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BRAZILInformation and Analyses of The Brazilian Minerals Economy | 6TH edition

IBRAM - Brazilian Mining Association | 2011

Brazilian Mineral Production Development

Beginning in year 2000, the high de-velopment rate worldwide and the in-creased demand for minerals boosted the BMP. From 2001 to the end of 2011, the Brazilian Mineral Production will have shown a 550% increase, from US$7,7 billion to US$50 billion.

Given the urban development rate worldwide and the growth of emerging economies, it is expected that the BPM will increase at an estimated rate of 10% to 15% per annum in the next three years.

Mining Companies in Brazil

In 2010, the DNPM – National Department for Mineral Production - had 7,809 com-panies recorded in its Annual Mining Re-port and distributed per region as follows:

In 2011, the Brazilian Mineral Produc-tion (BMP) is expected to reach a new record of US$50 billion, which would represent a 28% increase as com-pared to the US$39 billion in 2010.

Hence, in 2011 the BMP will show its recovery after the 2009 international economic crisis, which resulted in a decrease in demand for mineral raw materials.

2008 = US$ 28 billion

GROWTH OF BRAZILIAN MINERAL PRODUCTION

2010 = US$ 39 billion 2011 = US$ 50 billion2009 = US$ 24 billion

ForecastYear

s

30

25

20

15

10

5

40

50

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 0910 110

Variation2001/2011 = 550%

Region Companies

Center-West 942

Northeast 1.258

North 439

Southeast 3.392

South 1.901

BRAZIL IN THE WORLD

Area >3 million sq.km

Population >150 million inhabitants

GDP > US$800 billion

Petroleum & Gas not included

in US$ billions

Canada

Australia

United Kingdom Germany Spain

Italy South Korea

France

Holland

Mexico

India

Japan

China

BRAZIL

USA

Russia

Bangladesh

Republic of Nigeria

Pakistan

Indonesia

4

BRAZIL Information and Analyses of The Brazilian Minerals Economy | 6TH edition


11.0

30 15.1

96

22.8

41

18.0

96

35.3

60

43.0

00

4.49

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5.18

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9

5.49

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7.75

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6.54

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5.000

10.000

15.000

20.000

25.000

30.000

35.000

40.000

45.000

50.000

2006 2007 2008 2009 2010 2011e

Expo

rts

Impo

rts

Surp

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Brazil has one of the largest mineral deposits and is one of largest mineral producers and exporters.

Data collected by CFEM (Financial Compensation for Mineral Resources Exploitation) indicates that the states with the largest ore production in 2010 were:

Minas Gerais (48%), Pará (28%), Goiás (5%), São Paulo (4%), Bahia (2.7%), Mato Grosso do Sul (1.8%), Sergipe (1.7%), and Others (8.8%).

In 2010, CFEM reached another re-cord: R$1billion, or a 46% increase in collections as compared to the R$ 742 million million in 2009. For 2011 the forecast is to reach R$1,3 billion.

The mining industry in Bra-zil and its importance for the trade balance

In 2011, Iron Ore will remain #1 in the list of products that generate the highest revenues among Brazilian exports.

MINERAL PRODUCTION: GLOBAL POSITION OF BRAZIL

EXPORTER GLOBAL PLAYER EXPORTER SELF-SUFFICIENT IMPORTER

/ PRODUCEREXTERNAL DEPENDENCY

Niobium (1st)Iron ore (1st)Manganese (2nd)Tantalum (2nd)

NickelMagnesiumKaolinTin

LimestoneIndustrial diamondsTitanium

Metallurgical CoalPotassium

Graphite (3rd)Bauxite (2nd)Ornamental Stone

VermiculiteChromiumGold

CopperTungstenTalc

Phosphate DiatomiteZinc

SulphurRare Earths

STRATEGIC

Brazil is an important player in the world’s mining industry. However, it still depends on some minerals that are key to the economy. Brazil is the fourth largest consumer of fertilizers, and responds for only 2% of the world’s production. The Country imports 91% of the potassium and 51% of the phosphate needed, both essential for the fertilizers industry.

2004 2005 2006 2007 2008 2009 2010 2011e*CFEM 326 406 466 547 858 742 1.083 1.300

326406

466547

858742

1.083

1.300

0

200

400

600

800

1000

1200

1400

*forecast

CFEM

Expected 2011 Brazilian Balance = US$ 23 Billion | Balance of the mineral sector = 143% greater.

Brazilian Balance in 2006 US$ 46 BillionMineral Sector: 14%

Brazilian Balance in 2007 US$ 40 Billion

Mineral Sector = 25%

Brazilian Balance in 2008 US$ 24 Billion


Brazilian Balance in 2009 US$25 Billion


Brazilian Balance in 2010 US$20 Billion


The mining industry’s share in the Commercial Trade Balance

Millions of US$

Millions of R$

5



Main products exported and imported in 2010 and forecast for 2011 (in US$)

Labor Force in the Mining Industry

4,6%

4,7%

4,1%

1,5%

0,6%

0,7% 0,6%

0 ,6%

0,5%

Iron Ore81,8%

Gold

Niobium

Copper

Silicon

Manganese

Bauxite

Kaolin

Others

Granite

Coal50,7%

Potassium Chlorate

29%

Copper12,3%

Sulphur 1,8%

Zinc 0,1%

Others 6,2%

Suppliers First transformation Total

Jobs 411112

21

11

14

0

2

4

6

8

10

12

14

16

Multiplier Effect: 1 : 13

Mineral Extraction

In 2011, a total of 165,000 workers were employed by the mining industry in Brazil. Studies undertaken by the National Secretariat of Geology, Min-ing and Mineral Transformation of the Ministry of Mines and Energy show an employment ratio of 1:13 in the mining industry, i.e. for each position created in the mining industry, another 13 di-rect jobs were created along the pro-ductive chain, and that added to other indirect jobs.

Therefore, one may consider that in 2011 the mineral sector employs about 2,1 million workers directly, apart from the jobs generated during exploration, prospecting and planning stages, and the people working in the garimpos (panners).

Source:National Secretary for Geology, Mining and Mineral Transformation of the MMEDate: 2011

FOREIGN TRADE OF THE MINERAL SECTOR AMOUNTS IN MILLIONS OF US$

MAIN PRODUCTS EXPORTED AND IMPORTED 2010 2011e

Mineral Exports Primary Goods 35,360 43,595

Iron Ore 28,912 35,745

Gold (in bars) 1,786 1,988

Niobium (iron-niobium) 1,557 2,034

Copper 1,238 1,806

Silicon 460 637

Kaolin 275 258

Manganese Ore 357 276

Bauxite 270 322

Tin 8 20

Lead 12 12

Granite 219 230

Others 268 268

Imports of Primary Mineral Goods 7,756 10,023

Coal 3,575 5,078

Potassium Chlorate 2,204 2,904

Copper 952 1,232

Zinc 157 10

Sulphur 246 176

Others 623 623

Balance of the Mineral Sector 27,604 33,572

e = Amount forecast for 2011

Exports % of value exported in US$

Imports % of value exported in US$

Importance of Mining for the Generation of Jobs

6

BRAZIL Information and Analyses of The Brazilian Minerals Economy | 6TH edition


44.9

69

5.22

0

6.55

0

1.89

0

2.54

2

2.41

8

2.67

5

400

400

631

310

200

40 310

39.2

30

8.18

7

6.71

6

2.51

0

2.65

7

2.03

0

0 300

66 0 0 270

44 0

New investments in the mineral sector 2011 to 2015: US$ 68,5 billion

Investments in the mineral sector 2010 to 2014: US$ 62 billion

Alu

min

a

Iron

Ore

Copp

er

Gol

d

Nio

bium

Zinc

Lim

esto

ne

Coal

Man

gane

se

Vana

dium

Nic

kel

Phos

phat

e

Pota

ssiu

m

HDI of mineral producing municipalities

The Human Development Index is greater in mineral producing municipalities than the average in the respective States.

Even when far from large urban centers or in areas of poverty, a mining company has become a real possibility for the sustain-able development of the region.

The HDI is calculated by the United Nations Development Pro-gram - UNDP.

The graph shows an increase in the amount of investments in the Brazil-ian mining sector. The numbers com-piled by IBRAM are forecast for a five-year period. Based on data collected from mining companies, the Institute foresees significant investments in the amount of US$68.5 billion for the period 2011-2015, and a new record for the mining industry.

The private sector invests more in the Country, an average of over US$13 bil-lion per year. This amount is periodi-cally reassessed by IBRAM, as shown in the graph.

Investments in the amount of US$68.5 billion forecast for the period 2011 to 2015 represent an increase of 10.5% as compared to the period 2010-2014. These investments apply to a number of minerals, and since Iron Ore is the most significant one, it will take 63% of the total.

2528

32

48

57

2009-2013

2008-2012

2007-2011

47

2010-2014

4954

2010-2014

6264,8

2011-201568,5

0

10

20

30

40

50

60

70

80ja

n/07

mar

/07

may

/07

jul/

07

sep/

07

nov/

07

jan/

08

mar

/08

may

/08

jul/

08

sep/

08

mar

/09

jan/

10

apr/

10

aug/

10

jan/

11

may

/11

Source: UNDP

EXAMPLES OF MINING MUNICIPALITIES AND THEIR RE-SPECTIVE IDH IN COMPARISON TO THE IDH OF THE STATEMunicipality -State Mineral State IDH Municipal IDH

Itabira - MG Iron 0.766 0.798

Araxá - MG Niobium 0.766 0.799

Nova Lima - MG Gold 0.766 0.821

Catalão - GO Phosphate 0.773 0.818

Cachoeiro de Itapemerim - ES

Ornamental Stone

0.767 0.770

Parauapebas - PA Iron 0.720 0.740

Barcarena - PA Bauxite 0.720 0.769

Presidente Figueiredo - AM Cassiterite 0.713 0.742

Investments of the mineral sector by mineral from 2010 – 2014

Investments in the mineral sector

Billions of US$

Billions of US$

7



Despite significant investments in production/extraction, Brazil still in-vests little in mineral exploration. In 2009 and 2010 the country received only 3% of the world’s total private investment in exploration, and ranks well behind smaller countries, such as Peru and Chile. Besides, less than 30% of the Brazilian territory is geo-logically mapped in the 1:100,000 scale.

The table shows the disparity between the total amounts invested by countries assessed as compared to Brazil. The analysis takes into account the countries sizes, and confirms that smaller countries (Peru, Chile and Mexico) or countries of similar territorial areas overcome Brazil in exploration investment (except for Russia).

Canada(US$ 2,03 billion)

19%

Australia (US$ 1,2 billion)

12%

USA8%

Mexico 6%

Peru 5%

Chile 5%

Russia 4%

China 4%

Argentina3%

Brazil (US$ 321 million)

3%

Other Countries 31%

10 leading countriesTotal: US$ 10.7 billion

Investments in mineral exploration in the world

Global Investment

(US$ 10.700.000)

Area (sq.km) x

1.000

Absolute Investments (US$)

Share of Investments

(%)

Absolute Invest-ments/Area(US$/ sq.km)

Brazil Investment vs Countries

Brazil 8547 321.000 3 0,0 1

Canada 9971 2.033.000 19 0,2 5.4

Australia 7682 1.284.000 12 0,2 4.5

Peru 1285 535.000 5 0,4 11.1

USA 9373 856.000 8 0,3 2.4

Mexico 1973 642.000 6 0,0 8.7

Russia 17075 428.000 4 0,7 0.7

Chile 757 535.000 5 0,0 18.8

China 9600 428.000 4 0,1 1.2

Argentina 2780 321.000 3 0,1 3,1

US$ 1.000

Billions of US$

Private Investment in Mineral Exploration

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