Brazilian miners seek more incentives for exploration

Mining stakeholders in Brazil are calling for more incentives from the government to conduct exploration.

"Brazil needs more incentives to move forward with exploration, since this is the main route towards greater diversification of the country's mining production in the long term, and to understand the country's potential in minerals associated with the energy transition," Miguel Nery, director of mineral exploration and mining association ABPM, told BNamericas.

The association published an open letter requesting tax incentives for exploration shortly after the mines and energy ministry (MME) and federal development bank BNDES announced the creation of a fund of up to 1bn reais (US$200mn) to support junior exploration companies with projects related to the energy transition.

"ABPM, like the entire mining sector, recognizes that the fund created by the government through BNDES with support from MME is of great importance for strengthening Brazil in terms of attracting investments that enable the discovery of deposits and new productive sources of critical minerals. We believe, however, that in addition to the US$200mn that will be made available initially, given the growth in demand, much more contributions are necessary for the long term," said the association in the letter.

"As mineral exploration aimed at discovering deposits and developing mines is a long and costly process, to make these investments more attractive the country needs to approve initiatives such as bill No. 4,975/2023 [proposed] by congresswoman Laura Carneiro, which establishes tax incentives for mineral exploration, as in Canada and Australia," added ABPM. 

Currently, the Brazilian mining industry is highly concentrated in production of iron ore. But even iron ore giant Vale is looking to diversify, increasing investments in copper and nickel amid the demand for energy transition materials. 

The request for tax incentives comes at a time when the government is discussing a series of additional regulations for the full implementation of the tax reform approved by congress last year. 

"It’s quite difficult right now for the Brazilian government to move towards tax incentives for the sector at any stage of the activity, since the government is signaling its intention to increase tax collection," a tax lawyer at a firm that provides services to the largest mining companies in Brazil told BNamericas on condition of anonymity.

The main objective of the reform is to reduce the country's tax bureaucracy, but mining companies are concerned about an article in the law that makes room for state governments to create certain taxes on mining, in addition to those at the federal level.

MINING SMES 

Brazil’s mining association Ibram, meanwhile, is making efforts to arrange support for small and medium-sized (SMEs) firms, and not only for exploration.  

Earlier this week, Ibram president Raul Jungmann and the minister of entrepreneurship and micro and small businesses, Márcio França, held a meeting to discuss support for mining SMEs, which account for 85% of companies in the sector.

Ibram asked for more special credit lines for such companies, as well as more government measures to train workers in zones where mining takes place, which are generally remote low-income areas.