Cabral Gold (CBR) - Technical Analysis and Due Diligence

Cabral Gold Inc. is a mineral exploration company focused on gold and copper. The company's key assets include the Cuiú Cuiú Project in Northern Brazil, the Tapajos Region, and the Bom Jardim project. The company was founded in 2014 and is headquartered in Vancouver, Canada. 

Merlin-Marr Johnson caught up with Alan Carter, President, CEO, and Director, along with Ruari McKnight, Country Manager, Brazil, and Wille Hughes, Vice President, Exploration, Cabral Gold.

Dr. Carter is a Co-founder at Peregrine Metals Ltd. and Cuprum Resources Ltd. He currently serves as a Director and Chairman at both Fremont Gold Inc. and Altamira Gold Corp. He also co-founded Magellan Minerals Inc. which was acquired by Anfield Gold Corp. in 2016. Alan founded Cabral Gold in late 2016 and took the company public in November 2017. His educational credentials include a B.Sc. degree in Geology from the University of Nottingham, U.K., and a Ph.D. in gold geochemistry and structural geology from the University of Southampton, U.K. 

Mr. Ruari worked in gold and base metal exploration for Mt. Isa Mines Exploration Pty Ltd (MIMEX) between 1993 to 1996 before moving to South America where he became fluent in Portuguese, and Spanish. He joined Serabi Mining Plc in 2003 as CEO. Here, he oversaw the management of the Palito gold project including exploration planning, successful plant commissioning, and project generation. Mr. Ruari was a Founding Partner of Dourave and has held the position of Vice President, Exploration of Dourave Mining, and Country Director of Dourave Mineracao & Exploracao Mineral since September 2007. He graduated with a Commerce degree in Accounting and Finance and has an Honors degree in Geology. He is also the Treasurer of SIMEOESPA (Syndicate of Miners of West Para). 

Company Overview

Cabral Gold is a publicly-traded company focused on advancing its flagship, district-scale Cuiú Cuiú Gold Project in Brazil. The company is looking to grow its existing resource through trenching, sampling and drilling. Magellan Brazil is the company’s subsidiary. It is listed on the Toronto Stock Exchange (TSX-V: CBR), the OTC Markets (OTCQX: CBGZF), and the Frankfurt Stock Exchange (FRA: C3J). 

Cabral Gold has an advanced exploration project in Brazil called the Cuiú Cuiú Gold Project. Here, the company has 2 gold deposits, called the Central and MG deposits. The company has made several discoveries in the past few months. It currently has 5 drill rigs deployed on the project. This asset is located next door to a project that was recently acquired by Eldorado Gold and will soon be the world’s third-largest gold mine. Cabral Gold has a historical footprint that is 10 times higher than Eldorado’s project in terms of classical production. 

The company has been conducting infill drilling at the Central and MG deposits. It has a large number of drill results that it is looking to publish. The objective of drilling was to define the high-grade cores within the deposits. The deposits also feature a lot of low-grade peripheral mineralization that forms haloes. 

At the MG deposit, the company has posted excellent results at the high-grade core which is now 235m long. Yesterday, the company announced drill results of 17.5m at 4g/t, which includes 10m at 5.5g. Since 17th January 2022, the company has found narrow sections of 2.6m at 28.9g and 1.6m at 32.8g. The company’s primary goal is to define the high-grade cores at both Central and MG deposits. 

The second area of focus is the oxide blankets. The company has identified 3 oxide blankets so far. Previously, the company had about 900,000oz of higher than 1g/t grades in its global resource base, which dates back to 2018. 

In 2018, the company had 70 drill holes between the two deposits with 10g gold intercepts. A large part of the resource was significantly cut. As a result, the majority of the high-grade material was cut back, which led to a significant loss in the high-grade drill intercepts. This was because the company didn’t have enough drill intercepts in order to define the high-grade cores for both deposits correctly. The company’s engineers cut the high-grade intercepts assuming them to be statistical outliers. 

Currently, the company is looking to ensure that it has sufficient drill holes and drill density in both deposits in order to separately define the high-grade cores from the surrounding lower-grade envelopes. 

It is important to note that there’s a 0.5Moz difference between the current 1Moz resource and the actual 2018 uncut high-grade mineralization resource. 

Drill Results

As per the 7th June 2018 press release, 0.5Moz resource wasn’t included back in 2018. The 2018 estimate was based on 27,000m of drilling. Since then, the company has drilled 33,000m. By the end of this year, the company is looking to drill an additional 20,000m. 

Cabral Gold has 2 drill programs for each deposit. The MG deposit is a lot more advanced in defining the high-grade zone. This has given the company an idea about the actual size of the deposit. However, it is looking to drill additional holes before the MG resource can be upgraded. The company plans to model the high-grade resource and low-grade envelope separately. The company is running internal models for the same. 

At the Central deposit, it is drilling off a potential high-grade core.  In the last few weeks of drilling, the company found grades of 23.8m at 5.5g. This also includes grades of less than 1m of 98.4g gold. 

The company is looking to update the resource at both the Central and MG deposits either by the end of 2022 or Q1 2023. It is looking to update the global resource on the district along with the resources on both deposits. This would also include some of the new discoveries as well. 

Notably, the top cuts used in 2018 were carried out by an independent engineering firm. The firm conducted the resource estimate between a 2g-20g range. 

Most of the mineralized zones within the two deposits have maximum grades of 5g/t or 10g/t. In comparison, G Mining’s TZ deposit next door has a 25g/t global top cut for all the zones. Cabral Gold’s top cuts are much more conservative than G Mining’s resource.  

Resource Definition

Cabral Gold did not have enough drill holes previously which would enable it to model the high-grade zones separately. It now has sufficient drill holes that allow the modelling of high-grade zones with much higher top cuts. 

A small portion of the 2018 resource was underground. The company found a large number of high-grade veins that formed a high-grade core for both deposits. It anticipates that these veins are likely to have a significant extension at depth. 

The company has mined the deposit up to a depth of 1.8km. These Orogenic gold deposits have enormous vertical continuity. Interestingly, both the deposits are open at depth. Everything drilled by the company so far is open at depth and it is highly likely that there is a lot more gold present at depth. The company has several targets that are either at surface or close to surface. The company is currently focused on defining the open-pit resources. 

The theoretical pit was put in 2019, where the company is drilled 50m-150m below the actual pit. The pit itself goes up to a depth of 50m-130m. It is using a 250m theoretical depth as a guide for exploration. This is especially the case with the MG deposit where most of the drilling has been conducted. The company started working on the Central deposit in late 2021, along with some of the deep holes that would enable it to grow the underground resource. Based on statistics, the higher grades could not be put into a wireframe as a lot of the high-grade results were cut. 

Drill Operations

Since 2018, the company has drilled almost twice the metres compared to the previous program. It is looking to drill an additional 25,000m by the end of 2022. It is confident that the high-grade zones can now be defined and put into a separate resource. A similar strategy is planned for the Central deposit as well. 

So far, the company has around 15 holes at the Central deposit, which are a part of the ongoing drill program. Interestingly, each hole drilled so far has returned promising results. 

The company has had significant success in defining the high-grade zones at the MG and Central deposits so far. It is extending the ore body down depth for most of the sections at the MG deposit. The company is exploring this deposit section-wise and has been successful in finding significantly more mineralization at depth. The company’s most recent press release shows some really nice intersections located at depth. Both deposits offer a lot of upside. 

Cabral Gold has a lot more confidence in the MG deposit’s potential as a lot more drilling has been conducted compared to the Central deposit. The company is currently working on putting together a resource for the Central deposit, Pau de Merenda discovery, and Machichie discovery. The new discoveries do not have a resource yet. The land package features multiple gold deposits which provide a district-scale opportunity. All these gold deposits will feed into a central processing facility. Currently, each deposit is at a different stage of advancement. 

The deposits seem to share similar features. For instance, the MG deposit is east-west trending and carries similar characteristics to the Central deposit which is trending north-west and is wider. Although the high-grade zone at the MG deposit is obvious, the company is looking to carry out additional drilling. 

By the time the new MRE (Mineral Resource Estimate) is published next year, the company will have a much better understanding of the overall mineralization envelope within the district. 

Outside the 2 major gold deposits, the company had 43 peripheral targets within an 8km-10km radius. It now has several high-prospect drill holes. About 10 of these holes have very high-grade drill intercepts. At Pau de Merenda, which is a brand new discovery, the company recently drilled 22.4m of 4.8g/t. At one of the deposits located 500m southeast of Central, the company also found grades of 27m at 6.9g/t. At the Machichie deposit, the company found grades of 34m at 5.4g/t. It is important to note that all these grades were found outside the 2 main deposits. 

This district offers exciting opportunities. It is based in an area called the Tapajós, which is known for one of the biggest gold rushes ever in the 1980s. In fact, the Tapajós region is the world’s 3rd largest Placer Gold district. Interestingly, the gold rush here was 10 times bigger than the 1980s California gold rush. 

The company’s project was historically the largest placer camp out of all the areas. Based on the results obtained so far, the company anticipates that this district has a tremendous upside. 

During the Tapajós gold rush, people were panning and sluicing the sand and gravel in the streams and rivers. It is estimated that around 30Moz of placer gold has been eroded into the streams. The company has spent a number of years looking for hard rock sources. It anticipates that Cuiú Cuiú could possibly be the biggest hard rock source for placer gold. 

The PDM Discovery 

The Pau de Merenda (PDM) discovery is located 2.5km northwest of the Central Gold deposit. Here, the company currently has 12 drill holes. The discovery features a big geochemical anomaly that is 5km in length and extends to the north and northwest. Last August, the company discovered an oxide blanket here. 

Similar to the MG deposit, this oxide blanket consists of consolidated mud and sand. Here, the company has a primary gold deposit that dips sub-vertically in the granite, and it was found to be weathered and eroded over the years. This deposit spreads to form a mushroom shape that is made up of mud and sand. The company has identified the top of the mushroom at PDM, however, it is yet to determine the stem portion of the mushroom-like structure. 

Cabral Gold drilled under the blanket at PDM and found 22.4m at 4.8g grades. It stepped out 120m away from the initial hole in the northwest direction and found 12m at 3.3g grades. The company anticipates that there is a significant mineralized zone here. However, additional drilling is needed. The company has a lot of pending assay results. 

At the PDM discovery, the company has drilled 15 holes so far. It is focused on drilling the oxide blanket. The company also has plans to carry out infill drilling here. The PDM discovery is highly anomalous in terms of a big gold soil anomaly. The company is awaiting assay results on the top portion of the mushroom-like structure and the drill holes at PDM. In the meantime, it has moved the drill rig to the Machichie deposit. 

The Machichie Zone

The Machichie zone appears to run parallel to the MG deposit. It features multiple connective veins that drop off the southwest of Machichie. The company is excited about the prospect of this array of veins. It is trenching the area and has found promising results so far. 

The company has had a 134m drill hole at the Machichie deposit for a few years. This was originally thought to be a 500m zone, however, since then the company has expanded the zone significantly. 

As per the topographical map, the streams that were mined for placer gold are represented in yellow. These appear to drain mainly from the north, towards the south in a downward fashion. These streams are located 5km away from the MG and Central deposits. 

At the Machichie zone, the company has identified 43 targets that are represented by yellow dots. The Machichie area discovery is located north of the MG deposit. The company is very close to having significant success in this area. 

Infrastructure 

The infrastructure around the project features rivers that have bridges going across. Cabral Gold plans to build additional bridges as required. The region’s topography becomes quite challenging during the wet season. It is a hilly area that features several small creek crossings. 

Due to past mining activity, the region features a lot of road access, which makes operations easier. The company has a fleet of D6s and front-end loaders along with other pieces of equipment which are supporting the drill program and logistics. 

The company has drilled 3-4 holes in one of the target areas in the central southeast zone. One of the drill holes cut 27m at 6.9g/t. The best drill hole so far carried grades of 39m at 5.1g/t. The company anticipates that this region will have new discoveries and additional deposits in the future. 

Target Definition

Cabral Gold has categorised the targets across 3 main levels. The yellow dots represent different targets. At the top of the hierarchy are the most advanced targets that are associated with high-grade drill intercepts. The company currently has 10 such targets. These targets are 10 areas that largely feature high-grade drill intercepts outside the Central and the MG deposits. 

The second category of targets features 12 areas where high-grade veins are sticking out of the ground. The company has trenched these 12 areas. It has channelled samples where the veins are visible on the ground.

The third category of targets features 12 areas where the company has identified extremely high-grade boulders on the surface. Boulders are often categorised under high-risk categories of targets as determining the origin of these boulders is challenging. 

The company anticipates that both PDM and Machichie discoveries could be the next Central and MG deposits. It also believes that the additional yellow dots could potentially be additional deposits. However, additional work is required. 

The fifth range of targets is the geochemical anomalies. The company has multiple targets that are both close to the resources and are based in the regional tenements. 

Cabral Gold understands that each target is quite different. It is continually refining its priorities with regional reconnaissance targets. It is employing extensive geochemistry along with geophysics and trenching wherever possible. As drilling is fairly expensive, the company is looking to prioritise the high-prospect targets. 

The company’s targets vary widely in-depth and features. Some of them are veins that have a 2m-5m length, while other targets are zones that are 30m-50m wide. The company is modifying and adapting the drill program on a per-case basis. Target access also poses a challenge as the ground may be waterlogged or there may be problems getting the drill rig to the target. 

For instance, the company is drilling a regional target called Indio. Here, the company conducted some RC drilling late last year. However, since there’s a lot of water, the company needs to revisit the target with a diamond drill rig at a later time in order to drill deeper holes. The company had originally planned to drill shallow holes here under some of the geochemical anomalies. 

Past drilling has returned positive results, however, the company is looking to retain its flexibility. Geologists have been given autonomy when it comes to decision-making. However, there are a lot of unknown factors which make flexibility crucial. 

A large part of the company’s strategy is guided by the project located next door. The neighbouring project features a 2.1Moz reserve with a 10-year mine life for a 200,000oz annual production. The company is confident that it will have a resource base that would be significantly larger than its neighbours. 

Since Cabral Gold’s land package is a district-scale operation, the company is finding a wide variety of new targets along with discoveries on a regular basis. The company estimates that it will have a 2Moz-2.5Moz resource base. Upon reaching this resource target, the company will move towards a Scoping Study, which will be followed by a PFS (Preliminary Feasibility Study), and then a Feasibility Study. 

Due to a large number of different targets and new discoveries, the company has plans to continue drilling and expanding the resource base in parallel. 

In comparison, Eldorado’s project located next door has been in operation for 11 years, however, not a single ounce was added during this time period. G Mining, the previous owner, had drilled 35,000m, where most of the metres were drilled outside the TZ deposit. However, it didn’t return significant results. In fact, the best drill result was 20m at 1.73g in 11 years outside the TZ deposit, which is starkly different from Cabral Gold’s operation. 

Cabral Gold has set a 2Moz-2.5Moz resource threshold for the district. Once the target is reached, the company plans to focus on Economic Studies. It has the option to grow and optimise the throughput in case of additional resources that are within the trucking range. The oxide blankets offer a proviso that serves as a shortcut to production. According to Cabral Gold, the resource needs to be at least 2Moz-2.5Moz in order to build a meaningful operation. 

Back in 2018, 0.5Moz of high-grade ounces was not included in the resource estimate. If the company had a resource without any top cuts, it would include all the high-grade material, bringing the overall 2018 resource estimate to 1.5Moz. 

Material Testing

Cabral Gold has found a third oxide blanket on its land package and is currently conducting metallurgical work. Cabral Gold has sent about 0.5t material from the first blanket to a lab in Reno Caps Cassidy, where experts are conducting heap leach metallurgical work. 

The company is also conducting bottle roll tests, which have indicated very high gold recoveries within a 48-hour time period. The most important part of the ongoing metallurgical test work is the column leach test, where the material is put in columns and leached. 

The column leach test has a 60-day duration. The tests are currently on day 42, and the company is highly optimistic about the potential results based on the material response so far. If successful, the column leach work will indicate that the material is amenable to heap leach recoveries and processing. This would have massive implications for capital costs and operating costs as heap leach operations can be extremely cost-effective. 

The company also has material at the surface which is unconsolidated. This material essentially consists of mud, sand, and soil, and does not require drilling or blasting. The material would need very little crushing or grinding, if any, making it a highly cost-efficient operation. 

Similar to other heap leach operations, the company has plans to mix the material with cement. This process involves agglomeration, where the material is fed into a giant mixer with cement. The resulting material is in the form of pea-sized pellets that go up a conveyor belt and are stacked on pads. The mixing with cement allows all the muddy-silt material to form pellets which can then be percolated by a solution in the pore space. This is how the material is leached. The agglomeration is being carried out for the column tests. 

The material that is being put through this process is either very-high grade or low grade. The MG deposit has a 2% clay presence, which isn’t too high a percentage. The agglomeration process helps deal with the mud, clay, and silt. 

The results of the bottle-roll test work and the column leach work will be published next month once the results are in. The metallurgical test results are expected by May 2022. In case the results are positive, the company has plans to run other met work in parallel. If the heap leach results aren’t as good as anticipated, the company will run gravity tests and other met work on the oxide material. Following this, the company has plans to carry out a Scoping Study on the oxide material and a Feasibility Study on the global resource. The oxide material gives the company an opportunity to enter production faster due to significantly lower capital and operating costs. 

The Scoping Study for the oxide material is planned for early Q3 2022. This will help the company determine the capital requirements, production capacity, and estimated build time. 

Previously, the majority of the oxide material was considered to be waste. This was because back in 2018, the deposits were projected to be at surface. The company had originally planned to strip off all the material in order to gain access to the underlying ore body. The oxide layer has a very low stripping ratio. 

The PDM discovery covers a 30-hectare area. The company anticipates that this discovery has the potential to grow in several directions. Currently, the company has about 30 holes in the blanket and it is looking to carry out infill drilling here. 

It was found that the first 2 blankets at MG and PDM deposits have a high-grade zone running through the middle. The company has plans to start mining here. It anticipates that the zone carries grades of 1g-2g/t. The best grades discovered from the MG oxide blanket so far are 60m at 3.5g. Despite the lower grades, the cheap cost of mining and processing makes it an extremely profitable operation. 

At the Central zone, the company found grades of 55m at 1.1g above one of the feeder zones. The intercept was found to be sitting right about the primary deposit. Here, the oxide cap appears to be thicker, although it might not be as laterally extensive. This oxide blanket has less sedimentary material associated and features more weathered granitic intrusive rocks which are the oxides on top. The oxide is free to dig material, which can be easily mined and processed at very low costs. 

Cabral Gold is drilling the oxide blankets using RC drills. However, the primary drilling of the underlying deposits is being done using diamond drills. A large portion of these diamond drill holes is going through the overlying blankets as well. Oxide blankets will primarily be drilled with RC, while the underlying hard-rock deposits will be drilled using a diamond drill for the depth. 

In order to conduct a Scoping Study on the oxide material, the company would need to have a resource on one of the blankets. MG is the most advanced oxide blanket and the company is currently working on infill drilling of the PDM oxide blanket. The third oxide blanket, which was discovered at the Central deposit isn’t as advanced. 

The company anticipates that the district could possibly have additional oxide blankets. The company has a small RC rig mounted on a CAT which is highly mobile and cheap to run. The estimated running cost for this rig is about $35-$40. 

Cash Position

Cabral Gold is currently exploring various funding options. It would need a capital raise in order to continue operations. The CEO is aligned with the shareholders and is heavily invested in the company. 2021 was the company’s most successful year, and it currently has strong momentum. 

In order to continue operations, the company needs to keep the 5 drill rigs running while simultaneously expanding the discoveries. The company is publishing drill results on a regular basis and has received a lot of interest from the market. It currently has about 50% institutional ownership which comprises a lot of blue-chip, European, and North American institutions that are major shareholders. 

Cabral Gold had a strong run in 2020 in terms of its share price. The market gold pricing also played a major role in this run. However, the past 18 months have been challenging for the company and the market as a whole due to the onset of covid. The company was low going into November-December 2021, however, since then it has bounced back. Every gold stock appears to have performed significantly better than 4 months prior. 

It is important to remember that the company already has a 1Moz resource, which provides significant downside risk protection. The management has been involved with the team and is collectively responsible for 5 gold grassroots discoveries in Brazil. The company is working towards a district play and has 5 drill rigs deployed. It is located next door to the 3rd largest gold mine in the world. It is looking to publish news flow and updates at regular intervals. 

To find out more, go to the Cabral Gold website