Industrial Minerals Conference

The Americas - Minerals into the Millennium

Brazilian Industrial Minerals Overview:
Selected Highlights and Perspectives
Presentation by Eduardo Vale

Industrial Minerals Information Ltd.

Cancun 1997

Brazilian Industrial Minerals Overview:

Selected Highlights and Perspectives

Macroeconomic Environment
Mineral Sector Overview
Supply of Industrial Minerals
Highlights from the Demand Side
Outlook and Perspectives

Macroeconomic Environment
Inflation & Growth
Balance of Payments
International Reserves
Net Flow of Foreign Investments
Climate of Investments
Fundamental Challenges

International Reserves
1986 / 1997

US$ Million
60000

Oct

50000
40000
30000
20000
10000
0

86

87

88

89

90

91

92

93

94

95

96

97

Net Flow of Foreign Investments

12000

US$ Million /

10000
8000
6000

Cruzado
Plan

Constitution
Election
Collor Plan

4000
2000
0
-2000

81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96

Net Stock of Foreign Capital: US$115

Billion
Profile: 1981/96
Others
10%

Invest.
40%
Debt
50%

Climate of Investments
Political Stability
Confidence in the Political Economy
Tradition as a Good Guest to Foreign Capital
Actual and Potential Size of Domestic Market
Diversity, Level of Integration and Sophistication of the Industrial
and Technological Base
Speed and Scope of the Privatization Program

Climate of Investments
Competitive Advantages as a Launch Pad to Global Exports
Significance within the MERCOSUR
Competitive Taxation System
Modern and Large Financial Market
Clear and Liberal Legal Frame Regulating Flows of Foreign Capital

Mineral Sector Overview

Basic Indicators
Links with the Macroeconomic Expectancies
The Role of Foreign Capital
The Change in Minebusiness Climate

Mineral Sector Indicators : 1996

z Gross Value of Mining Production : US$ 14.4 Billion
z Added Value of Mining Production : US$ 10.3 Billion
z Added Value of Mineral Production : US$ 76.9 Billion
z Total Exports of Mineral Products : US$ 11.4 Billion p
z Total Imports of Mineral Products : US$ 10.0 Billion p

Mineral Sector Indicators : 1996

0,80%
31%

35,50%

Fuel
Metals
Non Metals
Gems

32,70%

Mineral Sector Indicators : 1996

Relevance in World Reserves
z
z
z
z
z
z
z
z
z
z

Niobium :
( 1st / 88% )
Kaolin :
( 2nd / 14% )
Graphite :
( 2nd / 13% )
Aluminum :
( 3rd / 14% )
Vermiculite:
( 3rd / 6% )
Iron Ore :
( 5th / 9% )
Magnesite :( 5th / 5% )
Manganese :
( 5th / 1% )
Fluorite :
( 6th / 3% )
Tin :
( 7th / 7% )

Mineral Sector Indicators : 1996

Relevance in World Production

z
z
z
z
z
z
z
z
z
z
z
z

Niobium :
Iron Ore :
Tin :
Magnesite:
Aluminum :
Kaolin :
Manganese :
Asbestos :
Graphite :
Talc :
Fluorite :
Dim. Stones :

( 1st / 88% )
( 2nd / 18% )
( 4th / 10% )
( 4th / 12% )
( 4th / 9% )
( 4th / 4% )
( 5th / 13% )
( 5th / 7% )
( 5th / 4% )
( 6th / 6% )
( 6th / 2% )
( 7th / 5% )

Foreign Investments in Mineral Sector

Countries
Australia, Argentina, Belgium,Canada,
China, France, Germany, Holland, Italy,
Japan, Norway, Portugal, South Africa,
South Korea, Spanish, United Kingdom,
United States

Foreign Investments in Mineral Sector

Groups and/or Companies
AKW, Alcan, Alcoa, Ambrex, Anglo American,
Bayer, Barrick, BHP, Billiton, CEMEX, Echo Bay,
Eldorado, ECC, Gold Star, Gencor, Holderbank,
Homestake, IFC, Inco, Itochu, JMC, Jordex,
Kawasaki, Lafarge, Lysander, Madison, Marubeni,
Mitsubishi, Mitsui, Molycorp, Newmont, Nippon
Steel, Nisho Iwai, Noranda, Norsk Hydro, Nomura,
Pegasus, Posco, Placer, Reynolds, RTZ, Santa Fe,
Southern Copper, Teck, TVX, Utah, WMC

Foreign Investments in Mineral Sector

Mineral Products
Alumina, Aluminum, Bauxite,
Cement, Copper, Chromium,
Diamonds, Dimension Stones,
Feldspar, Gold, Gypsum, Iron ore,
Kaolin, Mineral Water, Niobium,
Nickel, Steel, Tin, Titanium, Zinc

Sources of Funds: 1980s

Prospection and Exploration

Foreign
National
25%

State

42%

33%

Climate of Investments in Mineral Sector

Removal of Constraints to Foreign Capital
Sensitive Reduction in Taxation
Modernization of the Mining Code
Administrative Reform of Government Agencies
Determination to Guarantee Legal Stability
Ample Privatization Program

Climate of Investment in Mineral Sector

Real Commitment to Reduce the Brazils Cost => taxation +
infrastructure + cost of capital + administrative costs

Extension and Diversity of Geological Environments

Mining Legislation Clear and Transparent in Granting Exploration
and Mining Concessions
Exploration Permits are Granted for an Initial Maximum 3 year
Period, but can be Extended if Justified
It does not have a Maximum Period for the Mining Concession

Climate of Investment in Mineral Sector

Good Flexibility in Transferring Exploration and Exploitation
Rights
Great Number of Mining , Suppliers and Consulting Companies
Composing an Expressive Network of Potential Partners, Sellers,
Buyers and Customers
A Modern and Seasoned Institutional Frame of Specialized
Government Agencies
Several Incentives at Regional and Sector levels

17
16,5
16

IRR ( %

17,5

18

IRR of a Simulated Gold Project

Chile
Bolivia
Brazil
Venezuela
Argentina
Peru

Supply of Industrial Minerals

Selected Issues

Expressive Geological Potential and Modest Reserves

The Importance Attributable to the Exploitation and Processing of
Industrial Minerals is Relatively Recent
The Non Metals Answer for 31% of the Value of Mineral Production but
the Major Share is Relating to Construction Industry
Great Number of Small and Medium Sized Companies
Low Price Products
Focus on Regional Markets
Low Level of Industrial Integration
Low Level of Investments in R&D

Mine Sizes Profile

< .1M
( .1M ; .5M )
( .5M ; 3M )
> 3M

0%

20%

40%

60%

80%

Supply of Industrial Minerals

MINERALS
Asbestos
Barite
Refr. Bauxite
Bentonite
Clays
Dolomite
Fluorite
Gypsum
Granite3
Graphite
Kaolin
Magnesite
Phosphate
Potash
Talc

(1)
(2)
(3)
(4)

RESERVES1
159,000
50,000
565,200
33,652
1,957,227
1,800,971
177,664
1,081,778
1,669,611
96,672
1,156,170
720,023
2,712,062
9,179,902
64,018

PRODUCTION2

UNIT COST OF
UNIT COST OF
RESERVES3 PRODUCTION4
3,706
1
1,723
43
3.12
278
1,109
70.20
167
25,475
2,912
271
2.50
1,051
953
14
27
512
710
38
1,683
1,958
19
226
1,211
3.20
453
24,761
96
196
1,294
194
2372
298
6.54
89

Measure and Indicated Reserves (103 tons of ore)

Run of Mine. (103 tons of ore)
Unit Average Cost for Incorporation of New Reserves (US$/t)
Unit Average Investment for the Increase of Annual Production

Cement Production
( Million of tons )

40
35
30
25
20
15
10
5
0
80

81

82

83

84

85

86

87

88

89

90

91

92

93

94

95

96

Cement Consumption
Per Capita (kg/year)

700

614
600

507

500
400

333

328

309

300
200

165

100

65

0
Spanish

Germany

China

USA

Mexico

Brazil

India

Cement Consumption
Per Capita (kg/year)
350
300
250
Historic
Optimistic
Conservative

200
150
100
50

06
20

04
20

02
20

00
20

98
19

96
19

94
19

92
19

19

90

Consumption of Glass
( Thousand of tons )
2000
1800
1600
1400
1200
1000
800
600
400
200
0
1996

1997

1998

1999

Float

2000

2001

2002

Package

2003

Consumption of Kaolin
( Thousand of tons )
450
400
350
300
250
200
150
100
50
0
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

Filler

Coating

Investments in Mining: 1978 / 2010

US$ Million /

36000
31000
26000

Projected

21000
16000
11000
6000
1000

1978 / 92
Prospection / Exploration

1993 / 10

Expansion / New Projects

Total