Mining in Brazil
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Mining in Brazil Big, bountiful but bewilderingly bureaucratic. TABLE OF CONTENTS Brazil: an overview...........................................p74 This report was researched and prepared by Mining and Environmental Regulations..............p76 Global Business Reports (www.gbreports.com) for Iron Ore..........................................................p78 Engineering & Mining Journal. Gold..........................................p81 Diamonds.............................................p85 Editorial researched and written by Oliver Cushing, Nickel...........................................p86 Clotilde Bonetto Gandolfi, Gabrielle Morin, Maher Ali Phosphates and Potash...................................p88 and Nathan Klabin. Environmental and Social Issues.......................p90 For more details, please contact [email protected]. Equipment.............................................p92 Minas Gerais...................................................p94 Labor..............................................p100 Cover photo courtesy of Sotreq. Conclusion........................................p101 A REPORT BY GBR FOR E&MJ AUGUST 2012 MINING IN BRAZIL Brazil: an Overview One of the world’s great mining nations needs more investment to capitalize upon its sub-surface potential. All eyes have been on Brazil since the win- a substantial domestic aluminum industry 1:160,000 scale airbourne geophysical ning bids for the 2014 FIFA World Cup and consuming the majority of output, it only surveys. The geophysical survey is pro- 2016 Olympics were announced. Already represented 0.7% of exports. gressing well and 30% of the country has on the rise as one of the increasingly influen- Despite the importance of mining to been covered but there is still a long way tial BRIC nations, winning the hosting rights Brazil, miners and explorers alike feel that to go. In addition, exploration would be to the two most important global sporting they do not receive the support they deserve aided if the government were to invest in a events has provided a welcome boost to from the government. Brazil is an extraor- geochemical survey. Brazil’s presence on the world stage. dinarily bureaucratic country and red tape “The government has also invested in a With a plethora of new stadiums being clogs the exploration, development and new form of electromagnetic survey in Ba- thrown up in the country’s glamorous cit- operations processes. Reams of legislation hia and Rio Verde region of Minas Gerais ies, it is easy to forget that there is more to and multiple inefficient supervisory bodies where there are many gold mines. How- Brazil than football and beautiful beaches. combine with extremely high taxes (a recent ever, the general feeling in the government Mining is at the heart of the nation’s econ- Ernst & Young study found the country to be is that this sort of work should be funded omy and has been since 1693. amongst the highest three tax regimes for by the private sector. In southern Australia The importance of this industry is hard the majority of minerals), to hold back the the government has offered to fund 50% to overstate. The Brazilian Mining Insti- development of the industry. of the cost of such surveys and this might tute, IBRAM, estimates that in 2011 Brazil Brazil was ranked 126th out of 183 ju- be the right compromise that helps to help exported $43.59 billion worth of mineral risdictions for ease of doing business by encourage exploration here in Brazil” said products, and imported only $10.02 bil- the World Bank in 2012 and 26th out of Onildo João Marini, executive secretary of lion. Without the mining industry, Brazil’s 32 Latin American and Caribbean juris- ADIMB, a private-public sector association $20 billion trade surplus of 2011 would dictions. Sitting at the top of the regional for the development of the mining industry have been a $13 billion deficit. rankings is Latin American mining pioneer in Brazil. Brazil’s economy has grown in recent Chile, followed by exploration stars Peru Despite this underperformance, the years, with GDP per capita tripling in the and Colombia. Chile’s GDP grew by 6.5% industry holds out hope: “there is a new, past decade and the economy overtaking in 2011, Peru’s by 6.9%, and Colombia’s modern agency being proposed to regulate the UK to become the world’s sixth larg- by 5.7%. Brazil’s GDP grew by just 2.7% the mining sector, which we are in favor of. est in 2011. The Brazilian market has that year. The question is whether they just change matured during this period but mining has Brazil’s poor performance at the macro the name of the National Department of become a more, not less, important com- level is reflected in The Fraser Institute’s Mineral Production (DNPM), the exist- ponent: the value of mining output grew 2011/2012 Policy Potential Index, a ing regulator, or will they actually create more than fivefold in this time, from $7.7 survey of miner’s sentiments, though the a new, well-resourced agency? We believe billion in 2001 to $50 billion in 2011. disparity is less acute between the coun- that if you have strong public institutions Iron ore is by far the most important min- try and its regional competitors. Brazil and a strong legal framework the business eral product mined in Brazil and in 2010 it is ranked 57th out of 93 jurisdictions, environment will be more attractive to in- accounted for 81.8% of all mining exports. against Chile in the 18th spot, Peru at vestors. A new, high-level mining council is Brazil is the world’s second largest iron ore 56th, and Colombia at 64th. also being proposed, linked to the president producer and, in the shape of Vale, is home The effect of this difficult business en- and dedicated to higher level policies,” said to the world’s largest iron miner and second vironment on the mining industry is obvi- Professor Rinaldo César Mancin, director of largest mining company behind BHP based ous. In exploration, Brazil underperforms. environmental issues, IBRAM. on market capitalization. Per square kilometer Peru attracts 11 This report evaluates the mining sector Beyond iron ore, Brazil is the larg- times as much exploration capital as Bra- by mineral type. It provides an update to est niobium producer in the world and in zil, and Chile 18 times as much. In total, the 2011 report on the Brazilian mining 2010 the alloying agent represented 4.7% the country attracted 3% of global explora- industry by Engineering & Mining Journal of mineral exports by value. Brazil is the tion expenditure in 2010. With high taxes and Global Business Reports and aims to world’s 12th largest producer of gold in and sluggish permitting processes, Brazil shine a spotlight on some of the coun- the world and this accounted for 4.6% struggles to attract risk capital. try’s emergent mineral sectors, such as of minerals exports in 2010. Copper, of Through Brazil’s national geological diamonds and potash. As outlined above, which the country produced 213,000 mt service, the CPRM, the government is Brazil is a mining behemoth that is fail- in 2010, was the fourth most significant slowly investing to support exploration. “ ing to attract the risk capital it deserves. mineral in the country’s list of exports The CPRM is commissioning a series of In this report we identify the opportuni- that year, accounting for 4.1% of the to- surveys to evaluate the hydrology and ge- ties, the challenges and the solutions, as tal. In 2010 Brazil was the third largest ology of the country. Of chief interest to described to us by some of the country’s producer of bauxite in the world, but with the mining sector are the 1:100,000 and leading mining executives. 74 E&MJ • AUGUST 2012 www.e-mj.com MINING IN BRAZIL www.e-mj.com E&MJ • AUGUST 2012 3 Mining and Environmental Regulation Slow administration of outdated codes act as a deterrent to investment despite the stable, democratic political environment. The Brazilian legal process for mining The DNPM accepts resource profiles regulation, from staking to mine closure, calculated in accordance with foreign reg- is similar to the systems seen in high-per- ulations such as the NI 41-101 or JORC. forming jurisdictions in North America and “The DNPN understands that many com- Australia. However, the volume of legisla- panies use high-tech tools and are happy tion and the snail-like pace of many gov- to accept resource calculations derived ernment agencies sets it apart from these from products such as ours; it is not a jurisdictions that dominate the top of the prescriptive approach,” said Beck Nader, Fraser Institute’s rankings. executive director, BNA Micromine Brazil Explorers can either “claim what is and regional director, Micromine South called ‘open ground,’ an area where there America. are no titles, or make an acquisition. Under the current laws, mining licenses These days, companies usually prefer to do not come with an expiry date and it look at areas that have been explored be- is assumed that the license will run until fore rather than start at pure grassroots. In the deposit is exhausted. This may change some cases where land has had past ex- under the proposed new mining code (see ploration by a major the claims have been side box), along with a host of other key dropped, but otherwise the new company aspects of Brazilian mining regulation. must acquire the rights from them. Staking As a separate process, environmental is today done on a first come, first served licenses must be obtained prior to devel- basis; if the land is considered vacant a opment. Environmental laws are “enforced claim can be registered on the DNPN’s at a state level, although they were creat- website and, following that, proper paper- ed by the federal government,” said Carlos work is presented. Orsini, executive director of environmental “Licenses are granted from one to three and social consultants YKS.