Gold and silver exploration companies that develop economically viable projects will be the big winners in the years ahead. However, the number of exploration and development companies that will survive is estimated to be between 10 and 20 percent, according to expert Rick Rule. Stock picking becomes critical.
Casey Research created a framework for investors, The Eight "P's" of Resource Stock Evaluation. This framework is based on the analysis of eight criteria which aid in evaluating natural resource companies and measuring their quality as an investment.
We created a brand new section on GoldSilverWorlds that is dedicated to apply this "Eight P investment model" to the most promising gold and silver mining companies. The first company to be analyzed is Brazil Resources Inc. (TSX.V: BRI, OTCQX: BRIZF). Brazil Resources is a publicly listed gold exploration company which is focused on the acquisition and development of projects in emerging gold districts located in Brazil and other South American countries.
What follows is the short version of an in-depth analysis. The full version of the article is to be found here "Brazil Resources Inc - Gold Exploration & Development Mining Company"
(1) People: The management team's track record of success
Brazil Resources' management team has held senior management positions with world class mining companies such as BHP Billiton, De Beers, Kinross, Rio Tinto and Teck. Combined, they have an abundance of experience, particularly in South America having discovered and developed over 10 Moz in Brazil.
(2) Property: Results of drilling programs and ownership of deposits
The strategy of Brazil Resources is to grow by acquiring advanced-stage gold projects, with proven resources, at the right price. Four of the company's projects are located within the Gurupi Gold Belt, where significant gold deposits have been discovered over the last few decades.
The Cachoeira Project is the company's flagship property. The Cachoeira project has an NI 43-101 indicated mineral resource of 12.5 million tonnes at 1.11 g/t Au or 446,000 ounces of gold, and an inferred resource of 5.4 million tonnes at 1.27 g/t Au, or 221,300 ounces of gold. Brazil Resources' team was able to acquire the Cachoeira project for roughly $18/ounce in the ground, where historical valuations for gold in Brazil range between $50-$60/ounce. The gold at Cachoeira is near surface and past and present work confirms open pit potential.
Furthermore, the company has significant exploration upside with its Artulandia project, located in the central part of Brazil in Goais state.
(3) Phinancing: The financing to achieve the next phase of objectives
BRI has a strategic alliance with the Brasilinvest Group, which currently manages over $6 billion within Brazil and has a track record of attracting foreign investments, having already attracted investments in excess of $16 billion. The alliance between BRI and Brasilinvest Group should prove to be valuable for future financing opportunities and sets the company apart from other junior miners.
In May 2011, 3.8 million shares were offered during the initial public offering. The IPO was completed at $0.65 per share, as the company raised $2.5 million. A second round of financing was completed at a share price of $1.10. Both financings did meet the intended target.
The company currently holds a cash position of $7.2 million, as of August 31 202, and no debt.
(4) Paper: The owners of the shares
30% of shares are held internally by management and 35% are held by institutional investors:
- The KCR Fund (Rick Rule, Doug Casey and Marin Katusa), are the largest shareholders of BRI, owning 16% of the company
- The Brasilinvest Group, one of the largest private merchant banks in Brazil, owns roughly 12%.
Stock price performance since IPO vs. junior mining peers
Full version of the article
Read all the details of the first four chapters, as well as the next four chapters, in the full version of the article: "Brazil Resources Inc - Gold Exploration & Development Mining Company"