Changes On Brazilian Mining Sector

On July 25th, 2017 Brazilian President Michel Temer, the Minister of Mines and Energy Fernando Coelho Filho, the Chief of Staff Eliseu Padilha and Rodrigo Maia, the Speaker of the House of Representatives hosted an event to announce the Brazilian Mining Industry Revitalization Program, aiming to recover the mining sector credibility, attract new investments, ensure legal and regulatory certainty, reduce bureaucracy of the sector and increase geological reconnaissance of the Brazilian territory. Some changes introduced through the issuance of Executive Orders ("Medidas Provisórias" - MP) No. 789, No. 790 and No. 791 from 2017 to Brazilian legislation include the creation of a Brazilian Mining Agency (ANM), changes on the calculation of the mining royalty (CFEM) and changes in the Mining Code (decree-law No. 227/1967), as detailed below:

MP No. 789/2017: modifies the calculation method regarding CFEM, the mining royalty:

Assignor and assignee of mining rights are jointly liable for CFEM existing debts; The new tax basis will consider the gross revenue of the mineral sale, not including taxes. Currently, the tax basis considers the net sales. The new rules will be enforceable on August 1st; Tax rates set forth by law, on a maximum of 4%: 0,2%: gold and diamond, when extracted through small scale mining permission regime, and other gemstones; 1,5%: rocks, sand, gravel, clay and other minerals used in civil construction; 2%: gold and other minerals, except for iron ore; and 3%: bauxite, manganese, diamond, niobium, potassium and halite; For mining ore: progressive tax rates, according to the international price: 2%: below US$ 60; 2,5%: from US$ 60 and below US$ 70; 3%: from US$ 70 and below US$ 80; 3,5%: from US$ 80 and below US$ 100; and 4%: from US$ 100 on. Changes in the tax rates will be enforceable on November 1st, 2017; In cases where the miner consumes the mineral, the tax basis will be its price in the local, regional, national or global market, according to the case, or previously established by the mining authority. Nowadays, there is legal uncertainty because DNPM considers the price on the moment of the mineral transformation. MP No. 790/2017: changes some sections of the current Mining Code, maintaining the current legal regime (first-come, first-served principle). For example:

Allows additional mining exploration after the issuance of a final exploration report; Changes the exploration deadlines (that may vary from 2 to 4 years)...