Published in the Federal Official Gazette on June 13, 2018, Decree nº 9.406/2018 provides for a new Mining Code regulation and Decree nº 9.407/2018 regulates allocation of part of the CFEM to the Federal District and cities affected by mining activities
Following actions set forth by the so-called “Programa de Revitalização da Indústria Mineral Brasileira” (Brazilian Mineral Sector Revitalization Program) released last year by the Federal Government, the President of the Republic established new rules for the mining sector by regulating (i) the Mining Code (Decree nº 227/1967), which remains in force; and (ii) Law nº 8.001/1990, recently amended by Law nº 13.540/2017 (conversion of Provisional Measure nº 789/2017).
Decree #9,406/2018
In a brief contextualization, Provisional Measure nº 790/2017, which provided for substantial amendments to the Mining Code, expired on November 28, 2017, as it was not converted into Law within the applicable legal term, and reverted the Mining Code to the previous wording. Even though the new regulatory framework to the mining sector was not approved and converted into Law, to move forward with the revitalization program for the mining sector, the Executive Branch made a few relevant amendments to the Mining Code regulation through Decree nº 9.406/2018 that are worth pointing out, to wit:
• First and foremost, article 2 of the Decree states mining activities attributes and characteristics that are relevant to application and construction of the law, establishing that “the following are foundations for development of mining activities; and II - public interest” and that “mineral deposits are characterized by: I - site inflexibility; II - finite resources; and III - pecuniary value”.
• Research Authorization: The new Decree establishes that it is possible to continue research works after expiration of research authorizations and submission of a final research report. Under these circumstances, data relative to the mines (including field works) may be considered in future plans for exploitation and planning of undertakings. In addition, the rule expressly provides for the possibility of research authorization grants to cooperatives; ANMs (acronym in Portuguese for National Mining Agency) competence to define minimum content and guidelines for final report drafting; ANMs right to submit requests to mining entities/prospectors in case any technical problem is identified in the final research report (RFP) giving an opportunity for adjustment instead of an immediate rejection of the RFP; establishes a period of time for interested parties to submit a new technical and economic study of the mines feasibility in case a decision on the final research report is on hold, subject to termination of the proceedings to review the report.
As a rule, research permits may only be renewed once. Additional renewals shall only be granted in case access to the research area is barred or in the event an environment license has not be granted or is pending, provided the mining entity/prospector has not given cause to such denial/delay.
• Annual Fee per Hectare (TAH): possibility to calculate TAH gradually considering the relevant mineral substance, length and location of the site, among other "conditions". Previously, TAH was a fixed amount calculated per hectare under the scope of the research permit.
• Authorization for exploitation prior to the grant of the mining concession (“Guia de Utilização- GU): a GU shall be issued only once, with a 1 to 3 years term, subject to renewal for equal period, per resolution to be issued by the ANM.
• Mineral Deposits Classification: to address a prior request from the sector, the new regulation also states that mineral reserves shall be necessarily classified based on internationally accepted standards for statements of findings, per resolution to be issued by the Brazilian Mining Agency.
• Mining concession application: regarding requirements to submit mining claims (including environmental license), mining entities/prospectors shall have a 60-day term to comply, renewable once for an equal period. Additional renewals shall only be granted on an exceptional basis in case failure to comply with any requirement is caused by a public authority, at ANMs discretion. The rule allows for mining claims from cooperatives.
• Mining Concession: The Ministry of Mines and Energy remains competent to grant mining concessions in general, except those relative to mineral substances governed by Law n. 6.567/1978 (clusters in particular), as such mining concessions shall be granted by the ANM (currently delegated to the DNPM, per CGU/AGU Opinion n. 33/2018, of May 17, 2018).
• Encumbrance of Mining Rights: mining concessions may be offered as collaterals for purposes of funding, subject to future ANMs regulation. Indirectly, this Decree emphasizes the lack of legal grounds for encumbrance of rights relative to research or mining claims.
• Mining Suspension: mining entities/prospectors are entitled to interrupt mining activities while their requests for temporary suspension are pending decision from the ANM. This is an important provision that offers legal stability to holders of mining rights under this circumstance.
• Availability Proceeding: failure to comply with obligations relative to the availability proceeding within the applicable term shall subject the winning party to immediate forfeiture of the right of first refusal over the area, as well as to the penalties prescribed by Law n. 8.666/1993, per future ANMs invitation to bid or resolution. The ANM shall have the right to place the relevant area to prior public offering to assess its appeal for purposes of electronic bidding.
• Easement and Expropriation: mining entities/prospectors shall be entitled to request a statement of public interest from the ANM to constitute a mining easement or to expropriate real estate.
• Mine Decommissioning: the rule expressly includes use of waste and tailing, as well as mine decommissioning within the scope of mining activities. This Decree reinforces the provisions of the Federal Constitution and environmental laws on liability of mining entities for environmental remediation of degraded areas. Title extinction and waiver shall be subject to completion of a mine decommissioning plan previously approved by the ANM.
• Penalties: contrary to the provisions of MPV 790/2017 that, during its short term, established fines of up to thirty million reais, the new Decree had to abide by the limits imposed by applicable laws and is subject to the cap on fines in the amount of R$ 3.293,90.
It is worth pointing out that normative acts issued by the DNPM remain valid and enforceable until new resolutions are issued by the ANM. The new Decree (i) shall revoke, within 180 days counted as of its publication, Decrees nº 98.812/1990 (regulating small scale/alluvial mining permits) and nº 3.358/2000 (regulating extraction registration) and (ii) its other provisions shall enter into force on the date the ANM starts its operations (still pending enactment of presidential decree) and Decree nº 62.934/1968 (current Mining Code Regulation) shall remain in force until then.
Decree #9,407/2018
Law nº 13.540, published on December 19, 2017, amended Law nº 8.001/1990 to determine that 15% of the amount relative to the Financial Compensation for Mineral Resources Exploitation (CFEM) shall be allocated to the Federal District and cities that do not hold mineral production activities within their territories but are affected by them to the extent infrastructure for railway or pipeline transport of minerals cut through their territories, or are affected by port operations involving loading and unloading mineral substances or where piles of tailing, waste dams, mineral substances processing plants and other facilities set forth in the economic mining plan, are located.
Decree nº 9.407/2018, already in force, regulates this provision, and provides for the allocation of a percentage to compensate the loss of the CFEM by cities seriously affected by the new legal provision.
Among other provisions, the new Decree establishes that from time to time the ANM shall review the amounts distributed to the Federal District and to other cities affected by mining activities, and every year shall post on its website a list of cities entitled to the compensatory benefit. In addition, the Federal District and cities affected by mining activities shall have the right to request the ANM to add other beneficiaries of such compensation to the list.
Azevedo Sette Advogados Mining Consulting team is at your disposal for further clarifications and measures on this matter.