Good day. Thank you for standing by. Welcome to Cerrado Gold third quarter financial and production results conference call. At this time, all participants are on the listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Mike 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 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 US 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 Guimaras, our Executive Vice President, Andrew Kroll, 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 is 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 we're well on our way to meet our full year guidance of 50,000 oz-55,000 oz. We've maintained that guidance production, as you can 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. 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. 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. This $12 million arose due to increased profitability at our Argentina operation. 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. 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. In 2025 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. We cannot know the exact number of what that final tax liability will be until we go through our audit in early early 2026.
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. 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 Ciel operation at Columbia's 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-$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 $14 million and the hedge 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 three years on the exercise of our Michelle option agreement which needs to be exercised by December of 2027. Finally, 2025 is a year of transition. We have 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 are looking forward to reaping the benefits of that investment in 2026. At MDN, we are transitioning to underground mining, ramping up the heap leach production to peak production levels.
We've initiated a 20,000 m exploration program with plans for a further 50,000 m in 2026 which will include distal drills, internal lab verification and for a total program of 70,000 m. 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. 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. Thank you very much, ladies and gentlemen, for joining us on this call today. Again, as Jason emphasized, you know, 2025 is really being utilized by ourselves and you'll hear this in many of the presentations that we've given and 2025 is a transition year for us. 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 three assets to maximize their potential as well as to provide shareholder value from those assets. 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 at MDN. We're basically in Calandrias Sur.
We're basically targeting 4,000 oz-4,500 oz per month. On top of that, we've embarked upon a surface exploration drill program where initially we were targeting 20,000 m for 2025, which is currently underway. We are looking at a 50,000 m program in 2026. We've seen a very good progression on that underground. Sorry, on that program, probably not proceeding as quickly as we would have liked. At the same point, what we're seeing is tremendous instances where we see good potential for gold endowment and silver endowment for that matter.
From that perspective, what we're looking at is whether we complete the 20,000 m program this year or not. We will look to complete a 70,000 m 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. Our expectation would be to accomplish approximately 10,000 m-15,000 m this year. What we've done to accelerate that program is we've looked to, we've brought in three new rigs. 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. We believe that we can really accelerate the program with that. We've also had issues with respect to turnaround times on assays.
We're looking to certify our internal lab where we can turn around results very, very quickly, exclusively for our own operations. That will take place over the course of the next few quarters at MDN. Again, we're seeing very good indications of deposition of gold. What we need to do is really drive the exploration far more quickly. With regard to underground, we've also gone underground. We've probably now completed, I think, somewhere approximating 15,000 m-20,000 m of development. We're now in the stopes where the mineralization is held. 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. We are now looking at first of all producing some short term production to get into the stopes. From there we are 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 five to six 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 five- to six-year mine life. If you did the math on the 4,000 oz-4,500 oz 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. That's still a book, a story being told, being written today. 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.
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 2023. We see some really good, robust, a 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. From there what we'll look to do is look at our construction and recapi permit by the second quarter of 2026 leading to construction in Q3. From that perspective we're very pleased. What's going on there is that 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 being brought together should give us a far more robust project than we saw in the feasibility.
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 2028 to have us in construction by Q2 of 2028 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 tons per annum with the third year moving to 8 million tons per annum, retaining its 20 year mine life with extremely strong cash flows of free cash flows about $235 million per year. 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. 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. On top of that, which would bring another steady stream of cash flow for the next 14 years. 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 three to four years, which isn't that far away. We are 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. These plans, with or without the gold price, we're moving ahead. Each of these assets in our view can substantially drive much greater multiples of shareholder value than we see today. 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 oz-55,000 oz.
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 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 2025. That is with gold prices probably averaging closer to $3,200, where now we are over $4,000. 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.
We see hopefully those numbers again being eclipsed by the underground exploration, underground production and surface exploration. That said, you know, we've got $16.5 million in cash. Our expectation is that that cash balance will again continue to grow for the balance of the year. We're very confident in our expectation for that. 50,000 oz-55,000 oz 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.
Thank you. Ladies and gentlemen, to ask a question at this time, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. If you are joining on the webcast, you may submit your questions on the web by typing in the question box. Please stand by for questions. We have a question coming from the line of Heiko with H.C. Wainwright. Your line is now open.
Hey, Mark and team, it's Heiko 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. Looking ahead a bit, where do you see the capital appreciation for the next year with the shares? I mean, you got a lot of stuff coming up. You got the feasibility study for Lagoa, you got Mont Sorcier studies. Everything seems to be firing on all cylinders. What is the market seeing that maybe we're not? What is the market missing, more importantly?
Thank you, Heiko. I mean, this is again, this is something where we really try to focus on how do we grow the company and where are shareholders going to best benefit. We have spent predominantly of the $40 million that Jason spoke about as being investing. Most of that has gone towards the MDN operations and the production, expanding mine life production, et cetera, and bringing in new production formats. 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 0.5 for their development assets in this space.
You know, I think that frankly, even if we were just to add what they're giving to their common shareholders, that would be, you know, that would be $75 million U.S., another $100 million. Again, I hope that our numbers are going to be more robust than that that we've seen in the feasibility. If I look at, for example, Foran Mining McIlvenna Bay, those numbers are going to be somewhat similar to us. They're going to produce 1.5 million tons per annum. You know, 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. You know, theirs is $1 billion +. 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. We're going to change a little bit. We're going from, instead of doing 5 million tons, we're going to 4 million + 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%-2% per annum. This high purity iron ore, everybody wants it, it's growing 9%-10% per annum, trades at a significant premium to other iron ores, conventional iron ores.
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 0.1 x multiple? I think that's not unreasonable for a project that's going to have its environmental permit submitted by the two months, two quarters after we complete the feasibility study. That 0.1x would equate to $160 million. 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 five, six year mine life at this 50,000 oz level.
If you look at other companies in our sphere, you've got Jaguar, you've got Serabi, you've got Heliostar. 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 what they are, or the same value that they are, which is $350 million-$400 million. 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. That's kind of our internal kind of perspective. Heiko, 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 of. $1,600 in the last year, we're at 42.30 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? 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?
Hi Ko, it's Jason. Yeah, I mean our OpEx is, you know, our costs are around $7 million-$8 million a month. We don't foresee the change, you know, much changing in that manner over the next 12 months, you know. 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, you know, about $7 million a month. I think that's a reasonable estimate going forward. You know, at gold prices of $4,000 an ounce, that's whatever, approximately $18 million of revenue. I think that's a reasonable estimate.
Fair enough. Okay, cool.
I do think I'd go on that note. We do have good margin and, you know, we're coming to the end of capital expenditure programs. That'll be attributed to Cerrado at Lagoa Salgada and also at Mont Sorcier. Our CapEx should come down, certainly compared to 2024, on certainly those two assets and then for the foreseeable future. On top of that, you know, we think that if you were to see a devaluation in Argentina, which we think is highly likely at some point, that will reduce our cost in Argentina dramatically. If you remember, our cost in Argentina for labor is probably between 40%-50%.
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, you know, to the, not the, 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. 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.
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. We're looking at different mechanisms, but we're still pretty confident that we're going to see a good move forward.
Cool. Perfect. I will get back in queue. Thank you so much and good quarter.
Thank you, Heiko.
Thank you. As a reminder, if you'd like to ask a question at this time, please press star one one on your telephone. I see there are no further questions in the Q&A queue. I will now turn it back to Mike McAllister for any web questions.
Thanks, operator. Yes, we have a few. I'll just read them out and the team can take them from here. 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 Dorothea a significant amount of profit over the last few quarters. We've already answered that somewhat, but did you want to expand on that?
I'll just extend on that. To your point, you know, I think, you know, I don't regret having made those decisions on the information that I had at the time. 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. We don't have the same necessity to hedge. Obviously if we had the information we have today, we would not have made the same decisions if we had it back then. We will not hedge. We are concerned about, you know, 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, you know, the inflation levels, dollar stability, safe haven status. 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. Our, you know, 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. The reality is we probably won't know when they go down. 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. When we look at downside, I think, you know, are we going to see a 40% reduction? That seems a little heavy to me. Could we see 10%-20%? For sure. That's what we'd probably look to protect against.
Thanks Mark. Also asking, Cerrado previously announced a share buyback program. Is there any plans to continue with?
This in the future? Indeed. You know, listen, we're all, you know, the reason we announced the share buyback is that we want to return to shareholders. We feel that, you know, up until very recently the gold sector has not returned, you know, its gains to shareholders either adequately through dividends or such. We really like to see our operations normalize where we can provide year to year yields to shareholders outside of the capital appreciation. We will get back to that. 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 third quarter. The share buyback is very much on top of our minds. 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.
Thanks. We've somewhat answered this, but with the elimination of capital controls, can you provide an updated guidance about the foreign—sorry, about foreign currency risk in Argentina.
I think there's strong pressure in Argentina to complete the trifecta. I guess, you know, if you look at, you know, Milei has won the elections in October very handily. He's at probably his all-time high in terms of public support. And you've euphoria, I guess, because of, you know, one, you know, the second part being he's got, 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, when, you know, we're now allowed to repatriate our dividends based on audited profitability, which usually means once a year.
I think most companies, in order to go and invest in Argentina, want to see a natural repatriation of capital if, as and when they want to. I think that you'll start to see those controls lessened and a more natural market. I don't know. You know, in the next year, hopefully we can get to a point where we have a floating currency. If that's the case, then everything kind of goes away. 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 part 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.
Thank you. Given that we expect a positive investment decision at Lagoa Salgada, are we actively involved in financing discussions?
You know, one of the most important things for us. Many, many of you will be acutely aware of our sale of Monte de Carmo. 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. We don't ever want to be reliant as we were when we were with MDC. What I'd say there is that, you know, we already have funding support from the U.K. Export Finance 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 that the previous feasibility with CapEx of $165 million, we believe very comfortably that we can fund that asset and that capital program through UCAF on the one hand, or an export credit agency. Two to be, you know, two to be using off takers, three, a potential stream, leaving very little to Cerrado and equity and cash to provide. You know, 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 have a do, if we do have a cash call, that we want to be able to make that internally without having to go to the market.
The same applies if we look at Quebec, you know, what we're anticipating is we're hoping that we're going to have the same, same type of cash flows that we have now with the adjusted EBITDA for the nine months of about, or for the last quarter, about $11 million. You know, our hope is that we have, you know, cash flows of $45 million-$50 million for next year or a similar number. I'm not making a prediction there, but. On top of that, we have, you know, we have Lagoa Salgada producing cash, you know, and again, it puts us in a position with the building and construction of our Mont Sorcier project, you know, with using the U.K. Export Finance 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. 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 export credit agency funding, that won't be required that we can't get from either an offtake and, or a stream. 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.
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. We will utilize those capital markets for our growth capital. If, as and when we determine that we're in a position to grow our business, we will certainly utilize those capital markets. We really want to avoid dilution. That's a very critical element for us.
Great. Next caller asks 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 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, you know, Paloma South, Paloma, the antenna area, the Sufuro S, 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're seeing very interesting indications of gold. That is the area that we will initially announce. What I 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 one rig.
We found that that one rig was not achieving the results that we wanted. We found that we weren't getting the turnaround times that we wanted. 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 is actually in the exploration numbers. At the same point in the meters that we've drilled, at the same point, you know, we're correcting those issues. We're bringing in our own certified lab, we're going to certify a lab, we're bringing in three new rigs.
I say to you that, you know, one, we're going to show the market that we've got an extent, you know, we are very confident by year end we can show the market where that extended mine life is going to come from with the degree of science as opposed to speculation. On top of that, we're hoping that we'll see far greater and far more productivity in our exploration next year.
Great. 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. I guess in terms of our metallurgical, you know, we started about a year ago with a group called MindPro and Wardell Armstrong. Wardell Armstrong, you know, and MindPro, they know the pyrite belt better than anybody. You know, prior to that we were kind of learning as we went along and, you know, 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.
I'll say to you that, you know, we're now in a position where we're somewhat conventional and similar to many of the other mines and production on the pyrite belt. Again, we're just seeing a very robust project. I'll remind people that this feasibility study will show potentially, you know, we're kind of, it's not going to be too dissimilar from the previous one with the 14 year mine life. What I will say to people is that, you know, we've only done 40,000 m of exploration on this property and we recovered 27 million tons. The reality is that the recoveries, the removal of deleterious elements, the improved grades, that'll probably increase that resource as we move for the feasibility study.
What it does is it gives us a lot of confidence that our thesis when we optioned 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-250 million tons. I do not think that we have evidence today that it is going to be that big. I also do not have evidence that it is not going to be that big. We are very optimistic with what we see through seismic, through geophysics, gravity surveys that this project has a lot of room to grow. 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?
The corporate tax rate in Argentina is 35%. 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 Calandres Norte to use those accelerated tax credits to shield tax in 2023 and 2024. 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. It's hard to predict.
I can't tell you for sure. Like I just said, you know, the tax rate is 35% and we're going to do everything we can to reduce it as low as possible.
Great. Thank you. Last one here is, are you expecting guidance to be higher than 60,000 oz in 2026?
As I said earlier, you know, our expectation is for four to four-and-a-half thousand 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 six 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. In terms of any potential upside, it could well put us beyond that 60,000 oz. The fact of the matter is, we believe that the cadence on this asset should be well beyond that 60,000 oz.
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. I hope by the end of 2026, 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 2025 and 2026. 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.