In another move that demonstrates govenrment fears about a wholesale take-over of domestic industries by the Chinese, the Brazilian govenrment is moving to restrict foreign participation in mining, having already imposed restrictions on land ownership. While not exactly slamming the door, proposed legisaltion leaves the door more-or-less ajar. Up to now, foreign investors have enjoyed the same rights as Brazilian investors in mining, except in border zones.
The proposed legislation will only encourage foreign investors when they agree to add sundry investments outside the pure extraction of minerals. It will introduce auctions for mining rights and perhaps lower royalties on companies that process ore within Brazil rather than just export it.
The measure is seen as an attempt to prevent Chinese companies, who are starting to arrive in Brazil in force, from limiting operations to extraction as they have done so ruthlessly in areas such as soy. China's Wuhan Iron & Steel bought a 21% stake in miners MMX Mineração e Metálicos last year for $400 million, and took over Passagem Mineração, with plans to invest $5 billion in iron ore in the latter. MMX has an annual capacity of 10.70 million tons of iron ore
Wisco and MMX are said to be close to signing a second agreement to explore an iron ore mine in Santo Antônio de Leite in central Minas Gerais, according to Belo Horizonte paper Diário de Comércio. The project includes sinter and pellet plants. The plant is a world class mine with up to 68% purity. The project may require $4-5 billion in investments, depending on whether a steel plant is included in the plans. Wisco recently signed an agreement with LLX, the logistics sister company to MMX, with plans to build a steel plant in Porto do Açu in São João da Barra in Rio de Janeiro state. Anglo American has a 49% stake in the port project too.