Brazil: A critical minerals rising star

Brazil is emerging as a key player in the global critical minerals scene
The country’s ‘Lithium Valley’ is attracting significant investment
And rare earths players are growing in prominence

Brazil is following in the example of Western economies, seeking to break China’s stranglehold on metals and mining by offering ~US$815m in financing support for the development of strategic minerals in the South American nation.

The initiative, announced in January by the National Bank for Economic and Social Development (BNDES) and the Brazilian Company of Innovation and Research (FINEP), is for companies with critical mineral projects.

It’s also designed for those taking part in the manufacturing of energy transition and defence technologies including batteries, photo-voltaic cells and magnets used in EVs and wind turbines.

Currently, China has monopolised about over 80% of global critical mineral supply chains from mining to refining, manufacturing and production.

But Brazil, with its many ionic clay-hosted rare earth deposits, niobium and countless outcropping spodumene occurrences, is positioning itself as an alternative player in the global critical minerals space.

The Lithium Valley region already holds the lion’s share of the nation’s ~45 hard rock lithium deposits, similar to those mined in WA, and Brazil is estimated to contain about 21Mt of rare earth oxide equivalent or the world’s second largest REE reserves outside of China (though major producer Myanmar’s total reserves are a relative unknown).

Working to Brazils advantage are low labour costs, clean energy, established regulations and proximity to end markets such as the US, Canada, Africa and Europe.

Rare earths and lithium stand-outs

The country’s first rare earth’s mine, Serra Verde, started commercial production last year and is already planning to ramp up production to 5,000t of rare earth oxide annually by 2026.

On the lithium front, Canadian miner Sigma Lithium leads the pack in the region, having established itself as the fourth largest mining complex in the world with a proven and probable reserve base of 77Mt at 1.4% lithium oxide at Grota do Cirilo in Minas Gerais.

The area was also home to lithium mine developer Latin Resources, the previous owner of the 70.3Mt Salinas project before its takeover by Pilbara Minerals (ASX:PLS) .

A swarm of explorers and near-term developers are busting into the emerging hotspot, including Perpetual Resources (ASX:PEC), which recently increased its lithium footprint in the region by three-fold.

The new licences are adjacent to the company’s Isabella project as well as Sigma Lithium’s operations.

Counter cycle lithium moves

PEC executive chairman Julian Babarczy said from an economics point of view, Brazil’s Lithium Valley is a compelling location for resources development.

“There’s been a significant amount of investment and government support for critical mineral projects, including a number of large Chinese companies like BYD who have recently taken stakes in exploration ground and set up manufacturing facilities for EVs,” he told Stockhead.

“Compared to other parts of the globe, there’s also a willingness from US supply chain partners to participate in offtake deals and provide funding for projects – those are some of the reasons why we chose to do business in Brazil 15 to 18 months ago.

“Going back around three to four years ago when lithium prices were significantly higher, there was a bit of a land grab going on and prices for the ground we recently acquired (were)t many, many multiples higher than what we’ve been able to negotiate,” Babarczy added.

“Our strategy has been to set up our company for the next significant lithium cycle, which like any commodity, goes through ups and downs – we are just in a cyclical low at the moment.

“But at some point, given all the mine closures, there will be an undersupply which will cause prices to go up and we will be very well positioned when that occurs.”

Market turbulence ain’t no thang

Despite the volatile market environment, Canaccord Genuity head of research Reg Spencer has a speculative buy rating for Brazilian rare earths play Meteoric Resources (ASX:MEI) and a price target of 40c.

MEI’s Caldeira project in Minas Gerais boasts a resource of 740Mt at 2572ppm total rare earth oxide, with just eight of the project’s 69 prospects drilled.

An updated scoping study on the project, released last year, increased the pre-tax net present value by 14% to US$1.4b and the internal rate of return by 6% to 40.4% with the capital cost (US$403m) to be paid off in 2.2 years.

Neighbour Axel REE (ASX:AXL) is carrying out an auger drilling campaign across the Caldas rare earth project, where a fresh batch of thick intercepts were recently delivered from surface.

An average assay of 3229ppm TREO was achieved with all holes ending in mineralisation.

Another explorer in the Minas Gerais region is St George Mining (ASX:SGQ), currently accelerating metallurgical testwork and downstream processing studies at the Araxá niobium and rare earth project.

The downstream processing study will make recommendations for the potential commercial production of niobium and REE products, a critical step in finalising the plant design and project construction for a potential mining operation.

More rare earth players

Meanwhile, Brazilian Critical Minerals (ASX:BCM) has crunched the numbers on its Ema rare earths deposit in the country’s Amazonas state, declaring the asset has ‘no peers’ after a scoping study showed it would generate more than US$900m in life of mine cash flow.

The study delivered what could be the lowest capex and opex costs in the industry, promising to payback its $51 million construction bill – inclusive of a 35% contingency – in just the first 28 months of a two decade mine life, making money even at current depressed NdPr prices.

And in southeastern Brazil, Equinox Resources (ASX:EQN) is carrying out a drilling program across the Pindaibas, Patos, and Olegario prospects at the Mata da Corda project.

As well as boasting strong rare earths and niobium potential, widespread titanium dioxide mineralisation has been identified with samples exceeding 12.8% TiO2.

The latest results will be support the definition of a maiden resource estimate targeted for H1 2025.

At Stockhead we tell it like it is. While Perpetual Resources, St George Mining, Axel REE, Meteoric Resources, Brazilian Critical Minerals and Equinox Resources are Stockhead advertisers, they did not sponsor this article.