Brazil advances initiatives to boost output of critical minerals

Brazil is advancing with initiatives to develop its potential in critical minerals, combining efforts to diversify its mining industry and the growing interest of global players.

Federal development bank BNDES and mining giant Vale announced the asset managers that will oversee a 1bn-real (US$185mn) fund to invest in exploration of critical minerals.

"This fund announced by BNDES is part of a major plan where we will establish a more sophisticated financing structure for projects in the initial stages, involving junior companies," Miguel Nery, director of mineral exploration and mining association ABPM, told BNamericas.

"In addition to this fund, we are holding talks with the administration of Brazil’s B3 stock exchange to create a mechanism for listing junior companies, similar to what already exists in Canada and Australia," said Nery, who is also the coordinator of Invest Mining, a network that involves the participation of government agencies, including BNDES, and private sector bodies linked to minerals.

BNDES announced that a consortium formed by Ore Investments and JGP BB Asset was selected to oversee the fund to finance exploration and development of projects with strategic mineral assets for the energy transition, decarbonization and fertilizer minerals.

“The creation of the strategic minerals fund continues BNDES’s support for the mining sector. In the last 10 years, 8.3bn reais was invested in financing for around 1,800 companies. The sustainable exploration of critical minerals will be fundamental to make Brazil a global leader in the energy transition, one of the central objectives of President Lula's government," the bank’s president Aloizio Mercadante said during an interview.

BNDES and Vale will each subscribe quotas in the fund of up to 250mn reais, with the other 500mn reais open to third-party investors.

“Vale is a major producer of minerals for the energy transition and is proud to be part of an initiative that will boost investments in critical metals and promote the growth of national production chains. The great interest in managing the fund highlights the robustness of the strategic mineral exploration and production market in Brazil," said Vale CEO Gustavo Pimenta.

Questioned during the interview whether Vale could invest in other minerals, Pimenta said the company’s strategy continues to be focused on its core business, which is iron ore, and also on the development of copper and nickel projects, where it has large reserves. However, the CEO said Vale does not rule out investment in other minerals depending on the success of exploration supported through the fund.

According to BNDES, the 1bn reais is likely to support up to 20 junior and medium-sized companies that work in mineral exploration and development of new strategic mineral projects in Brazil.

The fund will prioritize cobalt, copper, tin, graphite, lithium, manganese, rare earths, platinum group metals, molybdenum, niobium, nickel, silicon, tantalum, titanium, tungsten, uranium, vanadium and zinc. Phosphate, potassium and remineralizers, fundamental for soil fertility, are also on the list.

The fund was created because junior companies encounter difficulties in raising resources in the Brazilian capital market and so they tend to seek funds on the Canadian and Australian stock exchanges.

Brazil occupies ninth place among the top 10 countries in investments in exploration of non-ferrous metals. Brazilian mineral exploration reached US$384.7mn in 2023, according to a study by consultancy firm EY.

"In South America, Peru and Chile receive substantially larger investments than Brazil for this activity. One of the main causes of this disparity is the absence of national investment attraction policies and risk compensatory mechanisms, foreseen in other countries, such as Canada," said EY in the study.

EXPLORATION AREAS

Brazil's mining regulator ANM, meanwhile, is preparing the ninth round of the tender to offer areas for mineral exploration.

The areas to be offered in the next year will involve critical minerals, an ANM spokesperson told BNamericas.

Currently, Brazil is in the middle of the eighth round to award up to 5,000 areas.

The rounds are part of the government's efforts to diversify mining production and attract more investment to the sector. Since 2022, when ANM began the processes, it has offered nearly 20,000 areas.