Saudi investment could help Brazil unearth new mining frontiers

Brazil's mining sector is looking to attract investment from Saudi Arabia to support efforts to diversify the industry and boost the development of projects to produce critical minerals.

Saudi Arabian government officials are visiting Brazil and Chile from July 22 to 30 to discuss investment opportunities in both countries, with a particular focus on the mining industry.

The Middle Eastern country's representatives are led by industry and mineral resources minister Bandar Alkhorayef and the vice minister for mining affairs, Khalid Saleh Al-Mudaifer.

"We will receive the delegation from Saudi Arabia and we will discuss investment possibilities and present Brazil's mining potential but, in addition, we want to create an ongoing relationship with Saudi Arabia, creating a permanent group of dialogue with them to discuss investment opportunities on both sides," Raul Jungmann, president of Brazilian mining association Ibram, told BNamericas. 

"Brazil's mining sector is highly dependent on iron ore, which has historically been very good for making our exports robust and also increasing our trade relations with Asia (the region that is the biggest client of Brazilian iron ore) but we know that in the long term we need to diversify mining," he added. 

Iron ore accounts for around two thirds of Brazilian mining output.

According to the Ibram president, Brazilian businesspeople will make presentations to the Saudi officials on the country's potential for lithium, niobium and rare earth projects.

Along with Jungmann, the Saudi Arabia delegation will be received by Ana Cabral, co-founder of lithium producer Sigma Lithium; Ricardo Lima, CEO of Brazilian niobium miner and integrated producer CBMM; and Ana Sanches, head of Anglo American in Brazil and chairwoman of Ibram, among other executives. 

The Brazilian mining sector is already familiar to players in Saudi Arabia.

Last year, local mining giant Vale sold 13% of its base metals division VBM, which has nickel and copper operations, for US$3.4bn. Manara Minerals, a JV between Ma’aden and Saudi Arabia's Public Investment Fund (PIF) agreed to pay US$2.6bn for a 10% stake and US investment firm Engine No. 1 acquired the other 3%.

While the Brazilian mining sector is looking to diversify, Saudi Arabia also wants to diversify its investments from oil.

"Saudi Arabia has a geopolitical challenge, as they have a close trade and investment relationship with the US and also with China. They can't invest too much in one of the two countries, considering the polarization between them, so Brazil and South America could be an important destination for Saudi investments, because we're a neutral region," said Jungmann.

INVESTMENTS 

Ibram maintains its projection of US$64.5bn in investments in the mining sector in 2024-28 but is expected to announce a new estimate for the next five-year cycle at the end of this year.

Although surveys of stakeholders in the sector have yet to begin for the preparation of a new investment forecast, the association expects investments to increase in the next cycle, mainly due to the advance of projects associated with critical minerals for the energy transition.

The trend of increasing investments in critical minerals has already begun. Of the planned investments in 2024-28, iron ore still accounts for a large chunk at US$17.2bn, but that figure is only 2.1% more than the US$16.9bn reported for 2023-27, according to Ibram.

Meanwhile, investments in rare earth projects are expected to rise 870% to US$1.45bn, in lithium by 175% to US$1.19bn, in copper by 51% to US$6.74bn and in nickel by 90% to US$4.44bn.

TAX 

Although the mining sector celebrated a partial victory with this month's approval of key regulations for the tax reform in the lower house of congress, the mining sector is fighting for more changes.

"The so-called selective tax on mining activities was reduced from 1% to 0.25%, but we don't agree with the existence of this tax, which is why we will ask for it to be abolished in the debate that's underway in the senate," said Jungmann.

As part of the government's efforts to simplify the complex tax system, the lower house authorized the creation of a selective tax on activities deemed harmful to health and the environment, which was fiercely opposed by mining companies.

Although the originally proposed 1% levy was lowered to 0.25% in response to industry pressure, the regulations are being discussed in the senate, and the mining industry is hopeful that there will be amendments.