Mining’s old guard needs strong medicine
A new report details subpar investor returns in the mining industry over the last decade, particularly big cap diversified companies which have not adapted to new realities.
Cerrado Gold (TSXV: CERT) has inked a $20 million stream agreement with Sprott Resource Streaming and Royalty Corp. for its Monte do Carmo gold project, an advanced-stage exploration property located in the state of Tocantins, Brazil.
The agreement provides for the sale and delivery to Sprott of 2.25% of all gold and silver produced from the project. Cerrado has the ability to buy back 50% of the stream based upon the buyback schedule below. Proceeds will be used to complete ongoing work to deliver an NI 43-101-compliant feasibility study for the project.
To facilitate funding in advance of commercial production, Sprott has issued a $20 million secured note bearing interest at 10% per annum. The interest may be payable by the issuance of common shares, should Cerrado elect to do so.
“We are very pleased to be partnering again with Sprott to fully finance our feasibility study and development works at Monte do Carmo. The facility is a non-dilutive, attractive financing that allows full flexibility to add additional project financing for construction beginning in 2023,” CEO Mark Brennan said in a news release.
Mike Harrison, managing partner of Sprott, added: “Our continued support of Cerrado demonstrates our confidence in management and the quality of their projects. The results of the Monte Do Carmo PEA technical report demonstrate a tier one, high-return, low-cost gold project with excellent exploration potential in a good jurisdiction.”
According to Sprott, this funding provides “catalytic capital” to advance the Monte Do Carmo project to a construction decision, as well as an opportunity to provide construction financing as Cerrado advances the project.
Gold mining in the Monte do Carmo area dates back as far as the 17th Century by the Portuguese. During the 1980s the area experienced an influx of artisanal gold miners motivated by the recent rise in gold prices.
Investments in mineral exploration at Monte do Carmo by others is reported to have amounted to $4.7 million from 1985 through 1995, and over $20 million from 1996 to 2018. Most of the investment was made in the Serra Alta area, the primary target at the Monte do Carmo mine.
The 2021 PEA for the Serra Alta deposit envisioned an annual gold production of 131,000 oz. over an eight-year mine life, including 149,000 oz. over first five years. This was based on open pit indicated resources of 9.1 million tonnes grading 1.85 g/t gold for 539,000 oz. contained gold, plus inferred resources of 12.1 million tonnes grading 1.82 g/t gold for 708,000 oz. contained gold.
