Key facts
- Vale Base Metals (VBM) believes there is no value in producing copper cathodes in Brazil.
- VBM's corporate affairs director, José Luiz Marques, stated that copper concentrate production captures 90-94% of the supply chain's value.
- Marques argued that high smelter costs and low treatment/refining charges (TC/RC) make cathode production an unattractive investment.
- He criticized Brazil's critical minerals bill for not adequately accounting for copper's established market and for its processing requirements.
- Marques pointed to the slow bureaucratic processes in Brazil for starting new projects, contrasting it with China's efficiency.
Vale Base Metals (VBM) has stated that there is no economic benefit in producing copper cathodes in Brazil, as the majority of value is already captured through the production of copper concentrate. José Luiz Marques, VBM's corporate affairs director, explained at a market event on June 10 that concentrate aggregates 90-94% of the value in the copper supply chain.
Marques elaborated that in a high-price environment, VBM maximizes value by focusing on concentrate. He noted that when copper demand rises, treatment and refining charges (TC/RC) decrease, which benefits concentrate producers. VBM prices its concentrate based on London Metal Exchange figures, minus TC/RC fees and specific discounts for impurities, meaning lower processing fees lead to higher concentrate prices.
He further argued that the substantial costs associated with building a smelter mean there is insufficient added value over concentrate to justify such an investment. Marques indicated that for copper cathodes to be a valuable addition for Vale, the aggregated value of copper concentrate would need to be around 60-65%, a threshold few jurisdictions can achieve through smelting.
Marques also voiced criticism regarding Brazil's critical minerals bill, suggesting it should have treated copper differently due to its established and liquid market. He pointed out that half of the bill's financial benefits are tied to companies processing critical minerals within Brazil. Since VBM and other local copper producers gain minimal value from this downstream processing, they risk missing out on approximately R5 billion in tax credits over a five-year period. VBM plans to invest $10 billion in its Carajás copper asset over the next decade.
Additionally, Marques highlighted that the bill fails to address the critical need for speed in bureaucratic processes for Brazilian critical mineral producers. He stated that it takes an average of 17 years to start a copper project in Brazil, which is problematic given the projected global supply deficit in 15 years. Marques cited China's addition of one-third of its smelting capacity in the last decade as an example of agile processes. He echoed other panelists' concerns about slow environmental licensing and unpredictable bureaucratic timelines.