22/04/09

By Peter Murphy
SAO PAULO, April 20 (Reuters) – Brazil`s mining sector has shown signs of stabilizing after the global economic crisis slowed mineral output and prospecting, but it is too early to speak of recovery, the head of Brazil`s Mining Institute said.
The institute, known as Ibram, revised its forecast this month for investments in the mining sector over five years, cutting its estimate to $47 billion for 2009-2013, down from the $57 billion it estimated last year for 2008-12.
“We have stopped falling now (but) I think 2009 will continue a very volatile year. Even though we`ll have rises, we will also have falls. There`s no real clear direction,” Ibram Chairman Paulo Camillo Penna told Reuters.
The Latin American country`s economy had been cruising in the past few years thanks to high prices for its mineral and agricultural commodities but its dependence on exports led to thousands of layoffs and a slowdown when the crisis bit in.
Iron ore has been one of the first minerals to show a turn around as steelmakers in China, the country`s biggest customer for the ore, begin to build up stocks again.
The Asian giant imported a record 52.1 million tonnes last month, eclipsing the previous record set in February and soaring 46 percent from March 2008.
Brazilian mining firm Vale said on Monday it was selling ore to clients at a 20 percent discount to existing term prices, while an annually revised benchmark price was being negotiated.
Although Ibram cut its forecast for total investment over the coming five years from last year`s estimate, the figure is still nearly double the estimate made in early 2007 for investments of $25 billion from 2007-2011.
Interest in Brazil`s mineral resources had been strong until the economic crisis worsened, as high metals prices made mining more profitable. But firms have since handed back rights to 1,800 sites to avoid paying fees while they go unexploited.
Penna said the lower forecast for investments was partly because placements previously forecast had now been completed while there were fewer new projects being undertaken to keep the investment forecast from slipping.
Expected investment in gold over five years, for example, was cut to $1 billion from $1.5 billion after miner Kinross invested most or all of the $500 million needed to get its Paracatu mine in Minas Gerais state up and running.
Gold`s appeal as a safe haven for investor cash has risen amid volatility on financial markets since late last year, pushing up the price for the metal while other commodities plunged.
Penna said many companies had changed strategy since the crisis worsened and were now directing what cash they had toward their most promising projects instead of spreading hard-to-find capital more thinly among several sites.
“They are speeding up the most promising projects and slowing down others,” Penna said, adding in some cases, firms chose projects not according to metals prices but rather based on which ones were closest to starting production.

Reuters