Nearly 44 years after he left his home in India to study mining engineering in Moscow, financier Stan Bharti believes his former stomping ground is now a land of opportunity for the Canadian resource sector.
It is why companies in Bharti’s Toronto-based Forbes & Manhattan Group are planning to invest over $1 billion in precious metals and iron ore projects in the former Soviet Union in the next four years.
In northeastern Russia, for example, Silver Bear Resources Inc. (TSX: T.SBR, Stock Forum) is working to bring one of the world’s highest-grade undeveloped silver projects into production within the next two years.
In the Ukraine, another Forbes & Manhattan company Black IronInc. (TSX: T.BKI, Stock Forum) has just completed a bankable feasibility study on an iron ore project that is expected to cost around $1.1 billion to develop.
“Obviously there are some challenges associated with developing large mining projects in Russia,’’ Bharti told Stockhouse in a recent interview.
They include the logistical challenges associated with transporting fuel and equipment along a 400 kilometre ice road to Silver Bear’s Mangazeisky project in northern Russia. That road is available for only four months a year.
But having travelled to Moscow at the age of 16 and studied at the People’s Friendship University from 1969 and 1974, Bharti thinks these are challenges that can be overcome.
“I understand their culture, their people. I lived there. I bonded with them. My best friends were Russians,” he said.
Now that he is based in Canada, Bharti says the similarities between the two countries also work in his favour as he works to cement relationships with key decision makers and potential strategic partners.
“We are both resource based [economies] and we love hockey,’’ he said.
Bharti’s overriding goal is to establish a similar type of infrastructure to the one that is already in place in Brazil, where Forbes & Manhattan employs about 100 people, working out of offices in Belo Horizonte and Rio de Janeiro.
“We want to build a head office in Moscow to service the former Soviet Union,’’ he said. “I want to have a core of people, bankers and geologists that are working for Forbes & Manhattan, evaluating [opportunities], constantly looking for deals,’’ he said.
For now, the focus is on Silver Bear Resources and Black Iron.
Silver Bear’s principle asset is the 100%-owned Mangazeisky project, located approximately 400 kilometres north of Yakutsk in the Republic of Sakha, Yakutia.
The remote property hosts more than 100 silver occurrences in a major north-northwest trending mineralized structure that stretches along a 35-kilometre corridor.
According to a NI 43-101-compliant mineral resource estimate, the Mangazeisky project contains roughly 60 million ounces of silver, including 17.9 million ounces at 518 grams in the indicated category, and another 43.5 million ounces of grade 282 grams per tonne in the inferred category.
This material is located in the Vertikalny and Nizhny Endybal zones.
Recent work, including airborne geophysical surveys covering 319 square kilometers on the property has outlined a geological anomaly located only 500 metres from Vertikalny, in an area known as the Porphyyrovy prospect where gold, silver and copper mineralization has previously been identified.
“This is one of the highest grade silver resources in the world,’’ said Silver Bear Chief Executive Officer Mark Trevisiol in an interview.
He said plans to expand and develop the resource got a significant boost last week when the Russian State Subsoil Agency agreed to a four-year extension of Silver Bear’s exploration licence.
Bharti says he thinks the company can put Mangazeisky into production in a couple of years, with very little capital. A preliminary economic assessment in 2011 envisaged a full annual production rate of 4.1 million ounces over a lifespan of 8.4 years.
The company has said it expects construction of a 1,000 tonnes-per-day facility to take up to 24 months, following the completion of a feasibility study and permitting. The initial capital cost is estimated to be US$111.1 million.
However, as it seeks project development support, Silver Bear Chief Executive Officer Mark Trevisiol said he believes the project can be developed for about half that amount.
Trading at 34 cents this week -- leaving the company with a market cap of $18.3 million, based on 53.8 million shares outstanding – Trevisiol thinks Silver Bear can also benefit its association with Russian shareholders, including the Alpha Group with 14% and oligarch Alexi Mordeshov, who owns roughly 10%.
Former Barrick Gold Corp. (TSX: T.ABX, Stock Forum) (NYSE: ABX, Stock Forum) Chief Executive Officer Randall Oliphant is Chairman of Silver Bear and a significant shareholder, with about 6% of the company.
Black Iron is equally optimistic about the projects for its Shymanivske Iron Ore Deposit which is located in the Dnepropetrovsk region of Kryvyi, Rih, the heart of Ukraine’s iron ore belt.
This is largely because virtually all of the infrastructure that would be needed to develop a project of this scale is located nearby, including railways, power lines and qualified miners.
The project is surrounded by five other operating mines, including ArcelorMittal’s (NYSE: MT, Stock Forum) iron ore complex and YuGOK, owned by Evraz and Smart Holing.
Bharti hopes Black Iron will benefit from the fact that its Shymanivske project is located 390 kilometres from Yuzhny, an access point to the Black Sea and global seaborne iron ore markets.
Up from around 28 cents at the end of 2012, Black IronInc. (TSX: T.BKI, Stock Forum) traded at 37 cents this week, leaving the company with a market cap of 52.2 million, based on 141 million shares outstanding. The 52-week range is 72 cents and 13 cents.
The Shymanivske project contains 646 million tonnes of measured and indicated resources, grading 31.6% iron and 188 million tonnes of inferred resources, grading 30.1% iron, which the company says can be concentrated to 68% iron.
A feasibility study envisages an operation producing 9.2 million tonnes per year of high grade iron ore concentrate, with total average operating costs over 16 years estimated at US$44 per tonne.
Physical construction of the mine is set to begin in the latter half of 2013, with the target date for start-up and commissioning being the fourth quarter of 2015.
Published reports say an off-take agreement is targeted for the first half of 2013, with the company having been in non disclosure agreements with 19 strategic groups as of late November.
A report also says investors await the resolution of a surface rights matter with neighbouring YUGOK, that still has to be resolved.
Meanwhile, company spokesman Michael McAllister said any off-take agreement, once it is secured, should enable Black Iron to negotiate debt financing for the project.
Disclosure: Forbes & Manhattan is a Stockhouse client.