The MoU sees the government pledge to support the company with permitting, licence review, and financial and benefits programmes aimed at advancing construction of a small-scale mining operation at Pedra Branca.

The R$120 million (US$30 million) is to come from various sources and programmes with governmental agencies, ranging from tax-exemption programmes to direct funding from economic development funds, South Atlantic CEO Douglas Meirelles said.

"Although our short-term exploration programmes remain unaffected and while we work on the proper licensing and permitting, this pledge represents a significant step in the Pedra Branca region and, more specifically, a significant leap forward in the development of our asset," he said.

It's to be Ceara's first gold mine.

South Atlantic noted that the MoU does not yet provide clear reference to the financing amount that will be in tax-exemptions or the amount of funding from the economic development programmes.

South Atlantic is to work to encourage economic growth in local communities through sustainable ESG programmes.

Red Cloud Securities noted that the MoU is "quite preliminary in nature" while adding it is encouraging to see the company receive the support.

"We believe the project offers lots of upside exploration potential with numerous Au targets identified along the main structural trend that extends for 40 kilometres of strike across the project.

"In our view, the company could likely expand the existing near-surface 180,000oz Au resource with additional drilling," Red Cloud said.

On July 26, South Atlantic had a share price and market capitalization of C$0.045 and C$4.24 million (US$4.24 million).

Red Cloud has a C$0.20 share price target for the company.