Brazil Draws Foreign Miners While Dissing the Dollar
Source: Gold World, Sam Hopkins††(6/1/09)
". . .there's another bullish gold trend in the works down there."
Amid a mining investment surge the country hasn't seen in three centuries, Brazil's leadership is using new economic strength to turn away from the U.S. dollar.
Following the discovery of glittering riverbed resources in the 1690s, hundreds of thousands of wildcatters poured into the then-Portuguese colony, and the influx of men and money into the Sao Francisco Valley helped the colonial power base from the northeastern city of Bahia, southwest to Rio de Janeiro.
It was a hundred years before the limits of contemporary surveying and mining technology brought Brazilian gold production to a virtual halt.
Today, there are again hordes of prospectors sweeping into new parts of the country's interior. As was the case in the gold craze 300 years backórumor spreads quicker than fortune.
But unlike in colonial times, Brazil is now an independent and rapidly rising country, free to set its own terms for investment and exploration.
The Sao Paulo Geological Institute's Helio Shimada says Brazil's gold production potential is up to 200 tons per year, and foreign firms like Barrick Gold [NYSE: ABX] and Anglo American [NASDAQ: AAUK] are working to ramp up output.
The government wants those companies to work with the Ministry of Mines and Energy to keep the nearly 400,000 wildcatters thought to be scattered throughout the Amazon region from doing major environmental damage and scarring the landscape with crude exploration pits.
Informal gold exploration activity steadily declined during the secular gold bear market of 1988-2000, but government-sanctioned mining and alluvial deposit collection led formal output to increase through most of that time.
As prices rose again recently, knee-jerk wildcatters headed into the hinterlands again. The government wants them out.
So international miners are pumping money into Brazil. Already the top emerging market in Latin America, Brazil just logged a 30% jump in foreign direct investment (FDI) over the previous record from 2007.
And as the leadership brings in more and more money inflows, there's another bullish gold trend in the works down there.
Brazil's new Gold Century is also contributing to the dollar's decline.