Zinco do Brasil, Inc. ("Zinco") is a publicly listed company (Ticker: ZNBR). The Company recently acquired 99.9% of Zinco do Brasil Mineracao Ltda., which owns 30 mineral rights for a total of 44,665 hectares in the Brazilian state of Minas Gerais. The mineral rights are split between two projects: "Salobro", which consists of 2 mining rights for an area of 1,685 hectares, and "Gorutuba" with 28 mining rights for an area of 42,980 hectares.
The Company expects the Salobro reserves to increase by 30 - 50% during the exploration drillings scheduled for Q2 and Q3 of 2013 to prove up reserves to 43-101 standard. The Salobro project is expected to go into production in Q1 of 2016 and to produce in excess of 30,000 metric tons of Zinc and 5,000 metric tons of Lead per year during the mine-life of 10 years (13 - 15 years after reserve increase of 30 - 50%), with an IRR of 24 - 71% (pending Zinc and Lead prices) and a payback of 1.4 to 3.5 years from commencement of operation.
The Gorutuba project consists of 28 mining rights containing an area of 42,980 hectares in total. Geophysical interpretation of the area was developed based on data gained from airborne geophysical survey conducted by the State of Minas Gerais. The study revealed that the geophysical characteristics of the Salobro deposit are highly correlated with seven targets within the Gorutuba project area, showing similar anomalies like Salobro. The extent of the seven selected targets is 17 km (compared to 2.35km of Salobro) and a drill program is scheduled to start during 2013 to confirm each deposit. Initial geochemical studies indicated other anomalies of Copper and Gold within the Gorutuba projects/targets.
Zinc and Lead Outlook & Market
The near term outlook for zinc consumption remains positive despite a global economic slowdown in most countries and particularly in Europe, with forecast growth of 5.2% in 2013 and 5% in 2014. The Asian economies are key to the moderate growth forecast over the next few years.
The expected closure of many large mines over the next several years and the lack of major new mines in the development pipeline continue to provide a very bullish intermediate to long term outlook for zinc. The closure of several large mines are evident in the reduced growth in mine output in 2014 and a shift from oversupply to supply shortfall.
The Supply Challenge for new Zinc and Lead Projects
An overview of new mine development is instructive and indicates that many of the new mines rely on existing mine and ormill infrastructure. These include Half Mile Lake (Canada) and Brace McLeod (Canada); other projects are restarts or expansions: ScoZinc (Canada), Satander (Peru), Pachapaqui (Peru), Lombador (Spain), Olympias (Greece), Rasp (Australia); and some new mines like Dairi (Indonesia), Al Massane (Saudi Arabia), Altintopkan (Tajikistan), Khandiza (Uzbekistan), Dugald River (Australia), Perkoa (Burkina Faso) and Bisha (Eritrea).
Almost all of the restarts and expansions are small, with less than 100,000 tonnes annual production, whereas the new mines are generally larger and in all cases financed by large mining companies. The costs of the restarts and expansions are modest compared to the new mines, and most of these types of projects are now underway, leaving the new mine projects with much higher capital cost for development.
Much of the new mine supply must come from new greenfields projects. As senior project debt financing remains essentially unavailable to small producers and developers these projects will require either joint venture financing or sale to a major company, to advance them to production. Most major mining companies have left the zinc space, with Anglo being the most recent example. Selwyn selected Yunnan Chihong Zinc & Germanium Co. Ltd. to finance Selwyn Project to bankable feasibility and provide project senior project debt with the Chinese banks. The few remaining major mining companies interested in zinc and lead, and outside of China, include Xstrata, Hindustan Zinc, Glencore Nyrstar, Votorantim and Teck. They will largely be responsible for ensuring adequate global zinc supply outside of China.
Given the approximate 1.9M tonnes of lost production due to pending mine closures by 2015, and annual demand growth of more than 500,000 tonnes per annum, one or more of these large mines is needed each year commencing 2015.
Management / Board of Directors
The Company is run by an all-star management team and board of directors with extensive experience and knowledge of the Brazilian mining industry, as well as an outstanding proven track record of building and running successful mining companies. The Company's officers held executive positions with mining giants such as Vale SA, BHP Billiton, Shell, and have been instrumental in building companies such as Jaguar Mining and Alacer Gold, as well as in founding institutions like IBRAM, the Brazilian Mining Institute.
Ryan E. Hart - CEO & Chairman
Mr. Hart, a dual citizen of Switzerland and the USA, holds a Bachelor Degree in Business Administration and is fluent in German and English. After working several years at Credit Suisse and UBS in the fields of Equity Trading and Portfolio Management, Mr. Hart worked as an alternative investment advisor - with a strong focus on hedge funds and venture capital - to independent asset managers and high net worth individuals. Mr. Hart and his clients have been early investors in numerous public and private businesses, offering start-up and small companies the financial resources and network to execute their business plans and create sustainable share holder value. Past and current portfolio holdings include investments in the information technology, oil and gas, precious metals mining and energy/resource recovery, tobacco as well as timber sectors.
Adriano Espeschit - Chief Operating Officer / Director
A mining engineer with degrees from Minas Gerais Federal University as well as an MBA in Strategic Business Management from Sao Paulo University, Mr. Espeschit has twenty-five years of experience in the fields of mining, metallurgy and oil & gas. In these industries he held executive and operational management positions with responsibilities ranging from mine planning and production to the beneficiation and haulage of nickel, iron ore, copper, bauxite, oil sands and potassium.
During his successful career in the mining industry, Mr. Espeschit held positions as: General Manager of Mount Keith Nickel Operation at BHP Billiton Ltd. in Australia, Head of Project Development at Oil Sands Growth Department of Shell Canada Ltd. based in Calgary - Alberta, General Manager of Sossego Project at Vale SA in Brazil, Operations Director at Steel do Brasil Participacoes SA., Director of Operations of the Santa Rita project in Brazil at Mirabela Nickel Ltd. Mr. Espeschit is a member of SME - Society for Mining Metallurgy and Exploration -, a member of CIM - Canadian Institute of Mining, Metallurgy and Petroleum -, and a member of the Technical Committee for the Brazilian Congresses of Open-pit and Underground Mining.
Mustafa Aksoy - Director
Having studied Public Administration at Dokuz Eylul University, Mustafa Aksoy worked at Garanti Bank as auditor and completed his MBA at Belgium's Antwerp University. Mr. Aksoy joined Calik Group in 2004 and since then served in various positions in the fields of marketing, corporate finance, M&A and business development. Mr. Aksoy is the General Manager of Lidya Madencilik and a member of the executive management of Calik Holding.
Edward C. Dowling Jr. - Director
Mr. Dowling retired as President & CEO of Alacer Gold Corp. in July 2012, which he joined in 2008 after a successful tenure as CEO and President of Meridian Gold Inc. Mr. Dowling has 30 years of mining experience and held leadership roles with: De Beers, Johannesburg, South Africa, as Executive Director for Mining and Exploration; Cleveland-Cliffs as Executive Vice-President of Operations; and Cyprus Amax Minerals Company in various leadership capacities.
Mr. Dowling holds a Bachelor of Science in Mining Engineering, a Master of Science and a Ph.D. in Mineral Processing, all granted from the Pennsylvania State University, and is recognized in the industry for his ability to assemble and motivate teams of people to tackle and deliver challenging projects for creation of long-term value.
Juvenil Felix - Director
Juvenil Tiburcio Felix was a Board Member and one of the founders of Jaguar Mining Inc. as well as its COO from 2002 to Oct/2008, during which Jaguar's market capitalization rose to over $1B. Prior to co-founding Jaguar Mining, Mr. Felix worked for Minas Gerais State Secretary of Mining and Energy as the Sub-Secretary for Mining Industry of the State of Minas Gerais in the years 1997 to 2002.
From 1979 to 1997 Mr. Felix held the position of Chief Executive Officer of Anglo American's gold division, during which he also was the President of Anglo American owned companies Mineracao Morro Velho, Mineracao Serra Grande and Jacobina Mineracao e Comercio, with a combined production of 450,000 Oz of gold per year. In addition Mr. Felix was Anglo American's Technical Director and Vice President of the Executive Board of Salobo Mineracao Ltda, a JV with CVRD (now Vale), where he was responsible for Anglo American's long-term exploration program as the President of UGM, Anglo's exploration division.
In the years prior to his tenure with Anglo American, Mr. Felix worked for the Brazilian Government as a General Manager on Brazil's "Plan for Non-Iron Metals", which was published in 1974. From 1962 to 1973 he worked at Mineracao Morro Velho, holding positions from Mine Manager to Mine Superintended, where he was responsible for a production of 165,000 Oz/year of gold. As the Superintendent Director of Mineracao Morro Agudo, he and his team were responsible for the feasibility study and the startup of the second zinc/lead mine in Brazil, which still is in operation today.
Mr. Felix graduated in Mining, Metallurgy and Civil Engineering from Ouro Preto School of Mines, Brazil, in 1961. He holds an MBA from UNA Business School 1974 and a Masters in International Mineral Economics from CETEC. Mr. Felix was a professor of Underground Mining at Belo Horizonte and Ouro Preto Schools of Mines, as well as a co-founder of IBRAM (Brazilian Institute of Mining) and Gorceix Foundation, a research Center from Ouro Preto School of Mines. His dedication to mining in Brazil was recognized by various public and private organizations in Brazil.
Cleber Macedo - Director
Cleber Macedo served Jaguar Mining Inc. from 2004 to May 2012, where he held the position of Vice President of Corporate Management since 2011. Currently Mr. Macedo serves as director of finance of Prometalica Mineracao Centro Oeste, a joint venture between IMS and Votorantim Group. Mr. Macedo has 28 years experience in financing & accounting, including 8 years in management positions at AngloGold Ashanti and 3 years at PricewaterhouseCoopers. Mr. Macedo received a B.S. in Accounting from Universidad Catholic de Minas Gerais.
Jose Mendo Mizael de Souza - Director
Mr. Mendo is a mining professional with 51 years of experience in the Brazilian mining industry, during which he held numerous executive and director positions in mining related government agencies and organizations, as well as private companies. Mr. Mendo is the founder of IBRAM - Brazilian Mining Institute - for which he has served as an executive for more than 26 years.
Mr. Mendo was an executive director at BDMG, the Minas Gerais State Development Bank, where he was in charge of the mining and metallurgical department. In 2003 he was invited by former Brazilian President Lula da Silva to become a member of CDES - Social and Economic Development Council - to share his insight and expertise of the Brazilian mining sector.
In 2006 Mr. Mendo left IBRAM and founded J. Mendo Consultoria, a mining focused consulting firm offering services in strategy, technical projects, studies and to identify, acquire and develop mining assets in Brazil. Mr. Mendo has tremendous experience and knowledge of the Brazilian mining industry, and decrees over a vast network on the government and private side of the industry. Mr. Mendo has been elected the Brazilian Mining Personality.
Key Milestones
Jan - Mar 2013 - Initiate first steps towards Salobro's exploration program and data collection for
the environmental license.
Mar - May 2013 - Initiate CEO recruitment process to hire an experienced mining executive with
the necessary skill-set and network to lead and represent a public trading mining company.
Apr 2013 to Sep 2013 - Exploration at Salobro to cover blank areas to define the mining plan and
initiate engineering studies. The additional drilling/exploration will convert the resource from
indicated & inferred to measured & indicated (43-101 compliant). The Company expects the
drilling to be completed by Q2/Q3 of 2013 and the resource of Salobro to increase by 30 - 50%.
Sep 2013 - NI 43-101 Report
Jul 2013 to May 2014 - Engineer studies and cxploration at Gorutuba to be completed
Dec 2013 - Bankable Feasibility Report
Jan 2014 to Mar 2016 - Mine Construction
Q1 2016 - Start up
Share Facts & Capitalization
Share price (March 12, 2013): $1.96
3-Month Average Trading Volume: 15,777
Shares Outstanding: 21,4221,203
Market Capitalization: $40.82M
Total Shares Outstanding post-transaction: 28,666,666
Shares Outstanding post-transaction & financing ($4M at $1.50, $6M at $3.00 per share): 33,333,333
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