Brazil's miners to invest US$50bn through 2027

The combined capex of Brazil’s mining firms is set to reach US$50bn in 2023-27, up from US$40.4bn in 2022-26, according to the country's mining association Ibram.

Ibram unveiled the forecasts at a press conference on Tuesday.

It represents the highest level of projected investment for such a period, since 2014-18, when capex totaled US$53.6bn.

Although iron ore will remain as the dominant segment in terms of investments, other segments are gaining ground, including copper and nickel. 

"Copper and nickel are materials that are obviously in demand with the issue of batteries and the energy transition, but there were already signs of expansion before that," Valdir Farias, executive director at mining consultancy Fioito, told BNamericas. Copper has seen high demand due to its use in electronic equipment such as computers, cell phones, tablets and smartphones, he added.

Iron ore, the country's chief mining product, is expected to receive investments of US$16.9bn through 2027, up 24% from US$13.6bn in 2022-26, according to Ibram.

Copper is expected to see investments worth US$4.47bn, more than triple compared to the previous five-year period. And a 60% increase is projected in the case of nickel, to US$2.38bn.

Meanwhile, US$5.22bn will go to investments in fertilizers, US$4.96bn in bauxite, and US$2.8bn for gold.

For 2023-27, Ibram also highlighted strong expected investments in logistics (US$4.44bn) and ESG practices (US$6.5bn).

"Most of these investments will likely be financed by the companies' own cashflow and a significant but smaller portion will be financed with capital injections from existing shareholders." said Julio Nery, Ibram’s sustainability and regulations director, in response to a question from BNamericas.

According to Nery, the biggest portion of investments in logistics will be in Bahia state, where Bahia Mineração (Bamin) is investing in the expansion of the Oeste Leste railway (FIOL) and the construction of a port terminal complex called Porto Sul.

Bamin is a subsidiary of Kazakhstan's Eurasian Resources Group.

Also responding to a BNamericas question, Ibram president Raul Jungmann said the association is in advanced talks with Brazilian stock exchange operator B3 to create mechanisms that will allow the local capital market to finance more mining projects.

"Currently, more than 70 companies with operations in Brazil finance their projects through the Canadian Stock Exchange, and in the local market there are less than 10 mining companies listed," said Jungmann.

In terms of the projected 2023-27 investments, 82% will be concentrated in three states, with Pará receiving US$13.9bn, Minas Gerais US$11.4bn and Bahia with US$10.2bn.

NEW TAXES

Ibram also warned that the expected investment plans face challenges since the recent months have seen several states create new mining taxes.

The mining sector is key to the country’s economy, especially when recession looms, and changing the rules of the game affect predictability and legal certainty, Jungmann said.

“There is a great risk that investment projections will decline, as well as the sustainable expansion of legal mining," he added.

Juliano Jorge Boraczynski, president of Mato Grosso state’s exploration company Metamat, told BNamericas that new taxes benefit the states both in terms of tax collection and in exercising greater control over mining firms.

In December, Mato Grosso legislators approved the TFRM tax on exploration and exploitation of mineral resources, and it will take effect on April 1. The state government expects to collect 200mn reais (US$38.4mn) a year from the new tax.

REVENUE OUTLOOK

"There are still many uncertainties regarding the performance of the Chinese and the global economy, so we will likely see a performance from the Brazilian mining sector that is very similar to what we saw in 2022," said Jungmann.

The sector posted revenues of 250bn reais last year, down 26%, while production dropped 12% to 1.05Bt.

The main reasons for the slowdown were lockdown measures against COVID-19 in China, which reduced steel production and iron ore stocks in Chinese ports.

China is the main buyer of Brazil’s iron ore, manganese and niobium; the second largest of copper, natural stone and ornamental coatings; the fourth largest of aluminum; and the fifth largest in terms of kaolin.

Last year the sector ended with 204,000 direct jobs, up from 198,000 in 2021.