Tuesday, 21 February 2012

Eagle Star Minerals - ready for phosphate exploration "success" in 2012

Junior explorer Eagle Star Minerals (CVE:EGE) last week refocused its strategy on phosphate exploration in Brazil - a plan CEO Eran Friedlander said gives the company a "competitive edge", and puts it on the path for a "very successful" year ahead.
The company, which was initially focused on developing its Brazilian Angico iron ore project, said it had recognized certain "opportunistic trends" in Brazil over the past year, taking note of a significant lack of sufficient domestic supply of agro-minerals, and as a result, decided to reposition itself to focus on agro-minerals projects in the country.
Friedlander said his company benefits from having a local geological team with "extensive technical knowledge" of the Brazilian mining industry, as well as from senior advisors with a background in mining operations located in the South American country.
With the help of this team, Eagle Star's CEO said the company was able to attain a significant amount of information on where mining opportunities are in Brazil at the moment, and was able to understand that the "best opportunity" was in agro-minerals.
Indeed, Eagle Star works fast. Monday last week, it acquired the Samba phosphate project located in the western portion of Piaui state in Brazil, and has staked areas with significant potential to host large phosphate deposits.
Under the terms of the new agreement announced last week, Eagle Star can earn a 100 percent interest in the Samba project - which it now considers its flagship property.
The 109,285-hectare Samba property, which consists of 60 mineral claims, is located near the cities of Valenca and Sao Jose do Peixe in Brazil, and near Eagle Star's Ruth phosphate project.
The new asset is also located near potential future end-markets, including the Balsas and Bom Jesus agricultural centres - which are home to a large soy growing industry with production of over 2.3 million tonnes of beans annually - the company said.
The proximity to its own Ruth project is not a coincidence, as preliminary exploration work done at Ruth led Eagle Star's team to investigate other areas with a "similar geological setting", which ultimately led to the discovery and acquisition of Samba.
Demand for agro-minerals projects in emerging markets is attracting increasing investor attention. As demand for foods grows exponentially with the global population, so does the need for fertilizers - produced from the three essential minerals of nitrogen, phosphorous, and potassium. To sustain reserves of these minerals globally, agro-mineral development has become of prime importance.
Brazil is the world's largest exporter of sugar, coffee and orange juice, and the second largest in soybean exports - ranking it as a leading Agrarian country - but its food production is outgrowing fertilizer production. Brazil is also the second largest world importer of phosphate - a business that generates around $1.1 billion in sales revenue for the country annually.
Lacking a sufficient local supply, Brazil has become one of the world’s largest importers of agro-minerals, as Friedlander said that 50 percent of local demand for phosphate is provided through importation, making farmers in Brazil pay international prices.
As a result, Friedlander explained, if a company finds a deposit and manages to produce phosphate, "there is an immediate local market, at an attractive cost structure by resolving a lot of transportation and logistics issues".
"All Brazilian mining companies understand the attractiveness of agro-minerals, with the government also following suit by providing incentives. It is a strategic necessity to create and develop agro-mineral deposits in the country."
Eagle Star also said it was drawn to the Samba property by regional reconnaissance work, which investigated an area of 200 by 170 kilometres in the region of Piauí state covered by the Longá Formation (Parnaiba Basin). Three sub areas of the Parnaiba Basin were identified with rock types carrying phosphate mineralization.
Due to the large target area of the regional exploration program, Eagle Star completed regional and follow up sampling on existing road cuts, generating 201 channel samples.
Lab results received so far showed an "excellent exploration case" for Samba, the company said, with 12 percent of samples returning values of over the 2.5% phosphorus pentoxide (P2O5) cut-off grade.
Regional samples returned grades as high as 17.6% phosphorus pentoxide, while on the actual Samba property, sample 51028 returned 9.42 percent P2O5, while sample 51063 returned 6.4 percent P2O5, and sample 51070 yielded a whopping 48.51 percent P2O5.
These results followed preliminary regional sampling work from the company's Ruth project last year, which initially helped Friedlander understand "they have something really good in [their] hands".
The "beauty" of Samba, however, unlike Ruth, said Eagle Star's CEO, is that the company was able to attain information from the sub surface as a result of significant exposure in the field due to much infrastructure being built in the surrounding area with the help of the local government.
"This is great from our perspective. In 2013, there is a railroad that is being built that is just 100 kilometres from Samba, in addition to a network of roads, with water access and power stations not far away either," said Friedlander.
Indeed, Samba is 100 kilometres away from the Transnordestina railroad, which is scheduled to be completed by 2013 at a construction cost of US$3.21 billion. The completed railroad will connect the region to three major ports in northeastern Brazil, known as Sao Luis, Pecem and Suape, providing an alternative transportation route to additional end markets.
Because of this infrastructure development, there are road cuts and several holes that have been excavated in the area already, meaning the company could take samples from the sub-surface at Samba, helping it to understand what the target rock types are, Eagle Star said.
Within these target rocks, the mineral explorer identified layers of phosphate up to 3.5 metres thick, seeing a long continuation of these layers across the property with a clear view of the subsurface, which spelled out "very good potential".
Eagle Star said that once it receives all the necessary licenses for exploration and development, which is expected in April, it has plans to start drilling between 20 to 40 holes at Samba through a combination of diamond and reverse circulation drilling.
Friedlander explained that the holes will not be very deep, "no further than 50 metres in most cases", as the phosphate mineralization is close to the surface with plans for an open pit mining operation. Because of this, he expects the drilling will not take long to complete.
CEO Friedlander himself has had a diverse business career with both public and private companies throughout Europe and the Americas, but Eagle Star is not his first venture in Brazil.
He started investing in the South American country in 2003, in the telecommunications industry, moving on to oil and gas, and eventually mining, giving him a network of contacts and allowing him to build the company "quicker and more efficiently".
In his first capital market job, Friedlander spent seven years trading futures and options on the London International Financial Futures and Options Exchange (LIFFE), and then moved to become a founding partner in many public and private ventures in the financial, IT and natural resources sectors.
Eagle Star's team also boasts exploration manager, Fabio Carvalho de Mendonca, who was previously employed for 10 years as a senior geologist for Xstrata Nickel, Yamana Gold (TSE:YRI) and Castillian Resources.
The company, which counts Haywood Securities as one of its biggest investors, said it has enough money in the bank to complete the planned drilling at Samba, but would look into raising further financing should market conditions allow in order to secure funds for developing its assets further and for continuing to build out its portfolio.
Though it is not looking to partner up on Samba, which is now its main focus, Friedlander said Eagle Star would consider partnerships or joint ventures with local mining companies for its other assets.
"Our operation is based on local people that understand the business environment in Brazil, the mining industry and geology of the country.”
"This gives Eagle Star a very competitive advantage, with 2012 set to be a very successful year in which the company will take a big step forward with its plans to develop its existing assets.
"We've matured - we know exactly what we are looking to do now with phosphate exploration and development, and it is important to be focused at this time," Friedlander concluded.
In light of Eagle Star's shift in strategy, the company said it has decided to stop its exploration work on the Angico iron ore property, despite its "excellent potential" to host significant iron ore mineralization.
The Vancouver, B.C - based company, which has a market cap of roughly $6.4 million, is currently changing hands at around 10.5 cents on the TSX Venture Exchange.

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