Avanco Resources Limited (ASX:AVB) has lifted reported gold resources at its CentroGold project in Brazil by 45% to 1.86Moz with the inclusion of a maiden JORC estimate for the Chega Tudo deposit. Chega Tudo (0.58Moz at 1.6g/t) will be incorporated into a forthcoming scoping study of the potential for a low-cost open-pit mine and conventional carbon-in-leach recovery plant. The operation would be centered on the larger, higher-grade Cipoeiro deposit (1.29Moz at 2.0g/t), with ore from Chega Tudo trucked 7km to the plant. Completion of the scoping study is now expected in Q1 2018, with a prefeasibility study targeted by mid-2018. We see significant potential in CentroGold, which is currently being ascribed little to no value by the market (Avanco’s shares are trading at a heavy discount to our NAV estimate of A$0.18, most of which is accounted for by our NPV estimates for the Antas copper-gold mine and the Pedra Branca project). In our view, the main near-term catalyst for unlocking value at the project will be a positive resolution to the outstanding permitting issues, which Avanco is targeting for H1 2018.
Chega Tudo maiden JORC-compliant resource: Having reviewed the extensive historical drilling and metallurgical database for Chega Tudo, Avanco has calculated a maiden JORC (the Australian mineral resource reporting code) resource estimate for the deposit of 0.58Moz at an average grade of 1.6g/t. Some 74% of estimated total gold is in the indicated category, with just 26% in the lower-confidence inferred category. This differs from an historic NI 43-101 (the Canadian reporting code) resource for the deposit of 1.04Moz at 1.4g/t, reflecting the application now of a higher, more conservative cut-off grade (1.0g/t, versus 0.3g/t for the historic estimate).
CentroGold project resources* by deposit
| Deposit | Category | Tonnes (kt) | Grade (g/t Au) | Gold (koz Au) |
| Cipoeiro | Indicated | 2.1 | 2.5 | 168 |
| (Contact Zone) | Inferred | 5.9 | 2.2 | 424 |
| Sub-total | 8.1 | 2.3 | 592 | |
| Cipoeiro | Indicated | 10.8 | 1.7 | 597 |
| (Blanket Zone) | Inferred | 1.4 | 2.2 | 97 |
| Sub-total | 12.2 | 1.8 | 694 | |
| Chega Tudo | Indicated | 8.2 | 1.6 | 425 |
| Inferred | 3.1 | 1.5 | 152 | |
| Sub-total | 11.3 | 1.6 | 577 | |
| CentroGold total | 31.5 | 1.8 | 1,863 |
Source: Avanco Resources *Calculated using >1.0g/t gold cut-off grade
Investment view: Avanco Resources Limited is trading at a significant discount to our NAV estimate of A$0.18, which we see scope to increase as CentroGold advances (we currently ascribe a nominal value to CentroGold of just A$0.02, an amount we expect to increase as we move to a DCF-based valuation on publication of the scoping study). We think this discount should narrow as Avanco further optimises Antas and progresses the CentroGold and Pedra Branca projects.
