Brazil is well known to mining investors, hosting some of the world's largest gold mines. Yet, the Tapajós area of Brazil may be less familiar. That’s all about to change, so it’s probably time to have a closer look at the investing potential and get in early.
The Bolsanaro government has invested heavily in national infrastructure since the election in 2019, with remote areas benefiting from improved access to markets. Given Brazil's hydroelectric capability, it has also unlocked considerable environmental, social, and governance (ESG)-friendly investment opportunities. We spoke with three international gold mining companies based in the Tapajós district to understand the area's potential. Our guests were:
- Mike Hodgson, CEO of Serabi Gold
- Louis-Pierre Gignac, President, and CEO of G Mining Ventures
- Alan Carter, CEO of Cabral Gold
Meet Our Guests
Serabi Gold is a gold exploration and production company headquartered in London and focused on the Tapajós geological region in northern Brazil. Serabi owns three gold projects. Two of the projects, Palito, and Sao Chico, are currently in production. Serabi acquired the third project, Coringa Gold in 2017 and is undergoing permitting and construction of a process plant. The company reports total group resources of over 910k oz and reserves exceeding 340k oz.
Mike Hodgson is the Chief Executive Officer, having worked in the mining industry for over 25-years. Before joining Serabi, Hodgson worked as COO for the Canadian-based Orvana Minerals Corporation.
Previous appointments include TVX Gold Inc, ACA Howe International Ltd, Rio Tinto plc, and Zambia Consolidated Copper Mines. Qualified in mining geology, Hodgson is a Fellow of the Institute of Materials, Minerals and Mining, a Chartered Engineer of the Engineering Council of the U.K. and a "Qualified Person" following the Canadian National Instrument 43-101 – Standards of Mineral Disclosure for Mineral Projects.
G Mining Ventures
G Mining Ventures (GMIN) is a new arm of the renowned Canadian G Mining family started by Louis Gignac Senior. The new company was created in 2020 and sought to leverage the experience and knowledge of G Mining Services who build mines for clients. The company’s buy, build and operate model targets the purchase and self-development of precious-mineral properties. The company aims to become a multi-asset precious metal producer by 2026.
G Mining Ventures’ most recent purchase and flagship asset is the Tocantinzinho Gold Project. Tocantinzinho is an open-pit gold deposit containing 1.8 million ounces of reserves located in Pará State, Brazil.
Louis-Pierre Gignac is the President and Chief Executive Officer, having over 20-years of experience in the mining industry. Before assuming the role,Gignac was involved in major project development studies, providing open-pit expertise, financial modelling, and the economic evaluation of projects.
Gignac is a member of the Ordre des Ingénieurs du Québec (“OIQ”) and the Canadian Institute of Mining (“CIM”). He holds a Bachelor of Mining Engineering from McGill University, a Master's degree of Applied Science in Industrial Engineering from the École Polytechnique de Montréal, and is a CFA Charterholder.
Cabral Gold is a Canadian-owned junior mining company engaged in identifying, exploring, and developing mineral properties focusing on gold properties located in Brazil. The company’s flagship project is the 100%-owned Cuiú Cuiú project, located in the northern Tapajós area. The Cuiú Cuiú project covers 15 x 10 km and has two discovered gold deposits, with a further 43 mostly high-grade targets.
Dr. Alan Carter Carter is the President and Chief Executive Officer. Dr. Carter founded Cabral Gold in 2016, taking the company public in 2017. Before Cabral, Carter co-founded Peregrine Metals Ltd and Cuprum Resources Ltd. He has been directly involved in discovering five gold deposits, four of which were in Brazil. He has a B.Sc. degree in Geology from the University of Nottingham, U.K. and a PhD degree in gold geochemistry and structural geology from the University of Southampton, U.K.
Mining in Brazil
Brazil has a long mining history, beginning with gold found in streams in the 1690s, followed by diamonds being discovered 50 years later. By the mid-18th century, the world sourced half of its gold from Brazil.
With the majority of Brazil's mineral industries based on metallic ores, it’s home to the second-largest iron reserves in the world. It also has the fifth-largest bauxite reserves and the seventh-largest gold reserves. In 2020, mineral mining production reached USD 41 billion, generating over 170,000 direct jobs.
The Tapajós Area
The Tapajós gold province covers 100,000km2 located in the Ceará region of northern Brazil. A remote region, Tapajós was once the location of the world's largest ever gold rush by artisanal miners between 1970 and late-1990. It is the largest placer gold province in Brazil and the third-largest alluvial goldfield globally. The Brazilian Department of Mineral Production (DNPM) reports a total historical gold production of between 20 and 30 million ounces.
The large Tocantinzinho geological gold deposit crosses the Tapajós area from Pará state, beginning in the northwest, and angling southeasterly to near the north of Mato Grosso state. The projects owned by Cabral Gold,G Mining Ventures, and Serabi Gold all lie on or near this deposit.
Jair Bolsonaro was elected as Brazil's President in 2020, with a stated aim to increase total infrastructure investments through partnerships or privatisation. Highways, ports, railways, and power generation are some of the 69 planned projects.
Mike Hodgson has been in the Tapajós area for 14 years and comments on the changes he's experienced.
"under the Bolsonaro government, we've... seen a huge improvement to the road. I remember ... it could take 14 to 15-hours to get from the ... plane to drive to site. It was very tough. It's a paved road all the way now."
Louis-Pierre Gignac agrees; he states,
"...there are definite advantages once that road got constructed. Previous to that, everything had to be plane supported ... bringing in equipment and people, so it was extremely expensive to explore in the region back in those days. It ... opens up a lot of opportunities."
While the BR-163 highway has slashed mining costs, the real benefit of the infrastructure boom is the sourcing and supply of energy.
G Mining Ventures predicated its purchase of the Tocantinzinho Gold Project on building a reliable supply of power. While the cash-rich company budgeted the construction of a new 138 Kv line to connect to the grid, Louis-Pierre Gignac notes that such investment costs for smaller projects are unbearable. However, he comments,
"the infrastructure, once it's in place, opens up a lot of opportunities in the region."
Alan Carter notes,
"there's a transmission line that is to the east of us, and that transmission line is connected to a big, hydroelectric power station to the south. ... there's a lot of upside to the potential for hydroelectric power here."
ESG investment opportunities
The recent Glasgow climate summit (COP26) has added impetus to increasing demand from investment funds for greater green credentials from the mining industry. Those miners hoping to access future funds will have ever-higher hurdles to jump. As Mike Hodgson notes,
"particularly after Glasgow, I get inundated with questions about how green our energy is."
While controversial due to the impact on forests and national parks, Brazil is implementing a large complex of hydroelectric dams on the Tapajós and Jamanxim rivers in Pará state. These dams form part of a plan to convert the Tapajós river into a waterway to take soybeans, Brazil's largest export, to Amazon River ports. They have also provided considerable hydroelectric potential, with 10,682 MW currently installed.
Mike Hodgson is bullish about the future, he says,
"Brazil has this amazingly high level of ...hydro/renewable energy, and for a big part of the country, it's transmitting that energy. ... it's very doable, and ... speaking to the government, ... it's in their plan to do this and connect this loop, and then I think this is going to really open up the whole area."
While this explosion of growth is promising, we've seen with the recent pandemic that resource constraints cause considerable operational roadblocks. What might the short-term resource effects be should the infrastructure investments trigger a wave of projects?
Concerning the workforce, Mike Hodgson believes that those in semi-skilled and unskilled jobs will continue to be readily available. He sees increased competition with the professional workforce, who comprise about 8% of his employees. He says,
"...we struggle to find ... the professional people... the management and the professional people are generally still coming from the southern part of the country."
Alan Carter agrees, saying,
"I concur with Mike, historically a lot of the skilled people, and I think it will continue for the foreseeable future, have come from southern states. Most of our skilled people, geologists and senior people, fly in from other cities."
The other constraint already making itself felt is the availability of drillers. Cabral Gold is feeling the pinch, with Alan Carter stating,
"It's tough to get drills in Brazil right now. You've got to plan months ahead. It's tougher than I can ever recall. Everybody wants to drill right now, so there is a lot of competition, there's a limited pool of resources and number of drills available, particularly R.C. rigs. ...if you want to drill R.C., ... there are limited options."
Three forces suggest that Tapajós may be a name we hear more of next year. Institutional investors seek to invest in solid projects with good fundamentals, with the current investment market sentiment positive for precious metals. ESG is at the top of the list for most ethical investors carrying out their due diligence on businesses, and the Brazilian government is pushing forward with comprehensive infrastructure projects.
On balance, it would appear that Tajapós is poised to reap the benefit of these three important economic events. With this backdrop, and to close out, we asked each of our guests to give us their view of what 2022 has in store for the companys and precious metal mining in Tapajós.
"...next year hopefully will be the full installation construction licence for Coringa. We've already started the underground mine, which should hit the orebody just before the end of the year. We're moving into the final stages of permitting ... we'll really see the project moving forward and developing the mine like crazy."
"We're starting a drill program ...the first holes ... drilled on the property since 2015 ... 2022 is going to be a period where we finance the project to get this off the ground. That will be a very exciting year for us and a very important catalyst for the company."
"...this year has been a very, very successful year. We've made two new gold discoveries on the site ...and we're finding new deposits. We've got a pretty aggressive drill program in process right now and planned to go well into 2022. It's going to be a very exciting year for us."
While it’s not unheard of for miners to be in selling mode, it would seem there may be more than hyperbole on this occasion. If you're looking for growth potential, the Tapajós area in Brazil appears poised to deliver.
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