Critical Minerals
A value-add approach to critical minerals production
In June 2023, Glencore, Stellantis and Volkswagen’s battery unit PowerCo came together to back a US$1 billion deal by ACG Acquisition Company to purchase two Brazilian mines; the Santa Rita nickel sulphide and the Serrote copper mine. The deal will turn ACG into ACG Electric Metals, focused on supplying critical metals for EV production in the West. The move was one of a number of major steps taken by global players to increase their presence in the Brazilian critical minerals area.
Brazil has lagged behind competitors like Chile and Argentina in terms of attracting direct attention from car companies and EV producers. Recently, however, vehicles manufacturers have started looking to Brazil. In June, the US automaker General Motors met with representatives of IBRAM to discuss critical minerals production in Brazil.
Brazil’s government is committed to developing the critical minerals segment and plans to launch a critical minerals fund at the next COP in 2024. Flávio Moraes da Mota, head of extractive and base industries department at the BNDES, explained: “The fund will support the exploration and development of the production of essential minerals in Brazil along the complete value chain.”
Lithium
On May 9, 2023, Governor Romeu Zema of Minas Gerais rang the bell at the Nasdaq stock exchange in New York, launching the Lithium Valley Brazil initiative (Vale do Lítio). The initiative intends to develop the populations of the Northeast and North parts of the state around value-added lithium production. In 2022, the government also loosened the rules on lithium exports.
Sigma Lithium (TSX: SGML) is one of the companies that has benefited from Brazil’s lithium expansion, entering production and shipping its first batch of 5.5% grade lithium concentrate in July, 2023. Sigma has capacity to produce 36,700 t/y of lithium carbonate equiavalent (LCE) at its Grota do Cirilo project. The mine operation also places emphasis on efficiency and sustainability. Lithium concentrates are being produced from a plant that uses 100% renewable energy, 100% recycled water and 100% dry-stacked tailings.
In 2018, AMG Critical Materials N.V. completed the construction of a US$65 million lithium spodumene processing plant, and has since produced 90,000 t/y of lithium spodumene. AMG is seizing the momentum, and is currently expanding production to 130,000 t/y. With a further US$250 million investment, AMG plans to convert concentrate to carbonate within Brazil. Fabiano Costa, CEO of AMG Brasil, explained: “In Brazil, we have a clean energy matrix due to our hydropower, and shipping all the concentrate to China to be processed produces as much CO2 as we are saving.”
Companhia Brasileira de Litio has also significantly expanded since 2021, with the mining unit reaching 45,000 t/y and the chemical plant reaching 1,500 t/y of LCE. The company is conducting feasibility studies for an expansion program with the potential to begin next year. Brazil is far from developing a complete battery supply chain, despite having the technology and natural resources for battery making. Vinicius Alvarenga, CEO of Companhia Brasileira de Lítio, identified the lack of demand as due to Brazil’s successful ethanol program which has reduced the country’s dependence on fossil fuels and incentives to purchase electric vehicles. Alvarenga stated: “I believe we should establish some type of incentive program for electric vehicle purchases, even if small, to avoid isolating our car industry in the future.”
Copper
6.1% of all Brazil’s mineral production is comprised of copper, which can be found across the country, with production centered around the three states of Bahia, Mato Grosso and Pará. According to data from IBRAM, copper investment is expected to be over US$4.5 billion over the 2023-2027 period.
Among the companies carrying out significant growth initiatives is Ero Copper, which controls the Caraíba operations in Bahia. In addition to constructing a new US$300 million external shaft at the Caraíba project, the company began construction of its Tucumã project in April 2022. Production at Tucumã, an open pit mine, is expected to commence in the latter half of 2024, doubling Ero’s consolidated copper production.
Vale, meanwhile, is advancing its US$30 billion nickel and copper investment plan. In July, the company announced its intention to sell 13% of its base metals division, VBM, to Manara Minerals for US$3.4 billion.
Copper juniors are equally enthused about developing in Brazil, but struggle with certain unfriendly policies. Lara Exploration (TSX: LRA) is developing the Plenalto project, located near several copper deposits such as BHP’s Pedra Branca, in a JV with Capstone Copper (TSX: CS). Miles Thompson, president and CEO, said: “One of the most frustrating aspects of working in Brazil as a junior exploration company is the slow turnover of mineral rights. We now have a new licensing system in place where if there is more than one party interested in a piece of land, it goes to auction, which is great, but the process is slow and has now been interrupted for some time by the need to catch up on paperwork.”
"Financing is always available for good projects. In Brazil, several good rare earth projects have been discovered in recent years, so we do not see any issues with financing in the country."
Tom Drivas, CEO, Appia Rare Earths & Uranium Corp.
Rare earths
In January 2023, the Serra Verde REE project received a capital injection of US$150 million to advance its rare earth elements (REE) project, and it expects commercial production to begin by the end of 2023. The Serra Verde project is a large deposit with a 25-year mine life, comprising of a variety of REEs. The project is one of few ionic-clay REE deposits outside of China, and like other ionic-clay deposits, can be mined easily and sustainably without hazardous chemicals, acid leaching, and other energy intensive or environmentally risky procedures. The project, which at production will be the first scale operation to produce four critical magnetic REEs outside of Asia, is an excellent example of Brazil’s REE potential.This potential can only be advanced with significant investment, which is challenging to obtain. “The international financing environment has been difficult in recent months due to macroeconomic conditions, especially high interest rates,” said Tom Drivas, CEO of Appia Rare Earths & Uranium Corp (CNSX: API), a Canadian exploration company that recently acquired the Cachoeirinha project (PCH) in Goiás, Brazil.
Alvo Minerals (ASX: ALV), an exploration company advancing the polymetallic copper-zinc-lead-silver-gold VMS Palma project in Central Brazil, recently acquired the Bluebush REE project. Rob Smakman, CEO, identifies the country as ripe with opportunity: “Alvo will continue looking for other opportunities around Brazil, specifically around the Palma area, which we think is emerging as one of the more promising exploration and mining districts in Brazil.”
Meteoric Resources (ASX: MEI) acquired the Caldeira rare earths project in March 2023. Caldeira’s average grade is three times higher than the second-best rare earth grade in the world, and since acquiring the project, Meteoric’s market capitalization has increased from A$20 million to A$500 million. “Brazil can change the energy transition market dynamics,” said Marcelo de Carvalho, Meteoric’s Brazil country manager, noting that China sets rare earth prices and there are no ionic clay rare earths mines outside of China. “Once the first deposit in Brazil starts producing, the market will recognize the amazing rare earths potential of the country.”
Nickel
Nickel, which comprises 1.2% of all mineral production in Brazil, is poised to experience a demand surge, as numbers from the International Energy Agency signal that the production of electric vehicles is already outpacing predicted numbers for 2030. Unlike other critical minerals, there is currently no direct substitute for nickel, placing the mineral in a strong position to benefit from the electrification boom.
Centaurus Metals (ASX: CTM) acquired the Jaguar nickel sulphide project from Vale in 2019, and recently finalized a deal to buy back the off-take rights that Vale held over Jaguar. The project is classified by the Federal Government as a critical project due to its nickel sulphide deposit, with an estimated resource nearing 1 million t with 70% of the resources less than 200 meters from the surface. “At Jaguar, we aim not just to extract nickel but also to produce nickel sulphate, a direct component used in batteries. This involves advanced processing, turning the mined nickel into nickel sulphate, and leveraging Brazil’s abundant resources and affordable labor and power costs,” said Bruno Scarpelli, executive director at Centaurus Metals.
However, the global market for nickel is competitive. Major mining jurisdictions worldwide are recognizing the need to lock down their position within the critical minerals segment, and Brazil is comparatively late to the game. Luis Azevedo, CEO of Bravo Mining (TSX: BRVO), which is developing the PGM + Au + Ni Luanga project, emphasized the need to jump on the moment: “If we come late to the EV party, we will not get in – battery makers will already have a supply chain settled.”
Aluminum
During the pandemic, there was strong demand for aluminum, used both in packaging and in civil construction as people in lockdown renovated their homes. Globally, demand has decreased in 2023, due not just to the downturn in China, but to lower demand worldwide. “However, the Brazilian market is quite good,” said Luciano Alves, CEO of CBA, which primarily provides aluminum to the domestic market. “There are some segments that are not doing as well, but some are doing very well. In Brazil, the transportation and consumer products markets are robust.”
Guido Germani, CEO of Mineração Rio do Norte, explained that the larger aluminum landscape is challenging. Germani said: “We are seeing a lot of smelters closing in Europe because of high energy prices, and there are also a significant number of Chinese companies mining bauxite in Guinea that have brought about 80 million tons to the market in the last five years.”
Image courtesy of Bravo Mining