Brazil to create mining regulator, limit terms

Tue Sep 9, 2008 11:01am EDT
SAO PAULO, Sept 9 (Reuters) - Brazil plans to create a new regulatory agency for the mining sector that will likely raise royalties, impose concessionary term limits and define companies' management and use of mineral resources, a local newspaper reported on Tuesday.
The director general of National Department of Mineral Production, Miguel Nery, said, "We are defending that the state has more powers and mechanisms to exercise them without implying a break with the constitutional bases," in the Gazeta Mercantil financial daily.
Nery added that his department has submitted the project to Mines and Energy Minister Edison Lobao but offered no more details. The ministry declined to comment on the report.
The paper also cited governors from Minas Gerais and Para, two important mining states, who are in favor of the mining reform and are involved in the process of setting new guidelines for sector.
The regulatory reforms would likely create an agency in the spirit of the National Petroleum Agency (ANP) governing the oil and gas sector in Brazil, which requires concession holders to publish geological data, define exploration and development schedules and pay royalties on productive fields.
The regulatory reform for the mining sector will likely also raise royalties paid on productive mines and redistribute how royalties are used, the paper said.
"I think the current system is absurd as Brazil is the country that has the lowest royalties for mineral exploration," said Para Governor Ana Julia Carepa, whose state has large iron ore deposits including Vale's (RIO.N: Quote, Profile, Research, Stock Buzz)(VALE5.SA: Quote, Profile, Research, Stock Buzz) large Carajas mine.
Support from governors is important for getting new legislation passed in Congress due to their sway of state representatives and senators.
Today, companies holding rights to explore mining resources in Brazil can hold the concession indefinitely.
Concession holders of phosphate and potassium deposits, which if developed would reduce the country's need to import fertilizers, have come under fire recently in the government for not developing the mines. Minister Lobao has threatened on several occasions to strip the companies of their concessions if they fail to develop them.
"The law today does not provide effective mechanisms to stop companies from sitting on top of areas perpetually," the paper cited an unnamed member of the group proposing the regulatory reform as saying. (Reporting by Reese Ewing, editing by Matthew Lewis)