TerraLex Cross-Border Guide to Cross-Border Guide to Mining Rights

The Federal Union has the exclusive power to enact mining laws and regulations. As far as environmental aspects related to mining activities are concerned, the Federal Union and the States (and the Federal District) have concurrent jurisdiction to enact the applicable laws and regulations. The Municipalities can also enact supplemental laws based on their local needs. The main legal diplomas enacted at the federal level and applicable to mining activities are:

• Decree Law 227 of 1967 that has amended and consolidated the Brazilian Mining Code (the former Decree-Law 1,985 of 1940);
• Decree No. 9,406 of 2018 that regulates Decree Law 227 of 1967 and other legal diplomas;
• Law No. 13,575 of 2017 that creates the National Mining Agency (“ANM”);
• Law No. 13,540 of 2017 that provides the rules applicable to the Financial Compensation for Exploitation of Mineral Resources;
• Law No. 12,334 of 2010 that provides the rules for the national policy for the safety of dams; and
• Resolution No. 95 of 2022 of the National Mining Agency on the safety of dams.

The Ministry of Mines and Energy (“Ministério de Minas e Energia – MME”) is the government body responsible for establishing the public policy covering the geological, mineral, and energetic resources, and the use and exploitation of hydroelectric energy, mining, metallurgy, oil and gas, renewable fuels, and hydroelectric power.

The National Mining Agency (“Agência Nacional de Mineração” or “ANM”) is the agency responsible for the management of the mining activities and Brazilian mineral resources, including nuclear substances.

The exploration and extraction/beneficiation of mineral resources may be made by means of a Federal Government authorization or concession, and such activities must be conducted by Brazilian citizens (during the exploration phase only) or a legal entity incorporated under the Brazilian laws with headquarters and management in the country (during the exploration and exploitation/production phases). Specific conditions apply when such activities are developed in border areas or Indian territories.

Equal treatment is ensured to foreign legal entities irrespective of their origin and their controlling shareholders in terms of access to exploitation/production and use of the Brazilian underground. Therefore, there is no distinction between national and foreign capital legal entities incorporated under Brazilian laws, with head offices and management in the country, except for areas located at the international border zone.

For the purpose of performing any kind of mining activity in Brazil the interested party must obtain an authorization from ANM, even to conduct a survey or research on a property. The two main types of authorization granted by the ANM are:

• License for preliminary exploration: This is usually granted for two or three years, depending on the mineral substance. Such license may be renewed upon request, if filed with ANM up to 60 days before the expiration date. The exploration activities may be indistinctly performed by an individual or a legal entity.
• Exploitation/production concession: If the exploration report on a mine is approved by ANM, the interested legal entity may apply for an exploitation/production concession. According to the Brazilian law only a legal entity is allowed to exploit a mine. The applicant must present, among other documents, evidence of its financial capacity to carry out the project. The holder of the exploitation/production concession must pay annual fees and present annual reports to ANM.

A license issued by ANM will be required for the exploration of an area aiming at the verification of the existence of mineral resources and determination of the economic feasibility for its exploitation on an industrial scale. If the mining title is available, the application for such exploration license must be filed with ANM jointly with the following documents:

1. indication of the substance that will be explored;

2. a description of the area where such substance is located; and

3. an exploration program, including budget and time schedule.

Generally, the exploration license is granted if the area is not being explored by third parties (by means of previous exploration licenses or exploitation/production concessions), and if the exploration program is solid. The license is usually granted for a three year period. An extension of this period may be requested under the condition that the beneficiary proves the development of the exploration works.

If the holder of the mining right is also the land owner, the exploration license will, in principle, be sufficient to allow the beginning of the exploration activities. If this is not the case, the holder of the mining right must agree with the land owner - or anyone who has the actual possession of the land – on the payment of an indemnification for the occupation and a compensation for the potential damages that may result. If the land is government property, the payment of the indemnification is not necessary.

The beginning of the exploration proceedings must be informed to ANM, otherwise the legal entity or individual involved will be liable to pay a fine. The holder of the license cannot interrupt the exploration proceedings for more than three months without proper and previous justification.

It is possible to extract small quantities of mineral resources before the granting of an exploitation/production concession, by means of a request to ANM for a utilization permit (“Guia de Utilização”). In such case, the requirement for the utilization permit must define the technical and economic reasons that justify its granting. In addition, the permit will only be granted by ANM if the owner of the mining right presents proof of the agreement with the land owners or the indicivdual who has the actual possession of the land, or presents the court order granting the access to the mining area. In addition, the beneficiary of the exploration license (and the utilization permit) will also need to obtain an environmental license.

If the conclusion of the exploration report is positive, indicating technical and economic feasibility for the exploitation/production of the mineral resources, and if such report is approved by ANM, the concerned legal entity may apply for an exploitation/production concession up to one year after the presentation of the final exploration report. The applicant must present, among other documents, proof of its financial capacity to conduct the project. The exploitation/production concession is granted for an undetermined period of time.

The concession may be denied by ANM if the exploitation/production is considered harmful to the public property or if it adversely affects interests that are higher in importance than the benefit of the industrial exploitation/production.

The beneficiary of the exploitation/production concession must submit annually to ANM the Annual Mining Report (“Relatório Anual de Lavra” or “RAL”), which shall contain information such as the composition and administration of the legal entity, mining right and production status, environmental and labor issues, inputs, machinery and equipment, investments, water and energy consumption, sales and taxes paid.

During the exploitation/production period the owner of the mining right has to pay monthly to ANM a Financial Compensation for Exploitation of Mineral Resources (“CEFEM”), which is a federal royalty that has to be paid as a compensation for the economic use of mineral resources. The CEFEM is calculated on the gross revenue of mineral sales. Currently the rate applicable to iron ore exploitation/production is 3.5%. The collected royalties are distributed among the Municipalities, the States and the Federal District.

The Brazilian Mining Code provides for the possibility of transfer and assignment of mining rights (i.e. the exploration license and the exploitation/production concession). To make the transfer and assignment effective, the interested parties must file a petition with ANM requesting its consent to the assignment. The payment of a fee and the presentation of specific studies (i.e. research plan) and other documents will be required. ANM’s consent is rarely denied. However, the assignment shall only be valid after the publication of ANM’s approval in the official Gazette (“Diário Oficial”). The assignor will remain responsible before ANM for the mining right until the time of such publication.

According to Brazilian laws, any intervention in environmentally protected areas will depend on IBAMA’s or State Agencies’ authorization, and will be subject to its/their supervision. Likewise, the extraction of natural vegetation for mining exploration and exploitation/production must be authorized and done in compliance with specific environmental laws.

From the environmental perspective, the Brazilian Constitution provides that any individual or legal entity that explores mineral resources must restore the degraded environment according to the technical solution required by the competent authority. Moreover, depending on the activity to be performed and the impact that it may cause to the environment, it is also necessary to have a special license and/or an authorization for the exploitation/production phase.

The environmental licensing is an administrative procedure by means of which the Brazilian government seeks to balance the economic development with the sustainable usage of natural resources, analyzing the conditions that the legal entity (or individual) proposes to install and operate the activity.

According to Brazilian environmental laws, legal entities and individuals that may effectively or potentially cause negative impacts to the environment are not allowed to operate without a specific license. In the absence of such license the legal entity may be (temporarily or permanently) closed by the governmental authorities and be subject to various penalties (including heavy fines). The legal entity or individual must be registered before IBAMA and the State environmental agency.

Based on the description of the activities to be developed, the licensing agency will evaluate the circumstances and the technical consequences of the project for its approval.The more important types of environmental licenses are:

1. the Preliminary License (LP);

2. the Installation License (LI); and

3. the Operation License (LO),

Each one of these licenses is to be obtained at the beginning of the concerned stage of implementation of the project. In most cases, the environmental license is granted by the State Environmental Agency. Likewise, a special environmental license is necessary for any suppression or clearing of vegetation.

All individuals or legal entities that perform activities that can potentially cause negative impacts on the environment or that make use of natural resources must pay to IBAMA the Environmental Control and Inspection Fee (“Taxa de Controle e Fiscalização Ambiental” or “TCFA”). Such fee must be paid quarterly and its amount will depend on the polluting potential and number of facilities in place.

The environmental legislation related to mining activities requires basically

1. the environmental impact study (EIA/RIMA);

2. the environmental license; and

3. the plan for the recovery of degraded areas (PRAD).

The EIA/RIMA applies to mining projects of any mineral substance; the environmental license is mandatory for the installation, expansion, and operation of any mining activity under the systems of mining concession or licensing; and the PRAD requires suitable technical solutions to rehabilitate the soil and other aspects of the environment that might be degraded by mining operations. Such studies shall be presented in the exploitation phase.

In general, an environmental license is not necessary for the exploration phase, even for the performance of drilling activities, when a declaration of exemption by the environmental agency or a license for suppression of the vegetation (should it be the case) will suffice.

It's important to note that the environmental licensing scenario is currently undergoing significant reform discussions. The ANM launched Public Consultation No. 5/2024 to revise the licensing regime with aims to simplify, debureaucratize, and increase legal certainty. Additionally, Bill No. 2159/2021, which seeks to establish a General Law for Environmental Licensing, continues to be intensely debated in Congress.

Due to recent environmental disasters caused by the collapse of two upstream raised iron ore tailings dams in the State of Minas Gerais, in addition to the rules contained in Law No. 12,334, of 2010 (that provides for the national policy for the safety of dams), Resolution No. 95 of 2022, issued by ANM, established a number of additional rules for the same purpose. The most relevant provisions are:

• the construction of upstream raised tailings dams is forbidden in the entirety of the Brazilian national territory;
• the construction of dams must be carried out in accordance with safety plans;
• dams shall be subject to regular safety inspections; and
• companies responsible for the dams must have emergency action plans.

The legislation of the State of Minas Gerais on the safety of dams was changed by Law No. 23,291 of February 2019 to reflect the new rules contained in Resolution No. 4 of the ANM, which was replaced by Resolution No. 95 of 2022. In addition, said law established additional rules to minimize the risks of accidents with dams of all kinds. Some of the main rules are:

• the granting of environment licenses for the construction, installation, enlargement, or increase in the height of dams in which a community be identified as located in the self-salvage zone and capable of being affected in case of rupture of the dam is forbidden;
• the licensing of the construction, operation, enlargement, and increase in the height of dams must observe three distinct and successive phases, following the submission of the Environmental Impact Study and the Report of Environmental Impact, which are: (i) the Previous Licensing; (ii) the Installation License; and (iii) the Operation License;
• the issuance of concomitant, temporary, or corrective licenses ad referendum of the competent authority is forbidden; and
• in case of noncompliance with the requirements of the law, without prejudice to the application of administrative, civil, and criminal sanctions, the CEOs, directors, administrators, Board members, technical bodies, auditors, representatives, or attorneys-in-fact who have contributed to the noncompliance shall also be liable to such sanctions.

Also, the promulgation of Law No. 14,514 on December 29, 2022, which amended legal provisions related to mining rights, significantly reinforced its dam safety legislation.

Sustainable solutions

Finding sustainable solutions for mining is a pressing issue and an emerging trend. Water has become a critical issue for the mining sector. As ore grades decline, more water is needed to extract the same amount of ore - pushing up water requirements in the industry. Concomitantly, water demand is rising globally, driven by population growth, industrial development, and expansion of irrigated agriculture which increases per capita water consumption. The big challenge for new mining projects is to be fully sustainable in terms of water supply.

Social responsibility

The new mining projects must provide employment opportunities for the local communities and counterbalance the increasing use of technology and automation. In addition, such projects should be more and more sophisticated in order to cause minimum effects to the health and the way of life of the communities near the mine sites. Last but not least, the planning of sustainable economic activities post-closure of the mining project will also be crucial to assure the perpetuity of the nearby communities and villages.

An open dialogue among all agents involved will be key to reach such objectives.

New strategies for mining

The operational safety of mining projects has become the number one concern for all agents engaged in mining in Brazil. Due to recent environmental disasters caused by the collapse of two upstream raised iron ore tailings dams in Brazil, this construction method is now forbidden in the entire national territory.

In parallel, the need for more cost-effective technologies with a lower water demand is causing a re-examination of dry processing techniques for the beneficiation of minerals. These factors are likely to lead to more costly projects and the mining companies will have to adapt to this new reality.

Mining on Indigenous Lands

This remains a highly controversial issue with intense legislative and judicial evolution. The National Council for Indigenous Policy (CNPI) approved a resolution recommending that the National Congress and the Federal Supreme Court (STF) refrain from regulating mining in indigenous lands without guaranteeing prior, free, and informed consultation. The STF has also been active, recognizing Congress's omission in regulating the participation of indigenous peoples in the results of natural resource exploration.

Access to new mining areas

Companies will need to venture into new frontier mining areas. As world-class mineral resources in low-risk areas become exhausted, mining companies must either master new technologies for extraction and processing, or venture into frontier areas where extraction has not previously been economically viable. Logistics for projects in remote areas will increase the Capex and Opex costs, reducing the profit margins.

Modern mining workforces

Mining company employees will be required to develop new skills to adapt to modern technologies. In this context, all agents involved in this activity will have to work together to help transition workers that cannot be absorbed by an automated mining sector to new activities through retraining and transitioning programs.

Transformation of the mining image

Changing public, employee, and customer perceptions of the mining business is a critical issue. Despite the recognized contribution of the mining sector to Brazil’s economy, the industry’s reputation remains somewhat tarnished due to perceptions that mining companies contribute to environmental damage, cause negative community impacts, and sometimes engage in dubious practices.

It is necessary for the mining sector to rebuild trust with employees, investors, communities, governments, and the public, engaging in corporate social responsibility policies, adhering to voluntary sustainability standards, and passing shareholder resolutions regarding increased disclosure on climate change.