LATIN AMERICA SPECIAL — Brazil’s exploration potential

If Brazil can stay on the road to reform, mining could well prove instrumental in revitalizing the country’s economy, according to Ulrich Rath, vice-president of Rio Algom (TSE).

Speaking at the recent convention of the Prospectors and Developers Association of Canada in Toronto, Rath said many Latin American countries, spurred by the example of Chile, are hastening reforms and opening up new markets. He stressed that these countries can no longer afford to continue their history of “reform followed by relapse.”

Latin America’s mining and exploration boom is “the largest in the entire world,” he said, adding that Brazil is well positioned to benefit from it. Rath estimated that exploration expenditures in Latin America have increased five-fold in recent years, and that they now exceed US$500 million per year. The total investment in new mines, either under construction or on the drawing board, exceeds US$10 billion, more than half of which is directed at copper projects, with about 25% reserved for gold plays.

Rath’s views are shared by several mining analysts who predict that Brazil could emerge as South America’s next “hot spot” of exploration. The country’s geological potential is considered to be among the best in the world; this potential is due not only to its vast area, but also to the diversity of its geologic origins. The region is characterized by Archean greenstone belts, mafic and ultramafic alkaline complexes and volcanic-sedimentary Precambrian complexes, as well as areas of still unknown potential.

Historically, Brazil has been known for its gold production, much of which came from local miners working alluvial or surface deposits. Gold is generally associated with Precambrian geology; however, the dense rainforest and intense weathering makes lithological classification problematical, and the geology is often poorly understood.

Only a handful of North American mining companies are active in the country, although the list is increasing and several groups are investigating opportunities.

Toronto-based TVX Gold (TSE) is among the first North American-based companies to gain significant exposure to mining interests in Brazil. It has a 50% interest in the Crixas gold mine, with the Brazilian unit of AMSA (Minorco), the operator, holding the remainder.

Situated in Goias state, about 155 miles northwest of Brasilia, the Crixas entered production in 1989. In 1994, it yielded 126,400 oz. gold-equivalent at a cash cost of US$170 per oz., with half of all production going to TVX. A decline ramp provides access to the underground operation, from which 1,320 tons are mined on a daily basis by means of mechanized cut-and-fill and room-and-pillar methods. The mill, which employs Merrill-Crowe zinc precipitation, was expanded in early 1992.

The property lies within the Crixas greenstone belt, with the Mina III deposit situated within folded metavolcanic and metasedimentary rocks of Archean age. Three zones of mineralization, stacked vertically, are each separated by about 197 ft. of barren rock. Satellite deposits were recently discovered.

TVX also has a 23% interest in the Brasilia gold mine,

a large-tonnage, low-grade, open-pit operation near the town of Paracatu in Minas Gerais state. In 1994, TVX’s share of production amounted to 38,300 oz., at a cash cost of US$196 per oz.

The company also owns half of the Novo Astro mine, which last year turned out 40,400 oz. gold-equivalent to TVX’s account at a cash cost of US$238 per oz. Another company with roots in Brazil is Santa Elina Gold (TSE), which operates the Sao Vicente gold mine in Mato Grosso state.

Santa Elina invests in, and holds, mineral properties exceeding 9 million acres in Brazil, Bolivia and other South American countries. It developed the Sao Vicente mine in 1992 on its extensive holdings in the Santa Elina gold belt near the border with Bolivia. At last report, this mine had an undiluted reserve of 4.4 million tons grading 0.05 oz. gold per ton, with potential for reserves to be increased by exploration.

A processing plant started up early this year, and the existing crushing plant was modified to improve material flow and to install a dust supression system. (Previously, crushed ore was processed in the gravity recovery plant of a drydocked dredge.) The plant now incorporates grinding, to increase liberation of the fine gold; a new gravity recovery circuit; and flotation. As a result of these improvements, gold recovery is expected to increase to 82% from 57%, and annual production should reach about 52,000 oz. Meanwhile, Santa Elina is working to advance its Sao Francisco deposit, situated within the same gold belt. At last report, the project hosted an inferred reserve of 67 million tons grading 0.026 oz. A drill program is in progress to upgrade and expand reserves.

The company’s land package in South America has attracted the interest of two majors, namely Rio Algom (TSE) and Echo Bay Mines (TSE). The former holds a small equity interest (about 2.5%) in Santa Elina and also has rights to select one of its projects for a joint venture. Echo Bay invested US$10 million in the company and secured rights to explore the Sao Vicente-Braco property.

Several junior companies are actively looking for diamonds in Brazil, and in good company, too. De Beers, the world’s foremost diamond company, is also searching for diamond deposits in the country.