Brazil Gears Up

The recent Mines and Money Americas conference in Toronto included an overview of the highly prospective geology of Brazil, and of an important initiative to attract foreign exploration and mining companies into the country.

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The Mines and Money (M&M) Americas conference in Toronto on October 15-17 included a presentation on Brazil's imaginative Investor Partnership Program (IPP) that is seeking to boost inward investment in mining.

In a session on Latin American jurisdictions, José Andriotti, a director at the Geological Survey of Brazil, CPRM, introduced Pedro Bruno Barros de Sousa, the IPP secretary. Launched in May 2016, IPP is a project designed to attract investment into the assets held by CPRM.

Although only four of the 191 projects are currently for mining (a further 18 are for non-oil energy projects), Mr de Sousa explained that the government was making every effort to boost foreign ownership of mining assets, and the CPRM website included a list of public assets available for private investors. Assets currently available include copper, zinc and cadmium deposits in Palmeirópolis in the centre of the country, and coal from Candiota in the far south.

Aerial surveys are available, with nothing to pay up-front, for 80% of the 2.2 million km2 of the country's Pre-Cambrian shields, which is the same area as Australia, and almost twice that of Canada. In terms of productivity from these areas, Brazil yields barely one-quarter that of Canada and on-sixth that of Australia.

More than 300,000 mineral rights are under technical evaluation and will be offered to the private sector (permits are currently held by the Brazilian Geological Survey). Under the initiative, "more flexible conditions" will be offered for mining in border areas, and a new policy is intended to encourage the production of fertilisers.

Mr de Sousa said the projects will "provide the best service for citizens", and IPP will seek to generate high-quality jobs and "modernise" public governance. IPP will, he said, "grant legal certainty and predictability to investors".

Mining Beacon (MB) caught up with Mr de Sousa to ask him what he considered the most valuable mining assets available under IPP?

Pedro de Soussa (PS): The most valuable mining assets available under the IPP portfolio include polymetallic deposits from Palmeirópolis (comprising copper, zinc, lead, cadmium and silver. This area offers good infrastructure (nearby power, railway and strategic road connections) and there is strong support for mining from the local community. No major social and environmental obstacles are expected during the licensing process for the six mineral rights (covering 5,500 ha, and for which final exploration reports are already approved by the Mining National Regulatory Agency).

MB: How many foreign mining companies had expressed an interest in the programme so far?

PS: The PPI projects have an advanced database and supporting research data, and around 13 companies expressed their interest in the programme so far.

MB: What specific actions are underway?

PS: The specific IPP actions and policies for mining projects include:

● Opening of new mineral opportunities for the private sector (more than 20,000 mineral rights areas are under technical evaluation and will be offered in the years to come);

● More flexible conditions for mining in border areas;

● Establishment of a new policy to encourage the production of fertilisers;

● Provide best services to citizens;

● Grant legal certainty and predictability to investors;

● Generate high quality jobs;

● Attract new investments; and

● Modernise and improve public governance.

MB: Which companies/countries are you targeting for IPP, and is the effort centred upon Canada?

PS: Australia, the US, Canada, South Africa and China are amongst the most important ones. Canada is definitely a country to focus on.

MB: What are the most attractive aspects of investing in Brazil (ie what sets it apart from other countries for metals and minerals exploration)?

PS: Mining activities are present in all Brazilian territory and, currently, there are more than 10,000 mining titles under the active mining concession regime in the country. In addition, geological diversity, potential for resources and reserves expansion, infrastructure availability in the mining areas and favourable new prospects with the creation of the National Mining Agency are also important advantages.

Today, Brazil imports potassium, metallurgical coal, copper, sulphur and phosphate rock, mainly. On the other hand, it is the second largest exporter of iron ore and also exports gold, niobium iron, copper, bauxite, manganese and kaolin, ornamental stones and rough diamonds.

It is important to mention that the private sector increasingly seeks to be in line with the strategic objectives established for the Brazilian mineral sector, based on the central government's policy of resumption of economic growth.

MB: And Brazil's geology is a particular attraction?

PS: Yes, with its continental dimensions, Brazil has an extremely favorable and rich geological environment, with excellent deposits already identified and new ones to come. Our country is a global player regarding production of mineral commodities and has a tradition in mining activity and it is a huge consumer market.

Investors interested in mineral exploration will also be able to access high-resolution geological data and the necessary infrastructure (water and energy) to support mining activities. In addition, royalty charges are amongst the lowest in the world. The mining activity brings regional development, and the government and local people support the business; this is partly because some of the royalties collected are used for local economic development.

MB: What national developments over the past 12 months do you think have been the most important?

PS: On the part of the Federal Government, an important set of actions was set with the objective of promoting the resumption of growth of the Brazilian mineral industry, within the scope of revitalizing programs of the Brazilian mineral industry. The following three actions, for example, focused on restoring credibility to investors through institutional modernisation and re-establishing legal certainty:

1. Creation of the National Mining Agency: Law 13,575, of December 26, 2017

The recognition of the importance of improving the sector regulation and promoting the effective management of the Brazilian mineral heritage, led to the creation of the National Mining Agency, replacing former DNPM. Still in the implementation phase, the design of the new Agency takes into account the understanding that it is essential to reduce the sector bureaucracy and the deadlines — so the entrepreneur can start production in a shorter time than experienced so far.

2. Mining Code Regulation: Decree: 9,406, of June 12, 2018

The new Mining Code regulation sought to improve mining legislation. The previous regulation (published 50 years ago) did not address the amendments to the Code, making it difficult to apply those rules. Among the changes and improvements proposed by the new regulation, we could highlight:

● License successive extension admission, especially when there are limitations to area access or delay for environmental license emission by the competent body;

● The possibility of continuity of the research work after the presentation of the Final Report, for the conversion of resources into reserves;

● An electronic auction system to offer available areas, to make the process faster, more objective and transparent; and

● Greater responsibility of the miner in relation to the environmental impacts and compliance with the mine closure plan.

3. Revision of the CFEM calculation base, its rates and penalties for its default.

The objective is to contribute to greater predictability and legal security for the development of mining activities. Decree No. 9.252 of December 28, 2017, established the calculation methodology for the reference value of CFEM (royalties) rates. Recently, Decree No. 9,407 of June 12, 2018, defined the distribution of CFEM's share to the municipalities affected by the mining activity.

MB: What are the current socio-political risks facing the country?

PS: In the mining sector, specifically, a combination of commodities falling prices, political uncertainties and economic crisis caused a reduction in both investments and activities, which were growing until 2012. In 2015, for example, Brazilian Mineral Production faced a drop of about 37% compared with 2012. Now, the sector is going through a period of resumption of its activities, production and investments. Policies and actions of the country's Revitalization Programs encourage the sector credibility and legal security recovery.

There are also macroeconomic policies for resuming growth, in addition to a trend of improvement in the global market for mineral commodities. All these factors will allow the performance improvement for the coming years. In 2017, for example, mineral production grew by almost 19% compared with 2015. The prospects for growing investments between 2018 and 2019 in mineral exploration are in the range of 25 to 30%, with important actions as the maintenance of the current mineral policy and implementation of the National Mining Agency.

The positive outlook presented by the new legal frameworks for investments in Research and Development should result in new good times for Brazilian mining. The establishment of national and international partnerships between the private sector, academia and research institutions as well as the definition of techno-economic aspects to determine the mineral assets capable of leveraging Brazilian production in a sustainable way should be the master lines for the coming years.

MB: Did you get what you hoped from presenting at the M&M Americas event?

PS: Yes. The M&M Americas event was very important for an exchange of experiences, and for the evaluation of market expectations. It is a great opportunity to present Brazil's mining rights to investors, and to highlight not only the potential, but also new regulatory environment created by IPP. 

MB: Thank you.

Chris Hinde

Chief Commentator, Mining Beacon

Previously editorial director of Mining Journal, and more recently head of S&P Global Market Intelligence's metals and mining team, Chris is now Mining Beacon's editor-in-chief and lead commentator. He posts two blogs every week, one on Monday reviewing market conditions over the prior week, and a second on Thursday looking at issues on the global mining scene. There is also a quarterly blog on business opportunities in the sector.