Brazilian courts are consistently ruling in favor of mining companies requiring the National Department of Mineral Production (“DNPM”) to issue new authorizations for exploration and exploitation of mining resources. Since November 2011, the agency has suspended the issuance of new authorizations in anticipation of the new mining regulatory framework currently under discussion in the National Congress.

After four years of discussions, Bill of Law no. 5,807 was presented to the National Congress on June 19th, 2013, and if approved, will set forth the new regulatory framework of the mining sector in Brazil. Despite all the expectation and urgency to vote on new rules for the sector, it was requested that Bill of Law no. 5,807 be removed from the urgency regime in progress. It is uncertain when such Bill of Law will be voted and approved.

Since November 2011, the Government has decided to suspend the issuance of mineral exploration and exploitation authorizations. The intention was to wait for the promulgation of the new mining law so that the requested areas were granted under the new regime. Notwithstanding, the waiting is causing serious problems for mining companies, which have been holding back investments.

Currently, approximately 4,300 exploration and exploitation requests are waiting for authorization by the DNPM. Among them, 120 mining deposits reportedly have complied with all the requirements to begin their exploitation activities, including the environmental permitting, but lack the necessary authorization from DNPM. Such delay in the investments is highly concerning and has caused a decrease in the production of iron ore.

Facing such expressive numbers, mining companies are starting to seek Courts for a solution. Several lawsuits have already been decided in favor of the mining companies, forcing the DNPM to take action on pending applications for authorization. In a recent decision, the Regional Federal Court has decided that “it has been proved in the records that the Public Administration failed to provide an answer of any sort to the plaintiff about its request for authorization” and, therefore, “it must be determined that the authority analyzes the requests and renders the appropriate decision.” It is expected that the number of lawsuits will grow as Courts continues to rule in favor of mining companies.

For inquiries regarding this legal update, please contact Francisco Rohan or Guilherme Vieira da Silva.