Mining Rights in guarantee – the regulations have finally arrived

On March 2, 2022, the long awaited and important resolution dealing with encumbrance and granting of mining rights in guarantee of transactions to finance mining operations and the requirements and conditions for transfer of ownership of those rights will take effect.

This refers to Resolution 90/2021 from the Brazilian National Mining Agency (“ANM”), which was published in the Official Federal Gazette last December 24^th.

The mining sector needs mechanisms to foster greater efficiency in the context of Brazilian economic development. One of the bottlenecks requiring a solution was the use of mining rights to guarantee financing transactions.

The expectation of the entire sector, based on Article 44 of Decree 9,406/2018 and the legal opinions of the Legal Department of the Ministry of Mines and Energy (CONJUR-MME) and the National Revenue Attorney’s Office (PGFN), was for the feasibility of offering mining rights in guarantee of financing, even during the Mining Exploration phase, a crucial moment to enable projects that typically demand intensive capital injection for many years. However, following the opinion of the Legal Department of the National Mining Agency (PFE-ANM), which viewed Article 55 of the Mining Code as an obstacle to this possibility, Resolution 90 restricts the offer of mining rights in guarantee to cases of existing mining concessions and mine ownership deeds.

Therefore, as Congress has been discussing changes to the Mining Code (Decree-Law 227/1967), it is very important to demonstrate to members of Congress and society at large the relevance of amending its Article 55, to specifically include other phases of mining rights as eligible for use as guarantees.

Regardless of this, the Resolution that will soon take effect can generate great opportunities, since it governs the encumbrance, registration and transfer of ownership of mining rights, clarifying aspects that have always been obscure, allowing mine operators and investors to have greater security and confidence in in this type of transaction.

In general, the Resolution defines concepts, delineates in which phases mining rights can be offered in guarantee, deals with the form of constitution, and specifies in detail the formal procedural requirements, among other aspects.   

The Mining Law Sector of SiqueiraCastro is at your disposal to provide additional information on the matter and follow up on developments to keep you informed. For any clarification, please, contact our partner Luiz Fernando Visconti (visconti@siqueiracastro.com.br).

ANM Resolution 90/2021

• Concepts:
  • Mining Rights or Titles: mining concessions and mine ownership deeds;
  • Financiers: financial institutions, companies or other entities involved in providing financing for mining projects;
  • Financing Transaction: transaction to obtain financing, in any legal modality, to support mining undertakings, their installation, expansion or regularization, including credit transactions, as well as other structured project financing transactions;
  • Mining Guarantee: a mining right encumbered to secure a financing transaction.

• What can be given in guarantee?

Mining concessions and mine ownership deeds can be offered to guarantee financing transactions.

• Forms of constituting a mining right guarantee:Mining concession: via a public or private instrument; andMine ownership deed: via a public instrument filed with the ANM.

• Means of requesting recordation of the encumbrance:

• Electronic request:
  • By the financier, or
  • By the holder of the mining right offered in guarantee, upon satisfaction of the rules on authentication and enrolment of users in the Digital Submission System of the ANM, along with the use of electronic signatures pursuant to the terms of ANM Resolution 16/2019, as potentially amended.

• What must be stated in the contract to establish the encumbrance?

• Amount of the credit, estimated or the maximum value;
  • Time frame set for payment;
  • Interest rate;
  • Identification of the mining right given in guarantee, with indication of the number of the administrative process to which it is linked; and
  • The purpose of the financing transaction, in conformity with Article 1, numeral III, of the Resolution;
  • Name of the financier, debtor and holder of the guarantee;
  • Date of recordation and of cancellation, depending on the case.

• Other provisions:
  • The contract will be considered a secret document;
  • Any person can request a certificate of the encumbrance;
  • The ANM will maintain a platform for public consultation to give transparency regarding the existence of the mining guarantees constituted;
  • During the period between the recordation and cancellation of the in rem guarantee right with the ANM (Art. 7):
    • Communications waiving the mining rights given in guarantee shall not produce effect and will not be known;
    • Lease agreements, total or partial, of the mining rights given in guarantee will not be recorded, unless there is express consent of the creditor;
    • The holder of the mining concession or mine ownership deed will continue being responsible for complying with the obligations inherent to the document and for engaging in all the acts necessary for its regularity and maintenance, subject to the sanctions established in mining legislation, including lapse of the mining right;
    • All the fitting summonses, including those related to compliance with the requirements and offer of defense in proceedings to impose sanctions, will be addressed exclusively to the holder of the mining right, among them the lapse set forth in the Mining Code and respective regulations;
    • The practice of acts or measures will not be permitted, under any pretext, set forth or not contractually, that can impair or hamper the operationalization and continuity of the activities to exploit mineral resources authorized by the governmental entity granting the mining right;
    • The practice will be permitted, in exceptional character, by the financier institution of procedural acts that aim to prevent the mining right given in guarantee from perishing;
    • The period between the recordation and cancellation of the in rem guarantee right shall extend to the period between the judicial or amicable sale of the right given in guarantee and the recordation with the ANM of the transfer of ownership thus performed.
  • The Resolution shall be subject to Assessment of Regulatory Result (ARR) for a period of three years after its publication.

• Judicial enforcement or amicable sale:
  • If the right given in guarantee is enforced judicially or sold amicably, the transfer of ownership of that right shall be perfected with the prior consent of and recordation of the transfer with the ANM, under the terms of Articles 224, 225, 231, 247 and 249 to 256 of DNPM Edict 155/2016.

• What parties can acquire mining rights given in guarantee?
  • Those that satisfy the requirements established in Article 176, §1, of the Federal Constitution and in Article 38, numeral I, of the Mining Code.

• Request for prior consent and recordation – formalities:
  • The request presented by the acquirer must be accompanied by the following elements:
    • Original or authenticated copy of:
      1. the letter of adjudication, sale or purchase at auction; or
      1. the public deed or private instrument, with notarized signature, with the consenting intervention of the creditor/financier institution, holder/debtor and acquirer/assignee, in case of amicable sale of the mining right given in guarantee;
    • Certificate or registration of the acquirer with the National Department of Commercial Registry;
    • Proof of availability of the funds or existence of a pledge of financing sufficient to carry out the plan for economic exploitation and operation of the mine in name of the acquirer; and
    • Proof of payment of the official fees covering the processing of the recordation of the transfer of the rights, as set forth in Annex II of the referred Edict.

• Legal position of the acquirer of the instrument giving the mining guarantee:
  • The acquirer of ownership of the mining guarantee assumes the legal position of the previous owner, receiving the obligations and rights of the concession or mine ownership deed in the state it is found, and shall be liable for any debts related to the period before recordation, without the need to reopen the opportunity to the parties confront each other in administrative proceedings commenced previously, with the prior owner continuing to have secondary or joint and several liability, as the case may be, for the same debts.

• What is the procedure for cancellation of the in rem guarantee with the ANM?
  • By judicial determination or instrument of discharge or release issued by the creditor, with notarized signature;
  • By reason of recordation of transfer to a third-party acquirer in a foreclosure proceeding or amicable sale of the guarantee.

• Access to information:
  • Upon request, the financier institution shall have access to the information delivered to the ANM about the security and integrity, payment of public revenues, and mineral exploration, and production of the encumbered mining right during the entire validity period of the guarantee.
    • The information shall be granted to a third-party acquirer enrolled and qualified with the ANM, between the judicial transfer or amicable sale of the right given in guarantee and the recordation, upon prior request;
    • Such information does not include that of a pecuniary character protected by intellectual property rights, as well as that referring to the production methods and techniques of the holder of the mining right.