Metals - Mining

Produced in collaboration with local industry experts, Gold Mining in Brazil not only outlines both historic and expected future levels of formal and garimpo mine production, but also describes the top domestic and international gold producing companies and exploration companies, licensing procedures and the current tax regime.

Essential reading for both foreign mining majors and juniors, as well as banks and investors considering an approach to the Brazilian gold mining sector.

The report also includes a list of key industry contacts.

The gold mining industry in Brazil is currently emerging from a phase of marked consolidation - gold production in the country during this period of contraction has fallen from a peak of over 100 tonnes in 1989 to reach an estimated 43 tonnes in 2003.

The explanation behind the dramatic cut in the country's output is twofold. Firstly, and most importantly, has been the steep decline measured within the informal sector. Alluvial output from the so-called garimpo areas of Brazil has declined on average by over 10% per annum for the last 14 years. This has largely been due to; the decline of the real gold price; urban migration as the Brazilian economy has matured; tighter environmental legislation; increased lawlessness in garimpo areas and the depletion of the highest grade and most accessible ores.

Timing of Foreign investment into the country and the gold price environment
The lack of projects in the development pipeline, in part, reflects Brazil’s poor investment climate during the early 1990s. A new constitution marking the transition to civilian rule in 1988, for instance, restricted direct foreign ownership in the sector, whilst high corporate taxes did little to attract new investment from abroad.

An amendment to the constitution in 1995 and the reduction in corporate tax in 1996 from 43% to 15% (plus an additional 10% when applicable) were welcome changes but unfortunately coincided with the start of a prolonged bear market, which saw gold prices decline for seven successive years. As a result, global gold mining investment stalled.

A new wave of investment built on exploration success
Whilst the investment climate outlined above clearly inhibited activity from new players, established producers in the country, such as AngloGold Brazil (now AngloGold Ashanti), Rio Tinto Brazil and CVRD, continued to develop their operations and explore new ground and in so doing, generated a handful of new gold projects. For strategic reasons the bulk of these prospects were offered onto the market, which coupled with the improved gold price has attracted a new wave of investment into the country.

Security of tenure and informal mining
In the past, a fly in the ointment of investing in Brazil has been concern over potential conflicts with small-scale alluvial miners (garimpeiros). Although still a sensitive issue, strict environmental controls and severe policing have much reduced the problems associated with uncontrolled garimpo mining.

Opportunities for further exploration success
The investment hiatus in exploration and mine development in Brazil during the 1990s coupled with the declining gold price has resulted in a dramatic reduction in gold mine production in the country. This does not reflect the potential in the ground. Indeed, the favorable geology, political stability, improving economic situation and well developed mining culture make Brazil an attractive country for new mining investment.

For more information visit http://www.researchandmarkets.com/reports/c19803

Laura Wood
Senior Manager
Research and Markets
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