Brazil’s Mining Code: Under Discussion The Future of Brazil’s Rare Earth Metals Q&A: Gustavo de Lima, Furriela Advogados Exploration & Corporate News
BRAZIL EXPLORATION BRIEFING Vol 4 • June 2013
GRINDING INTO MOTION Recent history reminds us to approach reports of a reform in Brazil’s mining code in June with healthy skepticism. However, there have been positive signs: a number of new mining licenses were granted for the first time since the end of 2011, and Brazil’s congress passed the equally controversial ports bill. “A galinha do vizinho é sempre mais gorda” (“the neighbor’s hen is always fatter”) is the Brazilian equivalent to “the grass is always greener.” For the Brazilian mining industry, the recent successful auction of oil and gas exploration blocks in the country only serves to reinforce the inefficiencies and uncertainties affecting their own sector. On May 14, participants in the 11th auction round of the National Petroleum Agency (ANP) gathered at the Royal Tulip hotel in Rio de Janeiro. 64 local and international companies bid for 289 exploration blocks spread over eleven of Brazil’s onshore and offshore sedimentary basins. The auctions raised $1.3 billion for the government, with a minimum $3.2 billion investment expected on the blocks in coming years. State owned firm Petrobras won the most bids, but local firms such as Eike Batista´s OGX and international majors including BG Group and ExxonMobil also picked up properties. Edison Lobão, Minister of Mines and Energy, hailed the round as the most successful in the ACP´s history and forecast that Brazil would be self-sufficient in oil within two years. Mining companies generally resist the idea that successful reforms made in the hydrocarbons sector–and the auctioning of blocks in particular–can be easily transposed to the minerals realm. However, the efficiency, transparency and clear investment framework embedded in Brazil´s hydrocarbons industry highlights the current uncertainties and doubts that cripple investment in the mining sector. A
/mining.leaders
reform of the mining code, under discussion since 2009, was delayed once again this May–as senators debated reform of the nation´s ports–another controversial issue. IBRAM, the national mining association, estimates that $20 billion worth of mining investment has been postponed while the exact form of the mining bill remains unknown. Following the passing of the ports legislation, it was widely anticipated that the mining bill would be next on the agenda for Brazilian congress, with a draft expected to go to the vote in June. However,
The passing of the ports bill is cause for celebration for Brazilian iron ore and bulk commodity producers.
@miningleaders
intense debate over the ports bill led to a split in President Dilma Rousseff´s 18-party coalition, and in the weeks since media reports have suggested that she may wait until 2014– the first year of her potential second term–before addressing mining reform to avoid further fractures in the coalition before her reelection campaign. This would be a disastrous outcome for the country´s miners. PORTS IN THE STORM: Despite its potential effect on the timing of the mining bill, the passing of the ports bill is cause for celebration for Brazil´s iron ore and bulk commodity producers. With mineral and agricultural exports forecast to quadruple to nearly one billion tons by 2013, the country´s 34 major ports are in need of investment, expansion, and an overhaul in procedures. Individual aspects of the bill could yet be subject to a presidential veto;
BRAZIL EXPLORATION BRIEFING Vol 4 • June 2013
1