Brazil’s Vale gears up for rare earths

Vale, the world’s biggest iron ore producer, is gearing up to move into rare earth mining as Brazil tries to compete with China to supply some of the world’s most sought-after metallic elements, says Brazil’s science and technology minister, Aloizio Mercadante.

The government has met several industrial companies to line up customers for rare earths, a group of 17 elements which are primarily used to make components for such items as wind turbines, electric cars, and computer screens.

“Vale would bring big benefits to Brazil by entering into this rare earth market and I think it’s an important thing for the west as a whole. It would also benefit Vale as a company,” Mr Mercadante said.

Vale confirmed it was looking at investing in the production of these metallic elements, adding that the project was still at a “preliminary stage”.

Prices for rare earths, such as cerium oxide, have risen fivefold since January after China, which produces 97 per cent of the elements, started clamping down on exports.

Brazil has large reserves of rare earths, allowing it to become a key exporter in the future as well as a supplier to its nascent technology industry, Mr Mercadante said. “We will gain competitiveness in wind energy and the production of electric cars.” He added that the elements would be fundamental to Brazil’s plans to develop a complete production chain for goods such as smartphones and tablet computers.

After lining up a possible $12bn investment by iPhone maker Foxconn in April, Brazil has rushed to develop its technology industry, introducing tax benefits for foreign companies and laying groundwork for production of semiconductors.

Analysts said Vale’s role in this made sense given that rare earths are found in its areas. But after government pressure saw Vale chief executive Roger Agnelli pushed out last month, concerns have grown that the state wants to regain management control over Vale, which it privatised in 1997. If it “starts following a new path because of the government, this could confirm somewhat the suspicions about state interference and the idea that the government is telling them where they can and cannot invest,” said Felipe Reis, analyst at Santander in Brazil.

The production of rare earths is likely to be a long and costly process given that the only reason the elements are ‘rare’ is because of the difficulty in extracting them, said Pedro Galdi, a mining analyst at SLW Corretora in São Paulo.

“It would definitely make a lot of sense and I have no doubt [Vale] will go down this road,” he said. “But these rare earth metals are found along with other metals so you have to develop the technology to separate them. This could take some time.”