A year into the pandemic, economies worldwide have been severely impacted and the financial downturn still persists in most countries. In Brazil, which has the largest economy in Latin America, this scenario is no different.
According to Brazil’s Economy Ministry, the country’s GDP is expected to drop 4.4% for 2020 compared with 2019. Yet, while there are still deep concerns about many sectors of the Brazilian economy, strong results from the South American country’s mining industry have exceeded expectations for last year.
In fact, the COVID-19 crisis did not shake the projections outlined by the Brazilian Mining Institute (IBRAM). Even before Brazil reached its most difficult period of the pandemic, the institution believed that mining activity would boost the country’s economy as a result of some remarkable characteristics.
The Brazilian government views mining as an essential activity and, as a result, the industry has more or less continued unabated. On 28 March 2020, when the Brazilian economy was beginning to feel the effects of the pandemic, Brazil’s minister of mines and energy, Bento Albuquerque, issued an act. The act considers the availability of necessary mineral inputs to be essential to mining’s production chain.
Inputs include research and mining of mineral resources, as well as related activities; the processing of mineral goods; mineral transformation; the sale and disposal of products generated in the mineral production chain; and the transport and delivery of supply goods from the production chain.
This initiative helped Brazil’s mining industry respond well to the challenges it faced last year. From January to December 2020, Brazilian mining industry revenues reached R$209B (US$38.9B), an increase of 36% compared with the previous year, according to IBRAM. The result was also due to the devaluation of Brazilian currency on exports, and rising prices for certain commodities, including iron and non-ferrous metals.
“The mining sector is the sector that will certainly be the first to respond for the recovery of the Brazilian economy … due to the installed capacity and short-term recovery capacity,” Flávio Penido, the president of IBRAM, declared in May.
Iron ore
According to IBRAM iron ore remains the country’s main mineral product. From January to December 2020, Brazilian iron ore revenues reached R$138.7B (US$22.21B), an increase of 39% compared with the previous year. In terms of exported physical volume, iron ore exports increased by 0.3% in 2020 compared with 2019, for a total export revenue of US$26B, 16% more than what was registered for 2019. China was the largest Brazilian iron ore importer (72%).
The Brazilian mining industry’s current good fortune is also reflected in the turnover of companies operating in the iron ore market. Vale, Brazil’s largest producer, registered a net revenue of US$2.9B in Q3 2020. The result is impressive when compared with the net revenue obtained in the same period of the previous year – US$1.65B.
Gold
While iron ore ranks as the most important mineral produced in Brazil, gold comes right after as the second most valuable mineral product in the country. According to IBRAM, gold production revenue increased by 76% compared with the previous year, reaching R$23.2B (US$4.32B) in 2020.
In terms of exported physical volume, gold exports increased by 8% in 2020 compared with 2019. Exports revenue reached US$4.9B in 2020, 36% more than the US$3.6B posted for 2019. Canada was Brazil’s largest gold importer, accounting for 38.2% of gold exports during the year.
For AngloGold Ashanti Brasil, the largest gold ore producing company in the country, 2020 began with high expectations. However, the pandemic challenged the company to find ways to survive the situation and maintain its essential activity.
“Surely, we had to adapt a lot, and production is being maintained. Gold today has reached a high level, which has been a positive point in the context of meeting other costs, which have also increased significantly within industries. Our estimated production level for 2020 remains at 15.5 tonnes, the same level as in 2019.” said AngloGold Ashanti Brasil vice president Camilo de Lelis Farace, in an interview with local Brazilian newspaper O Tempo.
Further growth powered by China and ESG
Looking ahead to this year, Brazilian mining companies that experienced growth in production in 2020 could continue on this upward trajectory as China’s appetite for minerals is expected to receive a boost once the COVID-19 vaccine is rolled out.
Also, Brazil is in a strong position to embrace the growing trends for environmental and social and governance (ESG) practices in mining. Along with issues involving environmental and social practices, which gained prominence during the pandemic, there is a degree of excitement about key metals, such as lithium, nickel and copper, largely stimulated by the outlook for a green revolution powered by electric vehicles.
