How Brazil can boost its critical minerals potential

Brazil’s energy transition potential, including the role of critical minerals, will come into sharper focus when the country hosts the UN COP30 climate conference next year, when President Luiz Inácio Lula da Silva's administration will want to showcase progress in combating climate change.

“Brazil will make progress in initiatives associated with critical minerals, particularly because we will have COP30 in the country and public agents will be more engaged in this race. COP30 should help accelerate public initiatives to be announced through the year and during the event. We will have a diversity of agents committed to this,” Patricia Muricy, leader of energy, resources & industrials at Deloitte in Brazil, tells BNamericas.

In this interview, Muricy also talks about the mineral potential, regulations and other aspects related to Brazil’s mining sector.

BNamericas: What role does Brazil play in the critical minerals segment and what potential does the country have?

Muricy: I see it having a central role in relation to critical minerals. 

Brazil has abundant resources and a large part of its territory is unexplored, that is, we need to have much more resources than we imagine.

In addition, today the world, the US, the EU, are looking for critical minerals in other countries to mitigate the risks of dependence on China, looking for more friendly countries. 

There's a huge focus in these countries on electrification and that leads to more searches for critical minerals.

In view of this, Brazil has very big advantages due to the fact that, in addition to reserves, it has a very clean energy matrix.

BNamericas: What are the challenges to developing Brazil’s potential?

Muricy: Exploring this potential depends on a series of factors.

First, we need strong government action. The US and the EU have incentives for investments in greener assets, while in Brazil, despite having very competent technical teams within the government, we see a certain delay in action.

We need to move faster to advance policies and regulations, for example, aspects associated with the regulation of a carbon market.

We can't miss a very important window of opportunity because we have resources and great potential remains to be explored.

Another aspect that we need to advance is access to capital for companies, but without clear public policies, this will not progress either.

Again mentioning the US and EU, [they] have incentives to promote mineral exploration. Here in Brazil we have 40, 50 junior mining companies that don't have access to capital from foreign investors.

BNamericas: Investment funds are increasingly buying stakes in mining companies. Does this development make it easier to raise funds?

Muricy: Recently, at an event at the B3 [São Paulo stock exchange] we saw international examples showing junior companies having access to capital, but this demands professionalization of companies, reliability of financial reporting.

However, many junior companies in Brazil struggle to find resources to buy basic things, equipment for their operations, leaving little to invest in greater professionalization. A task force is needed to give these companies access to capital.

BNamericas: Which critical minerals are most promising in Brazil in terms of extraction and investment?

Muricy: I would say that in addition to more potential, there are also minerals that are more in demand globally and I would put lithium and copper as two of the main minerals on this list, but also cobalt, niobium and rare earths.

BNamericas: What are the main bottlenecks in the Brazilian mining sector?

Muricy: Licensing is the most problematic one, as well as legal certainty.

With regard to environmental licensing, I am not referring to discussing relaxing environmental rules, but rather optimizing procedures.

International experience shows interesting cases. There are provinces in Canada that created a single body to evaluate processes, and that makes things much easier.

In Australia, there's the possibility of having the information about a licensing process in a single package so that the parties involved in that process can be informed.

The delay in licensing makes projects more expensive because a process that's approved in two years isn't the same cost as that which is approved in five years.

BNamericas: How do disasters like the ones involving the tailings dams in 2015 and 2019 affect society's perception of the mining sector?

Muricy: Two factors in Brazil greatly impact society's perception of the mining sector.

Putting it in a global context, if we look at countries like Australia and Canada, people generally understand the importance of mining for the economy of these countries and invest in the sector.

In Brazil, these incidents that you mentioned affected people's perception of the sector but in addition, there's a negative perception by people who associate the activity with deforestation or even disrespect for the rights of indigenous peoples. This happens because people can't separate what legal mining is from what is illegal activity.

People have a very archaic view of mining. They also associate the activity with scant use of automation, which isn't true, and this ends up affecting even the attraction of talent.

BNamericas: Congress is debating a tax reform that would include a selective tax on mining. How might that impact the sector?

Muricy: Tax always affects the calculation of investments. But in addition to the tax, it's necessary to monitor details of what's being thought about this selective tax, such as in which phase of the mining activity the tax rate will be charged. But either way, this always impacts the calculations.

BNamericas: How could the US election on November 5 impact the global energy transition?

Muricy: What I can say is that there's one candidacy that has a platform that indicates lower efforts in relation to decarbonization than another candidacy.

Of course, this does impact the race for critical minerals, but perhaps the effects aren't so obvious and clear. It's essential to evaluate what will actually be implemented by the next administration.