Cerrado Gold Inc. (CERT.V) Q3 FY2025 Earnings Call Transcript & Summary

Good day. Thank you for standing by. Welcome to Cerrado Gold Third Quarter Financial and Production Results Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Michael McAllister, VP of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. I'd like to note that today's call contains certain forward-looking statements based on the company's current expectations, estimates and beliefs. Please review the Slide 2 and other forward-looking information contained in today's presentation as well as on the company's annual information form, which is publicly available on SEDAR+ and the company's website. The accompanying presentation for today's call is available for download from the company's website at cerradogold.com. The accompanying press release is also posted on our website and on SEDAR+. Please note that all dollar amounts mentioned today are in U.S. dollar unless otherwise noted. Following management's presentation and remarks, a Q&A period will follow first on the conference call then on the webcast. Joining us on today's call are Mark Brennan, our CEO and Chairman; Jason Brooks, our CFO; Cliff Hale-Sanders, our President; Ed Guimaraes, our Executive Vice President; Andrew Croal, our Chief Technical Officer; and David Ball, our VP, Corporate Development. With that, I'd now like to turn the call over to Jason Brooks to take us through the financial highlights.

Thanks, Mike, and good morning, everybody. I'd like to start with production. We had our best production quarter of 2025. And in Q3, we produced 13,832 gold equivalent ounces, which was a 21% increase versus the second quarter. Included in that amount was a record heap leach production of 10,429 gold equivalent ounces, which was a 33% increase against Q2 2025. I'll also mention that our full year guidance of -- we're well on our way to meet our full year guidance of 50,000 to 55,000 GEO ounces. We've maintained that guidance production, as you could see from the Q3 results, is definitely weighted to the second half as the higher-grade underground mining ramps up. In Q3, we had adjusted EBITDA of $11.8 million versus $7.4 million in both Q3 2024 and Q2 2025. That represents about a 60% increase versus Q3 last year and Q2 of 2025. That increase is largely as a result of an increase in revenue. The revenue increased due to higher ounces sold versus Q2 and a higher realized price of about $500 an ounce. And as compared to Q3 2024, that increase is also primarily due to revenue as a result of an increase in realized price of about $850 an ounce. Now one thing I'd like to mention on the EBITDA section is there's a new item in the table calculating EBITDA this quarter, which is our tax liability. In the third quarter, we accrued a tax liability of $12 million. And this $12 million arose due to increased profitability at our Argentina operation. And again, as I just mentioned, primarily as a result of the increased metal prices in the quarter. It's new this quarter because in 2023 and 2024, the company used accelerated tax credits on our capital spend in Argentina in the previous years. So in Argentina, for tax purposes, we are allowed to accelerate depreciation and apply tax credits to our tax liability. We used those tax credits in 2023 and in 2024. And those tax credits are now used up, not entirely, but principally used up. So in 2025, we will be tax -- we will owe tax on the profit of the mine in Argentina. Now this is an internal estimate at this point. The final number will be crystallized as part of the year-end audit. In Argentina, tax is driven by accounting. And so we cannot know the exact number of what that final tax liability will be until we go through our audit in early 2026. And the final thing I will say on the tax liability in terms of cash, that cash payment will be due in May of 2026, so it will not affect cash flow in 2025. So yes, that is the reason for the new tax liability in the third quarter of 2025. In terms of all-in sustaining costs, in Q3 2025, we had all-in sustaining costs of $1,915 per ounce versus $1,678 in Q3 2024 and $1,779 in Q2 of 2025. The increase as compared to Q3 is primarily due to fewer ounces sold in 2025 as a result of 2024 production was primarily due to the high-grade CIL operation at Calandrias Norte, whereas in 2025, we are primarily focused on the heap leach operations. We are targeting the higher end of the revised all-in sustaining cost guidance of $1,600 to $1,800 per ounce for the full year. In terms of cash, we ended the quarter with a cash balance of $16.5 million. Cash is expected to continue to grow as gold prices remain strong and production levels increase in the second half of the year due to the higher-grade ore from underground at Paloma. The increase in cash was about just shy of $11 million as compared to Q2 on the back of operating cash flow of $14 million and the Hochschild prepayment of $8.75 million. Cash is only expected to grow further as our hedge comes off throughout the remainder of 2025. The remaining ounces delivered into the hedge are expected to be done through the remainder of 2025, at which point we'll have full exposure to the spot price of gold, less, of course, our Sprott stream that will continue to be ongoing. The balance sheet remains strong with an additional $5 million payment due in March 2027 from the sale of our Brazilian asset. In addition, we have a further potential $10 million payment within 3 years on the exercise of our Michelle option agreement, which needs to be exercised by December of 2027. And finally, 2025 is a year of transition. We've had significant progress of our three projects, MDN in Argentina, Lagoa Salgada in Portugal and Mont Sorcier in Quebec. Approximately $40 million has been invested to advance both the mine and those two projects, and we're looking forward to reaping the benefits of that investment in 2026. At MDN, we're transitioning to underground mining, ramping up the heap leach production to peak production levels. We've initiated a 20,000-meter exploration program with plans for a further 50,000 meters in 2026, which will include additional drills, internal lab verification and for a total program of 70,000 meters. At Lagoa, we've completed extensive -- we're completing extensive metallurgy work and engineering in anticipation of an optimized feasibility by the end of this year. And finally, at Mont Sorcier, we've completed significant drilling and engineering work as we progress towards a bankable feasibility in Q2 2026. With that, I'll turn it over to Mark Brennan.

Thank you, Jason, and thank you very much, ladies and gentlemen, for joining us on this call today. Again, as Jason emphasized, 2025 is really being utilized by ourselves, and you'll hear this in many of the presentations that we've given and we'll continue to give. '25 is a transition year for us. And when we talk about that, the greatest proponents that we're talking about that is that we're looking to put ourselves in a very, very strong financial position on the first hand. That financial position enables us to drive our 3 assets to maximize their potential as well as to provide shareholder value from those assets. So if I look at the transition at MDN in Argentina, as Jason mentioned, we moved from an open pit operation at Calandrias Norte to predominantly a heap leach operation in MDN. We're basically in Calandrias Sur, where basically we're targeting 4,000 to 4,500 ounces per month. On top of that, we've embarked upon a surface exploration drill program where initially we are targeting 20,000 meters for 2025, which is currently underway, and we're looking at a 50,000-meter program in 2026. We've seen a very good progression on that underground -- sorry, on that program, probably not as proceeding as quickly as we would have liked. But at the same point, what we're seeing is we're seeing tremendous instances where we see good potential for gold endowment and silver endowment for that matter. So from that perspective, what we're looking at is whether we complete the 20,000-meter program this year or not, we will look to complete a 70,000-meter program from surface between 2025 and 2026. That said, we are very pleased with the progress that's being made there, even if we're not potentially achieving all the meterages that we would have liked. And our expectation would be to accomplish approximately 10,000 to 15,000 meters this year. What we've done to accelerate that program is we've looked to -- we've brought in three new rigs. So basically, we've acquired an RC rig, which we've brought in. We have two more diamond drill rigs to add to the existing diamond drill rig that we have today. And we believe that we can really accelerate the program with that. We've also had issues with respect to turnaround times on assays. And so we're looking to certify our internal lab where we can turn around results very, very quickly, exclusively for our own operations. So that will take [good] place over the course of the next few quarters at MDM. But again, we're seeing very good indications of deposition of gold. And now what we need to do is really drive the exploration far more quickly. With regard to underground, we've also gone underground. We probably now completed, I would think, somewhere approximating 15,000 to 20,000 meters of development. We're now in the stopes where the mineralization is held. And from that perspective, we're looking for great things to come from the underground. As you may know, most mines that have had tremendous success in the Deseado Massif, whether it be Cerro Vanguardia, Cerro Negro, Cerro Moro, where they tend to find the greatest deposition of gold and the greatest concentration of high-grade gold is underground. And so we're now -- we're looking at, first of all, producing some short-term production to get into the stopes. And from there, we're also looking to start underground exploration, which we expect will again extend the mine life of the mine. Our objective is to show you by the end of the year that we are well on our way to extending or getting our mine life to 5 to 6 years. That doesn't sound like a lot. But at the same point, we believe that there's lots of gold at MDN, and we'll be able to continually turn over that 5- to 6-year mine life. If you did the math on the 4,000 to 4,500 ounces of production out of the heap leach operations, you'll see that not only are we looking to extend our mine life, but we really would like to see an increase in production. But that's still a book -- a story being told that being written today, and we hope that we'll be able to give you a very good update by year-end. On top of that, we're very, very pleased with our development at Lagoa Salgada. We should have an optimized feasibility study completed by year-end. We -- this optimized feasibility study, we're greatly confident and optimistic that basically, the numbers are going to be considerably better than the previous feasibility study that was done in July of '23. So we see some really good robust project there. We will also look to see our environmental impact permit to be issued. We're targeting before the end of the year. And then from there, what we'll look to do is look at our construction and recap permit by the second quarter of 2026, leading to construction in Q3. So from that perspective, we're very pleased with what's going on there. The -- all the different strategies and all the different elements of the feasibility study, whether it be metallurgy, grade, recovery, CapEx, all the very positive elements that we're seeing be brought together should give us a far more robust project than we saw in the feasibility. There was -- previous feasibility was generating about $75 million a year. At Mont Sorcier, our objective is to complete a bankable feasibility study in Q1 2026. We're looking to submit the Environmental Permit by Q3 of 2026, and we hope to be able to look at announcing and completing financing by the Q1 of '28 to have us in construction by Q2 of '28 with production in Q1 of 2030. Again, this project is extremely robust. We've seen a change in that project where we've decided to move to an initial 4 million tonnes per annum with the third year moving to 8 million tonnes per annum, retaining its 20-year mine life with extremely strong cash flows -- free cash flows of about $235 million per year. So the year that we've seen so far, we've been very lucky and very blessed by having very strong gold prices. That is a bonus to us. But at the same point, where we, as a company, have been going is really to look at the strategy of bringing a long-term sustainable mine in Argentina at MDN, hopefully targeting increased production, while at the same point, bringing to the shareholders Lagoa Salgada that we anticipate we can fund to a great extent through our funding partners without having to dilute the company too much, if at all. And then on top of that, which would bring another steady stream of cash flow for the next 14 years. And then on top of that, using the funding and the cash flows we have from Argentina and Portugal to develop our Mont Sorcier project, which would basically give us another strong cash flow generator without, again, raising too much equity, if any at all, to bring that project to fruition. If you look at these kind of numbers that we're targeting, it gives us a very, very strong and significant company going out 3 to 4 years, which isn't that far away. So we're very blessed and very happy to have seen gold prices move as strongly as they have. That certainly accelerated our programs. It's accelerated what we've been able to do. It's been able to give us a very, very strong financial position. But these plans with or without the gold price, we're moving ahead. Each of these assets, in our view, can substantially drive much greater shareholder -- multiples of shareholder value that we see today. So that's, in a nutshell, my comments on where we see ourselves. Again, we anticipate that we'll see gold production in the same types of guidance ranges we have this year, 50,000 to 55,000 ounces until such time as we start to monetize or become very confident in extended production or increased production. With prices where they are today, we see cash flows being higher. As Jason mentioned, we had a hedge, which is now -- will come off by year-end. We think that, that will add based on the production levels that we had, probably about $400 per ounce on the ounces we produced in '25. And that's with gold prices probably averaging closer to $3,200, where now we're over $4,000. So we see the increase in tax. We knew that taxes were going to come at some point, but we see the increase in gold prices being more than covered -- more than covering any tax payments that we need to make with the removal of the hedge as well as with the higher gold prices. And we see, hopefully, those numbers again being eclipsed by the underground exploration, underground production and surface exploration. So that said, we've got $16.5 million of cash. Our expectation is that, that cash balance will again continue to grow for the balance of the year. And we're very confident in our expectation for that 50,000 to 55,000 ounces for the year. That's everything I have to say at this point. Thank you very much for your attention, and we'd be very happy to address any questions that you may have.

Operator, please open up the line to questions.

[Operator Instructions] And we have a question coming from the line of Heiko Ihle with H.C. Wainwright.

It's Heiko Ihle here from Wainwright. Good to hear with the MDN, the mine life getting extended over and over, encouraging. Obviously, you saw some of that in our report this morning as well. But looking ahead a bit, where do you see the capital appreciation for the next year with the shares? I mean you've got a lot of stuff coming up. You got the feasibility study for Lagoa. You've got Mont Sorcier studies. Everything seems to be firing on all cylinders. What is the market seeing that maybe we're not? And what is the market missing more importantly?

Thank you, Heiko. I mean this is -- again, this is something where we've really tried to focus on how do we grow the company and where our shareholders going to best benefit. And we have spent predominantly of the $40 million that Jason spoke about us being investing. I mean, most of that has gone towards the MDN operations and the production, expanding my life production, et cetera, and bringing in new production formats. But for example, if I look at Lagoa, basically, Lagoa, if I were to use hypothetically the feasibility study of 2023, we had an NPV of about $145 million. If I look at Canaccord Genuity as an example of just using their kind of list, they look at multiples of about [0.5] for their development assets in this space. I think that, frankly, even if we were just to add what they're giving to their common shareholders, that would be USD 75 million, another $100 million. Again, I hope that our numbers are going to be more robust than that we've seen in the feasibility. If I look at, for example, Foran, Foran McIlvenna Bay, those numbers are going to be somewhat similar to us. They're going to produce 1.5 million tonnes per annum. I think they've got a 16-year mine life. I think their parameters are very similar to ours. But they've got a $2 billion market cap. Our CapEx is going to be -- as per the feasibility is going to be around $165 million. Theirs is $1 billion plus. So I think at some point, Lagoa has got to start realizing some value. If I look at the feasibility completion at Mont Sorcier in Quebec, we did a PEA in 2021, which came out with a $1.6 billion NPV. We don't think there's going to be a big difference in terms of the actual numbers. We still think that $1.5 billion approximation for the feasibility is going to be about right. So we're going to change a little bit. We're going from -- instead of doing 5 million tonnes, we're going to 4 million plus 4 million. We've moved away. We've taken vanadium totally out of the picture. We're focused now on our 67% high-grade, high-purity iron ore. It's a product that iron ore grows at 1% to 2% per annum. This high-purity iron ore, everybody wants it. It's growing 9% to 10% per annum, trades at a significant premium to other iron ores, conventional iron ores. So I don't know. If I look at a feasibility study being completed by amongst the best engineering firms in Quebec, if I use the comparatives to other development assets on a $1.6 billion asset, can I put a 0.1x multiple? I think that's not unreasonable for a project that's going to have its environmental permit submitted in the -- by the 2 months -- 2 quarters after we complete the feasibility study. That $0.1 would equate to USD 160 million. So I see a lot of potential for multiple and valuation extension. I look at us if we can show the market and make them comfortable that we can have an extended mine life at MDN. There's no reason why we shouldn't be trading at the same kind of levels if we have a 5-, 6-year mine life at this 50,000 ounce level. If you look at other companies in our sphere, you've got Jaguar, you've got Serabi, you've got HelioSar. The reality here is that -- and we still have lots of room for expansion as well. There's no reason we shouldn't be trading at the same multiples that they are or the same value that they are, which is $350 million to $400 million. So I think if you were to start to add up those numbers, irrespective of a big change in gold price, I think next year has the potential to be a far bigger year in terms of shareholder value and shareholder appreciation than what we've seen in the last year. So that's kind of our internal kind of perspective, Heiko, and thank you for the question.

No, that's a very fair and also comprehensive answer, and I appreciate it. And then just one more thing. I mean, looking at gold, gold is at $1,600 in the last year, we're at $4,230 right now. I mean it's up 61% year-over-year. Obviously, the market is ripping quite hard. What should we look at in regards to sensitivity analysis? And at what point do you think costs increase as well that may offset some of these still very strong tailwinds that you're facing right now?

Heiko, it's Jason. Yes, I mean, our OpEx is -- our costs are around $7 million to $8 million a month. We don't foresee the change -- much changing in that manner over the next 12 months. So I don't know if that answers your question. I mean, certainly, we've got $64 million of production costs year-to-date, which is about $7 million a month. So -- and I think that's a reasonable estimate going forward. So at gold prices of $4,000 an ounce, that's whatever, approximately $18 million of revenue. So I think that's a reasonable estimate.

Fair enough.

And I think on that note, so we do have good margin. And we're coming to the end of capital expenditure programs that will be attributed to Cerrado at Lagoa and also at Mont Sorcier. So our CapEx should come down certainly compared to 2025 on certainly those two assets and then for the foreseeable future. And then on top of that, we think that if you were to see a devaluation in Argentina, which we think is highly likely at some point that, that will reduce our cost in Argentina dramatically. If you remember, our cost in Argentina for labor is probably between 40% to 50%. And the fact of the matter is that any devaluation in the currency vis-a-vis the U.S. dollar, we're just going to see that going to the bottom line. I'm just thinking, listen, the suppliers and people always have an ability to increase costs. We think that there will be cost inflation. But I think the benefits to us from a devaluation in Argentina will be far more important than -- and likewise, the elevated gold prices that we were somewhat held back with a little bit by the hedge. The hedge provided us with certitude of being able to pay for the capital programs for the growth that we're going to see in 2026. But I think from that perspective, we're very acutely watching gold prices, and we're contemplating ways that we're not going to hedge again, but maybe there's ways we can look at protecting ourselves from the downside of gold at not too great a cost. So we're looking at different mechanisms, but we're still pretty confident that we're going to see a good move forward.

[Operator Instructions] And I see there are no further questions in the Q&A queue. I will now turn it back to Michael McAllister for any web questions.

Thanks, operator. Yes, we have a few. So I'll just read them out and the team can take them from here. So we have a question from Stuart Johnson. He's asking, what are your expectations about future gold prices? And what does this mean about the propensity to utilize hedging programs once again. These hedging programs seem to have cost Cerrado a significant amount of profit over the last few quarters. I'll let -- we've already answered that somewhat, but do you want to expand?

I'll just expand on that. And to your point, I think I don't regret having made those decisions on the information that I have at the time. But at the same point, we now have covered and we're comfortable that our financial position is strong enough to cover our liabilities and our programs going forward. So we don't have the same necessity to hedge. And obviously, if we had the information we have today, we would not have made the same decisions, if we had it back then. But we will not hedge. We are concerned about -- it looks to us like gold will continue in the direction that it's moving. We don't see anything material that's going to change in terms of the inflation levels, dollar stability, safe haven status. It looks like the world is continuing very much. We're also very aware that in May or so of next year, there's going to be a new Fed government who probably is not going to be as hawkish as Powell. I think that's going to leave lots of room for rates to come down, which basically means that gold prices should do better. So our -- but we'll be very candid. I mean, we had no idea gold prices were going to go as high as they have. Very few people did. And the reality is we probably won't know when they go down. So what we will do is we'll look to position ourselves with low-cost production. As I mentioned, our CapEx is coming down dramatically. Our programs are coming down. But we will look at maybe some instruments, potentially options or something that effective, it's not going to cost us a lot of money to protect ourselves against any downside. And when we look at downside, I think we going to see a 40% reduction? That seems a little heavy to me, but can we see 10%, 20%, for sure. And that's what we probably look to protect against.

Also asking, Cerrado previously announced a share buyback program. Is there any plans to continue with this in the future?

Indeed. Listen, we're all -- the reason we announced the share buyback is that we want to return to shareholders. We feel that for -- up until very recently, the gold sector has not returned its gains to shareholders in either adequately through dividends or such. And we really like to see our operations normalize where we can provide year-to-year yields to shareholders outside of the capital appreciation. So we will get back to that. But one of the points that I think we've tried to be clear with people about is really we need the production coming out of the underground. And as soon as we're comfortable that that's coming and consistent, then we'd be happy to go back and revisit that. My belief is that we're going to have a really good underground production month in December, but we need to see going out to the second quarter and the third quarter. But the share buyback is very much on top of our minds, and that's something that we will continue to be very anxious or very eager to bring back as soon as we think it's feasible.

We've somewhat answered this, but with the elimination of capital controls, can you provide an updated guidance about foreign currency risk in Argentina?

I think there's strong pressure in Argentina to complete the trifecta, I guess. If you look at Milei has won the elections in October very handily. He's at probably his all-time high in terms of public support and euphoria, I guess, because of one, the second part being, he’s brought in a lot of money from the IMF. He's got a swaps program with the U.S. government. So Argentina is doing very well. What we see is we see strong pressure right now, the next step will be to actually float the peso to remove controls and to remove the vestiges of controls. As people are aware, we're now allowed to repatriate our dividends based on audited profitability, which usually means once a year. But I think most companies in order to go and invest in Argentina want to see a natural repatriation of capital when -- if as and when they want to. And so I think that you'll start to see those controls lessened and a more natural market. I don't know in the next year. Hopefully, we can get to a point where we have a floating currency. And if that's the case, then everything kind of goes away. And Argentina, I believe, will benefit -- will reap the benefits of substantially more reinvestment than we're seeing today. It's my view that people are still hesitant to go into Argentina, just as they were in the past. Any form of partial currency control or repatriation of profits, dividends, et cetera, is something that people will potentially take political risk in less favorable jurisdictions as opposed to feeling that in any way, their capital may be tied up.

Given that we expect a positive investment decision at Lagoa Salgada, are we actively involved in financing discussions?

One of the most important things for us, and many of you will be acutely aware of our sale of Monte Do Carmo. And one of the things that we never want to have to have in the future is being reliant on the financial markets. We believe that we want to use the financial markets if as and when it's appropriate for growth capital, but we don't ever want to be reliant as we were when we were with MDC. And so what I'd say there is that we already have funding support from the U.K. Export Credit Agency, UCEF, for Lagoa Salgada. They're prepared to provide us with 70% of our financing and capital needs for the Lagoa Salgada project. We believe that hypothetically, if we're looking at the feasibility study, the previous feasibility with CapEx of $165 million, we believe very comfortably that we can fund that asset and that capital program through UCEF on the one hand or an export credit agency; two to be using offtakers; three, a potential stream, leaving very little to Cerrado and equity and cash to provide. And one of the reasons why we're so cautious and why we're trying to retain our -- build our cash position is that if we do have a cash call that we want to be able to make that internally without having to go to the market. And the same applies. If we look at Quebec. What we're anticipating is we're hoping that we're going to have the same type of cash flows that we have now with the adjusted EBITDA for the 9 months of about -- or for the last quarter of about $11 million. Our hope is that we have cash flows of $45 million, $50 million for next year or a similar number. I'm not making a prediction there, but -- and then on top of that, we have Lagoa Salgada producing cash. And again, it puts us in a position with the building and construction of our Mont Sorcier project with using the U.K. Export Credit Agency in Quebec, for Mont Sorcier, we're actually using TD Bank. They'll be supporting us. In Lagoa, we're using Santander Bank, a bank that's well known in Spain and obviously located in Spain and very strong in Portugal. But we have TD in Quebec. So the reality here is that we see the same formula. We see the formula of our own cash flow -- internally generated cash flows to hopefully provide a lot of the equity that won't be required from an export credit agency funding that won't be required from -- that we can't get from either an offtake and/or stream. So we feel that we can build and we can drive these assets without the support of the -- without being in a position where we're vulnerable to market weakness because market weakness will come at some point, as we all know. But we believe that the way we're structured now, we're in a position that we can absorb that. We strongly believe in the support of the markets and the efficiency of the capital markets in the long term, and we will utilize those capital markets for our growth capital. And when -- if as and when we determine that we're in a position to grow our business, we will certainly utilize those capital markets. But we really want to avoid dilution. That's a very critical element for us.

Next caller asked, when can we expect assay results from the current underground exploration program in Argentina?

What we've always stated to the market is that we're going to put out our results in batch -- in a one-shot batch, I guess, towards the end of the year. I guess it's going to come towards the end of the year or early next year. In terms of the indications are that we have very, very interesting areas, Paloma South, Paloma -- the Antenna area, the Sulfur OS, which all are similarly located around that Paloma large open pit that we used to have and where the underground is starting today. Around those areas, we got -- we're seeing very interesting indications of gold. So that's the area that we will initially announce. But again, what I'd stress here is that we see lots of gold throughout the property. We've got a big property, 330,000 hectares. We started the program, the drilling of the program in June with 1 rig. We found that, that rig was not achieving the results that we wanted. We found that we weren't getting the turnaround times that we wanted. So if anything, in our development cycle, where I'm a little bit -- I wish we would have done -- had been a little bit more productive was actually in the exploration numbers. But at the same point in the meters that we've drilled, but at the same point, we're correcting those issues. We're bringing in our own certified lab. We're going to certify our lab. We're going to bring in three new rigs. So I'd say to you that, one, we're going to show the market that we've got an -- we are very confident by year-end, we can show the market where that extended mine life and is going to come from with the degree of science as opposed to speculation. And then on top of that, we're hoping that we'll see far greater and far more productivity in our exploration next year.

Next question, will the updated feasibility study at Lagoa Salgada show improved metallurgy recovery rates? If yes, what is this attributable to?

All of the above. We're seeing an improvement in recoveries. We're seeing improvement in grades. We're seeing improvement in CapEx. I mean everything has really seen a tremendous improvement. And really, I guess, in terms of our metallurgical -- we started about a year ago with a group called Mine Pro and Wardell Armstrong. Wardell Armstrong and Mine Pro, they know the Pyrite Belts better than anybody. Prior to that, we were kind of learning as we went along and we were not experienced. And frankly, we should have perhaps looked at working with these groups earlier, but we felt that we had an idea that we were going along the right direction. But I'll say to you that we're now in a position where we're somewhat conventional in our -- and similar to many of the other mines in production in -- on the Pyrite Belt. And -- but again, we're just seeing a very robust project. And I'll remind people that this feasibility study will show potentially -- we're kind of -- it's not going to be too dissimilar from the previous one with a 14-year mine life. But what I will say to people is that we've only done 40,000 meters of exploration on this property, and we recovered 27 million tonnes. The reality is that recoveries, the removal of deleterious elements, the improved grades, that will probably increase that resource as we move for the feasibility study. And what it does is it gives us a lot of confidence that our thesis when we option this project is we thought this project had the potential to be a world-class project, which I think a world-class project would qualify being 150 million to 250 million tonnes. I don't think that we have evidence today that it's going to be that big, but I also don't have evidence that it's not going to be that big. And we're very optimistic with what we see through seismic, through geophysics, gravity surveys that this project has a lot of room to grow. So things are just looking very, very positive at that asset.

Just a couple more. What ongoing tax rate for MDN should be expected for future guidance?

Well, the corporate tax rate in Argentina is 35%. So that is the top rate. We're obviously going to do everything we can to reduce that tax rate and have our effective rate lower. As I said earlier, we took advantage of the capital program in 2023, when we were building the heap leach and building Calandrias Norte to use those accelerated tax credits to shield tax in '23 and '24. And we'll do the same thing going forward with any capital spend that we incur ongoing, we'll use those accelerated credits to the best of our ability. It's always best to pay less tax than more. So it's hard to predict. I can tell you for sure, like I just said, the tax rate is 35%, and we're going to do everything we can to reduce it as low as possible.

Last one here is, are you expecting guidance to be higher than 60,000 ounces in 2026?

As I said earlier, our expectation is for 4,000 to 4,500 ounces a month for our heap leach operations in Argentina. Right now, it's premature to be predicting from the underground just because right now, it's a little bit sporadic in terms of what we're going in. We've only been in there for less than 6 months. As many of you know, we had some issues with stability and aggregated rocks that meant we had to go a little slower than we wanted to. But in terms of the -- any potential upside could well put us beyond that 60,000. And the fact of the matter is we believe that the cadence on this asset should be well beyond that 60,000 ounces. 2026 may be a little premature. But certainly, we've got a lot of scope for showing how we can expand the production of this asset. And I hope by the end of '26, if we haven't achieved that, that we'll certainly be in a position to show how we're going to do it.

That's it for the questions. Do you have any closing remarks?

No, I'd just like to thank everybody for their support and for your interest in our project. One can go to the website, the www.cerradogold.com. We're available for any questions at any time. Thank you very much. I hope the balance of '25 and '26, we're very, very excited for the capital appreciation we expect to see in the year ahead.

Great. Thank you. That concludes the call. Operator, please end the call.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation, and you may now disconnect.