The following is question and answer exchange between Stockhouse Editorial and the management of Brazil Resources.
- Briefly describe Brazil Resources.
Brazil Resources Inc. (TSX-V: BRI; OTCQX: BRIZF, Forum) is focusing on the acquisition and development of gold projects in producing districts throughout the Americas. Our growth strategy is premised on taking advantage of historically low valuations in the commodity business to make accretive acquisitions of resource-stage projects, mainly at a significant discount to the replacement value of work completed by prior owners and operators. Our project portfolio gives us meaningful exposure to a pipeline of projects with near-term potential and long-term leverage. This includes our portfolio of high quality gold projects in Northern Brazil, Whistler Gold-Copper Project with district-scale land package in Alaska, and uranium exploration with JV partner Areva Resources Canada Inc. ("Areva") in the western Athabasca Basin. In 2015, with the acquisition of the Whistler Project, we grew our resource base to 3.7 million ounces gold and gold equivalent in the indicated category and 5.8 million ounces gold and gold equivalent in the inferred category. The mineral resource table at the end of this paragraph provides details of the resource estimates, including grades, tonnage and gold equivalents for each of our properties.
Mineral Resources
*See bottom for chart footnotes
- Who are the key players on both the board and the executive team, and what skills do they bring to the table that will help drive the company toward its milestones?
Amir Adnani
Amir Adnani, Chairman and Founder, is an entrepreneur and a mining executive. He is the founding Chief Executive Officer and a director of Uranium Energy Corp (UEC), an NYSE MKT-listed uranium mining and exploration company. Under his leadership, UEC moved from concept to initial production in the U.S. in five years, and has developed a pipeline of low-cost, near-term production projects. By background, he is an entrepreneur, and earlier started and expanded two private companies.
Mr. Adnani is frequently invited to speak at prominent industry gatherings including the Milken Institute Global Conference, the International Economic Forum of the Americas and the PDAC Convention, and is often interviewed by major business media outlets including The Wall Street Journal, Bloomberg, CNBC and Fox Business News.
Fortune magazine distinguishes Mr. Adnani on their ‘40 Under 40, Ones to Watch’ list of North American executives. He is recognized by a qualified resource industry investment advisory, Casey Research, as one of the sector’s leading entrepreneurs, a list researched and known as ‘Casey’s NexTen.’ He is a nominee for Ernst & Young’s ‘Entrepreneur of the Year’ distinction. Mr. Adnani holds a Bachelor of Science degree from the University of British Columbia, and serves on the university’s Alumni Advisory Board.
Garnet Dawson
Mr. Dawson has over 30 years of experience in the exploration industry working with senior and junior mining companies in the Americas, Europe, Africa and China. He has held executive and directorship roles with several Canadian mining companies working internationally. Mr. Dawson is a registered Professional Geologist with the Association of Professional Engineers and Geoscientists of British Columbia and holds a Bachelors of Science degree in Geology from the University of Manitoba and a Master's of Science degree in Economic Geology from the University of British Columbia.
Mario Garnero
Mario Garnero, Director, is Chairman and founder of the Brasilinvest Group, a private merchant bank established in 1975. Brasilinvest is a strategic partner of Brazil Resources and is a leading merchant bank in Brazil. Under Mr. Garnero’s leadership Brasilinvest has completed investments valued at $16 billion. He is recognized as one of Brazil's most accomplished entrepreneurs. Mr. Garnero holds a law degree from the Pontifical Catholic University of São Paulo.
- What are the major gold projects currently in Brazil’s portfolio and where do they sit in terms of development?
The Company has advanced our core projects in Brazil, Sao Jorge and Cachoeira. Both gold projects are now at the permitting stage and the Company's expenditures moving forward during this stage are minimal. Since acquiring the projects, the Brazilian Real has fallen by over 30% with respect to the Canadian dollar and we benefit by getting more done at less cost. Similarly, the strengthened United States dollar has resulted in the Brazilian Real denominated costs trending lower in relation to gold prices, which are generally quoted in U.S. dollars.
At the Sao Jorge Gold Project in Para State, the Company has submitted a comprehensive final report to the DNPM for the exploration concession overlying the deposit recommending that it be converted to a mining concession. With DNPM approval, we plan to initiate environmental and engineering studies and apply for the necessary permits to further advance the Project.
For the Cachoeira Gold Project in Para State, we have commenced environmental and mine permitting for the Project, including having submitted the EIA/RIMA (Environmental Impact Assessment Report) to the state environmental agency and completed the public hearings that were validated by the state environmental agency in order to continue with the licensing process. The EIA/RIMA report is now under review and the Company is waiting to hear back from the agency.
Our Alaska based Whistler Gold-Copper Project has had approximately 70,000 metres of drilling completed historically with several gold-copper porphyry deposits identified over an area of 170 square kilometres. At C$500/m, the replacement cost to complete this drilling would be in the order of C$35M. The Whistler Project is truly a district-scale project, which we believe has good potential for resource expansion. The Company acquired the project for share consideration resulting in less than 5% dilution to our existing shareholders.
- What are the major advantages to the gold districts the company is currently operating in (Brazil/Alaska)?
Brazil has a low federal government royalty rate of 1% on gold. Our Brazilian projects enjoy paved road access, sufficient power and ample water supplies. Both our Sao Jorge and Cachoeira Projects benefit from government incentives including a 75% reduction in income tax over the first 10 years of the project life for an effective tax rate of 15.25%. The Whistler Project in Alaska is located in a stable mining jurisdiction with several operating mines. The project has a 50 person all season exploration camp and airstrip for staging exploration programs.
- What were the major milestones in 2015?
January 7, 2015 – the successful completion of a non-brokered private placement of units of the Company at a subscription price of $0.55 per Unit. The aggregate amount of the Private Placement was increased to approximately $4.07 million from the initially announced amount of $2.5 million.
January 27, 2015 – The Company raised an additional $387,000 pursuant to subscriptions for a further 703,636 units under its non-brokered private placement of Units of the Company at a subscription price of $0.55 per Unit. The additional subscriptions bring the total aggregate amount of the Private Placement to approximately $4.46 million for an aggregate of 8,103,506 Units issued.
June 1, 2015 – the Company received authorization from the Alberta Department of Environment and Sustainable Resource Development for a proposed drill program on the Rea Uranium Project in northeast Alberta. The Project is located in the western portion of the Athabasca Basin, which the Company believes is an underexplored region and which has seen renewed exploration activity with the recent discoveries and resource estimates in the Patterson Lake area by Fission Uranium Corp., NexGen Energy Ltd. and PurePoint Uranium Group Inc.
August 6, 2015 – the Company completed the acquisition of 100% of the Whistler Gold-Copper Project and certain related assets in south-central Alaska from Kiska Metals Corporation as announced on July 21, 2015. Consideration under the transaction consisted of 3.5 million shares of Brazil Resources. The Whistler Project includes 304 Alaska State Mineral Claims, a 50-person all season exploration camp, airstrip and assorted equipment.
October 26, 2015 – the Company filed a National Instrument 43-101 technical report for its Whistler Gold-Copper Project located in South Central Alaska, which included a resource estimate for the Whistler deposit.
- The Company has recently announced the closing of its private placement offering, what does it plan to do with the proceeds and will it need further financing in the near-term, if so, why?
We are very pleased with the strong interest from our existing and new shareholders, including the Company’s insiders. This financing positions us well to further execute on our business strategy of expanding our gold resources at a significant discount to their replacement value. The Company intends to use the net proceeds from the private placement to advance its corporate strategy, including expenses associated with its existing property portfolio and the acquisition of additional projects, and for general working capital purposes.
- How did Brazil Resources come to own its interest in the Rea Uranium Project?
With a good dose of serendipity! As part of our 2013 acquisition of Brazilian Gold Corporation and its gold portfolio, we also received the 75% interest in the Rea Project which had been in Brazilian Gold’s portfolio since 2005. Months after this acquisition we started to witness a dramatic unlocking of value in western Athabasca due to recent, high-grade, near surface discoveries by companies like Fission and NexGen. Our Rea Project covers approximately 125,328 hectares and is located in the western portion of the Athabasca Basin. Areva, with exceptional experience in exploration and production within the Athabasca Basin, is our partner holding a 25% interest.
Prior operators have expended over $10 million in exploration on the Project. In 2014, we completed a NI 43-101 technical report based on drilling and ground geophysics, which identified a number of targets that have potential to host unconformity-type uranium mineralization. The Rea Uranium Project surrounds Areva's high-grade Maybelle deposit.
- What major milestones do you have planned over the next 12 months?
Management is very excited about 2016. There are unprecedented acquisition opportunities in the markets today and we are in a position to take full advantage of highly accretive transactions. We continue to evaluate potential acquisitions of select gold projects and with such acquisitions, our goal is to realize on their value when markets improve, through joint venture, sales or advancing exploration and development. In the longer term, we will continue to be an aggressive explorer and developer with a portfolio of six projects that offer upside potential.
- Why is now a good time for investors to consider Brazil as a portfolio addition?
Interest rates near zero and an increasing trend towards negative interest rates are very beneficial to gold. The dollar and gold, and bond yields and gold have strong negative correlations. With 3.7 million ounces gold and gold equivalent in the indicated category and 5.8 million ounces gold and gold equivalent in the inferred category, BRI has tremendous leverage to a rising gold price environment. It should be noted that BRI’s mix of projects gives investors near-term production visibility in Brazil at our Sao Jorge and Cachoeira Projects in addition to leverage to higher gold prices. The mineral resource table in Section 1 above provides details of the resource estimates, including grades, tonnage and gold equivalents for each of our properties.
Furthermore, our Rea Project is located in the western portion of the Athabasca Basin, one of the most exciting areas for uranium exploration in the world today due to recent, large, high-grade, near-surface discoveries by NexGen Energy Ltd. and Fission Uranium Corp. Areva, with exceptional experience in exploration and production within the Athabasca Basin, is our partner holding a 25% interest.
Brazil Resources provides a unique and attractive dual exposure for investors to a growing gold resource base and uranium exploration in the exciting Western Athabasca Basin.
- Where do you see the company in five years?
Over the course of the next five years, Brazil Resources will continue to execute its business plan of acquiring low cost resources in the Americas at attractive valuations versus our peer group. The Company will continue to advance its existing portfolio while actively pursuing M&A opportunities in the precious metals industry.
Our goal is to assemble one of the largest and highest quality gold resource portfolios in the Americas and to advance and monetize our top projects as commodity prices improve and fully recover. Additionally, the Company intends to advance our resource stage projects through pre-feasibility and feasibility studies as capital markets improve and cost of capital for mine construction comes down. BRI’s objective is to acquire medium to long live projects that are economic at today’s gold price or slightly higher, where given better capital markets the medium size capex projects could be financed and developed.
FULL DISCLOSURE: Brazil Resources is a Stockhouse Publishing client.