What happened? Resource update surprises.

So what? Good and bad, mostly good. "More gold, less rock."

What next? Go Cabral, go!

Well, I was way off! No 5 million ounces at Cuiú Cuiú yet. But we knew that already, as per my recent interview with Cabral Gold (TSXV:CBR) CEO Alan Carter at the Metals Investor Forum:

Peter Bell: And how about this resource estimate? One of the friends online said, "I think it's gonna be a non-event." I said "okay, you can think that." I've crunched my numbers and I think it's good.
Alan Carter: I can’t comment on that Peter.
Peter Bell: My suggestions of 5 million ounces may be overdone?
Alan Carter: Yes. We're likely not going to get anywhere close to that with this estimate, but it will be another step along the way.
Peter Bell: A great first step for Cabral Gold itself as a new company.
Alan Carter: And it's only going to cost us about $100,000 for the updated estimate.
Peter Bell: Good to see you deliver that within a year of going public. 6 months, even.
Alan Carter: I’d like to see another resource estimate out in a year.
Peter Bell: That would be good. And with all the trenching that you’re doing.
Alan Carter: That’s right. Our trench data can be used for an estimate.
(https://www.scribd.com/document/380746194/Newton-Interviews-Alan-Carter-Cabral-Gold-Metals-Investor-Form-May-2018)

Read on for my personal opinion on the latest news from the company. This is a resource update I've been waiting for since my first interview with CEO Alan Carter recorded the week they started trading publicly. He has found great success with Tapajós gold in Brazil.

But first, another quote from the same interview at MIF.

"I was looking at this map of the Tapajós the other day, Peter. And there's seven gold deposits in this area with resources. How many have we been involved in? 4 of the 7 – Coringa, Palito, Cuiú Cuiú, and Tocantinzinho. We've been involved in 4 of the 7, all of which are discovery or production stories" Alan Carter, 26 May 2018. (https://www.scribd.com/document/380689181/Newton-Interviews-Alan-Carter-Cabral-Gold)

Cabral's resource update for Cuiú Cuiú (CC) is out today. The closest comparable for CC is Tocantinzinho (TZ). As Alan said in the quote, he was involved in discovery of both of them. Check out Serabi Gold (TSX:SBI), which is trading at $0.06 per share. I suspect that company might be worth billions. Anyway, Cabral Gold has something special with CC. It was the largest gold camp in the region. There is a massive Au soil anomaly running +10 kilometers. And my favourite fact is that the company recently found high-grade gold in areas outside the hot soils. Alan explained why with this photograph in our interview at MIF.


It's great to watch Alan and team contribute to the model for gold in the Tapajós. They continue to make significant contributions to exploration geology in the area.

Now that you're up to speed on Cabral, let's run through some numbers:

- TZ estimate used 167 holes (46,900m) for resource statement of 2.4Moz Measured and Indicated (70.2Mt @ 1.06g/t gold) and 0.1Moz Inferred (6.9Mt @0.66g/t gold).

- CC old estimate used 50 holes (13,605m) at Central and 24 holes (5,692m) at Moreira Gomes for combined resource statement of 0.1Moz Indicated (3.4Mt @ 1.0g/t gold) and 1.2Moz Inferred (31Mt @ 1.2g/t gold).

- CC new estimate used 108 holes (30,448m). Uncut, as before, the estimate is 0.2Moz Indicated (6.4Mt @1.0g/t) and 1.3Moz Inferred (23.3Mt @1.7g/t). With top cuts, the estimate is approximately 0.2Moz Indicated (5.9Mt @ 0.9g/t gold) and 0.8Moz Inferred (19.5Mt @ 1.2g/t). 

Today we got the headline numbers for the resource update. It includes 108 diamond drill holes (30,448m). Not quite the 176 holes (47,970m) I was expecting, but I'll take it. My prior analysis estimated CC to hit the same mark as TZ in meters, tonnes, and ounces, but this update only includes 2/3 of meters drilled at TZ. Sorry that my estimates for CC were off!

In my prior writing (https://ceo.ca/@Newton/looking-back-to-see-forward-at-cuiu-cuiu-cabral-gold-cbr), I wrote that "TZ resource has 46,900m across 167 holes. Cuiú Cuiú initial resource had 25,900m across 104 holes and the update has 22,070m meters in 72 holes. Will doubling meters included double the estimated gold in situ?"

I'm afraid we don't have an answer to that question yet, as the resource update today didn't double the meters. I thought the old resource had 25,900m and update would 22,070m for 47,970m total, which is close TZ total meters drilled. Instead, the historic resource had 19,297m and the update added 11,151m for a total of 30,448m. For comparison, TZ had 46,900m. As I said, 2/3.

I'm sad that the update didn't include as much meterage as I'd expected, but I am glad to see it was done for a good reason. Top cuts are pretty standard, but I wonder what will happen in the future when Cabral estimates a resource including the high-grade they've been finding recently.

Please let me say thank you to the consultants who prepared this update. Micon International Limited did a difficult thing by saying that the last guys used the wrong method. That's always a tough thing to tell a client, but it's the right thing to do. Top cuts are pretty standard. I wonder what they will do when Cabral estimates a resource including the high-grade they've been finding recently? I am glad to see Cabral could improve the methodology and provide comparable numbers to the old method. The results are in and they look good.    

The new CC estimate has 5.9Mt Indicated and 19.5Mt Inferred, for approximately 25Mt total tonnage. The prior resource had around 35Mt total tonnage. Did this update cut 10Mt of material? I've never seen anything like that at for such an early-stage project. I’m just glad they are not going into production! Thanks again to Micon for addressing this problem with the prior estimate.

You might be surprised to hear me commending the company for reducing tonnage in this update, but it's not a bad thing. Mickey Fulp and I discussed it in an interview out yesterday. The exploration industry always pushes for bigger and bigger projects and I’d say this update by Cabral is precisely what "Money Mining" looks like when applied to exploration!

Just read this excerpt from the release about “more gold in less rock”.

"Micon’s 2018 pit and underground constrained estimate without top cuts contains 14% more gold than Pincock’s 2011 constrained estimate. Due to more rigorous economic parameters used in determining the 2018 pit shells, gold grade is 44% higher, while tonnage is 27% lower than the 2011 resource calculation." Cabral Reports an Updated Resource Estimate at its Cuiú Cuiú Project in Brazil, 7 June 2018 (https://www.cabralgold.com/news-releases/2018/cabral-reports-an-updated-resource-estimate-at-its-cuiu-cuiu-project-in-brazil/)

More gold in less rock? Yes, please. All day!

See what I’m talking about in the table below, which shows what is probably the most important comparison for this update – the new resource versus the old one at CC itself. As per the 2011 estimate, the grades are uncut but the ore body is pit-constrained. Thank you, Cabral, for releasing such fulsome detail. 

The numbers in the graphic above tell a striking story:

- More gold. It was 0.1Moz Indicated, now it is 0.2Moz. Was 1.2Moz Inferred, now 1.3Moz.

- Less rock. It was 3.4Mt Indicated, now it is 6.4Mt. Was 31Mt Inferred, now 23.3Mt.

There's lots more you can say about this stuff, too. It’s all standard information, but it's presented very clearly. See this sensitivity table below comparing the old/new resource. 

Old resource (uncut, unconstrained):

1 g/t cutoff: 1Mt, 2.0 g/t, 0.06Moz Indicated; 11Mt 2.3 g/t 0.83Moz Inferred.

0.1 g/t cutoff: 6.2Mt, 0.6 g/t, 0.13Moz Indicated; 100Mt, 0.5 g/t, 1.7Moz Inferred.

New resource (uncut, unconstrained):

1 g/t cutoff: 2.16Mt, 1.8 g/t, 0.12Moz Indicated; 15Mt, 2.3 g/t, 1.2Moz Inferred.

0.1 g/t cutoff: 30.25Mt, 0.4 g/t, 0.37Moz Indicated; 142Mt, 0.5 g/t, 2.4Moz Inferred.

Notice how the gold numbers are bigger in each case under the new resource? That shows they added a variety of high-grade and low-grade ounces to the new resource, which is good.

At first, I was trying to match those numbers up with the table I mentioned just before, “more gold, less rock”, but that table was pit-constrained. Uncut, but pit-constrained.

Cabral released all kinds of important numbers today.

For example, at the highest cutoff reported, 1 g/t, the Inferred gold and tonnage both increased by approximately 40%. Recall that the update added 11,151m of drilling for a total of 30,448m in the current resource at CC, so the new drilling was approximately 40% of the total. Is it useful to compare the change in gold on the books (doubling indicated, 40% increase to inferred) with the amount of incremental meterage?

This is one for the mine analysts! I will be watching for wisdom and neat graphics about compendium of results and analysis in release today.

I will briefly point out that the top cut was applied to 10 or 20 g/t assays and the 2011 method was an "uncut estimate", which didn't cap the gold grades in drill core when estimating the resource. That's a statistical issue because there's a good amount of high-grade gold material at CC. With "no top cut", the old Inferred resource at a 1.0 g/t cutoff was 11Mt at 2.3 g/t for 0.830Moz and new one is 15Mt at 2.3 g/t for 1.175Moz. With a top cut of 10 or 20 g/t, the new estimate at a 1.0 g/t cutoff is 14Mt at 1.57 g/t for 0.723Moz.

The new cut CC estimate is approximately 0.2Moz Indicated and 0.8Moz Inferred. The new uncut estimate is 0.2Moz Indicated and 1.3Moz Inferred. The old estimate had 0.1Moz Indicated and 1.2Moz Inferred. Note that gold in the Indicated category basically doubled from 0.1Moz to 0.2Moz at the same grade in the new update. The total Inferred gold, however, was more complicated: it increased a bit following the original method with no top cuts, but decreased a lot with the top cuts. Total Inferred gold at 0.35 g/t cutoff decreased from 1.2Moz in 2011 uncut to 0.8Moz today with top cuts. Sucks to lose all that gold, but I trust it was necessary.

Again, the numbers are:

- CC old estimate used 50 holes (13,605m) at Central and 24 holes (5,692m) at Moreira Gomes for combined resource statement of 0.1Moz Indicated (3.4Mt @ 1.0g/t gold) and 1.2Moz Inferred (31Mt @ 1.2g/t gold).

- CC new estimate used 108 holes (30,448m) for 0.2Moz Indicated (5.9Mt @ 0.9g/t gold) and 0.8Moz Inferred (19.5Mt @ 1.2g/t).

- The update adds 34 holes (11,151m) to the resource estimate. Cabral now has 0.2Moz (5.9Mt @ 0.9g/t gold) Indicated and 0.8Moz (19.5Mt @ 1.2g/t) Inferred at CC.

In my prior writing (https://ceo.ca/@Newton/looking-back-to-see-forward-at-cuiu-cuiu-cabral-gold-cbr), I wrote that "TZ resource has 46,900m across 167 holes. Cuiú Cuiú initial resource had 25,900m across 104 holes and the update has 22,070m meters in 72 holes. Will doubling meters included double the estimated gold in situ?"

I'm afraid we don't have an answer to that question yet, as the resource update today didn't double the meters. I thought the old resource had 25,900m and update would 22,070m for 47,970m total, which is close TZ total meters drilled. Instead, the historic resource had 19,297m and the update added 11,151m for a total of 30,448m. For comparison, TZ had 46,900m. As I said, 2/3.

I'm sorry the update didn't include as much meterage as I'd expected, but I am glad to see it was cut for a good reason. Top cuts are pretty standard, but they might cause some sticker shock to people looking for a headline here. The bottom line is that Micon were a lot more conservative with their assumptions and Cabral Gold trading below $0.30 puts the valuation at under $10/oz for the new resource update. They say you shouldn’t hold any shares that you wouldn’t buy again today at the market and this setup is looking good.

Find the full news release yourself here on the company site: https://www.cabralgold.com/news-releases/2018/cabral-reports-an-updated-resource-estimate-at-its-cuiu-cuiu-project-in-brazil/