I see gold in your future

Despite its gold-rich soil Brazil was never capable of exploring the country's gold reserves at its fullest. From discovery in 1500 up to 1882, the year of the Brazilian independence, official gold production was at a mere 2.69 tons per year. Between 1822 and 1889, the imperial period, this number improved slightly to 2.99. Production exploded in 1995 with 75 tons but the better is still to come.

Hélio Shimada

Brazil is now experiencing a new gold rush. Many important world-class mining companies are disputing exploration areas in its territory. Brazilian mining companies owning legal rights to explore potential areas (exploration claims) are being aggressively asked to sell them or to accept partnerships. Some local mining specialists consider the situation the beginning of a new era in which Brazil will finally develop all of its potential for gold production. Experts believe that there still is a huge potential of undiscovered gold to be tapped. All that optimism, however, should be tempered with some less upbeat reality.

Brazil has been a gold producer since the 1500's when gold-bearing veins were discovered by the Portuguese close to the Jaraguá Peak, a proterozoic quartzite mountain at the outskirts of São Paulo, now the biggest city in South America. During the colonization, the search for gold in the newly discovered lands was stimulated by the Portuguese Crown, as Portugal, highly dependent on imports from England, had to equilibrate its trade balance.

Adventurers known as bandeirantes, leading the bandeiras (literally, flags), expeditions for gold exploration, were responsible for many important discoveries, mainly in the states of Minas Gerais, Goiás and Mato Grosso. The majority of the new gold discoveries were shallow deposits, mineable by primitive methods. The bandeirantes also hunted Indians to sell them as slaves and contributed to define the present Brazilian western border, formerly limited by the Tordesillas Treatise, signed between Portugal and Spain. The bandeirantes pushed the border thousands of miles to the west.

Immediately after the first discoveries, Portugal reserved to itself all the rights over the "gold veins and any other metal." In 1603, it was established the Regimento das Terras Mineiras do Brasil (Statute of Brazil's Mining Lands), the first mining code in the Americas. According to that rule, metal mining was allowed to all interested people as long as they paid one fifth of the production to the government. Mining land could also belong to the miner through the payment of taxes.

THE FIRST GOLD RUSH

In 1690, an important gold district was discovered in Minas Gerais and it was founded the village of Vila Rica, presently a historical town named Ouro Preto. This discovery resulted in intense human migration for many years, increasing the colony's population as a whole. That was the first gold rush in the country. After 1764, gold production experienced a decline. The causes were the exhaustion of easily mineable deposits and the lack of mining techniques and financial resources to invest in profitable mining of deep veins. The total registered gold production of the colonial period (1500 to 1822), was about 866 tons, mainly produced between 1735 and 1754, giving an average of only 2.69 tons per year.

After the independence from Portugal, in 1822, the gold production continued its decline. Then, starting in 1824, the Imperial Government, convinced of the necessity of stronger financial and technological resources to save the mining industry, allowed foreign companies to mine gold. Among several companies installed in Brazil, mainly of English origin, only two were successful: the Imperial Brazilian Mining Association, operating the Congo Soco Mine, and the St. John del Rey Mining Co., operating the Morro Velho Mine. Those two mines produced more than the half of the gold mined in Brazil between 1820 and 1860. The total amount of gold produced during the imperial period (1822 to 1889) was about 200 tons or an annual average of about 2.99 tons.

The production between 1889 and 1977 was mainly represented by mines in the Minas Gerais state, as Morro Velho, Passagem and smaller ones like Raposos, Faria, Bicalho and Bela Fama. The total of this period was about 363 tons, with a still low average of 4 tons per year. This estimate did not consider the production of newly discovered garimpo areas in the southwestern state of Pará. Garimpos are gold or precious-stone-producing areas mined by private diggers, known as garimpeiros.

Those garimpos were characterized by shallow and very rich gold bearing placer deposits associated to flood plains in the Tapajós river basin, mainly along its tributaries Jamanxim, Novo, Cuiú-Cuiú and Crepori rivers. Although hundreds of garimpeiros were working there, their production only began to appear in the statistics after 1977, when it became important.

A SECOND GOLD RUSH

Since 1967, mining is ruled by the Código de Mineração (Mining Code). During the 1970s, the Brazilian government invested heavily in basic geological survey over almost all of the country. The result was the discovery of promising geological environments for gold and many other mineral resources. Typical gold-bearing units, the so-called greenstone belts, an association of basic-ultrabasic igneous rocks and metamorphic rocks of Archean age (older than 2.5 billion years) were identified in many regions.

Exploration projects carried out in some of those areas resulted in now important gold mines such as Jacobina and Fazenda Brasileiro (Bahia state), Crixás (Goiás state), São Bento (Minas Gerais state) and Igarapé Bahia (Pará state) among others. Gold mineralizations related to younger geological environments as some Proterozoic units (2.5 billion to 570 million years old) were also found. Such was the case of Novo Astro (Amapá state) and Morro do Ouro (Minas Gerais state). At the same time, the production from garimpos of the Tapajós region quickly increased after 1978, pushed by the elevation of gold prices that went up to $800 a troy ounce. It was like an explosion that brought out the second gold rush.

In the early 1980s, three new garimpo areas in the Eastern state of Pará started to produce gold: Cumaru, Tucumã and the world-famous Serra Pelada. Serra Pelada was in Vale do Rio Doce Company's claim, a state-owned property and the Government then made a serious mistake, illegally allowing the garimpeiros to keep the area and to make a predatory mining. As a consequence, the garimpeiros, greatly influenced by some politicians and illegal entrepreneurs, felt in the right to violently invade any gold claim, mainly in the Amazon region. Serious conflicts have been common in the area and, unfortunately, there are now very few official guarantees against this situation. Garimpos, where hundreds of tons of mercury were dumped into stream without any control, also represent an environmental disaster to the country.

Between 1978 and 1990, about 781 tons of registered gold were produced and the garimpeiros were responsible for 86% of that amount. The average jumped up to more than 65 tons per year. It is believed, however, that the real production was greater than the registered one, as smuggling and tax fraud were common. Some of the hidden gold was probably used to clean money from drug trafficking.

NO TO FOREIGN COMPANIES

In 1988, a new Federal Constitution was written by Congress adopting an extremely nationalist position regarding the mineral resources. The new Constitution only allows mining to Brazilian companies, owned by Brazilian citizens, or by foreign citizens living in Brazil. Foreign mining companies were simply prohibited from mining in the country, except in the case of minority interest in Brazilian companies. This restriction, allied to the world recession, causing the reduction in the consumption of mineral products, had an almost catastrophic effect on the Brazilian mining sector.

Until 1988, the sector had annual investments of about $200 million, mainly from multinational companies. In 1993, that investment had dwindled to a mere $40 million. Despite the good geological potential of the country, many well-prepared mining professionals as geologists, mining engineers and technicians lost their jobs, and some mining equipment industries and mineral analysis laboratories had to close their doors. At the same time, the garimpos have experienced an accelerated decline due to the exhaustion of shallow and rich placer deposits and also to the reduction in gold prices. Even the once famous Serra Pelada became a flooded pit in the jungle. The gold production profile has also changed since 1992. The organized mines were responsible for 49% of the 377 tons produced in the last four years (1992-1995) and their participation continues to increase.

THE THIRD GOLD RUSH

More recently, some politicians started to realize their mistake. In 1995, an ammendment to the Constitution has once again allowed the mining by foreign companies. This fact, allied to the recent economical and political stability, was the origin of the third gold rush. Many important foreign companies such as TVX, Barrick Gold, RTZ, Anglo American and Noranda are now investing in Brazil. Some of them were already installed in partnerships with local companies. There is also the presence of several junior companies, mainly from Canada, searching for promising gold targets aiming for future partnerships with bigger companies.

Airborne geophysical companies are flooded by contracts with target searching companies and mining professionals are being contacted for jobs. Gold production in 1995 was 75 tons, the seventh largest in the world. However, there is a potential to produce about 200 tons at the beginning of the next century if the investments are kept at an annual average of $200 to $250 million.

Despite all the euphoria related to a new gold rush, there are still many structural problems in the country embarrassing the development of the mining industry. One of these hurdles is the question of garimpeiros' invasions, yet unsolved due to the lack of the Union's political will. Another obstacle is the complexity of the Brazilian taxation system which is something hard for foreigners to understand. The government is trying to change that system as a whole, but things are going in a tortoise pace. The Código de Mineração is now being revised by Congress in order to adapt it to the absence of distinction between national and foreign capital, but it is also being conducted very slowly. Over all, there are many political interests and even blindness. Considering the recent and typical past of a so-called banana republic, there is also the fear of sudden changes in the economical, political and legal rules. We sincerely hope such fear is baseless.

Hélio Shimada is a geologist at the Intituto Geológico in São Paulo, Brazil. You can E-mail him at hshimada@igeologico.sp.gov.br

FOR MORE INFORMATION

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