ASX explorers watch closely as Brazil scrambles to defuse US trade tensions

ASX explorers are on alert as US-Brazil trade clash looks to threaten investor confidence, here’s what some of the companies operating in the region have to say.

Brazil’s trade standoff with the US draws close attention from ASX critical mineral explorers in the country. Pic: Getty Images

• Brazil seeks relief measures as 50% import tariff looms 

• If it happens, the move signifies a near-term blow to Brazil’s mining sector amid its rise as an alternative to China for critical minerals

• Here's what some ASX explorers operating in the country have to say 

Brazil’s Lula administration is planning relief measures for companies impacted by a 50% import tariff imposed by the US, as the country’s Finance Minister Fernando Haddad warns the measure could harm more than 10,000 local businesses.

Set to take effect on August 6, Trump’s latest move on the South American nation - a significant trading partner for the US and Latin America's largest economy - was reportedly made in response to trade deals classified by the White House as ‘unfair’ and ‘far from reciprocal’, with the new rate reflecting a massive jump to the 10% figure initially proposed.

The Trump administration has also expressed anger toward the trial of former Brazilian president Jair Bolsonaro, who has been charged with trying to overturn his 2022 election loss.

While it’s unclear if the tariff will have a direct impact on ore produced by companies in the mining sector, it will no doubt play a part in discouraging foreign investment, adding upward inflation pressure and potentially weakening the real.

It also represents a material short-term headwind for Brazil’s resources and mining sector, which is currently viewed by countries around the world as a safe alternative supply hub to China’s stranglehold on critical minerals.

The Middle Kingdom controls ~70% of rare earth mining and ~90% of rare earth processing while Brazil holds the world’s third largest reserves of rare earths at 21Mt.

But although China is the only country with a fully vertical integrated rare earth supply chain, Brazil is starting to show promise in this area too.

Mining companies are forming partnerships with domestic and international groups to build magnet capabilities, just like St George Mining (ASX:SGQ) has done with MagBras.

St George targets REE magnet production

MagBras is a public-private initiative focused on developing rare earth magnet production in Brazil.

It is backed by the National Service for Industrial Training (SENAI), funded by the Minas Gerais Research Development Foundation (Fundep) and managed by the Federation of the Industries of Minas Gerais (FIEMG).

St George is collaborating with MagBras on research, development and production of rare earth magnets with the potential to supply high-grade material from its 40.6Mt at 4.13% total rare earth oxide (TREO) Araxa project.

Along with rare earths, the Araxa project holds substantial niobium exposure, with historical drilling outlining high-grade zones grading up to 8% (80,000ppm) niobium pentoxide.

The versatile metal is used primarily in steel making, superconductivity and high-performance alloys, which enhances the strength and corrosion resistance of steel, making it crucial for infrastructure like pipelines and construction.

Niobium-based superconductors are vital for MRI machines, maglev trains and can be found in rocket engine nozzles as well as other aerospace components.

SGQ managing director John Prineas told Stockhead the company was the only ASX-listed junior explorer in Brazil to have defined JORC resources for rare earths and niobium, with these unprecedented market developments underpinning its potential to deliver sustained value from Araxa.

Brazil gains ground as critical minerals hub

Even if the US has yet to decide on pursuing a trade agreement with Brazil, such a move could open the door to negotiations and jumpstart talks to reduce current tariff disputes.

The US currently accounts for 4% of Brazil’s mineral purchases and ranks as the 12^th largest importer of minerals from the country by volume.

Mining projects require substantial investment and long development timelines, leaving them especially vulnerable to sudden shifts in trade policy or market conditions.

A significant tariff could prompt companies to reassess the financial feasibility of current projects or delay new ventures in favour of markets with more predictable regulatory environments.

Verity Resources (ASX:VRL), owners of the Pimenta and Caldera rare earth assets in northern Minas Gerais, Brazil, believes the country is rapidly emerging as a critical frontier in the global race for critical minerals as Western nations seek to diversify away from China.

“The current US-Brazil trade talks only underscore the urgency to develop transparent, geopolitically aligned non-China supply chains,” VRL non-executive director Patrick Volpe said.

“Verity’s Pimenta REE-gallium-titanium and Caldera REE projects are well-positioned within this strategic context to support long-term, secure sourcing of these essential metals.”

The company is planning a maiden auger drill program at its Pimenta project, focusing on a 20km high-grade rare earths-gallium-titanium zone.

Drilling will follow recent reconnaissance work, which delivered up to 25,817ppm total rare earth oxide (TREO), with an average of 25% high value magnet rare earths (MREO) over 147 samples.

ASX explorers double down on critical minerals 

Axel REE (ASX:AXL) operates the Caladão project, also in the prolific mining province of Minas Gerais, where mineralisation is found within a thick regolith profile, rich in clay minerals such as REEs and gallium.

Existing exploration at Caladão covers just 20% of the total 430km2 project area, offering plenty of potential for further discoveries.

Auger drilling results have reinforced the asset’s status as a key non-Chinese gallium project with Area B standing out as a high-potential target for a large, high-grade resource.

Axel REE non-executive director Paul Dickson said Brazil’s strategic importance in the global critical minerals landscape was growing and its Caladão project was uniquely positioned to contribute to this shift.

“With a mineral resource estimate for gallium on the horizon, Caladão could play a key role in reshaping the non-China gallium supply chain at a time when alternative sources are urgently needed,” he said.

Another early-stage explorer in the area is Australian Mines (ASX:AUZ) with its Jequie rare earths-niobium project.

Recent auger drilling has revealed REE mineralisation across near-surface areas, indicating the potential for ionic-clay hosted deposits.

A total of 16 holes for 157.1m were drilled over the Jequie South target, while another 45 were collected for assaying.

About 69% of the samples returned total rare earth oxide (TREO) assays greater than 400ppm.

Over at the Jequie North target, 56 holes were drilled for 343.5m, intersecting anomalous intervals of REE mineralisation over a wide area – resulting in the best intersection to date of 9m at 1028ppm TREO.

About 55% of the assays returned TREO values greater than 400ppm.

Going forward, Australian Mines intends to complete additional exploration programs at Jequie (North and South) which may comprise geological mapping, geochemical sampling and auger drilling.

Potential risks

Brazilian Critical Minerals (ASX:BCM) is in the midst of advancing multiple work streams at its Ema project in the state of Amazonas, aimed at designing, permitting and financing the asset.

The explorer has appointed lead consultants ANSTO and WSP to advance the project through detailed feasibility studies.

Ema is the only rare earths in-situ recovery development of its kind in the Western World with a capital cost of just US$55m, positioning it as potentially the lowest-cost, near-term source of rare earth feedstock under current market conditions.

BCM managing director Andrew Reid said whilst unclear if the 50% tariff coversed rare earth products, the implications – if true – would be far reaching given the geopolitical uncertainty.

“Brazil is poised to accelerate its development of projects, which could rapidly aid in the establishment of an ex-China supply network,” he said.

“These tariffs would force US buyers to pivot to other suppliers or domestic sources, inflating global cost curves.

“Brazilian projects with US financial backing could face financing and market-access risks, possibly slowing execution timelines,” Reid added.

“All of this could case global rare earth price volatility to rise, increasing costs for all sectors heavily dependent on rare earths.”

At Stockhead, we tell it like it is. While St George Mining, Verity Resources, Axel REE, Australian Mines and Brazilian Critical Minerals are Stockhead advertisers, they did not sponsor this article.

Originally published as ASX explorers watch closely as Brazil scrambles to defuse US trade tensions