Igor Utsumi

Igor Utsumi

Staff Writer
The Brazil Business


Gold Mining Market in Brazil

Igor Utsumi

Igor Utsumi

Staff Writer
The Brazil Business


Searching for gold was once Brazil’s most important economical activity, but years of exploitation have lead to depleted reserves of this resource. This article will show the current market for this activity.

Latin America was one of the most promising territories during the 16th and 17th century when the matter was looking for gold. Spain widely benefited from its colonies during this period, while Portugal only found and explored the gold present in its Brazilian colonies in the 1700s.

At that point, many individuals went to the state of Minas Gerais to extract gold. Intensive exploitation was responsible for exhausting the mines in this region.

In the 20th century, new mines were located and gold panning became the chance of a lifetime for many Brazilians. The mine of Serra Pelada, for example, located in the Brazilian state of Pará, was once the largest active open mine in the world.

Once again, the predatory exploitation led to an exhaustion of the mine, and gold panners started looking for different economic activities. Nowadays, the biggest amount of gold from Brazil is explored by large multinational companies, but there are still some individuals trying their luck in this activity.

Current Market Size

According to the United States Geological Survey (USGS), Brazil has one of the 10 largest global gold reserves, and is currently ranked as the 11th top producer in the world. USGS estimates that Brazil produced 75 million metric tons of the mineral in 2013.

This production is growing: in 2011, Brazil was the 12th top producer. If the Brazilian government’s intent of doubling the national production becomes a reality, there is the possibility that the country can reach the 7th position by 2017.

In order to achieve this growth, investments are expected, from both multinational companies and the Brazilian government. The expectation of this sector is that an investment of USD 2.4 billion has to be made by the end of 2015.

One of the main explanations for this growth is the recent global economic crisis. Gold is seen as a safe investment, and this mineral has been highly valued ever since.

Main Exploring Areas

The Brazilian law states that any mineral riches found in Brazil are owned by the Federal government. Therefore, the landlord that owns a property with gold, for example, has no right over that mineral before obtaining licenses and authorizations.

Gold in Brazil can be found in different types of locations, like riverbeds, rocks and ancient volcanic sediments.

One of the most traditional regions for gold exploration in Brazil is known as Quadrilátero Ferrífero, or Iron Quadrangle. This area is located in the south-central region of the state of Minas Gerais, involving municipalities like Itabirito, Itabira, Mariana and Ouro Preto. Some of these cities had their gold reserves completely exhausted because of the extraction during the 18th and 19th century, but there is still some gold panning going on there.

The Amazon currently plays an important role in the gold mining business. However, there are many obstacles in this region, since areas with large quantities of this mineral are protected either by environmental legislation or the presence of native Brazilians.

Other main areas for the extraction of gold in Brazil are:

  • The state of Bahia, especially near the cities of Itapicuru and Jacobina
  • The state of Goiás, in cities like Crixás and Goiás Velho
  • The state of Pará, which is an important pole for the gold extraction, with big mines in cities like Andorinhas, Inajá do Sul and, of course, Serra Pelada
  • Other northern states, like Rondônia and Tocantins

Types of Gold Production

According to Brazilian law, foreigners are not allowed to work directly as gold panners, since only individuals born in Brazil with certain authorizations are able to exercise this activity. But foreigners may join this market through a different way.

An authorization might be conceded by the National Department of Mineral Production — DNPM, or Departamento Nacional de Produção Mineral — if someone believes that a certain property has gold in its subsoil.

If this authorization is conceded and the owner of the area that is to be explored also agrees with the whole process, the interested party has a period of six months to arrange the necessary equipment and structure to do so. After the exploration begins, the landlord receives its financial compensation: landlords receive half of the amount that the exploring company owe to the Federal government. In other words, if a company pays BRL 1 million to the government per month, for example, it must also pay BRL 500,000 to the landlord.

Equipment Used In Brazil

A large percentage of the gold panners in Brazil are illegal. They usually live in bad conditions, close to gold fields, and pan gold in the hope of making a living. That is also the reason why they cannot afford to wait a long time to obtain a license or afford more expensive specialised equipment. This results in the use of substandard practices and, sometimes, hazardous materials.

Other gold panners use machinery, like engines with water pumps and hydraulic excavators, which are primarily used in the exploration of riverbeds. When it comes to larger mines, that require deeper exploration, advanced machines, excavators and dynamite are commonly used.

Taxes & Fees

Gold production is affected mainly by two different fees: royalties and regular taxes.

The royalties — formally known as CFEM, acronym for Compensação Financeira pela Exploração de Recursos Minerais — are charged monthly on top of the net revenue obtained from mineral production and sale. The aliquot charged for gold is 1% on top of the net revenue, being divided as follows:

  • The Federal government collects 12% of the charged amount
  • The government of the state where the gold field is located collects 23% of the charged amount
  • The government of the city where the gold field is located receives 65%

The main regular taxes that apply to the gold extraction activity are:

  • ICMS, which aliquot varies from state to state, but usually staying between 17% and 19%
  • Cofins, which is variable according to the tax regime which the company operates under
  • PIS, which also depends of several factors