Brazil’s mining sector to recover lost ground as iron ore, metal prices stabilize

Brazil's mining sector is expected to recover its long-lost appeal to investors and see a fresh wave of mergers and acquisitions, as mineral prices begin to settle and major producers look to sell core assets to reduce debt loads, a new report shows.

According to BMI Research, mining deals are already picking in South America’s largest nation. As of May 23, investment and M&As in the resources sector reached $1.6 billion, up from $1.4bn during the same period last year, thanks mostly to China Molybdenum's $1.5bn acquisition of Anglo American's niobium and phosphate unit.

BMI experts predict increased investment in Brazil's mining industry that will benefit several sectors, beyond iron ore and potash, giving a renewed boost to the country’s gold scene.

The experts predict the windfall will benefit several sectors, beyond iron ore and potash, giving a renewed boost to the country’s gold industry. Higher gold prices will push miners to restart or speed up development of projects in Brazil, they say.

As an example, the report quotes the $4.4 million investment Canada’s Belo Sun Mining (TSX:BSX) received in March from privately held hedge fund Sun Valley Gold, as well as the $4.7 million investment made by Agnico Eagle Mines (NYSE, TSX: AEM) in the same miner, which is developing the Volta Grande project.

Only last week, AngloGold Ashanti (NYSE:AU) teamed up with Luna Gold (TSE:LGC) to explore the mineral claims surrounding its past-producing Aurizona Gold Mine in northern Brazil.

The deal came on the heels of other high-profile transactions, such as Yamana Gold’s $52 million purchase of the Riacho dos Machados gold project from Carpathian Gold, announced early May.

Brazil’s mining sector to recover lost ground as iron ore, metal prices stabilizeIt also follows Lara Exploration’s acquisition of the early-stage Serrita and Tocantins gold projects and the takeover of Magellan Minerals by Anfield Nickel for about $19 million to develop the Coringa gold project, located in eastern Para state.

Much needed boost

With Brazil’s economy in its worst slump since the 1930s, new leader Michel Temer took power last month promising a more business-friendly agenda to spur growth. Temer named a ­conservative-leaning cabinet whose members include figures with close ties to powerful landowners and agribusiness companies.

Miners and energy firms should benefit from the new political environment, experts believe, as the sectors combined account for more than 22% of Brazil’s exports, up from 12% in 2000.

Meanwhile, national development bank, BNDES, is fine-tuning a $338 million funding program for companies involved in exploration and development of projects related to minerals the government deems as “strategic”, such as niobium, cobalt, lithium, graphite and rare earths.