War in Ukraine could boost nickel exploration in Brazil

Owner of the third largest nickel reserve in the world, Brazil may emerge as an investment alternative in the sector, which is experiencing a scenario of record prices and great uncertainties after the beginning of the Ukrainian war.

The international price of nickel reached US$ 100,000 (R$ 480,000) per ton in early March for the first time in history, reflecting the increased risk on Russia, which currently represents 10% of global production.

Trading ended up being interrupted on the London commodity exchange, but even so, the metal closed some trading sessions above US$ 48,000 (R$ 230,000) per ton.

The conflict in Eastern Europe caught the market at an already heated moment, with prices already pressured by the high demand for batteries for electric vehicles and solar or wind energy generating parks.

This scenario was already benefiting Brazil with the increase in revenue from exports and royalties and led to the resumption of operations at one of the largest mines in the country, in Bahia, which had been paralyzed in 2015 and reopened in 2019.

Experts in the sector believe that the rise in prices and the scenario of greater uncertainty regarding the future of Russian supplies could accelerate projects for the exploration of the metal in the country.

“The high price will favor the search for deposits, more in-depth geological studies and project portfolios that are waiting for the most appropriate moment”, says Aline Nunes, coordinator of Mining Affairs at Ibram (Brazilian Mining Institute).

Ibram raised four large nickel production projects in progress in the country, with investments of US$ 1 billion (R$ 4.8 billion, at the current price). These are projects approved before the war, with quotations much lower than the current ones.

In 2021, for example, the average nickel price was US$ 18,500 (R$ 89,000) per ton. After the beginning of the war and the peak of the beginning of the month, the metal was traded this Friday (25) at around US$ 37,000 per ton.

“Brazil already had this context of being an important player, even before the war, and this geopolitical scenario certainly creates a new market level”, says Gilberto Calaes, advisor to the Geology and Mineral Resources directorate at CPRM (Geological Service of the Brazil).

According to an estimate by the USGS, the US Geological Survey, Brazil has estimated reserves of 16 million tons, second only to Indonesia and Australia, with 21 million each.

But it is in eighth position among the largest producers, with 100 thousand tons per year in 2021. The number represents a growth of 50% in just two years, reflecting the resumption of the Santa Rita mine, in Itagibá, 400 kilometers from Salvador.

The mine had been demobilized due to the reduction in the price of ore and resumed operation, already made possible by the demand for batteries. Its operator, Atlantic Nickel, is controlled by the British group Appian Capital Advisory.

After purchasing the project, the company carried out further research and is already thinking about doubling the mine’s useful life, which was expected to take ten years. Sought, Atlantic Nickel declined to give an interview about the operations.

City Hall celebrates the return of local exploration. “For the municipality, it is fundamental, but this recovery managed to help the entire region”, says the mayor of Itagibá, Marquinhos (PCdoB).

In 2021, Itagibá was the 26th largest collector of Cfem (financial contribution for mineral exploration) in the country, with R$ 27.4 million. Considering only the nickel producing municipalities, it was the largest collector, according to the ANM (National Mining Agency).

The city has a population estimated by the IBGE (Brazilian Institute of Geography and Statistics) at 15,200 people. The mine alone generates around 2,000 jobs, according to the mayor. Between 2018 and 2021, the municipality’s current revenue almost doubled, from R$ 44.5 million, already adjusted by the IPCA, to R$ 81.4 million.

“The city today is full of works from these resources”, says the mayor.

The Brazilian trade balance has also been feeling the effects of rising prices, combined with an increase in nickel production. In March, exports of the metal totaled US$ 31.6 million (R$ 151 million), almost double the US$ 17.9 million (R$ 86 million) exported in the same period in 2020.

In 2021, the country exported US$ 237.2 million in nickel ore and its concentrates, more than three times the US$ 77.7 million exported in the previous year.

Although most of its nickel production is outside the country, the scenario also favors Vale, which is one of the largest global producers of the metal since it bought Canadian Inco in 2006. In 2021, the company produced 168,000 tons of the metal. .

“Nickel, copper and cobalt are starting a renaissance due to the global low-carbon energy transition,” Deshnee Naidoo, executive vice president of Base Metals at the miner, said on a conference call with analysts at the end of February.

“Increasing demand coupled with a lack of supply will attract significant interest across the industry,” she added, who sees consumption doubling over the next decade with the popularization of electric vehicles.

Vale has already announced studies to open the capital of its base metals operations, taking advantage of the growth perspectives in this segment. At the February conference, the company said again, however, that there is still no definition on the subject.