Mineral & Financial - Investment Update
Investment Update: Cerrado Gold - Completes Acquisition
to become a Gold Producer
MAFL owns 625,000 shares or about 1.5% of the
Cerrado has entered into an agreement with
· Adds a producing asset, producing free cash flow to a M&FI investee company - Don Nicolas could produce up to 50,000 ounces per year, for at least 7 years, with upside from exploration to extend the mine life. The current All in Sustaining Cost (AISC) is less than
· Excellent infrastructure - Newly built processing plant in operation for two years, well- established camp with its own power facilities
· Cerrado's management experience to enhance operations - New operational procedures are expected to deliver significant operational improvement, higher production and lower unit costs. These significant potential for operational improvements are expected to deliver increased production and free cash flow.
· Enhances Cerrado's existing mineral Resources & Reserves - Transaction adds to Cerrado's Mineral Resources & Reserve base in
· Non-dilutive financing of acquisition to complement Cerrado's existing project - Cash flows leveraged from Don Nicolas can advance Brazilian Monte do Carmo exploration.
· Favorable acquisition timing - Gold price has appreciated over 20% in the past year, significantly improving the confidence in base case expectations.
· First step in Cerrado's goal of becoming an intermediate producer.
MINERA DON NICOLAS OVERVIEW:
Minera Don Nicolas is located 1,625km south west of
MDN is situated within Deseado Massif where the underlying geology of the region is dominated by rhyolitic and andesitic volcanic and tuffaceous volcaniclastic lithologies of Middle to Upper Jurassic age (130 to 170 ma). It is crisscrossed by numerous extensive fault and fracture zones which served as conduits for hydrothermal activity during periods of Jurassic volcanism. The result of this activity is a widespread network of shallow level mineralized, epithermal fissure veins, breccias, and stock-work systems, many of which carry potentially economic gold and silver mineralization. The Deseado Massif region is host to several multi-million-ounce epithermal gold and silver deposits including
Construction of the operational facilities was completed in 2017 and has been ramping up to full capacity during 2018 and 2019. Current mining operations are conducted in two areas; the high grade La Paloma deposit and the Martinetas deposits, which are approximately 30km apart. Ore is processed through a 1,000 TPD CIL plant located near the Martinetas pit. The project currently supports 325 employees and contractors on a fly-in fly-out basis. Don Nicolas has strong regional backing having signed agreements with the two neighbouring communities and has received strong support from the government of
Cerrado undertook a fundamental review of the MDN resource database and based upon reinterpretation, Cerrado's internal estimates suggest that the operation currently hosts approximately 2.97 million tonnes at 4.62g/t which includes initial mine plan gold resources of 2.0 million tonnes at an average grade of 5.19 g/t. However, there can be no guarantee that this gold can be extracted and this information is provided for guidance only, and should not be relied upon.
Cerrado sees numerous target areas that can be expected to be quickly added to the resource inventory with only modest exploration efforts. We note current resources are restricted to open pit mining methods as previous operators focused on open pit targets only. That said, many known ore zones continue and remain open at depth, similar to the other mines in the region offering significant exploration potential for underground operations in the future.
Upon taking ownership Cerrado plans to introduce new operational strategies at MDN, which are expected to add significant improvement with limited additional capital, in the overall operation within a relatively short period of time. The Company's initial focus will be on enhanced grade control activities to increase the head grade delivered to the mill, sustaining the mill throughput rate at its design capacity of 1,000 tpd and recommence exploration efforts that have been on hold for the better part of three years.
Cerrado believes the exploration potential of the property remains highly prospective to increase the mine life from both additional open pit and underground potential. In addition, Cerrado will also investigate the potential to increase production via the processing of the significant amounts of low- grade stockpiles via heap leaching in the future as is seen at nearby operations.
On the Corporate front, Cerrado continues to seek a path forward to become a public company, maintaining its commitment to provide liquidity to its current shareholders. Cerrado also expects to deliver a strong operational turnaround at MDN while also looking to increase resources at its
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