Cerrado battles Portugal over stalled copper-zinc project

Cerrado Gold (TSXV: CERT; US-OTC: CRDOF) reported higher annual earnings on Thursday, though attention is shifting towards a legal dispute in Portugal that could determine the future of its Lagoa Salgada copper-zinc project.

The Vancouver-based miner, which produced about 50,000 gold-equivalent oz. last year, filed an injunction challenging an unfavourable environmental ruling issued in January by Portugal’s environmental regulator, known as APA. The decision followed concerns over potential impacts on water resources, even as the company maintains the issue hadn’t been raised during earlier stages of the review process. The local court is reviewing the matter. 

“We’re very confident in our case, and we feel that there’s been irregularities in process and timing and conclusions that were not regular,” CEO and Chairman Mark Brennan said on a conference call on Thursday. “We’re hopeful that within a period of two months, certainly by the end of the quarter, we will have a resolution that is satisfactory to all parties.” 

Cerrado traded flat at $1.67 on Thursday afternoon in Toronto, after a 3% dip in the morning, valuing the company at about $228 million (US$164 million). The stock has traded between 41¢ and $2.41 in the past year.

The dispute highlights a broader test of Portugal’s permitting regime, as Cerrado faces opposition from local authorities who say the project violates planning rules and lacks environmental viability, while the company argues the approval process itself was flawed. The outcome could shape investor confidence in the country’s mining sector, particularly as Europe seeks to secure domestic supplies of critical minerals from projects such as Lagoa Salgada, which has been designated a Project of National Interest.

‘Flawed process’

Municipal officials say the project near Grândola, about 100 km southeast of Lisbon, conflicts with land-use plans and raises unresolved environmental risks, particularly around water. Failure to secure a favourable or conditional environmental approval for the project should be grounds to terminate the state contract, one local mayor has said.

Brennan contends the water issue raised in January by the APA concerns a third, deep aquifer that wasn’t mentioned previously as a concern when an APA committee indicated a potential all-clear last May. It contains water the mine would use, but is already too contaminated with sulphides and acids for farmers or local residents, the CEO said. 

“We have probably one of the most sophisticated hydrological studies conducted in Portuguese history, and the reason for that is that we have an expert in Spain who’s renowned as one of the leading experts on water resource management,” Brennan said. “The fact is that we have a very comprehensive layout in the plans as it relates to all three aquifers.” 

Cerrado also argues the environmental rejection was procedurally flawed, citing a shortened consultation period in which it was given eight days to respond instead of the 10 days required under Portuguese law. The company claims the project should have been tacitly approved once deadlines passed without a valid decision.

Lagoa Salgada, a volcanogenic massive sulphide deposit in southern Portugal’s Iberian pyrite belt, was previously advanced by Ascendant Resources (TSX: ASND; US-OTC: ASDRF) before Cerrado acquired the asset in 2021. The project hosts multiple mineralized zones containing copper, zinc, lead and silver, and has been positioned as a potential supplier of critical minerals for the energy transition.

Results

Cerrado reported revenue of US$131.8 million (C$183 million) for last year, up from US$105.5 million in 2024. Adjusted earnings before interest, taxes, depreciation and amortization rose to US$33.4 million from US$24.2 million, driven by higher realized gold prices and improved recoveries at its Minera Don Nicolás mine in Santa Cruz province, Argentina.

Production at Minera Don Nicolás totalled 50,238 gold-equivalent oz. in 2025, down from 54,494 gold-equivalent oz. a year earlier, as lower grades from maturing open pits weighed on output during the transition towards underground mining and expanded heap leach operations.

Even so, operating performance strengthened through the year as the company accessed higher-grade material and improved processing efficiencies, helping lift margins despite the lower output.

Minera Don Nicolás remains Cerrado’s cornerstone asset and primary source of cash flow. The ramp-up of underground mining is expected to support more stable production, Cerrado said.

That cash generation is helping fund development of the Monte do Carmo gold project in Brazil, while also supporting work at Lagoa Salgada and the Mont Sorcier iron project in Quebec.