Adimb sees prominent role for Brazil in energy transition

Brazil is well positioned to become a leading player in the energy transition, says Marcos André Gonçalves, chairman of Adimb, the Brazilian Mining Industry Development and Innovation Agency.

In terms of geology, Brazil is very similar to Australia, he says. Just as Australia is mining ionic clay for rare earths, so also Brazil has many areas with lateritic clayey soils and has the opportunity to research the surface, at least, of deposits holding these soils.

A factor that can facilitate this exploration is that most of these deposits are found in areas that are already licensed under mining legislation. This will speed up the procedure, because companies can skip the slow bureaucratic approval of an application for an exploration permit.

Brazil is now witnessing a race for already licensed areas in several states, Gonçalves says, naming five: Rondônia, Bahia, Ceará, Minas Gerais, and Goiás. "There is an opportunity", he says, "and that is what we are seeing, a series of new entrants numbering maybe about eighty or a hundred companies that have assets in Brazil."

One observation that corroborates the interest of companies in researching strategic minerals in Brazil, Gonçalves says, is their presence in the activities that Adimb is organizing for PDAC 2024. Among the approximately thirty companies sponsoring the Adimb event, around one-third of them are active in lithium, rare earths, and graphite.

On the question of mineral exploration, Gonçalves believes that companies will be able to carry out their work quickly and identify potential deposits. The big challenge, therefore, will be processing this material to obtain marketable products. Another challenging aspect, especially for junior companies and even medium-sized companies, is the capital cost of these projects, which can run to hundreds of millions of dollars. This will result in projects ending up under the control of large players since, for a mineral exploration company, it is no easy task to raise funding to pay for the work that will demonstrate the technical and economic feasibility of mining an identified discovery, and harder still to finance the processing and testing costs. One way forward, he says, might be through the Invest Mining network, which brings mining industry bodies together with the BNDES (National Bank for Economic and Social Development), which is already looking for mechanisms for financing the initial stages of mining projects. One alternative now under review would be an investment fund (under BNDES management) similar to existing tax-exempt funds for agribusiness and the building industry.

Another possibility, in the case of strategic minerals such as lithium, would be to seek the cooperation of industrial users, which might become a partner in the venture or even acquire the project. This would clearly be a departure from the path normally followed by junior companies, which discover a promising mineral deposit, do the exploration and the test drilling with the support of a private backer, and then sell a controlling share in the venture to one of the major mining corporations.

Gonçalves says he is optimistic that Brazil will eventually find a way to provide financial support for mining development, a search that began as long ago as 2012, with a plan to recreate in Brazil Canada's flow-through shares, a mechanism that grants tax exemptions to investors in companies engaged in exploring natural resources on Canadian territory.

What Brazil wants to create, he says, is a business environment — he calls it an "ecosystem" — that would allow investors to participate in the initial stages that are an essential part of a mining project, such as reconnaissance of the locality, prospecting, target identification, and discovery, followed by a full description of what has been discovered. "We know it is difficult," he says, "to convince people to put their money into a variable-income investment when you can earn an 11 to 12 percent profit by leaving your money sitting in CDBs [bank deposit certificates]. But if there are investment funds for agribusiness and for housing construction, why can't there be an investment fund for mining?"

Privileged position

Roberto Perez Xavier, Adimb's executive director, agrees that Brazil is in a privileged position in the field of essential minerals for the energy transition. It is one of the ten largest world producers of these minerals and metals. Brazil is the third largest producer of aluminium, which, together with copper, is a highly important metal for the energy transition. It is the second largest producer of graphite, needed for electric vehicle batteries. In the case of lithium, now in fashion, Brazil ranks fifth among producers of lithium from hard rock. It ranks sixth in both tin and titanium, both now seen as critical minerals. "So," he says, "we are already suppliers of a long list of raw materials for these critical or strategic metals."

Brazil also holds large reserves of several other strategic metals, though not ranking as a leading producer. Xavier cites nickel and rare earths. In both cases, Brazil ranks third in terms of the world's largest reserves. "Furthermore," he says, "if we look at the lists of critical minerals as defined by the European Union, the United States, and China, we see there is a set of them that is common to the three regions, which are aluminium, graphite, rare earths, lithium, and nickel. In all these minerals, we hold a prominent position, either in terms of production or of reserves. This means we are in an extremely privileged position to be a very important player in terms of supplying raw materials for the energy transition."

Xavier recalls that some important projects have recently entered, or are about to enter, production, citing the instances of Mineração Serra Verde's rare earths project in the state of Goiás, where production has now begun; of Centaurus Metals, awaiting the licence to implement a nickel project at Carajás, a US$ 400 million investment; of Sigma Lithium, which has been producing lithium in Minas Gerais since 2023; of Meteoric Resources, whose project to extract rare earths from ionic clays in the Poços de Caldas region, in Minas Gerais, is now at an advanced stage; of Viridis, which also has a rare earths project in Minas Gerais; and of Bravo Mining, which is investing heavily in its platinum-group elements (PGE) project in the Carajás mineral province, soon to be brought into production.

"This shows we have the potential to produce," Xavier says. "And there is, at a global level, a mismatch: the demand is very high, there are enough resources worldwide to meet that demand up until 2030 or 2050, depending on output, but for this to happen, those projects need to be brought into operation. That means there is a time frame: the demand exists, the reserves exist, but bringing the projects into production at the right time to meet that demand is no simple task. It is an obstacle that each country will have to overcome in its own way."

Xavier argues that to be brought into production these projects need to have at their disposal a legal framework that is flexible, dynamic, and timely. "This is perhaps one of the biggest problems we are facing today," he says. "To attract greater investments, we need to provide investors with a juridical framework that gives them the assurance they need to be willing to invest. Projects need to be analysed more quickly. And this may be where we are going wrong, for several reasons arising from our government policies. Our policies need to be more effective in support of the development of the mining industry. Mineral research is not the issue. That is progressing, including investments. But for these projects to develop, up until they become operational, we need celerity in our juridical framework."

In this context, Adimb has sought to develop an important role in supporting companies in making their projects feasible, engaging in similar actions to those performed in Australia by Amira. "One of Adimb's main missions," he says, "is to encourage actions that generate new knowledge, that add value to mining projects, especially by enabling a company's professionals to make more accurate decisions in regard to their assets. To achieve this, in efforts to generate new knowledge, we adopt collaborative projects, which bring together companies, universities, and research institutions. A collaborative project begins with a conversation with the company or companies, to define more clearly what their geological and technological demands would be along the length of the mineral chain in which they are operating. Based on the understanding and clarity of these requirements, Adimb assembles a group of professionals who will form a research team, from which a project emerges that is then submitted to the company. It is not an academic project, it is a professional project that involves deadlines, periodical reports, and a budget. Once this project is approved by the company, it is put into operation, with Adimb managing the financial and technical-scientific side and being audited by a committee on the company's behalf. Projects vary from two to four years. There are four of them so far. The biggest of the four is a copper project with Vale. There are two other copper projects, one with Oz Minerals/BHP and the other with Centaurus Metals; all three are located in the Carajás mineral province, each dealing with its own problem, some of them more specific and others more comprehensive. A fourth, more recent, project is with Meteoric Resources in Poços de Caldas. These are multi-institutional projects that are not just about mineral exploration, not just about the upstream. They also address the question of ore utilization. This is the case, for example, of ionic clay deposits rich in rare earths where we have a combined team of geologists and mining engineers, gathering all the relevant information that will enable the company to make its decisions.

In addition to collaborative projects, Adimb is engaged in other actions, including specialist training for company personnel, notes Marcos André Gonçalves. In 2024 it will introduce, in partnership with Ibmec, a higher education institution in the area of economics and finance, an MBA course in the economic management of mining projects.

In addition, lithium and graphite courses have been held, which were in great demand. Adimb is also resuming scientific visits to other countries whose geology is significantly different from Brazil's.

Also, in alternate years Adimb hosts its International Symposium on Mineral Exploration, known by the acronym Simexmin, which is the main discussion forum on mineral research in Brazil.