Brazil’s Mining Code: Avoiding an Apagão Pará on the Rise: A Talk with David Leal Exploration & Corporate News
BRAZIL EXPLORATION BRIEFING Vol 6 • September 2013
Lights Out for Explorers? Brasília finally sent its long-anticipated and long-delayed new mining code to Congress for approval in June. Initial concerns focused on how the draft bill would impact Brazil’s big iron ore exporters. However, a closer look at the bill’s fine print reveals that it may be junior explorers who find themselves hardest-hit by the new regulations. When Brazil’s new mining code was proposed in June, the media focused on how the new royalty would affect the country’s massive iron ore export industry. But with ore prices remaining high and the state promising major investments in rail infrastructure, the focus of debate has now turned to the bill’s impact on explorers. The introduction of an auction system for prospective areas and the bulkingup of the national geological service has led to fears that the private sector could be pushed out of exploration, with potentially disastrous results for the wider mining industry in Brazil. Elmer Salomão, president of the Brazilian Mineral Exploration Association (ABPM), has warned that the country risks facing an exploration apagão—a blackout—if the mining code is approved in its current form. The exploration sector is the lifeblood of the global mining industry. As existing mines are depleted, new discoveries are needed to replenish reserves. In the last decade the majors have reduced their exploration focus, relying instead on junior firms to take the risks needed to make big discoveries. The odds are stacked against firms discovering a commercial project—some say only one in a thousand prospects results in a mine—so firms expect hefty rewards when they hit a major deposit. At present, Brazil’s mineral resources remain the property of the state, but the discoverer has the right to stake the claim and, by acquiring a mining license, extract and commercialize the deposit, subject to taxation. More often, the successful explorer will sell the project on to a major for a hefty sum.
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Brazil’s new mining code looks set to radically change this dynamic, with public auctions set to be introduced for exploration permits. There is still considerable confusion, apparently even among government bodies, about which areas of the country will go to the block. An original version of the bill suggested that the soon-to-be-established National Mining Agency would identify “strategic areas” with high potential for phosphate, copper, and rare
Elmer Salomão, president of the Brazilian Mineral Exploration Association (ABPM), has warned that the country risks facing an exploration apagão—a blackout— if the mining code is approved in its current form.
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earths deposits, and that these titles would be subject to auction. However, in a June interview with Reuters, Manoel Barretto, president of the Geological Survey of Brazil (CPRM) suggested that all exploration titles, excluding those already held by companies, could be subject to auction. The CPRM itself has been significantly bulked-up in preparation for a more central role. Local business daily Valor Econômico reported that the organization has seen its budget grow to R$468 million for 2013, with 355 analysts, geologists, and technicians expected to be hired in the coming months. The Ministry of Mines and Energy has stated that by the end of 2014 an additional 900 square kilometers of Brazilian territory will be geologically mapped, with an additional 1.4 million square kilometers subjected to aerial geophysics studies. However, it is doubtful that building a bigger databank of geological maps will further
BRAZIL EXPLORATION BRIEFING Vol 6 • September 2013
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