The mining segment involves a spectrum of activities, including raw material extraction, production and the logistics of commercialization of these products. From a broader perspective, the mining industry is present in all sectors of the economy: primary (research and mineral extraction), secondary (metallurgy, steelmaking, chemistry etc.) and tertiary (transport, commerce, recycling). For this reason, the mining segment traditionally manipulates large amounts of resources in the economy, significantly influencing growth. In Brazil, mining has been an important pillar of the national economy. The country’s geodiversity and size are important factors accounting for its large mineral potential and increasingly important role in the international market of mineral commodities.

Iron ore and its by-products are used as raw materials in the steel industry. As a consequence, the demand for iron ore, as well as its price, are directly connected to the global steel segment, which, in turn, is strongly influenced by global economic growth. In a consistent manner over the last twenty years, periods of extended economic growth have fueled the development of the mining industry, including that of the iron ore segment. [In 2000, the global transoceanic market totaled 780 million tons, as compared to 725 million tons of iron ore in 2006]. Such growth, especially influenced by the recent industrialization of developing countries, has increased demand and put pressure on the prices of several steel and non-steel materials, which are currently quite high.

The mining segment is capital intensive, demanding large investments in order to begin the extraction process in a particular region. Investments are needed for prospection, carving, construction of plants and infrastructure.. Furthermore, such investments are based on a long-term outlook, since the effective construction of such infrastructure may take years. On the other hand, revenues only start to be received once the ore is sold, which often happens years after the initial investment. Such a time lapse between initial investment and receipt of revenue increases the segment’s risk and is responsible for many of the short and medium term imbalances between supply and demand for the different metals, in addition to being a big barrier to investment. For this reason, in this industry, investments are based on long-term perspectives and depend on stable rules to be successful.

The segment is highly competitive and is currently undergoing a process of consolidation with large multinational mining companies tending to concentrate on high resource volume deposits and maintaining a diversified portfolio, and small and medium-sized companies concentrating on smaller deposits.

Like large companies in this segment, small and medium-size companies actively search for new mineral opportunities by means of prospection and research and, as a result of the accelerated growth of the mineral sector and of the liquidity in the global economy, they are succeeding in financing their prospection and expansion projects by attracting capital or issuing debt bonds.