The drivers that will shape South America’s mining landscape in 2025

The mining sector in South America is heading for 2025 with lots of investor interest, given the region's vast reserves of critical minerals associated with the energy transition.

But in some major mining countries like Brazil, long delays in environmental licensing processes risk reducing the appetite of potential investors.

To find out more about these issues, BNamericas speaks with Manuel Fernandes, a leading partner of KPMG's energy and natural resources sector in Brazil and South America.

BNamericas: What will be the main drivers for the mining industry in Brazil and South America in 2025?

Fernandes: We should see the continuity of a scenario that we saw throughout 2024, which is a focus associated with the energy transition.

Several studies show that to meet all the demand linked to the energy transition we will have to multiply current mineral production by five, perhaps even six times, which is why this topic tends to lead the discussions.

In view of this, Brazil starts from a point of great advantage given the potential of the country, which still has a vast unexplored territory and good mineral diversification underway.

Furthermore, as the focus associated with the energy transition centers on [high quality] iron ore, copper, nickel and lithium, in addition to Brazil, the countries set to benefit are Chile, Bolivia and Argentina.

BNamericas: Do you see new investors entering the mining sector?

Fernandes: We already have large companies operating in the region; Vale in iron ore in Brazil, BHP, Codelco in Chile in more traditional mining areas such as iron ore and copper.

Now we see new categories of investors looking at assets associated with critical minerals, like Chinese vehicle manufacturers such as GWM, BYD and others that are arriving in the region and looking at the mining sector for potential investments.

But in the region we have some challenges that need to be overcome, such as creating a mining industry that is as vertically integrated as possible.

For example, many of the benefits from the lithium process are currently in China, so we have to think about ways to verticalize the industry.

This discussion about verticalization isn't new, it happened with other minerals too, where in several cases we didn’t take advantage of opportunities to export goods with higher added value.

In an environment like our region, where there's an abundance of renewable energy and low-cost energy, there are lots of opportunities.

BNamericas: But what are the challenges in moving forward with these opportunities?

Fernandes: We still need to advance with sources of financing for exploration activity, but there's a positive sign as we have seen development banks showing interest in financing exploration.

These initiatives are important because an exploration process takes about five or six years, and then another five years of investment until the first tone is produced and exported. So, it’s an activity that needs more sources of financing like we see in the stock markets in Canada and Australia.

BNamericas: Is skilled labor a challenge for the sector?

Fernandes: Qualified labor is a constant challenge for the sector. 

Brazil is an example of this. Today the state of Pará, more precisely in the Carajás region, has iron ore reserves for another 300 years of high-quality production. 

It's difficult to attract talent to and retain it in a remote region, even though Vale, which operates in the region, has an ecosystem created there. It's always a challenge to attract well-trained people who prefer to live in large urban centers like São Paulo or Rio de Janeiro. 

The same problem is true for lithium, where there are reserves in the Jequitinhonha valley region, a remote area of Minas Gerais state that faces difficulties in attracting talent.

BNamericas: What other bottlenecks do you see in the sector in Brazil?

Fernandes: Licensing and tax issues are always problematic, but in the case of taxes this is a reality in every country that has mining activities.

What we need to resolve in a better way in Brazil are licensing issues. 

Strict [environment] licensing rules are necessary, as they already exist, but we cannot have licensing processes that don't have a defined deadline. This is very damaging to project cost forecasts.

Without a basis on the licensing schedule, a company can't make its cash flow estimates.

But I would say that, in addition to licensing, we also have a task ahead that's linked to the decarbonization of the industry, and in this case, I’m referring to steel activities, which will need to invest a lot in reducing greenhouse emissions and buying carbon credits. 

BNamericas: In terms of both production and investments, will growing demand for critical minerals at some point end the reign of iron ore as the main product of Brazil’s mining sector?

Fernandes: I think that's unlikely to happen due to the huge volumes of reserves we have in Carajás, as I mentioned.

Furthermore, the world still shows no signs of finding any type of real substitute for iron ore, which is closely associated with infrastructure projects. 

Even at times when there's discussion of an economic slowdown in China, which was a major driver of iron ore in recent years, infrastructure projects in other parts of the world generate new demand for it. There are already signs that in the long term, India could have major demand for iron ore.

Because of this, even though other minerals are being developed, I don't see iron ore losing its role in Brazil.

But there is an area that I see great potential for Brazil that we haven’t mentioned.

BNamericas: Which one?

Fernandes: Minerals associated with the production of fertilizers, such as potassium, for example.

Brazil is a major global agricultural producer but it depends on imported fertilizers. To reduce that dependence, minerals associated with fertilizer production are also critical minerals for Brazil.

But in order to have greater production of these minerals, there is the issue I mentioned about the delay in licensing processes. Brazil needs to speed up these licensing processes.

Brazil, and more specifically [Pará state capital] Belém will host COP30 next year. In my view this will be an important event where Brazil will be able to show investors and international participants who will visit the region the projects that are underway - and seeing them with their own eyes they will better understand the risks associated with the projects. Not only in the mining sector, but also those associated with oil exploration and production.

[Editor’s note: The UN's COP30 climate conference will be held in November, 2025.]

BNamericas: What examples can Brazil showcase during COP30?

Fernandes: In its recent history, Brazil has no major environmental incidents directly related to mining or oil production.

Someone who doesn’t know the sector may mention the incidents that occurred in the cities of Mariana and Brumadinho, but those are related to the collapse of tailings dams, which were due to problems with the management of tailings and not with the production itself.

If we look at the oil sector, where there's a lot of discussion about exploration and production in the Equatorial margin, there are no records in Brazil of incidents as [state-owned] Petrobras has developed high specialization in terms of safe oil production.

If we remain stifled in the discussions associated with licensing, we will miss the windows of opportunities in both of these sectors, as well as in the nascent segment of green hydrogen production.