Hello and welcome to the KE Report. I'm your host Shad Marvitz and today we're getting an update on Cerrado Gold. Cerrado Gold is traded on the TSXV under the ticker C E R T and on the OTCQX under the ticker CRDOF.
And I'm joined today with the founder and CEO of Cerrado Gold, Mark Brennan. And Mark, it's great to get you back on the call. We chatted just earlier in the year and we had looked last time at some of the operations in Q4, how things were going at the Moneraton Nicholas project in Argentina.
We talked a little bit about the permitting process at Lagoa Salgada and we talked a little bit about the feasibility study that's coming up from Mon Sorcier. We'll get into those topics today and more, but before we dive into all this, I definitely want to give your team some kudos. You were recognized since we've talked last as one of the top 50 performing companies on the TSX Venture Exchange.
So, I just wanted to give your team a quick kudos and maybe let you respond to getting that honor this year, being one of the top 50 companies on the venture. Well, thank you, Shad, and it's always great to be here and and again, thank you very much for engaging in the Cerrado story. No, we we're very happy and and pleased what we what was accomplished last year and also that it was recognized by the market and and with a 329% share price improvement.
As we've always highlighted, last year was really meant as a year of transition and where we cleaned up our balance sheet, that we put in place a number of elements that would would look to to drive our our value proposition this year. I'm pleased to see that the market is taking that into consideration for for what we're planning, but now the challenge is to to make sure that we can come as close as we can to that that proposition in in 2026. And we have some very very exciting things we're working on that we believe give us a chance to have a very strong share performance this year.
Well, let's just take a look at 2025 which you just put out to the marketplace on April the 2nd, your full year 2025 financial results. You had annual production of over 50,000 gold equivalent ounces and your all-in sustaining cost 1746 per ounce, which was right in line with your guidance. There's a lot of other metrics in there though.
I I would love you to dig into some of the key meat and potatoes metrics you want investors to know about how things went wrapping up 2025. Sure. I mean, I think as you know, down in Argentina, the focus that we've had in terms of production is has been one on the heap leach operation at Calandria Sur.
You know, we we spent some part of 24 and and most of 25 ramping up that operation to a point where the production coming out of Calandria can be anywhere from that 4,000 oz range give it half, you know, 500 oz per per month plus or minus. We've also spent a lot of time and energy trying to bring down our our all-in sustaining cost. I'm fairly comfortable that we should see a long-term trend to to be around that 1800 if sorry, the 1800 mark if not a little lower.
We will see a little bit of an increase in the first and second quarters largely driven by some programs that we're implementing where hypothetically we can spend a million bucks now and and save 300,000 a month. So, the payback is very quick and those are easy decisions to make. And those decisions are being made for the first half, but we will be a back-end production driven company as we were as we always have been.
Our projection and and guidance of 50 to 60,000 oz we're we're very comfortable with and again, I think we're we're looking forward to a really strong year. Well, let's talk about the balance of the heap leach processing, but also getting underground at Paloma. You achieved that I think in Q3 or Q4 of last year, but now that's going to be a bigger contributor, the underground and then maybe just remind people that you always start at surface first, but once you get underground, these mines can run for a long time.
For sure. And and and you know, first of all, on the Deseado Massif, you know, the big players on our on our belt would be Anglo and Newmont and now Pan American who are all our neighbors. Basically, these guys have really seen the the strong growth come from underground operations.
So, we started last June, you know, we we started initial development to drive down to the stopes. In December, we we kind of really hit the ground running in terms of hitting those stopes. I think we're going to see, you know, for for the year we should see some really strong production, particularly some elevated production starting in May, which should see some some really good growth to our our production profile.
We have been trying to acquire exploration rigs for underground. They're very difficult to come by right now, but we'll spend quite a bit of money on exploration underground starting in July, August when we receive the rig that we've acquired. And our hope is, you know, that we we didn't we didn't enter underground for the purpose of producing, you know, 1,000 ounces a month or 2,000 ounces a month.
The objective here is really to to drive substantial production and that'll be done through exploration. Just to remind you, we're we're actually we built the access points through the bottom of of the Paloma pit which we've previously mined for about a year and a half or so where we had grades on average of about 8 g. So, there's no reason why we can't see the continuity of the of the vein at depth and and due to the difficulty in in drilling from surface, we'll now be in a position to to really go out and expand the resource by you know, it's open all over at depth, the strike.
You know, so so from that perspective, we're expecting some really good growth coming from the underground. Well, let's dive into the expiration topic a little further. We've had several updates with you and I'm actually a little surprised at how much you beefed up this program.
I think you started with like a 10 or 20,000 m program and now some of that's surface drilling too along with the underground, but now it's up to like 70,000 m from the end of last year into this year. So, just remind us how many meters are you drilling, Mark? And then the mix of surface and underground.
>> I I mean, you know, we'll drill whatever we have the capability to drill and and you know, last year we were a little hindered by the fact that we were using contract drillers and we only had one rig and and we weren't getting efficiency that we wanted. So, what we did is we bought three additional rigs. So, we have a total of four rigs now, three diamond drill, one RC rig.
And basically, what we're doing is, you know, from surface drilling we'll do 50,000 m in my view at a minimum and then from there we'll we'll look at doing underground drilling and I would expect that expiration which I expect will be about 20,000 m. You know, one of the areas that that we've had a few issues with is is the turnaround times for for assay results. We're certifying our lab.
We believe by September that lab will be certified. So, that'll further reduce the times that we have to wait in order to get assays back before we determine the best course of action for for future drill holes. So, I think that the expectation that we have is is that you know, we should see some substantial resource growth in the coming in the coming months.
Now, you know, in order for us to right now, we we have two areas that we're focusing on. One is just east of the Paloma pit and frankly, what we see there is very exciting, but at the same point, we probably need to put 40 or 50 holes in in order to to build a deposit and and from that perspective, we're we're pursuing that and we're pushing that forward. Also to the south of the Paloma pit, we're seeing some very exciting areas there too that that one particular area that that we're we're focusing on also looks highly prospective.
Again, same same story where we're finding gold. We're finding good grades of gold, but we just need to consolidate it in order to to report a a deposit as opposed to just reporting you know, the the odd drill hole here and there. So, you know, as soon as we get that that density that we require and and providing with us with the an accountable resource that we can disclose, we'll be doing so.
Well, I think a lot of companies that are quote-unquote expiration companies are happy with a 5,000 m program or a 10,000. 70,000 m, 50,000 at surface, 20,000 underground is a substantial expiration program. Mark, the knock against Cerrado from the Argentina perspective has been is the short mine life.
What do you think all this drilling could mean? I mean, I I know you got to drill it and put the resource out, but in a rough idea, what do you think it could mean for mine life? Well, I I think there are a few things.
There's on the expiration side, you know, what's interesting is we're now actually able to hire strong expiration geologists and others from some of the major companies around us. Why? Because they're seeing that we're buying these rigs.
They're saying that we're we're increasing our fleet. We're extending our mine life in terms of our tails facility, extending the the leach pads. They all see that that we're in the kind of the same elements of growth that that you saw with these other projects in their infancy and you know, I I was down there at our site probably about 6 weeks ago and and talked to a new geo for underground who basically came to us from Newmont and I said, well, why would you leave Newmont?
And and he just said, the reason I left is because I see what you guys are doing and and I see a three or four year mine life now and we see lots of room for that to grow. So, the nice thing is is that we we have a number of strategies, one on the development side, two on the expiration side where we can really see expansion of mine life. You know, we're building a five year tails facility.
We're not doing that because we think we've got a three year mine life. We we see gold fairly widespread no matter where we are. It's just really finding that the areas where we've got the best concentrations of gold.
Well, I'm putting you on the spot a little bit here, but do you think you could double the mine life, triple the mine life? What do you think's reasonable? Well, I mean, again, I I what I'd say to you is that, you know, we've done probably expiration drilling on this property since we acquired it in 2020 and I don't think anybody did substantial expiration prior to 2015, but I'd say, listen, there's there's no reason why this property cannot match our neighbors next door where they have 3 million ounces.
There's no reason why it can't be where our neighbor to the south of of Cerro Vanguardia where they've they've had 8 million ounces. I'm not going to tell you that we're going to get there, but what I will tell you is that there's no reason why we can't expect that we might be able to get there. So, it's really a question of of the drill bit.
And so, what I would target for investors is is we hope by midyear we'll be able to show people that we have the ability to to at least double the mine life of the project. And then from there, you know, we're going to continue to spend 15 20 million dollars a year in drilling. And then we should be able to substantially expand our resource to numbers that could see us get to a you know, going from 50,000 to 80,000 oz to 100,000 oz over a much longer mine life.
We just don't know. It's just very very early, but what I can tell you is that we're seeing evidence of gold pretty much wherever we drill. And and the real focus that we have to to to get to is is determining where the best concentrations of gold are.
That's great answer and I think that the key takeaway is there's a lot of exploration going on. No matter what happens, you're going to be growing some gold resources here, whether it's at surface, whether it's underground and find the most appropriate ways and you'll put out a resource update when the time is right. But that's a lot of drilling and it sounds like you just want to keep the pedal to the metal and keep drilling year after year to keep growing things.
So, we'll keep following along. One other aspect of growth we should probably talk about Mark is now that we're in Q2 and we just wrapped up Q1. I mean, we're talking about Q4 numbers in 2025 numbers, but the reality is there's a big step change.
We were talking about it off mic from where things were at just in the fourth quarter to where they closed up in the first quarter as the highest gold prices we've ever seen as an average quarterly cost. So, maybe just talk about the coming step change that you'll see from a revenue perspective just because of that, but also you've removed the hedges and we've had a couple questions about that. So, please just describe the hedges coming off and how that'll be another accelerant.
Yeah, I mean as you saw from the financials, I mean, we realized the gold price of about 3,400 bucks for the fourth quarter of last year. Most companies you mentioned were were reporting 4,100 to 4,200 in the current quarter. I think most companies average realized gold prices were about 4,900.
So, the reality here is that we could actually gain about 1,500 through our non-hedge. We had hedged 2,000 oz per month. Our final delivery against that hedge was on January 15th and so we are no longer hedged as of January 15th.
You know, a year end of of last year we had about a 22 million dollar cash position. I can tell you that that position has materially improved since the end of last year. So, yeah, I mean, our objective is to retain that that approximately 1,800 all-in sustaining cost level.
I'd like to bring that lower, but let's just say 1,800. And on top of that, we'll be realizing a lot more from from our gold prices moving forward. So, it's a good time for for gold mining companies for sure.
Yeah, that's about the widest margin I think we've ever seen in the industry. You know, if you think about 1,800 and where gold is, let's just say it was at 4,900 now. So, that's a big spread there.
So, lots of money to be made producing gold right now. Nice to see that not only are you growing the resource with drilling, but that you're growing the margins too just because of the gold price. So, couple different value levers there in Argentina at Manera Don Nicholas.
Let's shift over to Portugal though. A lot of questions coming in still about Lagoa Salgada. Now, this is your VMS project where it's still very heavy on the precious metals, but also some critical minerals in the mix.
We talked last time about the environmental impact assessment, the EIA. I wondered if there's any update you can give us as far as how that's moving through the legislation process. Sure.
Well, just to remind you, I mean, we we had the first unanimous decision by the 17 members of the technical evaluation committee for the environmental agency APA for mining projects, so which included water resources. And and we were very surprised in in January that we received a a notification from the president of APA that he decided almost unilaterally that he wasn't going to provide the the license. And as a consequence, we filed an injunction on two points and and one was the illegality of the process.
And then two, we filed the injunction on the basis that that the technical information was fully in compliance with with the Portuguese law and and international mining practices. So, you know, we have been in discussions and we continue to have discussions with the government of Portugal. It's our view that that we will find a resolution that'll come to everyone's satisfactory conclusion.
And our hope is that in the best case scenario, we can still look at coming to a an investment decision by by midyear and and hopefully being in construction in the first quarter of next year. So, from that perspective, we'll have to wait and see, but but we believe that initially, you know, we had fairly muted responses from from the government, but now they're certainly moving in the direction that that we think is very positive and we hope that we'll be able to provide some guidance on that in the in the in the coming weeks. Okay, appreciate the update there and yeah, hopefully a good resolution can be found and it just basically backed up the timeline a little bit, 3 months to 4 months, but still hoping to make a construction decision and and move towards the pathway to production.
So, one other asset we should work in here though is and we don't want to shortchange it is Mont Sorcier. It's a large iron project in Quebec and you've got a big milestone coming out this quarter in Q2, the bankable feasibility study. So, just talk about why this project is still quite Germain.
I don't I don't even think Mark a lot of people even realize you have this project, but talk about the size and scale, but also the importance of this updated study. Well, I think what's what's first when people hear iron, it's kind of okay, you know, that's a a big market and and you know, it's a it's a fairly base market. However, we're not necessarily in the conventional iron ore market.
We're in actually the high-grade, high-purity direct reduction induction furnace or DRI product that one is trading at a 40% premium to iron ore prices and and two has a growth profile of about 10% per annum. And if you look at iron ore, generally grows the conventional iron ore, which is 61% iron ore, generally has a growth of about 1% to 2% per annum. Where this high-grade DRI product is growing at 9% to 10% per annum and it's only constricted by supply.
So, from that regard, this is an actual a really special project. We have 1. 1 billion tons of of material resources of most of which is in the measured indicator category.
We're looking to build a mine that'll produce 4 million tons in the first 2 years and then an additional 4 million tons or 8 million tons for the next 15 to 20 years. This project will only use about 400 million tons of the of the 1. 1 billion tons.
We're completing a feasibility study now with with probably the most sophisticated mining engineering firms in Quebec, which is where the mine is located. We have infrastructure. We've got the support of the UK export credit agency as long as well as TD Bank.
And this project is is looking to throw off somewhere in the region of about 350 million of free cash and about 500 million dollars or or so of of cash flow on an annualized basis for a considerable period of time. So, you know, we're very excited by that. On our PA that we completed in 21, we had an MPV of about 1.
5 billion. 1. 6 billion.
Basically, we think the number is going to be somewhat around the same as a consequence of inflation that we've seen over the course of the past 4 or 5 years. But at the same point, a very very robust project. Very manageable project.
It's an easy project to bring to production. And we'll be filing our our environmental impact assessment permit with the Quebec government by the end of this year. So, our objective here is to have that into construction in 2028 and be in production by 2030.
So, you know, if we were to combine all our operations, our expectation would be to be generating half a billion dollars of cash flow and 400 million of free cash by the end of 2030, which is not so so far away these days. Well, Mark, I just remind people listening, your market cap's only 230 million. If you're generating 300 to 500 million in free cash flow and if that project alone was worth 1.
6 billion, let's just talk valuation. Like just the gold production assets I think underpin the asset, but when you think about this iron ore project or you think if we add in Lagoa Salgada and the value there, let's talk about the valuation, the sum of the parts here. I still scratch my head thinking how could you be valued where you're at when all these different projects are worth so much more?
Well, that's it's a great question and we ask ourselves the same question. You know, as you know, we haven't raised any money in the market since 2020. We don't need any money.
We're very comfortable that we can bring these projects into into fruition without a great deal of dilution if any at all. So, so we're just keeping our heads down and and driving the business forward and seeing if the best way for the company to grow moving moving on. Well, Mark, I think we'll wrap it up there for today, but yeah, a lot of value drivers for the company in Argentina, in Portugal and Quebec.
A lot of milestones coming up that we'll follow along with. Man, a lot of drilling coming up too, Mark. So, we'll keep tabs on that and if if you want to just do a more exploration focused episode sometime where we just dig into all the exploration work, we can definitely do that as well.
But looking forward to see the Q1 numbers when those come out in a couple months. And for those of you listening in, if you want to follow along with all this news at Cerrado Gold, definitely click on the link below down in the show notes. It takes you right over to the company website, straight to their new section where you can sign up for updates that hit your email inbox or just follow along with all the news.
There's going to be a lot of it in 2026. And Mark, as always, looking forward to our next conversation. Chad, thank you again very much and and great to chat.
