Engineering & Mining Journal

AUG 2013

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BRAZILIAN MINING LAWS in charge of regulating, managing and inspecting the sector, creating the rules to be followed and standards to be met, promoting public auctions for the areas with mineral deposits, and imposing penalties. Furthermore, as part of the sector's intended modernization, the Law Project alters the mining concession system. If the text is not changed by the Congress, the priority claim principle (the first to claim an area has the right to explore and exploit it), on which the current system is based, will be replaced by different types of public auctions. The CNPM will specify which areas shall be granted by means of an auction, the other areas then being granted through a simpler procedure named public call ("chamada pública"). Both auctions and public calls shall be conducted by the ANM and cases where one or another will apply are yet to be fully defined, but there is a general sense that areas containing large mineral deposits or minerals considered strategic by the government will be submitted to auctions. Foreign companies may take part in either procedure through their Brazilian subsidiaries. 60 E&MJ; • AUGUST 2013 Auctions shall be triggered by invitations to bid specifying the areas in which they will apply, containing the draft concession contract, and the minimum parameters for a bid to be submitted, including level of local content and guaranties to be placed by bidders. Payment of fees to the government (signature bonus, discovery bonus and participation in the exploitation earnings) may also be stipulated as bidding parameters. Public calls may be triggered by the ANM through a calling instrument containing the characteristics of the area, a draft of the concession contract, and the parameters for the bids. In addition, any interested party may request the start of a public call in relation to a given available area not set aside by the government for public auctions. The validity term of concession contracts shall be up to 40 years, renewable for successive periods of 20 years. According to the Law Project, there shall be only three categories of mining tenements: concessions, authorizations and permissions. Concessions shall embody both exploration and exploitation phases. Authorizations shall refer to minerals used in civil construction, mineral water, decorative stones and minerals used in the production of fertilizers, formalized through adhesion contracts with a renewable validity term of 10 years. The Law Project mentions permissions, which apply only to prospectors' cooperatives and are defined in an existing law. In addition to the CFEM and other fees stipulated in the invitations to bid, mining companies shall also have to pay annual inspection fees and occupation fees (calculated with a basis on the area occupied), as well as royalties to the land owners (20% of the amounts paid as CFEM). Generally speaking, there is a sense that the production cost will increase. While the new system is supposed to be easier to handle and more transparent, the government shows every sign of its intention to be more rigorous in the regulation of the sector, including from the antitrust standpoint. As the Law Project is yet to be voted on, the market will follow the discussions in Congress in an attempt to anticipate the actual impact its final wording will have on the sector. Barros da Cunha is a partner with Siqueira Castro, a Brazilian law firm that specializes in mining. (www.siqueiracastro.com.br) www.e-mj.com

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