Impact: Neutral
Cerrado announced that it has received the second advance, of US$1M, under the signing loan as part of the agreement to option off its Monte do Carmo (MDC) project in Brazil for a US$60M total consideration (read note). The next payment of US$7M is to be received two days after Cerrado mails a management information circular to its shareholders calling for a meeting to approve the transaction. This is expected no later than June 5, 2024. The second advance represents a significant step forward in the transaction process and should help Cerrado’s liquidity in the short-term. With Cerrado’s board unanimously recommending the proposed transaction, and key insiders collectively representing a 22.83% of Cerrado’s ownership supporting the transaction, we expect the vote to be in favour of the transaction, which would avoid the repayment of the US$8M received in advance so far. For the company’s long-term outlook, we look forward to Cerrado ramping up production at its only producing project – Minera Don Nicholas in Argentina – to regain its footing in a challenging operating environment after a decrease of production in Q1/24 (read notable).