Brazil delays mining bill, says to reach Congress in June

Thu May 23, 2013 4:08pm EDT

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By Leonardo Goy

BRASILIA, May 23 (Reuters) - Brazil's government plans to submit its mining reform bill to Congress in June rather than this month, energy minister Edison Lobao said on Thursday, prolonging a wait that is slowing investment in mineral extraction.

The bill, first unveiled in 2009, is expected to create an independent regulator, establish auctions for strategic minerals and impose tougher exploration and development schedules for concession holders.

The expected changes are significant enough to have prompted companies to delay billions of dollars in planned investments as they wait for a clearer idea of the legal framework that will govern them and help determine their bottom line.

Government sources said the wait could be further extended because President Dilma Rousseff does not want to put the bill before lawmakers any time soon due to growing divisions in her coalition majority in Congress.

Rousseff's government is just getting over intense wrangling within its 18-party coalition to pass a law that would open the country's ports to more private investment, boosting efficiency.

Lobao, however, denied accusations that the government was deliberately delaying the mining legislation to allow the dust to settle in Congress.

"The Congress is settled, the government has a functioning base there," Lobao said, without answering a reporter's question on whether the draft bill had been finalized.

INVESTMENTS FROZEN

Mining is an important part of some states' economies and revenue. Legislative reform of the oil and gas industry has been one of the most difficult and lengthy bills the government has tried to move through Congress. The fight among states over royalty redistribution in the oil reform bill is being settled by the Supreme Court.

Brazil is the world's top iron ore exporter and produces a variety of other minerals, with gold and copper output in particular expected to surge in the next few years. Interest is also growing in its reserves of rare earth minerals.

Plans to revise the mining code have been a bone of contention between the government and private sector. The government is likely to raise royalties, which it says are lower than in many countries. Miners counter that a host of other taxes payable make Brazil an expensive place to mine.

Cinthia Rodrigues, head of research and development at the Brazilian mining industry association Ibram, said about $20 billion of $75 billion in expected mining investments between 2012 and 2016 was being delayed as miners waited for a clearer idea of the sector's long-term future.

A former senior government mining official now working in the private sector said royalty hikes the government would likely introduce showed it was out of touch with changing realities in the sector since the bill was announced.

Mining activity plunged then made a rapid recovery around the time of the 2008/09 financial crisis but cooling demand in China, Brazil's top iron ore buyer, for example, has lowered prices for the steel ingredient and tightened producer margins.

The private-sector miner said his and other companies had begun to lay off staff, particularly geologists, since the government halted issuing new exploration permits while it waits for the bill to pass.

"A year ago you couldn't find an experienced geologist anywhere. Now you've got more senior geologists sending in their CV," he said. (Additional reporting by Jeferson Ribeiro and Peter Murphy; Writing by Peter Murphy and Reese Ewing; Editing by Caroline Stauffer and Dale Hudson)

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