Brazil: Mining Industry In Brazil: 2012 Year In Review

Last Updated: 12 March 2013
Article by Francisco Rohan, Guilherme Vieira da Silva and Carlos Hartveld

Keywords: mining, Brazil, Mining Code, M&A,

In this 2012 Year in Review, we summarize some of the mining industry's most noteworthy developments, with a particular focus on the legal environment, the current economic climate, the major M&A transactions and the potential opportunities and challenges for 2013.

Legal Environment

As has occurred in many other countries during the last decade, there has been debate in Brazil about the current mining legal framework, which dates from 1967. President Rousseff's administration is currently working on a new Mining Code, a draft of which is expected to be sent to the National Congress during the first half of 2013.

Following the model applied in the oil and gas industry, it is expected that the New Mining Code will boost competition among mining companies with the introduction of a bidding process for the acquisition of certain mineral rights. Additionally, the new law should incentivize the exploration and/or production of currently unexploited mines by fixing a term during which a company may hold mineral rights and by implementing stricter rules regarding the performance of the exploitation plan.

It is also expected that the new legal framework will increase the State control over the sector by transforming the National Department of Mineral Production (DNPM) into a regulatory agency and by raising certain taxes. However, it is likely that the government will be careful not to overburden a sector that has been contributing so generously to Brazil's commercial surplus.

During 2012, some legislative bills relating to the industry have been submitted to the National Congress: e.g., one bill sets forth special provisions in connection with the encumbrance of mineral rights and another provides for a bidding process for the concession of production licenses of strategic and high-profit minerals. Two other bills set forth certain rules for the concession of mining licenses in ecological reserves and the increase in the mining royalties.

However, despite the intentions of certain members of Congress, it is unlikely that any of these new law bills submitted last year will be passed, since the new Mining Code should cover all of those same subjects.

Economic Scenario

At the end of 2012, the DNPM suspended the granting of new mining licenses. The only exception is in respect of aggregates, which are basic raw materials for civil construction. According to Mines and Energy Minister Edison Lobão, this measure will continue until the new Mining Code is passed.

The government's intention was to put an end to speculation in relation to mineral rights and to set aside reserves for the new regime to be implemented under the new Mining Code. However, the Brazilian Mining Association (IBRAM) is currently engaged in discussions with the government in order to reverse this decision.

Notwithstanding the complaints of IBRAM and certain mining companies, IBRAM expects US$75 billion to be made in new investments in the mining sector between 2012 and 2016. According to a PriceWaterhouseCoopers (PWC) report, Brazil will receive 20 percent of the world's investment in such sector until 2016.

In fact, despite the international economic turmoil and the local regulatory uncertainties, Brazil is home to many of the largest mining-related investments in the world: e.g., Anglo-American's Minas-Rio Project and Vale's Carajás Serra Sul S11D Iron Project.

The Minas-Rio Project (Anglo-American's largest project worldwide) is comprised of four sections: the mine and the processing stations, both in the state of Minas Gerais; a terminal in the Açu Port in the state of Rio de Janeiro; and the mineral pipeline connecting the stations to the terminal. The pipeline, with its 525 km of extension, is the longest of its kind in the world and will allow the production of approximately 90 million tons of iron ore per year at a price of about US$30 per ton.

The Carajás Serra Sul S11D Iron project is an expansion of the Carajás Mining Complex and is the largest iron ore mine under production in the world. It is a main focus of Murilo Ferreira, Vales CEO, and the company's investments total US$19.5 billion. Upon its expected completion in 2017, the Carajás S11D Iron Project will produce and supply more than 90 million metric tons of iron ore per year. If successful, it will help to further consolidate Vale's position in the global iron ore market.

Major M&A Transactions

Despite an international downturn in mining sector M&A deals during 2012, the Brazilian M&A market has remained steady. The major M&A transactions in the mining sector involving assets in Brazil during such period are listed here:

  • The South-African company AngloGold Ashanti has acquired, from the Canadian Kinross, a 50 percent participation in the gold mine of Crixás, the State of Goiás, for US$220 million.
  • Glencore has acquired, from Branford, a 28.5 percent participation in Mineração Caraíba for US$118.5 million.
  • Brazilian company O2iron has merged with the Canadian company Golden Raven Resources with the intention of joining forces on the exploration and production of iron ore in Brazil. The value of the transaction was not publicly disclosed.
  • The Brazilian investment bank BTG Pactual and AGN Participações, a company founded by Vale's former CEO, Roger Agnelli, have incorporated B&A Mineração to explore mining opportunities in Africa and Latin America. B&A Mineração plans to spend approximately US$520 millions on investments.

Forthcoming Opportunities and Challenges for 2013

Despite the uncertainties created by the prospect of a new legal framework for the mining sector and the possibility of a heavier tax burden, it is likely that the effects of the new Mining Code will be positive.

In fact, it is expected that the new law will address many of the legal issues on which the current law is silent or confusing. It remains to be seen whether the government's intention to encourage competition and incentivize the exploitation of mineral rights will come to fruition.

In short, notwithstanding Brazilian legal issues and the international economic turmoil, the Brazilian mining sector is demonstrating that it will keep its place in the spotlight of the Brazilian economy.

Originally published March 4, 2013

Visit us at Tauil & Chequer

Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."

© Copyright 2013. Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. All rights reserved.

This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
Levy & Salomao Advogados
Levy & Salomao Advogados
Levy & Salomao Advogados
Levy & Salomao Advogados
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Levy & Salomao Advogados
Levy & Salomao Advogados
Levy & Salomao Advogados
Levy & Salomao Advogados
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions