Up-and-coming copper miner Avanco Resources is poised to announce it has snapped up a big but challenging 3 million ounce-plus gold deposit in Brazil.
Avanco is understood to be preparing an announcement to confirm its acquisition of the Gurupi gold project in northern Brazil that will add a gold arm to its portfolio.
The deal will see Avanco take an initial 20 per cent interest in Gurupi for $US2.2 million ($2.89m) plus $US300,000 in exploration and permitting work.
It can then move progressively to 80 per cent by meeting various milestones on the project, before getting the option to buy out the remaining 20 per cent for the higher of $US6.5m, or $US12.50 per ounce, of gold reserves.
The project’s owners, Toronto-listed Jaguar Mining, will hold a 1-2 per cent royalty over any future production.
The price tag would at first glance appear to be a bargain given the scale of Gurupi.
Jaguar and its predecessors have defined a total resource at Gurupi of more than 3.6 million ounces of gold, including a reserve of 2.3 million ounces at an average grade of 1.14 grams per tonne.
The catch? The project has run into several permitting issues over the years, meaning it has struggled to get off the ground.
Avanco has effectively picked up a low-cost option to test the strength of their local connections and know-how.
On that score it has the advantage of having as its executive director Wayne Phillips, formerly technical director in South America for Canadian heavyweight Kinross Gold. Kinross used to own Gurupi before it sold the project to Jaguar in 2009 for $US42m.
Kinross’s other executive director is Luis Azevedo, a Brazilian lawyer and geologist who founded successful Rio-based law firm FFA Legal. FFA provides specialist legal and technical support to resource companies operating in Brazil.
A pre-feasibility study into Gurupi back in 2010 found the deposit could support a 154,000 ounce a year gold mine with a 13-year mine lifespan, $US224.6m capex and an average cash cost of $US519 an ounce. That study was predicated on a base case gold price of $US885 an ounce.Avanco operates the Antas North copper mine in Brazil and is developing the nearby Pedra Branca copper deposit. News Ltd.
AVB Price at posting:
6.2¢ Sentiment: Buy Disclosure: Held
