Big River’s big transformation on show at Borborema
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Having balanced up its share register, completed a transformational equity raising and with project funding discussions ongoing, Big River Gold enters 2021 as a project developer on the cusp of big things in Brazil.
It hasn’t always been that way for Big River (ASX:BRV), the owner of the immense Borborema gold project in north eastern Brazil, which has worked hard to put itself back on the map over the past few years.
The Definitive Feasibility Study on Borborema completed in December 2019 was based on a mineral reserve of 42.2 million tonnes containing 1.61 million ounces at 1.18 grams per tonne gold and delivered robust financial outcomes.
But the Board believed it could be improved upon and 2020 was spent doing exactly that.
“We had finished a definitive feasibility study at the end of 2019, but there were certain aspects we wanted to improve, so we worked intensely on those aspects, checked and recalibrated – we thought we did a pretty good job of it,” Big River executive chairman Andrew Richards told Stockhead.
“By July, we had really honed down the feasibility study, the capital and operating costs and timeframes.”
The updated DFS highlighted a project with start-up capital costs of US$90.7 million with US$11.3 million contingency, and which at a gold price of US$1550 would produce 729,400 ounces of gold over 10.2 years in stage one an all-in sustaining cost of US$713 per ounce.
The 2 million tonne per annum project had a pre-tax net internal rate of return of 64.7%.
It was here that the project finance conversations began, and so too did the challenges. Borborema’s excellent value proposition was hampered by the fact it was in Brazil during Covid, which prevented parties from conducting traditional due diligence.
Rather than sit and wait for financing to come along, Big River decided to undertake a capital raise – successfully bringing in $20 million through an oversubscribed placement to institutional and sophisticated investors.
Those funds would be used advance the project development while project finance was being secured. The opportunity was also taken at this time to consolidate its shares on an eight-to-one basis.
A major objective of the placement was to strengthen the shareholder register and this was achieved with several major North American and European funds taking part in the placement.
That included an $8 million cornerstone investment by highly experienced Canadian-based resource investor Dundee Goodman Merchant Partners – adding highly credentialled backing that Richards believes changes the perceptions around Big River and what it stands for.
“We’ve carried out that raise and concentrated on the registry, we’ve now got a lot of good people in there with good experience who have done a lot of due diligence coming in – a great sign for retail investors coming in,” he said.
“The perception of us is no longer as an Australian junior trying to develop a large project in another country, but really as a company which has the capacity to bring this project into production , and the funding and backing to show we are really serious about moving ahead.”
Dundee Goodman’s belief in Big River and Borborema was further evidence on Friday when the firm revealed it had increased its shareholding to 19.9% through an off-market purchase of 180 million shares from major shareholder, the Copulos Group.
The Copulos Group retains a 20% shareholding in Big River following the transaction.
“We view that as a very positive move. It demonstrates Dundee Goodman’s enthusiasm for the project and has resulted in an even more balanced share registry with strong financial capacity,” Richards said.
With $20 million from the raising up its sleeve and some serious institutional backing, Big River is now revisiting its vision for the project as a whole.
The company has always considered Borborema better suited to being closer to a 4Mtpa project, as opposed to the 2Mtpa throughput envisioned in its stage one plans.
The staged approach required substantially less upfront capital and importantly, considering Borborema’s semi-arid location, sufficient process water had been secured for the 2Mtpa option.
“The question our investors raised which was quite valid, ‘was the Stage 1 plan the best design to take us seamlessly to an expansion, and if we do an expansion earlier, what might that cost us in terms of capex and production disruption?’” Richards said.
“What we’re doing right now while we have the time and funds is reviewing our options.
“If, as we anticipate, we secure a greater supply of process water can we bring expansion plans forward? Have we got the best design now or should we spend a bit more and design differently now, so that when it comes time to do the expansion we don’t have to add wasted capex or lose production while we relocate and install equipment?
“If we can improve the design now, even if we have to spend a bit more, that will set us up better to flow seamlessly into an expansion – we’re looking at that currently.
“It’d be a case of tweaking – you are still looking at Borborema being a relatively low capital, low operating cost project.”
Big River commenced civil works ahead of schedule in the December quarter, and on the back of its significant turnaround, has been able to utter a word which hasn’t been heard at Borborema for some time – exploration.
“Now we can start doing more exploration work – some resource definition, drilling to improve the pit design for the expansion. We’ve got some really good high-grade material there which hasn’t been followed up,” Richards said.
“There are also some zones around 50m thick at depth which we want to confirm are indeed still thickening at a higher grade. We want to look at those high grade shoots just outside the pit.
“We’ve got about half a million ounces in the inferred category. If we can convert even part of that inferred resource, it may lead to an increase in our reserve above 1.61Moz – and that’s without additional exploration below the design of the pit, and also the plunging shoots out to the south.”
As it pushes towards project financing and ultimate production, with a solid registry and exploration activity ongoing, it’s clear that Big River is working towards something significant at Borborema.
“We’re not just a junior explorer anymore,” Richards said.
“We’re actually an international developer with serious backing from groups who follow their money into their investment. I think that’s the difference as we head into 2021.”
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.