Cerrado Gold Q1 2023 Results: Gearing Up for Production Growth

Cerrado Gold (TSXV:CERT) (OTCQX:CRDOF) reported solid financial results for the first quarter of 2023. Good cost control, improving recovery rates and ramping production means Cerrado is still on track to become one of the lowest cost gold miners globally by 2025.

In addition to strong results in Argentina, the company’s first producing asset, Cerrado’s receipt on May 30th of a preliminary license for their Monte Do Carmo mine in Brazil is an important milestone and means the company is on track to receive 1 of 2 remaining licenses in 90-120 days and the final operation license after construction is complete in the third quarter of 2024.

Monte Do Carmo (MDC), is expected to have some of the lowest operating costs in the world, below $500/oz. The ramp up of this mine is going to double production and cut sustaining costs by 30%, upgrading Cerrado from a junior miner to a low cost intermediate producer in a few short years.

Monte Do Carmo Estimated Production and Sustaining Capital Costs per Ounce

With Cerrado trading at a large discount to the net asset value of both junior developers and producers, the company has significant rerating potential as it moves closer to first production at Monte Do Carmo in Brazil.

Monte Do Carmo represents 80% of consensus Net Asset Value for Cerrado and with the stock trading today at a 50% discount to its NAV we strongly believe the valuation gap will naturally close within the next 18 months offering investors significant upside potential.

Q1 2023 Operational Highlights

• Production increased 3% year over year to 13,951 gold equivalent ounces “GEO”
• Operating cash flow of $12.6 million increased 97% year over year.
• Gold recovery of 92%, a 4% increase from Q1 2022 (88%); Silver recovery of 67%, also a 4% increase from Q1 2022 (63%).
• New production from the Las Calandrias heap leach will begin in June adding ~20K annual ounces of gold production, a 30% increase from 2022 full year production.
• Bankable Feasibility Study for Monte Do Carmo in Brazil is expected in the next 30 days, a major milestone for the company’s transformational project outside Argentina.

Cerrado generated revenue of $27.5 million for the three months ended March 31, 2023, from the sale of 16,255 GEO at an average realized price per gold ounce sold of $1,696 and price per silver ounce sold of $22.83.

For the three months ended March 31, 2022, the Company generated revenue of $27.4 million from the sale of 15,044 GEO. Revenue from sales of gold and silver for the current period was slightly higher than the three months ended March 31, 2022, due to the higher number of ounces sold, offset by the lower realized price in the current period due to a one-time deferred revenue adjustment of $2.4 million recorded in Q1/2023. Revenue for the quarter without the deferred revenue adjustment was $29.9 million.

First Quarter 2023 Operational and Financial Performance

Cash Cost Trends

Cash costs per ounce sold were $1,139 per ounce in the three months ended March 31, 2023, as compared to cash costs per ounce sold of $1,049 per ounce in the three months ended March 31, 2022, a 9% increase. The 9% increase is a result of higher consumables and material costs compared to the first quarter of 2022.

Cash provided by operating activities during the first quarter ended March 31, 2023, was $17.3 million compared to cash provided by operating activities of $8.8 million for the first quarter ended March 31, 2022. Cash provided by operating activities before working capital changes in 2023 consisted of $12.6 million as compared to $6.6 million of cash provided by operating activities before working capital changes in 2022.

Adjusted EBITDA was $8.2 million in the first quarter of 2023 as compared to $9.7 million in the first quarter of 2022. Current year adjusted EBITDA was slightly lower due to higher production and general and administrative costs, offset by higher cash sales in Q1/2023.

Net loss for the three months ended March 31, 2023 was $7.4 million, as compared to a $3.4 million net income for the three months ended March 31, 2022, a difference of $10 million.

The decrease in net income is primarily a result of Cerrado ramping up personnel in anticipation of managing construction and production in Brazil and the funding of the feasibility study, an important milestone for securing the necessary permits in Brazil.

Cerrado Gold is a market awareness client of Capital 10X.