Earlier this week, the special commission of the Brazilian Congress released a substitutive project for the country's proposed mining code (the "Revised Draft Mining Code"). The Revised Draft Mining Code has significant improvements (if compared with the bill originally tabled by the Brazilian Government), but still needs some adjustments. After approval by the special commission, the Revised Draft Mining Code will need to be voted on by the Brazilian Congress and Senate and ratified by the Brazilian President. This new draft is a breath of new hope that the reviewing process of Brazilian mining law is moving in the right direction.
The Revised Draft Mining Code defines clear rules to allow a smooth transition into the new model (including a grandfather clause for existing owners of mineral rights) and made significant improvements in the mineral rights granting system (if compared with the originally proposed bill), in the classification of resources and reserves (suggesting that it will be harmonized with international standards), and creates an interesting framework for debt finance transactions and registering of third party rights in connection with the mineral rights.
The main issue remains the public bid system that the Brazilian Government would like to implement for the granting process of mineral rights in the country. This new version of the upcoming mining code creates a dual system to grant mineral rights in Brazil, one based on the public bidding model, and one based on traditional priority system (first-come, first served), giving the Brazilian Government the right to determine which areas will follow each granting system. The mining industry around the world applies the priority model to grant new mineral rights and a public bid system will put the country in a competitive disadvantage vis-a-vis such other countries.
We hope to have some interesting news and improvements in connection with the approval of the Revised Draft Mining Code in the near future. If this Revised Draft Mining Code is not approved this year, it will prove difficult to continue these discussions next year, with the World Cup and Presidential elections taking in place in Brazil in 2014. To download the Revised Draft Mining Code, please click here.
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