Brazil suspends Belo Sun's gold mine licence, stock collapses

A Brazilian court has once again suspended a construction licence for Canada’s Belo Sun Mining’s (TSX:BSX) Volta Grande project, expected to become the South American country’s largest gold mine.

The decision, the second of its kind since 2013, represents a significant new obstacle in the way of the Toronto-based miner’s plans to develop the vast gold mine, in the Brazilian Amazonic state of Pará, local newspaper O’ Globo reported (in Portuguese).

According to the ruling, construction of the project is to remain suspended until indigenous study has been approved by Funai (Indigenous Affairs Agency of Brazil), Belo Sun said in a statement.

Volta Grande, expected to become the South American country’s largest gold mine, would produce an average of 205,000 ounces a year over its nearly 17-year life.

Shares in Belo Sun collapsed on the news and were falling almost 17% to 69 Canadian cents in Toronto at 9:57 am local time. But year-to-date, the stock is still up 1.47%.

According to Brazilian regulations, indigenous studies are required if their lands are located less than 10 kilometres from the project, something Belo Sun said it has already done. The company said it believed that following a review of the completed study, the court will reconsider their position.

In February, a group of locals who opposed the project asked Pará authorities to suspend the recently issued construction licence for Volta Grande. They oppose the company’s planned use of cyanide during extraction of the precious metal, arguing that waste will be deposited in a dam located just 1.5 km from the Xingu River, a tributary of the Amazon, which poses risks in case of a dam collapse as it happened in 2015, after the Samarco dam burst in the south-eastern state of Minas Gerais, which killed 19 people and polluted water streams.

In November 2013 a federal court suspended the company’s environmental permit, saying Belo Sun had not taken necessary steps to analyze the mine’s potential impact on indigenous peoples who live within a few kilometers of the mine site.

In December, Belo Sun won temporary permission to keep operating while awaiting a final ruling on that case, which came in June 2014 and meant for the company to suspend work at Volta Grande.

“We are disappointed by this second interruption to our construction plans, however these hurdles are expected and we will work through them," the firm's President and CEO, Peter Tagliamonte, said in the statement. "We are working with our local Brazilian counsel to have the decision of the Court overturned on appeal."

Belo Sun plans to spend an initial $5 million in exploration this year, aimed at demonstrating the possibility of new and expanded gold mineralization on 175,000-hectare property, where small-scale miners have been active since the 1960’s.

The Volta Grande project consists of an open pit, a gold recovery process facility, water and tailings management and supporting infrastructure.

It is expected to produce an average of 205,000 ounces a year over its nearly 17-year life.