Privately held hedge fund Sun Valley Gold has added to its shareholding in Belo Sun Mining (TSX: BSX) with the purchase of 7 million shares at 19¢, bringing its total stake to 12.4% in the Brazil-focused gold explorer.
The positive news on June 19 sent the junior’s shares surging 28% to close at 25.5¢, with 10.3 million shares changing hands.
Belo Sun is advancing its wholly owned Volta Grande gold project in Brazil’s Para state and launched a drill program in May with two rigs to focus on four high-grade areas within the Ouro Verde and Grota Seca deposits.
Early assay results released on June 26 include 14.7 metres grading 9.19 grams gold per tonne from 26.8 metres, and 8.1 metres grading 5.39 grams gold per tonne from 78.9 metres.
The 2,000-metre drill campaign at the near-surface high-grade areas of Ouro Verde and Grota Seca is expected to improve the project’s overall economics.
Four high-grade targets were identified in the company’s last resource estimate published in October 2013, which outlined a total measured and indicated resource of 93.8 million tonnes grading 1.69 grams gold per tonne for 5.1 million contained oz. gold, and inferred resources of 45.5 million tonnes averaging 1.75 grams gold per tonne for 2.5 million contained oz. gold.
This resource estimate is limited to a depth of 350 metres, however, and restricted to a 5 km strike length from the Ouro Verde and Grota Seca deposits, as well as a minor portion at the Bloco Sul target.
The company believes there is potential to add higher-grade resources with underground mining, as several sections showed intercepts below the 350-metre vertical cut-off. Belo Sun also notes that soil and rock geochemistry anomalies indicate that mineralization may extend northwest and east.
In February Belo Sun received its preliminary licence (LP) approving its environmental impact assessment (EIA) for Volta Grande. The LP is needed for development and incorporates the results of public hearings.
On June 26 the company informed the market that the Federal Judge of First Level in Altamira had ruled that for the LP to be valid, Belo Sun should complete an indigenous study in accordance with the reference terms of the Brazilian indigenous authority FUNAI.
The company says that the LP required that an indigenous study be completed before Belo Sun was issued an installation licence (LI), and in January it engaged Brandt Meio Ambiente to conduct the indigenous study. The company anticipates the authorization from FUNAI to access indigenous lands shortly. Once the authorization is received, management says, it should take five months to complete the study. Belo Sun filed the fieldwork plan at FUNAI in March and in April the company had meetings with FUNAI, at which time the parties agreed that the field studies should begin in June.
Brandt Meio Ambiente has already prepared the EIA for Volta Grande that has been approved by the Secretary of Environment for Para state (SEMA), and “has an outstanding background in the preparation of indigenous studies in Brazil,” the company says.
Brian Quast of BMO Capital Markets noted that he does not expect the preliminary licence’s temporary cancellation will impact the development schedule because when Belo Sun received the PL in February, one of the 24 conditions included the completion of an indigenous study.
“The indigenous study was scheduled to be completed next regardless of the status of the preliminary licence, and the company does not have to reapply for the preliminary license once the indigenous study is completed,” he explained in a research note.
Belo Sun has already requested proposals for engineering, procurement and construction, and expects the work will be awarded soon.
Mark Eaton, the company’s president and CEO, describes Volta as one of the world’s premier gold projects.
The company completed a preliminary economic assessment (PEA) of the project in February and then began working on a definitive feasibility study.
The PEA envisioned a conventional open-pit mine and a 3-million-tonne-per-year processing facility for the first seven years of production, and a 6-million-tonne-per-year processing facility from year nine until the end of the mine life. Volta Grande would be designed as a two-pit operation with Ouro Verde and Grota Seca, featuring multiple phases in each pit mined over 21 years, plus a year of preproduction. Higher-grade material would be processed in the first years of the mine life, with lower-grade material stockpiled to speed up payback.
The project is 60 km south of the town of Altamira, which has a population of 95,000 and an airport with commercial flights. Access to the project is along an upgraded gravel road. Power for the mine would come from Belo Monte’s Pimental distribution station, but the company would need to build a 20 km, 230-kilovolt, high-tension power line. Water is available on-site.
Gold is believed to have been discovered at Volta Grande in the early 1900s, and many parts of the property have been mined over the years by artisanal miners, including Ouro Verde and Grota Seca.
The Volta Grande project area is situated along the northern boundary of the Carajas–Iricoume block of the Eastern Amazonian craton along a major ductile deformation zone, within the northwest-trending Tres Palmeiras greenstone belt.
It is underlain by west–northwest trending and steeply south dipping gneisses of metasedimentary or metavolcanic origin, and syntectonic diorite.
Previous operators at Volta Grande — TVX Gold (now part of Kinross Gold (TSX: K; NYSE: KGC) and Battle Mountain Exploration, which is now part of Newmont Mining (TSX: NMC; NYSE: NEM) — both identified widespread gold mineralization, with their drill efforts adding up to more than 27,000 metres of combined core, auger and reverse-circulation drilling, as well as several thousand channel and soil samples. Belo Sun says that preliminary metallurgical test work shows the mineralization is amenable to conventional processing methods, with gold recoveries in bottle-roll tests reaching 95%.
The shear-hosted resource at Volta Grande is contained in three main areas — Ouro Verde and Grota Seca at the North Block, and the South Block — all of them developed by artisanal miners. Within these areas are many narrow zones of high-grade gold mineralization, open along strike and at depth, with excellent potential for expansion, the company says.
The company says more mineralized zones could exist within the large alteration envelope in the host intrusive, which has been traced for more than 3 km along strike. Two types of gold mineralization are present: primary gold in intrusive rocks, and secondary gold in an extensive saprolitic zone overlying the primary mineralization.
As of May 30 Belo Sun Mining held cash and equivalents of $13 million.
Over the last year the junior has traded in a range of 16¢ to 93¢, and has 266 million shares outstanding. At press time its shares traded at 18¢ per share.
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