Gold
Exploration and production continue to shine
In Brazil, all that glitters is indeed gold. According to data from IBRAM, gold production makes up 9.6% of Brazil’s total metals production by value. Gold will receive nearly US$3 billion in capex investments in the 2023-2027 period, approximately 6% of the total investments in the Brazilian mining industry during that period.
Kinross, which has been operating at the Morro de Ouro Mine in Paracatu, Minas Gerais, since 2005, produced 577,000 oz of gold in 2022, approximately 22% of the total national production. The company is investing in projects to improve production, explained Gilberto Azevedo, president and general manager. Speaking of the Gravity project, which will operate fully in the 2nd quarter of 2024, he said: "The project will involve the installation of concentrators in the circulating load of the grinding circuit, together with the implementation of an intensive leaching reactor. The investment is around USD$30 million and we hope to produce 20,000 oz/y of gold with this project. The new circuit is already in the implementation process and is scheduled to fully operate at the end of the second quarter of 2024."
In 2022, the company optimized the fleet of 793 off-road trucks and replaced two diesel engine loaders with electric models at Kinross Paracatu. In 2023, major projects include replacing combustion pumps with electric ones and replacing combutions lighting towers with solar systems. Azevedo said, “We believe that mining can be carried out in a responsable and sustainable way, contributing to Brazil’s economic growth and the well-being of the communities where we operate.”
"The legal framework has improved significantly since 2014. Most of the processes are now handled online, which has simplified things on the mining side."
Michael Bennett, President & CEO, Altamira Gold
Tristar Gold (TSX: TSG) is currently developing Castelo de Sonhos, which has a resource estimate of up to 1.8 million oz of indicated and 700,000 oz inferred, and benefits from an excellent location outside of any indigenous or nature reserves and near a road, power line and labor force. Tristar has completed the pre-feasibility study and is currently awaiting its LP, the environmental permit. Nick Appleyard, president and CEO of Tristar Gold, praised Brazil’s solid legal system and stable political landscape even with a major change of government at the federal level: “Countries come in and out of favor as an investment location, and right now, Brazil seems to be one of the best jurisdictions within Latin America to attract investment.”
Cabral Gold (TSX:CBR), a junior exploration company advancing the Cuiú Cuiú project in the Tapajós region of the state of Pará, anticipates the completion of Cabral’s PFS by the end of 2023, with hopes to enter production by the end of 2024. The company is benefiting from the investment in infrastructure that has been transforming Brazil of late. In the Tapajós region, major new roads have been constructed, including the BR-163 highway, and G Mining has funded a 170-km high voltage power line. Alan Carter, president and CEO of Cabral, noted: “Over the past 20 years, massive improvements have been made in the region, creating opportunities for more discoveries to be made.”
"We have seen a significant influx of new investors, both junior exploration companies and mining companies."
Miles Thompson, President and CEO, Lara Exploration
Altamira Gold (TSX: ALTA) is a junior with multiple projects covering 180,000 hectares, including Cajueiro, with a resource of 700,000 oz. Michael Bennett, president and CEO, expressed that the legal framework has improved since 2014. “Most of the processes are now handled online, and this improvement has simplified things on the mining side,” he said.
However, Bennett has observed a shift in terms of areas coming up for bidding that is challenging for juniors. He explained: “Currently, these areas require a financial offer, which may pose a challenge for a company like Altamira to compete with the major players.”
Equinox Gold (TSX: EQF) was started with the purchase, building and commissioning of the Aurizona gold mine, and although it has expanded with assets in Mexico, the US and Canada, Brazil is the heart of the company’s operations. In 2022, Equinox Gold brought the Santa Luz mine into production with the construction of a new processing system, the first resin-in-leach system in Brazil. The company is now producing around 600,000 oz/y Au, and plans to continue developing the portfolio to reach the goal of 1 million oz/y. Greg Smith, CEO of the company, said: “Equinox gold is extremely pleased to currently see increased production right across our asset portfolio in Brazil.”
Gold prices have reached a notable high of over US$2,000/oz. Mike Durose, president of Lavras Gold (TSX: LGC), which went public in 2022 with approximately 1 million oz of gold resources in at least 23 gold showings on the property, emphasized the strengths of the commodity: “In today’s market where there are a lot of geopolitical risks, inflationary pressures, and economic risk, people should diversify their investment portfolios, and gold is the best asset to do so.”
"Given current low share prices and the depressed market, it is very difficult to raise capital. Most companies are raising capital through private placements and suffering significant dilution as a result."
Alan Carter, President and CEO, Cabral Gold
The number of new mines in development and the boom in exploration demonstrate that the global mining community is confident both in Brazil as an investment target and in gold as a commodity. Durose continued: “I remain positive on gold and think it is a commodity everybody should have some exposure to, primarily for diversification purposes because it is a negatively correlated asset class.”
Inflation, however, is a significant challenge to the gold segment, as mining becomes more cost-intensive. “2022 was a challenging year for gold producers in terms of increased input costs – reagants, explosives, mill steel, labor, fuel, etc. increased dramatically throughout 2021 and 2022," said Smith of Equinox Gold. The CEO of the multi-asset gold company added: "We have seen that level off in 2023, but we have not seen the gold price match that increase in costs.”
Image courtesy of Anglogold Ashanti