The International Comparative Legal Guide To: Mining Law 2014

1 RELEVANT AUTHORITIES AND LEGISLATION

1.1 What regulates mining law?

Mining activity is subject to the regulation of the Ministry of Mines and Energy (MME), through the Secretariat of Geology, Mining and Mineral Processing (SGM). SGM is in charge of general mining policies and coordination.

MME also regulates the mining activity through the National Department of Mineral Production (DNPM), an autarchy created with the purpose of managing mineral resources, controlling the emission of titles, collecting statistical data and gathering comprehensive information in data banks.

In regard to Mining Law, miners are subject to the Brazilian Mining Code (Decree-Law No. 227/1967) and, alternatively, the Regulation of the Mining Code (Decree-Law No. 62934/1968). These two rules set forth the basic rights and obligations. Details of each right and obligation are set forth by DNPM, through ordinances and normative rulings.

The mining industry has been waiting for the New Mining Framework ("NMF") (Bill of Law No. 5807/2013) for a while. The Government has submitted the NMF to the National Congress and it is currently under discussions. If approved, Mining Law may change. If so, it represents an absolute change in the current regime, as follows: (i) the creation of the National Council for Mining Policy (CNPM), in order to assist the President in strategic decisions; (ii) concessions will be granted through bidding processes, based on a sole title for exploration and mining with a 40-year term, extendable for 20 years, with a minimum investment; (iii) the creation of a new agency named the National Mining Agency (ANM), with greater management and financial autonomy and basing its decisions in collegiate rulings; (iv) change in the mining royalties (CFEM), which will be calculated over the gross revenue with a maximum rate of 4%.

1.2 Which Government body/ies administer the mining industry?

There are three Government bodies responsible for the administration of the mining industry: MME; the National Department of Mineral Production (DNPM); and Brazil's Geological Services (CPRM). DNPM is the Federal Government agency responsible for managing and monitoring the performance of mining activities throughout the country, ensuring that the exploitation of mineral resources is carried out in a rational, controlled and sustainable way. The Minister of MME, the highest authority, is responsible for granting mining concessions, while other permits are granted by DNPM. CPRM is responsible for mineral research.

The NMF, if approved, will change the current structure. DNPM will become the National Mining Agency (ANM), an agency-structured government body to regulate the mining industry in a more autonomous fashion.

1.3 Describe any other sources of law affecting the mining industry.

Mining is subject to federal statutes and rules enacted by DNPM. Also, the Attorney-General opinions have a binding nature on controversial matters.

Other laws affecting the mining industry are:

the Labour Law, due to the hiring of manpower to operate and work at the mines; the Tax Law, due to the payment of major taxes and the general rules applicable to royalties and some other taxes that arise from mining activities; the Environmental Law, due to all the compliance with environmental matters and obtainment of licences to operate mines and plants; and the Competition Law, to avoid concentration and abuse of dominant position in the mining industry. 2 MECHANICS OF ACQUISITION OF RIGHTS

2.1 What rights are required to conduct reconnaissance?

Geological reconnaissance is permitted by the DNPM, provided that a prior approval from the National Security Council is issued.

Pursuant to article 91 of the Mining Code and articles 39 to 44 of the Regulation of the Mining Code, geological reconnaissance is made by aerial prospection, through photography, geophysical equipment and remote sensors to the extension of 12,000 km2.

The holder of the reconnaissance title must carry out its works within 90 days, in order to obtain the priority right over the researched area. After raising data, the permit holder must submit a report with its findings, even if the area proves to be geologically unprofitable.

The reconnaissance is allowed even during the exploration phase, but it is not a mandatory requirement to claim priority over available areas. Most of the time, the prospective miner requests the exploration permit without having carried out reconnaissance works.

2.2 What rights are required to conduct exploration?

Miners applying for exploration must file a specific form provided by DNPM, demonstrate sufficient knowledge of the area to be explored, through a Location Plant, and submit an Exploration Plan. This Exploration Plan comprises information such as the intended minerals, minimum evidence of occurrence, sampling and drilling methods. If this report is approved, DNPM will issue an Authorisation Permit, which will entitle the explorer to conduct exploration works.

2.3 What rights are required to conduct mining?

To apply for mining, the company must have accomplished the exploration works, supplied the Final Exploration Report and submitted the Plan for Economic Use of the Mine (PAE). Also, environmental licences must have been issued. The authorisation to mine is granted by DNPM through a mining ordinance, published in the Official Gazette. The mining rights are granted through concession, since mineral resources are Federal Government property.

The exploration works may have been carried out by another mining company, but the concession will only be issued on behalf of the title holder.

Once conceded, the mine extraction can only take place in accordance to the PAE, and any substantial change in the mining performance must be communicated to and approved by DNPM.

2.4 Are different procedures applicable to different minerals?

Minerals are subject to different regimes.

As a general rule, mineral resources are subject to the authorisation and concession regulation. Mineral rights are granted through an exploration permit and a mining concession.

Other regulations include licence, permission and monopoly regulations.

Gravel, stone, clay and crushed stone ("aggregates"), for instance, are subject to licensing. These minerals have a different regime because they have immediate application in construction.

Additionally, small-scale mining authorises natural persons to dig gold in a non-industrial fashion.

There are also nuclear minerals that are subject to monopoly of exploration by the Federal Government.

2.5 Are different procedures applicable to natural oil and gas?

The exploration and production...