OVERVIEW ON MINING RIGHTS IN BRAZIL
| Jurisdiction | Derecho Internacional |
(Nov 1997)
OVERVIEW ON MINING RIGHTS IN BRAZIL
Roberto N. P. de Cillo
Tozzini Freire Teixeira e Silva
Sç Paulo, Brazil
1. MINING ACTIVITIES
According to the Brazilian Federal Constitution, the mineral resources and the hydraulic power sources are deemed to be owned by the Federation. As a result of such ownership, they can only be explored under an official permit granted by the federal government1 . The control and inspection of the mining activity is made by the "Departamento Nacional de Produçço Mineral" (shortly, "DNPM"), a governmental agency and a bureau of the Ministry of Mines and Energy.
The Decreto-Lei No. 227 passed on February 28, 1967 (the "Mining Code"2 , regulated by the Decreto 62934 issued in July 2, 1968, which sets the specific rules for the Mining Code), in accordance with the provisions of the Federal Constitution, created mining responsibilities relating to, among other things, the manner the mineral deposits are exploited, the health and safety of workers, the protection and restoration of the environment, the pollution prevention and the promotion of the health and safety of local communities where the mines are
[Page 2E-2]
located3 . The Mining Code also imposes certain notification and reporting requirements4 .
In addition to taxes levied on minerals extracted that are exploited, mining companies are subject to certain financial obligations, including (i) compensation to the federal government, state and municipality in which the mine is located, (ii) the payment of compensation to landowners for damages and losses of income caused by the use and occupation of their land in connection with mining activities, and (iii) requirements to share mining production with landowners in the case of mining on private lands5 .
2. MINING CLAIMS
The Mining Code sets forth the conditions to be fulfilled by the applicant, in order to obtain an authorization to proceed to the preliminary researches.
Applications for prospecting are filed in the DNPM and are the first step towards the procurement of an exploration permit.
[Page 2E-3]
The exploration permit, once granted, gives the applicant the right to explore the area covered by the permit.
2.1. Exploration
Exploration comprehends the execution of the necessary works for the definition of the deposit, its evaluation and the determination of the feasibility of its economic utility6 , which shall result from a preliminary analysis of production costs, freights and of the market.
An exploration permit application must be supported by an exploration plan and must comply with certain other requirements7 . Providing the area of interest is not already covered by a pre existing application or exploration permit and all requirements are met, the DNPM will normally grant the permit on a priority of application basis8 . Applications are sequentially numbered and dated on filing in the DNPM. Companies are given a period of sixty (60) days after filing to supply additional information that may be required9 .
The exploration permit is granted by the General Manager of the DNPM, indicating the real estates included in the area under exploration. The area must be defined by its location, boundaries and surface extension in hectares10 .
Exploration permits are granted for a maximum period of three years, renewable at a reasonable request presented sixty (60) days prior to its final term, provided that such renewal shall be authorized by the General Manager of the DNPM11 .
The exploration must begin within sixty (60) days from the issuance of the permit and must not be suspended for more than three (3) consecutive months or one hundred and twenty (120)
[Page 2E-4]
non consecutive days12 . Otherwise, the DNPM shall be entitled to penalize the permit holder13 .
The DNPM must also be reported any changes in the exploration plan, including the interruption of works. Whatever may be the result of the exploration, the prospector is obliged to submit the report on the works undertaken within the period of the authorization14 . Should prospector fail to present the report mentioned in the previous paragraph, it will be subject to a pecuniary fine to be imposed by DNPM15 .
Once the report is approved, the explorer has one year to apply for a mining concession. If explorer does not apply for the mining concession, his right will lapse and the Government will be free to award the work to a third party applying for it16 .
2.2 Mine Working: Mining Concessions
Mine working could be understood as the combined coordinated operations, having in view the industrial utilization of the deposit, from the extraction of the profitable mineral substances that it contains to the processing thereof17 . The application must include a mining plan and an economic feasibility analysis18 .
After the concession is published in the Official Gazette, the mining company has ninety (90) days to request the possession of the mineral lode or deposit to be mined19 and six (6) months to start the preparatory work contemplated in the mining plan20 . Once the mining has started, it may not be interrupted for any
[Page 2E-5]
period longer than six (6) consecutive months21 , otherwise the concession may be revoked. The mining company is also required to submit to DNPM's review an annual a report on the activities and performance of the mining company22 .
A mining concession gives the mining company the right to extract and process the minerals contained in the deposit, in accordance with the plan approved by the DNPM and also to commercialize the mine production. The mining company has the ownership of the mine production and the mining concession enables its holder to exploit the mine deposit until it is exhausted, generally with no fixed term. The holder of a mining concession is also entitled to sell or lease the concession, subject to the approval of the Government.
Once a mining concession is granted, a mining company is required to obtain an operating permit for each mine. The operating permit is renewed annually subject to compliance with environmental matters.
3. SPECIAL PROVISIONS
There are special provisions whenever the mining activity is performed on sites located along the frontier areas, or whenever the deposit is located inside an Indians protection area23 .
3.1 The Indian Areas
According to the Brazilian Federal Constitution24 , an authorization from the National Congress is required whenever the mining property is located inside an Indians protection area and the Indian community will have the right of participating in the results of the mining. The national foundation for Indian protection, known as FUNAI, should also evaluate the impact of the mining activities toward the Indian community. In any case there are also provisions regarding environmental protection under the authority of the IBAMA, a governmental agency.
[Page 2E-6]
3.2 The Frontier Areas
The Federal Constitution issued in 1988 originally determined that the permit for mineral exploration could only be granted to Brazilian citizens or to Brazilian companies with national capital25 , meaning that its control and power of management would have to be in the hands of individuals residing or domiciled in Brazil. This provision was changed by Constitution Amendment No. 6, issued on August 15, 1995. Thus, mining activities can be generally performed by any company established according to Brazilian laws and having its head office and management in Brazil.
Although the Federal Constitution has suffered several changes, the lower laws are still effective whenever their provisions do not oppose to the constitutional regulations. Basically, the provisions about mining activity can be found in the Mining Code.
Frontier areas are deemed to be the internal area of 150 Km of extension, parallel to the national boundary26 . In addition, Section 38, Sole Paragraph, of the Mining Code states that:
"Presentation of a proof of consent is compulsory, which consent is to be obtained from the International Boundary Areas Special Committee, whenever the mining site is within area under its jurisdiction."
DNPM will directly consult with the National Defense Council when the claims are located within 150 km from the Brazilian international boundaries (DNPM, IN Regulation 01, 1983, Item 5.3).
Section 91, III, of the Brazilian Federal Constitution gives power to the National Defense Council27 :
"to propose the criteria and conditions of utilization of the areas that are fundamental to the security of the
[Page 2E-7]
national territory, and to express an opinion about the effective usage, within the International Border areas, on matters related to preservation and exploitation of natural resources of any kind";
According to Article 3 of the Law No. 6,634, exploration and/or exploitation and even the formation of a company branch within these areas is only allowed by special permission of the National Defense Council. The By-laws of such companies must clearly define that:
a) at least 51% (fifty one per cent) of the capital stock shall be owned by Brazilians;
b) at least 2/3 of the employees shall be Brazilian;
c) the management of the company shall be exercised by Brazilians, provided that such Brazilian managers shall always have the main powers in connection with the company.
Entities incorporated under the form of corporations shall have it set forth in their By-laws that the shares representing the capital stock must be in non-bearer form28 .
In order to file mining claims, the...
To continue reading
Request your trial