The mining industry is a key economic sector in Brazilian economy and the mineral production reached approximately USD 24 billion in 2016.

It is worth noting that Brazil is one world´s largest iron ore producers.

Amongst the government charges levied in this sector is the CFEM ("Compensação Financeira pela Exploração de Recursos Minerais"), which is considered a royalty on mining activities.

The revenue associated with the collection of CFEM is divided among the federal, state and municipal jurisdictions related to the economical use of the mineral resource located in their respective territory.

Currently, the Brazilian Government is seeking to alter the legislation regarding the Mining Sector. This has been done through the recently enacted Provisional Measures 789/2017 (which relates to the CFEM), 790/2017 (which alters the Mining code and issues regarding special regimes for mining exploration) and 791/2017 (which creates a National Mining Agency, in substitution for the current department which deals with these issues).

CFEM

CFEM had its guidelines fully altered, as the calculation basis shall be the gross revenues resulting from sales of mineral assets, by deducting the taxes paid over this operation. Under the previous regime, the basis was the net revenues.

Also, CFEM rates were substantially transformed. For iron ore, for instance, the current 2% rate was replaced by a variable system, wherein the rates fluctuate as per the international USD pricing per iron ore ton, as follows:

• 2% - ton price below USD 60;
• 2.5% - ton price between USD 60 and USD 70;
• 3% - ton price between USD 70 and USD 80;
• 3.5% - ton price between USD 80 and USD 100;
• 4% - ton price higher than USD 100.

Niobium, diamond and gold rates were also increased, from 2% to 3% for Niobium and diamond and from 1% to 2% for the gold. Please note that for gold and diamonds extracted through permissions for independent mining ("Permissão de Lavra Garimpeira"), the rate is 0.2%. On the other hand, the rates for mineral assets used on civil construction were reduced from 2% to 1.5%.

Mining Exploration

Some relevant changes were set up also for the mining exploration, rules, as for example, the changes in time limits (in general lines, it was extended from two to four years). Also, the possibility of online tender process was stipulated, with the purpose to provide a quick bid course.

Regulation

Finally, the former regulator ("DNPM") was replaced by the National Mining Agency, aiming to confer less political influence and to enhance regulatory certainty. Also, note that these rules are already in force, but the three Provisional Measures will still be further analyzed by the Brazilian Congress.

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