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Royalty increases in Brazil: a renewed burden for iron ore miners' cost competitiveness

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Report summary

Brazil's new mining code may finally leave paper in 2018. The so-called Novo Marco Regulatório da Mineração is set to be forwarded to Congress for voting by the end of April , according to Fernando Coelho Filho, Brazil’s Mines and Power Ministry. The proposal intends to increase the current royalty charge for iron ore producers from 2% over net revenue to between 2% and 4% over gross revenue. Based on a 62% Fe fines FOB price of US$46/wet tonne for 2018, our analysis indicate that this change can potentially bring between US$150 million and US$570 million of additional revenue to the local government next year. In the worst case scenario (4% royalty over gross revenue), companies such as Vale and CSN will see their total cash costs increasing by approximately 8% (to US$15/wet tonne) and 5.5% (to US$22.8/wet tonne), respectively.

What's included

This report contains

  • Document

    Royalty increases in Brazil: a renewed burden for iron ore miners' cost competitiveness

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Table of contents

  • Executive summary
  • Setting the scene
  • Miners cash cost set to increase by at least 2%
  • Brazilian royalty rates to remain a competitive advantage over Australian peers
  • Vale to remain the biggest payer

Tables and charts

This report includes 5 images and tables including:

Images

  • Brazilian producers total cash cost under different royalty charge models
  • Total cash cost by country and royalty contributions
  • Total royalty payments under different charge models
  • Royalty payments by company under different charge models
  • Share of total royalty payments by company under the current charge model

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