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
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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