� e Strength ofBrazilian Mining

2012

Phot

os: S

hutte

rsto

ck

Voto

rant

im

A Positive Outlook for Mining in Brazil

Brazil has one of the largest mineral repositories in the world and is an important producer and exporter of high quality ores. That’s why Mining is one of the strengths of the Brazilian economy.

The Mining Industry is responsible for the positive balance of Brazil’s trade, and the outlook of this economic activity is extremely optimistic for the coming decades.

The Brazilian mining industry currently finds itself in a time of vigorous growth, thanks both to the profound structural changes that the country has experienced and the social and economic situation in which the world is in. This growth is driven by the urbanization process in emerging countries endowed with large territorial areas, high demographic density and high GDP (Gross Domestic Product), as the BRICs (Brazil, Russia, India and China), which coincidentally makes them important players for global mining.

Canada

Australia

United KingdomGermanySpain

Italy South Korea France Mexico

Japan

IndiaChina

BRAZIL

EUA Russia

Bangladesh

Republic of Nigeria

Pakistan

Indonesia

BRAZIL IN THE WORLD

area > 3 million km2 Population > 140 million inhabitants

GDP > US$ 900 billionSource: World Bank (2010)

Shut

ters

tock

Mining Companies in BrazilAccording to Annual Reports on Mining, DNPM – National Department of Mineral Production Brazil reported 7,932 Companies in 2010. Their breakdown by region is as follows:

MIDWEST: 942 companies

NORTHEAST: 1.258 companies

NORTH: 439 companies

SOUTHEAST: 3.392 companies

SOUTH: 1.901 companies

2

Exports Imports Balance

From 2000, the increased demand for minerals, especially the high global growth rate, boosted the value of the BMP. During 2001/2011, the value of the BMP will have an increase of 550%, from US$7,7 billion to US$50 billion (estimated). With the urbanization process and the strengthening of world economies, it is estimated that the BMP will keep growing between 5% and 8% per year over the next two years.

Brazil’s Mineral Production (BMP)2011: Forecast of Brazil’s mineral production totaled US$ 50 billion

GROWTH OF BRAZIL’S MINERAL PRODUCTIONIn US$ billions

Petroleum & Gas not included. Source: DNPM/IBRAM

0

5

10

15

20

25

30

35

78Years 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 09

40

50

10 11

Forecast

MINERAL TRADE BALANCEBrazilian Trade Balance 2011 = US$ 29.796

35.3

60

US$

mill

ion

18.0

96

5.49

7

12.5

99

22.8

41

9.72

9 13.1

12

2006 200920082007

11.0

30

4.49

0

6.54

0

15.1

96

5.18

5 10.0

11

50.000

45.000

40.000

35.000

30.000

25.000

20.000

15.000

10.000

5.000

02010 2011

7.75

7

27.6

03

49.7

10

11.2

92

38.4

19

Source: MDIC/Aliceweb

3

MINERAL PRODUCTION: GLOBAL POSITION OF BRAZIL

Source: DNPM/IBRAM/PNM 2030

Exporter (Global Player)

Exporter Self-sufficient Importer/ Producer

ExternalDependency

Niobium (1st)Iron ore (1st)

Manganese (2nd)Tantalum (2nd)

NickelMagnesium

KaolinTin

LimestoneIndustrial diamonds

Titanium

Metallurgical CoalPotassium

Graphite (3rd)Bauxite (2nd)

Dimension Stone

VermiculiteChromium

Gold

TungstenTalc

Copper PhosphateDiatomite

Zinc

SulphurRare Earths

STRATEGIC

CLASSIFICATION OF THE PRODUCTION AND MINERAL RESERVES OF BRAZIL IN THE WORLD

Mineral Production Brazil Ranking Position Reserves Brazil Ranking Position

Bauxite 14% 3rd 6,8% 5th

Copper 2% 5th 2% 13th

Dimension Stone 7,7% 3rd 5,6% 6th

Gold 2,3% 12th 3,3% 9th

Iron Ore 17% 2nd 11% 5th

Kaolim 6,8% 5th 28% 2nd

Manganese 20% 2nd 1,1% 6th

Niobium 98% 1st 98% 1st

Tantalite 28% 2nd 50% 1st

Tin 4,1% 5th 13% 3rd

Zinc 2,4% 12th 0,85% 6rd

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 is responsible 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.

Source: PNM 2030/IBRAM

4

MAIN MINERAL PRODUCTS IMPORTED AND ExPORTED(US$ 1.000.000)

2011 2010 Δ 11/10

Brazilian Exports 256.039 201.915 26,81%

Exports Mineral Sector 49.710 35.360 40,58%

Iron Ore 41.817 28.912 44,64%

Gold (in bars) 2.239 1.786 25,38%

Niobium (iron-niobium) 1.840 1.557 18,18%

Copper 1.573 1.238 27,04%

Silicon 637 460 38,39%

Kaolin 261 275 -5,02%

Manganese Ore 306 357 -14,40%

Bauxite 319 270 18,15%

Tin 23 8 192,50%

Lead 9 12 -21,67%

Granite 247 219 12,60%

Others Minerals 439 268 63,88%

Brazilian Imports 226.243 181.768 24,47%

Imports Mineral Goods 11.292 7.757 45,57%

Coal 5.231 3.575 46,31%

Potassium 3.471 2.204 57,48%

Phosphate 207 135 52,96%

Copper 1.141 952 19,88%

Zinc 184 157 17,07%

Sulphur 441 246 79,43%

Others Minerals 617 488 26,43%

Brazilian Balance 29.796 20.147 47,89%

Balance of the Mineral Sector 38.419 27.603 39,18%

Source: MDIC/AlicewebBrazilian Trade Balance Mineral Sector Trade Balance

5

Mineral Trade Balance

importS 2011% of value imported in US$

Coal 46,32%

Potassium30,74%

Phosphate 1,83%

Copper 10,11%

Zinc 1,63%

Silphur 3,91%

Others 5,46%

Iron Ore 84,12%

Gold 4,50%Niobium 3,70%

Copper 3,16%Silicon 1,28%

Kaolin 0,53%Manganese 0,61%Bauxite 0,64%

Granite 0,50%

Tin 0,05%Lead 0,02%

Others 0,88%

EXportS 2011% of value exported in US$

Source: MDIC/Aliceweb Source: MDIC/Aliceweb

roYALtiES iN BrAZiL 2005-2011(CFEm – FiNANCiAL CompENSAtioN For miNErAL rESoUrCES EXpLoitAtioN)

Source: DNPM/IBRAM

462,5537,4

853,9

405,1

1.800

1.600

1.400

1.200

1.000

800

600

400

200

02005 2007 2008 2009 2010 2011

736,8

1.540,0

2006

1.078,2

6

Jobs in the Brazilian Mineral Sector

The total labor force employed in mining in 2011 reached 175 thousand workers. Studies by the Ministry of Mines and Energy’s National Department of Geology, Mining and Mineral Processing show that the multiplier effect of jobs is 1:13 in the mining sector, ie, for each mining job, 13 others are created (direct employment) along the production chain.

Therefore, it can be assumed that the mineral sector in 2011 employs about 2.2 million workers (directly), not considering the vacancies generated during the research, prospecting and planning stages, and the workforce employed in the mines.

HDI of mineral producingmunicipalities

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 sustainable development of the region. The HDI is calculated by the United Nations Development Program – UNDP.

Municipality-Estate Mineral State

HDIMunicipality

HDI

Itabira – MG Iron Ore 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 Itapemirim – ES

Dimension Stone

0,767 0,770

Paraupebas – PA Iron Ore 0,720 0,740

Oriximiná – PA Bauxite 0,720 0,769

Presidente Figueiredo – AM

Cassiterite 0,713 0,742

Source: UNDP

IMPORTANCE OF MINING FOR THE GENERATION OF JOBS

Generates 2,2 million direct jobs in Brazil(175.000 created by the mining industry)

Date 2011

EMPLOyMENT GENERATION

MULTIPLIER EFFECT: 1:13

2

11

1416

12

8

4

0

Mining

Suppliers

First Transformation

Total

1

Source: National Secretary for Geology, Mining and Mineral Trasnformation of the Ministry of Mines and Energy of Brazil (MME)

7

Shutterstock

The graphs shows an increase in the amount of investments in the Brazilian mining sector.

The figures calculated by IBRAM are projections for a 5-year period. The Association expects, based on data collected from mining companies, significant investments of US$ 68.5 billion for the period 2011-2015, which represents a new record for the mining industry.

The private sector invests more in the Country, an average of over US$ 13 billion per year. This amount is periodically reassessed by IBRAM.

These investments apply to a number of minerals, and since Iron Ore is the most significant one, it will take up 63% of the total.

Ores Production 2011 (1.000 ton) (A)

Increase on 2015 (1.000 ton) (B)

Forescast Production on 2015

(C)=(A+B)

Variation x times (V/T)

Iron Ore 372.000 399.500 771.500 2,1

Nickel 74 118 192 2,6

Alumina 8.900 10.000 18.900 2,1

Bauxite 31.700 13.000 44.700 1,4

Copper 213 449 662 3,1

Gold 0,058 0,033 0,091 1,5

Phosphate 6.300 5.300 11.600 1,8

Zinc 288 50 338 1,2

Agregates 516.000 156.770 672.770 1,3

Niobium 80 40 120 1,5

iNCrEASES iN miNErAL prodUCtioN UNtiL 2015

Source: IBRAM estimatives

Investiments in the Minning Sector 8

iNvEStmENtS oF thE miNErAL SECtor BY miNErAL From 2011 – 2015In millions of US$

iNvEStmENt iN thE miNErAL SECtor 2011 – 2015In billions of US$

Source: IBRAM

25

jan-

07

mar

-07

may

-07

jul-0

7

sep-

07

nov-

07

jan-

08

mar

-08

may

-08

jul-0

8

sep-

08

mar

-09

jan-

10

apr-1

0

aug-

10

80

70

60

50

40

30

20

10

0

2832

48

57

47

2009-20132010-2014

2010-2014

4954

2008-2012

2010-2014

6264,8

jan-

11

2007-2011

sep-

11

68,5

2011-2015

Source: IBRAM

Investments in the mineral sector 2010 to 2014:

US$ 62 billion

New investments in the mineral sector 2011 to 2015:

US$ 68,5 billion

Iron

Coa

l

Chr

omite

Nic

kel

Alu

min

a

Pho

spha

te

Cop

per

Gol

d

Man

gane

se

Vana

dium

Nio

bium

Pota

ssiu

m

Zinc

limes

tone

4440 0310

270

200

0310

0631

66400

300

400

0

2.67

5

2.03

0

2.41

8

2.65

7

2.54

2

2.51

0

1.89

06.71

6

6.55

0

8.18

7

5.22

0

39.2

3044.9

69

2011-2015

9

Geological Surveying

Brazil’s mining potential is significant. To date, about less than 30% of its immense territory is known through geological surveys in an appropriate scale for this activity. The Indigenous areas, that account for 13% of this territory and 25% of the Amazon, are among regions that may have their mining potential assessed, as well as the coastal area, located along the Brazilian continental platform.

The graph shows that there is pent-up demand in the field of geology surveying in Brazil. For illustrative purposes, although its land area is about seven times that of Peru, Brazil allocates only half of the amount invested by that country on geological research.

Canada (US$ 2,03 billion) 19%

Australia (US$ 1,2 billion) 12%

US 8%

Mexico 6%

Peru 5%

Chile 5%

Russia 4%

China 4%

Argentina 3%

Brazil (US$ 321 million)

3%

Other Countries 31%

10 leading countries Total: US$ 10,7 billion

Source: Metals Economic Group – 2009

PRIVATE INVESTMENT IN MINERAL ExPLORATIONTOP 10 COUNTrIES IN TErMS OF INvESTMENTS IN MINEraL ExPLOraTION

10

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 are ahead of Brazil in exploration investment (except for Russia).

INVESTMENTS IN MINERAL ExPLORATION IN THE WORLD

Shut

ters

tock

Global Investment (US$ 10.700.000)

Area (sq.km) x 1.000

Absolute Investments

(US$)

Share of Investments (%)

Absolute Investmentes/

Area (US$/sq.km)

Brazil Investment vs Countries

Canada 9971 2.033.000 19 0,2 5.4

Australia 7682 1.284.000 12 0,2 4.5

USA 9373 856.000 8 0,3 2.4

Mexico 1973 642.000 6 0,0 8.7

Chile 757 535.000 5 0,0 18.8

Peru 1285 535.000 5 0,4 11.1

Russia 17075 428.000 4 0,7 0.7

China 9600 428.000 4 0,1 1.2

Argentina 2780 321.000 3 0,1 3,1

Brazil 8547 321.000 3 0,01 1

US$ 1.000

11

www.ibram.org.br