Cerrado Gold (TSXV: CERT) is about to get a cash infusion, with the firm announcing this morning that Hochschild Mining has elected to exercise an option that will see it acquire Cerrado’s Monte Do Carmo project in Brazil.
The option relates to an agreement entered into back in March by the two parties, whereby Hochschild was provided with the option to acquire a 100% interest in the project in exchange for US$5 million in exploration expenditures and US$60 million in cash. US$15 million was initially provided upon signing of that agreement.
“The proceeds from the sale of Cerrado’s MDC Project will allow us to achieve our goals of growing our MDN gold mine in Argentina, complete a feasibility study on our very robust Mont Sorcier Iron Ore Project, improve the balance sheet and enable the Company to pursue other growth opportunities to maximize shareholder value,” commented Mark Brennan, CEO of Cerrado, on the sale of the property.
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Under the terms of the agreement, US$10 million was to be paid by Hochschild upon exercise of the option, with a further US$20 million to be paid upon closing. A further US$10 million is to be paid upon the second anniversary of the date of shareholder approval of the transaction, which is set as June 27, 2026, while the final US$5 million is to be paid upon the earlier of commercial production at the project and March 31, 2027.
The transaction remains subject to approval by the TSX Venture, with closing currently slated to occur on November 5, 2024.
The sale of the Monte Do Carmo project follows a capital raising process that was launched by Cerrado back in the summer of 2023 in an effort to secure working capital. The firm was unable to attract sufficient capital to maintain operations, and as a result was led into the arrangement to sell Monte Do Carmo, which is expected to address short-term working capital requirements.
The Monte Do Carmo project boasts a net present value (5% discount) of $390 million along with an after-tax IRR of 34%, based on a feasibility study completed late last year. The project is estimated to produce 95,212 ounces of gold on an annual basis over a 9 year mine life, at a cost of US$686.6 per ounce, based on $1,750 gold.
“Cerrado is now favorably positioned as one of the few well-funded, cash flow positive, stable junior producers in the sector,” continued Brennan.
Cerrado Gold last traded at $0.415 on the TSX Venture.
Information for this briefing was found via Sedar and Cerrado Gold. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
