Belo Sun Mining (BSX-TSX)
230 million shares outstanding
245 million fully diluted
Market capitalization ~$244 million
Cash ~$35 million
Belo Sun owns 100% of the Volta Grande gold deposit in Para State, Northern Brasil. The property is well located with respect to access and power, and only 60 kilometers southwest of Altamira, a decent sized city. This week Belo announced updated resources for the Volta Grande deposit, consisting of a measured and indicated 2.85 million ounces grading 1.69 grams per tonne gold, plus an inferred 1.97 million ounces grading 1.70 grams per tonne gold. The resources occur in two deposits and are hosted in ductile deformed intrusive (diorite) rocks offset about 700 meters along a northerly trending fault (maybe).
With the increased resources at Volta Grande, Belo was the standout company in our study. The deposit holds together quite well within the mineralized structures and, although there are barren or low grade zones within the deposit, it appears the deposit is mineable via open pit, with limited dilution. As Figure 2 (below) illustrates, the mineralization in the Oro Verde deposit consists of some wide zones that are continuous from mining bench to bench—a good thing.
(Fig. 2-Conceptual 2nd year open pit layout, illustrating ore [red] and waste [brown] zones for mining bench by bench)
At the current share price, BSX is trading at about $86 per ounce of M&I resource and $51 for MI&I. This is at the low end of the range of companies investigated, but the average grade of 1.7g/t is quite high for what will probably be a simple processing operation (milling and CIL recovery). A 2009 sensitivity analysis by Scott Wilson RPA projected capital costs of $295 million, which I have increased to $550 million to account for additional mill throughput and cost creep. Given the relatively high grade, I estimate total cash production costs per ounce will be roughly $575, bringing the production plus capex costs to around $768 per ounce of M&I and $690 per MI&I. Ignoring taxes, G&A and such, at a $1,600 gold price that represents a good profit margin for any mining company looking for a well-located acquisition in a stable happy country.
Belo will be releasing the results of a Pre-Feasibility Study Q-3 2012, and hopes to have a Definitive Feasibility Study out in early 2013. Construction is projected to begin in early 2013 as well, with commissioning in early 2015. They are currently infill and step-out drilling the deposit and have about 70,000 meters planned for 2012.