Cabral Gold Receives Final Payment from Osisko Royalty Agreement

Summary

Cabral Gold Inc. (TSXV: CBR), a junior gold exploration and development company focused on the Cuiú Cuiú gold district in Brazil, has received the second and final US$2.5 million payment from Osisko Gold Royalties (TSX & NYSE: OR) relating to a royalty purchase agreement announced on July 12, 2023.

In an interview, Cabral CEO Alan Carter explained that the company has granted Osisko a 1% net smelter return (NSR) royalty on production from the Cuiú Cuiú property in exchange for the US$5 million payment.

According to Carter, the influx of capital will support completion of a pre-feasibility study (PFS) examining potential open-pit mining and heap leach processing of Cuiú Cuiú’s near-surface oxide gold mineralization. Metallurgical test work to date indicates recoveries of 82% are achievable through heap leaching. The PFS will incorporate additional metallurgical testing, resource drilling, mine planning, geotechnical studies, and topographic surveys.

Carter stated that if the PFS is positive, Cabral aims to make a construction decision by end of 2023 rather than completing a full feasibility study. He estimates initial capex for the starter oxide heap leach operation could be in the range of $12-20 million based on comparable projects. Carter mentioned that with the strengthened balance sheet from the Osisko deal, the company has numerous funding options under consideration including potential joint venture partners, stream financing, debt facilities, and other alternatives to avoid dilutive pure equity financing.

The Cuiú Cuiú project is located adjacent to the Tocantinzinho project currently under construction by G Mining. Historical placer gold production in the district is estimated at 30-50 million ounces between 1978 and 1995. In addition to the near-term heap leach potential, Cuiú Cuiú also offers significant exploration upside across the broader district.

With construction potentially fast-tracked through the PFS route, the Osisko deal provides Cabral the funding needed to rapidly advance Cuiú Cuiú toward becoming a near-term cash flowing gold producer.

Interview with Cabral Gold

Risks & Opportunities for Investors

Risks

• The preliminary feasibility study may return negative economics or identify technical challenges that could delay development plans. Additional metallurgical test work could indicate lower gold recoveries.
• Capital costs for mine construction may come in higher than initial estimates. Many projects face cost overruns.
• Permitting delays are common with new mining projects. Environmental and social license to operate factors in Brazil could hold up development timelines.
• Dilution risk if purity equity financing is required due to inability to secure alternate funding sources on acceptable terms.

Opportunities

• The preliminary feasibility study could verify the potential for a low-cost, rapid construction timeline for an initial heap leach operation to drive near-term cash flow.
• With gold prices remaining historically strong, the project economics could come in very robust. Cash flows from initial operations can fund expansion.
• Exploration upside remains across the broader Cuiú Cuiú district beyond the known deposits. New discoveries could significantly expand resources.
• Successful commissioning of an initial operation could re-rate the stock as Cabral transitions to producer status. Attractive M&A target.
• Potential for Cabral to become a consolidator in the Tapajós district if able to use Cuiú Cuiú cash flows to acquire additional prospective properties.

5 Takeaways for Investors

1. Validation of the Cuiú Cuiú project through the royalty deal with a respected player like Osisko. Demonstrates confidence in the asset's potential.
2. Strengthened balance sheet provides funding to advance Cuiú Cuiú through the pivotal pre-feasibility study phase.
3. Near-term potential for making a construction decision in 2023 if the pre-feasibility study economics are positive.
4. Initial capital costs potentially quite modest if heap leach scenario is confirmed, enabling quicker path to production.
5. Exploration upside remains across the broader Cuiú Cuiú district beyond the known deposits. Potential to significantly expand resources over time through additional discoveries.

Conclusion

The Osisko deal provides a crucial stamp of validation while also giving Cabral the financial resources to progress Cuiú Cuiú rapidly. Investors get exposure to a project poised to transition to producer status in a rising gold price environment. Near-term catalysts ahead.