ARGENTINA UNSHACKLED - INVESTORINTEL

Argentina Unshackled
Observers from outside Argentina have gone on a frenzied romp
of self-congratulation hailing the change in the Argentine
Presidency in last week’s elections as something akin to a
Revolution. Once again though we find that simplistic formulas
are being used and the nuances of what has happened being
ignored. The situation still has the potential to be a wild
ride for investors.

For a start the victory of Mauricio Macri is being hailed as a
“right-wing” victory. To put that in context, firstly he leads
a Rainbow Coalition that stretches from the Left across to the
Right and the party he beat, the Frente Para la Victoria, is
in   fact   the   old   Peronist     Party,   which    was   a
fascist/corporatist construct in its original roots. So to
claim that a wealthy businessman (in fact I would venture one
of the five wealthiest in the country) that leads a Coalition
including the Left is a “Right-wing” victory is stretching it
a bit.

Secondly we would note that the victory was surprisingly
narrow. While the first votes in showed a 9% lead for Macri,
as the night wore on the margin slipped and it ended up being
51.4% for Macri and 48.6% for his Kirchnerite opponent, Daniel
Scioli. It should also be noted that the first round of
elections last month delivered stinging losses to the
Kirchnerites but they just barely hung onto control of the
Senate meaning that, if they stay cohesive, they still have
potential to block reforms. That said, with their patroness
gone, the rats tend to disperse into the woodwork to regroup.
We may end up seeing the phenomenon apparent under the De La
Rua government in the late 1990s of Bribes for Votes when a
hostile majority in the Senate had to be paid off, literally.

The New Lay of the Land

As we have repeated endlessly mining is controlled in
Argentina by the provinces, in much the same way as it is in
Canada or Australia. The national government in Argentina has
NO approval or denial power over mining projects. So
everything you have heard of “Cristina Kirchner blocked our
project” is a load of codswallop. In all cases blockages
occurred because of ornery provincial governments.

It is interesting therefore to look at the map of the
electoral results. The blue areas are provinces that voted for
the Kirchnerite candidate. The yellow are those that voted for

the winning Macri-led ticket. Oops, for those who know the
only province with mining of note (Silver Standrad’s Pirquitas
mine) that voted for Macri was Jujuy. La Rioja has been an on-
again, off-again mining favorable area and La Pampa and
Mendoza have been graveyards for miners.

The provinces where mining is currently active are Catamarca,

Santa Cruz (the Kirchnerite province par excellence now run by
the outgoing president’s daughter), Salta and San Juan.

If there is anything to be read from this map it is that the
marginalized distant provinces with the smallest populations
(excepting Buenos Aires which was only won       marginally by
Scioli and that was because of the sprawling urban slums
voting for him) supported the Kirchnerite program which gave
them a greater share of the goodies. The provinces that
trended for Macri where those with the largest populations
(and strong agricultural export economies) that were actively
persecuted and discriminated against for the last 12 years.

Implications for Mining

Having said that mine approvals are in provincial hands, some
matters are still in the Federal purview. Amongst these that
have relevance are foreign exchange allocations. Miners have
been griping for years now that they could not bring in the
capex items they wanted in an unrestricted way due to import
restrictions and could not remit profits or dividends as and
when they wished. These restrictions were part of the
increasingly draconian and bizarre forex rules that the
Kirchnerite regime was imposing as Argentines tried to head
for the exits and buy dollars to protect themselves against
the rapidly deflating peso.

Moreover to say the forex regime was complex was an
understatement. Here is the table of exchange rates for today
for a leading Buenos Aires newspaper, La Nacion:

So on the left we have the official rate, on the far right is

the so-called Dolar Blue which is the back-alley rate. In the
middle are various official rates administered by the Central
Bank for different purposes. Dolar Ahorro is a savings rate,
Dolar Tarjeta/Turista is the rate that locals can use credit
cards for (when travelling abroad) and that bona fide tourists
within the country can use to change money. The Dolar Soja is
the very prohibitive rate forced upon farmers selling their
crops (effectively a 30% tax on the official rate and a 150%
tax on the unofficial rate). Finally the Dolar Bolsa is a
conversion rate for transactions in the Stock Exchange.

Byzantine is obviously not too strong a word to describe this
bizarre system. Miners will be hoping that this system loosens
up, though the new government will be wary of letting this go
too soon or there will be a dollar buying spree that will
decimate Central Bank reserves. One suspects that Dolar
Turista and Dolar Soja will be the first to go. The government
will then aim to draw the Dolar Blue and the official rate
together somewhere in the middle. Who knows? Maybe the
wonderful Convertibility regime of the 1990s might be
revived.. Certainly Argentina had never experienced such good
times since the 1920s as under that arrangement.

Despite the mining provinces largely being of the Kirchnerite
ilk, they are the provinces that have shown themselves to be
most pro-mining. With less subsidies coming from the Federal
government more of the provinces will have to look to mining
to keep their local economies buoyant.

If one wants to muse with some names in Argentine mining those
to consider are:

     Patagonia Gold Plc (AIM: PGD)
     Hochschild Mining (LON: HOC)
     McEwen Mining Inc. (NYSE: MUX | TSX: MUX)
     U3O8 Corp. (TSX: UWE | OTCQX: UWEFF)
     Pan American Silver Corp. (NASDAQ: PAAS | TSX: PAA)
     Silver Standard Resources Inc. (TSE: SSO)

Yamana Gold Inc. (TSX: YRI | NYSE: AUY)
     Argentex Mining Corporation (TSXV: ATX | OTCQB: AGXMF)
     Orocobre Limited (ASX: ORE | TSX: ORL)
     Western Lithium USA Corporation (TSX: WLC | OTCQX:
     WLCDF)
     Galaxy Resources Limited (ASX: GXY)

One might also see those who have downplayed their Argentine
prospects dusting them off or racing back to restake them.

What Next

After exchange rates there are a vast swathes of regulations
constraining all aspects of economic life that could be cast
into the dustbin of history. Some of these measures being
rescinded should help miners. One that might not though is the
bizarre fuel subsidies. These were introduced after the
collapse of 2000/1 and the spike in inflation. To “protect the
poor” massive subsidies were introduced which have bled the
Treasury dry. They have been reduced and some have been made
to pay world parity prices for oil but many have not. This
could be the big budget winner but also a tough policy to bite
on first.

One could see a strong inflow of FDI though and this might
actually reverse the exchange rate so delays in freeing
remittances might actually work out better for miners when
they are eventually freed.

The whole construct of Kirchnerism was so bizarre and
distortive that untangling it is akin to unraveling the
Gordian Knot. Like Alexander the Great, sometimes it’s better
to just draw one’s sword and chop the knot in one fell swoop
than spend years testing one’s Boy Scout skills trying to
untie it..

Conclusion

After 12 years of Kirchnerite “policies” (more like populist

bootstrapping) the Argentine economy is emerging from a long
dark tunnel into the glare of daylight. Frankly it’s better
out of the tunnel rather than being in it and foreign miners
for better or worse face a brave new world. We can say with
confidence that the rules will NOT be more onerous and the
forex regime WILL be more flexible. Growth should kick up and
frankly Argentina looks like a better bet than the deeply
troubled Brazil these days.

As a New Yorker would say “What’s not to like?”

When the going gets tough,
the technology metals get
going
                                         Oil prices are going
                                         to stay low until
                                         2020,    warns    the
                                         International Energy
                                         Agency this week. The
                                         base metals are in a
                                         swoon. Wheat, corn
                                         and oilseed prices
                                         are seeing sharp
                                         price drops. And the
                                         U.S. Federal Reserve
                                         is limbering up to
                                         raise interest rates,
                                         with no one quite
                                         sure what the global
                                         economic impact will

be.

So, while most of the commodity sector struggles and suffers,
there are still strong signs of life in the technology metals
sector.

First, Lithium Australia (ASX:LIT) is expanding when many
other exploration companies are counting their money and
calculating how long they can survive. It already has
alliances with European Metals (ASX:EMH) with its Cinovec tin
and lithium deposit in the Czech Republic, Pilbara Minerals
(ASX:PLS), the owner of the Pilgangoora lithium and tantalum
project in Western Australia, along with with two other West
Australian operations, Focus Minerals (ASX:FML) with targets
near the mining centre of Coolgardie and Tungsten Mining
(ASX:TGN). Lithium Australia has carved a distinctive niche
for itself, targeting the lithium micas which it regards as
the forgotten lithium resource.

Now it has its eyes on Mexico and a new under-rated source of
lithium. Lithium Australia has teamed up with Alix Resources
Corp (TSX.V:AIX) to advance the latter’s lithium concessions
covering 22,625 hectares in Sonora, a state abutting the U.S.
border. There has been a meeting of minds: both companies
believe that a combination of low-grade material and the
application of energy intensive processing systems have
historically hindered lithium clay deposits from being
commercialized. The Australians plan to bring to the Mexican
project their low-energy technology to extract lithium from
micas. It is thought that some of the materials previously
tested by the Australian company may have similar mineral
chemistry to what is found at the Sonora project,

For Lithium Australia, this is clearly not just another
deposit. It is a foothold in North America, which it sees as
the future lithium business powerhouse, Gigafactory and all.
The project adjoins the big Sonora lithium project operated by
Bacanora Minerals (TSX.V:BCN), which has caught the attention

of Tesla.

Aggressive expansion is not an option for too many exploration
companies. But the key here is that Lithium Australia is just
not another exploration company. It has developed its own
technology, and that separates it from the herd.

As it does for Neometals (ASX:NMT) which has announced that it
and Mineral Resources (ASX:MIN) have begun a definitive
feasibility study on their Eli process, to produce 20,000
tonnes a year of battery-grade lithium hydroxide directly from
lithium oxide concentrates. NMT points out that this
development coincides with the announcement by one of the
world’s leading lithium producers that it has hiked its
lithium compounds prices by 15%, thanks to the demand from
renewable energy    storage   end   electric/hybrid   vehicle
manufacture.

And Peak Resources (ASX:PEK) is pressing on with its bankable
feasibility study on its Ngualla rare earth project in
Tanzania. Last month it completed important field drilling
programs needed to underpin the BFS, with two additional areas
firmed up as containing high grade mineralization. Managing
director Darren Townsend sees it as another milestone
establishing Ngualla as a low cost, long term supplier of
magnet metals.

All three of these developments out in the past few days
confirm one thing: that quality technology metals projects can
survive what is a challenging commodities environment.

Africa the key to feeding the
world (and itself)
A critical meeting   is now underway at Dakar, Senegal. It is
about food, but it   is also about much more than that: it is
about fertilizer     (potash and phosphate) and about the
stability of two     continents, Africa and Europe.

It is the African Development Bank’s (AfDB) conference on food
for Africa, held Wednesday through Friday this week. As the
bank puts it, Africa has 65% of all the arable land left in
the world and, by 2050, that land will be vital to meeting the
food needs of nine billion people living on the planet by that
year.

Yet, Africa imports $35 billion worth of food annually.
Africa’s food needs are set to double by 2050. How can Africa
feed itself and the world? Sub-Saharan Africa has the highest
prevalence of under-nourishment in the world. One in every
four people in Sub-Saharan Africa is under-nourished with 39%
of children being malnourished.

According to one study, Uganda alone spends around $254
million year treating cases of diarrhoea, anaemia and
respiratory infections linked to malnutrition.

But the AfDB president, Nigeria’s Akinwumi Adesina, sheets
home the food issue as one of the causes of a problem that is
headline news in Europe right now. “Migration out of rural
areas is rising rapidly, and thousands of young people now
jump on boats to the Mediterranean looking for new
opportunities in Europe,” he says. “That is why we make the
claim that we can diminish the migrant crisis in Europe by
supporting agricultural transformation in Africa.”

Alliance for a Green Revolution, based in Nairobi, Kenya, has
recently warned that Africa will not alleviate its chronic

food shortages unless more youth get involved in farming. Yet
a survey in Ethiopia found only 9% of youth there planned to
work in agriculture.

By 2050 the world will probably not be in a position to supply
food to Africa; everyone will need to feed their own, ever
growing populations. The AfDB notes that by 2030 (only 15
years away, folks) the value of the food and agribusiness
market is estimated to reach $1 trillion. Rather than
importing food, Africa will need to be a net exporter within
decades if there is going to be enough food to go around. This
is an enormous task, and opportunity (for the fertilizer
feedstock miners particularly).

In early 2014 I reported on InvestorIntel that sub-Saharan
Africa consumes only about 750,000 tonnes a year of potash.
But it could easily absorb 6 million tonnes if the money was
there to pay for it and the infrastructure to get it to the
farmers.

Over the past 50 years, cereal productivity for Sub-Saharan
Africa has stagnated at 1 tonne a hectare compared to 4 tonnes
a hectare in developed countries. Average fertilizer use in
Africa is 8kg/hectare compared with the global average of
107kg/ha.

We have been disappointed many times before by promises made
by and for Africa, only to see hopes dashed in the longer
term. But Akinwumi Adesina puts his finger on the key point:
how will Africa turn agriculture from a sector that now
manages poverry to one that creates wealth. “How will we move
away from exporting primary commodities to the point where we
sell processed cocoa not cocoa beans, processed coffee not
coffee beans, and textile instead of cotton?” he adds.

Good question.

*******

The problem is that African farmers have usually been on the
wrong end of any deal, with decades of possible progress
squandered in the colonial era. My recently published book,
Fighting on Empty: How Hitler and Hirohito Lost the Economic
War, contains details of one shameful fact about how Britain
treated farmers in its African colonies during the Second
World War who faced a loss of their European markets as
Germany invaded those markets, and reduction in exports to
Britain due to shortages of merchant ships. It is an episode
that should be better known:

The colonies which relied on agricultural products were faced
with sudden contractions in the market for their produce;
coffee growers in east Africa suffered, as did copra producers
in the Pacific islands, banana growers in Jamaica and cocoa
and palm oil plantation operators in West Africa. London made
a good deal of the fact that it bought the whole cocoa crop of
1940 in the Gold Coast (now Ghana) and Nigeria at prices
higher than had obtained in 1939, but this was small comfort
to the growers as their receipts were still lower than they
had been in 1931 before the worst of the Great Depression was
felt. In fact, Britain did not buy the entire output of cocoa:
the mid-crop had no taker and was destroyed, and then in 1941
London sliced twenty per cent off what it paid for that year’s
crop at the same time as raising the price of the cocoa to
wholesalers within Britain by £10 per ton, the extra margin
accruing to the government.

When it came to palm oil, Britain did not need the entire
output from Sierra Leone and Nigeria. Those farmers in Nigeria
who grew oil palms as part of a diversified operation (and
therefore did not rely solely on this crop) were told their
output would not be needed, so they should switch to other
crops (cassava was one suggested, as Britain needed 10,000
tons of that). The Economist estimated that palm oil growers
who could not sell their palm oil lost, in total, about half a
million pounds. As for cocoa crops, African officials had

recommended to London that some extra payment be made to
compensate for the fact that growers no longer had an open
market. This fell on deaf ears at the Colonial Office, the
price being set at £16 10s a ton when growers could not make a
viable living at much less than £25. The London response was
that, with Germany’s market closed off and American demand
declining, the growers had no option other than to take what
London was offering.

The Impact of the Liberal
Majority     on    Canada’s
Marijuana Industry
                                   We’ve previously looked at
                                   the possible impact of
                                   various electoral outcomes
                                   on   Canada’s      cannabis
                                   industry. On Oct 19 the
                                   Liberal Party cruised home
                                   to a majority of seats in
the House of Commons, meaning their agenda will be implemented
with little real opposition over the next four years.

The Liberal Position on marijuana is very clear: “If we pass
smart laws that tax and strictly regulate marijuana, we can
better protect our kids, while preventing millions of dollars
from going into the pockets of criminal organizations and
street gangs.”

Watch for legislation to be introduced that amends the
Criminal Code and the Controlled Drugs and Substances Act to
allow for decriminalization and licencing, much like alcohol

and tobacco. On the medical side, expect further licences to
be granted to MMPR applicants, and expect the range of medical
products to be expanded (see our analysis on the Smith
decision from the Supreme Court of Canada.)

This will generate additional tax revenue to the feds and the
provinces (see our prior tax analysis here). Full-time jobs
will be created. There will also be less government money
spent on street level policing for marijuana, and a clearing
of the backlog in the criminal justice system. Financially,
all of that is good for Canadians and the dollar.

On a more micro basis, there is less risk associated today
with the marijuana stocks so expect them to rally. Share
prices will fluctuate in accordance with the usual factors but
over the long run the market is in a far better position than
it would have been under the Conservatives.

The next two drivers of value in the cannabis industry will be
the Allard decision from the Federal Court of Appeal (our
historic analysis is here, and remains accurate) and the exact
terms of the legislation to be introduced by the Liberals when
Parliament is formed. The grey market in MMPR applicants
continues to grow with valuations decreasing as more capital
is consumed pending the application process being completed.

We are at the end of Marijuana Prohibition. The Allard
decision will go a long way to determining who the winners
will be, but the Liberal majority ensures that there will be
winners.

Aurora Cannabis’ Terry Booth
on the impact of the Allard
decision and the election on
the Marihuana Industry
September 22, 2015 — In a special InvestorIntel interview,
Publisher Tracy Weslosky, speaks with Terry Booth, President,
CEO and Director of Aurora Cannabis Inc. (CSE: ACB | OTCQB:
ACBFF) on the two new Board members and securing the former
executive director of the CMCIA for the Aurora management
team. They also discuss how Aurora is positioned as rising
leaders in the marihuana sector and what the Allard decision
and elections will mean to the overall industry.

Tracy Weslosky: Terry I noticed you had a big corporate
update, but I also noticed that you keep attracting some of
the leaders in the industry, a new brand manager, a couple of
new board members. Can you tell us just a little bit more
about this?

Terry Booth: Adam Szweras joins us, Chuck Rifici, ex-CEO of
Tweed and Neil Belot, he was an executive director of the
CMCIA, association of LPs in Canada. Quite happy with the team
we’re assembling.

Tracy Weslosky: Well, I think there’s a lot of other companies
looking at you because you seem to be attracting all the best
and brightest. Could that be your personality or does it have
to do with the actual story, which I’m assuming it does?

Terry Booth: I’d like to say it’s the personality, but it’s
not. It’s the team we’ve assembled, it’s the facility that
we’ve built and I think it’s the corporate vision that we
have.

Tracy Weslosky: And, of course, all of you out there who may
not be familiar with Aurora Cannabis, can you just step back
and give us an overview as you were one of the first
facilities in Canada?

Terry Booth: Yes. We’re one of 26, I believe, licensed
producers in the country out of 1,400 applicants. The facility
itself is over 55,000 square feet. It’s in a very tax friendly
jurisdiction in Alberta. We’re the very first facility in
Canada built brand new from the ground up. We’re ready to
roll. We’ve got a license to produce. We’ve pulled over seven
harvests in to our vault and looking forward to the sales.

Tracy Weslosky: It’s my understanding that you have some
competitive advantages to this processing facility. Would you
mind telling us what those are?

Terry Booth: Sure. Well, building brand new, the flow of the
facility itself is built for growing cannabis. There’s tax
advantages in Alberta with its corporate tax rates. We hope
that remains the same. We’re in a rural location in Alberta.
We don’t pay for our water, its mountain fed. There’s farm tax
credits in Alberta that a lot of provinces don’t have and our
power rates are the second lowest in the country and the
lowest in the    country   when   we   get   our   discounts   for
deregulation.

Tracy Weslosky: Of course, there’s a lot happening in the
marijuana sector in Canada right now. We have a major election
and we also have the Allard decision. Can you give us some
insight into both of these events?

Terry Booth: On the election front both the opposing
candidates have said they’ll either decriminalize or legalize
it. Either way the existing government is who we’re answering
to now. If it changes then it will only be good for us and
we’re poised to take on any increase in market. With respect
to the Allard decision…to access the rest of the interview,

click here

Disclaimer: Aurora Cannabis Inc. is an advertorial member of
InvestorIntel

Commodities cycle: Is the
worst of the pain behind us?
                                                       Call
                                                       it
                                                       “All
                                                       Quiet
                                                       on the
                                                       Commod
                                                       ities
                                                       Front”
                                                       .

Which is not a bad thing; as this is being written before the
Federal Reserve makes its decision on whether to lift interest
rates, this feeling of calm is probably a good thing. A lack
of volatility – one hopes – means that the Fed won’t scare the
commodity horses (in either direction).

And there’s even good news on the rare earth front with
Reuters reporting that China’s demand for these elements “is
likely to soar more than 50% over the next five years”. Chen
Zhanheng, vice-secretary general of the Association of China
Rare Earth Industry, told a conference in Shanghai this week

that domestic consumption was expected to rise nearly 9% this
year to 97,700 tonnes, and would end the decade at nearly
150,000 tonnes, up from 90,000 tonnes in 2014.

If this is the case, it will certainly encourage non-China REE
hopefuls to press on, holding out the hope that China might
have to curb exports further to satisfy domestic manufacturing
demand (and possibly even look to imports for heavy rare
earths).

On the broader front, the metals markets seems to be
stabilizing; we have a few days without any sudden, heart-
stopping movements.

Is it over, then? (The downward plunge in the commodity cycle,
I mean.) Well, Peter Strachan who runs the commodity analysis
business StockAnalysis in Perth, Western Australia, says he
thinks “the Australian resource sector is now either very
close to its maximum point of pain or it is 85% of the way to
that point.”

The slight weakness in the U.S. dollar this week (at least
against some currencies) has probably helped stabilize the
metals ship of state. Prices may fall again, possibly across
all the minerals, oil and soft commodities, but you get the
feeling that it will be a gentle slide at worst. After all,
they’ve all pretty well taken their licks, so Strachan might
be right in saying the pain has reached its maximum point.

The team at Capital Economics in London has compiled an
overview. Their conclusion: “After the mid-Summer volatility
in global financial markets, commodity indices have had a
period of relative calm since mid-August”. The S&P energy
index did worst among the commodity indices, while the
industrial metals index actually rose 1% month on month.

However, they point out that a number of commodities have seen
a large decline in investor interest over the past month,
highlighted by a 25% fall in the number of open-interest

contracts for palladium, and a       13%   and   15%   decline
respectively for corn and wheat.

What is most encouraging – and here I am reading between the
lines of this report – is that the futures curves for
industrial metals indicate some changes, but no great
volatility. Copper, further out, looks like getting a little
more colour in its cheeks, but zinc may be losing some ground
in terms of investor expectations.

On the soft commodities front, Capital reports that investors
have sharply cut the number of short positions on sugar, and
cocoa is also now net-long. Corn prices might be helped by
forecasts that the next harvest total may not be so good.

And a very interesting piece of news on the gold front:
Randgold Resources is considering a spend of up to $1 billion
to help AngloGold Ashanti revive its huge Obuasi mine in
Ghana. It is estimated there are still 5 million ounces to be
extracted.

Randgold has not made a discovery since 2009 and has no new
mines in development.

Does that company see a gold squeeze ahead? It is getting
harder and harder for the major producers to replace the
ounces they are mining. And people still want to buy gold.
(And when was the last time there was a gold surplus, with
bars of metal lying around unsold? Answer: probably never.)

Cancana                    Resources                        –

Production Trumps Inaction
When we have written about Manganese in the past it has been
in the context of steel alloys or of exotic new types of
batteries. The conversation has keep to these topics rather
than the alternative use as fertilizer because for Manganese
to be fertilizer grade it needs to be in excess of 48% Mn
grade. While Manganese mining does tend to focus on the high-
grade Direct Shipping Ore (DSO) material it is rare that it
reaches the grade that satisfies fertilizer demand. In fact of
all the major manganese mines in Brazil, only that of Cancana
Resources Corp. (TSXV: CNY) broaches the required level. I
thought that this merited highlighting so I have done a review
of the company’s activities and shall discuss these here.

Assets

                        Cancana Resources Corp. is focused on
                        exploring and developing the BMC
                        manganese project in the far western
                        state of Rondônia in Brazil. This
                        state borders Bolivia. The assets
                        consist of concessions that the
                        company accumulated itself and then
                        the plant and deposits of two other
                        producers that the BMC Joint Venture
                        (in which Cancana is partnered by a
                        leading resources hedge fund) bolted
                        on in 2014 to take the step up to
being a producer.

The Joint Venture holds a large land position extending to
nearly 37,000 hectares in very prospective terrain. In its
2015 NI43-101 report the consultants noted that very little
exploration had been performed to date and that Cancana needed
to initiate regional exploration programs aimed at identifying
manganese occurrences with follow up leading to resource and

reserve calculations. That report was based upon exploration
over an area of a mere 4.4 hectares, containing an inferred
resource of 35,000 tonnes of mineralization with an average
grade of 54% Mn.

The geology of the area consists of Proterozoic aged granitic
plutons underlying several high-grade manganese occurrences.
The mineralization occurs as close-packed, rounded to angular
clasts of Pyrolusite / Manganite within a saprolitic soil. The
clasts range in size from sand particles to boulders greater
than 1m on a side. Prior to Cancana’s arrival on the scene
this type of mineralisation was already in production by Rio
Madeira and Eletroligas, two companies operating in the area,
of this more anon.

Manganese (Mn) – the Known Unknown Fertiliser

Manganese is a chemical element with symbol Mn and atomic
number 25. It is not found as a free element in nature; it is
often found in combination with iron, and in many minerals.
Manganese is a metal with important industrial metal alloy
uses, particularly in stainless steels.

So while Manganese is primarily used in the production of
steel, the high-grade and high-purity nature of the material
produced at BMC qualifies as ‘agricultural-grade’ manganese
and can be sold at a premium. Manganese is an important plant
micronutrient and is required by plants in the second greatest
quantity compared to iron. Manganese is a major contributor to
various biological systems including photosynthesis,
respiration, and nitrogen assimilation. Manganese is also
involved in pollen germination, pollen tube growth, root cell
elongation and resistance to root pathogens.

Manganese deficiency in plants is evidenced by symptoms which
often look like those of iron deficiency. Deficiency can occur
from low fertilizer application rates, use of general purpose
fertilizers (which typically have reduced micronutrient

contents), excessive leaching or applying too many iron
chelate drenches.

Manganese is the world’s twelfth most prevalent mineral and is
mined in South Africa, Australia, China, Brazil, Gabon,
Ukraine, India and Ghana and Kazakhstan. It is the fourth
most traded metal with annual production (in 2011) amounting
to an estimated 14 million tonnes. As a direct shipping ore
(DSO) it has become in recent years almost the exclusive
preserve of mega-producers, and smaller players have
disappeared. One of the largest players has been BHP-Billiton
(with mines in Australia and South Africa) while the largest
player in North America is probably Grupo Autlan in Mexico.
The BHP Manganese assets (amongst others) were recently spun-
out via the South32 demerger operation. The goal here though
is not for the product from Cancana’s venture to go to the
export market but rather to go for domestic fertilizer usage
in the soybean industry in particular.

Brasil Manganese Corporation

In 2014, the producing assets of the two miners operating in
the vicinity of Cancana’s concession in Rondonia came under
the ownership of Brasil Manganese Corporation (BMC), Cancana’s
joint venture partnership with Ferrometals (which is a special
purpose investment vehicle for The Sentient Group). Sentient
is a resource-focused private equity fund with approximately
$2.7Bn in assets under management, and a 15-year track record
for advancing resource projects from early stage to pre-
feasibility and development. We have come across Sentient
before, principally in the context of the Rincon Lithium asset
in Argentina.

The backstory to the two companies acquired is that Manganese
was first explored for by Rio Madeira Mineracao in 2005. The
partners in that firm recognized an opportunity to create a
niche market for high-grade, high-value manganese cobbles.
These cobble fields were known from road cuts and discussions

with local farmers. The black cobbles were visible in
roadbeds, especially after a rain. Minimal exploration
uncovered several occurrences of these “boulder patches”. The
company built a processing plant, which became operable during
2008.

Operations

BMC’s first actions after ownership transfer were to bring the
safety features into line with modern practices.

The mining is open cut, indeed it is somewhat akin to scraping
the surface as the weathered boulders are the main material
sought after. The picture below tells a thousand words as the
heavily weathered red earth so frequently found in the tropics
is the source of the boulders and other Manganese ore.

The Rio Madeira plant is a basic affair consisting of common
gravel washing and sorting plants. The raw material from the
field is fed through a hopper and jaw crusher if needed, to

the first wash station – vibrating screens. The majority of
soil is removed with the soil / water slurry being pumped to
settling ponds. The remaining clasts are fed through a trommel
for a second wash before being sorted by size with vibrating
screens. The sorting places the material into 3 piles – a
coarse, medium and fine fraction that is now available for
sale as the final product. Further beneficiation can be done
to separate manganese clasts from gangue by jigging the fine
and medium material producing a cleaner, enriched material for
the end client, depending on their need.

During 2011, a second company, Eletroligas, optioned the
properties known as Jaburi and set up a similar plant based on
Rio Madeira’s plant. They produced material for themselves, as
they are a ferro-manganese producer and needed a source of
high-grade manganese. Their plant was designed to produce
product for the ferro-manganese market only, which means they
can tolerate higher minor elements in their final product then
can material destined for the fertilizer market. Increased
silica (quartz) and iron minerals are detriments to fertilizer
producers but not ferro-manganese producers.

The Eletroligas plant (renamed the Jaburi Plant) was improved
to provide feed for the fertilizer market. The washing cycle
and particle separating jigs were improved. The trommel feed
and rotation were adjusted. New water pumps were installed.

Both facilities needed extensive safety features such as re-
wiring of overhead electrical infrastructure, hand rails, cat
walks, chain guards, upgraded trommels, water pumps, tailing /
settling ponds.

Both plants follow similar circuits to produce finished
product from raw materials. The raw material, which is a
mixture of soil and clasts of all sizes, is brought to the
plant by 20 tonne capacity trucks and stored near the plant.
The clasts within the soil are heterogeneous in nature, made
from manganese bearing materials, granitic, mafic and vein

quartz bearing clasts.

Communications were improved by installing a radio network
between all vehicles and base stations at each plant capable
of reaching Espigao, over 40 km away.

Production is still relatively small scale. BMC produced 2,143
tonnes of manganese product during the June quarter from
colluvial sources, bringing stockpiles to 7,056 tonnes (net of
sales) at the end of June. BMC then went on to produce 2,045
tonnes of manganese in the month of July 2015, being record
production levels for the Rio Madeira plant. Most product
seems to be accumulated into these stockpiles as BMC recorded
second quarter sales of 338 tonnes. However what it did sell
it managed to achieve prices averaging more than a 30% premium
on current CIF prices. CIF Tianjin pricing for 44% manganese
was US$2.98 per dmtu as of June 26th, 2015

Conclusion

As I often repeat, Production is King and Cancana have short-
circuited the expensive and tedious route of endless
consultant’s reports by acquiring two producing properties to
get the product flowing. We suspect that this shall be the
trend for wannabe miners across a swathe of metals in coming
years as the old paradigm fades in the face of brutal
financing conditions.

The Joint Venture partners, Cancana and Ferrometals, are
employing a two-pronged strategy at BMC. The primary objective
is to advance BMC to an initial resource and onward to pre-
feasibility, while also expanding current small-scale
production to support those exploration activities. This
matches the strategy we have seen a number of other more
innovative miners have pursued with the small scale operations
funding the eventual bigger project. We can find nothing to
fault in that and Cancana have gained a serious endorser of
that strategy by attracting the very choosy Sentient people to

join with them in the venture.