In a Unique Position to Benefit from Rising Gold Prices

(Statement from Tucano Gold CEO Jeremy Gray)

Dear Readers,

A few days ago, we had the pleasure of spending five days on-site at Mina Tucano in northern Brazil with Leo Hathaway, the CEO of Golden Shield Resources (CSE GSRI / WKN A3DJD6). On July 10, we signed a memorandum of understanding with Golden Shield to merge their large exploration package in Guyana with Tucano Gold, with Golden Shield shareholders receiving a 12.1% stake in the combined group. The transaction provides Tucano with a vehicle for going public, exploration opportunities, and a great addition to our management team.

Tucano Gold is one of the few gold mines being commissioned now, as the gold industry has been underinvested for years. The last time the sector was flooded with eager investors was in 2011, when the previous owners of Mina Tucano, Beadell Resources, raised most of their money to build this world-class operation. As they completed construction, the gold price crashed to $1,050.

As we are one of the few new gold mines coming online in Q4, we are in a unique position to benefit from the rising gold price. When we acquired Mina Tucano in October 2023, the gold price was only $1,820. The table below shows the potential free cash flow at these higher gold prices.

Cash Flow Expectations; Source Tucano Gold

Importantly, we have a very tight capital structure with only 55 million outstanding shares for the combined merger of Tucano Gold and Golden Shield. After this $10 million round at 80 cents with a half warrant at C$1, our share count rises to only 67.1 million.

(Download the current subscription form for private placement shares here).

If you halve our cash flow forecast for 2025 and assume a gold price of only $2,000 (to be conservative), we would still achieve a P/E ratio of 1 for the next year, offering considerable upside potential for both Tucano Gold and Golden Shield investors.

Our structure is one of the best among producing companies, as we bought Mina Tucano for significantly less than the replacement value of $500 million and, most importantly, we have not taken on any loans or accepted royalties for our gold. It’s tempting to take on debt or royalties, but we want to maximize profits for our shareholders. We also want to reduce the financial risk for our operations in case gold prices fall or we encounter production issues in the coming years. 10 years of bear markets in gold have taught us to avoid debt.

Buying existing capacity in a bull market is key to strong shareholder returns, and we believe we have a similar appearance to Ero Copper when the company started as a brownfield restart in Brazil. Today, gold is arguably one of the best businesses to be in in Brazil, with the local price now four times higher than when Beadell Resources commissioned the operation in 2013.

Mill Restart Update

We are on the verge of recommissioning Mina Tucano. Last week, I spent most of two days touring every part of the plant to ensure we prioritize the parts needed for the restart.

The total cost of recommissioning the plant, including consumables, parts, and the delivery of ten generators to increase power supply, amounts to only $1.5 million, and we are very keen to prioritize these payments from the current financing round.

Turning Tailings into Treasure – Tucano Green Iron Ore

We are also very excited about our iron ore business, which we plan to resume next year. Although iron ore prices have collapsed, our low-cost operation is largely immune to this downturn. We are the only gold mine in the world with iron ore as a by-product and have more than 35 million tons of gold tailings with 20-40% Fe content. This business has the potential to expand to 1mtpa of high-grade 67-69% concentrate with cash costs of less than $5 per ton. At today’s price, that’s an additional $100 million in revenue that we haven’t factored into our projections above.

This video was taken last week by one of our investors as he took a sample from our tailings pond. You can see how rich our gold tailings are in free iron ore as they quickly jumped onto the magnet. Our basic calculations suggest that we have at least 10 million tons of mineable iron ore in our tailings that can be processed by our iron ore magnetic mill, in addition to the fresh tailings that will come from our own gold production.

Old Heap Leach Tailings Ore – Stockpile

The photo below was taken in 2006 when the old heap leach was operated by GoldCorp and before Beadell built its 3.5 Mtpa mill right next to it. The heap leach only recovered about 50% of the gold at that time and was dumped onto the stockpile (circled in green). This is where we now find high-grade gold. So far, the team has taken over 1500 drill samples and had them analyzed in our first-class laboratory.

Tailings piles at Mina Tucano; Source Tucano Gold

We now have over 20,000 ounces on the ROM and stockpile next to the mill, which is perfect starting material for the first 3-4 months of production before we need to mine fresh material from AB1. It’s free-dig, pre-crushed, and very low cost, giving us a potential profit of over $20 million in this strong gold market.

By the way, we will be attending the Denver Gold Forum next month from September 15-18. If you would like to see us there, please get in touch and we’ll be happy to arrange a meeting.

In conclusion, we would like to thank all our investors for their support and look forward to starting production to benefit from this strong gold price. I wouldn’t be surprised if the gold price reaches $2,800 by the end of September. This could help accelerate our growth plans and achieve the original target of 10,000 ounces per month by the end of Q1 25 without having to take on debt or royalties.

Best regards

Jeremy Gray | CEO of Tucano Gold
Jeremy.Gray@TucanoGold.com

Charles Chebry | President
Charles.Chebry@TucanoGold.com

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