In a letter to shareholders earlier this year, Amir Adnani, chairman of Brazil Resources (TSXV: BRI; US-OTC: BRIZF), stated that the company’s strategy since its initial public offering in 2011 has been “to take advantage of the opportunities presented by challenging market conditions during the four-year bear market in the junior resource space and to grow our resource base through accretive acquisitions.”
Those acquisitions began in 2012 with Luna Gold’s (TSXV: LGC; US-OTC: LGCUF) Cachoeira gold project in Brazil, and continued in 2013 with the addition of Brazilian Gold Corp., whose assets included the Rea uranium project in the Athabasca basin, and three gold projects in Brazil’s Para state: Sao Jorge, Boa Vista and Surubim.
Now, the company is picking up 100% of the Whistler gold-silver-copper project and associated assets in central Alaska, 150 km northwest of Anchorage, from prospect-generator Kiska Metals (TSXV: KSK; US-OTC: KSTKF) in an all-share deal worth $1.6 million.
Under the proposed deal, Brazil Resources will issue 3.5 million shares in exchange for the 170 sq. km property, which hosts several gold-copper porphyry deposits, including Whistler.
Whistler has a pit-constrained indicated resource of 79.2 million tonnes grading 0.51 gram gold per tonne, 1.97 grams silver per tonne and 0.2% copper, and an inferred resource of 145.8 million tonnes grading 0.40 gram gold, 1.75 grams silver and 0.2% copper. The resource adds up to 2.25 million equivalent oz. gold in the indicated category and 3.4 million equivalent oz. gold in the inferred category.
Ash Guglani of Salman Partners calculates that if the deal is completed, Brazil Resources would “add ounces at roughly 29¢ per equivalent oz. gold.” Moreover, he says, the transaction allows the company “to diversify itself into a mining friendly jurisdiction” and “adds a potentially attractive asset with substantial gold ounces to the company’s portfolio at significantly lower costs.”
The analyst estimates that on a per ounce basis, Brazil Resources is trading at $11.44 per oz. gold and that the acquisition “is accretive, as the cost is 30¢ per equivalent oz. gold.”
In a press release announcing the deal, Brazil Resources said it considers Kiska’s 2011 National Instrument 43-101 compliant resource as a historic resource only, and plans to update it after the acquisition is completed. For its part, Kiska noted in its press release announcing the deal that it has done little exploration at Whistler since it completed the resource estimate in 2011, due to market conditions.
According to Brazil Resources, 70,000 metres of drilling have been completed on the project — 19,870 of which (48 holes) were drilled at Whistler — and the district-scale project hosts several mineralization styles, including gold-copper porphyry, precious and base metal-rich epithermal, and intrusion-related mineralization.
Garnet Dawson, Brazil Resources’ CEO, said in prepared remarks that while the company is focused on its gold-development projects in Brazil, the Whistler project, at a cost of just 4.5% dilution, provides “a historic, multi-million ounce resource, large expansion potential, relatively low holding cost and the support of Kiska’s technical team,” which is also in joint ventures on other projects with First Quantum Minerals (TSX: FM; LSE: FQM) and Teck Resources (TSX: TCK.B; NYSE: TCK).
Under the deal, Brazil Resources will deliver its 3.5 million shares in four installments of 875,000 shares every five months after the first installment is made, which is scheduled for five months after the transaction. For 15 months after the transaction, Kiska Metals will provide support and maintenance services at Whistler for $10,000 per month.
The entire Whistler project — made up of 304 Alaska state mining claims in the state’s Yentna district — is subject to a 2.8% net smelter return royalty. In addition, certain claims overlying the Whistler deposit itself are subject to a 2% net profit interest royalty.
The Whistler project comes with a 50-person all-season camp, 2.7 km from the Whistler deposit, and includes a gravel airstrip, 38-kilowatt diesel generator, water well, septic system and fuel-storage facility. The Whistler deposit and nearby prospects are connected to the camp and runway by a 6 km access road.
Brazil Resources describes the property as being situated in an underexplored area of south-central Alaska. A volcano-sedimentary Jura-Cretaceous Kahiltna Assemblage underlies the property, intruded by the Late Cretaceous Whistler Intrusive Suite, with associated gold-copper porphyry and epithermal mineralization, and the Late Cretaceous to Paleocene Composite Intrusive Suite, with associated, intrusion-related gold mineralization.
Outside Alaska, Brazil Resources is bullish about the prospects of its 75% stake in the Rea uranium project, which covers 884 sq. km in the western part of the Athabasca basin. Areva owns the remaining 25%.
In Brazil, the company has started environmental and mine permitting for its Cachoeira gold project, which has indicated resources of 17.4 million tonnes grading 1.40 grams gold for 787,000 contained oz. gold, and inferred resources of 15.6 million tonnes grading 1.12 grams gold for 563,200 oz. gold, using a 0.35-gram-gold-per-tonne cut-off grade.
At Sao Jorge, a defined resource coincides with a geophysical anomaly, with only 50% of the anomaly untested. The project has 14.4 million tonnes at 1.54 grams gold for 715,000 contained oz. gold in the indicated category, and another 29.2 million tonnes at 1.14 grams gold for 1.04 million contained oz. gold in the inferred category, also at a cut-off grade of 0.3 gram gold. So far, a tenth of the project area has been explored.
Elsewhere in Brazil, the Boa Vista project has an inferred resource of 8.5 million tonnes of 1.23 grams gold for 336,000 contained oz. gold using a 0.5-gram-gold-per-tonne cut-off grade, and the Surubim project has an inferred resource of 19.4 million tonnes of 0.81 gram gold per tonne using a 0.3-gram-gold-per-tonne cut-off grade.
Brazil Resources says both projects have only seen initial drilling, and its geological team has identified more zones for follow-up.
Finally, in Brazil’s Goias state, Brazil Resources owns 100% of the Artulandia project, a polymetallic discovery that has two base-metal horizons with precious metal credits that have been identified and measure at least 2,000 by 250 metres. The company says the property’s geological features suggest a gold- and zinc-rich volcanogenic massive sulphide deposit.
At press time, Brazil Resources shares were trading at 53¢, within a 52-week range of 45¢ to 95¢.