Brazil mining investment jumps on metals demand
London, 23 August 2011: Reuters
Surging investment in Brazil's mining sector will help the country to double iron ore output by 2015 and triple copper production in the same period, the head of Brazil's mining institute, Ibram, said Monday. Ibram expects Brazil's iron ore output to more than double to 772 million tonnes by 2015, from 372 million tonnes of the steel ingredient produced in 2010. That is well above the mining ministry's estimate for 585 million tonnes by 2015.
Investment is expected to quicken in the 2011-2015 period to $68.5 billion compared with the $62 billion in investments in the previous forecast for the 2010-2014 period, despite a shaky global economic outlook. Ibram's president, Paulo Camillo Penna, said the world market would easily absorb the extra output.
"Even with the slowing down of the economy, the (iron ore) supply is well below the demand that exists around the world," he told Reuters at Ibram's Brasilia headquarters. "Developing countries like China and others have sustained this strong demand," he said. He said he expected iron ore prices to stay above $150 a tonne for up to five years despite anticipated larger supplies that would be available by then.
Copper output would treble to 662,000 tonnes by that year from 2010 Ibram estimates, with large projects coming on stream like Brazilian miner Vale's two-phase Salobo project in the state of Para, home to its main iron ore mine, Carajas.
Regarding prospects for 2011, Ibram expects iron ore output of 400,000 to 410,000 tonnes, up from last year's 370 million. Copper output would change little from 2010 at 210,000-220,000 tonnes of concentrate, and gold output would continue in the range of 60-65 tonnes.
Brazil's vast and diversified mining sector has grown rapidly in the last decade, and Ibram believes the value of the 2011 mining output is likely to reach $50 billion. If that forecast is achieved, it would mark a leap of more than 25 percent from 2010's $39 billion total. Penna said the higher forecast was based on a combination of larger production volumes and higher prices.
SEARCH FOR GOLD Penna said there had been unprecedented demand this year for prospecting licenses for gold deposits, boding well for future output. Brazil's gold output should reach 94 tonnes by 2015, up from 61 tonnes in 2010, Ibram forecasts. Economic uncertainty typically raises the metal's appeal as a safe haven for investors, sentiment that helped push the precious metal's spot price to a record near $1,900 per ounce on Monday.
Political stability and high quality deposits have favored Brazil's mining sector while a strong local currency, official red tape and uncertainty over drawn-out government plans to overhaul the mining code and raise royalties are challenges.
Slow and erratic procedures for issuing environmental licenses for mines had also created uncertainty for investors as various government authorities dispute whose job it is to issue the permits, pending regulation of the existing law. "You have no idea when you will get your license. This can slow down the start of new projects or make them no longer worthwhile," he said.
An overhaul of the mining code and a probable rise in royalties charged on mineral output are expected to reach Congress this year. Penna said the mining industry had been assured the government would consult with it before any vote.
Mining minister Edison Lobao said that any increase in royalties would likely be compensated with reductions in other taxes mining firms pay.
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