BRAZIL - MINING REGULATION
The Federative Republic of Brazil is a union of twenty-seven federal units (twenty-six states and one federal district). Brazil is the largest country in South America and the 5th largest in the world. It borders virtually all of the other South American counties, except Ecuador and Chile, physically dominating the continent from the center to the north and east and has the visual appearance of pushing its smaller neighbours towards the Pacific Ocean. It is the only Portuguese speaking country in Latin America and, in relation to Portugal, shares a somewhat similar status to that of the United State of America where the colonized have become larger, stronger and more successful than the colonizer itself. According to World Bank statistics Brazil has the 7th largest economy in the world by GDP, the largest in South America.
Brazil is geographically and geologically diverse and also encompasses a number of oceanic archipelagos, such as Fernando de Noronha, Rocas Atoll, Saint Peter and Paul Rocks, Trindade and Martim Vaz. The country has some extremely rich mineral deposits and is a major world producer of iron ore, bauxite, kaolin, niobium and gemstones. In the case of niobium and gemstones, Brazil produces the vast majority of the world's supply of these minerals. Gems include aquamarines, topazes, amethysts, tourmalines and emeralds. The country also produces coal, tin, manganese, aluminum, gold, copper, nickel, cobalt, diamonds, titanium minerals, fluorspar, potash, phosphate, zinc and lead.
PRINCIPAL LEGISLATION AND REGULATOR
Pursuant to Article 176 of the Constitution, mineral deposits belong to the state and only the federal government has the authority to legislate in this area. The main legislation governing the resource sector includes the Brazilian Mining Code (Decree 227/1967), which is currently under review (as amended by Law 9314/1996); Law 7805 on gold mining and the Gold Mining Statute (Law 11685); and various ordinances. There are three government bodies in charge of the administration of the mining industry, namely, the National Department of Mineral Production (DNPM), which is responsible for granting exploration authorizations, the Ministry of Mines and Energy, which is responsible for the issuance of mining concessions, and the Secretariat of Geology and Mines, which is in charge of general mining policies and coordination.
GRANT AND FORMS OF MINERAL TITLE
Minerals rights are granted by means of exploration permits and mining concessions, however, other minerals such as gravel, clay and stone, which are considered construction materials, are subject to other forms of licensing.
- Aerial Survey Consent: Mining companies may carry out aerial prospecting activities for a period of 90 days and will have a priority right over the researched area (Art. 91).
- Exploration Authorization (Autorização de Pesquisa): Exploration Licences are granted on a “first come, first served” basis, provided that the application concerns open land and a qualified Brazilian geologist has endorsed the proposed exploration plan and budget. In this respect, Brazil has found a means of screening applicants (those capable of engaging a geologist and outlining reasonable technical plans) without offending the principle of first come, first served. The authorization grants an exclusive right to explore over licenced land. An exploration authorization shall not be less than one year, nor more than three years, at the discretion of the DNPM; it may be extended once, at the discretion of the DNPM, if exploration completed to date justifies further exploration work. Upon completion of exploration work, the titleholder must submit to the DNPM a final report outlining the existence of any mineral deposits and, where applicable, a feasibility study justifying a mining concession. The maximum area of an exploration licence may vary from 50 hectares to 10,000 hectares, depending on the mineral to be explored and the area within Brazil where exploration will take place. The licence is granted in respect of particular minerals. Exploration licences may be transferred (in whole or in part) to Brazilian individuals and legal entities incorporated in Brazil, subject to the prior approval of the DNPM. The exploration authorization does not provide any assurance of a mining concession; rather, at the end of the exploration period the DNPM will consider the final report on work completed and decide to approve the report or dismiss the report. If the report is approved, the titleholder will have one year in which to apply for a mining concession.
- Mining concessions (Concessão de Lavra): According to Article 38.1, only legal entities are allowed to request a mining concession. A mining concession is granted through an ordinance of the Ministry of Mines and Energy and confers the exclusive right to mine, as well as the right of ingress to and egress from the property, and rights over adjacent lands for mining operations. Mining concessions are valid until depletion of the mineral deposit. Mining concessions may be transferred to legal entities incorporated in Brazil, as long as the transferee demonstrates technical and financial capability to the DNPM. The transfer is subject to the approval of and registration by the DNPM. (It should be noted that special rules apply where the mineral deposit is located within 150 kilometres of the Brazilian border, particularly in terms of Brazilian majority ownership requirements.)
An artisanal authorisation is also available, provided the prior approval of the landowner has been obtained, where applicable (Art. 74). The permit is granted by the DNPM for five years that may be renewed (Art. 5, Law 7805/1989). Minerals that can be mined through such an authorisation include gold, diamonds and gems.
An applicant for a mining concession must prepare a baseline study and submit to an environmental impact assessment process. This involves a three-stage process whereby terms of reference are approved and public consultation takes place, an installation licence is granted and finally an operation licence is granted. The holder of a mining concession must commence development within 180 days from the grant of the concession, subject to obtaining all required environmental licences and authorizations (Art. 47). Once commenced, development and mining activities cannot cease for more than six months without the prior approval of the DNPM. The DNPM must approve all mine plans and the operator must adhere to the plan. An annual plan must be filed in respect of production and other information.
No exploration or mining activities can be carried out without the payment of compensation to a landowner (Art. 62). Where agreement cannot be reached by the parties, either party may apply to the Court to have compensation determined. During mining, landowners are entitled to compensation based on a royalty (essentially a Net Smelter Returns royalty), which is also payable to the government. Royalty rates vary from 0.2% to 3%, depending on the mineral, and for landowners the rate is 50% of the government rate. For most minerals the rate is 2%.
See Brazil – Environmental Regulation.