Cabral Gold (CBR) – High-Grade rather than High-Volume

Cabral Gold Inc
  • TSX-V: CBR
  • Shares Outstanding: 95M
  • Share price C$0.23 (15.07.2020)
  • Market Cap: C$22M

Interview with Alan Carter, President & CEO of Cabral Gold (TSX-V: CBR).

Cabral Gold is a South American gold story that has been public for around 3.5-years. The strategy has recently segued from low-grade, bulk-tonnage towards high-grade gold veins. The company recently closed an over-subscribed private placement to the tune of c. US$4.2M.

Cabral Gold’s flagship asset is the 100%-owned Cuiú Cuiú project in North Brazil. It has indicated gold resources of 0.2Moz + Inferred resources of 0.8Moz. It is in close proximity (20km away) to Eldorado Gold’s Tocantinzinho project that, as gold investors may know, has Measured and Indicated resources of 48.7Mt at a grade of 1.35g/t gold (for 2.1Moz) and Inferred resources of 2.4Mt at 0.9g/t gold (for 0.07Moz).

Matthew Gordon talks to Alan Carter, 15th July 2020

The geology of Cuiú Cuiú is regarded as highly-prospective by the Cabral Gold management team. There is a gold-in-soil anomaly upside (+70ppb gold) of over 18km, which is virtually untested. There are also 4 promising deposits, and all possess resources that remain largely open. There have been drill intercepts in 6 other targets outside of the existing resources. These include 39m at 5.1g/t and 27m at 6.9g/t gold. The company promises plenty more surface fold mineralisation to come, with preliminary results pending.

The area in which Cuiú Cuiú is situated, the Tapajos Region, is an area with impressive infrastructure. in the last 5-years, the federal government paved a 70km road for Eldorado Gold leading to its flagship project via the highway BR-163. A spur road from this main road makes Cuiú Cuiú easily accessible. Eldorado has recently been granted its construction licence and tailings permits, demonstrating the government’s agreeability with projects of this kind. Moreover, new hydroelectric power plants are planned for the region, with plenty more growth on the cards. Cuiú Cuiú was at the centre of one of the world’s largest gold rushes ever from the mid-1970s and mid-1990s, producing c. 30Moz of placer gold alone, making Cuiú Cuiú the richest placer gold producer during this period.

All in all, it has been a tough 8 years for Cabral Gold. Absolutely nobody cared about a South American low-grade (1.2g/t) gold exploration story at the time, and raising capital on reasonable terms was almost impossible. With a bullion price up above US$1,700/oz, this influx of new capital is trickling down to the juniors, which can cloud judgement and paper over the cracks…

Why did these at-surface high-grade gold veins only rise to prominence recently? Carter points to the style of the terrain: granite. The gold deposits are high-grade veins that are up to 10m wide. They historically flowed via hot water through the cracks within the granite hundreds of millions of years ago. The real focus is on high-grade core zones where large amounts of gold are concentrated, some being touted as up to an incredible 200g/t gold. The previous bulk tonnage strategy was clearly influenced by market thematics at the time, with an emphasis being placed on production volume in the last cycle. Carter claims the difference between the “cut data” and the 43-101 for the Resource is 500,000oz gold! He states that resources are a statistical calculation, and the independent third-party report writers discard high-grade data.

Carter himself has invested US$1.7M into Cabral Gold. He is remunerated via a salary of C$125,000 pa (gross) with zero additional fees. He owns c. 8.8M shares and is the largest shareholder in the company.

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Fresh off the back of the company’s recent successful raise, with orders of c. US$8M coming in, Carter remarks that the share price has tripled. However, it has only tripled on the COVID-19 base in a v-shaped bounceback. The share price is similar to pre-coronavirus. Is the market really excited? He insists the company is at a 12-month high (true). How will Carter make use of the US$4.2M to add value for his patient shareholders? The challenge of the company is figuring out where best to invest this capital in its relatively large 36,000 ha, district-scale land package with multiple deposits and more discoveries on the cards. Investors will be hoping Carter can focus on the right targets with an imminent reverse circulation drill programme. Last year, the company completed 2 diamond drill programmes of 4-5,000m drilling at US$247/m. However, drilling at that rate will mean an incredibly slow process for a project of this size. Shareholders will be hoping the RC drilling strategy pays off, having acquired a used RC drill rig for US$75,000; they usually retail for c. US$1M. The RC rig will cut drilling costs to just US$25/m, including analysis. This faster rate of drilling and reduced cost would have resulted in 40-50,000m drilling instead.

The fundamental strategy of Cabral Gold is to demonstrate that it has an economic gold deposit. With this RC drill programme, the company will be testing the 3 high-grade components, starting with high-grade at-surface deposits with 0 existing drill holes. It a “robust plan” that has been “hotly debated” internally. “Investors will be exposed to (the) potential for discovery every couple of weeks.” The plan is to very quickly develop a picture of just how large this resource is, but it’s likely to be much larger than 1Moz. The company will then proceed to a PEA and PFS. Once the resources reaches 1Moz at c. 8g/t, Carter would be happy to start marketing that rather than constantly chasing more ounces. In Brazil, mining and exploration are regarded as critical industries, so all of them have continued operating with standard safety protocols in place.

Early days. What did you make of Alan Carter?

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