The Conversation (0)
The company’s acquisitions strategy is being rewarded by the market and noticed by industry observers.
One such company is Brazil Resources (TSXV:BRI), which gained 1.47 percent yesterday on the Toronto Venture Exchange after confirming the resource estimates from three gold projects it inherited late last year through its acquisition of Brazilian Gold.
Those projects are São Jorge, Boa Vista and Surubim. Together with BRI’s Cachoeira project it bought in 2012 for cash and shares, these four properties account for 3.93 million ounces in the indicated and inferred categories.
The new numbers from São Jorge, Boa Vista and Surubim confirm previous calculations done before the acquisition of Brazilian Gold, and are now compliant with National Instrument 43-101 (“NI 43-101″) – the accepted industry standard for reporting resource estimates.
Breaking it down, the São Jorge project has an indicated resource of 715,000 ounces and an inferred resource of 1.035 million ounces. Grades in the indicated category are 1.54 grams per tonne and 1.14 g/t inferred. The cutoff grade for both categories is 0.3 grams per tonne. Boa Vista has an inferred resource of 336,000 ounces graded 1.23 g/t at a 0.5 g/t cutoff, while the Surubim project has 503,000 inferred ounces graded 0.81 g/t at a cutoff of 0.3 g/t gold.
Cocheira, located Southeast of Luna Gold’s (TSX:LGC) producing Aurizona mine, has an NI 43-101-compliant indicated resource of 786,737 ounces and 563,200 ounces inferred, with grades of 1.4 g/t and 1.12 g/t respectively, according to an updated technical report and resource estimate put out last October. According to the report by engineering firm Tetra Tech, the property is similar in geology, mineralogy, topography and grade to the Aurizona mine, and that it has significant exploration upside:
“Significant exploration potential remains around and within the three known zones and the potential exists to locate additional gold mineralization along the shear zone where it passes to the northeast,” the report reads.
While BRI’s portfolio of properties (it’s also exploring the Artulandia project west of Brasilia, the Apa High property in northern Paraguay, and the previously mined Montes Aureos project) has attracted the attention of the market, with its stock up nearly 40 percent year to date, it has also earned praise from analysts and newsletter writers.
Lawrence Roulston, publisher of Resource Opportunities, wrote in a recent newsletter that Brazil Resources is “the leading gold explorer in Brazil”. Along with the company’s “extensive property position,” Roultson calls out BRI’s “exceptional management team and a strategic alliance with a powerful Brazilian financial group.”
The latter refers to BRI’s partnership with Brasilinvest Group, one of the largest private merchant banks in Brazil, while the former acknowledges the key people behind Brazil Resources. These include founder and chairman Amir Adnani, CEO of Uranium Energy Corp, (NYSE:NEC) which became the first uranium junior to mine and process uranium in the United States; president and CEO Stephen Swatton, an industry veteran whose resume includes a stint as global head of business development for BHP Billiton’s (NYSE:BHP,ASX:BHP,LSE:BLT) exploration division; director Mario Garnero, chairman and principal shareholder of Brasilinvest Group; and director Herb Dhaliwal, an influential Canadian politician who held three Cabinet posts including Minister of Natural Resources.
Brazil Resources’ model is somewhat different from most juniors trading around similar market capitalizations, which may have one or two projects and are looking to get bought out, not make additional buys. Adnani articulated the goal upon the company’s completed acquisition of Brazilian Gold last October:
“The acquisition of BGC has expanded our project base in the region and represents a significant milestone in our strategy to build shareholder value through targeted accretive acquisitions.” In other words, picking up some great assets on the cheap, something that can be done, strategically, in today’s depressed gold market. Those assets can then either be developed through further exploration, or hived off, adding to the company treasury.
According to Gold Newsletter, BRI’s acquisition of Brazilian Gold for around $13.5 million “made great sense for Brazil Resources, as it not only expanded its in situ gold profile to almost 4 million ounces, but it also came with several advanced stage assets the company’s management team is confident it can move along the development curve.”
Of course, to do that, BRI needs cash, but the company has demonstrated its ability to raise capital. On the last day of 2013 BRI announced it successfully completed an oversubscribed $6.4 million private placement, raising $1.4 million more than the initial $5 million announced placement. Again, Adnani indicated his intention of how the cash would be used:
“The proceeds of this financing will allow us to advance our long-term growth strategy, including positioning the company to take advantage of accretive opportunities in the current depressed resource markets,” he stated.
The company’s intention of seeking further acquisitions is causing industry observers to sit up and take notice, in a market where it’s easy to assume that all juniors are hurting. Not so.
“With the junior resource industry presently starved for cash, there are opportunities available,” Roulston wrote. “The cash from the private placement puts BRI in a strong position to advance its projects and to make further acquisitions.”
Securities Disclosure: I, Andrew Topf, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: Brazil Resources is a client of the Investing News Network. This article is not paid-for content.