Transcript: Huge New Gold District Exciting Investors

By
Morgan Leighton
·
December 2, 2021

Mike Hodgson, CEO of Gold producer Serabi Gold (LSE: SRB, TSX: SBI), Louis-Pierre Gignac, President & CEO of G Mining Ventures (TSX-V: GMIN) the new entrant into the region following their acquisition of the Tocantinzinho Gold Project, and Alan Carter, President & CEO of Cabral Gold (TSX-V: CBR), explorer with the Cuiú Cuiú Gold district, all give their thoughts on the potential of the region.

Serabi Gold has been in the Tapajos region for about 15 years and has the high grade, underground Palito mine which is producing about 40,000oz. The company also has a similar deposit, Coringa where development has started and permitting is underway to potentially double production for Serabi once Coringa is in production.

G Mining was created about 1 year ago and has recently acquired the advanced stage Tocantinzinho Gold Project due to the potential of the project and the Tapajos region. G Mining is currently updating the feasibility study and is looking to start construction towards the second half of 2022.

Cabral Gold has an advanced stage exploration project in the Tapajos region called Cuiú Cuiú where there are two deposits with 5 drill rigs turning. Cabral Gold is a long term believer in the Tapajos region.

Brazil has historically moved in and out of fashion for investors. Jurisdiction is an important consideration and the Tapajós region has great potential for the future as it remains largely unexplored. Infrastructure in the region has improved enormously in recent years with huge investment in the roads and energy supply to the region.

There is a readily available workforce in the region but there is competition between companies for more skilled, experienced workers such as geologists and drill rig operators. Supply chain constraints have caused delays and mining companies are having to consider lead-times for equipment and supplies which have increased due to the effect of Covid.

The ESG element is becoming increasingly more important for these mining companies, especially the carbon emissions but the Tapajós region has a good supply of hydro and other renewable energy which is a huge benefit. 2022 has the potential to be a strong gold market and the Tapajos district is exciting for these three mining companies and we will be following their progress with great interest over the coming year.

We Discuss:

00:00 - Intro

03:42 - The Tapajos Region: What did G Mining see as the Potential?

05:25 - Ease of Operating in the Region

08:42 - Infrastruce Investment in the Region

11:50 - Criteria for Acquiring the Tocantinzinho Project?

14:08 - Resources, Equipment, Roads, People & Supply Chain Constraints- Competing for the Same Resources?

23:44 - Adapting with these Constraints

28:13 - G Mining's Learnings from their Service Background. How can they Mitigate Risk?

32:27 - Are Cabral Gold feeling the Supply Constraints?

33:48 - ESG & Net-Zero Carbon

42:00 - How do you Approach the Potential Strong Gold Market in 2022

Matthew Gordon: Hello and welcome everyone. You’re joining us today for our gold panel special. We’re going to focus on Brazil, not just Brazil but the Tapajós region. Joining us today we’ve got Mike Hodgson, CEO of Serabi Gold. They’re based in the UK where they’ve got Brazilian projects in Palito, Sao Chico, and also Coringa. We’ve got Louis-Pierre Gignac who is the President & CEO of G Mining Ventures, a new entrant into Brazil, interested to see what he’s got to say. They’ve recently picked up the Tocantinzinho (TZ) project from Eldorado Gold. And Alan Carter, CEO of Cabral Gold, the Canadian explorer with their Cuiú Cuiú project in Brazil too. Gentlemen, how are we? 

Alan Carter: Very well thank you, Matt. 

Louis-Pierre Gignac: Very good. 

Mike Hodgson: Good thanks. 

Matthew Gordon: Good, good. Well look, I’m excited to talk about this because I think we’re seeing in Brazil, and particularly in regions you guys all have in common, it’s starting to catch people’s attention as a gold producing district. I’m going to ask each of you to start off with a 1-minute summary of your companies and I’ll pick up with some questions from there. Mike, if I may start with you, and then Louis-Pierre, and then Alan. 

Mike Hodgson: Okay, thanks, Matt. Thank you all. Okay, Serabi Gold, we’ve been kicking around the Tapajós now for about 15-years. We must be doing something right because we’ve survived in what was a tough location, and it’s certainly improving by the day with infrastructural improvements etc., high-grade underground mining at the Palito mine producing about 40,000oz, and I guess our next biggest story is we’re got a similar desposit called Coringa, which we’re hoping to bring on stream. We’ve actually started the underground development of the mine already, and we’re working our way through the permitting and hopefully, that’s going to be in construction next year. That will of course double our production, which is a significant step for us, and I think it’s fair to say that having been there in the region for a long time, we’re pretty committed to the region, we’re not seen as a company that’s here today, gone tomorrow. We’ve certainly shown our staying power, and we’re liked in the region. I think that’s really important in mining these days. We have a lot of local support, and long may that well last. We’re certainly there to stay. It’s an area of great potential. We all know that - all 3 of us on this panel - that’s why we’re there. Simple as that. 

Matthew Gordon: Louis-Pierre, the new entrant. 

Louis-Pierre Gignac: Yeah, so G Mining Ventures was essentially created about a year ago. When we created the company, we essentially had a hunting licence to go find a project, so we landed on the acquisition of Tocantinzinho, which we closed about a month ago now. What really attracted us to this project was the great potential of the region itself, the fact that this was an advanced stage project that had gone off the rails within Eldorado and became non-core, but it was a really good fit for our team to carry that project forward. We’re in the process of updating the Feasibility Study and looking to start construction towards the second half of next year. 

Matthew Gordon: Alan. 

Alan Carter: Thanks. My name is Alan Carter, I’m the CEO of Cabral Gold. Cabral Gold is about 4-years old as a public company now. We have an advanced exploration project in the Tapajós called Cuiú Cuiú. We currently have 2 deposits there that currently total about 1Moz. We have 5 rigs turning. I’ve been previously involved in the deposit Mike mentioned earlier, Coringa, which he’s putting into production, and also the TZ deposit that Louis-Pierre mentioned. I’ve been a long-term believer in the Tapajós. It is the site of a very large gold rush, and I’m very, very excited about recent developments. 

Matthew Gordon: Thank you, gentlemen. Look, I wanted to pick up with you guys because we followed your stories during the year. It’s been a tough year. Covid has come along and made it a little bit difficult. There were a lot of bumps along the road that you guys have had to overcome in your own particular way, and I do want to talk about that. First of all, Brazil. It seems to come in and out of fashion for investors. Why have you guys selected Tapajós as your region? I’m going to start with you Louis-Pierre because you’re the new guy. You guys had choices as to where you went. What did you see there? 

Louis-Pierre Gignac: For us, jurisdiction is always an important topic that comes up with investors and for us, we did our due diligence and had been active in other countries, in the Guiana Shield and elsewhere in South America. For us, Brazil stood out as being a great place to invest given the large mining industry in the country, and the ability to execute on projects with competent people, staff and technical people, that you can find in-country. There were many, many pluses for us. I’d have to say that the Tapajós being in Pará State offers fiscal advantages compared to other states in Brazil as well, so definitely that was an attraction for us when we looked at the economics of the project. Also for us, just the potential of the region - we feel it’s been explored to some extent, but largely still unexplored and likely to have many other deposits discovered in that trend. 

Matthew Gordon: Mike, you’ve been there a while like you say, is it as easy as Louis-Pierre thinks? 

Mike Hodgson: I think he’s certainly avoided the tougher times, there’s no doubt about that. I was coincidentally today on a call with the British Chamber of Commerce with the Secretary of Geology and Mineral Transformation on the call, a guy called Pedro Mesquita, and I was talking to him about the infrastructure change, and what’s happened in the Tapajós. I would say under the Bolsonaro government we’ve obviously seen a huge improvement to the road. I remember going there and it could take 14 to 15-hours to get from the point at which you actually land your plane to drive to site. It was very tough. That’s just completely changed. It’s turned it on its head. It’s a paved road all the way now. On the call today, he was saying how great – and this maybe brings us onto energy which we know is key - sorry, I’m bouncing around a little bit but at the end of the day, being a Canadian-UK company with our existing funds and our hopeful new funds coming in, particularly after Glasgow (COP26), I get inundated with questions about how green our energy is, ESG etc. etc., and there today was the secretary talking about how Brazil is leading the world in green energy production and I said, ‘Well, that’s great and I’m delighted to hear it, but the problem is the transmission of that energy and we all need it, and this part of Brazil, 40Moz of artisanal gold production, that came from somewhere. That region, Tapajós goldfield, contains an enormous amount of gold. Bring the energy there and it’s going to take off. It’s absolutely going to take off.’ Now, I think it’s on its way. There are all kinds of plans in process, and I think there’s a real momentum today with what went on with Glasgow and the way everyone’s got to react to this about how they’re improving their energy, where they’re getting their energy from, etc. Brazil has all this beautiful green energy floating around the lines, but we’re not connected to them, or they’re very fragile lines. It is very important that we actually use this momentum, and I know Alan agrees with me, I’m sure Louis does too, that we’re going to really try all the opportunities and angles to actually bring power. If that happens, then this area will take off, and rather than being a promise, it’ll be a reality. I think, perhaps, Louis is coming in just at the right time, whereas we’ve battled on with gensets and what power we can get, and difficulty with access etc. But that said, we’ve enjoyed success in an area that actually wasn’t attractive to a lot of companies for the reasons I just mentioned. They just thought, ‘Nah, too difficult.’ But I think the time is coming where it’s not so difficult now, and I think this is the moment. 

Matthew Gordon: That bodes well if it does happen. Let me bring Alan in, and then perhaps we can all riff off each other in terms of what we need to see and what we need to believe. Alan, you’ve been there a while, you extol the virtues of this as a significant gold district, and Mike’s just referenced some of the numbers that have come out of the ground so far. What are you hearing on the ground with regards to - more broadly, not just the energy component, but more broadly - infrastructure investment in the region? 

Alan Carter: I mean, I concur with what Mike said. There have been massive improvements in the last few years in which I’ve been involved in this part of the world. Mike mentioned roads - the grid power right now, there’s a transmission line that is to the east of us, and that transmission line is connected to a big, hydroelectric power station to the south. The energy right now - there’s a lot of upside to the potential for hydroelectric power here to run river plants, and a number of places have been designated as potential plants. What’s really driving the infrastructure here is not the mining business at all, it’s the soybean industry. Soy, as you probably know - Brazil is now the world’s largest producer of soybean. It’s a massive producer. The advantage that this part of the world has is that there’s a 12-month growing season. The producers here get 2, sometimes 3 crops a year. During the harvest times, there are 10,000 trucks going up and down that road that Mike mentioned, that BR-163 that was paved a few years ago. There are 10,000 trucks a day moving up and down that road. It’s a massive, massive industry. As a result, the soybean trucks used to move, and most of the soybean is produced just south of the Tapajós in Southern Pará, Northern Matto Grosso, but the soy trucks used to go all the way south to Cuiabá and then across to a port near Rio, which must be around 2,000km. Now that the road has been paved, those trucks are all moving to the north, or most of them are moving to the north, and then loading on Tapajós River. There’s a whole series of massive soybean terminals sprung up there. There’s a lot going on in this part of the world, and I think more broadly in Brazil terms, let’s not forget as I’ve said to you, Matt, several times, some of the world’s largest gold producers are in Brazil. I get asked quite a lot, I’m sure both Louis-Pierre and Mike do, what are you doing in Brazil? We’re in pretty good company here. Kinross’ largest gold mine is in Brazil. We’re got AngloGold Ashanti here with 2 mining complexes. You’ve got Yamana. You’ve got Lundin Mining that just 2-years ago made a $1Bn investment. They bought Chapada, which is a big gold-copper mine off Yamana. You’ve got Equinox, one of the world’s fastest-growing gold companies. They’ve got 4 gold mines in Brazil. There’s a lot going on, and the Tapajós really, I think, is going to be the next big gold district. It certainly is internally in Brazil, but I think in a more regional sense and global sense, it’s going to be an exciting future. 

Matthew Gordon: Louis-Pierre, let me ask you this because as an investor, I run a family office here, there are certain things I need to see and need to believe, and there are certain opportunities I like to take advantage of. What were the criteria by which you assessed your projects before settling on Tocantinzinho because it seems to me if these companies can operate in-country without the necessary infrastructure, or the ideal infrastructure, how good could it be when this infrastructure is in play, when you can take advantage of it, when you haven’t had to pay for it? Was that part of the decision-making, or was there more to it for you? 

Louis-Pierre Gignac: Yeah, there are a lot of things. Obviously, we’ve talked about the power situation. For us, the project is so large that we need reliable power to run this place, and we need to build a 138kV line to connect into the grid. We always saw that as being an integral part of the project, and a cost to be factored into the initial construction cost. It was never a question of can we have this line built by someone else, or will the government pay for some infrastructure to develop the region. We’re going with the assumption that we must make that investment and it’s built into the equation here for this project. For smaller projects, that could be a cost that’s just unbearable, so I think for the region, this project has a scale that’s going to justify these investments, and I think the whole region will eventually benefit from that infrastructure. As the guys have said, the infrastructure, once it’s in place it opens up a lot of opportunities in the region. We talked about transportation - the access road into Tocantinzinho and essentially Cuiú Cuiú, you are able to access the project from the same road, so there are definite advantages once that road got constructed. Previous to that, everything had to be plane supported in terms of bringing in equipment and people, so it was extremely expensive to explore in the region back in those days. It definitely opens up a lot of opportunities. 

Matthew Gordon: Right, the other thing that you guys are going to have to share, as well as roads, is resources. People, equipment, services, etc. You’re going to be competing for the same resources, aren’t you? Mike, it might be worth laying out some of the issues that you guys have had to overcome during Covid with just your own people, let alone any growth plans. I mean, remind us, what have you had to contend with? 

Mike Hodgson: Well, I suppose we were all in the same boat. We’ve tried to - probably not with great success - wean people off the camp and try to create more of a, have more people living in town, so to speak. I wouldn’t say it’s been a roaring success, probably we’re going back to, we are at the end of the day, it is still sufficiently remote that camp mining is what we’re having to do, really. I would imagine the guys are going to be the same. I suppose, again I mentioned this today, we’re a little bit of an anomaly in the mining business in Brazil in the sense that we’re small, high-grade, underground selective mining, and that’s really at the other end of the spectrum to what you normally see in Brazil. Brazil is dominated by large, open-pit mines, which usually bring and create their own towns almost, therefore an economy comes with the mine. We’re a little bit different. We’re small. We are a drive-in, drive-out type situation. We aren’t so far away from reasonable urban centres. Itaituba is the nearest city of any scale, let’s say, and Novo Progresso. Novo Progresso has about 50,000 people. Itaituba, I imagine is something like 300,000 people. As Alan said, it was a bit of a Wild West town, but it’s certainly on the up in terms of all the soya silos and loading areas that Alan mentioned. That’s brought an entirely new economy to the area. As the soya business is moving north from Mato Grasso up that BR-163 as the plantations are going up the line, the economies are well. There are a lot of associated and indirect jobs coming with it too. I think there’s quite a movement of people to the region to take agricultural jobs. You find with all those, as Alan says, 10,000 trucks a day, there’s no shortage of mechanics on that road, I can tell you. There’s a lot of those types of business, so you can find, lets’ say, I hope the term is not incorrect when I say rank and file type people, semi-skilled and lower-skilled jobs. They are readily available. There are a lot of people up there available for that. But what we struggle to find, that we do have a challenge with, is the professional people. They generally come from the south of Brazil. We have very few ex-pats in the company, but all the management and the professional people are generally still coming from the southern part of the country. But that probably represents about 8% of our workforce, I would say. That is an issue that I’ve always had with basically the government in Pará, that here’s the state that wants to be number 1 in Brazil in terms of mining, and yet it still doesn’t really have a mining school in Belém, and I’ve also had an issue with this saying, you know, ‘You don’t like having all these mineros working in Pará, well do something about it and let’s have a mining school in Belém and really put the state on the map. 

Matthew Gordon: That’s a big statement, Mike, because I think we’ve talked in the past in terms of your fly-in, fly-out crew, they’re not just coming from within Brazil, they’re coming from outside of Brazil too, and that in the early days cause you some problems. Does the state recognise this? Is it moving towards doing anything about it? Or is the people side of the business going to have to be that little bit more expensive than you hope? 

Mike Hodgson: I think for the foreseeable future, the professionals are going to come from states like Minas Gerais and Goiás. That’s where most of our guys come from, so that’s it, but we are really trying to - we now employ 77% of our workforce all from the state of Pará. We’ve really tried to emphasise that and empower the local people to take these jobs. 

Matthew Gordon: Okay, Alan, you’ve got 5 drills turning. You’ve got a lot of exploration going on. You’ve got a big district yourself there. In terms of the crews there, again we’ve been hearing stories from all across the world where because of the whole supply chain issue, that drill crews are just taking a little bit longer to turn up, they don’t necessarily turn up because someone has offered them an extra $100 a day, and that can be problematic because you’re working to a timetable. How are you finding it in-country, or in-state? 

Alan Carter: It’s tough. It’s tough to get drills in Brazil right now. You’ve got to plan months ahead. It’s tougher than I can ever recall it. Everybody wants to drill right now, so there is a lot of competition, there’s a limited pool of resources and number of drills available, particularly RC rigs. Brazil traditionally has had quite a lot of diamond rigs. There are a lot of diamond rigs available, but if you want to drill RC, which obviously we know is faster and cheaper, then there are limited options. We are competing on different levels, particularly for people, drill rigs, geologists, skilled people, and I concur with Mike, historically a lot of the skilled people, and I think it will continue for the foreseeable future, have come from southern states. Minas Gerais is a good one. Minas Gerais is one of the biggest states in southern Brazil and translated to English, it’s called General Mines. That’s how the name of that state translates. There are a lot of big mines in the south, and obviously, a lot of the expertise is located in the south. Most of our skilled people, geologists and senior people, are flying in from other cities. 

Matthew Gordon: Louis-Pierre, can I just say because the parent company as it were, or the family business, G Mining Services, you guys deal with these problems every day. Do these things not concern you? You must see it all around the world. 

Louis-Pierre Gignac: Absolutely. When we, for example, constructed Fruta Del Norte in Ecuador, it’s a country that’s in its infancy in terms of mining. When we had to build that, we had to bring in about 200 ex-pats from North America to supervise the construction of the site. In Brazil, we don’t expect to be bringing in such a large ex-pat contingency because we can find good resources in-country, but to Alan and Mike’s comment, I think we’re competing with the Vale’s of this world, and some of the bigger companies. They’ve seen massive growth and experienced really good pricing as well for their commodities. I think it’s more of an industry hot market that we must contend with, but I’d say the one thing that plays in our favour is that because we do have a camp situation, we can actually spread out quite wide in terms of where we’re sourcing competent people from. When you’re seconded or have to hire from a local community because you don’t have a camp, then your radius of finding people is much smaller. I actually see that as an opportunity when you’re in a tight market, to be in a camp situation. 

Matthew Gordon: Tell me this though, and I don’t mind who answers this question. I’ve always wondered with drillers, are they just watching the time because they get paid by the hour or by the day, or do they get excited when you actually hit something, when they actually find gold? How does it work? Alan, you’ve got a big team there. 

Alan Carter: These guys will get excited when we start getting good results. If you know there’s gold associated with quartz veins like in Mike’s projects and in ours, if you start pulling a lot of quartz then drillers tend to get pretty excited. Obviously, if you start to make discoveries and you start to grow your resource base, that means larger drill contracts for these companies. So, yeah, they do get excited. Not as excited as the geologists!

Mike Hodgson: Yeah, they see an exploration program becomes an evaluation program, and that’s metres, metres, metres. 

Matthew Gordon: Okay, I just wondered because I guess the senior management of geologists, I can understand, but the drillers, I just wondered if it was just another day in town, which explains the, ‘If somebody is going to pay me more money, I’m off, no matter if this is a big new gold district.’ Is there any emotional tie to that? Maybe it’s only the bankers and the companies getting excited about that. I mentioned supply chain issues, we talked about some of the competition for resources in terms of people and equipment, but in terms of supply chain issues, the industry seems to be moving from a just-in-time process, i.e., we’re about to run out of filters, let’s get them in, they take 2-weeks to arrive so we’ll order them 4-week ahead of time to, actually, that doesn’t work anymore because there are no guarantees, and there’s a lot of competition, we’re going to have to create some kind of back up inventory process. Again, Mike, I’ll go to you because I know you did learn the hard way I think this year, or last year I should say. 

Mike Hodgson: Yeah, I mean you can’t cover everything off. I think when the pandemic began, we focused mostly on the process plant, and we probably got more proactive management in the process plant at the time, so I think they were really smart and they looked at critical items and just stocked up on inventory a little better because we didn’t quite know how this was going to pan out, how long it was going to take. The process plant sailed on through, but we weren’t so smart on the mine. I think we’ve paid the price, actually ironically a little bit more this year than last year. Last year, we battled our way through and lived off the fat a little bit, not only in the blocks underground and mining but also in the inventory and stores. I think it was pretty hard to set budgets for this year based on people not factoring in supply chain delays, and as you know, we’ve struggled this year without developing a lot underground, not for the lack of miners or for mobile fleet or silly things, like really big bits of equipment, not being able to work for the sake of a filter or little things like a $50 part keeping a $0.5M piece of equipment not working. Very frustrating, and that was down to management just not being proactive enough. We actually have made some management changes, not because of that, but it was just one of the issues which hopefully, we’re really getting all that solved. Things are easing now, definitely. They are beginning to ease. This was all a function of really the big industrial centres in Brazil were far worse hit. The remoteness of the Tapajós, again, played into our hands. It didn’t really impact any of us, I don’t think, in terms of day-to-day business. Everyone’s so far apart and there’s no real congestion there, so short of just spacing people out in our camp, we kept going relatively normally. The problem is the manufacturing centres in the south of Brazil were the areas that did get shut down, the plants and areas were furloughed, so there’s been this delay and it’s beginning to work its way through. We’ve had so much stuff on backorder. I mean, look, we’re a small company, we can’t cover every eventuality. We can’t have $10M worth of stuff in stores just in case. We’d love to, but you just can’t afford it. So, you pick your battles, pick your fights, and just try and do what you can, and hopefully - but it is easing now, I’m pleased to say. It is getting better. 

Mathew Gordon: Louis-Pierre, how do you guys manage it? You guys have got a lot of cash available to you now, right? Plus, you’ve got a track record, so you’ve got a bit of optionality here. 

Louis-Pierre Gignac: Yeah, I think part of the plan, and we did it on the back of the acquisition, was to build up a good cash position so that we could commit to long-lead item orders and we’re well aware of the market being pretty tight with the shutdowns that happened, lead times for certain equipment are about a year. For example, stuff that you wouldn’t expect to be an issue trying to buy, such as a pickup, sometimes it can be 6-months before you can get a pickup. That’s the type of stuff that we’re trying to anticipate as we’re updating our study, getting pricing for different materials, and when we see that something’s going to be an issue then we’re slowly committing to certain expenditures to try and manage that schedule, and the issues of supply chain and getting what we need on time. That’s definitely a risk that we’re trying to mitigate as we move forward, and with the cash that we have. 

Matthew Gordon: You’ve got a lot of pressure on you, right, because it’s a new story - like I say, you had options as to where in the world you went, and you chose here. You’ve got your shareholders that you need to keep happy. You’ve got your bankers that you need to keep happy. You’ve got your old man that you need to keep happy because he’s going to be watching you! You’ve got so much to get right, but I’m just wondering, I wonder if you can share this, what are you bringing into this story in terms of what you’ve learnt from being this kind of service provider to other big companies all around the world, with some of the biggest projects in the world - how do you think you mitigate a lot of the risk component here? 

Louis-Pierre Gignac: Yeah, we’ve done it before on other projects. I think we do have good relationships with some of the equipment suppliers, and vendors, so normally, when we’re contacting them to get in the queue to get materials and equipment, we rank pretty high up in the order for them just because we’re also servicing other clients and projects. I think that the relationships that we’ve built up over the years will help us going forward in terms of maintaining and expanding on the relationships that we have with some of these vendors. I think the other thing that we’ve tried to really build into the project at this point is knowing what Brazil can provide, given that we previously weren’t sourcing from Brazil. For example, Metso Outotec, FLSmidth, they all manufacture most of the mill equipment that we need for the project in Brazil. That’s the main advantage for us, we’re not going to have to deal with overseas shipping and ocean freight for bringing in some of this important equipment. Those are all things that we’re looking at. And a lot of the relationships that we have with Metso Outotec in North America, well those get transferred down to their Brazilian counterparts pretty rapidly. 

Mike Hodgson: I think I also would say as well, Louis, that almost in a way, the bigger you are in Brazil, the easier it is because there’s a lot of big stuff available in Brazil. I think we found being a small company, that’s quite difficult because you are niche. Almost the bigger you are, the more likely you’ll be able to find easier suppliers, there are more people doing it. Everything that’s scaled up in Brazil, there’s more of it. Again, the vendors selling this stuff want to make big machines. They don’t want to make small machines. There’s no margin on small machines. That’s tough for us. We really do have to think ahead. Like today, I was onsite, we’re still waiting to get our budget done for next year, we’re just finalising it, but we ordered equipment before we even set the budget for 2022 in July, just had to thumb suck what we need, well we’ve got a few years of empirical data to have a vague idea what we’re going to want. A bit difficult with Coringa coming on stream, we’ve got to look in the crystal ball when exactly we’re going to really be able to go forward with that, but we have to really plan ahead because our mobile fleet, the underground stuff, all has to come from overseas. We can’t get anything in-country at all. But if you’re a bigger producer, that’s a lot easier in Brazil. 

Matthew Gordon: Well said. Louis-Pierre, I think these 2 will be tapping you up for some cheap supplies by the sounds of it. 

Louis-Pierre Gignac: We can combine some of our purchases and get a bit of a bulk discount.

Matthew Gordon: Oh my goodness. There you go, guys. You’re all welcome. 

Alan Carter: We’re the first guys on the road, so we can highjack the stuff that’s coming in, you see. 

Louis-Pierre Gignac: Yeah, if there’s a little missing out of our supply, we’ll know where it went! 

Matthew Gordon: Alan, you’ve got it easy by comparison, then. You’re just drill, drill, drill. 

Alan Carter: Yeah, to some extent but look, we don’t need the same sort of equipment, but we still need spares and all the rest of it. Mike’s right, the manufacturing capability in Brazil is in the south, so this whole Covid thing has impacted that. We’ve noticed that it’s taking longer to get spares and certain equipment that we need for what we do. The other big impact that it’s had is just getting results back. We shift thousands of samples a month down the road to Belo Horizonte to the big SGS Geosol lab down there, and at the lab, everything has just been slowed down. Turnaround times have really been impacted. 

Mike Hodgson: Yeah, that’s very true. 

Matthew Gordon: What sort of time - what are we talking about? 4-weeks? 6-weeks? 

Alan Carter: Yeah, well sometimes 6-weeks, sometimes more. Prior to the pandemic, you could expect to get results back in 3 or 4-weeks, sometimes earlier than that. Now, it’s 4 to 6-weeks generally and can take longer. 

Matthew Gordon: Yeah, I guess that’s frustrating. We’ve seen a lot of CEOs come on just very frustrated about how quickly they can get the information. They know it’s good, you guys always do. You know it’s good, you want to get it out to the market, but you can’t. I guess there is a deep frustration there. Mike mentioned earlier the green element, the ESG element. Net-zero carbon will come into the conversion I’m sure too, with regards to energy. But more broadly, are you seeing, and I guess Louis-Pierre for you this will be interesting because you did this deal recently and you will have raised money recently - was that a big part of the discussion for you in terms of the money, and if so do you find that, obviously, because you’re beginning this process, you weren’t able to take advantage of perhaps cheaper money influenced by ESG concerns? 

Louis-Pierre Gignac: Yeah, you’re right, the ESG aspect is super important. Carbon emissions is a question that we get a lot. The fact that we’re putting a power line that’s going to be providing us green energy is a plus for our project. The question I often get asked is, ‘Are you going to have battery-powered trucks?’ Well, unfortunately, we don’t have battery-powered 100t class trucks yet as a technology that we can access, so we have to think of other ways of offsetting some of our carbon emissions, and that’s something we’ll be looking into. We do have to impact some surface to build the mine out, but we’ll be doing progressive rehabilitation as we move along with the project and doing that type of work in parallel to the operation itself. We’ve seen other people, call it, side projects to do some carbon offsets, and that’ll be something we’ll be looking into as well.

Matthew Gordon: Right. What about you, Mike? What are you doing about it? Because you’re in production. 

Mike Hodgson: We are. We do get half of our energy from hydro, the grid we have, and the other half we have to top up with diesel. I guess we are looking at all kinds of hybrid issues as well and what we might be able to do there. Because we’re a rich producer in terms of carbon consumption per ounce, we actually come out of this pretty well. We’re pretty good because we’re not moving a lot of material. We’re moving a quality product, so we’re doing everything to try to enhance the quality, but at the end of the day, it goes back to what I said right at the very beginning. Brazil has this amazingly high level of hydro / renewable energy, and for a big part of the country, it’s transmitting that energy. I think it’s very doable, and again speaking to the government, which I’ve now done twice recently, it’s in their plan to do this and connect this loop, and then I think this is going to really open up the whole area. It’s something I’m getting from a lot of our funds in London, you just can’t escape this now, particularly after Glasgow; I would say it’s got out of control, but it’s certainly at the forefront, it really is. It’s something that has to be addressed, and we have to do everything we can. We’ve looked at carbon offsets as well. There are several companies now in Brazil offering, particularly in Pará and in Amazonas - I we will try, and we are going to try to start reforesting and try to offset our credits that way. We’re looking at other companies that offer that service, where if you haven’t got the land space, you can fund them to do it. I’m a bit anxious about just doing that as a bit of a - to use this new term, I just don’t want to greenwash what we’re doing, to try to pretend that if we just plant some trees over there, we can do whatever we like over here type thing. There is always that risk of that criticism, but as I say, I think with our 2 projects at the moment, because they’re high grade, we are moving a lot of material. We do come out of this looking reasonably good, but that’s not any kind of suggestion that we’re stopping at that. We’re going to continue to improve as much as we can.

Matthew Gordon: The difficult bit of the ESG narrative at the moment is that there’s no clear definition of what it means, and different jurisdictions will have clearly different views on the social component. Governance, I think stands for itself. But the ‘E’ in particular, people are talking about the energy component, or are you say, planting trees seems to be the thing that people go to, but there’s got to be more to it. I know Louis-Pierre, you mentioned are we going to use electric vehicles. Where do you get your guidance from? How do you know what you need to be doing, or are you all making up your own version of it? 

Louis-Pierre Gignac: For me, one of the strong ‘E’ aspects is water management and tailings management, and it’s doing that right. I think that’s what we looked at as part of the project, how we’re managing tailings and water, so recycling water where we can. Any effluent that gets discharged from the site will be treated as required to meet regulations and thresholds, but I think it’s trying to minimise your footprints as well where possible. It comes down to designing things properly to minimise your impact right from the start. That’s how we’ve been looking at the project. Phasing the project so you’re not having to create large impacts right from the start and allows you to do things a bit different from a reclamation point of view. 

Mike Hodgson: I think a lot of it as well, Louis, is getting people used to the idea when they see the benefits of income to the region and what companies bring, like starting small and getting bigger. It might not be the best thing to do from an NPV perspective or what your analyst in the other part of the world is saying, but at the end of the day, getting people used to the idea, I think that’s the reason why Serabi has been successful and got such unanimous support getting the public hearing for Coringa. The people in Novo Progresso are hugely supportive of the project because they want the jobs. These guys, I should be careful what I say here, are not bothered about ESG. They want jobs, simple as that. I think people focus on the ‘E’ of ESG because the ‘E’ is something you can measure - how many trees do I need to plant to offset what the carbon dioxide I’m putting into the atmosphere, things like that. Again, how much water do you recycle, all these sorts of things are things we can do. The ‘S’ is harder because the ‘S’ is always about how many local jobs are you bringing, what are the indirect jobs you’re providing with those direct jobs, and all the programs for the community you’re putting in place in terms of - we do a lot for building local schools and funding. I must say, we’re in a part of Brazil that’s pretty undeveloped, and there are a lot of people on low incomes there. The companies end up doing part of what the municipality should be doing, basically. Our role, being in the area, there’s a lot of social responsibility there for companies, which we try to do our best with. 

Matthew Gordon: Look, I think we’ll pick up with each of you in the new year with regards to individual interviews, but also just trying to understand that component a little bit more. What I want to finish with today because I’m conscious of your time here guys is how you project yourself into 2022. I always say if you’ve got companies that can operate in a difficult market environment like 2021 has unexpectedly been, and put yourself in a position to benefit and launch into 2022, which from all accounts seems to be a very pro-precious metal market, certainly in terms of what the brokers are saying, the fund managers, the institutional guys that we’re speaking to, and certainly a lot of the family offices looking at 2022 for gold projects, good gold projects with strong fundamentals, so they don’t make the same boom and bust mistakes of 2020. How are each of you approaching that? Alan, talk us through what you think you’ve been able to do this year to set you up to best take advantage of next year? 

Alan Carter: I think this year for us has been a very, very successful year. We’ve made 2 new gold discoveries on the site. As you said, we do have a district here within the Tapajós, and we’re finding new deposits. We’ve got a pretty aggressive drill program in process right now and planned to go well into 2022. It’s going to be an exciting year for us next year. If we can build on the success that we’ve had this year, an awful lot of drill results, and we truly believe that the district is going to have multiple deposits within it, so we’ll push those forward as aggressively as we can. It’s going to be a very exciting year for us. 

Matthew Gordon: Louis-Pierre, you’re just starting this thing off, your plans are fresh in your head. 

Louis-Pierre Gignac: We’re starting a drill program as well, so we expect - these will be some of the first holes that have been drilled on the property since 2015, so we’re pretty excited to get that cycle going as well, in advance of us financing the project, so for us, 2022 is going to be a period where we finance the project to get this off the ground. That’s going to be a very exciting year for us and a very important catalyst for the company. 

Matthew Gordon: Absolutely, I think a lot of people are watching you. And Mike. 

Mike Hodgson: I guess our main story for next year hopefully will be the full installation construction licence for Coringa. We’ve already started the underground mine, which should hit the orebody just before the end of the year. I’m going to be down there in about 10-days’ time to hopefully see that with a bit of luck, if nature behaves, I’ll see it. We’re moving into the final stages of permitting, we’ve already had our site visits all done by the environmental agency, so hopefully, we’ll have good news getting that LI, and then we’ll start constructing and assembling the process plant and putting all that together. We’ll really see the project moving forward and developing the mine like crazy and building up a nice big stockpile. Over at Palito, and Sao Chico, pretty much more of the same, but you know the other part of the story that I really like, and I know Alan is certainly a big fan of, is our regional exploration. We’re going to continue with 2 rigs drilling through the day job, which is resource growth on Palito and Sao Chico, but you know we’ve got that beautiful, big, east-west anomaly that our exploration manager thinks we’ve got great porphyry potential there, so we’re going to be moving those forward. We’ve got 6 sites where we’ve got really good size anomalies, like 1km anomalies, so we’re going to be driving those out, and hopefully, we’ll be not just talking about chasing veins. 

Matthew Gordon: Brilliant, look guys, I was hoping for a Brazilian gold panel, but this is the Tapajós gold panel today, an area that people should be looking at. Investors, do take a look at each of these 3 companies. Good management teams, they know what they’re doing, they’ve got a plan, and we’ll be following them with great interest next year. Thank you very much, gentlemen. 

Alan Carter: Thank you. 

Mike Hodgson: Thank you. 

Louis-Pierre Gignac: Thank you.

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