Brazil's mining sector looking to diversify financing mechanisms

Brazil’s mining sector is looking for new financing mechanisms in the local market.

Currently, most of the funding obtained by larger companies comes from their own cash flow or overseas bonds, while medium and smaller companies tend to access international investors by listing their shares in markets such as Canada and Australia.

Now mining companies in Brazil want to change this profile a bit.

"Of the 2.1tn reais [US$420bn] that the national financial sector has available to offer as loans, only 18bn reais are for loans directed to mining. The mining industry is one of the three largest economic sectors in the country, but only a fraction of local lending is directed to this sector," Raul Jungmann, head of mining association Ibram told BNamericas during a presentation of Q3 figures.

"If we consider the equity market, there are only four companies in the mining sector that are listed on the stock market in Brazil, whereas in Canada there are 42 companies listed that operate almost exclusively with projects in Brazil. We need to reinforce the local market," he added.

Ibram is actively working to change the scenario.

The association is in talks with federal development bank BNDES on financing lines specially for mining projects linked with the energy transition.

According to Jungmann, BNDES is expected to announce details of the lines by the end of the year.

"Mining is fundamental for a low-carbon economy. Without it there is no electrification, there are no electric cars, there are no wind turbines for the production of wind energy. Brazil has immense possibilities, with lithium, with niobium, with tantalum," said the association’s head.

In addition, Ibram is in talks with innovation project financing agency Finep, an arm of the science, technology and innovation ministry (MCTI), to create financing mechanisms for the segment.

Ibram-UK partnership 

The mining association also announced a partnership with the UK government for a project to set targets to reduce greenhouse emissions in the mining industry.

The project is aimed at decarbonizing industrial activities with an emphasis on the transition to renewable energy sources, Ibram said in a statement.

Eleven mining and metals companies joined the project. The initiative is the result of a partnership between Ibram, the UK government and the mining hub – an innovation space for the sector.

"This project and the 3rd greenhouse gas inventory, being prepared by Ibram since August, will serve as a basis for the association to structure, from 2024 onwards, a carbon roadmap for mining, which will allow it to set sector targets for reducing emissions. Ibram believes that the roadmap will influence the processing of environmental licenses favorably for mining companies that engage in the climate sector agenda, led by the association," it said in the release.