Brazil Gold Rides New Investment Wave
Published by MAC on 2004-10-06Source: PlanetArk
Brazil gold rides new investment wave
PlanetArk, story by Peter Blackburn
October 6, 2004
RIO DE JANEIRO, Brazil - A new wave of miners and investors, attracted by higher bullion prices and a clampdown on illegal small-scale mining, is reviving Brazil's run-down gold mining industry.
"Gold prices are now rising and people from all over the world are coming back to Brazil to explore for minerals, especially gold," said Manoel Barretto, director of research at CPRM, the government's minerals research agency. Production is expected to start recovering this year after slipping to an estimated 43 tonnes in 2003 from a peak of 102 tonnes in 1989 following a fall in prices, a decline in small-scale "garimpeiro" mining and larger mine closures. "The scenario for economic growth in Brazil is very favorable and this boosts mining investment," said Jose Mendo Mizael de Souza, executive vice president of the Brazilian Mining Institute (Ibram) in Brasilia.
Increasing prosperity has fueled demand for gold jewelry, and others have been turning to gold as a safe haven, Gold also got a boost from crude oil's rise above $50 a barrel this week. COMEX most-active December futures fetched $420.10 an ounce last week afternoon, posting a 5- 1/2-month high and approaching a 15-year peak of $430.50 set in January.
But unlike the gold rush of the early 1980s, when thousands of garimpeiros scoured the Amazon region from the Tapajos river to the Serra Pelada, development is now led by new small Canadian mining companies as well as by established producers.
Barretto said the government is injecting more funds into geological research and aerogeophysical mapping, notably in the Amazon and the center-west state of Goias, to encourage private mineral exploration.
"There's a proposal to increase state investment to 100 million reais in 2005," he said, adding that a new law passed in March switching oil exploration funds to mineral research will give a major boost to geological prospecting. Gold output is expected to more than double to 90 tonnes in 2009, which would make Brazil the world's ninth biggest producer, according to a report by London-based mining research group GFMS Ltd.
"Gold prices make investment attractive and the geological prospects are extremely good, especially in Amazonas and Rondonia states and northern Mato Grosso," said the report's author, Jeremy Bates, senior partner in Sociedade de Mineracao Juruema, a mining services company in Minas Gerais state.
NO SHORT CUTS Speaking from a tin mine in a national forest in remote Rondonia, Bates said environmental permits took time but weren't more difficult to obtain than in North America. Strict policing had also reduced invasions by lawless garimpeiros.
Bates added there are no legal short-cuts to getting a permit.
"It deters people who want to get rich quickly," he said, adding that the complex and onerous tax system can be offputting.
But that hasn't deterred new mining companies which are expected to produce around 15 tonnes of gold a year by 2009.
They snapped up concessions offered by the country's largest miners - AngloGold Ashanti Ltd (ANGJ.J: Quote, Profile, Research) , Rio Tinto Ltd Plc (RIO.L: Quote, Profile, Research) (RIO.AX: Quote, Profile, Research) and Cia Vale do Rio Doce (CVRD) (VALE5.SA: Quote, Profile, Research) (RIO.N: Quote, Profile, Research) - which are focusing on core business.
Early this month Rio Tinto said it was selling its stake in the Paracatu gold mine in Minas Gerais state in order to concentrate on iron ore and copper.
One of the most active newcomers is Canada's Yamana Gold Inc (YRI.TO: Quote, Profile, Research) , which bought the Fazenda Brasileiro underground mine in Bahia state from CVRD last year and will shortly start production at the Fazenda Nova mine in Goias state.
Together with two other projects, Yamana aims to produce 400,000 ounces of gold in 2007.
"Brazil has excellent infrastructure, mining costs are low and the permitting process is straight forward," said Greg McKnight, Yamana's vice president for business development.
Jaguar Mining bought a number of gold concessions from AngloGold Ashanti as well as from CVRD and a Rio Tinto subsidiary.
Canada's Desert Sun Mining Corp. (DSM.TO: Quote, Profile, Research) plans to start production at the Jacobina gold mine in northeast Brazil in January 2005 at an initial rate of 103,000 ounces per year.
"There is great potential for growth," said Peter Tagliamonte, Desert Sun's manager in Brazil, noting that the mine lay on Bahia's 155 km (96 miles) gold belt. Eldorado Gold, Wheaton River Minerals and Hidefield have also invested in Brazilian gold.