Brazil: Mining, Minerals and Fuel Resources

Topics Covered

Welcome to Brazil
Overview of Resources
Industrial Minerals and Gemstones
Metals
Fossil Fuels
Investment
Sources

Welcome to Brazil

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Brazil, with a total population of 205,716,890 as of July 2012, is located in Eastern South America, adjoining the Atlantic Ocean. Brazil covers a total area of 8,514,877 km2 and is the fifth largest country in the world by landmass. The country has mostly tropical climates.

The national flag of Brazil. Image Credit: CIA factbook

Brazil gained independence from the Portuguese in 1822 and ever since focused on improving its agricultural and industrial growth. Today, the country is regarded as a leading economic power and regional leader in South America. Brazil’s growth in its mining sector has helped improve the country’s economy and make its presence felt in international markets.

Brazil’s continuous economic growth has resulted in the country being considered as a leading destination for foreign direct investment along with Russia, India and China. In 2010, Brazil’s GDP growth rate was 7.5%, which is the highest growth rate experienced by the country in the past 25 years. Although this growth rate dipped to 2.7% in 2011, Brazil still holds the seventh place in the global economy in terms of GDP.

Brazil occupies a strong position in the global economy thanks to its industrial strength, vast resource wealth, and international status.

Overview of Resources

Brazil ranks sixth in mining production globally and is a significant producer of bauxite. It is the largest exporter of iron ore in the world and is also a growing producer of copper and nickel.

In 2010, Brazil traded almost 80 mineral commodities and globally stood out as a leading mineral producer. The country owns the fifth largest iron ore reserves in the world.

Brazil's earliest national capitals Salvador and Rio de Janeiro were well suited to trade and vulnerable to maritime raids. Image Credit: CIA factbook

Brazil produces 70 mineral commodities including four fuels, 45 industrial minerals, and 21 metals. The country’s gold seems to be evenly divided among major producers like Yamana Gold, Kinross and Anglo Gold Ashanti and also smaller companies like Jaguar and Eldorado Gold.

Globally, the country has the following credits:

  • Thirteenth largest gold producer
  • Seventh largest producer of tin
  • Second largest producer of iron ore
  • Leading producer of huge quantities of aluminum, bauxite and alumina
  • Leading producer of steel feedstocks that include niobium

From a mining perspective, the vast resource base of Brazil combined with the current commodity prices has enabled potential investors to consider Brazil as an interesting proposition.

Industrial Minerals and Gemstones

The mineral production in Brazil saw an increase by 250% in terms of US dollars between 2000 and 2008. However, the global economic crisis of 2009 led to a major dip in Brazil’s mineral production. In 2010, it was estimated that the mineral production in Brazil will exceed $35 billion and will continue to increase every year by 10 to 15%, owing to huge demand. The country is a major exporter of manganese, lead, niobium, bauxite, tin and copper.

A section of the Negro River in Jau National Park, Amazonas state, is Amazon’s largest tributary. Image Credit: CIA factbook

Brazil’s industrial minerals include gemstones, asbestos and phosphate rock. In 2010, the country continued to establish itself as a leading producer and exporter of gemstones in South America. High quality gemstones such as paraiba tourmaline and imperial topaz are produced by Brazil. About 48% of gemstones and diamonds are mined by garimpeiros and 52% by other mining companies.

In 2010, Brazil was the world’s third leading producer of asbestos. Some of Brazil’s major asbestos deposits are located in Minacu and Cana Brava.

In 2009, Brazil’s phosphate rock concentrates production amounted to 6.1 Mt and in 2010 it was 6.2 Mt. About 86% of the country’s total phosphate rock reserves were represented by leading mining companies such as Fosfértil S.A., Vale, Ultrafértil S.A. and Bunge Fertilizantes S.A. The domestic consumption of concentrates was 7.6 Mt and the imports of concentrates stood at 1.4 Mt.

Metals

Brazil is one of the largest producers of iron ore in the world with a production estimate of about 372.1 Mt of iron ore in 2010. In the same year, about 258.8 Mt of iron ore was exported by the country and this was valued at nearly $21.4 billion. Vale is the leading iron ore producer in the country. The leading importers of Brazil’s iron ore are France, Japan, China, the Republic of Korea and Germany.

Brazil is the sixth leading aluminum producer in the world and it produced more than 8 Mt of alumina in 2010 in comparison with 7.8 Mt in 2009. The export of aluminum in 2010 amounted to 760,000 Mt, which was valued at about $1.7 billion.

After iron ore, Brazil’s next major export commodity is gold. Currently, Brazil is considered as the 13th largest global gold producer with an output of 61 Mt accounting for nearly 2.5% of global production.

The major gold producing states of Brazil include Para, Minas Gerais and Bahia. The leading gold producing companies in the country are AngloGold Ashanti Mineração, Kinross Gold, Jaguar Mining, Yamana Gold and Gold Digging.

Fossil Fuels

In the recent years, Brazil’s consumption of natural gas and crude oil has increased rapidly. In 2010, Brazil’s natural gas production amounted to 22.9 billion m3. According to Agencia Nacional do Petróleo (ANP), 4 million m3 of natural gas was imported by Brazil in the form of LNG in 2010.

Nearly 6.3 Mt of coal was produced by Brazil in the year 2010 and coal mining was carried out in Parana, Rio Grande do Sul and Santa Catarina. An increase in the demand for coal was experienced mainly because of thermoelectric plants operating at full capacity in the above-mentioned states. In 2010, Brazil used the majority of the coal to generate electricity besides using it in industries and other areas.

Petrobrás is a major company operating in the petroleum sector of Brazil. In 2010, the country’s oil production saw a tremendous increase following the country’s crude oil exports amounting to about 640,000 bbl/d.

Investment

Brazil’s mineral production in the future will largely depend on the discovery of new technologies and approaches that will enable sustainable and responsible mining without causing any harm to the environment. The country is trying to encourage foreign direct investment through joint ventures and development of fresh projects with Vale, Petrobrás and other companies.

Remarkable changes in the natural gas and crude oil markets in 2010 led to an increase in Brazil’s energy investment opportunities. In order to boost its economy, the Brazilian government eliminated price controls and import tariffs on petroleum and derivatives thus drawing more private investments for the country.

Brazil expects to increase iron-ore output by 2015 through its new iron ore mining projects developed by local miners including Vale SA, Cia and MMX Mineracoa e Metais. The country also has plans to increase its gold production based on the increased interest shown by foreign and domestic investors in unexplored areas.

In order to boost the country’s revenue and increase the state’s control over natural resources and energy, the Brazilian government has come up with a new mining code according to which the country will sell limited mineral rights to the highest bidder.

Focusing on the development of the iron ore market, Brazil has decided to proceed with the new iron ore mining project in its Amazon region. According to the Vale data, this new mine will start functioning in 2016 with a production capacity of 90 million tons of iron ore every year.

With all these futuristic plans, Brazil hopes to strengthen its mining market and mineral production and establish itself as a leading global supplier of key metal and mineral resources.

Disclaimer: The Author of this article does not imply any investment recommendation and some content is speculative in nature. The Author is not affiliated in any way with any companies mentioned and all statistical information is publically available.

Sources

https://www.cia.gov/library/publications/the-world- factbook/geos/br.html

http://minerals.usgs.gov/minerals/pubs/country/2010/myb3- 2010-br.pdf

http://www.gbreports.com/admin/reports/BrazilMining_2011.pdf

http://www.bernama.com.my/bernama/v6/newsindex.php? id=679343

http://uk.reuters.com/article/2012/06/27/uk-mining-brazil-regulation-idUKBRE85Q1IB20120627

http://www.upi.com/Business_News/Energy-Resources/2012/07/06/Brazil-OKs-Amazon-iron-ore-mining-project/UPI-26171341602900/

http://www.ft.com/cms/s/0/8e340244-bc93-11e1- a470-00144feabdc0.html#axzz20VrDZGyA

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