The new regulatory framework for the mining sector will include bidding processes for areas containing the so-called "rare earths," a group of 17 chemical elements used in the manufacture of various industrial components such as electric motors, fluorescent lamps, batteries, magnets, catalysts, and military applications. Under current rules, all mining areas are offered to companies that first submit applications to the National Department of Mineral Production (DNPM). The government will revise these criteria for issuing mining rights by shifting to auctions for these areas. The Ministry of Mines and Energy (MME) believes this change will encourage continuous exploitation of deposits while curbing speculation surrounding mining titles. Many companies – and even individuals – can hold exploration and mining authorizations for decades without using them, fueling a parallel market for selling these titles.
The auctions will not be limited to rare earths. The new code will propose creating special exploration areas for minerals deemed strategic by the government, such as phosphate, potassium, and lithium mines. Yesterday, in Washington, MME Minister Edison Lobão assured that the anticipated mining code text will be unveiled within 15 days.
The government's legislative proposal is anchored in four main changes. Firstly, it abolishes the DNPM, transforming it into a regulatory agency, the National Mining Agency (ANM). Secondly, it will set deadlines for companies that have been granted mining rights to conclude their exploration and commence production. Thirdly, it addresses the sector's tax burden by adjusting the rates of the Financial Compensation for Mineral Exploration (CFEM), the royalty paid by mining companies. Lastly, the government intends to establish the National Mineral Policy Council (CNPM).
Interest in rare earth exploration has intensified in the past three years. Until 2009, the DNPM had received only 28 requests from companies regarding the research and extraction of these minerals. By 2010, there were 53 requests, escalating to 92 requests the following year. According to data obtained under the Access to Information Act, by December 2012, the DNPM had received 199 research requests. Recent enthusiasm for rare earths is directly linked to China's role in the global market for these minerals. China owns approximately 48% of the known rare earth reserves and accounts for 97% of global production. The Chinese Bayan-Obo mine alone produces about 45% of the global output. However, due to increased domestic consumption, China's Ministry of Land and Resources has progressively restricted export quotas. In 2005, China's total export quota was 65,000 tons. By 2009, it had dropped to 48,000 tons. In 2011, China only released 30,246 tons of rare earths.
Restrictions on rare earths prompted international reactions, leading European Union countries, along with the United States, Mexico, and notably Japan, to approach the World Trade Organization (WTO) to challenge Chinese protectionism. An immediate consequence of this movement was the revival of exploration projects in countries such as the United States and Brazil.
Despite the numerous research requests submitted to the DNPM, there is currently no effective exploitation of rare earths in Brazil, although the country dominated this technology until the mid-1980s. A report from the Federal Court of Accounts (TCU) indicates that 18 projects hold mining permits for rare earth extraction, all located in Minas Gerais and owned by Vale, the mining company. However, these projects have not commenced operations because, according to the court's report, they lacked economic viability following the issuance of the mining permits. Nearly half of the research requests to the DNPM target Bahia, followed by Tocantins and Goiás.
The international rare earth market is estimated to be worth around $3 billion, a figure expected to double by the end of this decade. Japan is the largest importer, followed by the United States, Germany, France, and South Korea. (Contributed by Juliana Ennes, for Valor, from Washington)
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