THE EDITORIAL PAGE A gold producer’s Mecca

With minimum wages standing at $36(US) per month and some of the most lucrative operating conditions anywhere, it is perhaps surprising to learn that only two Canadian juniors are conducting operations in Brazil.

Toronto-listed Consolidated TVX is currently Brazil’s second largest gold producer with a target of 192,000 oz this year and The Northern Miner has learned that a Vancouver-based Kam Creed Mines is exploring the Virgem de Lapa region for placer gold.

But judging by the interest shown in the activities of TVX at the company’s recent annual meeting, it seems that others are preparing to venture into this colorful region to seek out new and as yet undiscovered gold reserves.

While the famed Cruzado Plan failed to curb Brazil’s rampant inflation, the country remains potentially one of the world’s most profitable gold regions.

To encourage the country’s mining industry, the government has adopted a number of incentives including low interest loans for mining equipment and a 10-year corporate tax holiday for new mineral projects in Brazil’s Amazon basin.

Desperately in need of cash, the government is also attempting to discourage the sale of gold outside Brazil by paying gold producers the world gold price plus the parallel currency premium which has averaged over 40% since 1983.

As a result, companies in Brazil are receiving $600(US) per oz for their gold and with a local economy suffering the effects of a huge foreign debt load, it’s likely that such an inflated gold price will continue to exist for some time to come.

Despite these obvious incentives, exploring for precious metals in a “third world” country does present some peculiar difficulties.

Acquiring the necessary permits often entails standing in line for two weeks and miners, familiar with the terrain, warn that having reliable local contacts is essential.

But with the local government bending over backwards to attract foreign investors, can Canadian exploration companies afford to ignore Brazil much longer?