Insight
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.
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 the following images and tables:
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Brazilian producers total cash cost under different royalty charge modelsTotal cash cost by country and royalty contributionsTotal royalty payments under different charge modelsRoyalty payments by company under different charge modelsShare of total royalty payments by company under the current charge model
What's included
This report contains:
