Brazil Mining News – Project Pipeline, Lithium, and Tax Reform.

Brazil is an important mining market. The country is one of the five largest mineral producers in the world and the mining sector makes up a large portion of its GDP.  Although the country is known for its iron ore reserves, it also has production in copper, gold, nickel, niobium, manganese, bauxite, and tin. More recently, lithium from hard rock has been another mineral that is attracting investment dollars. 

The mining sector is expected to grow over the next few years. The country’s mining association Ibram released a report that provides an overview of 2022 and their growth projections up to 2027.

The 2023-27 mining capex is expected to reach US$50bn, up from US$40.4bn in 2022-26, according to Ibram. Of the total, US$16.9bn is for iron ore, US$6.55bn for socio-environmental projects, US$5.22bn for fertilizer, US$4.96bn for bauxite, US$4.47bn for copper, US$4.4bn for logistics, US$2.85bn for gold and US$2.34bn for nickel. 

See our previous post on the project pipeline here. 

Further Project News 

• We have provided a breakdown of some recent news and updates related in investments and projects. 

Cerrado Gold plans Monte do Carmo start-up for 2025.

• Cerrado Gold is planning to start production at its Monte do Carmo project in Brazil’s Tocantins state in 2025.
• Recently, Cerrado requested an installation license from the state’s environmental authority. The installation license is part of the environmental approval process, comprising preliminary, installation, and operation licenses.
• The company expects to get the installation license before end year. The feasibility study is expected to be completed by October, and funding completed by the first quarter of 2024. Construction will take 16 months with first production expected in late 2025.
• In the first full year of production, the company is expecting 100,000oz with capex estimate to be US$150mn.

Sul Americana starts new licensing push for US$2bn iron ore project.

• Sul Americana de Metais (SAM), the Brazilian subsidiary of Chinese group Honbridge Holdings, is trying to gain support for licenses to advance its US$2.1bn Block 8 iron ore complex.
• The company planned to obtain the environmental license last year but failed. As part of a new attempt, executives of companies are discussing a pipeline for the project.
• The company is proposing the construction of a pipeline that will cross both Minas Gerais and Bahia states to transport pre to Porto Sul. This will bring benefits to 12 municipalities in Bahia and to Porto Sul with royalties in the order of US$1bn, including the possibility of fiber optics in the municipalities the pipeline will cross.
• Block 8 in Minas Gerais is among Brazil’s biggest mining projects. It is expected to produce 27.5Mt/y and includes a tailings dam. An associated 482km slurry pipeline will be built by Lotus Brasil, linking Grão Mogol town in Minas Gerais and the Porto Sul terminal in Bahia.
• Earlier this year, company officials met with Minas Gerais authorities to discuss the licenses. The company needs a preliminary license to certify environmental viability, an installation license to start work, and the operation license.

Gerdau to invest US$650mn in Minas Gerais mine

• Brazil’s largest steelmaker, Gerdau, provided details of its US$653mn investment plan focused on the Miguel Burnier iron ore mine in Minas Gerais state.
• The project has 476Mt of proven and probable iron ore reserves.
• The 2023-26 investment will go towards a crushing and concentration unit, filtering and tailings pile, agglomeration, filtration concentration, the construction of a 13km iron ore pipeline and a 10km tailings pipeline, a new rail terminal and a 138kV energy transmission line.
• The Miguel Burnier mine will supply Gerdau’s steel units in the state and will produce around 5.5M tons of iron ore per year.

USD$1.2b Nickel & Cobalt Project

• Brazilian Nickel announced a US$1.2bn investment plan to develop a nickel and cobalt project in Piauí state.
• The new unit would produce 25,000t/y of the metal per year, starting in 2026, in addition to 800t/y of cobalt, as from 2027.
• The company currently produces 600t of nickel per month at its unit in Capitão Gervásio Oliveira, also in Piauí.
• The company has around 400 workers at its operations, but the new investments are expected to create 2,000 direct jobs during the construction phase of the new unit, in addition to 800 new employees during the operating phase.

Lithium – Brazil could be the Next Frontier? 

Brazil has been taking steps to get its lithium industry off the ground. The deposits differ from those in Chile, Argentina, and Bolivia, which are brine-type lithium deposits. Instead, Brazil is known for hard rock lithium deposits that are hosted in pegmatites.

Minas Gerais is known for its iron ore operations, but within the state is a place called Jequitinhonha Valley, one of Brazil’s most impoverished regions. The region is now being called “Lithium Valley” since it sits on 85 percent of Brazil’s known lithium deposits. Further exploration and potential deposits could be located in other states. 

The countries only operating lithium mine, Sigma’s Grota do Cirilo, recently opened but there is a level of exploration now starting to take place that it should not be long before more projects advance to where there is further project announcments. There is a lot of pressure to turn the Jequitinhonha Valley into a Lithium Hub that will have a special tax regime for companies operating in the state. 

Sigma’s Grota do Cirilo

• Phase one of Sigma’s Grota do Cirilo received US$123mn and is in operation, while US$155mn are earmarked for phase two and three.
• Production will take place over 13 years, generating over $5 billion for the company and over $200 million in payments to local municipalities. 
• Phase one is expected to produce 270,000t of high-purity 5.5% concentrate per year. Phase two will double the production rate to 531,000t and will make use of existing infrastructure from phase one and contribute an additional 261,100tpa of high-purity 5.5% lithium concentrate.

Other Exploration 

• Atlas Lithium (formerly Brazil Minerals) raised US$10mn to advance its Neves project in the so-called lithium valley.
• Perpetual Resources signed a binding agreement with RTB Geologia e Mineração on the exclusive option to acquire a 100% interest in four lithium exploration permits valid in Minas Gerais.
• Lithium Ionic is expected to invest 750mn reais (US$157mn) in its lithium operations in Minas Gerais, the first time the firm disclosed an investment value in the state. The company extracts lithium at its Araceli, Itinga and Salinas projects.
• Companhia Brasileira de Lítio (CBL), Sigma, Atlas Lithium Corporation, Latin Resources, Deep Rock and Lithium Ionic all have operations in the state at different stages of development.

Australia’s Latin Resources unveiled a capex plan worth US$308mn for its Salinas lithium project in Brazil’s Minas Gerais state.

• Of the total, US$253mn is for phase 1 and US$55mn is for phase 2, the company said in the preliminary economic assessment.
• Phase 1 production is expected to start in 2026 and phase 2 output as of 2029.
• The capex of phase 1 is expected to be funded by a combination of debt and equity as the company will continue to explore funding options, while phase 2 is expected to be funded from cash flows generated from phase 1.

Brazil Tax Reform – Impact on Mining

The reform passed the lower house in July and is aimed at simplifying the system. Brazil’s lower house of Congress approved in July the main text of a tax reform that will restructure the country’s complex consumption taxes and is and is aimed at simplifying the system. Starting in 2026, the reform plans over eight years merge five levies currently in place into a value-added tax (VAT) with separate federal and regional rates, which will be defined later by a complementary law.

The new reform would also empower states to impose taxes on primary and semi-finished products to finance infrastructure and housing. At the time of passing, business leaders hailed the reform but there are now concerns that states would gain the power to raise their own taxes which would be unacceptable for miners.

The reform is mainly aimed at simplifying the tax system by combining various taxes. While business leaders approve of this simplification, the provision to empower states to impose taxes on primary and semi-finished products to finance infrastructure and housing is seen as problematic.

There is also changes to the way royalties would be distributed which are seen to benefit more communities then previously. The reform would increase transfers from 50% to 55% to municipalities with infrastructure used for rail transport of minerals.  Municipalities with mining structures are located that make industrial use possible, including deposit, tailings piles, processing plants would increase from 30% to 35%.

On the other hand, the compensation for municipalities affected by port operations would be reduced from the current 15% to 5%, while localities with mine pipelines would remain at 5%.

Around 3.4bn reais (US$680mn) were collected under the CFEM tax in the first half of 2023, up from 3.2bn reais in 1H22, according to the most recent figures by mining association Ibram. With the changes, 1,521 localities will get more transfer payments and 28 fewer.

Minas Gerais and Pará states collected most CFEM funds, while iron ore, gold and copper generated most resources for local governments.

The bill is still being discussed by the upper house. 

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