Belo Sun (TSX:BSX) emerged from a tough week relatively unscathed despite having to cancel a financing deal for a project in Brazil after authorities opened a probe into what is the South American country's largest gold project.
The Canadian company announced a $50 million capital raising led by BMO Capital Markets on Monday only to cancel it the next day after Brazilian federal prosecutors opened an "investigation" citing inconsistencies in the mine's environmental plan and that the full impact of the project on local communities had not been taken into account.
By Wednesday, the bought deal financing was relaunched after Belo Sun clarified some of the events and said it is happy to be working with Brazilian investigators. Despite the setbacks Belo Sun, listed in Toronto with a market value of $320 million, ended the week only 6% cheaper, holding onto 36% gains since the start of the year, indicating the confidence the market has that the investigation is just a temporary hiccup.
The 165,000 gold ounces per year project is set to enter the definitive feasibility stage next year. Belo Sun owns 100% of Volta Grande and increased its property position from 195 sq. km to 1,305 sq. km a year ago.
The controversial mine in the Volta Grande do Xingu area is to be built near lands of the indigenous Xingu people and 14 km away from the Belo Monte hydroelectric dam. Norte Energia, the operator of the hydroelectric dam in Belo Monte, did not speak publicly on the Belo Sun project but was thought to have been against the mine's location.
The Belo Sun investigation comes amid controversy over a new bill to mine Brazil's vast indigenous territories in the Amazon that is to be presented to the country’s lawmakers in October.
The proposed law, which aims to revoke Brazil’s indigenous groups "inalienable rights" over their lands, granted by the 1988 constitution, would allow mining in a vast area that covers nearly 13% of the country, an area almost twice the size of Spain.
In exchange indigenous peoples would share in mining profits on their territories.