Brilliant Resources looks to shine in Equatorial Guinea

There are few countries in the world without active mineral exploration, but before Brilliant Resources (BLT-V) showed up, Equatorial Guinea was one of them.

The small, oil-rich, west-central African country wedged between Cameroon and Gabon has seen a spattering of survey and sample work but little modern exploration and, according to the country’s ministry of mines, has never had an active mine.

Brilliant Resources is looking to change that through a unique deal with the government. The company is fronting the $10-million cost of a geophysical survey covering the entire 28,000-sq.-km country, and in return gets to pick 15% of the land surveyed for its own exploration.

“This is an interesting initiative we’ve got,” Sean Mager, president and chief operating officer, says by phone. “It’s a state-of-the-art geophysical survey and this is going to give [the government] a tool that they can use to promote their country, in terms of investment in the mining sector.”

For Brilliant, the deal gives it a very real first-mover advantage, picking the best anomalies that show promise for gold, base metals, diamonds, bauxite and pegmatite minerals, iron ore, platinum group and even petroleum. But the deal also carries a good deal of geological and political uncertainty.

“It’s a risk because you have to secure the rights to make it worthwhile,” Mager affirms. “You’re hoping that the anomalies that turn up will make it worthwhile.

“The only surprise has been the weather: it caused a major delay. We were flying every possible day and it still took a year to complete the survey.”

But with the survey done, the company is now identifying the areas it wants.

“It’s fairly straightforward, but this is the acid test, where we secure the rights,” Mager says, adding that so far dealing with
the government has been quite good. He points out that, owing to significant investment in the country’s off-shore oil industry, the government already has extensive experience dealing with resource companies.

As to what the company found in the survey, Mager won’t release much information until the rights are secured and everything is settled with the government. The company is hoping to release details in the coming months.

“What we’re finding in the results is that we won’t have trouble selecting 15 percent with good quality targets,” Mager says. “That’s a great outcome, even just to say that.

“The geophysical survey is an incredibly useful tool for this area because it’s thick, equatorial jungle,” Mager sadds. “The actual access on foot will be daunting, so we narrow this down to our anomalies before we do the ground work.”

Of course, while Equatorial Guinea is not in the news much for its mineral prospects, its government has been in the news regarding possible shady dealings with the country’s new-found oil wealth. 

President Teodoro Obiang Nguema Mbasogo has ruled the country since taking power in a coup in 1979, and the country has consistently ranked high on corruption and human rights violation indices.

With the country producing 322,700 barrels of oil a day, the gross domestic product reached US$23.82 billion on a purchasing power parity rate in 2010, which, with an estimated population of around 700,000, works out to US$34,824 per capita. But poverty remains widespread, while 2.2% health expenditures of its GDP puts the country third last in the world behind only Burma and North Korea. 

Mager points out that the government is investing in roads, airports, education and health care, but that the oil wealth came quite recently and the country is still adapting to the change.

“They’re going from no infrastructure to speak of, to quite modern in places,” Mager says. In more rural areas the living standards still have a ways to go, but Mager says “that’s not a five-year fix; that takes some time.”

Meanwhile, the government is trying to diversify the economy away from its reliance on oil, hence Brilliant’s involvement in the country. Since becoming active in the country Mager says he has not encountered any corruption.

With the long-lead time on the survey, and with no news to report and very little promotion in the interim, Brilliant’s stock price has slowly eroded from around 53¢ a year ago to around 12¢ today. With 149.5 million shares out the company’s $17.2 million market capitalization is just a little above its $16 million in cash-on-hand.