Zero Dilution Strategy: How Cabral Gold's $37M Starter Mine Could Fund Major Growth

• Cabral Gold has a district-scale advanced gold project in Brazil with 1.2 million ounces in inferred and indicated resources across multiple deposits.
• Released positive Pre-Feasibility Study (PFS) for a low capex, high margin starter oxide gold mine to self-fund resource expansion drilling and avoid shareholder dilution. Post-tax IRR of 47% at $2,250/oz gold, jumping to 83% at $2,700 gold.
• Excellent exploration upside with 4-5 known deposits and over 50 drill-defined peripheral targets. Recent high-grade drill results include 11m @ 33g/t gold at the new Machichie Northeast discovery.
• Experienced management team led by CEO Alan Carter, who was involved in discovering the neighboring Tocantinzinho deposit being developed by G Mining. Carter has invested nearly CAD$2M of his own money in Cabral Gold.
• Attractive valuation at only US$25 per ounce, with substantial re-rating potential as resources grow and the starter oxide mine advances to production.

Cabral Gold (TSXV:CBR) is a junior company in the gold sector, providing exposure to a district-scale project in Brazil with a clear path to production and resource growth. With a 1.2-million-ounce resource base across multiple deposits, huge exploration upside, an experienced management team, and a positive PFS for a low capex starter mine, Cabral is well positioned to create significant waves in the sector.

Positive PFS Results for Starter Oxide Mine 

On October 21st, Cabral Gold released results of a small starter operation for an oxide gold mine at its flagship Cuiú Cuiú project in Brazil. The study outlines a small-scale, low capex operation processing the soft, weathered saprolite material from the top of the deposits. At a conservative gold price of $2,250 per ounce, the project generates a strong post-tax IRR of 47% and NPV of US$25 million, with a modest initial capex of only US$37 million.

CEO Alan Carter explains the strategic rationale for this two-stage development approach:

"We think the best way of doing that is rather than continuing to dilute the capital structure of the company and raising money every 12 months through issuing shares at a price we have no control over...we think a better way to solve this problem of really determining how much gold we've got within this district is to be self-funding."

The starter oxide mine will produce approximately 20,000 ounces of gold per year over an initial 5-year mine life at all-in sustaining costs (AISC) around $1,200/oz. This will generate significant free cash flow to fund aggressive resource expansion and exploration drilling, without further shareholder dilution. At current gold prices near $2,700/oz, the IRR jumps to an impressive 83% with an after-tax NPV of $50 million, demonstrating the project's strong leverage to rising gold prices.

Exploration Upside & District-Scale Potential 

While the starter oxide mine is compelling on its own, the real blue-sky potential for Cabral Gold lies in the district-scale nature of the Cuiú Cuiú project. The company has already defined 1.2 million ounces across just two of the 4-5 known deposits within the project area. Additionally, there are over 50 peripheral targets with high-grade gold mineralization identified in drilling, trenching, and boulder sampling.

Ongoing exploration continues to yield exceptional drill results, highlighting the potential for significant resource growth. This includes 11m grading 33g/t gold at the new Machichie Northeast discovery, some of the highest-grade intercepts ever reported on the project.

Other notable results from peripheral targets include 27m @ 6.9g/t, 39m @ 5.1g/t, and trenches of 5-6m @ 25g/t gold. With follow-up drilling, any one of these targets could deliver a major new discovery.

CEO Alan Carter is confident in the district's prospectivity, drawing comparisons to the adjacent 2-million-ounce Tocantinzinho gold deposit he discovered 20 years ago:

"Based on everything I know about this part of the world, I'm very optimistic about the ultimate size of the Cuiú Cuiú project. The soil anomaly at Tocantinzinho is about a kilometer across...The equivalent soil anomaly at Cuiú Cuiú is 7km long and it's still open."

Carter notes that the historical artisanal gold production at Cuiú Cuiú was an order of magnitude greater than at Tocantinzinho, supporting the interpretation of a larger gold endowment.

Attractive Valuation & Re-Rating Potential 

One of the key aspects of the Cabral Gold opportunity is the company's modest valuation in relation to its resource base and overall potential. Based on a current share price around C$0.22 and 212 million shares outstanding, Cabral's market capitalization is approximately US$35 million. This values the company at roughly US$25 per gold ounce in the ground (after subtracting cash), well below the average for junior developers.

As the starter oxide mine moves towards production, generating near-term cash flow, and the resource base expands through successful exploration, Cabral is poised for a significant re-rating towards its larger peers. 

"The PFS is based on all the drilling that we had up until mid August so we've done quite a lot of drilling that since then...we're continuing to drill and and as I said, the primary objective of that drilling is to convert as much of this inferred material to indicated. We are going to be revising the mine plan and that will flow through obviously to even better NPV's and IRR's moving in the short-term here."

Interview with Chief Executive Officer, Alan Carter

The Investment Thesis for Cabral Gold

• Large resource base of 1.2Moz across multiple deposits with excellent expansion potential
• High-margin starter oxide mine to quickly generate cash flow and fund exploration
• Exceptional exploration upside in a district-scale land package with 50+ high-grade gold targets
• Strategic location beside a major 2Moz gold mine being developed by G Mining
• Proven management team led by CEO Alan Carter, who was part in the discovery of the adjacent 2Moz deposit
• Discounted valuation at only US$25/oz in the ground versus peers
• Prepared to advance oxide mine to production and continue aggressive exploration drilling. Construction decision expected in Q2 2025.

Macro Thematic Analysis

The bullish case for Cabral Gold is further supported by a highly favorable macro environment for the gold sector. The unprecedented monetary and fiscal stimulus unleashed by global central banks and governments in response to the COVID-19 pandemic has increased the risks of currency debasement and inflation. Gold has a long history of outperforming in periods of negative real interest rates, financial instability, and rising inflationary pressures.

Many industry analysts and experts are forecasting gold prices to reach new record highs above $3,000 per ounce in the coming years as these macro drivers continue to play out. 

In this environment, gold equities are poised to outperform the underlying metal given their leverage to rising prices. Producers will see expanding margins and cash flows, while single-asset developers like Cabral Gold can re-rate significantly higher as their projects become more economically robust. These macro tailwinds should accelerate Cabral's progress towards a construction decision and first gold pour at the Cuiú Cuiú starter mine.