V Winner Post #7- Brazil is Golden

Brazil, which was the biggest gold producer when it was Portugal’s colony in the XVIII, is still investing in increasing its gold mining industry to offset the dramatic fall in the production of ‘garimpeiros’. Entrepreneur Eike Batista leads the project started last November by Mineração Pedra Branca do Amapari in Amapari, 200 km from Amapa, which means a new development cycle for that state which has suffered the impact of the manganese mines’ shutdown in Serra do Navio, formerly operated by ICOMI.

His associate partner is Canadian Gold Corp and the project has been implemented in 18 months to produce 5 t/y of gold as the third biggest mine in Brazil. In its first phase of the open-pit mine and heap-leaching plant to treat oxidized ore, R$150 million were invested. In the second phase, to take place from 2009 to 2012, R$150 million more will be invested to open an underground mine and build a CIL plant to treat sulphide ore. Reserves amount to 1.53 Moz of gold, at a grade of 2.3 g/t, sufficient for 12 years of production.

Yamana Gold is another Canadian mining company, with two mines in Brazil – Fazenda Brasileiro, in Bahia, and Bacilandia, in Goiás. It has an extensive program involving three new projects, São Francisco, in Vila Bela da Santíssima Trindad, Mato Grosso, with a 4 Mt/y ore capacity requiring $45 million in investment; and the Chapada project, whose production is expected to start in October 2006 generating 16 Mt/y of ore, which will demand a $100 million investment. The third project is São Vicente, in Nova Lacerda, Mato Grosso, an operation expected to start in December 2006, producing 1.8 Mt/y of gold ore.

Yamana Gold is predicting its gold production exceeding 340,000 oz in 2006, increasing to more than 500,000 oz in 2007 from mines currently in production and under construction. For 2008, total production is expected to
increase to almost 600,000 oz.

Estimated production to 2008 from Yamana properties (shown pro forma assuming the completion of the acquisition of RNC Gold, which includes the acquisition of the San Andres mine in Honduras and La Libertad in Nicaragua, by March 1, 2006) is detailed below. The other mines below are all in Brazil.

Potential gold production from São Vicente has not been included in the table as the project is subject to completion of feasibility studies. Gold production at Chapada in 2006 will mainly depend on whether or not mine construction is completed in September 2006.

AngloGold Ashanti announced investment of $125 million in 2005, 70% of which is to increase the production Cuiabá mine in south-eastern Brazil to open new galleries underground and access ramps to deeper levels than the current 700 m, going down to 1,300 m. The project focuses on deepening the mine to access the Serrotinho and Fonte Grande ore bodies, located below the existing mine, which account for 60% of the total mineral resource at Cuiabá. Production will increase from the current level of 190,000 oz/y to 250,000 oz/y at a cost of $169/oz over the life of the project and will extend the life of mine profile by six years to 2019.

To accommodate the resulting increase in mining volume, the project will include upgrading shaft hoisting capacity and constructing new milling and flotation facilities at the Cuiabá shaft area. Flotation concentrate will be transported via the existing aerial ropeway to the treatment plant at Queiroz, located 16 km from the mine, both located in Minas Gerais, where another roaster and acid plant will be built and the current leaching facilities upgraded.

The existing milling and flotation facilities at Queiroz will be decommissioned. The expansion should be commissioned in December 2006, ramping up to full production by the end of the second quarter of 2007.

In addition to significantly increasing production at Cuiabá, the completed
deepening project may also provide a new opportunity to exploit narrow-vein ore bodies below level 11 at Cuiabá as well as the Lamego deposit in the area. Conceptual studies have highlighted the potential to extract significant value from these areas, which would otherwise be sterilized, using the infrastructure that the Cuiabá expansion will provide. Commenting on the expansion, AngloGold Ashanti CEO Bobby God sell said:

The company also holds interests in Crixás gold mine, in Goiás and is studying the gold ore body in Córrego do Sitio. Investments for 2006 have been estimated at $90 million.

Jaguar Mining is a Canadian gold mining and exploration company that produces gold in Brazil and is expanding production and expects to produce at a rate of 200,000 oz/y by 2008.

Jaguar’s focus is on gold properties in the Iron Quadrangle, which is a compact but prolific gold-bearing greenstone belt in close proximity to the well-serviced mining city of Belo Horizonte, in the State of Minas Gerais.

Belo Horizonte is the mining capital of Brazil. The Iron Quadrangle is a geological sweet spot which has hosted several multi-million ounce gold mines that exhibit strong vertical continuity to depths exceeding 2,000 m.

Jaguar describes Brazil as “a pro-mining country offering outstanding minerals resources and infrastructure, commitment to sustained mining development and respect forth environment. It is active in four local regions in the Iron Quadrangle: Paciência, Sabará, Santa Bárbara and Turmalina, where last year it worked to upgrade approximately 1.3 Moz of measured and indicated resources to proven and probable reserves in its four regions by completing feasibility studies that preliminarily indicate production of between 1,200 and 4,000 t/d, depending on the property.

At the beginning of this year, Jaguar commissioned its new 25,000 oz/y gold oxide heap leach facility and recovery plant at Sabará. The plant is crushing and stacking ore at a rate of 450,000 t/y and has produced its first gold. This surface production advances Jaguar’s development plan of becoming a mid-tier producer by generating near term cash flow while it completes development and construction of its underground mines. Underground operations are projected to make up 75% of Jaguar’s production profile of over 200,000 oz/y by2008. Jaguar also confirmed the measured and indicated resources feeding the new plant at 2 Mt at 2.8 g/t.

In the Sabará Region, Jaguar now has production capacity of 75,000 oz/y. It is producing gold at two oxide plants and is developing its underground Catita sulphidemine. Catita mine began supplying 400 t/dof ore to the Queiroz plant of AngloGold Ashanti in the first quarter of 2006. Jaguar will sell 65,000 oz of gold this year. Jaguar is also building the 60,000 oz/y Turmalina mine and ended 2006 with 150,000 oz/y of production capacity. Rio Paracatu Mineração (RPM), controlled by Kinross, started its expansion project III for the Morro do Ouro mine at an estimated cost of $110 million, which will allow it to grow, beginning in 2007, its gold production from 7 t to 10 t/y, by commissioning a SAG mill to process harder ores (Wi above 9). The plant will increase its throughput from 20 to 30 Mt/y.

The expansion of the mine and its reserves resulting from lowering the underground water will increase its lifecycle to 11 years.

Canadian junior Desert Sun Mining has invested $40 million to resume gold production at Jacobina Mineração in Jacobina, Bahia, which was closed at the beginning of 1999.

In January 2005 the first mill was activated and the second, in February. The underground mine João Belo is already producing 120,000 t/month on average. Jacobina’s potential is 4 Moz of gold, but further deposits may be found in the so-called 160 Km long ‘Gold Belt’. Eldorado Gold assumed 100% ownership of the São Bento mine in July 1996, in Minas Gerais. This 20 km2 property hosts an underground mine, conventional mill with flotation, pressure oxidation, BIOX plant and CIL. It produced some 65,000 oz in 2005.

The Amapari heap leach and processing plant, at Amapá, in the north of Brazil.
There is also the Vila Nova gold project in Amapa State, where Eldorado holds an option to acquire 84% of the project. The 2005 diamond drill programmed began in November and totaled 764 m in nine holes. The drilling occurred in two areas where the targeted gold mineralized zone has been exposed: Gaivota and Croado.

Brazil ranks twelfth in world production (and second in Latin America) according to GFMS, with output in 2001 at 51 tonnes (1.6 million oz), of which roughly 38 tonnes (1.2 million oz) came from formal mines and the balance from alluvial operations (garimpos) worked by prospectors (garimpeiros).

Greenstone belts in Brazil's extensive Achaean shield, similar to those in Canada and South Africa, host extensive gold deposits. Gold was first discovered in 1552, but significant production did not begin until after 1700 at alluvial deposits in Minas Gerais, Goias and Mato Grosso provinces.

Output was around 16 tones (0.5 million oz) by 1750, making Brazil the world's largest producer, but then declined.

In 1835 the Mineracao Morro Velho mine opened in Minas Gerais; it is the world's oldest continually worked mine, now owned by AngloGold, who also have a 50% share in the Serra Grande mine.

Apart from Morro Velho and limited alluvial output in the Amazon basin, output did not rise above 10 tones (0.3 million oz) until 1980. Then the high gold price prompted an immense gold rush of garimpeiros, who located rich alluvial deposits along the Rio Tapajos and Rio Madeira and in the regions of Cuiaba, Cumaru, Alta Floresta and, above all, at Serra Pelada ('Hill of Gold' in Portuguese) south of Belem in the Amazon delta. Serra Pelada alone produced 13 tones (0.4 million oz) in 1983. Production peaked at a record 102 tones (3.3 million oz) in 1988. The best alluvial deposits, however, were soon worked out and through the 1990s the balance shifted to formal mining as Brazilian groups, such as CVRD, and foreign mines such as Rio Tinto, TVX Gold, and Eldorado Gold developed mines. By 1993 their output exceeded garimpos.

Gold production was at 50,393 kg in 2000, including 8,368 by garimpeiros. Deposits found at Serra Pelada in 1980 raised gold production to 103,000 kg by 1989; production averaged 90,380 kg in 1987–91, and output in 1996 was 60,011. Higher production costs, depletion of shallower deposits, lower world prices, and much higher environmental standards caused the drop-offs. Gold output could increase significantly with the growth of copper production and increased interest by domestic and foreign investors in largely unexplored areas; more than 2000 gold occurrences were known, mostly Precambrian vein deposits and alluvial placers.

Brazil in 2000 was the largest recipient of foreign direct investment in the region for the fifth consecutive year—because of the sale of previously state-owned assets. The governmental Company for Mineral Resources Research has sought to expand existing mineral industries and to establish new ones—the Amazon region has been a particular focus of the company's efforts. The government took steps to encourage private capital investment in the development of phosphate reserves, the exploitation of oil-bearing shale, and the expansion of iron ore output. Brazil's petroleum and mining industries and utilities attracted investors' interest because of the government's macroeconomic policies, the country's diversified minerals endowment, and a skilled labor force. Most important in the non fuel sector were the Minas Gerais iron ore joint venture (CVRD and China's Shanghai Baosteel Group Corp.) and the Sossego copper-gold joint venture (CVRD and Phelps Dodge Corp., of the United States); both were to begin in 2002. Because of increased world demand for stainless steel and better nickel prices, $1.4 billion was invested in the nickel industry, with plans to triple output to 107,000 tons per year starting in 2003. The Carajás mining project, in Pará, was expected to lead to the mining of manganese, copper, tin, silver, gold, nickel, molybdenum, bismuth, and zinc.

The discovery of gold in Minas Gerais ("general mines") in 1693 made Brazil the world's leading gold producer; rapid exploitation under the Portuguese colonial system exhausted the mines in less than a century. The dissipation of the nation's gold wealth for the benefit of a foreign power instilled in Brazilians a protective attitude toward mineral reserves, resulting in government control. The 1988 constitution forbade foreign majority participation in direct mining operations. Lack of capital has long restricted development by domestic firms, and Brazilian mining laws and adverse geographic conditions have discouraged foreign capital. The major portion of the mineral industry was partially or wholly owned by private Brazilian investors, Brazilian corporations, and/or foreign companies, the exceptions being the natural gas and petroleum industries. The structure of the industry continued to change to a privately owned/government-regulated regime. Two 1995 constitutional amendments opened the way for participation of the private sector (domestic and foreign), through privatization, joint ventures, and deregulated investment, in the sectors of coastal and river shipping, mining, natural gas, petroleum, telecommunications, and transportation. By the mid-1990s, investment was on the rise, as a result of aggressive economic policies, the diversity of mineral resources, and the constitutional reform that eliminated restrictions on foreign investment in mining. In 2000, the import tax for minerals was reduced, with varying rates, and the export tax would no longer apply to exported mineral products, nor would the tax on industrialized products apply to mining activities.

Disclaimer- As metals in general, and gold specifically - has changed dramatically, many of the figures mentioned (monetary/production) are significantly different today. Take this piece as a general overview. We will provide more accurate numbers in the near future.

- A. Jonathan Buhalis