Toronto mining finance house Forbes & Manhattan is preparing to ramp up its spending in the Brazilian resource sector.
“Over the next five years our spend will be over $5 billion,’’ said David Argyle, who leads the agriculture operations at Forbes & Manhattan, which employs 100 people in Brazil, working out of offices in Belo Horizonte and Rio de Janeiro.
Speaking to Stockhouse on Thursday, he said that money will be deployed in projects controlled by Aguia Resources Ltd., Brazil Potash Corp., Belo Sun Mining Corp. (TSX: T.BSX, Stock Forum) and Irati Energia.
Having spent $400 million in the last five years, Forbes & Manhattan is already a highly significant grass roots explorer and project developer in Brazil an agricultural superpower which is gearing up to host soccer’s 2014 World Cup and the 1916 Summer Olympic Games.
Those events are expected to have a transformative impact on Brazil as it works to develop a huge oil discovery off the coast of Rio de Janeiro.
“It’s a great place to be,” said Forbes & Manhattan founder Stan Bharti.
A former Falconbridge Ltd. senior executive, Bharti made his first foray into Brazil in the mid 1995s with William Resources a company which went looking for undervalued resource assets and ended up with the Jacobina gold mine in Bahia State, northeastern Brazil.
After the Bre-X gold mining scandal in 1997, William ran into financial difficulties and Jacobina was sold to another Forbes company, Desert Sun Mining which was acquired by Yamana Gold Inc. (TSX: T.YRI, Stock Forum) (NYSE: AUY, Stock Forum) for $735 million in 2006.
That transaction remains Forbes’s biggest success in Brazil so far.
Forbes still has a foot in the Brazilian gold sector via Belo Sun Mining, which was being touted this week as a possible takeover candidate by Canaccord Wealth Management
The company’s Volta Grande project in Para State is currently host to a global resource, all categories of 5.17 million ounces, with an average grade of 1.74 g/t, including 2.84 million ounces, grading 1.69 g/t in the open pit, measured and indicated category.
“With large high grade open-pit gold projects (in stable jurisdictions) becoming increasingly scarce, this asset could garner a lot of interest from larger producers, Canaccord said in report.
In the absence of a buyout, Bharti said Belo Sun has the ability to take the project all the way to production.
“We don’t need partners. Right now we are doing more drilling to increase the resource. Then we are going to do a feasibility study. Then we will move towards construction.”
Bharti said it’s too early to estimate what it would cost to put Volta Grande into production.
But any investment is likely to be dwarfed by future spending on Forbes’s Brazilian oil and potash/phosphate assets.
Argyle said roughly one third of the expected $5 billion spend (referred to above) is likely earmarked for Brazil Potash, a company that is expected to go public on the Brazilian Stock Market (BOVESPA) next year.
Brazil Potash holds the key mineral rights in the 400-kilometre long Amazon potash basin. Geological, seismic and borehole surveys indicate the basin has similar scale, geological properties and is the same age as the Saskatchewan basin in Canada, home to Potash Corp. of Saskatchewan (TSX: T. POT, Stock Forum) (NYSE: POT, Stock Forum), the world’s leading producer.
The project is located in Amazonas State, adjacent to potash deposits, which have already been drilled off by Brazilian energy giant Petrobras SA.
On June 1, 2012, Brazil Potash announced that it has raised $58 million to fund exploration its potash properties. The company expects to announce its first potash resource within the next three months.
“We have been working in the basin since 2007 where we believe there is potential for multiple potash deposits to be discovered,’’ said Bharti.
“If you look at Brazil, it imports seven million tonnes of potash per year, and it is the world’s largest exporter of agricultural products,’’ he said.
“We saw this as an opportunity to help Brazil become self sufficient in potash.’’
Forbes also has high hopes for Australia Stock Exchange-listed Aguia Resources, a phosphate and potash exploration company that Forbes & Manhattan hopes to list on the TSX early in 2013.
It’s portfolio includes Tres Estradas, Joca Tavares and Carbonatite – collectively known as the Rio Grande Projects – which are located in the state of Rio Grande do Sul in southern Brazil.
In mid June, the company said it will accelerate efforts to commercialize Tres Estradas after outlining an inferred resource, estimated to be 21 million tonnes at 4.6% phosphate from holes drilled to a depth of 100 metres.
The grade and mineralogy is similar to that of other operating mines globally, including Yara’s Siilinjarvi mine in Finland and Vale SA’s (NYSE: VALE, Stock Forum) Cajati mine in Brazil, both of which produce high quality concentrate from phosphate with carbonatite host rocks, the company has said.
“We think that by 2014, we should be in production,’’ said Bharti. “We have a large phosphate deposit and permitting in Brazil is not a problem.”
As development work continues in Rio Grande do Sul, Forbes is also looking ahead to a production startup at its oil shale assets in southeastern Brazil.
In that area, Irati Energia has ownership rights to 2,700 kilometres of drilled property, including a formation that has produced 25 million barrels of oil since the 1980s.
The company is targeting two billion barrels of potential oil reserves.
However, it is estimated that it will cost about $400 million -- $160 million in equity, plus $240 million for project financing – to take the project to 8,000 barrels per day (2.9 million barrels per year).
Forbes & Manhattan’s Brazilian operations were assembled by Falconbridge geologist Helio Diniz, and are headed by David Gower, who led Falconbridge’s international nickel exploration operations before the Canadian mining icon was swallowed in August 2006, by Xstrata of Switzerland.
Argyle said the group is so active in Brazil that it may have as many as 25 drill rigs operating on its projects at any given time. At that rate, Forbes & Manhattan is drilling more exploration metres per year than even Vale SA. (NYSE: VALE, Stock Forum), the Brazilian metals giant.