Erik Wetterling – PDAC Review – Value Proposition In Cabral Gold, Sonoro Gold, and Cerro de Pasco

Hello, and welcome into the K.E. report.

Shadding Corey here as your host.

And today we're talking with our friend and colleague,

Eric Wetterling.

Eric is the Headless Horseman,

and we will put a link to theheadslesshorseman.com down below.

So you can check out his site.

He often weighs in on not just the news of the day

and some of the companies on his radar,

but just what he's looking at in the sector.

And Eric, you've just spent some time in Toronto, Canada

for the PDAC convention.

You were there for the full go of it.

And from what we've heard from other people,

it was crowded, it was big,

but what were your key takeaways after being at really

the global mecca for mining as far as Toronto's PDAC

being probably one of the largest conferences

there is in the sector?

What were the key takeaways you had from this year?

Yeah, I mean, it was well attended.

I saw some post about having record attendance.

And then I asked around people who have been

going to the PDAC longer than me.

I mean, according to most of them,

they said it was well attended,

but it wasn't like crazy attendance.

So I don't know how it was 2011.

And to be honest, I didn't really feel,

at least in the exhibition where the juniors are,

that it was like super, super packed.

Maybe actually I felt like the Eric was more packed.

And I've been to PDACs before,

where there's been quite a lot of people.

But yes, I would say that's probably more interest,

higher interest, and all that.

But at the same time when you talk to people,

I still get the feeling that it's kind of a climbing

of World of War.

Yes, some people are getting back into the space

or new people are showing up.

So that attendance is in fact up,

but it still doesn't feel like everybody's totally

sold on a longer-term bull, for example.

You have a lot of people with different opinions,

sound very cautious, basically.

And maybe that's also because what happened in Iran,

for example, during the week.

So there's been a lot of chaos.

So I think people are overall quite cautious,

climbing a World of War and are afraid of as per usual.

I mean, volatility shows up.

People get somewhat scared.

And I've seen some people say that,

hey, it's time to be cautious here,

racing cash levels, et cetera.

So that's fine by me.

I don't want red-hot sentiment

and everybody's just like it's a no-brainer to be long.

Eric, I'm curious your thoughts,

because look, what we've heard and what makes sense

is that there are a lot of companies that go to PDAQ,

but now even more so, we seem to have more companies

in the sector.

There are some people that have come back into the sector

and taken over either old projects or new projects,

and we've had a lot of other companies spin out assets.

So curious, you're taking away from the amount of companies

we're seeing in the sector and this trend of,

it seems like more rather than less, juniors.

Yeah, I mean, it's kind of diluted in that sense, I guess.

But at the same time, if you just look at the metal prices,

of course, almost anything makes sense

at these metal prices.

And let's say you had some products

stashed away for a long time,

and you see record high-gold and silver prices, for example.

I would think that you would want to come out

out of the woodworks with those projects,

but it still feels like there's not that much capital,

at least in the Canadian market,

the Canadian retail sector for these companies.

So it's a weird thing where fundamentally everything looks great

and new companies pop up and assets

that might not really be that good assets

and might really not work at metal prices

we saw two, three years ago.

They're coming out to the market now,

but it feels like there's not enough capital in a sense.

So it's kind of, yeah, it's being a bit diluted, I guess,

and simply the buying power that everybody, at least I,

would think would show off that, you know,

new record highs in gold, for example.

It's not showing up.

So it's a weird environment.

I mean, I've been in the space 11 years now.

I still haven't seen an environment exactly like this.

Well, just one more thing we keep hearing

is that every company is cashed up

and they've got work programs.

Typically, before a big event like this,

a lot of companies blow out their best news

and want to have a talking point

when they're at these conventions,

did you feel the sense of a news overwhelm going into PDAC?

Did you feel like a lot of the companies you wanted to see

had just put out something tantalizing

or did you feel that there's a lot of companies

still waiting on assay results

or waiting on their drill program?

What was the vibe like as far as news flow?

Well, I would say a bit of mixed.

I mean, there was quite some news before,

but it's nothing like craze in my opinion.

I also think that maybe the big race,

there were the big races for companies.

There were kind of maybe too late

for especially the modern juniors

to really, really have a beefy program

because of course, I mean,

if you're gonna have a big winter program, for example,

or a modern program, whatever,

or actually, I mean, most,

or a lot of Northern viewers can't do much in the winter,

but it's like you would have to race bigly

like, I don't know, eight months ago

or 10 months ago or something.

So I think it's, you know,

the cash infusion might have been a bit too late

over the last 12 months for the news to really speed up,

but now we're seeing in the last few months

some really, really beefy financing.

I mean, I've seen juniors racing three times

what their market cap was like a year ago, for example.

But so I would expect that 2026

is probably gonna be even more news, have it?

Oh, you're absolutely right.

We've seen this financing window.

It's been open for six months at least now.

Companies have been raising a ton of money.

I've never seen this much money come into the juniors.

And I've been in the sector for almost 20 years now.

But Eric, to that point, have you noticed a change

in terms of when news is released this year

compared to later last year?

How is it impacting the markets?

Have you noticed less of a market response?

Have you noticed more of a market response?

What's your assessment of, again,

how the market is digesting news this year so far?

Yeah, I would say it's not like investing as an insider,

like it was in 2024, maybe early 2025,

where it's like almost even if the news is positive,

nobody cared and it got sold off, it was a liquidity event.

So I'm seeing more positive response to news.

And I guess it still depends on what kind

of news, but it's definitely picking up.

But I'm not seeing extreme responses.

I still think that maybe 2016 at the sentiment peak

when gold hit 1350, I still think that had probably more,

it was more sensitive to positive news.

But it is picking up.

And it's also been a bit scrambled, I guess,

with the latest two weeks, okay, as far as, yes,

there was more news before PDEC around PDEC

and now after PDEC, but look out there.

I mean, the oil market, for example, has,

I mean, gone up on a hammered, oil went up

and then went down, et cetera.

So I still think it was somewhat of an unfortunate timing

if you're long, but as a continuous buyer in a sense,

I actually like when good news gets put out on,

let's say, sour days, because then you can actually

get a chance to buy some obviously positive news,

but at discount like you are an insider.

Well, let's get into some of the news

that's on your radar.

One of the companies that at least has had a positive response

to their news is Cabral Gold.

It's traded on the TSX V under the ticker CBR.

And they put out to the marketplace on the 10th of March

that they got a major permitting milestone granted.

And this is at their project in Brazil,

both for the surface layer, satellite,

and then also the larger mining project

down into the hard rock.

So it seems like the market like that news Eric,

what do you make of Cabral Gold?

Yeah, I mean, it rhymes with the fact that I thought

for a year at least now, as mail prices have gone up.

I mean, the second port of the La Sonco

have never been this valuable.

And Cabral has been doing really well.

I think it's at multi-year highs now.

And I mean, they're separate face one operation.

I mean, it's not a big operation, but at the same time,

given where the gold prices are.

I mean, that might have three times the,

let's say, free cash flow as a similar scale operation

would have like two, three years ago.

So it's the mail prices are just so high

that it makes a lot of sense to go into production.

And these guys in this port of Brazil

seem to be able to get into production.

Of course, this is just the face one

where they have the separate light.

But they'll reduce the store.

I mean, when I first invested, it was for the hard rock.

So they kind of, I mean, went hard rock first

and back to separate light and get this going.

And of course, if they can become a self-funded explorer,

I mean, they have a huge land package.

And this, the risking event where they actually seems

like they're getting permitted for more than just a separate light.

And then also knowing that G mining is, you know,

their neighbor basically and G mining are quite aggressive.

So I don't know, you know, I think the market also

might be thinking that, you know, as this gets more

the risk, the G mining since they're,

they seem to be a very aggressive grower.

There's probably a constant threat if I had the guess

that they might be acquired.

So I like this kind of two-prong, you know, threat, let's say.

Words like they can get cash flowing.

It's almost record gold prices.

And also there might be a, and I'm not saying,

I don't know when it could be or if it's going to happen.

But one should at least be aware that there's a very

aggressive mid-tier right next door.

So Eric, with this permit, does it speed up cash flow?

Does it make it that the company could cash flow sooner?

What, what is your estimate?

What does your outlook for?

That initial, separate light cash flow.

But now having this, what seems like wider permit,

a bigger production scenario?

Well, with especially a growth production story like this,

which they stayed in the news release, where they, you know,

might start off with 500,000 tons per year

and then full plant capacity, one million tons per year

and then ramp up from that.

So it's like, it's hard to put a exact number on, you know,

what this is production going to look like.

Because once the phase one is, let's say, started,

the market is probably going to look to phase two.

And then also exploration and maybe ramping up

phase two in a few years.

So it's very much a moving target.

And also in the background where you have this,

like the regional thing is that they have so many

hard rock targets there.

So Cabral, I don't have, like I think I stated from day one,

basically, I think it's just, for the time being,

kind of a perpetual growth story in a sense.

So it might look expensive based on phase one,

but I think the market is going to price in that.

Well, in one year from now, it might be bigger.

And in, you know, one year from now,

it might be pricing in that, hey, in two years,

it might be even bigger than that

and then add exploration, results, et cetera.

So I don't have any like firm production,

profile or anything that I based this off

because I just think it's going to keep growing

if they do in the getting to production.

And it's an interesting point and there's a lot of companies

that are just trying to fast track some production,

whether that's through a bulk sample and trial mining

or whether it's getting a small open pit going

before they do their underground

or there's a lot of different approaches now,

but you see a lot of companies scrambling

in these higher metals prices to get anything

into some production, gets the money coming in

that's non-delutive capital and then use that

to fund the bigger project.

So we'll keep tabs on how Cabral progresses.

Another company that's using the higher metals prices

to their advantage that we were talking about

is Sonoro Gold in light of the higher metals prices,

they reworked their resource estimate

and they used in their estimate now $3,500

announced gold and $48 silver, $48 ounce silver

and then that way they were able to bring some resources in

that had been considered waste previously

and it's a lot more valuable project now

when they mix their PEA economics into it.

And they even have some spot features in there

so you can kind of see what it looks like

at almost $5,200 gold, $88 silver.

So what do you make of reworking the mineral resource estimate

and the PEA in light of higher metals price assumptions?

Well, I mean it, I liked fact

and we've been talking about this for a long time,

you know, what metal prices should you use?

I mean, this is, they don't have a permit yet,

that's the big thing waiting for a permit,

but as we've seen, I mean,

Mexican produce have been getting permits lately

and I think there's a, you know,

I don't know how long the queue is,

but I wouldn't be surprised if these guys get the permit.

Now of course, given what's happening,

Mexico recently, maybe, you know,

jurisdictional risk has increased

or at least the perception of it,

but I mean, when I look at Sonoro Gold, for example,

I mean, it's a low-capics product,

it's a simple product,

he bleached open pit product

and at today's metal prices,

after tax NPV with 8% discount is around 525 million USD,

which is, I don't know, 700 million or something CAD,

market cap is around 90 million CAD

and of course, this is maybe one third,

I mean, they drilled out one third,

let's say, or what they think is gonna be there

at this product.

So, I mean, to me, it's kind of a simple bet.

I mean, a low-capics product should be quite easy

to do technically and they have people

who have built mines before.

So I just, you know, again, at these metal prices,

payback is, I don't know, a year or something,

I mean, the after tax error is 91%,

and this could get built quite quickly.

So long term, it's hard to say, of course,

I mean, after the mine has been in production,

that's when, you know, what the actual value was,

but I just think it's a quite asymmetrical bet.

I mean, it looks cheap, very cheap on paper,

especially if you assume that it can actually get a permit

and get into production, you know,

in the not too distant future.

I mean, you're free rolling just the current resource,

large parts of it.

And then, if they get money and get cash flowing

like a brawl, they could obviously use that

to prove up maybe three times the resource, for example.

So as always, I don't know exactly what's going to happen.

Maybe they never get a permit.

I would be surprised if they didn't,

but I just think it's a very asymmetrical bet.

And this is maybe a, you know,

perfect type of product for this kind of, you know,

metal price environment.

Eric isn't a little bit much to assume

that they're going to get a permit

and be in production in the near term

to take advantage of these metals prices

because if you're calling this stock cheap,

it is a $90 million market cap.

D-risk, fine, they have this PEA out,

but you're still looking at a 10 year life of mine

of under a million ounces.

Under half a million ounces actually, 459,000 ounces.

So you extrapolate that out to a cost of ounces

in the ground that seems a little on the high end to me,

but curious to your thoughts then of how you work those numbers

to determine this $90 million being cheap

for a half million ounces of gold production, potentially.

Well, I mean, just think about this,

I mean, at this gold prices,

let's say there's a 3,000 USD ASIC Morgan

and let's say 45,000 ounces,

they have 46,000 ounces in the study here.

I mean, that's 135 million USD per year in ASIC Morgan.

What's that in CAD, maybe, I know, 192 million CAD,

so that's twice the current market cap.

I mean, how much of that is priced in?

Is it priced in that they're gonna be doing that in 12 to 18 months

or whatever?

No, I mean, if they actually get a permit

and they get into production,

I think the market cap's gonna be quite a bit tired

and this, especially if the market figures out also,

that's like the actual mine life is not 10 years,

they could keep this production profile for maybe 20 years.

So if that happens, yes, I think it's gonna be cheap

and it's not the highest cost,

it's not a super low cost operation, of course,

but hey, if you can get a payback in, let's say,

one or two years and you're free rolling after that.

And I mean, personally, I think the gold bull

is not gonna end this year.

I think we might have a few years left,

but it's always like investing is not about guarantees.

How much is priced in?

What is the chance or success, let's say priced in now?

Is it pricing in this kind of operation

and that it would be, I mean, at the end of the day,

longer life asset or maybe that they could expand

the production profile if they find,

if it takes them two years to, you know,

prove up double the amount of answers,

no, I don't think that's priced in.

I don't know, I don't have an exact percentage chance

of this working out, but I sure shit on the CDS,

let's say, blue skies priced in.

Yeah, and I think when we've talked with John

and Ken in the past, they've been pretty open that

they started and launched this process,

thinking they were gonna get the permit very quickly

because that was right before everything got shut down,

but they purposely left two thirds of the resource

undrialed so that they could pay for expiration

through production.

Nobody expected to get stuck in the muck

with the Mexican permitting process for years

like everybody has, but if they can get it in production,

I think the idea that they extend the mind life

and that you see those resources grow,

are there's a very high potential, at least that's what they

believe, we'll try to get them back on the show soon

and just get an update from the company,

but interesting to see companies starting to use higher

metals assumptions and rework economic studies

and mineral resource estimates.

One other one that we can highlight here

that you mentioned to us off mic is Serratiposco Resources.

Serratiposco is traded on the TSXV

under the ticker CDPR and they just had some interesting news

that was put out on the second of March

and it really deals with the US International Development

Finance Corp, the USDFC suggesting

they could provide up to 300 million in support

for the development of this project.

Now this is a huge tailings project

that has a lot of silver, a lot of base metals

and even some important critical minerals in it.

What do you make of the idea?

Because it's kind of nebulous.

The press really says there's the considering

the possibility of providing 300 million.

So I guess any money's better than none,

but what do you think of this as a catalyst for Serratiposco?

Well, I do think it increases the chance of this actually.

Getting to production.

So yes, the kind of big language in a sense,

but I mean, this actually looks like a product

that makes a lot of sense.

I mean, we've seen the US government

where I've heard people say the US government

or the Americans throw money at some pretty wild products,

for example, but I think this,

which is the largest tailings product in the world,

it should make a lot of sense.

I mean, this is probably a very good mine.

I would think the OPEX would be very low,

given that it's already in a mind and that surface

just waiting to be mined again in a sense of process at least.

So I simply think this increases the chance

of this product getting a go ahead

and obviously if we're to get a go ahead,

they might get some cheap funding from the US.

Hey, I mean, they have Indium and Gallium et cetera,

which are considered strategic.

And I mean, even silvers against strategic in the US right now

and we know how high the silver prices are.

So I would think this to be a very robust product

and I think this increases the chance of them getting to mine it

and it might also increase the economics

because I would think that alone from the Americans

it's going to be cheaper than if they went to some

I don't know, Toronto banker for example.

So I think it has multiple, let's say,

I mean, multiple effects, let's say we're,

you know, the signal value impacts quite a few things

about this product as always.

I don't know what the exact chance of this actually

becoming a minus, but if this were to be a mine,

I would think that the current market cap

is going to look quite cheap because it's a huge project

and it looks relatively simple simply thanks to the fact

that I mean, the tailings are above ground

and just laying there.

So hey, at these silver prices,

with the added, you know, maybe credits

from the strategic metals, et cetera.

Yeah, I mean, I like this story

and I've been watching the store for quite some time

and it's like everybody seems to know

that it's a robust project

but it's always the politics because it's close to a town

and yada yada.

But I think this is, I mean,

from people who know the story better than me,

they saw this as a very big catalyst.

So I think this also, as always,

I mean, the most important thing about a news release

is what it suggests about the coming news releases,

let's say.

So I think this opens up a lot of increases the chance

of more positive news releases

over the, you know, in the future, basically.

So I've actually been adding a bit in this,

especially now since it's sold off after the news,

given the market turbulence.

Okay, well, I think we'll wrap it up there for today, Eric.

There's a couple good ideas for people to do

some due diligence on and dig into

with Cabral, Sonoro, and Serratapasco.

Appreciate you giving us the recap on PDAQ

and as far as the boots on the ground take.

For those of you listening in,

if you want to get more information for Eric,

definitely click on the link down below.

It takes you over to theheadslisthorseman.com.

You can see some of the articles he's writing about

in the sector, some of the companies on his radar,

some of the news flow in the sector.

And Eric, there's always looking forward

to our next conversation.

Talk to you next time.

Thanks, guys.

And so we'll always consider me biased.

I would share some old companies mentioned.

Cabral Gold and Sonoro Gold are banner sponsors as well.

So twice biased there.