Cerrado Gold issued preliminary licence for Brazil gold project, shares rise

Cerrado Gold (TSXV: CERT; US-OTCQX: CRDOF) shares gained more than 12% early Monday after completing first-stage permitting for its Monte Do Carmo (MDC) project in Tocantins, Brazil.

The next step following receipt of the preliminary licence from the state environmental regulatory authority entails obtaining the installation licence allowing construction to start, which the company expects to receive within the next 3 to 4 months. The third and final step is the licence to operate, granted when the build is complete and operations start.

The 100% owned MDC project comprises 82,541 hectares of mining concessions. Development is currently focused on the Serra Alta gold deposit, which according to a 2021 technical report, contains an estimated 1.3 million oz. gold in all resource categories, comprising 9.1 million tonnes grading 1.85 grams gold per tonne for 541,000 oz. indicated (openpit plus underground) and 12.12 million tonnes grading 1.96 grams gold (openpit plus underground) for 780,000 oz. inferred.

A preliminary economic assessment in July 2021 outlined an eight-year open-pit operation with an average gold production of 131,000 ounces. At a 5% discount rate, its after-tax net present value is calculated at US$617 million, with an internal rate of return of 94.8%.

Haywood Securities mining analyst Kerry Smith views the development as constructive, saying in a note to clients that receipt of the preliminary licence adds momentum to its production growth pipeline.

“With one producing asset and a very strong development project in its portfolio, Cerrado could move from junior to intermediate producer status in the next few years,” Smith said. The shares remain recommended for all risk-tolerant accounts.

The next big step will be the release of a feasibility study for MDC, expected in the next 30 days, followed by the finalization of a funding package for this project, likely with a debt component from export credit agencies, the analyst suggests. For 2023, Cerrado expects to produce 50,000-70,000 oz. gold from their operations in Santa Cruz Province, Argentina, comprising the mill at Minera Don Nicolas and the heap leach operation at Las Calandrias.

Cerrado CEO Mark Brennan said in a news release receipt of the PL represents a significant endorsement from the community and regulators for the development of the project.

“As previously announced, discussions for project financing are ongoing, and we look forward to the completion of the FS in the coming weeks as we work to bring the Monte Do Carmo project into production.”

In a mid-April update, alongside its intention of securing project financing, Cerrado said it expects to deliver its feasibility study for the MDC gold project in by the end of this month.

Meanwhile in Argentina, the company recently kicked off its first heap leach project in Las Calandrias, Santa Cruz province, with the first gold pour in early June. This is expected to add 25,000 oz. yearly of gold production. A second heap leach project is expected to be constructed at Martinetas later this year for production in early 2024, adding another 20,000 ounces of production capacity.

Shares of Cerrado Gold retreated following the early-morning froth to trade at 7.8% by 11:45 a.m. EDT following the milestone achievement. The South America-focused explorer has a market capitalization of $75.4 million.