Lavras Gold Corp (TSX-V:LGC) is a Toronto-based company exploring the multi-million-ounce potential of the Lavras do Sul (LDS) gold project in southern Brazil.
With approximately C$10 million in cash and a resource base starting at a million ounces of gold at LDS, Lavras expects to realize the potential of the project as a multi-million-ounce gold district by applying an integrated exploration approach to its 22,000-hectare land position.
The company is a spin-out of Amarillo Gold Corporation which was purchased by Hochschild Mining PLC in March 2022. In addition to the LDS project, Lavras acquired a 2% net smelter return royalty on certain exploration properties outside the Posse Gold deposit in Mara Rosa, Brazil, from the Amarillo spin-out.
READ: Lavras Gold achieves million ounce milestone for LDS project in Brazil with Cerrito prospect resource
LDS features historical gold workings dating back to the 1700s. Exploration to date suggests that the project is primarily an intrusive hosted gold system likely of alkaline affinity with epithermal and porphyry characteristics, with the scale of known gold showings on par with other large-scale alkaline gold systems.
Lavras’ CEO Michael Durose told Proactive that the company was working to de-risk the LDS project from both the exploration side and permitting side as the company pursues increased investor visibility through its recent listing on the TSX-V exchange.
An exploration geologist by training with a master’s of mineral economics, Durose has worked as a financial analyst for more than 25 years, with a focus on gold and precious metals. Having been a member of Amarillo’s board from 2009 to 2014, Durose returned to the company in 2019 to supervise a number of exploration projects for the company ahead of the spin-out of Lavras.
“When the spin-out came, they wanted someone with an exploration background [to lead the company] because that’s the stage of this project in order to take it to the next level,” Durose said.
Lavras do Sul’s potential
Per two NI 43-101 compliant mineral resource estimates, Lavras has an estimated one million ounces of gold available from two prospects - Butiá and Cerrito - at the LDS project. At the most developed prospect Butiá, mineralization generally extends from the surface to a depth of 300 metres (m) with a width of 15m to 20m, according to the resource estimate.
Durose told Proactive that the million ounces of gold the company has defined to date at LDS were from just two of 23 known gold showings throughout the project's 10 kilometre (km) diameter intrusive gold complex.
“We think we’ve got a multimillion ounce exploration project, which is quite unique in Brazil, so we’re just working away to prove that up,” he said. “We know we’ll be adding to that system, it’s just a question of what the grades are, what size they are, what the geometry of those deposits are, and ultimately what the economics is going to look like.”
Underway at the site is a 12,000m drilling program with two drills on site. Durose said the company is testing three targets - the Zeca Souza, Matilde, and Matilde Extension prospects - with the goal of getting to an additional two targets by the end of 2022. “Conceptually, what will likely happen at Lavras is that there will be a central processing facility and we will feed into this mill from the various deposits in the district,” Durose explained.
Following the exploration stage, Lavras is open to moving the project to the next level itself, however, Durose noted the company was not married to the project, so it was also open to leaving that up to the right group to take the project forward. “We’ll see what the share price is, we’ll see how investors support us and make our decisions accordingly,” he said.
Working in Brazil
The LDS project is located in the state of Rio Grande do Sul in southern Brazil. The site, named for the historical gold mining town of Lavras do Sul, is a four-and-a-half-hour drive southwest of the port city of Porto Alegre. To Lavras’ advantage, the project is supported by excellent infrastructure, including tarmac roads, water, and power.
Durose, who has travelled extensively to mining and exploration projects throughout Central and Latin America throughout his career, said that he ranked Brazil as the most advanced economy in the regions. “It's very sophisticated and on the mining side, they’ve got a strong mining culture,” he explained, noting that it was important to have the right people in place on the ground to push things along.
READ: Lavras Gold bolsters leadership team in Brazil with two key appointments
Two members of Lavras’ leadership team are based in Brazil: country manager Paulo Serpa and project geology coordinator Thiago Schlichta. Serpa is a Brazilian national with more than 35 years of experience developing mines and numerous contacts within the mines ministry of Brazil - advantageous to Lavras when it comes to permitting - and Schlichta has previously worked as an exploration manager for Anglo Gold Ashanti Limited at Serra Grande, Brazil.
Serpa is moving to the town of Lavras do Sul, a small farming town of 7,500 people, with Schlichta already having made the move, allowing the pair to be located as close to the project site as possible.
The investment case for gold
Durose, drawing on his experience as a mining analyst, said the investment thesis for gold was that it is a portfolio diversifying asset. “Gold’s been in a bear market you could argue for 11 years, since 2011,” he explained. “These cycles always change and the sentiment is starting to change, so I think the prognosis for gold is quite constructive in the near term.”
He noted that gold was essentially a negatively correlated asset class. “When stock markets go up, gold goes down, and when stock markets go down, gold goes up,” he said.
On Lavras in the context of gold’s broader outlook, Durose said the company as a junior explorer would move with the gold price as money flows in and out of the sector. “Hopefully, we’ll have catalysts that will supersede just the gold price movement which will ultimately be good drilling results to create value for stakeholders,” the Lavras CEO concluded.
Contact the author Emily Jarvie at emily.jarvie@proactiveinvestors.com
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