Miners to invest $57 bln in Brazil despite crisis

Thu Nov 13, 2008 1:41pm EST
By Raymond Colitt
BRASILIA, Nov 13 (Reuters) - Mineral prospecting in Brazil will be delayed because of the global financial crisis but the bulk of a five-year, $57-billion investment plan remains on track, industry leaders said on Thursday.
"Junior companies, which play an important role in identifying new areas to explore, have been hard hit," Paulo Camillo Penna, head of the Brazilian Mining Institute, or IBRAM, told Reuters.
"They are suspending projects and cutting investment," Penna said by telephone from an international mining conference in the Amazon city Belem.
Small companies prospecting in Brazil have run into financial difficulty over the past three months as equity markets plunged and credit dried up amid growing risk aversion.
In Tapajos, a mineral rich basin in Brazil's Amazon region, the number of prospecting companies fell from 20 in July to currently five, Penna said.
Part of IBRAM's projected investments of $57 billion through 2012 could be delayed by 1-2 years Penna said. Iron ore accounted for 56 percent of that amount, he added.
Last year IBRAM forecast only $28 billion investment over five years.
Brazil is the world's seventh-largest mining country, accounting for 5.62 percent of total world output, according to Raw Materials Group consulting firm.
Major players are not hit by financial problems as much as they are by falling demand, which several participants at the Belem conference forecast to be recovering within a year.
"Many miners went into this crisis cash-rich and that hasn't changed," Anthony Hodge, head of the International Council on Mining and Metals told Reuters.
"Of course there are investment and production cutbacks but there are just too many people in the world with needs for commodity demand to remain weak for long," Hodge said.
Anglo American Plc (AAL.L: Quote, Profile, Research, Stock Buzz) secured a 1.4 billion reais ($600 million) loan on Monday to expand a nickel mine in Barro Alto in Brazil's central Goias state.
"Unlike other countries, Brazil had 60 to 70 big mining, steel, and metals projects in the pipeline with money ready -- financing and markets guaranteed," Paulo Haddad, a World Bank mining consultant, told the conference.
Foreign companies account for only around 12 percent of Brazil's total mining output, compared with 75 percent in Peru and 100 percent in Argentina, according to the Raw Materials Group.
The group forecasts global investment in mining exploration to fall marginally next year from around $12 billion in 2008.
Several participants at the Belem conference urged Brazil's government to cut red-tape and help reduce costs in its mining sector. Long delays in waiting for environmental licenses was one of the complaints. (Editing by Marguerita Choy)