14 th Americas School of Mines

Transcription

1 Mining Investment Analyses-Risks and Opportunities Antenor Silva

2 Agenda Logistic Energy Market Fiscal & Financial Environment & Community

3 Logistic Main Risks Of The Logistic System in Brazil Part 1 Highway System Inadequate, over-weight and over-aged vehicles Poor maintenance Heavy traffic Railroad System Large metropolitan center s access bottleneck Low mesh density Difficult mesh integration Different gauge s metric Inadequate system in Center-West and North-East regions Viable cost just for transportation over 500 km distance Slide 3

4 Logistic Main Risks Of The Logistic System in Brazil Part 2 Maritime System Low port access to highway and railroad systems High costs Shallow waters Poor warehouse infra-structure close/into ports Slide 4

5 Logistic Main Consequences Of The Current Logistic System Part 1 Highway System Quality and productivity lost High freight costs Over weight vehicles Increase pollution emission and high fuel consumption Railroad System Lower average speed Productivity and opportunity lost Urban invasion; risk of accidents; goods thefts or loses Requirement of new transportation and multi-system terminals Restrict and inefficient system utilization Slide 5

6 Logistic Main Consequences Of The Current Logistic System Part 2 Maritime System Ports under capacity Extra payment for additional ship waiting Demurrage Large ports dependence Slurry Pipeline As another alternative, companies start to invest in slurry pipelines, which are restricted just for one operator, not being helpful for the country system Slide 6

7 Logistic Possible Solutions To Solve Logistic Problems Part 1 Highway System Further incentives to fleet renovation via BNDES/Pro-Caminhoneiro Further investment on paving, road signage and/or road geometry Railroad System Basic improvements on infra-structure and multi-systems terminals Clearance of domain areas which are current occupied by communities Investment on railroad mesh extension Integration of the Center-West and the North-East regional systems Institutionalization of independent railroad operators Slide 7

8 Logistic Possible Solutions To Solve Logistic Problems Part 2 Maritime System Dredging and duplication of: Access channels Port terminals New piers areas implementation Further incentives to coastal and internal navigation Investment on new warehouses Slide 8

9 Energy Brazilian Energy Risks High Costs Since 2003, electricity costs in Brazil began an upward trajectory, reaching the same levels of top industrialized countries Overloading cost of one of the most important production inputs, the country undertakes its competitiveness The energy cost is compounded by additional taxes and subsidies, which should not be funded just by the industry Global highest energy costs due to high tax burden Energy Availability Distribution has shown signs of saturation / Series of localized blackouts The shutdowns have caused a decline in the quality of energy Oil-fired diesel and fuel oil are more expensive and are pollutants Lack of maintenance of power lines Slide 9

10 Energy Consequences Of Brazilian Energy System Disadvantages for domestic Companies Brazil current has the highest industrial electricity tariffs over industrialized countries To reach the future domestic demand, companies will need to import products, which were produced internally in Brazil before Expensive and unreliable energy difficult maintenance and the expansion of manufacturing facilities Due to high energy costs, the industrial sector began to shift investments to other countries Energy bill are compounded by charges of other economy sectors Slide 10

11 Energy Possible Domestic Energy Problems Solution Charges and taxes clean-up Relieve investments of new power generation from the energy bill Charges and taxes represent 51.6% of the Brazilian energy cost Purge from the energy tariff the explicit and implicit cross-subsidization Planning Politics Demarcate domestic hydro potential reserves Brazilian domestic hydro-power energy represents 10% of the world Further research incentives: Empresa de Pesquisa Energética (EPE) Prioritize expansion on hydro-power facilities Continue with new ventures auctions Implementation of a policy to increase the natural gas competitiveness Governmental Transparency and efficiency in the decisions made for the energy sector Next government s dedication to solve the barriers related to energy Slide 11

12 Market Brazilian Market Risks Fertilizer Market Approach High prices of production inputs Volatility of international agricultural products prices Excessive dependence on fertilizer imports Consumers purchasing power is low Credit risk High tax burden Low infra-structure investment Final consumers are high affected by logistic Domestic prices are one of the highest global prices Instability on the demand flows Concentration of product supplement in certain markets Slide 12

13 Market Brazilian Fertilizer Market Consequences and Solutions Domestic market consequences Mismatches in the production and demand flows Seasonality Low per capita consumption High cost of inputs due to logistics Solutions Stimulation of alternative inputs supply sources for industry Projects supply chain integration Development of projects near to consuming regions Intensification of a producer / consumer interaction processes Slide 13

14 Fiscal & Financial Fiscal & Financial Risks Mining/Fertilizer are intensive Capex sectors Complex tax system High tax burden over investment and revenue Imminent taxes and contributions increase in the mineral sector Local governments and communities demand/establish new contributions Regressive effects of the tax system undermines competitiveness Conflict of state taxes ICMS (VAT) Project investment Compensation for licensing new ventures increase projects investments Insufficient funding lines for new business Difficult to establish guarantees to new ventures Broad and diversified industrial chain with differentiated needs of financial resources Slide 14

15 Fiscal & Financial Fiscal & Financial Consequences and Solutions Consequences Drop on profitability Increase on project risks Low investment capacity Loss of competitiveness and sustainability Solutions Reduction and simplification of taxes, including exemptions for investment Improving and streamlining of federal funding lines Tax incentives focusing competitiveness and sustainability improvements Mineral reserves as part of funding collateral Slide 15

16 Environment & Community Environment & Community Risks Negative environment & communities impacts to business Fragility of some Environmental Agencies Conflicts between Agencies actuation areas Ignorance and reinterpretation of the law Creation of reserves, protected areas, parks Emerging rights of minorities and association costs to resolve Long-term licensing requirement Absence of industrial districts and zoning policies Urban development next to industries Access roads and drainage products across cities Low rationalization of land use, water and energy Incipient process of waste re-use and effluent control Slide 16

17 Environment & Community Environment & Community Consequences and Solutions Consequences Local conflicts Complexity of the licensing process for new developments Difficult to improve competitiveness and sustainability indicators Lack of encouragement to investment High amount of investment in environmental protection and conservation Solutions Characterization and institutionalization of industrial districts Strengthening of zoning policies Environmental/Community strategic analysis Master plans for municipal development Awareness for water and energy rationalization Development of waste re-use capabilities Cooperatives formation, using the company as a pivot of innovation Slide 17

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