Reform Of The Brazilian Mining Sector – Key Aspects

Author:Mr Christian Galvão Davies and Isaac Cattan
Profession:Levy & Salomão Advogados

On 7/25/2017, President Michel Temer approved 3 Provisional Measures (PMs) to reform the Brazilian mining sector: (i) PM No. 789, which alters the regime of the Financial Compensation for Exploitation of Mineral Resources (Compensação Financeira pela Exploração de Recursos Minerais - CFEM); (ii) PM No. 790, which amends several provisions of Decree-Law No. 227, of 2/28/1967 (the so-called Brazilian Mining Code); and (iii) PM No. 791, which replaces the National Department of Mineral Production (Departamento Nacional de Produção Mineral - DNPM), with the newly formed Mining National Agency (Agência Nacional de Mineração - ANM)1.

The reform has a positive intent of modernizing the Brazilian mining legal framework, by establishing that reports on mineral research and the determination of reserves in mineral deposits shall comply with internationally adopted criteria, and by increasing the independence and supervision prerogatives of the Brazilian mining regulator, including with respect to compliance by the miner of environmental laws. On the other hand, the new PMs have the downside of increasing the tax burden and other costs applicable to mining activities. The key aspects of the Brazilian mining reform are set out below.

Mining Regimes

PM No. 790 has maintained the regimes set forth in the Brazilian Mining Code for the research and exploitation of mineral resources. The mining concession (concessão de lavra) is the regime applicable to the exploitation of most minerals in Brazil and is preceded by a research authorization (autorização de pesquisa)2.

As a general rule, the party interested in exploiting mineral resources in Brazil will first apply to the ANM for a research authorization for a certain area and a given term. The ANM will deny or impose amendments to the application if the relevant area is already covered in whole or in part by existing mining rights. Once the interested party obtains the research authorization, performs the mineral research and obtains ANM approval of a final research report presented within the term of the research authorization demonstrating to ANM that the economic exploitation of the required mineral in the applicable area is viable, a mining concession may be requested to the Minister of Mines and Energy. The minimum term of the research authorization was increased from 1 to 2 years under the reform. Such term is extendable only once, upon demonstration to ANM that reasonable research has been performed...

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