25.07.201721:26:00UTC+00(UPDATE) BRAZIL: Government Raises Iron Ore Royalty Charge

The Brazilian government will change the calculation method and raise the rates of Financial Compensation for the Exploration of Mineral Resources (Cfem), which regulates royalties paid by companies that extract these raw materials in Brazil. The measure comes amid a growing effort by the government to meet this year's fiscal target.

The new rule provides that the royalty charge will focus on companies' gross revenues from minerals sales. Until now, compensation applied to net sales - that is, sales after taxes, transportation and insurance expenses arising from the sale.

Also, the government raised the royalties charges. For iron ore, the rate will have a 4% ceiling, and the exact level will depend on the iron ore price in international market. Before the changes, the iron ore royalty tax was at 2%.

Under the new rules - which should enter into force in November -, the fee would remain at 2% if iron ore prices are below US$ 60 per ton. If prices rise to between US$ 60 and US$ 70 per ton, the charge will increase to 2.5%. For a US$ 70 to US$ 80 per ton price range, the rate grows to 3%.

The royalty fee would rise to 3,5% it iron ore prices increase to the US$ 80 to US$ 100 per ton range, and rest at 4% when prices are above US$ 100 per ton. The government still has to define the benchmark for iron ore prices.

Other minerals will also face higher rates, as gold (from 1% to 2%), niobium (from 2% to 3%) and diamond (from 2% to 3%).