying, they've just drilled 50m at 0.5g, or 60m at 0.8g, or 60m at 3.5g - interesting. What does that mean? As you know, the cost of mining unconsolidated mud, sand and soil and processing that material is a fraction of doing it with hard rock. It's not a 10% or a 20-30% reduction in cost, it's an enormous difference in terms of your costs for mining and processing that material. 1g material in unconsolidated mud and sand is not the same as 1g material in hard rock granite that you've got to drill, blast and crush and grind.
Matthew Gordon: That’s why I'm trying to get access to your thinking about how you go about this, and as a CEO of a company you've got a responsibility to shareholders and to the operational team to do things the right way and safely. But ultimately, what rules all of the above is the economics. You've got to get the economics right. When we talked last time, you were talking about the potential of getting into production and the re-rate that comes with that, but more importantly, the cashflow that comes from that. That's an important move, even the timing of that is really important as well. I'm trying to get an idea from you as to whether that is coming to the fore more and more in your thinking, and if so, when?
Alan Carter: It is coming more and more to the fore, yes. If so, when? Probably in the next 6-12 months. That is becoming more and more important as an option. As I said, we've got that optionality. The most important thing for us is that we have to get the metallurgical test work done. If you consider that back in April we didn't even know that this blanket material existed, and I predicted to you back then that I thought we would find more of these things. We've subsequently found a second one. I'll make you another prediction: I think we will find another one and possibly more of these blankets. So we're going to keep expanding the amount of this oxide mineralization that's obviously very amenable to processing, but we've got to get the metallurgical work done. We know that this is in, as I've said several times already, unconsolidated sand. There are no deleterious elements so there's nothing like arsenic, a lot of big Goldmines have arsenic, bismuth, antimony or Copper. These things have to be addressed from a metallurgical perspective. We have none of those.
Once we got that metallurgical test work done, we will be much better placed. In the next 6-12 months we will get those bulk samples processed, we will get the results back and then we'll have a much better grip on how the option of near-term production with this oxide material looks, or what shape it is, the costs, etc. Then we can decide whether to go forward with the Scoping Study, but obviously, the capital costs on it will be much, much lower.
Matthew Gordon: 2 questions for you: when you say there are no deleterious materials, or not much in there, is it a fairly homogeneous-type sand that we're talking about here? Is one bulk sample likely to be similar to the bulk sample on the second blanket?
Alan Carter: There are some differences, some have a little more sand versus mud, in some areas the soil cover is a bit thicker. Each hole is not wildly different from the next, and it's remarkably consistent in terms of grade. The interesting thing about it is there's a high grade centre to this thing, just like in the second blanket. Where the underlying deposit, which is a vertical deposit which sits in intrusive rocks, comes up to the surface and it comes up through this material, we've got a high-grade core to it in the over-lying blanket. Obviously, we would want to mine that first. Interestingly, the second one also has a high-grade core, which may be giving us a strong clue about where the underlying deposit is in the second one, so there's quite a lot to do.
This is a district-scale project. I've said this many times. It's just going to take us a little time to unravel the whole thing. But we need to grow this to a point where we can pull the trigger on a Scoping Study and move forward with what we think is going to be a significant operation. There's no doubt that we're having success on the discovery side. As I said, there's an awful lot of great intercepts that we've been getting, it's going to be a very exciting time for us from a news perspective.
Also, now we have the project next door to us, which in all likelihood is going to go into development over the next few months, and will be one of Brazil's biggest Goldmines.
Matthew Gordon: Sorry to labour this point, but I do want to understand the decision making a little bit more. With the blanket component, you said that you’ll give yourself options, subject to the metallurgy panning out. What is the scale of that going to look like when you make the decision? Because if you have 1 blanket, you’ll have 2 blankets, if you're right, and another 2 beyond that. That seems enough to be getting on with and driving the potential of revenue as the capex is cheap.
The trouble is that when people say ‘district-wide scale’, I'm thinking, oh man, that's going to go on forever. What about the dilution? What if they can't drive the share price up and raise money at an ever-increasing share price? It's hard because there are so many factors out of your control. What is within your control is making the decision as to when you start to potentially monetise some of the easy, cheap oxide Gold at surface to be able to pay for that district development. What are you thinking in terms of scale, when you do get to that decision?
Alan Carter: I can't make any predictions in terms of scale for this but I can give you some idea on time frame. These blankets are at surface. We're only doing 50m holes in large parts, so we're going to know pretty quickly here. We've almost finished drilling off the first one and we have a pretty good idea about the size. It is currently about 22 hectares, up to 50m thick, but that won’t be the average thickness. We can drill these off very quickly and it's reasonable to assume that in the next 12 months we will have a very good grip on how many of these blankets we've got, and once we know that, we will know what size operation that will support, we can move forward with a PEA. At least we have the option to move forward with a PEA on that oxide material. We will have the met studies done. We'll have a lot more information within the next 12-months. It is something that we're going to pursue. We're going to look at and continue to drill the higher-grade zones within the underlying deposit at the same time. So there's a lot going on, but I can't make any predictions in terms of how big these things are going to be.
Matthew Gordon: The reason I'm asking the question is because you're going to make a decision, but you don't need to work out what the total size is, you need to work how big it needs to be before you can make a decision on whether you go ahead with it. You could do it with just the first blanket?
Alan Carter: I can’t answer that right now. What I can say is that we're very encouraged by the amount of this type of mineralization that we have. Don't forget: this material in both of these blankets that we've got now, particularly the one at MG where there is an underlying hard rock deposit, was assumed to be sterile. This material was all assumed to contain no Gold whatsoever. In the 2018 estimate it was waste and it would be a cost to move. It's not. It's mineralised. It contains a significant amount of Gold, but right now I cannot tell you exactly what size it will be or how many ounces we're going to need to move forward. I'm hoping that I will have those answers in the next 6-12 months. It's a very good question and I understand why you would like to know those answers, but I'm not in a position right now to give you those numbers.
Matthew Gordon: As a follow-up question, with projects like this: oxide at surface, relatively cheap to process and, hopefully, a relatively simple process, can you get that financed off the back of a PEA or will you have to go through the whole study process? Will you have to get in much further down the line, which will take a lot longer and cost a lot more money to do? We've heard a couple of instances where people have done it off a PEA, are you expecting to?
Alan Carter: In this market, I think there's a good chance we could. As the capital cost for that operation will not be enormous, as I said, there's no crushing, grinding required. We don't need drilling and blasting equipment for that type of material. So I think there's a very good chance we could. However, I won't know until we start seriously looking at what the results of a PEA are. We own the land. We own the surface rights here. We don't just own the mineral rights, we own the surface rights. We already have trial mining licenses over these 2 blanket areas and that is a huge step forward. Thus, this is something that could happen very, very quickly. I know where you're going; you're saying that a lot of Gold projects take years to put into development. There are several years where companies will go through steps on Scoping Study, Pre-feasibility, Feasibility Study. I don't think that we necessarily have to go through all those steps. Then a lot of big Gold projects take years to actually build and get into production. The actual process of demonstrating economic viability should go much quicker. And I think actually constructing an operation to mine this material could go much quicker than usual too.
Matthew Gordon: That's exactly where I was going. I just want to know how long we're waiting before it will actually get into production. I know they have happened, it's not normal but it does happen; funds are able to fund off the back of a PEA. That's good news for you and for shareholders because the re-rate as a producer happens sooner. But I'm sitting here, waiting 3, 4, 5 years and beyond. I've got some decisions to make, so that's really interesting to me. You also reminded me that you were actually considered to be overburdened before and now it's actually: no, that's dollars in the ground there. We're playing to remove the overburden, we're making some money and we can plough that back into the ground after the good stuff underneath.
Alan Carter: And imagine what this mineralised material on surface does for the stripping ratio? The stripping ratio is going to go lower on the underlying deposit and the pit is going to go deeper. If the pit is going deeper, we're going to pull more resources at the base of the pit into the resource in the hard rock deposit underneath. So there are lots of positive implications, but again, I'd encourage your viewers to look at other operations and the costs actually associated. It's worth doing a little bit of homework on the costs associated with mining and processing this material. It will not be a small difference between mining hard rock material as opposed to mining this sort of material. It will be an enormous difference in cost. What those costs are going to be - I don't know. And even if I did, I couldn't say without a PEA, but it's tremendously exciting.
I'll say this again because this is really, really, important: 50m of 0.8g Gold in this material is not the same as 50m of 0.8g, it’s not even close to 50m of 0.8g in hard rock granite that you're going to drill, blast, crush and grind. It's a completely different proposition from a cost perspective. Also, if it's a completely different proposition from cost perspective, it's likely to be very different in terms of profit too.
Matthew Gordon: I appreciate the conversation today. This company caught our eye last year. You were up 1.10x this year, which has been particularly tricky for precious metals. I'm intrigued by the business plan and what you guys decide to do in terms of creating value, realizing value on this district. Stay in touch. Let us know how you get on, especially with 5 rigs turning at the moment. I look forward to catching up with you soon.
Alan Carter: Thanks, Matt.