Why the Brazilian mining sector can’t be ignored
All is not well in Brazil, as the devastating fire at the country’s national museum would suggest.
However, in spite of the well documented economic challenges and reports of corruption in government, Brazil is home to an established mining sector that can’t easily be ignored.
Brazilian giant Vale SA [VALE-NYSE] emerged as a global leader in the production of nickel when it acquired Canadian mining icon Inco Ltd. and its fabled Sudbury, Ontario operations in October 2006.
Now, Brazil is the second-largest exporter of iron ore after Australia and home to large deposits of copper, bauxite, and other minerals, including potentially major recent finds by miners such as Anglo American [AAL-NYSE].
In the last 12 months, attention has focused on a staking rush, led by Anglo American and Nexa Resources S.A. [NEXA-TSX], which picked up over three million hectares in the Amazon rainforest of Mato Grosso and Para states, according to a report by Reuters News Service.
Experts say those companies have been attracted to the region by a porphyry-style copper-gold discovery that is geologically similar to Andean mines in Chile that contain 60% of the world’s copper resources.
Some of the ground staked by Anglo and Nexa surrounds Altamira Gold Corp.’s [ALTA-TSXV; EQTRF-OTC; T6UP-FSE] property position in the Juruena Belt, which historically produced an estimated seven to 10 million ounces of placer gold.
“The discovery of the first ever copper porphyry in the Juruena belt is significant because porphyry copper deposits generally occur in clusters or belts,” said Altamira President and CEO Michael Bennett. “Where there is one, there are usually others.”
If there is substance to these rumours, it would undoubtedly attract more attention to the region.
However, a new Brazilian mining regulator created in 2017 to cut red tape and attract foreign investment is still not up and running, with experts warning that the agency could be stalled at least through the October election and perhaps until 2019.
The National Mining Agency – approved by Congress in November – cannot begin its activities until the Senate confirms five directors appointed by President Michel Temer. A separate initiative to modernize the country’s mining code will only go into effect once the agency launches.
With less than two months to go before the general elections, published reports say it isn’t feasible that the directors will be confirmed before a new government is elected.
Meanwhile, Brazil is attracting investment in the exploration and production of both manganese and vanadium, metals that are viewed as leading edge or battery production
Largo Resources Ltd. [LTO-TSX; LGORF-OTCQX], for example, is focused on the production of vanadium flake, high purity vanadium flake, and high purity vanadium powder at the Maracas Menchen Mine in Bahia State, Brazil.
Vanadium is a ductile and malleable transition metal. It is widely used as an alloy to strengthen steel and titanium.
The Maracas Menchen Mine property covers 17,690 hectares and is located 250 km southwest of Salvador. It is also located near the town of Maracas, which boasts a population of approximately 25,000. Largo has contracted a take-or-pay off-take agreement with Glencore International PLc for 100% of its vanadium material and has two years remaining in the contract. The mine is projected to produce 8,950-9,950 tonnes of vanadium pentoxide in 2018. However, the company has said it plans to expand the capacity by 25%. Vanadium at Maracas Menchen is contained within a massive, titaniferous magnetite and possesses very low levels of contaminants, such as silica. This helps to account for the low production costs and vanadium-rich (3.2% V205) ore.
The following is a list of other companies that are active in Brazil.
Jaguar Mining Inc. [JAG-TSX; JAGGF-OTC] has three gold mining complexes and a large scale land package covering 65,000 hectares. The company’s principal operating assets are located in the Iron Quadrangle, a prolific greenstone belt in the heart of Minas Gerais. They include the Turmalina Gold Mine Complex, and Caete gold Mine Complex, which together produce more than 95,000 ounces of gold annually. The company also owns the Paciencia Gold Mine Complex, which has been on care and maintenance since 2012.
Under a five-year strategic plan, the company hopes to grow its gold production to 200,000 ounces. That would be up from the 90,000 to 105,000 ounces of gold that the company expects to produce this year.
Emerita Resources Corp. [EMO-TSXV] has agreed to earn up to a 100% interest in the Salobro Zinc Project in Minas Gerais State from Vale and IMS Engenharia Mineral. Under the July, 2017 agreement, Emerita agreed to pay US $6.5 million in cash to Vale over a period of seven years. Salobro is comprised of two mining applications covering 1,209 hectares in an area that is well serviced with infrastructure, including paved roads, cellular coverage, rail water and power.
Known mineralization at the site occurs in three lenses all of which remain open for expansion by further drilling. According to a historical resource estimate, the Salobro deposit is estimated to contain 8.3 million tonnes, grading 7.12% zinc, plus lead. The estimate is based on results form 40 diamond drill holes or 13,884 metres of drilling. However, further work needs to be done to find out if there is a reasonable chance that the resource will prove economic to mine.
According to a technical report, the property could host significant zinc deposits.
Equinox Gold Corp. [EQX-TSXV; EQXGF-OTC] recently said it hopes to achieve the first gold pour at its Aurizona mine in Brazil before the end of 2018. The overall project was 60% complete and plant construction was 51% complete at the end of June, 2018, the company said.
Led by financier Ross Beaty, Equinox Gold is a well-funded, multi-asset company. Its portfolio includes the wholly-owned, past-producing Aurizona Gold Mine, and wholly-owned past-producing Castle Mountain gold mine in California.
The company’s primary focus is on completing construction and achieving production at Aurizona, where average annual production is forecast to be over 136,000 ounces. The company also recently completed a prefeasibility study for Castle Mountain with the objective of commissioning Phase 1 production by the end of 2019.
Yamana Gold Inc. [YRI-TSX; AUY-NYSE] is a Canadian gold producer with operations in Brazil, Argentina, Chile, Mexico and Canada. The company is expected to produce 900,000 ounces of gold, 8.15 million ounces of silver and 120 million pounds of copper this year. On a gold equivalent basis, that amounts to over one million ounces.
Its portfolio includes the Chapada open pit gold-copper mine in northwest Brasilia in Goias state. The mine produced 119,852 ounces of gold and 127.3 million pounds of copper in 2017. The Jacobina operation in Bahia state, northeastern Brazil, consists of a complex of underground gold mines, and a 6,500 tonnes-per-day carbon-in-pulp processing plant. The operation has a line of sight to the strategic production objective of 150,000 ounces of gold annually. Proven and probable reserves at the site stand at 1.9 million ounces of gold, with a further 3.3 million ounces in the measured and indicated resource category.
Leagold Mining Corp. [LMC-TSX; LMCNF-OTCQX] completed the US $279 million acquisition of Brio Gold Inc. [BRIO-TSX] in May, 2018. The acquisition was in line with Leagold’s plan to emerge as a mid-tier gold producer with a focus on opportunities in Latin America. Brio Gold is an established Canadian mining company with significant gold producing, development, and exploration-stage projects in Brazil. The company’s portfolio includes three operating gold mines, and a fully-permitted, fully-constructed mine (Santa Luz) that was on suspended in September 2014.
Santa Luz is a key growth opportunity for Leagold. However, Leagold’s first priority is optimizing the three operating mines in Brazil. As a result, Leagold is not expecting to re-start construction of the Santa Luz project until later this year or early next year.
With the addition of Leagold’s Bermejal Underground project at the Los Filos mine in Mexico and the restart of Brio’s Santa Luz mine, the combined operations have the potential to produce over 700,000 ounces of gold annually in 2020 at an all-in sustaining cost of US $850 an ounce.
Leagold is backed by a shareholder group that includes Yamana Gold Inc. [YRI-TSE; AUY-NYSE] and Goldcorp Inc. [G-TSX; GG-NYSE], which hold approximately 20.5% and 12.2% of the outstanding shares of Leagold respectively.
Cabral Gold Inc.’s [CBR-TSXV] is engaged in the identification, exploration and development of mineral properties, with a primary focus on gold properties in Brazil. It’s key asset is the 100%-owned Cuiu Cuiu Project, which covers the largest of the historical placer gold camps in the Tapajos Region of northern Brazil, about 20 km west of northwest of Eldorado Gold Corp.’s [ELD-TSX; EGO-NYSE] advanced Tocantinzinho gold project.
The Tapajos region was the site of two major gold rushes and has produced up to 30 million ounces of placer gold.
The company recently released a new NI 43-101 mineral resource estimate for the Cuiu Cuiu property saying indicated and inferred resources stand at approximately one million ounces.
Cabral said it has also identifying a strong gold-in-saprolite anomaly southeast of the Central Deposit at the Cuiu Cuiu Project. It said auger drilling to the southeast of the Central deposit, which contains 485,000 ounces, has identified a broad gold-in-saprolite anomaly of +100ppb gold, extending 250 metres across strike in a north-south direction. The anomaly is located one kilometre southeast of the Central deposit and 550 metres east southeast of drill hole CC138-11, which intersected 6.9 g/t gold over 27 metres.