Brazil unveils mining bill to cut speculation

Brazil on Tuesday proposed legislation that would improve regulatory oversight and reduce the life span of mining concessions in an effort to discourage speculation in mineral properties.

“We are stimulating exploration and production in Brazil,” Mines and Energy Minister Edison Lobao told reporters at the presentation of the bill.

“We don’t want to persecute anybody or upset the sector … we simply want to modernize it,” Lobao said, adding that the existing mineral law dated back to 1967 and parts of it to 1934.

He added the government would not, for now, hike royalties to assure Brazil’s competitiveness as a mineral exporter.

“This bill will not suffocate the miners,” he said, adding that companies already faced a steep tax burden.

“We need to keep the sector competitive,” Lobao said.

The issue of royalties was still subject to debate within the government, added Mauro Henrique Moreira, the ministry’s legal advisor.

The proposed changes would give companies a maximum of five years to explore areas, changing the current practice that allows companies to hold concessions for decades and resell them at a profit without actually developing the properties.

It would also limit licenses to produce minerals to 35 years.

Lobao said of 150,000 properties under concession, only 50,000 are actually being developed.

The government will have the right to rescind concessions if companies do not develop them on time, Lobao said, adding it would always act within the law. The proposal would also restrict individuals from holding concessions for most types of minerals.

The bill would also set up an independent industry regulator to replace the existing mines oversight agency.

Lobao said a number of proposals are still under discussion. A state-run fertilizer company that would explore and possibly produce could be created by a separate law, he said.

Investors are expected to commit $50 billion to $60 billion by 2012 or 2013 to mining operations in Brazil, a major iron ore exporter that is seeking to boost production of other metals such as copper, nickel and manganese.

The head of the industry group Ibram, Paulo Camilo, said a strong regulator would benefit the sector as a whole but that time restrictions on prospecting and mineral production were counter-productive.

“Mining is already a risky business, tighter deadlines don’t help,” he told Reuters by phone from a mining conference in Canada.

Officials last year floated an idea to levy an export tax on iron ore amid tensions between the government and Vale, the world’s largest producer of iron ore, that subsided once Vale agreed to hike investments in Brazil.

Government sources later told Reuters the proposal had been meant to pressure Vale to increase its investments.

The government has a majority in Congress but the bill’s approval this year is uncertain. The legislative agenda is already packed, and the beginning of the soccer World Cup in June and subsequent campaigning for the Oct. 3 general elections will slow Congress down, analysts said.