The critical minerals segment has been driving acquisition and financing activity in the Brazilian mining sector in recent days.
This week, the Canadian company Lithium Ionic completed the sale of its Salinas project in Brazil to the Australian company PLS Group Limited, in a US$37.5 million transaction.
According to the Canadian company, the funds raised from the sale will strengthen its cash position and make it possible to advance on another front in Brazil, the Bandeira project, valued at US$190 million and located in the state of Minas Gerais.
“With the conclusion of this transaction, our focus remains fully on advancing our main asset, the Bandeira Lithium Project, toward a construction decision, as well as on our goal of becoming, in the short term, a low-cost lithium producer,” said Blake Hylands, CEO of Lithium Ionic, in a statement.
Another agreement that is about to be concluded involves the acquisition of the rare earth producer Mineração Serra Verde by the US-based USA Rare Earth.
USA Rare Earth has now obtained US$1.55 billion in financing from the United States government to fund the acquisition of the asset in Brazil.
In April, USA Rare Earth announced the acquisition of control of Mineração Serra Verde, which operates rare earth assets in the state of Goiás, in a transaction valued at US$2.8 billion.
In addition to merger and acquisition operations, the sector has also seen progress in raising financing.
Recently, the Australian miner Viridis Mining and Minerals Limited announced the raising of US$120 million to finance its rare earths project in Brazil. The company also completed the definitive feasibility study (DFS, in its English acronym) for the Colossus project in Minas Gerais, with projected capital expenditure (capex) of US$449 million.
Brazil has attracted growing interest from investors in the critical minerals chain, given its large mineral reserves, which place the country in a prominent position in a geopolitical scenario in which several countries are seeking to diversify their sources of resources, which are currently highly concentrated in China.
Despite this potential, regulatory issues still prevent faster progress in operations associated with critical minerals in the Latin American country.
“We have some factors that have generated uncertainty. The bill on critical minerals, for example, in my assessment ended up having the opposite effect to what was intended. When you combine high interest rates, inflation, a complex macroeconomic environment and an election year with the possibility of changing the rules of the game, investors become more cautious,” Pedro Garcia, partner and head of the mining practice at the law firm Veirano Advogados, told BNamericas.
Recently, the Chamber of Deputies approved a bill related to critical minerals, which is now under discussion in the Senate. Among its various points, the proposal provides for the creation of a council made up mostly of members of the federal government, which would have veto power over certain merger and acquisition operations involving the mining sector.
Another aspect of uncertainty mentioned by Garcia is a recent decision by the Federal Supreme Court (STF) on rural properties, which made certain acquisitions and leases conditional on the approval of the National Institute for Colonization and Agrarian Reform (Incra).
The measure may create an additional hurdle for foreign investors seeking assets in the mining area, since the rule may have broad reach over surface rights.
“Imagine someone investing US$400 million in a mining venture without having security regarding access to the surface area needed to develop the project. It is very difficult to convince a foreign investor to take on this risk. Brazil needs to remember that it is competing for the same capital as countries like Peru, Chile, and Argentina. If our rules are perceived as less secure, if environmental licensing takes longer, or if there is a perception of excessive litigation, the capital can simply choose another destination”, said Garcia.
By – https://www.bnamericas.com/en/news/critical-minerals-drive-mas-and-financing-operations-in-brazil