Mining to Brazil

Trends and opportunities

The market

Brazil is one the biggest global players in the mining sector. It is the world’s largest producer of niobium, second largest exporter of iron ore and manganese and among the largest producers of bauxite and tin. Iron ore accounts for 80 per cent of Brazil’s mining exports and provides 30 per cent of global demand, with the remainder provided by Australia (Source: Brazilian Mining Institute, October 2015).

The minerals sector accounts for five per cent of Brazil’s Gross Domestic Product (2015) and 21 per cent of total exports. Iron ore alone is responsible for 11.5 per cent of exports, of which China takes half (Source: Brazil Mining Report Q4 2016).

According to the Brazilian Mining Institute, in 2015 the mining sector generated 2.7 million direct and indirect jobs. This number represents nearly eight per cent of all jobs created in Brazil. Nevertheless, the sector suffers with a lack of qualified employees and an urgent requirement for skilled training services (Source: Brazilian Mining Institute).

Despite the global mining downturn and competition for the Chinese iron ore market, Brazil’s major mining company Vale continues to sell record tonnages and generate significant profits with relatively low-cost production. In order to remain competitive, mining companies in Brazil are looking at solutions to increase productivity and reduce costs. There is a growing appreciation for innovative technologies and autonomous operations and robotics.

A feature of Brazil’s mining sector is the gradual move towards exploration and operations in the country’s tropical northern states, which are home to the largest high-grade iron ore deposits. In particular, the northern state of Pará represents opportunities for Australian mining equipment, technology and services (METS) companies with capabilities to operate in tropical, indigenous and remote environments.

In 2015, Brazil faced its worst environmental mining disaster in history with the bursting of two dams at an iron ore mine operated by Samarco, a joint venture between BHP Billiton and Vale, in Mariana in the state of Minas Gerais. The Renova Foundation has been created to manage the repair and reconstruction programs of the region affected and it may represent opportunities for engagement of Australian companies with capabilities in tailings management, environmental risks and water management solutions.

The Brazilian mining industry is expected to invest approximately US$53.6 billion between 2014 and 2018. Major mining producers in 2015 were Vale, CSN/Namisa, Samarco, Gerdau, Usiminas, Comisa, Vallourec, ArcelorMittal, Ferrous Resources and Minerita. Some of these companies have announced their investment projects pipeline:

• Conclusion of Vale’s US$19.7 billion S11D project and Conceição de Itabiritos and Cauê Itabiritos projects worth US$2 billion.
• Gerdau is planning to invest US$289 million in setting up a further unit to boost its iron ore production by an additional five million tons a year.
• Ferrous has a US$1.3 billion investment plan for an expansion project at its Viga mine, tripling output capacity from current five million tons a year to 15 million by end of 2017.
• Manabi intends to develop two mines (Morro do Pilar and Morro Escuro) and a port terminal in Espírito Santo with budgeted investment of US$3 billion.
• SAM (Sulamericana de Metais) plans an investment of US$3.8 billion in its Vale do Rio Pardo project.

(Source: Brazil Mineral Magazine – special issue 2016).

Opportunities

With the expansion plans for the Brazilian mining industry, particularly iron ore projects, there is a wide range of opportunities for Australian companies.

Opportunities exist in:

• mineral exploration – geophysics, mapping, drilling, blasting
• mining software – resource estimation, modelling, mine design and planning, maintenance and optimisation
• automation and robotics
• contract mining and engineering services
• environmental equipment and consulting
• mining processing technologies
• mining equipment
• mine safety
• mining education and training services
• mining research and university collaboration
• communities engagement consulting.

Australian mining presence in Brazil

As of December 2016, Austrade is aware of 31 Australian companies in the Brazilian mining market including:

• 13 mining companies with projects in various phases of development, from early stage junior miners to development and production
• 15 Mining Equipment, Technology and Services (METS) companies that have set-up a subsidiary office
• three METS companies contracted a local distributor.

Tariffs, Regulations and Customs

All products exported to Brazil are subject to import tax (unless specifically exempt).

Key points on import taxes include:

• it is levied on the customs value
• it is generally assessed based on the ‘transaction value’ which is the cost, insurance and freight (CIF) value
• it is selective and depends on the product's tariff classification.

Special preferences are granted on a wide range of items imported from member countries of the Latin American Integration/Development Association, in particular, from Mercosur member countries - Argentina, Uruguay and Paraguay.

Products manufactured or exported to Brazil are classified under the Mercosur Common Nomenclature (NCM) classifications. It is important to check the sub-classifications, as there is a wide variation of import tax rates. Companies called ‘despachantes’ provide a valuable service by doing this check. Visit NCM for more information.

Most duties are ad valorem, based on the GATT Valuation Code (approximately CIF value) (Source: Incoterms 2000).

The drawback regime is an incentive for exports introduced by the government. The requirement for requesting the incentive is that the finished product that has been manufactured in Brazil and then exported has used some parts and pieces that have been imported into Brazil.

As tariffs and duty rates are constantly revised and are subject to change without notice, Austrade strongly recommends you confirm these prior to selling in Brazil. For more information, visit the Secretariat of the Federal Revenue of Brazil.

Marketing your products and services

Market entry

Austrade strongly recommends that exporters obtain professional legal and accounting advice before conducting any business in Brazil. Austrade can provide referrals to service professionals.

A sound business plan, a long-term strategy and some degree of local presence are likely elements of success in Brazil. Important points to consider include:

• Local business presence – agent, representative office or joint venture partner:
• For most exporters it is necessary to establish a local presence through an agent/distributor, representative office or joint venture partnership. To maintain business contacts or where regular sales or service follow-up is required, it is critical to be on the ground.
• Brazil has a large choice of reputable sales agents, which are a popular way for new exporters looking to develop a market presence, particularly for smaller companies. The challenge is to find an agent with the right contacts and experience for your product.
• A smaller number of exporters establish representative offices, due to the high costs involved. These companies usually have needs that cannot be met by agents or distributors, such as businesses that need a high degree of control over their products and after-sales service, or have commercially sensitive intellectual property.
• One option that is increasingly popular is the establishment of a joint-venture partnership with a local company. An attraction of this method is that costs and risk are shared by the partners, with the Brazilian partner bringing to the venture local market knowledge, expertise and business experience.
• Strategies to deal with administrative and legal requirements, including tariffs and taxes.
• The likely need to localise manufacture of the product at some stage.
• Understanding the structure of Brazilian mining companies and their procurement processes.
• The need to develop relationships with procurement offices, as well as with operation teams at mine sites.
• Presenting a concrete value proposition which demonstrates the value add of your solution.
• Understanding that there is a lot of bureaucracy involved in site visits and long driving distances from regional mining centres such as Belo Horizonte and Carajás

Consider participation at Exposibram (September 2017), which the largest mining show in Brazil that showcases mining companies with global operations and major suppliers of products and services. It is an opportunity to meet with Brazilian customers and other industry contacts, liaise with potential agents and distributors and investigate the competition. The next event will be held in Belo Horizonte in September 2017.

Download the mining to Brazil summary

Links and industry contacts

Government, business and trade

Brazilian Geological Survey
Geology, Mineral and Mining Transformation Secretary
Ministry of Mines and Energy
National Department of Minerals Production

Industry resources

Brazilian Association of Mineral Exploration
Brazilian Mining Institute (IBRAM)
Metallurgic and Materials Brazilian Association
National Syndicate of Iron Ore and Basic Metals Industry

Please note: This list of websites and resources is not definitive. Inclusion in this list does not imply endorsement by Austrade. The information provided is a guide only. The content is for information and carries no warranty; as such, the addressee must exercise their own discretion in its use. Australia’s anti-bribery laws apply overseas and Austrade will not provide business related services to any party who breaches the law and will report credible evidence of any breach. For further information, please see foreign bribery information and awareness pack.

Contact details

The Australian Trade and Investment Commission – Austrade – contributes to Australia's economic prosperity by helping Australian businesses, education institutions, tourism operators, governments and citizens as they:

• develop international markets
• win productive foreign direct investment
• promote international education
• strengthen Australia's tourism industry
• seek consular and passport services.

Working in partnership with Australian state and territory governments, Austrade provides information and advice that can help Australian companies reduce the time, cost and risk of exporting. We also administer the Export Market Development Grant Scheme and offer a range of services to Australian exporters in growth and emerging markets.