Concealed among the rolling hills that separate the city of Poços de Caldas in southeastern Brazil from its smaller neighbor, Caldas, is a defunct uranium mine.
It was opened during the military dictatorship in 1982, but later abandoned as Brazil’s nuclear program foundered – a failure that was due, in part, to meddling by the United States.
Now, Brazil’s history of mining and foreign pressures could be on the brink of repeating itself, this time with rare earth elements.
Why We Wrote This
Brazil has the world’s second-largest rare earth reserves, deposits of elements essential for 21st-century economies. It’s trying to rewrite who wins and loses in global extractive industries.
Located on the rim of a 70-million-year-old volcanic crater, Poços de Caldas sits on promising deposits of the 17 chemical elements essential for 21st-century economies and warfare. They’ve become a point of focus for world powers, including President Donald Trump’s foreign policy interests, sparking a modern-day global “gold rush” for these critical minerals.
Brazil is home to the world’s second-largest rare earth reserves. It has the potential to become a major producer of these metals – and to offer the world an alternative to China, which currently dominates the supply chain. But it is keen to do so without repeating the extractive models of the past, which saw Brazil become a big exporter of raw materials and then lose out on the added value of processing them.
This idea of rewriting the playbook on who wins and who loses in extractive industries is playing out in countries, many low- and middle-income, across the globe, as superpowers home in on critical minerals such as rare earths and lithium. Brazil is one of the best-placed countries to leverage these resources into economic and geopolitical power, potentially reshaping global relationships – if, experts say, it succeeds in developing its own production chain.
“If these critical minerals, these rare earths, exist in Brazil, they are ours. We won’t allow for them to be exploited the way other minerals were,” President Luiz Inácio Lula da Silva, popularly known as Lula, said this month, shortly after Mr. Trump slapped 50% tariffs on U.S. imports from Brazil. Though the tariffs were ostensibly announced for political reasons, U.S. interest in Brazil’s rare earths soon emerged as a possible point of negotiation.
“Something unprecedented”
Rare earths are not, as their name suggests, scarce. But they are tricky and costly to extract and separate.
Brazil has an advantage in that part of its reserves, including those around Poços de Caldas in the southern part of Minas Gerais state, are located in ionic clay deposits. Those are easier, cheaper, and less environmentally damaging to mine than hard-rock deposits such as those found in the U.S. They also have a higher concentration of coveted heavy rare earths, needed to make super magnets that are resistant to very high temperatures and used in electric motors.
“Brazil can be the next hub of rare earths from the West,” says Marcelo De Carvalho, executive director in Brazil of Meteoric Resources, one of two Australian companies that have acquired mining rights around Poços de Caldas and hope to start producing large quantities of mixed rare earth carbonate – the technical term for the minerals extracted from the clay – within the next two to three years. The other mining company is called Viridis Mining & Minerals. Latin American countries have exported commodities such as copper and soy to China and elsewhere for years without sustainably advancing their economies, subject to the rise and fall of commodity prices. These companies are playing a part in helping Brazil build a production chain on its own turf.
Both foreign and Brazilian companies are rushing to explore rare earths in Brazil, but the country currently has just one functioning mine, in the central state of Goiás. It is telling that the company operating the mine is backed by American and British investors but sells almost all its output to China.
“Right now, there is no company in the U.S. that is operational to do the separation stage,” says Fernando Landgraf, an engineering professor at the University of São Paulo.
The U.S. is rushing to change that. Meteoric Resources already has an agreement to sell rare earth carbonate from its Brazil project to a Canadian-owned facility in Louisiana.
But Brazil also wants to develop its own downstream industry and the capacity to not just extract these strategic minerals, but also separate them and make them into magnets.
“Over the last 10 years … there has been significant support for projects covering the entire rare earths production chain,” says Dr. Landgraf, who coordinated a research network on this topic.
Earlier this year, Brazil launched South America’s first rare earth magnet plant, called CIT SENAI ITR. In June, the Brazilian development bank BNDES included 10 rare earths projects in a $920 million funding program to develop critical minerals production. Meteoric Resources and Viridis are among the selected firms, both with pilot plans to develop separation technology.
“Very few countries, very few companies have the technology to refine the carbonate and produce rare earths oxides,” says Viridis’ executive director, José Marques Braga Júnior, speaking from the company’s offices in Poços de Caldas. Bringing that technology to Brazil “would be something unprecedented for the Southern Hemisphere,” he says, and allow it to compete with China.
“Developing countries should have the opportunity to benefit from the export of these minerals, but with time, the opportunity to also add value locally,” says José Puppim de Oliveira, a professor at the Fundação Getulio Vargas university in São Paulo and co-author of a paper that argues for the creation of a global trust to manage the production and trading of critical minerals fairly, without geopolitics interfering.
“At the center of a geopolitical dispute”
While Brazil’s rare earths potential is generating excitement in boardrooms and government offices, locals around Poços de Caldas are skeptical.
“They’re trying to get environmental permits for gigantic operations,” says Daniel Tygel, an environmental activist and former city councilor of Caldas. He sees parallels with the short-lived hype around uranium in the 1970s and ’80s, which left his sleepy town of 14,000 people with lakes of radioactive waste.
Meteoric Resources and Viridis each plan to dig up 5 million tons of clay per year, from which the rare earth concentrate is extracted through a chemical process known as “leaching.”
In Caldas, Meteoric Resources is trying to gain permission to dig its caves in the buffer zone of an environmentally protected area, where local legislation prohibits mining. Viridis’ plans place its mines just meters away from a low-income residential area south of Poços de Caldas.
Water usage tops resident concerns, as well as pollution from dust particles and the impact that the mining will have on the community.
“It’s going to seriously disrupt our daily life,” says Marcos Bruno Raimundo, who lives in a rural area of Caldas and feels a deep affection for the surrounding hills.
The mining companies say they will take every precaution to mitigate environmental impacts, but not everyone is convinced. And the thought of foreign governments’ interests dictating these projects causes concern for people like Edna Leite, a Poços de Caldas local and NGO worker.
“Donald Trump has his eye on rare earths because he needs to keep up arms production. They’re going to make weapons with these rare earths,” she says.
President Lula might be doubling down on his defense of Brazil’s national sovereignty in reaction to U.S. interest in rare earths, but “I’m still not seeing sovereignty in the sense of giving a voice or listening to the region,” says Mr. Tygel. He wants the community to be given more of a say over the terms of the mining projects.
“We’re at the center of a geopolitical dispute,” he says. It echoes Brazil’s uranium-mining bust, when it was pressured by the U.S. to drop its burgeoning nuclear program during the Cold War.
Amid the buzz around rare earths, the Brazilian government has promised to soon present a national policy for strategic minerals, which could include investment strategies and specific rules for exploiting these resources.
Right now, says Dr. Puppim, there is a vacuum in national and international regulations which leaves the rare earths supply chain vulnerable to the whims of powerful nations. But Brazil could create an opportunity out of these geopolitical tensions, he says, and with time develop an industry to rival China’s.
