Brazil-focused Crusader Resources features high-profile board

Investors in North America may not be familiar with Aussie gold junior Crusader Resources, but investors in Australia would have heard of the company’s largest shareholder and non-executive chairman, Stephen Copulos, a wealthy businessman with interests that span everything from manufacturing and property development to food and hospitality.

Copulos owns 23.8% of Crusader’s stock and has backed the Brazil-focused junior since its earliest days.

“He’s not a mining guy. He’s a businessman. And he owns a variety of hotels and retail and KFC franchises, and a whole lot of things in Australia and the United States … he is individually wealthy, supportive and becoming more interested in the mining scene,” Robert Smakman, Crusader’s managing director, said during a presentation at the Precious Metals Summit in Beavercreek, Colo., in September.

North American investors, however, might be familiar with the company’s non-executive director, Jim Rogers, an Alabama-native, author, financial commentator, adventurer and international investor.

Rogers is perhaps best known for cofounding the Quantum Fund, a global-investment partnership that over its first 10 years gained 4,200%, after which Rogers retired at 37 to manage his own portfolio and write books. He wrote his first title, Investment biker: On the road with Jim Rogers, after a 100,000-mile motorcycle trip across six continents from 1990–1992. Other books were to follow, including Adventure capitalist: The ultimate road trip, and Hot commodities: How anyone can invest profitably in the world’s best market.

Rogers has also taken a shine to Brazil.

“Unfortunately he sees it as a bit of a basketcase, and that’s where he likes to invest,” Crusader’s Smakman explained. “He likes to take a long-term view. He likes gold, and he likes Brazil … he’s agreed to join the board, which is quite good for us, and opens a few more doors in North America.”

For Smakman, however, who has lived in Brazil for the last decade, non-executive director Mauricio Ferreira serves one of the most important functions on the board. The senior executive — who spent 26 years within Vale (NYSE: VALE), and in the 1990s was involved in the exploration and development of three gold mines in Brazil — is of particular importance to Crusader in-country.

“He’s built businesses within Vale itself, billion-dollar businesses … and he brings me a lot of projects. He opens a lot of doors, and his real role that I have him doing for me is explaining Brazil to the rest of the board, because sometimes the country can be a little confounding.”

Crusader is advancing two gold projects of its own: Borborema in northeastern Brazil; and Juruena, in central Brazil, on the southern fringe of the Amazon basin towards the western end of the Juruena-Alta Floresta gold belt.

The company acquired 100% of Borborema in 2010. The asset had been mined as an open pit by Brazilian businessman Eike Batista in the 1980s, and was the country’s first heap-leach mine. But Batista didn’t keep it for long.

“Once he reached the fresh ore, at 30 metres deep, he didn’t get any recovery, and he left the project at that point,” Smakman said. “It has been fully licensed ever since for heap leaching on a small footprint, and that licence has been maintained.”

Crusader bought it from a private group that had inherited the project. During 2011 and 2012, Crusader drilled 90,000 metres at Borborema, completed a prefeasibility study in 2011 and a bankable feasibility in 2013.

“We were doing the bankable feasibility study during the falling gold price,” Smakman said. “It was a big capital hurdle for us at the time. We put the feasibility on ice at that point, so we never released those numbers, we kept it as a draft.”

Borborema has a JORC-compliant proven and probable reserve of 42.4 million tonnes grading 1.18 grams gold for 1.61 million oz. gold. Measured and indicated resources stand at 51 million tonnes grading 1.14 grams gold per tonne for 1.87 million oz. gold, and inferred resources are 17.6 million tonnes at 1 gram gold for 0.57 million contained oz. gold.

“There are two main lenses, one is a bit shallower than the other, which means we have quite a bit of optionality in how we go ahead and mine it,” Smakman said. The shallower lens contains most of the reserve (26 million tonnes grading 1.14 grams for 970,000 oz. gold).

The company envisions annual production of 120,000 to 130,000 oz. gold a year, with a throughput rate of 3 million tonnes per year.

Crusader is reevaluating the deposit’s metallurgy.

“One of the criticisms that came back from the document [draft bankable feasibility study in 2013] when it was reviewed by the banks was that the metallurgy was all done in-country, it was not done in an ISO lab, and they wanted us to redo it,” Smakman noted. “During 2015 we drilled another 1,000 metres of PQ core and sent it to Australia.” The sample material is at the ALS lab, and the company is awaiting the results.

“At this point we have no concerns, there are only opportunities that we can improve the economics from the advanced metallurgy, but it’s just work we need to do.” He adds that there is only a small part that remains oxide — 5% of the entire resource and reserve — and it has been well studied.

Smakman describes Borborema as a tabular orebody with lenses that have a shallow plunge south. “It dips 40 degrees, which is perfect for an open pit,” he says.

“They really just scratched the surface of this orebody,” Smakman added, referring to Batista’s tenure in the 1980s. “We have to do a bit more than that.”

Borborema is 20 km from the mining town of Currais Novos, which Smakman describes as the capital of the tungsten mining industry in South America. The town has a population of 40,000 and a technical school for miners, which could provide skilled workers.

The project is 140 km from the port city of Natal, where an international airport has flights to the U.S. and Europe. It also has access to cheap hydropower, although it will have to build a 6 km spur.

“The town is important to us because one of our primary sources of water will be coming from there,” he said. “They have no wastewater treatment at all, they put it all into the river. The agreement we have reached with the local mayor is that we will build him a wastewater treatment plant and pump that water to site, and that will create our main water source for the project.

“We own 100% of the project, we own the farm under the project and it’s really quite a vanilla site,” Smakman said.

The area’s other benefits include regional tax concessions (Crusader’s overall tax rate will be 15.3%) and government mineral royalties, which are low at 1%.

Crusader has completed all its drilling for the updated bankable feasibility study, which it hopes to finish over the next couple of months. It has worked with the government to convert the valid licence for heap leaching into a carbon-in-leach and carbon-in-pulp permit, which it expects to receive within two months.

“We’ve been backwards and forwards with them for the last 18 months, and we’re getting close to that final point,” Smakman said.

The company expects to have a full feasibility study completed in the second quarter of 2017, and at that point will look at its financing and development options. It is also working through environmental permits.

“It’s obviously a big project and something we’ve worked on for a number of years, and we’re pretty excited about it.

“Borborema is a significant development project for us,” he continued. “We’ll move it forward until we get to a natural decision — whether we develop it, whether we look for a joint-venture partner — it’s a project that has great potential.

“It’s close to getting permitted, and it’s certainly got the size to interest the mid-tiers.”

The company’s Juruena high-grade gold project, meanwhile, continues to excite the management team, despite its small size.

The company acquired the project in May 2014 (“in the depths of the gold doldrums) from a Canadian junior for $650,000, and milestone scrip payments.

“We were looking for a project that we could develop at really low gold prices and to do that we wanted something with grade,” Smakman said.

Smakman noted that the vendor had another geological model, and were looking for a gold-copper porphyry.

“They spent a lot of money. They did a lot of drilling with great geochem and great geophysics, but were unsuccessful in finding a porphyry. It doesn’t mean that there is not one there,” Smakman said. “But the work they did was to a high standard. They built a great camp and did a lot of drilling, which we’ve used a lot along the way.”

Crusader is following another approach, and has analyzed a huge gold-in-soil anomaly that the previous owners produced using auger drilling and careful soil geochemistry. The gold anomaly is 8 km long and 4 km wide.

“You can see it’s quite an extensive soil anomaly … it is pretty real, but within that anomaly, there are a whole number of small operations that appear to be a series of gold deposits within a district-scale area.”

Crusader started drilling each one, in turn. In 2015 it drilled 10,000 metres on four targets and delineated three inferred resources. The first were two  high-grade targets — Querosene and Dona Maria — and the third was called Crentes.

Querosene has a JORC-compliant inferred resource of 263,500 tonnes grading 12.3 grams gold for 104,100 oz. gold; Dona Maria contains 196,300 tonnes of 11.8 grams gold for 74,700 oz. gold; and Crentes has 846,000 tonnes grading 2 grams gold for 55,100 oz. gold.

This year the company has infill-drilled nearly 8,000 metres, and plans to upgrade the resources and complete a scoping study before year-end.

Smakman noted that artisanal miner “garimpeiros” have been active in the area since the 1980s, and have produced an estimated 500,000 oz. gold.

The Australian geologist says Juruena would mine these targets at the same time, because in Brazil you can use a trial mining permit. “It allows you to get into production quickly and has restrictions on tonnage,” Smakman said. “These two targets — Queresone and Dona Maria — are 1 km apart, and they are on separate tenements … we are allowed to go out and ask for trial mining licences on each one.”

The idea is to build a central processing facility — something in the order of 100,000 or 150,000 tonnes per year, that are “quite small and quite cheap to build” — and to “truck from individual deposits to that facility.”

Crusader has reported that a trial mining licence had been approved for the Querosene, which the company noted in a press release “demonstrates our team has a strong relationship with the Department of Mines.” The company also released more drill results from Querosene, including 8.3 metres grading 23.71 grams gold from 87 metres, and 1.5 metres grading 76.69 grams from 78 metres.

Depending on the results of the scoping study for Juruena, Smakman said the company will look to build and get the project into production in 2017, “albeit at a modest run rate initially, hopefully growing as we build up the resources on the different targets.

“Juruena is exciting,” he said. “We’ve added a lot of value to it already.”