Centaurus hunts Brazilian riches in wake of Avanco deal
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Following Avanco’s windfall this week, another Brazil-focused play may soon see its value appreciate, writes Barry FitzGerald in his weekly Garimpeiro column.
OZ Minerals had big wraps for Brazil as a mining investment destination earlier in the week, praising the country’s mineral prospectivity and its fiscal and regulatory regime.
No surprise in that, given OZ had just committed $442m in cash and scrip to acquire the ASX-listed Brazilian copper/gold specialist Avanco for a massive 116 per cent premium to its pre-bid price.
Despite the premium, analysts reckon OZ (ASX:OZL) is paying fair value for Avanco (ASX:AVB).
It seems that despite Avanco’s ownership of a producing copper/gold mine, and three advanced development projects, it had simply fallen off the investor’s radar, forcing its shares down to a point where a fair value bid came across as overly generous.
Falling off the radar is something that could also be said about the handful of ASX juniors that have made Brazil their focus.
Their hope now is that OZ has alerted the broader market to the attraction of the less-crowded Brazilian mining market.
That’s the hope anyway.
The juniors still need to be reporting the type of exploration results that will pique investor interest whether they are from the back blocks of Western Australia, or deep in the Carajas — a premier mining province in Brazil and home to Avanco’s assets.
ASX-listed Brazilian explorer Centaurus Metals (ASX:CTM) is hoping to do just that in coming weeks from its Itapitanga nickel-cobalt project in the Carajas.
Itapitanga is a relatively newcomer to the Centaurus portfolio and is part of its move into the Carajas to look for game-changing discoveries after previous attempts over many years to break in to Brazil’s iron ore industry did not amount to much.
That is reflected in its modest 1.3c share price for a market cap of $27 million.
Itapitanga covers the southern extension of Anglo American’s world-class Jacare nickel-cobalt laterite deposit which is rated at 307Mt with grades of 1.3 per cent nickel and 0.13 per cent cobalt.
Recent reconnaissance drilling using a hand-held auger has confirmed similar type grades of the two battery material metals (cobalt has shot off to a staggering $US94,000 a tonne on looming supply shortages) at Itapitanga.
While a rudimentary technique, the auger program did identify good grade nickel and cobalt mineralisation from surface to “drill refusal’’ at an average of 6.5m depth, over a zone some 3.3km long and up to 500m wide, and open at depth.
The mineralisation is hosted within a weathered profile which is typically 50m deep in the region, as is the case at Anglo American’s Jacare.
Next drill results due in May
It is encouraging stuff – 29 of the first 33 auger holes finished in mineralisation. Centaurus will follow up the results with a reverse circulation (RC) drilling campaign due to start in the middle of next month. It will test the depth extensions of the mineralisation and provide a more reliable guide to the grade.
First results from the maiden 5000m RC drilling program are expected to begin to flow from early May, making for exciting times at Itapitanga for Centaurus shareholders.
Announcing the latest auger results, Centaurus managing director, Darren Gordon, said he was confident the RC program could extend the near surface mineralisation “significantly”, given the mineralisation profile of the Jacare deposit.
“With the EV [electric vehicle] space driving the cobalt price towards $US100,000/t and the positive outlook for nickel, we are looking forward to start delivering quality nickel and cobalt results from the RC drilling from early May,” Gordon said.
Like Avanco, Centaurus has been working its contact book from years of operating in Brazil to direct it to more opportunities in the Carajas.
Its other projects in the region include the Salobo West copper-gold project, and the Pebas copper project. Salobo West sits 12km from Vale’s big Salobo copper-gold mine.
When taken with Itapitanga’s regional proximity to Jacare, it’s why Centaurus likes to say its “hunting for elephants in Brazil”.
It might be better to change that to hunting for lowland tapirs, given we’re talking about South America, not Africa.