How is Brazil to diversify its range of mining products? This is one of the industry's greatest challenges, in the view of Marcos André Gonçalves, the chairman of Adimb. The Brazilian mining industry, he says, remains overdependent on iron ore, produced mainly for the export market, although this dependence has now become somewhat less extreme following the expansion of gold and copper.
One of the bottlenecks he sees is the lack of financing mechanisms for mining, something that countries such as like Canada and Australia, two other important mineral producers, have successfully achieved. In this connection he praises recent initiatives adopted in Brazil, such as the launch of an investment fund set up jointly by BNDES and Vale to finance early-stage mining projects; the financing offered by BNDES in cooperation with Finep to support technology development projects for the use of strategic minerals for the energy transition and food security; and the government decree that includes mining companies among the qualified issuers of incentivized debentures affording tax relief for investors.
Another factor that Gonçalves lists as positive is the resumption this year by the Brazil Geological Survey of aerial geophysical surveying, mainly because the fact that the Brazilian public was consulted in advance, allowing private-sector companies to give their opinion on the areas to be prioritized in aerial surveys. "After all," he notes, "the work will cover a million linear kilometers. It will mean a significant advance for the industry."
At the same time, he calls attention to what he sees as a negative factor, namely the gap that persists in the regulation of mineral exploration activity. There is a very large stock of pending applications for areas where interested companies ought to have already started their exploration work. "Assigning these areas would help to achieve greater diversification of the Brazilian mineral mix. We noticed strong interest from companies in commodities linked to the energy transition, which is positive," he says. However, there is a shortage of areas available for mineral exploration.
Gonçalves also sees difficulties in obtain ing financial resources to support company projects, particularly in the more traditional commodities. Junior mining companies or medium-sized companies producing iron ore, copper, nickel, lead, zinc, gold, and tin, among others, are currently experiencing great difficulty in accessing financial resources, while at the same time "it is raining money," in Gonçalves' words, for those that operate in minerals aimed at the energy transition, such as lithium, cobalt, rare earths, and graphite.
He regrets that, amid this shift that promises to lead to a diversification of its product range, Brazil is not taking advantage of uranium, of which it holds important reserves, though still insufficiently known. Uranium is still treated as a strategic mineral in Brazil, he notes, and the law does not allow private investors to engage in production. He hopes the law may change, opening up this activity to the private sector.
An issue that Gonçalves considers essential to give more dynamics to the race that is on in today's Brazil, above all in the field of the energy transition minerals, is the full computerization of ANM procedures together with making up the personnel shortfall at the Agency. The undersupply of areas available for exploration is leading to a surge of speculative deals, with many companies opting to acquire areas from other holders, in order to speed up their mineral exploration work. This is pushing up prices, in comparison with the cost of acquiring the rights at an ANM auction.
The importance of the retail investor
In the financing connection, another major challenge for mining in Brazil, Gonçalves says, is winning over retail investors. This is not a problem in countries like Australia and Canada but in Brazil the path will not be easy, he warns. It will require education, in order to show the financial market that mining has its attractions. To meet this need, Adimb has teamed up with Ibmec, an educational institution that is a reference for those working in the financial area, to offer a new MBA degree course. One of the guidelines is to show what mining can do for the financial sector. Mining can be very successful, making it an excellent investment option, for institutional investors and for the retail investor alike. "If, for example, we analyze free cash generation in iron ore operations," he says, "we see that it is extraordinary. Few commodities offer this level of profitability." And this needs to be shown clearly, he adds. "It must also be demonstrated that the world is going to need more and more minerals, in particular the base metals. In other words, the world is still going to depend on mining."
