The timing for resuming gold mining is perfect
| We are excited to restart Mina Tucano with our own fleet and proud to work with SANY’s most important franchise partner in Brazil, IRMEN Máquinas. Our first order will be loaded onto low loaders on Tuesday and begin the 10-day journey from Belo to Mina Tucano. The delivery includes 8 x 60-ton trucks (SKT90S), 2 x excavators (SY750H), and 1 x loader (SW978K1). A second delivery will arrive in July, doubling our SANY capacity. Our strategy differs from the last two operators, Beadell Resources and Great Panther, who relied 100% on contractors. See this link to the video on our LinkedIn page. |
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| Our trucks are ready for delivery: 8 x 30 tons + 60 tons payload – SKT90S |
| I would personally like to thank Pedro and João from IRMEN Máquinas for their support and know this is the beginning of a long and successful partnership together. IRMEN Máquinas is the largest dealer of the SANY fleet in Brazil and Latin America. We believe now is a good time to restart Mina Tucano with a firm gold price and world-class infrastructure. Our first goal is to reach 6,000 ounces per month by August and use the cash flows from these gold sales to slowly increase this amount to 12,000 ounces per month by mid-2025. The higher the gold price rises, the faster we can increase our monthly ounce quantity. Like some children who are allergic to nuts, we are allergic to debt and prefer to grow with our own cash flow. It is very important to us that we bring long-term jobs back to this beautiful part of Amapá and run the company without debt and excessive operating costs. |
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| 2 x Excavators – SY750H 1 x Loader – SW978K1 |
| We like to start small and plan to feed our modern mill with a capacity of 10,000 tons per day (3.5 Mtpa) with low-grade stockpiles and fresh material from our TAP AB1 pit. We have more than 1 million tons of low-grade material located near the mill with an estimated grade of 0.5 g/t. This material is a welcome cost-effective source of gold. We estimate that our cash operating costs at 6,000 ounces per month will be less than $1,200. This gives us the necessary strength to tackle our Stage 2 growth plan and expand Urucum Central South from Q4’24, where 127,000 ounces are located in the current pit plan. We have secured the services of U to carry out the pushback work. U was the contractor for Great Panther and knows our operation well. |
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| Our open-pit mines will more than offset the financing for Phase 3 for underground mining. We believe that the Urucum ‘Complex’ or referred to as Urucum ‘Deeps’ by Beadell’s geos, is probably the best undeveloped underground gold project in Brazil and likely one of the top three in the world. Currently, there are still 13,000 ounces in the Urucum North pit, but the key to long-term achievement of 150,000 ounces per year lies underground. This project has the potential to mine 4,000-5,000 tons of ore per day with a recovery grade of 4 g/t (Reserve 160koz @ 4.85 g/t + Inferred Resource 748koz @ 5.17 g/t). Our modeling suggests that the Urucum Complex will have cash costs of about $800 per ounce, which at today’s gold price could generate more cash flow in a month than our current market capitalization. We expect this mine plan to grow considerably as the deposit is open at depth both to the north and south. |
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| Mine plan for the Urucum Complex – the beginning of a mine life of over 30 years |
| Both Beadell and Great Panther conducted extensive deep drilling with great success. Great Panther reportedly spent approximately $40 million on drilling at Urucum North in 2019-21. Both companies recognized the underground potential and regularly reported excellent deep drill results. Beadell also recognized the potential to recover the iron ore present in this system and built what we now call the Tucano Green Iron Mill. We believe this mill can easily be expanded to 1 million tonnes per year to produce a high-grade concentrate with 67-69% magnetite content, at cash costs of only $5 per tonne of concentrate. Once the plant is back in operation, we will be producing the cleanest, most environmentally friendly, and lowest-cost iron ore in the industry, and it’s conceivable that this by-product could reduce our AISC by up to $200 per ounce. The capital cost for recommissioning is less than $2 million, with a payback period of about 3 months at current iron ore prices. |
| The timing for resuming gold mining is perfect, and I believe gold is like iron ore was in 2003. Back then, the Japanese were the largest consumers of iron ore, just as Indians were for gold. Then China came along, and the iron ore market changed forever. The same could happen with gold, where we believe the Chinese will dramatically overtake Indian buyers. |
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| The Mina Tucano team in front of our 3.5-Mtpa gold plant |
| We’ve had an excellent response so far to our 80-cent round that we launched last week. With only 52 million fully diluted shares for Tucano Gold Inc., this implies a market capitalization of just C$41 million, which compares to the replacement cost of building Mina Tucano of over $400 million. While that’s a big number, it’s not just about money. Building such an operation requires years of exploration, permitting, planning, financing, and construction. |
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| Master Geologist Luiz “Pigoiao” Quirino General Director Israel Oliveira |
| Beadell Resources built this fine 3.5-Mtpa mill in two stages over a period of six years, with the CIL plant and first ball mill commissioned in December 2012 to process oxide material. In 2018, the CIL circuit was then upgraded for processing sulfides, and another ball mill was added to double the capacity. When they arrived, they also invested in a 200-man camp and an airstrip where 63 Australian employees would fly in and out every 45 days on business class tickets. Out of respect for our shareholders, we travel economy class, but we’re also superstitious that the day we turn left on the plane is the day the gold bull market ends. Tonight, I’m hoping for a seat in the last row on my flight to São Paulo. Happy Easter. |
| Best regards, |
| Jeremy Gray | CEOJeremy.Gray@TucanoGold.comCharles Chebry | PresidentCharles.Chebry@TucanoGold.comEdward Balme | Head of IR Edward.Balme@TucanoGold.com |
