Brasilian The government of Luiz Inácio Lula da Silva (PT) is studying changing the legal framework of mining to force companies in the sector to actually exploit their productive units.
The diagnosis is that there are thousands of mines inactive throughout the country and that the measure under consideration could mobilize a volume of resources in the national economy comparable to Petrobras’ annual investments.
The subject is of great interest to Lula, who accuses the sector of not exploiting the mines and only taking advantage of selling rights to the units.According to numbers gathered by the government and obtained by Folha, 25% of the more than 14,000 mining concessions granted to companies are stalled, either due to lack of start of exploitation or due to activities suspension.
The government’s movement towards the new rules has as one of its main targets the Brazilian company Vale, but companies like the Australian BHP Billiton and the Anglo-Australian Rio Tinto are also mentioned in the discussions, according to reports heard by Folha.
Iron ore mining at the Brucutu mine, in São Gonçalo do Rio Abaixo (MG) 90 km from Belo Horizonte – Ricardo Teles/Divulgação/Vale”What we want is for Vale to have more responsibility.
[There is] a number of mines in Vale’s hands that it has not exploited for over 30 years and it operates as if it were the owner and sells.
Vale, lately, is selling more assets than producing iron ore,” said Lula less than two months ago to journalist Kennedy Alencar, without giving details.The study on the mineral exploration situation in the country has been conducted by the Lula government since last year.
The analysis involves the ministries led by Fernando Haddad (Finance) and Alexandre Silveira (Mines and Energy) and indicates that a large portion of mines enter a paralysis scenario even before the start of exploitation.
According to the government’s survey, units with delayed start of activity are in this situation for an average of ten years; those with suspended activities, for an average of 12 years.To change the situation, the government is considering tightening the rules, which may involve changes in legislation.
However, it is also studying a solution that does not require legal changes, as there is a view that the current framework contains tools for proper exploitation.
Among the first alternatives analyzed are adjustments for stricter deadlines for companies to extend the research phase (which precedes exploitation) or to temporarily suspend activities.
If these limits are not met, there is the possibility of moving more firmly towards the extinction of the mining rights of the unit.Another point being studied is to increase the so-called annual per hectare fee (APHF) –the amount that the company pays during the first phase of the process, the research authorization, until the delivery of a final report on the unit’s feasibility.
The increase in values, which can even be progressive over time, would discourage what is seen as intentional and speculative retention of areas.In the government’s view, the paralysis situation may also contravene several legal provisions aimed at preserving free competition.
The legislation provides for violations of economic order when, for example, companies act to prevent new companies from accessing the market, create difficulties for the operation of competitors, and cease activities totally or partially without proven just cause.
Moreover, there is a belief that the scenario hampers revenue collection for public coffers. This is because the Constitution guarantees the Union, states, and municipalities a share of the resources obtained from mineral exploitation (as with oil royalties).
The government is studying a revision of the legal framework at the same time it advocates mining as a fundamental part of the energy transition. There are essential minerals in high demand currently for the manufacture of components aimed at the low-carbon economy, such as batteries.
The issue also has as its backdrop Lula’s intention to boost the Brazilian economy, a topic that has drawn even more attention from the leader amid the recent drop in popularity identified in public opinion polls.
To give an idea of the market size, in 2023 Brazil traded R$ 312 billion in ores —considering only the 11 main metallic substances produced in the national territory (such as iron, gold, copper, nickel, and aluminum).The discussion also revolves around the role of Vale, which Lula wants to see more active in national activity.
Recently, he worked to appoint Guido Mantega, his former Finance Minister, as the company’s CEO –but was not successful.”Vale needs to understand the following: it’s not Brazil that belongs to Vale. It’s Vale that belongs to Brazil,” said Lula.
“What we want is to have a new mining policy, for this country to empower all companies that want to take care of so-called critical minerals […]. The concrete fact is that Brazil’s potential must be exploited and Vale cannot have a monopoly,” said the president.
When contacted, Vale states that it holds less than 1% of the total number of mining rights in Brazil and that the portfolio of this portfolio in the country has been reduced by 80% since 2005 after divestments, right assignments, and area withdrawals.
According to the company, mining concessions in a situation of delayed start or with suspended exploitation are affected by external factors that prevent production.”Vale is the company that invests the most continuously in mineral research in the country,” the company says.
“As a result of these investments, Vale has mineral assets of excellent quality that make the company the largest mineral producer in the country, collecting a larger volume of CFEM [contribution paid to public coffers for mineral exploitation] than all other mining players combined,” says the Brazilian miner.
BHP Brazil informed that its mining rights “are still in the research phase and that it has been rigorously complying with the studies and research required by national legislation.”
Rio Tinto was contacted but did not provide a statement.UnderstandWhat the law saysThe sector is mainly governed by the Mining Code (Decree-Law 277/1967) and a decree that regulated it in 2018 (9.406).
The framework states that before exploiting a mine, the interested party needs to file a request for the so-called mineral researchResearch authorizationThis is an authorization valid for one to three years granted by the ANM (National Mining Agency) to the company.
The deadline can be extended for an equal period. The company must start the research within 60 days (without being able to interrupt the work without justification for more than three consecutive months)ReportThe studies carried out in the research phase must conclude on the feasibility or not of the mining and it will be up to the ANM to approve the company’s report.
Once an approved report indicating feasibility is produced, the interested party has one year to request from the ANM or the Ministry of Mines and Energy the mining concession, a deadline that can be extended by one yearMining concessionWhen the concession decree is published, work for exploitation must start within a maximum of six months –and, once started, cannot be interrupted for more than six consecutive months.
The company must demonstrate to the ANM, every six months, that the environmental process is ongoing and that measures are being taken to obtain the licenseSuspensionIt is possible for the company to request a temporary suspension of mining based on a request, requiring an inspection by the ANM, which must produce a report to be submitted to the decision of the Ministry of Mines and EnergyPenalties.
The company may face different types of penalties if it fails to meet obligations, but the law expressly provides for the expiration of the research authorization or even the concession if abandonment of the deposit or mine is characterized or if failure to meet research or exploitation deadlines is verified even after warning or fine.
