Investors more demanding in the new mining investment cycle
Despite the rise in commodity prices and the gradual return of investors, investments in the mining sector aren’t growing at the same pace and with the same enthusiasm. Potential reputational and project risks are growing concerns, and sustainability will be critical to defining how investment plays out in the sector. Yet according to analysts and investors gathered at the BrazilCanada Exclusive Capital Markets Roundtable yesterday, an upcoming growth cycle and the energy transition are expected to drive future investments, and Brazil is well-positioned for potential growth.
Martin Valdes, Partner at RCF Resource Capital Funds, sees a lot of opportunities in Latin America and Brazil in particular, where he pointed out the potential in gold. “We expect the mining sector to be in growth cycle again after the China-US trade war and the COVID situation,” he said, adding that “stimulus packages should drive a lot of economic growth in most of the countries around the world.”
Randy Smallwood, President & CEO at Wheaton Precious Metals, said his first significant investment in gold was in Brazil in partnership with Vale. He noted there is something very unique in operations in South America in terms of ESG opportunity as most mineral deposits are in rural locations. “There is an incredible opportunity to dramatically improve quality of life in these jurisdictions, increasing access to education, health benefits, and raising living standards.”
For Wilson Brumer, Chair of the Board of Brazilian Mining Institute (IBRAM), the biggest challenge for the mining industry in Brazil is finding ways to expand mineral exploration in the country. He noted that over the past years just a few companies, only large companies, have invested in exploration despite the enormous number of areas recently offered by the government for mining activities. “It’s a challenge but also an opportunity for investors partnering with Brazilian small and medium-sized mining companies to explore the vast, untapped mineral potential across the country.” Ted McGurk, Managing Director at TD Securities, said that investors are also focusing on what the investment target does on the tech side. He mentioned that the market is focusing on innovations more than ever before, such as autonomous vehicles in hauling, optical storing systems, predictive maintenance. “This is in part because those innovations make operations more efficient and that’s what the market looks for.”
For Daniele La Porta, Senior Mining Specialist, Energy & Extractives at World Bank Group, there is a consensus that ESG requirements alone are not enough to tip the scale. “There is an understanding that business as usual in terms of sustainability is not enough, and keeping the same path will only amplify the project risk and turn away investor opportunities.” She added that “decarbonization in the sector is seen by the bank as one of the keys sustainability issues, in addition to safety, business ethics, and community relations.”
Overall, the participants agreed that since the role mining will play in the clean energy transition brought the world’s attention to the sector, there is also pressure on the sector to improve sustainability and do mining better when it comes to the environment and people. While minerals and metals will be crucial to delivering climate goals and eventually will help to shift the narrative about the sector, decarbonization will be a key driver for defining its sustainability agenda as well.
About “The Brazilian Mining Sessions 2021” - The Brazilian Mining Sessions 2021 is a series of events held online from March 5th and March 11th, 2021, including “The Brazil-Canada at PDAC” series of events, which take place during the 2021 PDAC Virtual Convention. The events focus on the Brazilian mineral exploration and mining industries and are hosted by the Organizing Committee of Brazil PDAC 2021, led by the Brazil-Canada Chamber of Commerce and the Agency for the Development and Innovation of the Brazilian Mineral Sector (ADIMB).
*with information provided by ADIMB.