BRAZIL’S mining sector is passing through a period of major change with a number of legal, economic and cultural shifts set to shake up the character of the local industry.
First and foremost is the ongoing overhaul of Brazil´s mining code, with the existing 36-year-old legislation set to be replaced in a bid to “modernise the sector”, in the words of President Dilma Rousseff.
Almost four years in the making and still not even close to coming into effect, the code has taken significantly longer to be developed than initially expected and, with key changes to directly affect the profitability and risk levels of projects, the delay has put a tangible dampener on investment in the sector – with many decision makers waiting to see what happens.
The main changes to the existing code involve three aspects: higher royalties on selected commodities; new processes for the concession of mining titles; and the creation of a new regulatory agency for the industry.
While royalties for some key categories look set to rise considerably, the new levels remain within reasonable limits compared to other key mining countries.
It is the change to the concession process that has been the most contentious issue, with strong criticism of the government’s initial proposal to introduce compulsory auctions for almost all new concessions – a measure brought across from the oil and gas sector with little regard for the unique and significantly more diffuse nature of the mining industry.
While the government has argued that this will increase competition and stop opportunists from locking up areas for years on end, the main wave of opposition has focused on how such an approach would stifle exploration and geological research – and therefore the potential for new projects – by removing the first-mover advantage that gives smaller players the security to invest in new prospects and opportunities.
As it stands, a strong campaign from exploration-focused groups looks set to result in a watered-down version of the initial plans, featuring the first-mover advantage retained in a range of situations, accompanied by more rigorous rules concerning the development of mining concessions – essentially a “use it or lose it” provision to discourage pure speculators.
Whatever the final framework, implementation of the new code is still a way off, with the latest version likely to be approved by Brazil´s lower house in December.
Under the best-case scenario, the Senate would sign off by the end of the first quarter of 2014, which would see the changes take effect around the end of Q3 2014 (180 days later), just before the next presidential election.
Worst case could see the October balloting push the new code´s commencement well into 2015.
Simon Tarmo is the Brazilian general manager for Aspermont Limited, publisher of MiningNews.net and NoticiasdeMineracao.com – our Brazil-based Portuguese language mining news service.
Almost four years in the making and still not even close to coming into effect, the code has taken significantly longer to be developed than initially expected and, with key changes to directly affect the profitability and risk levels of projects, the delay has put a tangible dampener on investment in the sector – with many decision makers waiting to see what happens.
The main changes to the existing code involve three aspects: higher royalties on selected commodities; new processes for the concession of mining titles; and the creation of a new regulatory agency for the industry.
While royalties for some key categories look set to rise considerably, the new levels remain within reasonable limits compared to other key mining countries.
It is the change to the concession process that has been the most contentious issue, with strong criticism of the government’s initial proposal to introduce compulsory auctions for almost all new concessions – a measure brought across from the oil and gas sector with little regard for the unique and significantly more diffuse nature of the mining industry.
While the government has argued that this will increase competition and stop opportunists from locking up areas for years on end, the main wave of opposition has focused on how such an approach would stifle exploration and geological research – and therefore the potential for new projects – by removing the first-mover advantage that gives smaller players the security to invest in new prospects and opportunities.
As it stands, a strong campaign from exploration-focused groups looks set to result in a watered-down version of the initial plans, featuring the first-mover advantage retained in a range of situations, accompanied by more rigorous rules concerning the development of mining concessions – essentially a “use it or lose it” provision to discourage pure speculators.
Whatever the final framework, implementation of the new code is still a way off, with the latest version likely to be approved by Brazil´s lower house in December.
Under the best-case scenario, the Senate would sign off by the end of the first quarter of 2014, which would see the changes take effect around the end of Q3 2014 (180 days later), just before the next presidential election.
Worst case could see the October balloting push the new code´s commencement well into 2015.
Simon Tarmo is the Brazilian general manager for Aspermont Limited, publisher of MiningNews.net and NoticiasdeMineracao.com – our Brazil-based Portuguese language mining news service.