Belo Sun stock sinks on another Brazilian interim suspension order

VANCOUVER (miningweekly.com) – The TSX-listed stock of Brazil-focused project developer Belo Sun Mining lost more than 18% on Wednesday morning, following an announcement that the Brazilian Federal Regional Court has issued an interim suspension order halting construction of the flagship Volta Grande project pending completion of an indigenous study.

The long-delayed Volta Grande, or Big Bend, openpit project was expected to start production in 2016 and become Brazil's largest gold mine. It is next to another controversial project, Belo Monte, which is designed to become the world's third-largest hydroelectric dam and has also been the target of lawsuits by prosecutors, who argue that the impact of the two massive projects on the habitat of two local Indian communities straddling the Xingu river has not been properly studied.

Belo Sun stated Wednesday that the order suspended the ‘Licenca de Instalacao’ (LI) until the Indigenous Affairs Agency of Brazil (Funai) had approved an indigenous study.

Belo Sun has completed indigenous studies on the two closest indigenous lands, located 12 km and 16 km away from the Volta Grande project, which was accepted by the Secretary of State for Environment and Sustainability. According to Brazilian regulations, indigenous studies are required if the indigenous lands are located less than 10 km from the project; however Belo Sun completed an indigenous study according to best practices related to indigenous affairs. 

The interim decision by the court was granted without hearing arguments from the state of Para or from Belo Sun. The company believes that following a review of the previously completed indigenous study, the court will reconsider its position. 

"We are disappointed by this second interruption to our construction plans; however, these hurdles are expected and we will work through them. We are working with our local Brazilian counsel to have the decision of the court overturned on appeal. We are working diligently on the appropriate steps to reverse both decisions,” president and CEO Peter Tagliamonte said.

Belo Sun received the LI early February, prompting it to place orders for long-lead items such as the semiautogenous grinding mill through FLSmidth. However, the Agrarian Court of Altamira issued a temporary 180-day injunction halting certain work related to the LI to provide time for the relocation of certain families living in an area in proximity to the Volta Grande project.

The relocation plan approved in the LI provided a programme for families living near the project site, allowing them flexibility to decide to relocate at a time of their choosing, with expenses covered by the company.

Belo Sun’s major shareholders include Agnico Eagle Mines (about 19%), Sun Valley Gold (about 18%) and Canadian Gold Funds (about 19%).

Belo Sun has completed a March 2015 feasibility study highlighting a straightforward openpit mine, with an estimated average output of 205 000 oz/y of gold over 17 years, with all-in sustaining costs of $779/oz.

The project will have a 17-year mine life with the first decade of production expected to average 268 000 oz/y of gold.

Based on a gold price of $1 200/oz, Volta Grande has an after-tax net present value, at a 5% discount rate, of $665-million, and an internal rate of return of 26%.

Mineral reserves stand at 3.8-million ounces grading 1.02 g/t, with measured and indicated resources totalling five-million ounces grading 0.98 g/t and inferred resources at 1.1-million ounces grading 0.9 g/t.

Commercial production is now slated for 2019.