Brazil mining reforms stalled by impasse over new agency

BRASILIA (Reuters) - A new Brazilian mining regulator created last year to cut red tape and attract foreign investment has still not gotten out of the blocks, with experts warning that the agency will be stalled at least through the October election and perhaps until 2019.

Miners say major investments are hanging in the balance.

The National Mining Agency (ANM) — approved by Congress in November — cannot begin its activities until the Senate confirms five directors appointed by President Michel Temer. A separate initiative to modernize the country’s mining code will only go into effect once the agency launches.

With less than three months to go before general elections, “it isn’t feasible” that the directors will be confirmed before a new government is elected, said Israel Lacerda de Araujo, Senate mining expert who advised lawmakers on the regulations.

Flexa Ribeiro, a senator who sits on the infrastructure committee overseeing the confirmations, said Temer’s nominations “showed a lack of respect” because they did not include any directors from Brazil’s most important mining states of Minas Gerais and Para.

It will take longer for the directors to be confirmed as a result and it’s still possible new names could be put forward, said Ribeiro, a member of the Brazilian Social Democracy Party (PSDB) from Para.

The names were chosen purely based on their technical experience in the mining industry, according to two government officials. The officials said the whole process takes time and is at the discretion of the Senate.

Ana Cabral-Gardner, co-chairman of Sigma Lithium Resources Corp, which mines lithium in Brazil, said enactment of the reforms will be key to clearing up legal uncertainty in Brazil and bringing laws in line with international standards.

The government says that cutting red tape in the sector could boost the mining industry’s share of gross domestic product (GDP) to 6 percent from 4 percent currently by speeding up a system in which it can take more than a decade to get a permit.

The reforms include allowing mining concessions to be put up as financial guarantees and would release 20,000 concessions tied up in bureaucratic limbo.

Brazil is the second-largest exporter of iron ore after Australia and home to large deposits of copper, bauxite and other minerals, including potentially major recent finds by miners such as Anglo American Plc.

“On the whole, the changes are positive ... but all of this depends on the effective installation of the Mining Agency, which until now has not happened,” said a representative of Nexa Resources SA, a Brazilian miner that went public last year, in an email to Reuters.

The agency’s creation was approved by Congress along with a hike in mining royalties, in part to fund its operations.

The taxes have already gone into effect and helped boost the budget of the current mining regulator, which ANM would replace, to 2.6 billion reais ($700 million) from 1.7 billion reais last year, said Victor Bicca, the director of the current agency DNPM, who is also nominated to lead the new agency.

Reporting by Jake Spring; Editing by Susan Thomas