-- Published: Wednesday, 20 January 2016 | Print | Disqus
Everyone says to buy at the bottom of the market but few have the gumption to pull it off. Brazil Resources Inc. (TSX-V:BRI, OTCQX:BRIZF) founded in 2009 and taken public in 2011, has spent the last few years snapping up gold projects in the bear market at increasingly cut-rate prices. The company now has a stable of gold properties in Brazil, and, looking to diversify its holdings, has recently secured an advance stage gold-copper project in Alaska.
Altogether, Brazil Resources has put together projects with a total of 7 million (9.5 Moz AuEq) indicated and inferred gold ounces with minimal dilution to its shareholders. The company sees several of its projects as viable at today’s prices, but looking longer-term it’s setting itself up for big rewards when metal prices go higher.
Gold in Brazil
True to its name, Brazil Resources has concentrated its bargain shopping in the South American economic giant with the backing of a significant financial partner in Brasilinvest. Brasilinvest has structured and completed investment plans in Brazil amounting to approximately US$16 billion and is a major shareholder of Brazil Resources.
Starting in 2011, the company started to acquire exploration properties like the Trinta, Montes Aureos, and Artulandia projects, as well as staking some of its own property. But as markets started to deteriorate the company moved on to bigger targets.
In 2012, the company secured the 5,743-ha Cachoeira project from Luna Gold that had about 446,000 oz. gold in the indicated and 221,000 oz. in the inferred category.
In March 2013, Brazil Resources published a new technical report on the project by Tetra Tech Inc. that, established an indicated resource of 17.5 million tonnes grading 1.23 g/ gold for 692,000 contained ounces, plus an additional 15.7 million tonnes averaging 1.07 g/t gold for 600,00 ounces in the inferred category.
Cachoeira’s resource is hosted in three gold zones along a 5 km north-south trending shear zone that Luna Gold and Kinross put together in one land package for the first time in 2007. The shear zone hosts a number of quartz-sulphide veins and stockworks with associated gold mineralization.
The near surface deposit is amenable to open pit extraction, but the company hasn’t completed detailed engineering and financial studies yet.
More Brazilian Gold
Fortunately the company has since acquired several other substantial gold projects in Brazil it is pushing forward.
In 2013, Brazil Resources took over Brazilian Gold Corporation in an all-share deal worth about $13.5 million. In doing so, it secured several properties including the 58,500 hectare Sao Jorge project.
Thanks to work done by Brazilian Gold and previous owners, the Sao Jorge deposit hosts an indicated resource of 14.4 million tonnes grading 1.54 g/t gold for 715,000 oz. gold, plus an inferred resource of 28.2 million tonnes averaging 1.14 g/t gold for a further 1.04 million oz. gold, both at a 0.3 g/t cut-off.
The resource is based on 37,000 meters of drilling in 145 holes. Brazil Resources notes that 90% of the property remains unexplored.
Despite being located in northwestern Para state, the project has convenient infrastructure including low-cost hydro-electric power at site, a recently paved highway crosses the property, and the 60,000-person town of Novo Progresso sits only 70 km to the south.
The project also sits merely 30 km from Serabi Gold’s Palito gold mine, and is located along the same major regional shear zone that hosts the major gold deposits of the region including Eldorado Gold’s Tocantinzinho and Magellan’s Cuiu-Cuiu deposit.
Brazil Resources sees Sao Jorge as one of its foremost priorities and has applied to convert the exploration license into a mining license to ready the project for further development.
But while Sao Jorge is a clear focus, Brazil Resources is also keeping an active eye on the Surubim and Boa Vista projects it also took on as part of its acquisition of Brazilian Gold.
Both projects, like Cachoeira and Sao Jorge, sit in Para State in northern Brazil. The 8,500 ha Surubim project hosts an inferred resource of 19.4 million tonnes grading 0.81 g/t gold for 503,000 oz. gold at a 0.3 g/t Au cut-off. The 12,900 ha Boa Vista project has an inferred resource of 8.47 million tonnes averaging 1.23 g/t gold for 336,000 oz. gold at a 0.5 g/t Au cut-off.
To diversify its geographic base and tie up more long-term gold holdings, Brazil Resources struck a deal in July to acquire Kiska Metal’s Whistler gold-copper project in Alaska.
The deal had Brazil Resources handing over 3.5 million shares worth about $1.6 million (less then 5% dilution) to secure complete ownership of the Whistler gold-copper project from prospect generator Kiska.
Brazil Resources wasted no time in having a technical report drawn up to confirm Kiska’s historic resource estimate from 2011. The report announced in September showed an indicated resource of 79.2 million tonnes grading 0.51 g/t gold, 1.97 g/t silver, 0.17% copper and 0.88 g/t gold equivalent for 2.25 million ounces gold equivalent.
Inferred resources add 145.8 million tonnes averaging 0.4 g/t gold, 1.75 g/t silver, 0.15% copper and 0.73 g/t gold equivalent for 3.35 million ounces gold equivalent.
The report was based on almost 20,000 metres of drilling, while overall the Whistler project has seen roughly 70,000 metres of drilling to test a multitude of gold-copper porphyry targets on the 170-sq.-km Whistler project.
Other targets include the Whistler Orbit gold-gold porphyry prospects, the Island Mountain gold-copper porphyry deposit, the Muddy Creek intrusion-related gold target, and several gold-copper targets outlined by soil geochemistry, geophysics, and mapping.
The project, sitting about 150 km northwest of Anchorage and comprised of 304 Alaska state mineral claims, came complete with a 50-person all season exploration camp, airstrip, and 38 kw generator.
To help manage and advance the project, Brazil Resources has contracted Kiska for a $10,000-per-month support and maintenance arrangement.
Whistler wasn’t, however, the first northern resource play for Brazil Resources. As part of its acquisition of Brazilian Gold the company also took on a 75% interest in the 88,500 ha Rea uranium project in the western Athabasca Basin of northeastern Alberta. BRI’s 25% partner is French nuclear giant, Areva, who is a major player in the Athabasca basin including the Western Athabasca.
The Rea uranium project surrounds Areva's Maybelle high-grade uranium deposit. Prior operators have expended over $10 million on exploration activities at the project. An initial NI 43-101 technical report on the project was completed and the report identified a number of targets that have potential to host unconformity-type uranium mineralization. The company has drilling permits to explore the project and has plans to test the high-grade targets in the North and West zone of the property in 2016.
The global push toward cleaner and greener energy is positive for uranium. Nuclear is the only form of base load energy that emits zero carbon. Moreover, uranium was the top-performing mining commodity in price terms for 2015 and looks set to gain further in 2016.
The company has funded its growth and acquisitions through a number of share issues and financings, leaving it with 84.2 million shares outstanding, plus almost 20 million warrants and 3 million options.
The most recent financing in January 2015 brought in $4.46 million after the company initially announced plans to raise only $2.5 million. The financing was at $0.55 per unit, which included a share and a full warrant exercisable at $0.75.
The financing left the company with $2.1 million in cash at the end of August. Insiders have invested over $3 million into the last two private placements completed at 0.55.
Out of the shares outstanding, management controls 25 per cent, 45 per cent is retail, and institutions own the remaining 30 per cent.
Brazilinvest Group, a merchant bank with US$6 billion under management, is one of the major institutions that has bought into the company. Brazilinvest has a strategic partnership with Brazil Resources, owning 10 per cent of shares, while founder Mario Garnero sits on Brazil Resources’ board.
The largest institutional investor is the KCR Fund with a 15% stake; other institutional investors include gold and mining focused investors such as Tocqueville Gold, Extract Capital and Commodity Capital.
Brazil Resources receives analyst coverage by Cantor Fitzgerald and H.C. Wainwright & Co.. Analysts believe that the company is a buy and have 1-year price targets ranging from $2.00 to $2.65 per share.
Leading the direction at Brazil Resources is Amir Adnani, chairman and founder of the company. The driven executive has previously proven his leadership as founding chief executive of Uranium Energy Corp and has won accolades for his management skills.
He’s joined by an experienced team including Garnet Dawson as chief executive, a geologist with over 30 years in the business, Paulo Pereira as president, a geologist with over 25 years of experience,Pat Obara as chief financial officer and director, an industry professional with several former CFO positions and board seats, and The Hon. Herb Dhaliwal serving as a director, a former Member of Canadian Parliament for over 10 years serving as a former Minister of Mineral Resources under Prime Minister Jean Chretien. He’s a member of the Liberal party which recently won a majority in Canada.
Brazil Resources has gone from being an upstart junior explorer in 2011 with some minor land titles to a company with close to 2.7 million indicated ounces and 4.3 million inferred ounces of established gold holdings, often at basement bargain prices. The company also has huge land holdings of promising ground around its deposits and more resources in copper and silver.
With competitive mining jurisdictions in Brazil and Alaska, the company has assembled a valuable group of properties that it can either put into production at today’s prices or provide tremendous upside when commodity prices increase.
With a proven ability to raise money in tough markets, add ounces to the company at great prices, and legitimate previous experience successfully guiding companies to production, Brazil Resources’ provides an investment opportunity that goes against many of the headwinds facing the industry.
20 years ago I started investing in gold stocks. The gold market was around $300/ounce and miners were struggling. Exploration projects were mostly halted while solid assets were sold for dimes on the dollar. Seabridge Gold, Silver Standard and Vista Gold assembled portfolios of gold-silver projects during this time that in the coming years were valued in the hundreds of millions and billions of dollars.
The opportunity to create wealth for their investors came during severely depressed precious metals markets. 20 years later we are back in a similar phase of the cycle. This allows companies like Brazil Resources to build valuable portfolios once again while providing excellent leverage to metal prices.
How much longer will this opportunity exist to keep adding to the 7 million (9.5 Moz AuEq) indicated and inferred gold ounces Brazil Resources has already purchased with relatively minimal investment? I think some more time exists for Brazil Resources to keep making lucrative acquisitions, but if metal prices reverse suddenly, shareholders will be rewarded again with investments into projects bought near the bear market bottom.
- Peter Spina, President of GoldSeek.com
TSX-V: BRI | OTCQX: BRIZF
More information on Brazil Resources..
Peter Spina's experience with the precious metal markets started back in the mid-1990s, which led to the creation of GoldSeek.com back in 1995. Today GoldSeek.com ranks in the top three most popular global gold websites and its sister site, SilverSeek.com ranks as the most visited silver website in the world. Back at the start of the new secular precious metals bull market, Peter established the technically-focused subscription newsletter, which at the start of 2005 was merged into the more comprehensive Gold Forecaster (goldforecaster.com) service. In addition to the newsletter and websites, Peter frequently appears in the media including MarketWatch, Reuters, and Investors Business Daily.
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-- Published: Wednesday, 20 January 2016 | E-Mail | Print | Source: GoldSeek.com