Government announces New Regulatory Framework for the Mining Sector

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The announcement was made in a ceremony at the Presidential Palace, in Brasilia.

Government expects to raise investments in sector with the measure.

 

Fábio Amato e Priscilla Mendes of G1, in Brasilia

The federal government announces on this Tuesday 18th, the New Regulatory Framework for the Mining sector, a set of rules that, by the government’s vision, should facilitate the investments turned to the exploration of mineral resources in the country.

This is another set by the government to increase the internal investment and boost the brazilian economy to combat the effects of international crysis. Since last year, the government has announced plans for several sectors, like roads, rails, ports and airports.

Besides modernizing the rules for the mineral sector, the New Framework provides for changes in the collection of the financial compensation for exploiting mineral resources (CFEM) that should double the government revenues with this tax that, only in the last year, has earned $900 million to the public coffers.

Concession

In presentation to businessmen and journalists at the Presidential Palace, the Minister of Mines and Energy, Edison Lobão, has detailed the Regulatory Framework.  Among the changes is the creation of competitive bidding for concession of rights.

“The measure’s objective is to allow competition”, says Lobão. According to him, the concession will be for a period of 40 years, renewed successively every 20 years, and will be applicable for both exploration and exploitation. Today, the interested parties request authorization to explorate an area and, finding the mineral, require an exploitation permit for unlimited time by the Ministry.

According to the Minister, for the exploitation of mineral water and ores linked to civil construction, like clay, the competitive bidding won’t be necessary.

The New Regulatory Framework establishes, however, the obligation by the holder of the concession to invest in the area under concession, at the risk of having the exploitation permit’s renewal denied. This investment will depend of the area and the type of the ore.

The bid rounds will be defined by the Mineral Policies National Counsel (CNPM), body created by the New Framework to assist the President in the definition of public policies for the sector. It is the the CNPM, therefore, that will define the areas carried to bidding.

But the New Framework also provides for public calls that will show the interest by companies in the exploitation of an area not considered in the CNPM plans.

Tax calculation

Lobão has also announced changes in the financial compensation for exploiting mineral resources (CFEM) calculation, paid by the miner for the mining activity. The rate, that goes today from 0% to 3% depending of the type of ore mined, will have a new ceiling from now on: 4%.

Another change is that the rate, which is applicable to the net billings of companies today, will be applicable to the gross billings after the taxes are paid, increasing the tax revenues.

“This (the change on the CFEM calculation basis) will increase the income of the states and cities. It will probably double the tax revenue”, says the president, Dilma Roussef, during the ceremony to present the New Regulatory Framework. In the last year, the CFEM has earned $900 million.

O novo marco não alterou, porém, o modelo de partilha dos valores arrecadados via Cfem. A maior parte (65%) vai ficar com os municípios onde a exploração é feita. Outros 23% vão para estados e 12% para a União.

The new framework, however, has not changed the model of sharing the values earned by CFEM. Tem biggest part (65%) will be kept for the cities where the exploitation take place. Another 23% will go for the states and 12% for the Union.

The government, however, gave up of instituting in the mining sector the collection of the so-called special participation. Valid today in the exploitation of oil, the special participation guarantees extra amounts to the government in very profitable oil wells.
Definition of new rates

Lobão said that the government will submit the New Framework for discussion in the Congress in the form of legislative bill, requiring urgency in the procedure. It is a roll back by the government after the great difficulty to approve, on the last month, the New Regulatory Framework for the port sector.

Only after the bill is approved and transformed in Law, the new rates of CFEM will be defined for each type of ore under exploitation in the country. Tem minister has advanced, however, that the tendency is to double, from 2% to 4%, the tax-rates of the iron ore, which represents at least 75% of all exploitation in the country.

Another rate that should double, according to him, is the gold’s, today in 1%. Lobão said that these new rates will be defined by presidential decree.

 

According to the Minister, the country has over 8 thousand mines today, of which about 7 thousand are under exploitation and the rest are idle. The current legislation already provides for the government to take back the idle mines, but he admits this requirement is not met. He says, however, that the government will be “more rigorous.” “

 

Source: <http://g1.globo.com/economia/noticia/2013/06/governo-anuncia-novo-marco-regulatorio-para-o-setor-de-mineracao.html> (freely translated)

 

The Sion Advogados’s partners, as well as great part of the mining sector, are in Brasilia carefully following the matter.

 

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