the long road to brazilian success

Stumbled across this, thought i would share:

The long road to Brazilian success
Wednesday, 19 March 2014

Justin Niessner

AFTER six years of patient development in a rocky copper space, Avanco Resources is now assessing the timeline of its Brazilian properties in mere months.

With encouraging drill data continuing to be filed, the company is planning to finish studies at the Antas copper project (part of the broader Carajas portfolio) in three months with commissioning in first quarter of next year.

Four diamond rigs are in operation on the project’s stage 1 development area known as Antas North, with standout results including 31m at 2.72% copper from 25m, 54m at 3.03% copper from 25m, 33m at 3.97% copper from 86m and 26.1m at 5.35% copper from 47.9m.

Updates from the program led to the Avanco board approving first development expenditures as well as a $US12 million ($A13.9 million) royalty-based investment deal with BlackRock World Mining Trust and $58 million in senior debt with Brazilian bank Banco Votorantim.

On top of this, the company recently raised $A18.1 million via a share placement to fund early works at the site.

Preproduction capital requirements for Antas before contingency and owner’s costs have been estimated at $50 million.

Feasibility results defined a net present value of $224 million with an internal rate of return of 94% and a payback period of only nine months.

Avanco began drilling at Carajas in early 2008, gradually preparing a consistently growing resource for a two-stage development plan, which is now expected to involve initial production at Antas North followed by exploitation of its larger neighbour, the Pedra Branca project.

Resources at Carajas include 560,000 tonnes of copper and 500,000 ounces of gold at Pedra Branca as well as 183,000t of copper and 135,000oz of gold at Antas North.

Along with a relatively minor contribution from the Antas South site, the combined project suite holds a total of 67.9 million tonnes grading 1.22% copper and 0.32 grams per tonne gold for 828,000t of copper metal and 700,000oz of gold.

Production for the first three years at Antas North has been tipped to average 11,900 tonnes per annum of copper and 7800 ounces per annum of gold at a C1 cost of 84c per pound.

The cost includes treatment charges, refining charges, royalties and freight less gold credits.

The feasibility update comes on the heels of a $US1000 per tonne drop in the value of the red metal over the course of 2013 as increasing global mine output pressured a tight supply-demand dynamic.

Copper was last trading at about $6530/t.

Recent research has confirmed that a seven-year timeframe between discovery and production is the industry norm but the fact that Avanco has been able to match this pace with a robust but remote flagship over such a volatile period for copper pays tribute to the underplayed benefits of developing in Brazil.

Few people in the industry need be reminded of the mining advantages of this country, where foreign investment began scraping the $200 billion mark as far back as 2007.

This momentum has experienced a significant slowdown in recent years, however, with the Brazilian Mining Institute flagging a 30% drop in mining investment since 2012 on uncertainty over plans for a new mining code and general difficulties of doing business in the country.

Investment in Brazil’s mining sector fell to $53.6 billion for 2014-18 compared to a $75 billion estimate for 2012-16.

For many investors, the ongoing overhaul of the country’s mining code has been a painfully slow process of modernising 36-year-old legislation and the cause of rampant speculation on the state of the local industry in the medium term.

But bureaucracy bickering aside, this four-year-long (and still running) policy makeover also serves as a reminder of Brazil’s commitment to unfolding long-range projects with an eye for deferred but worthwhile goals.

As part of its evolution, the world’s 10th largest economy and home to the world’s second largest miner (Vale) expects to transform the Carajas region over the next decade into its premier mineral production province.

In January the Brazilian National Department of Mineral Production approved continued works at Pedra Branca, paving the way for further regulatory submissions and illustrating government support for development of the region.

The green light also supports confidence in the feasibility of Avanco’s broader Carajas portfolio and tightening plans for initial development through Antas.

The project’s civil engineering geotechnical drill program and condemnation drilling have been completed while ongoing drilling aims to outline a maiden reserve within weeks.

Avanco has also commissioned the start of a detailed tailings dam design.

It seems that development of the Carajas region and the Brazilian economy in general is turning out to be more inconvenient proof for anxious investors that timelines are sometimes hard to nail down in this industry.

Perhaps more importantly, it also demonstrates that support from major institutions and a healthy dose of patience are always among the most essential ingredients to success.