BNDES and Vale team up to catalyze investment in Brazil's critical minerals sector

Brazilian development bank BNDES and mining titan Vale have begun a process to create an investment fund with resources of up to 1bn reais (US$193mn) to support domestic projects to produce critical minerals.

The bank and the mining firm launched a call to select an investment fund to manage the money, which is expected to be concluded in October 2024. Once that is done, the selection of the assets to receive investments will start.

Vale and BNDES, via its equity arm BNDESPar, will each subscribe quotas in the fund of between 100mn reais and 250mn reais, subject to a maximum percentage of 25% in the total committed capital of the fund. It will be open to third-party investors and the aim is to raise up to 1bn reais, which will be invested in research, development, implementation or operation of projects to produce minerals and metals required for the energy transition and decarbonization, as well as fertilizers.

"The initiative will allow BNDESPar and Vale to act as an investment catalyst, leveraging private investments and strengthening the national capital market, while encouraging the production of key inputs for the energy transition, decarbonization and food security," BNDES said in a statement. 

The initiative was applauded by stakeholders. 

"Brazil has a significant lack of financing options for projects associated with the energy transition, which are generally carried out by junior mining companies. This fund is a step in the right direction," Wilfred Bruijn, a mining consultant and CEO of Anglo American in Brazil until the end of 2023, told BNamericas. 

The companies targeted by the fund will be those holding mining titles or rights to mineral resources, either directly or indirectly, to extract cobalt, copper, tin, graphite, lithium, manganese, platinum group metals, molybdenum, niobium, nickel, silicon, tantalum, rare earths, titanium, tungsten, uranium, vanadium, zinc, phosphate, potassium or other minerals to promote soil fertility, according to BNDES.

Eligible companies include those that are based in and have operations in Brazil, as well as entities with headquarters abroad, 90% of whose assets are in Brazil at the time of the fund's first investment, and with annual gross operating revenue of up to 300mn reais, it added.

Despite government efforts to expand domestic mining activity in critical minerals, Brazil faces significant challenges to become an important producer of these resources. 

"We have observed a significant influx of new companies into the Brazilian mining sector, particularly in the critical minerals segment. However, despite this growth, I believe it is challenging for Brazil to become a major global player in these commodities. This is largely because a substantial portion of the world's critical mineral reserves is controlled by China, either through domestic assets or those acquired across the African continent in recent years," added Bruijn.