Brazil Mining Report Q2 2012 Published: May 2012
No. of Pages: 57
Price: US$1175
BMI View: Brazil's mining sector is poised for a period of strong growth as domestic and foreign demand for mineral resources spurs investment. The country's large untapped reserves and relatively small mining sector relative to regional peers make it a compelling sector growth story. Iron ore production will be the key driver of mining sector investment, but we expect significant growth in several base metals as well, providing opportunities for mining companies and investors. Investment into infrastructure in advance of the 2014 FIFA World Cup and 2016 Olympics will not only help support demand for raw materials, but also enable more efficient transport of mineral resources. We forecast that Brazil's mining industry will contract in 2012, due primarily to moderating iron ore prices. We expect the industry's value to reach US$69.4bn in 2016, up from US$49.2bn in 2012. Driven by global demand for Brazil's high grade iron ore at home and abroad, we forecast average annual industry growth of 6.3% between 2012 and 2016. Continued Growth In Iron Ore Production Brazilian iron ore miner Vale will continue to dominate the mining industry well past our forecast period. The company's performance in 2011 supports our view that iron ore is driving sector growth. While the company has recently moderated its view towards sustained iron ore demand growth in China, the People's Republic will remain the world's largest steel producer in the coming years even as output growth slows. We expect China will be the largest importer of Brazilian iron ore for the foreseeable future. We forecast total iron ore output in Brazil will reach 621mnt (mn tonnes) by 2016, as companies bring multiple large projects online. Average growth over our 2012-2016 forecast period is expected to be an impressive 10.9% year-on-year (y-o-y). Vale's 2011 iron ore production came in at 322.6mnt, a y-o-y increase of 4.8%, as it increased output from the Carajás mines in Brazil. Iron ore will be the mainstay of the company's growth, with the Carajás Serra Sul mine expected to reach 90mntpa (mn tonnes per annum) in 2014. Vale's strong project pipeline both domestically and increasingly abroad, will help maintain its position as one of the world's leading iron ore miners. Regulatory Environment We expect the administration of President Dilma Rousseff to maintain favourable policies towards mining. The country's reliance on mineral exports for its export revenues will require concerted efforts to make the industry competitive globally. The federal government is in the process of approving revisions to the mining tax and industry regulatory bodies, although details and a timeline for final approval remain unknown. In the meantime, mining companies are opposing recently installed provincial taxes in key mining states such as Pará, Amapa and Minas Gerais. Further government intervention in the mining sector remains a modest threat in the coming quarters. The government's stake in Vale and the company's recent challenges may encourage the government to take a greater role in influencing company strategy. Key Players Brazil's mining industry is dominated by several domestic companies. Most notable is Vale, which operates in 14 Brazilian states and is expanding its presence internationally. Vale is also Brazil's largest logistics operator, with an extensive network of railroads and ports. Other significant Brazilian companies include Votorantim Group, Mineração Rio do Norte and Companhia Siderúrgica Nacional.
Although large diversified global miners such as BHP Billiton and Rio Tinto operate in Brazil, they are not major players in the sector. That said, Anglo American is developing several nickel mine projects that will substantially boost its market share. Key international firms include US-based Jaguar Mining, which explores and extracts gold in Minas Gerais state, and Australian company Mirabela Nickel, which operates the Santa Rita nickel sulphide mine in Bahia state.
Mining Report in Brazil Table of Contents Executive Summary . 5 SWOT Analysis . 7 Brazil Mining SWOT .. 7 Brazil Political SWOT ... 8 Brazil Economic SWOT . 9 Poland Business Environment SWOT .. 10 Global Mining Outlook ... 11 Table: Recent Tax Increases 13 Table: Largest Coal Projects ... 15 Table: Frontier Mining Projects .. 16 Americas: Mining Sector Outlook 17 Central American And Caribbean Mining Projects . 19 Industry Forecasts . 21 Iron Ore: Strong Growth To Come From Large Projects . 21 Table: Key Iron Ore Mining Investments . 22 Table: Brazil's Iron Ore Output, 2009-2016 (mn tonnes) 23 Zinc: Slow Growth To Remain In Place 24 Table: Potential Zinc Mine Expansion . 25 Table: Brazil's Zinc Production, 2009-2016 (kt) .. 25 Nickel: Growth To Accelerate In 2012 .. 26 Table: Brazil's Key Nickel Projects . 26 Table: Brazil's Nickel Production, 2009-2016 (kt) ... 27 Bauxite: Domestic Demand To Support Growth ... 28 Table: Main Bauxite Mine Expansion Plans 29 Table: Brazil's Bauxite Production, 2009-2016 (mnt).. 30 Tin: Production To Rise 31 Table: Brazil's Tin Production, 2009-2016 (kt) ... 32 Regulatory Structure .. 33 Table: Recent Government Intervention .. 33 Table: Key Mining Investments 34 Business Environment .. 35 Americas Mining Business Environment Risk/Reward Ratings 35 Competitive Landscape . 39 Company Profiles ... 41 Vale .. 41 Table: Vale's Key Financial Data, 2008-2011 . 42 Alcoa 43 Table: Alcoa's Key Financial Data, 2008-2011 ... 44 Anglo American ... 45 Table: Anglo American's Key Financial Data, 2007-2010... 46 Commodities Forecasts. 47 Copper . 47 Aluminium 48 Lead . 48 Nickel ... 49
Tin 50 Zinc .. 51 Gold . 52 Business Environment Ratings Methodology. 54 Table: Mining Business Environment Indicators . 55 Table: Weighting Of Components 56Table: Recent Tax Increases . 13 Table: Largest Coal Projects . 15 Table: Frontier Mining Projects . 16 Table: Key Iron Ore Mining Investments . 22 Table: Brazil's Iron Ore Output, 2009-2016 (mn tonnes) . 23 Table: Potential Zinc Mine Expansion . 25 Table: Brazil's Zinc Production, 2009-2016 (kt) . 25 Table: Brazil's Key Nickel Projects . 26 Table: Brazil's Nickel Production, 2009-2016 (kt) . 27 Table: Main Bauxite Mine Expansion Plans . 29 Table: Brazil's Bauxite Production, 2009-2016 (mnt). 30 Table: Brazil's Tin Production, 2009-2016 (kt) . 32 Table: Recent Government Intervention . 33 Table: Key Mining Investments . 34 Table: Vale's Key Financial Data, 2008-2011 . 42 Table: Alcoa's Key Financial Data, 2008-2011 . 44 Table: Anglo American's Key Financial Data, 2007-2010. 46 Table: Mining Business Environment Indicators . 55 Table: Weighting Of Components . 56"