Plenty of Room for Revaluation

The thorough sampling of the old heap leach pad by our geology team and our laboratory suggests that the first mill run at Mina Tucano could have a much higher grade and lower cost per ounce than expected. We believe there could be up to 12,000 recoverable ounces of this low-cost material, which could be processed in the first two to three months of mill operation and generate $20 million in free cash flow.

This ore comes from Eike Batista and Goldcorp’s old heap leach, which operated between 2005 and 2009 when recovery was around 50%. Our plan is to commission the mill at the end of June. Initially, we had expected 0.5 g/t from this material. So far, we’re at 1.1 g/t for 4,300 ounces from sampling, but the real test will come when we examine the much richer slimes after the current rains have stopped.

We suspect these slimes could be up to 2 g/t and make up about a third of the estimated 400,000 tons of heap leach inventory. Time will tell, but this is a real surprise for us and could improve the prospects for our ramp-up of Mina Tucano in this very strong gold environment.

Our main focus now is on building a large stockpile on the ROM pad and completing spare parts orders for our 3.5 Mtpa mill, which will ensure smooth operation during commissioning at the end of June. The cost to build this mill today would be well over $400 million, and permitting, financing, and development would take years.

Plenty of Room for Revaluation

This compares to our valuation of only C$35 million before this 80-cent round and hopefully gives our investors confidence that there is plenty of room for revaluation over the course of this year when Tucano Gold Inc. goes public. In reality, we bought Mina Tucano very well in October 2023, allowing our new shareholders to participate at a very low valuation.

We believe Tucano Gold has the potential to become a $1 billion company in a strong gold market. Just to build this mill today, our stock price would have to rise to C$15-18 to cover these costs, and the valuation could rise to C$34 per share assuming an NPV gold price of $2,200 short-term and $1,800 long-term. The beauty of this company is that it’s already built and ready to benefit from strong gold prices.

As you can see below, the impact of this high gold price on our own internal projections for future cash flow at Mina Tucano is dramatic. Please remember that these are just internal projections subject to all sorts of risks, but hopefully they illustrate how strongly Tucano can depend on a rising gold price. It’s clear that our AISC in 2024 could be below $1,000 if these heap leach grades continue to surprise us.

Estimated Cash Flow Projection Compared to Gold Price

In reality, our current pre-money value at today’s gold price is probably less than a quarter of next year’s cash flow. This kind of profitability will bring valuable wealth to this wonderful part of northern Brazil in the state of Amapá and make us the largest employer in the state.

While waiting for our SANY fleet to arrive, we’ve deployed a small rental fleet over the past six weeks to transport spent ore from the old heap leach to the ROM pad, which is located right next door.

Our new SANY trucks and excavators have now arrived, and we expect them to be operational once our new drivers have completed safety and operational tests. We plan to double our SANY fleet again by August once we’ve achieved some solid gold sales.

In addition to the spent ore from the old heap leach, there are also plenty of low-grade stockpiles of mined ore that wasn’t processed in the past because it wasn’t considered economic when the gold price was much lower.

Our world-class laboratory is led by Mr. Davi and his excellent team of Gedielson, Nizan, Raimondo, Gean, Uisman, Jordy, and Augusto. We are truly fortunate to have inherited such knowledge and talent.

Our team of geologists, overseeing all sampling of both the heap leach pad and the plate samples in our pits, is led by Luiz Quirino. His outstanding team includes António, Alex, José, Jady, Genilson, Paulo, Josia, Bruno Esiko, Baldico, Madureira, Rafael, William, José, Elso, Aguiar, Adriano, Genilson, Fredson, Jairo, Josequias, and Marvivaldo.

These are just some of our employees who are bringing this incredible operation back to life under the leadership of our General Director, Israel Oliveira.

This 80-cent round also provides investors with exposure to our exciting Duckhead deposit, which last produced in September 2016. For three years, it was the highest-grade gold mine in the industry, and Beadell Resources produced 20,000 ounces in those final four weeks at an average grade of 59 g/t. Our geology team believes the deposit is open in all directions, and it’s worth viewing this Leapfrog video link. Some historical drilling that was normal at the time: FVM560 intersected 48 m at 11.62 g/t and remains unmined below the current pit.

Historical high-grade results from Duckhead by Beadell Resources in 2015

Take a look at our recent Tucano Gold presentation to get an idea of the company’s size and scale, and to understand why we consider it to be Brazil’s largest and richest gold system. We control the country’s second-largest contiguous land package after Vale, and I’m confident that there are more Tucano and Duckhead deposits to be discovered in the coming years.

The timing for the restart is perfect, and we believe the market is increasingly driven by Chinese buyers who could soon be 2-3 times larger than their Indian counterparts. We discuss this phenomenon in Stijn Schmitz’s YouTube interview. Many thanks to Stijn and Lars for the opportunity.

Tucano Gold could soon be a $1 billion company, and with such a tight share structure, we hope it will be a C$10 stock in this beautiful new world for gold.

Best regards,

Jeremy Gray | CEO
Jeremy.Gray@TucanoGold.com

Charles Chebry | President
Charles.Chebry@TucanoGold.com

Edward Balme | Head of IR
Edward.Balme@TucanoGold.com