Key Minerals, Companies and Projects
Brazil produces 70 mineral commodities: 21 metals, 45 industrial minerals and four fuels
Despite recent turbulence in global financial and commodities markets, iron ore has experienced a significant boom in pricing over recent years as the three iron ore super powers of the world (Vale, Rio Tinto and BHP Billiton) have re-negotiated pricing contracts with their key markets. Having experienced price increases in the region of 100%, from $70 up to more than $160/dry metric ton in today’s market, the prospects of iron ore profitability have changed significantly.
Iron ore is the mineral of greatest value to Brazil’s mining industry, representing 78% of total mining exports; $16.5 billion of a $22.5 billion industry in 2008. Over-reliance upon the production and export of iron ore to China, the overwhelming driver of demand for Brazil’s iron ore, presents an acute risk to the industry. A potential housing bubble in China or a currency revaluation has the potential to suddenly reduce the country’s demand for Brazilian iron ore. Despite this risk, Brazilian iron ore producers remain buoyant.
“The Brazilian mining economy is very dependent upon Chinese demand,” said Antonio Rigotto, director of operations, Ferrous Resources. “Since the urbanization process in that country has been rapid, internal consumption and industrial production of a vast range of consumer goods will inevitably increase Chinese demand for steel. Consequently, the demand for iron ore is going to be the defining trend in Brazil’s mining market for at least the next five years. I expect prices of iron ore to grow by at least 20% over the next 10 years because iron ore demand will outstrip growth in supply. I expect Chinese demand to be a key driver in the Brazilian mining economy for at least the next five years.”
As Chinese iron production goes into decline, opportunities for Brazil’s iron ore exporters will increase over the medium term.
With combined, measured and indicated reserves of iron ore standing at 26 billion mt, Brazil has the fifth largest iron ore resource globally. Brazil’s iron ore is of the highest quality, on a par with that found in Australia’s Pilbara region. Hematite—found in the state of Para—averages a 60% grade, while itamirite—found in Minas Gerais state—averages 50% grade. With production standing at 380 million mt in 2008, Brazil ranks as the second largest global producer of iron ore behind China.
Vale is responsible for 79% of Brazil’s iron ore output, CSN produces 7%, MMX 3% and others such as Ferrous and Samarco account for the remaining 10%. Brazil’s key iron ore producing states are Minas Gerais, which accounts for 71% of output, Para makes up 26%, and others such as Bahia account for the remaining 3%.
In terms of major iron ore projects, Vale’s Carajas complex in Para State is the crown jewel of Brazil’s iron ore industry and the world’s largest iron ore complex. Discovered on July 31, 1967, the Carajas complex of four open cast mines first came into production in 1985 with output of 1 million mt of iron ore. Today, Carajas produces 300,000 mt of iron ore each day. All of the iron ore produced at Carajas is transported along Vale’s 892-km railway track to the ports of Itaqui and Ponta Da Madeira for export to international markets.
Inaugurated at the end of 2007, the Carajas Operational Control Center provides total control over operations at the Carajás Mining Complex from one location. The mine operation areas, remote monitoring (telemetry) of equipment’s essential systems, the treatment plant and dispatch facilities are all controlled in real time by means of satellites. Images of mine operations can be visualized at any production stage, for example, with available data ranging from macro figures on a given operational area to the amount of material in a crusher. Based on this advanced control system, it is possible to determine the optimal routes from the location the ore is extracted from, to the place where the first stage of beneficiation will take place; or the most efficient combination of equipment required to raise productivity in a given operation. The control system also makes it possible to maximize synergies between mine, plant, dispatch and maintenance operations from a single location. The Operational Control Center is an example of Vale’s continued investment in advanced technology, with continuous process improvements involving automation used to achieve operational excellence. New technology also enables a reduction in energy consumption, while raising production capacity and boosting competitiveness in relation to external markets.
In accordance with recent steep increases in the price of iron ore, new investments in this sub-sector of the Brazilian mining industry will represent $37 billion over the course of the next five years. MMX is in the process of investing $2.35 billion in its System Minas-Rio which is expected to produce 26.5 million mt by 2011. Rio Tinto will invest $1 billion in its Mina De Corumba, expected to produce 15 million mt/y by 2014. Vale has ambitious plans to double output from the Carajas complex combined with further investments in organic expansion in the Minas Gerais iron ore Quadrangle. Two relatively new entrants into Brazil’s iron ore market are Anglo American, with its 2008 purchase of MMX-Minas Rio for $5.5 billion, and domestic firm Ferrous Resources, established in 2007.
The establishment of Ferrous Resources is a reflection of the buoyancy currently surrounds the iron ore sector in Brazil. The company recently invested $2 billion in its flagship Viga project. “Ferrous acquired the Viga mine, located in Congonhas, Minas Gerais, in 2007. The company is in the process of building a pipeline to link the Viga mine with the Espirito Santo coast where Ferrous is going to build a port,” said Rigotto. “The pipeline will be 420-km long, with one pumping station, unlike the majority of pipelines in Brazil, which have two pumping stations. In the first phase, from 2013, the pipeline will have the capacity to transport 25 million mt/y of iron ore, while in the second phase, from 2017, the capacity has the potential to expand to 50 million mt/y of ore. The port is situated in a submarine hole, which will be linked onshore by a 5.5-km bridge. The port will be at least 21 m in depth. Ferrous expects to start mine production by the middle of 2013. We plan it to be the largest plant in Brazil, with the country’s largest processing plant, even larger than any of those in Carajas mining complex. Ferrous has four other active mine prospects in the state of Minas Gerais and one active prospect in the state of Bahia. For this project, Ferrous is working in partnership with a variety of local companies.
“Ferrous’ processing capability enables us to develop a very successful business with relatively low grades of iron ore,” Rigotto said. “We are the leading company in Brazil in terms of the development of low grade processing technologies.”
Ferrous’ plans and ambitions are a positive indicator for the investment potential inherent in Brazil’s vast, high quality iron ore resource. The diversification of established international gold miners, such as Eldorado Gold, into iron ore production serves to underline how recent price rises have galvanized a surge of investment in Brazil’s leading mining sub-sector.
“Eldorado has bought the Vila Nova mine, located in Amapa State, in the Amazon region,” said Lincoln Silva, director, Eldorado Gold. “In May 2010, Eldorado decided to do a trial operation and in June, our first shipment of iron ore begun. Current production is 45,000 mt of final product per month, about 500,000 mt/y.”
Manganese prices have experienced considerable volatility in recent years, owing to demand fluctuations in major consumer nations such as India and China, as well as price influences associated with the global financial crisis. Prices peaked in 2008 at $302/mt, but currently stand at around $156/mt. Globally, Brazil is the second largest producer of manganese ore, behind South Africa, producing 1.7 million mt in 2010. Brazil currently produces 18% of the 10 million mt of global manganese output. Brazil’s combined measured and indicated resources of manganese stand at 566 million mt, 10% of the global total, second only to South Africa’s total reserves of 4 billion mt. Brazilian manganese reserves are concentrated in Minas Gerais state with 87% of the total, and Mato Grosso and Para with 6.5% and 4.3% respectively. Exports of Brazilian manganese stood at 2.5 million mt in 2010, key export markets are China and India.
In terms of production, Vale is unrivalled in its dominance over manganese production in Brazil, accounting for some 95% of overall output. The fact that manganese production represents just 2.2% of Vale’s business overall offers some insight into the size and scale of the company. Vale’s Brazilian manganese output is concentrated in four production complexes distributed throughout the country: the Minas Gerais complex produces approximately 200,000 mt/y alonside the Bahia, Corumba and Mina do Azul complexes.
Brazil’s other player in manganese production is Mineracao Buritirama. “Mineração Buritirama S.A. was setup in 1982 with the purpose of mining and commercializing the significant manganese ore reserves of the mine located at Serra de Buritirama, municipality of Marabá in the State of Para,” said Director Ricardo Dequech. “The Buritirama ore body was discovered in 1966. The implementation of the project began in 1992 and finished in January 1994. Total reserves are estimated at 18.4 million mt of high-grade manganese ore. We have a productive capacity of 1 million mt/y of first-class manganese. Buritirama manganese ore may be ranked as metallurgic, with 45% Mn grade, low phosphorous grade and high Mn/Fe ratio. Mineracao Buritirama’s manganese is exported mainly to China, but also to Europe and Latin America. About 20% of the production is directed at the Brazilian internal market. Today we have a solid position in the manganese market, supplying five different products.”
As steel production in Europe has declined, Brazil’s manganese producers have turned their attentions toward emerging Asia. Brazil’s vast manganese resource and established status as a key global supplier provides plenty of opportunities for new entrants to come into the market. The key challenges for potential investors to overcome are Brazil’s traditional challenges, surrounding logistics and energy infrastructure. Vale’s vast logistical network is a key support mechanism for the company’s dominance over Brazilian manganese production.
As uncertainty in the global economy lingers on and gold prices continue to increase beyond records set months and weeks previously, the world’s relatively untapped gold mining regions, such as Brazil, have become of increasing interest to a host of domestic and international interests. NYMEX gold prices have increased by almost 500% since 2000, from $250/oz to more than $1,400/oz. Brazilian gold exports have grown alongside price increases to $2 billion in 2010. Gold is now Brazil’s second most important mining export after iron ore. “When you look at the fundamentals, internationally things do look positive for gold producers. There is ongoing currency instability, particularly in the U.S. dollar and emerging markets, which is having an increasing impact upon the global market. These trends have seen the global investment community look to gold as a safer asset,” said Helcio Guerra, vice president of AngloGold Ashanti.
With gold reserves of 2,000 mt, 4.5% of global ore reserves, Brazil ranks as the sixth most endowed country. Brazil is currently the 13th largest global gold producer with 61 mt of total gold output and accounts for just 2.5% of global production. This output gap represents a significant investment opportunity for new entrants to help bring production into proportion with Brazil’s reserves.
Brazil’s main gold producing states are Minas Gerais, Goias, Bahia and Para accounting for 64%, 11%, 11% and 3% of overall production respectively. Current production levels are shared between three major firms: AngloGold Ashanti, Yamana Gold and Kinross, each accounting for approximately 25% of output, with smaller firms such as Jaguar Mining and Eldorado Gold making up the remaining share of production. As highlighted previously, Brazilian garimperos have significant involvement in national gold production, with 9% of total output.
AngloGold Ashanti is Brazil’s leading gold producer with a 2010 output of 500,000 oz between the company’s Serra Grande and Brazil Mineracao operations. “Brazil is of significant importance for AngloGold Ashanti’s operations moving forward,” said Guerra. “The geological potential is huge and the business environment for miners is very conducive, particularly in Minas Gerais. Brazil has an excellent culture for mining and the understanding of the mining industry is very strong. Currently, one of the key challenges is the strength of the Real, which makes market conditions for us exporting a dollar denominated commodity quite tough in terms of operational profitability.”
In accordance with the company’s increasing focus on Brazil, AngloGold Ashanti has expansion plans in place with output set to increase to 700,000 oz/y on the back of a $350 million mine development program in Minas Gerais State. Sustainable practices are integral to AngloGold’s strategic approach according to Guerra. “We have a specific environmental sustainability department. AngloGold Ashanti also focuses very heavily upon the development of education in terms of economic development and the maintenance of local cultures in the communities within which we operate. Anglo Gold Ashanti employs a participative approach whereby our local stakeholders decide upon which specific projects are of interest and should be invested in. Engaging at these levels with communities builds your reputation in Brazil, which serves greatly in the long run in terms of having efficient approvals and quality relationships with the regulatory bodies in the country.”
Latin America-focused Yamana Gold’s global production is increasingly based on the company’s Brazilian operations as highlighted by President and COO Ludovico Costa. “Currently, Yamana Gold has six operating sites; three in Brazil, two in Chile and one in Argentina. Brazil currently accounts for around 30% to 35% of Yamana Gold’s production. We plan to add three new operations (in Mato Groso, Goiás and Bahia state) in Brazil and one in Mexico in the following years, increasing Brazil’s GEO participation to more than 40%. Moreover, Yamana has its exploration department in Brazil, which conducts extensive exploration activity in the country. Yamana has been active in Brazil since 2003 and has built a world class operating and construction team. Since 2003, we have developed significant expertise here that we have actually used for expansion into other parts of Latin America. Our experience has given us significant knowledge regarding the potential mining opportunities in Brazil, and we have built up significant exploration capacity in four greenstone belts in Brazil. We have made construction decisions at C1 Santa Luz, Ernesto/Pau-a-Pique and Pilar. This will create significant organic production growth after two years in construction. We have made a new exploration discovery at Suruca, which will add only gold production to our existing Chapada mine. According to IBRAM (Brazil’s Mining Institute), Brazilian gold production will increase 50% by 2014.”
Canadian-based Kinross accounts for the third element of Brazil’s tripartite of leading gold producers. The company’s flagship Paracatu mine is of particular interest as the world’s lowest grade gold mine with just 0.4 g/mt of ore. “From the beginning we thought the Paracatu mine’s potential was very high,” said Regional Vice President Jose Freire. “However, after conducting a drilling campaign and an exploration campaign to re-evaluate the potential of the operation, we realized the potential was three or four times higher than previously anticipated. Kinross invested $500 million in 2006 and expanded Paracatu’s production by three times from 18 million to 61 million tons of ore. The Paracatu operation is relatively cheap, because the amount of hard rock in relation to the amount of ore is low. The deeper we go however, the more costs increase as our efficiency drops. Kinross’ goal is to continuously strive to find the best extraction methods, with the aim of maximizing our profitability. Our total recovery is determined by a combination of our floatation and magnetic recovery technologies. Flotation is currently around 82% and iron metal recovery is around 96%. Total overall recovery stands at about 79%. This year Kinross’ current production of gold from Paracatu will be around 490,000 oz. Kinross’ Brazilian operations account for around 22% of Kinross International’s production. Right now the current cost of production is about $500oz; on the whole this is competitive, even if the ore grade is as low as it is. At full capacity, Paracatu will be the largest gold producing mine in Brazil. Kinross is currently building a new processing mill and we have just approved the construction of a fourth mill. Next year we will finish construction of a new tailings dam, which is a huge investment, but will suffice for the entire duration of the life of the mine. Next year we will also increase production to between 492,000 to 550,000 oz; while in 2012 production will reach about 575,000 oz. Kinross expects the life of Paracatu mine to endure for approximately 30 years.”
Three emerging gold miners of particular interest in Brazil are Jaguar, Colossus and Eldorado Gold, whose relatively recent entries into Brazil underline the country’s immense potential for gold production. “Jaguar Mining started its operations in Brazil in 2006 and is currently producing gold at its Turmalina, Paciência and Caeté operations, which combined produce about 220,000 oz of gold,” said COO Lucio Cardoso. “Jaguar’s gold operations are located in the Iron Ore Quadrangle region, near the city of Belo Horizonte in the state of Minas Gerais, Brazil. Belo Horizonte serves as the commercial center for Brazil’s mining industry, and has excellent infrastructure to support world-class mining operations. The Iron Quadrangle, where Jaguar controls 93,000 acres, is a prolific greenstone belt that has produced significant quantities of gold at competitive costs per ounce from open-pit and large-scale underground mining operations for more than 300 years. However, it remains relatively under-explored compared to the other great greenstone belts around the world, with a relative absence of active junior mining and exploration companies. An encouraging fact about the Iron Ore Quadrangle is the existence of multiple examples of gold resources running to depths exceeding 2,000 m, with similar widths and grades to those seen at shallower depths. This is important to Jaguar because the average depth of its resources is less than 400 m from the surface. The bulk of these resources are open at depth and laterally, giving the potential for substantial discoveries.
“In addition to its activities in the Iron Quadrangle, Jaguar also has plans to develop the Gurupi Project in the state of Maranhão, where it controls 293,000 acres that Jaguar Mining acquired in 2009 from Kinross. Through a joint venture with Xstrata, Jaguar is also engaged in gold exploration at a greenfield site in the state of Ceará covering 182,000 acres; the Pedra Branca Project. Last year we achieved an average cost of $468/oz, while this year we have an estimated cost of production of $750/oz. Over the course of the next few years we expect production of 220,000 oz/y. We intend to consolidate our operations in Minas Gerais and start implementing the Gurupi project. The project is located in the state of Maranhão, Brazil. In May 2010, Jaguar filed a National Instrument (NI) 43-101 compliant pre-feasibility technical report on the Gurupi Project, which was prepared by AMEC. The AMEC pre-feasibility report, which assumes an average gold price of $950/oz and a cut-off grade of 0.3 g/mt of gold, registers an estimate of 65.4 million mt of indicated mineral resources at an average grade of 1.14 g/mt totalling 2.4 million oz. We expect to start production in Gurupi between 2013 and 2014,” said Cardoso.
Specialist exploration firm Colossus Minerals is unique in Brazil in that the company has negotiated a cooperative working alongside the Garimperos’ union COOMIGASP in order to complete underground exploration of the Mina Nova Serra Pelada site. “The Nova Serra Pelada is located on 100 hectares very close to the pit where the largest garimpo in the world is operated,” said Colossus Director Luis Celaro. “During the 1990s, the Brazilian government decided to shut down the garimperos due to security reasons. Since then, panners organized in a cooperative known as Coomigasp which developed the dream of once again mining ore in that region. With the support of the Brazilian government, Coomigasp carried out a process to select a mining company that would perform underground exploration, in order to confirm the existence of a commercially exploitable deposit. The cooperative holds the mining rights to operate at the site, in accordance with a document issued by the federal government. Colossus, using its Brazilian technical staff, studied the situation and recommended to the management of the company in Canada that it study the possibility of submitting a proposal for a commercial partnership with Coomigasp, which took place in 2007.
“Having been the only one to make a formal proposal, Colossus was selected by Coomigasp. Beginning at that time, Colossus conducted a series of geological studies in the area of 100 hectares and concluded the deposit could yield an economically viable amount of precious metals, including gold, platinum and palladium. Given these findings, we both formed a joint venture, Serra Pelada Companhia de Desenvolvimento Mineral (SPCDM), who became the holder of the mining rights and is responsible for administration of the Nova Serra Pelada project,” said Celaro.
“This was an important step in the history of Colossus. Up until this time, we had only been dedicated to the mineral exploration phase. The implementation of a mining project is a very promising challenge. The geological exploration indicates an ore body in the area of 100 hectares which could produce 3.5 mt of precious metals per year. The first extraction of ores is expected for the middle of 2010. At the moment, SPCDM is progressing with the excavation of the decline and the implantation of the industrial facilities for the beneficiation of ore in that area. Gold, platinum and palladium will be transformed into bars by industrial process in Serra Pelada, something totally unprecedented in that region,” said Celaro.
Despite being a very new entrant into Brazil’s precious metals industry, Colossus has been quick to embrace Brazil’s tradition of investing in the communities. “The Vila de Serra Pelada is a collection of houses made of wood, where sanitation and paved sidewalks exist. The community displays high indices of HIV and child prostitution. Trash collection does not exist, public equipment is damaged and there are no hospitals. When we arrived at the place with a proposal to once again extract ores that could become wealth, Colossus could not ignore the local neediness, so we decided to take an attitude together with regional governments,” said Celaro. “The arrival of Colossus in Serra Pelada was considered a milestone in the history of that region and not just because of the future extraction of gold, platinum and palladium, but for the contribution to the restoration of citizenship for these thousands of people.”
Vancouver-based Eldorado Gold invested in its most significant gold prospect in July 2010 with the acquisition of Brazauro Resources Corp. “This transaction affirms our commitment to explore and develop the Tocantinzinho project in Para state and provides us with option agreements on two nearby early-stage exploration projects; Agua Branca and Piranhas,” said Eldorado Director Lincoln Silva. “The Tocantinzinho project is a granite-hosted disseminated deposit containing 2.1 million oz of gold. At Agua Branca, located approximately 25 km south of Tocantinzinho, 2,000 m of diamond drilling will be completed to test gold anomalies outlined by soil geochemistry surveys. The Piranhas project area contains a very strong gold-in-soil anomaly and extensive areas of garimpo workings, located approximately 15 km west of Tocantinzinho. If Eldorado gets positive results from the Tocantinzinho project, we can begin the pre-feasibility study. We expect to finish the pre-feasibility study by January 2011 and complete the feasibility study in July 2011. The environmental studies should also be finished in September 2011. By the end of next year or early 2012 we can decide whether to undertake construction and start production.”
Given the upward macro-economic pressures on the gold price, it is no surprise Brazil is seeing an upsurge in international interest in the country’s gold reserves. The relative output gap between output and reserves makes Brazil an extremely attractive location for gold prospecting and mine development.
Given the long-term nature of contracts for the supply of bauxite and alumina, Brazilian fluctuations in production have been relatively mild over the course of the past decade, with output steadily increasing from 135 million mt in 2000, to 205 million mt in 2010. Prices have experienced fluctuations with peaks of $35/mt in 2008 and lows of $25/mt in 2010. Exports of Brazilian bauxite in 2010 are forecast to reach 5.9 million mt.
With reserves of bauxite of 3.8 billion mt of a global total of 34 billion mt, Brazil ranks fifth overall globally behind Australia, Guinea-Conakry, Vietnam and Jamaica, with just over 11% of the global total. Brazil is currently the world’s third largest producer of bauxite, representing 14% of the global total. Para state dominates bauxite production in Brazil accounting for 85% of overall output, while Minas Gerais produces the country’s remainder. Mineracao Rio Do Norte accounts for 68% of Brazil’s bauxite, followed by Norsk Hydro and Votorantim with 12% and 8% respectively. In May 2010, Norwegian based aluminium producer Norsk Hydro acquired all of Vale’s bauxite and aluminium activities in a $4.9 billion deal representing the largest single foreign direct investment into Brazil’s alumina and bauxite industry for the year 2010.
Mineracao Rio Do Norte (MRN), a consortium of major bauxite producers operating out of the Oriximina municipality in Para state, overwhelmingly dominates Brazilian bauxite production. With key shareholders such as Norsk Hydro, Alcoa, Rio Tinto, Votorantim and BHP Billiton, the firm boasts world-class expertise in possibly the most geographically challenging location for a mining operation in the world. Deep in the Amazon Rainforest, MRN’s operational site is serviced by its own airport, rail infrastructure and ports.
Established in 1974, MRN has worked hard to integrate the company’s operations with the sustainable development of local communities, investing in widespread reforestation initiatives and the Quality of Life Program (PQV) which aims to raise health and educational standards for the communities of North West Para state.
Alcoa’s Juruti project is the most recent major investment in Brazilian bauxite production. “Juruti first started production in 2009. After one year, we are at an approximate annual rate of 3 million mt. We will remain at this level of output for the foreseeable future. All of our bauxite output is shipped to our smelter at the Port of San Luiz in the state of Maranhão. The infrastructure that we have in place is capable of ramping up significantly; however at this stage we are stabilizing production at between 3 and 3.5 million mt/y of bauxite,” said Alcoa Brazil’s President, Franklin Feder.
Tin prices have increased significantly over the course of the past decade, from $5,429/mt in 2001, to $26,700/mt in 2010. Despite such steep increases, Brazilian production has remained relatively flat over the same period, averaging approximately 300,000 mt/y. Brazil’s tin reserves account for 11% of the global total, placing the country fifth in terms of its share of global tin reserves. Brazil’s key tin producing states are Amazonas and Rondonia, accounting for 60% and 40% of total national output respectively.
Mineracao Taboca is Brazil’s leading producer of tin, working the company’s flagship Pitinga mine in the Amazon. Pitinga has suffered from a scale-down in production recently as Mineracao Taboca aims to modernize the operation and bring the company’s depreciated capital stock back up to optimal standards. “The Pitinga mine started its development in the 1960s. The production of tin started several years later,” said Mineracao Taboca President Joao Luiz Serafim da Silva. “In the 1980s, the company was sold by the founders to a group of investors led by investment funds. In 2008, a Peruvian family group bought the Pitinga mine from Paranapanema. The company has suffered from some decisions taken in the past and has got multiple asset and maintenance issues, including the poor status of equipment. In 2009, we decided to reduce output, step back and produce only out of tailings and take some time to refurbish our equipment. Currently we are processing tailings and rebuilding the whole plant in order to modernize the operation. We hope to restart the mine’s production from hard rock in 2012. We expect to increase production by five times in the next couple of years. Pitinga is the key project for Mineracao Taboca in Brazil for the next few years. We produce multiple minerals in the mine but mainly tin and an alloy of niobium and tantalum.”
Following a significant dip in 2008 resultant from the global financial crisis, zinc prices have recovered from their 2008 low of $1,090/mt, stabilizing at $2,350/mt in 2010. Brazil’s 6 million mt of total global zinc reserves account for roughly 3% of global total reserves. China and Australia account for the largest global zinc reserves, accounting for 16.5% and 10.5% of total respectively. Brazil is currently ranked as the 12th largest global producer of zinc with output of 175,000 mt of concentrate in 2010, accounting for 1.5% of total global output. Minas Gerais state is the sole zinc producing region in Brazil occupying 88% of the country’s total reserves.
Through its wholly-owned subsidiary CIA Mineira de Metais, Brazilian conglomerate Votorantim is the only producer of zinc in Brazil. “Votorantim Metals is the largest producer of zinc in Latin America and is among the three largest worldwide,” said Votorantim President Joao Bosco Silva. “In 2010, its productive capacity reached 706,000 mt/y. The zinc business unit began in 1956, with the establishment of the Mineira Minerals Co. in Três Marias, Minas Gerais. In 2002, it acquired the Paraibuna Metals Co., housed in Juiz de Fora, also in the state of Minas Gerais. In 2004, Votorantim Metals took control of its first unit outside of Brazil. The acquisition of the Cajamarquilla Zinc Refinery in Peru is a reflection of a new growth strategy for the group, which intends to increase its activities in Latin America. In Peru, we have a total of $15 billion and participation in a mining company called Milpo Minerals Co., Peru’s fourth largest zinc mining corporation, which we currently control entirely. Votorantim’s Caquamarquilla project in Peru has just been expanded with an investment of $500 milion.”
Volatility has been rife for nickel prices over the past five years, peaking at US$ 33,500/mt in 2006 before falling to a recent low of $11,000/mt in 2008. Currently, they appear to be more stable at an average price of $24,105/mt in 2010. Brazilian nickel reserves stand at 9 million mt, representing 6.6% of the global total of 144 million mt. With annual production of 74,000 mt in 2010, Brazil is ranked as the world’s 10th largest nickel producer. Brazil’s key nickel producing states are Bahia, Goias and Minas Gerais, accounting for 46%, 42% and 12% of total output respectively.
Brazil’s nickel production is dominated by Votorantim and Anglo American who account for approximately 60% and 40% respectively of overall Brazilian nickel output. However, as new investments come on stream from companies such as Vale and Mirabella, it is widely expected Brazilian nickel production to reach 200,000 mt/y by the end of 2011.
“Votorantim Metals is currently the largest Brazilian producer of nickel and Latin America’s only producer of electrolytic nickel, with a capacity of 44,000 mt/y,” said Joao Bosco Silva. “This unit began operations in 1981. The mining area of this business unit is located in Niquelândia (Goiás), where laterite nickel is mined and nickel carbonate is produced. These products supply a metallurgical plant located in the neighbourhood of São Miguel Paulista, São Paulo. This unit manufactures electrolytic nickel and cobalt. In Fortaleza de Minas, Votorantim Metals produces nickel for the international market.” Votorantim recently invested in upgrades on the company’s Niquelândia plant in order to increase production from 27,000 to 37,000 mt/y.
Anglo American’s Codemin project has been in operation since 1982 and currently produces approximately 9,500 mt/y of nickel. Anglo American is investing $1.5 billion in its Barro Alto project with a view to significantly raising the firm’s overall Brazilian nickel production. “The Barro Alto project is located in the state of Goias, approximately 170 km from Anglo American’s existing Codemin nickel operation,” said Walter De Simoni, CEO Nickel Business of Anglo American. “The project was approved in December 2006 and is forecast to come into production in the first quarter of 2011. Average production over the 32-year life of mine will be at 36,000 mt/y of nickel. Once at full production, the operation is expected to be in the lower half of the cash cost curve, and will more than double Anglo American’s nickel production. Anglo American will complete the conceptual study by the middle of 2011 for our Jacaré project in Para state. And after that, the pre-feasibility and the feasibility study. Nickel demand is expected to have a CAGR of 5% up to 2015. By 2011 Anglo American will be producing more than 60,000 mt of nickel. Anglo American is also conducting the feasibility study of the Morro Sem Bone nickel project.”
Vale’s recent acquisition of major Canadian nickel producer Inco has catapulted the company into second position as the world's largest nickel producing company behind Norilsk of Russia. Vale has begun an investment program of organic growth in its Brazilian nickel producing capacity. The Onca Puma project represents a total investment of $2.3 billion and is expected to deliver annual output of 58,000 mt/y when it comes online in the first quarter of 2011.
Mirabela is a relatively new entrant into Brazil’s mining industry, first tendering for the Bahia based Santa Rita project in 2005. “The Santa Rita project was discovered in 2004 by CBPM, following which a tender was issued and subsequently won by Mirabela. Santa Rita is a record breaking project—discovery to first nickel production was achieved in just five years, compared to the normal timeframe of 10 years,” said Mirabela Director Luiz Nepomuceno. “It is also important to note Mirabela had to contend with the disruptions caused by the global financial crisis during the development period. I think the main point was how efficiently we were able to work with the state government in getting environmental licenses and studies completed. This was a huge contributing factor to our successful project development.
“Mirabela has the flexibility to get things done quickly. The Santa Rita mine is the largest nickel sulphide mine in Brazil, and the second largest open-pit nickel mine in the Americas behind Inco of Canada, so we are obviously very excited about delivering the full potential of this deposit,” said Nepomuceno. “Currently, the Santa Rita mine is aiming to produce around 10,000 mt of nickel concentrate for 2010. We expect the mine to achieve full production by the end of 2011 of between 23,000-25,000 mt of nickel concentrate on an annualized basis. I think the fact the Santa Rita project was brought into production in five years demonstrates that Brazil has a very good environment for the development of mining activities. Environmental and construction licenses are critical for any mining project in Brazil and you have to work closely with, and have the support of the government when undertaking these plans. We have found the state government of Bahia is a very friendly authority to work with.”
Uranium prices have increased seven fold over the past decade, jumping from $7/lb in 2000 to $48/lb in 2010. Brazilian reserves of uranium are currently ranked seventh globally with 310,000 mt accounting for 7% of the global total. With production of 390 mt in 2010, Brazil is ranked as the world’s twelfth largest uranium producer behind international uranium powerhouses such as Kazakhstan and Canada. Global demand for uranium currently stands at 67,000 mt/y, however this figure is widely expected to double by 2030.
The Brazilian uranium industry is a monopoly under the control of Industrias Nucleares de Brazil (INB). “Brazil has the seventh largest deposit of Uranium in the world, despite the fact that only 30% of Brazilian territory has been explored,” said President of INB, Alfredo Tranjan. “There are 310,000 mt of known reserves, beyond that, there are a further 300,000 mt we strongly believe to exist in two deposits in the states of Pará and Amazonas. Even beyond that, given the similarities of Brazilian soil and terrain to, for example, Australia, there are a possible further 500,000 mt of uranium ore that could be explored. We are looking at a total of approximately 1.1 million mt, which would place Brazil securely as having the world's second or third largest uranium reserves.
“We are focusing on the opportunities presented by international trade, since Brazilian production far exceeds the needs of the domestic population. Most significant is, perhaps, the exploration model we have already initiated with Galvani Mineração, a major Phosphate producer in which we buy the Uranium by-product created from the excavation of phosphate that would otherwise go unused,” said Tranjan.
“Today Brazil is getting rich through technological innovation, and we own the technology for all of the steps in the production of nuclear energy. The problem is that the use of uranium as fuel has a limited shelf life, and will eventually be substituted as new technology creates other sources of energy that are more feasible. From Brazil’s perspective, if this shift happens before all of the country’s Uranium is explored, we will have lost a massive opportunity. It is important, then, to increase exploration and production as soon as possible, so that the end of the need for uranium coincides with the end of Brazilian explorable uranium itself,” said Tranjan.
“INB’s main impediment to growth is due to a political conviction that Brazil does not produce enough Uranium to satisfy national demand. This idea must be overcome; Brazil dominates the production cycle, which few countries internationally do, and we produce more than enough Uranium to meet our growing national demands. We hope INB will be able to export its product. We plan on entering the international export market within the next four years, be it during exploration or at different phases of production. As far as uranium is concerned, Latin American Reserves are Brazilian reserves and there is a big interest on the part of MERCOSUR to create some continental integration based on a strategy of creating mutually beneficial partnerships.”
Niobium prices have almost doubled over the course of the past decade, increasing from $13,197/mt in 2001, to $23,091/mt in 2010. Brazil’s 5.2 million mt of niobium represent more than 90% of the global known total of 5.7 million mt. Given the above figures, Brazil dominates global niobium production accounting for 80,000 of the 83,000 mt produced in 2010. Brazil’s key niobium producing regions are Minas Gerais, Goias and Amazonas, each accounting for 57%, 42% and 1% of national production respectively.
Three companies effectively control the Brazilian niobium productive sub-sector. Companhia Brasileira de Metalurgia e Mineração (CBMM) accounted for 60% of production in 2010, while Anglo American and Mineracao Taboca accounted for 21% and 12% of output respectively. CBMM, a predominantly family-owned business with minor participations owned by U.S. company Unocal and the Minas Gerais state, sells more niobium or niobium-derived products than the rest of its competitors together.
CBMM owns the world’s largest deposit of pyrochlore, the most important mineral for niobium extraction and production. This mine, located at Araxá, in Minas Gerais State (Brazil), is operated as an open-pit, without much need for drilling or explosives and its production supplies between 65% and 70% of the world demand for niobium products. China is the world’s largest producer of steel, and therefore the single-largest consumer of niobium. Brazil has the world’s largest reserves of niobium.
Potassium and Phosphate
Potassium prices have more than doubled in recent years, increasing from $144/mt in 2004 to $374/mt in 2010. Brazil occupies seventh position in terms of total potassium reserves with 284.7 million mt representing 1.6% of total global reserves. Brazilian potassium production accounted for approximately 500,000 mt in 2010, placing the country in ninth position amongst global producers.
Global prices of phosphate rock have somewhat levelled out from peaks of $192/mt in 2008, coming back down to US$95/mt in 2010. Brazil’s 319 million mt of phosphate rock reserves ranks the country in 12th position globally, accounting for 0.6% of total reserves. Brazilian phosphate rock production accounted for 6 million mt in 2010, positioning the country in sixth position with 4.3% of overall global output.
Brazil’s status as one of the world’s leading agricultural producers of everything from cattle to coffee, has positioned the country as one of the key global swing markets for fertilizers. Despite Brazil’s strength in phosphate and potassium reserves, the country still relies upon imports for fertilizer inputs into the agricultural industries. This reality has not been overlooked by Vale. The company has made major strategic inroads into the fertilizer industry during 2010 with acquisitions of major producers Bunge and Fosfertil. The establishment of Vale Fertlizantes has emphatically set out the company’s strategic ambitions for diversification into the growing strategic importance of fertilizer producing raw materials such as potassium and phosphates.
“Following the privatization of Vale in 1997, the company has had a specific policy of diversification. Vale has been operating a potash mine in Brazil since 1992 and with the development of the phosphate mine in Per, we have established a solid platform for growth supported by the excellent fundamentals in the fertilizer industry,” said Vale Fertilizante’s Operations Director Ruben Fernandes. “This is an area where Vale is now working to achieve critical mass. Brazil has a huge demand for fertilizers with two harvests a year, plenty of arable land and the country’s favorable conditions for agriculture. The market for fertilizers also has a very different cycle if you compare it to iron ore or base metals. Fertilizers are related to food, whereas metals are related to heavy industry. As a result our risk is minimized when you consider the fluctuations in economic cycles. This has led Vale into the acquisitions of Bunge and Fosfertil. Vale has no interest in producing fertilizers as such; the company’s interest is in providing the raw materials for these industries. We will go as far as producing MAP, TSP or SSP, which are the basic fertilizers for the blenders; we don’t want to become a blender.
“Vale also has fertilizer operations in Peru, Argentina and Mozambique. In five years from now Vale Fertlizantes expects to be one of the world’s top three fertilizer companies. We aim to produce 12 million mt/y of potash and 16 million mt/y of phosphate rock. Iron ore will always be Vale’s main business; however we genuinely believe that fertilizers will be Vale’s second business in the near future.”
Despite a dip in the copper price throughout the most serious period of the global financial crisis, the price has increased many times over in the past decade from lows of $1,500/mt in 2001 to highs such as $8,400/mt in 2010. Brazil’s 15 million mt of copper account for 2% of the global total and copper output in the country ranks fourteenth overall globally with 230,000 mt in 2010. Brazil’s major copper producing states are Para, Bahia and Goias accounting for 60%, 20% and 20% of overall output respectively.
CVRD started producing copper at Sossego, near Carajas in northern Brazil in mid-2004. Currently, the company has four more copper projects and expects the Salobo project to produce 200,000 mt/y of copper metal over 30 years. Vale dominates copper production, accounting for 57% of total output in 2010, followed by Yamana and Mineracao Caraiba with 25% and 14% respectively over the course of the same timeframe.
No major new copper mines are expected to come on stream through 2012 and existing mines are aging, meaning that ore grades continue to fall. Meanwhile, copper consumption continues to grow at an expected increase of 4.6% worldwide in 2011. The growth in world usage is largely due to growing consumption in Japan, the EU, Brazil, India, Korea and Taiwan. According to the non-ferrous metals association Sindicel, copper consumption is expected to rise in Brazil too. Geraldo Haenel, president of the Brazilian Copper Association has forecast copper metal’s growth will be stronger than that of copper products. Haenel, CEO of the Paranapanema non-ferrous metals group, added production capacity of refined products—copper wires, cables and brass—increase at a slower rate. Paranapanema owns Caraiba Metais, Brazil’s only copper smelter.
However, construction works for the upcoming 2014 Football World Cup and the 2016 Olympics will actively boost the demand for copper products.