Exploration in Brazil’s Tapajos district heats up again (March 09, 2011)

Vancouver – In the wake of Eldorado Gold‘s (eld- t, ego-n) mid-2010 takeover of Brazauro Resources and its 2.1-million-oz. Tocantinzinho gold project, several Canadian juniors have ramped up their exploration efforts nearby in the hopes of finding the next big deposit in Brazil’s promising Tapajos district.

The area gets its name from Brazil’s Tapajos River, which runs for 1,900 km through hot and humid valleys before pouring into the Amazon River.

The international mining community has been exploring the area on and off since the early 1990s, after as many as 500,000 garimpeiros rushed there in the 1970s and 80s to exploit extensive areas of newly discovered alluvial gold. According to Houston-based TriStar Gold (tsg-v), unofficial reports estimate that up to 30 million oz. of gold have been produced from the area without the presence of a single major mine.

In the 1990s, majors such as Barrick Gold (abx-t, abx-n) and Rio Tinto (rio-n, rio-l) headed into the heart of the Amazon to find the bedrock sources of the alluvial gold in Tapajos. Rio Tinto was the most successful, discovering four separate deposits totalling 3.3 million oz. along a 250-km-long, northwest-southeast trend.

That same trend is home to Brazauro Gold’s 2004 discovery of the Tocantinzinho deposit. The company intersected 170 metres of 1.84 grams gold per tonne in its first drill program on the property, and the results sent Brazauro’s stock soaring to a high of $1.93 from 40¢, prompting yet another rush of activity, this time by the juniors.

One of those explorers is Magellan Minerals (mnm-v), owner of the Cuiu Cuiu project, where drilling recently intersected 220 metres of 2.02 grams gold. Magellan is led by president Alan Carter and director Dennis Moore, who credit themselves with being the actual discoverers of Tocantinzinho. In 2003, they sold Brazauro the rights to the project when it was just a grassroots exploration property. Carter and Moore split US$465,000, 2.6 million shares and a 3.5% net smelter return royalty in exchange for the initial 83 prospecting licenses. They eventually started their own Brazilian gold explorer, Magellan, which they took public in 2008, raising $11 million.

In June 2010, after several more years of exploration and the addition of the nearby Agua Branca and Piranhas properties, Brazauro was taken over by Eldorado Gold for $1.33 a share, or $122 million. A condition of the deal allowed Brazauro’s management, led by chairman and CEO Mark Jones, to first spin out a new company, TriStar Gold, which kept Brazauro’s other Brazilian gold projects.

In late 2010, TriStar also acquired the Castelo dos Sonhos property, which Barrick explored in the mid-1990s. Along with surveying, sampling and trenching, Barrick completed 23 diamond drill holes there totalling 2,027 metres, which TriStar’s management nevertheless believes was “insufficient to adequately test such a large property,” particularly two large soil anomalies.

Other companies exploring in the Tapajos district include Vancouver-based Brazilian Gold (bgc-v), which bills itself as one of the largest landholders in the area with 10 projects totalling 2,250 sq. km. The most advanced is Sao Jorge, which hosts a National Instrument 43-101-compliant 8.3 million indicated tonnes grading 1.3 grams gold and 12.6 million inferred tonnes at 1.1 grams gold, or a total of 801,000 oz. contained gold, using a cut-off of 0.5 gram gold).

Like many Tapajos properties, Rio Tinto got there first, drilling 26 holes between 1993 and 1998. Brazilian Gold currently has two drill rigs turning on Sao Jorge, and hopes to complete a preliminary economic assessment for it some time in the coming months. It is also drilling with two rigs on the nearby Rio Novo property, after completing 1,188 metres of drilling on a third property, Boa Vista.

Lastly, Vancouver’s Kenai Resources (kai-v) has raised $6 million in a February private placement to option the Sao Chico gold project in Tapajos and pay for exploration. The company recently sampled 1 metre of 348 grams gold from Sao Chico’s historical underground workings and hopes to drill 3,500 metres there later this year.