Brazil Frontier Mining Bill Nearly Drafted

Brazil frontier mining bill nearly drafted

by Reuters, RIO DE JANEIRO, Brazil

3rd February 2006

A new law bill that could open up Brazil's mineral-rich border lands to foreign mining companies is in the final stages of preparation, a government mining sector official said.

"The government's aim is to attract new investment to frontier lands," said Paulo Ribeiro de Santana, national mining department (DNPM) adviser, estimating that this area covered 1.6 million square kilometers with 10 million inhabitants.

Rio Tinto Brasil, a wholly-owned subsidiary of UK-based Rio Tinto Ltd./Plc , expects the bill to be sent to congress any day now, with a decision "within two years."

"This will aid our planned investments in expansion," said Rio Tinto Brasil commercial director Eduardo Rodrigues, estimating that frontier lands amounted to 28 percent of Brazilian territory.

Rio Tinto operates an iron ore mine, Mineracao Corumbaense Reunida, in Mato Grosso state, 50 km from the Bolivian border.

"What is needed is an alignment between Brazilian law number 6634 of 1979 and the Brazilian constitutional amendment of 1995," Rodrigues said.

The 1979 law banned companies with more than 50 percent foreign capital mining in areas 150 km from national borders.

However, the 1995 constitutional amendment allowed foreign companies to operate in these areas via a legally registered Brazilian subsidiary.

Rodrigues said that both the 1979 law and 1995 constitutional amendment are valid, leading to conflicting interpretations of what is legally permitted.

Prior to the amendment, Rio Tinto had only a minority shareholding in the MCR mine, but purchased 100 percent of MCR's capital in 1998, when this became legally possible.

Rio Tinto Brasil has plans to expand its iron ore mining capacity at MCR to 15 million tonnes a year, from 2 million.

It also hopes to attract international partners to a pig iron and steel project at its site near Corumba.