Cerrado Gold owns 100% of the Minera Don Nicolás gold and silver operation and the Las Calandrias heap leach in the Deseado Massif, Santa Cruz province, Argentina, roughly 280 km south of Comodoro Rivadavia. The company also holds an 80% interest in the Lagoa Salgada base metals project in Portugal and a project in Quebec. In this interview, I asked about the Argentine operation, the underground ramp-up, a 50,000 metre drill program, an updated PEA planned for Q1 2027, cash flow and debt, and the stalled permitting process in Portugal.
TL;DR
The CEO told me the whole story right now is exploration and adding mine life. 2025 production came in around 50,000 gold equivalent ounces against a plan of about 56,000, and guidance for the current year is 50,000 to 60,000 with CEO Brennan saying they will land closer to the top end. He wants the Q1 2027 PEA to show at least a five year mine life at 50,000 ounces a year, with 100,000 ounces as a longer term ambition that he would not put a date on. He says life of mine no longer worries him after the Falcon acquisition from Pan American Silver and the current drilling. Costs are the other half of the pitch. AISC ran around US$1,600 in the first half, Q2 will look inflated because of equipment purchases, and he thinks a normalized US$1,600 to US$1,800 is the right number, which he says still makes money at US$3,000 gold. He also said that they have not raised equity since 2023 and intend to fund everything, including Portugal, from cash flow.
What have they done for shareholders lately?
Since acquiring the asset in March 2020, production has gone from about 20,000 ounces to 40,000 in 2021 and roughly 55,000 in 2022, mainly by tightening mining practice: an on-site lab doing 24 hour turnarounds, mining polygons cut from five or six metres down to two or three metres, and plant throughput lifted from about 900 tpd to about 1,300 tpd with recoveries of 90% to 92%. More recently they started underground mining beneath the old Paloma pit in June of last year, bought back the Sprott royalty and stream for about US$32 million (Sprott had held a 6.25% royalty up to 29,000 ounces delivered), acquired the Falcon property from Pan American Silver about six to eight weeks before this interview, and staked additional ground below Las Calandrias. They also brought in a new VP Exploration in January 2025, went from one rig last June to five surface rigs plus an underground rig that arrived about six weeks ago, and expanded the internal lab to 400 to 500 samples a day with certification targeted for the end of October.
How much money do they have and what are they spending it on?
They had US$25 million in the bank at the end of March, the last reported period, and Brennan says the operation is generating cash monthly, describing roughly US$120 million to US$150 million of cash flow from the asset and a revenue base north of US$200 million to US$250 million. Debt sits at about US$40 million, mostly US dollar debt raised in Argentina at 4% to 6%. Capex is about US$55 million this year including US$15 million on exploration, up from roughly US$30 million to US$40 million last year, and much of that went to buying the mining fleet and crushers instead of leasing, extending the leach pads by about five years and the tailings facility by about four years. He expects capex to drop next year to somewhere in the US$20 million to US$30 million range and would be surprised if it went above US$30 million. On sustaining capital he gave a wide and somewhat confusing range of US$70 million to US$100 million a year. No equity raise since 2023 and he was emphatic about not wanting to dilute or rely on capital markets again.
Upcoming catalysts
Technical: an updated PEA for Minera Don Nicolás in Q1 2027, targeting at least a five year mine life at 50,000 ounces or better, plus results from the 50,000 metre surface program (he guessed the split is roughly half infill, half step-out) and an approximately 20,000 metre underground exploration program, with another 50,000 metres likely next year and lab certification targeted for the end of October. Operational: continued underground ramp-up beneath Paloma at a target grade of about 5 g/t. Corporate: production guidance for next year expected around mid December, resubmission of the Lagoa Salgada environmental application and detailed engineering study around the end of this year, a University of Lisbon study on the aquifer question, a statutory 120 day review plus roughly 30 days of back and forth pointing to a decision around the end of April, mine approval about two months after that, funding approval from the UK export credit agency working with Santander expected around the end of Q1, and construction targeted for Q3 2027.
Risks
CEO Mark Brennan named Argentine macro policy, specifically the risk of higher taxes on mining, as the thing that could hurt most, alongside inflation given that 60% to 70% of costs are labour and consultants. As to the rest of the portfolio, Portugal is the other open question. The environmental agency president overruled a unanimous 17 out of 17 technical committee approval, a negative opinion followed in January, and the whole timeline depends on a regulator that has already gone against them once. Beyond what he raised, the obvious risks are that the PEA does not deliver the mine life or production step-up he is guiding toward, that underground ground conditions cause further delays like the instability that already cost them ounces, that the underground grade comes in below the 5 g/t target, and that a pullback in gold compresses the free cash flow the entire self-funding plan depends on. He also acknowledged the region generally runs two to three year mine lives, so five years is the target rather than the norm.
Cerrado Gold CEO Interview
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