2. Cecilia Vidigal Monteiro de Barros ceciliavidigal@xbb.com.br Direct tel.: 005511-3069-4335 MINING IN BRAZIL

3. Mining in Brazil ADVANTAGES – MINING IN BRAZIL ● favorable ecology ● political stability ● improving economic situation ● well developed mining culture ● availability of highly qualified personnel, especially in the South and Southeast regions ● no resource nationalism suppression of former preferential access to Brazilians of 1988 Constitution by 1995 amendment

4. DISADVANTAGES – MINING IN BRAZIL ● Long time to obtain environmental licenses Lack of personnel and structure at agencies: DNPM (Departamento Nacional de Produção Mineral) and IBAMA (Instituto Brasileiro de Meio Ambiente e Recursos Renováveis) well equipped in their main offices in Brasília Lack of qualified personnel and structure in each State Mining in Brazil

5. Lack of personnel and structure at State authorities: delay in grating of licenses by State authorities (research/“previous license”/“ installation license”/“operation license”) applications increasing agencies losing personnel to private companies due to low wages Mining in Brazil DISADVANTAGES – MINING IN BRAZIL

6. environmental regulation x 1967 Mining Code ● Conflicting legislation conflicting Requirements from Federal, State and Municipal authorities conflicting Public Attorney's Office opinions with requirements from environmental authorities; ● Lack of high qualified technicians qualified technicians on the South and Southeast regions only large companies have high-qualified personnel in sufficient number DISADVANTAGES – MINING IN BRAZIL Mining in Brazil

7. ● Lack of Governmental policy and regulation lack of regulation on indian territory – bill of law under discussion → indians request 3% on net income plus indemnification for damages mining in the border → restrictions to foreign investments mining in caves no policy by Brazilian Federal Government since the decade of 80 to stimulate local production of non-ferrous metals DISADVANTAGES – MINING IN BRAZIL Mining in Brazil

8. ● Potential barriers due to social and environmental responsibility Equator Principles standards guiding bank’s investments in developing countries over 80% of global finance investment capacity covered by the Principles World Bank (IFC) investments subject to Equator Principles competitive advantage for companies investing in social responsibility barrier for companies from less stringent countries DISADVANTAGES – MINING IN BRAZIL Mining in Brazil

9. ● Lack of geological data small number of areas available to exploration with quality geological data areas with quality geological data are usually controlled by a few large companies data on extensive areas of the country are scarce ● Tax issues “Environmental Compensation” – current legislation (Law No. 9.985/2000) sets out a minimum of 0,5% of the total investment cost, but sets out no cap Law does not prevent Federal, State and Municipal Government from fixing a cap; the State of Bahia sets out a cap of 0,5% and the State of Minas Gerais 1,1% DISADVANTAGES – MINING IN BRAZIL Mining in Brazil

10. ● “Brazil Risk” in general Tax bureaucracy Difficult access to financing at adequate interest rates Transport-related costs (mainly highways) Port-related costs Customs bureaucracy DISADVANTAGES – MINING IN BRAZIL Mining in Brazil

11. BIODIESELBIODIESEL

12. Biodiesel ● Biodiesel is the biofuel deriving from renewable biomass or animal fat used in transportation, power generators or generators for cogeneration of power and heat, engines etc BIODIESEL IN BRAZIL ● Wide range of oilseeds: castorbeans soybeans palm oil sunflower babassu palm cotton

13. Biodiesel BIODIESEL IN BRAZIL ● Rationale behind the PNPB: growing demand for fuels from renewable sources captive market expansion of internal and external markets Brazilian potential to meet part of demand foreign exchange ● National Program for Biodiesel Production and Use (PNPB) December 6, 2004

14. addition of value to agricultural activities – competitive advantage to Brazil uninterrupted growth of demand for agroenergy, as opposed to most agrobusiness products sustainable development of Brazil’s poorest regions social inclusion – engagement of small farmers of Brazil’s poorest regions in the biodiesel value chain reduction of regional inequalities Biodiesel BIODIESEL IN BRAZIL ● continuation - rationale behind the PNPB:

15. Biodiesel TAX MODEL ● cap on Federal taxation on biodiesel – taxes on mineral diesel ● reduction up to 31% - producers not family farmers ● reduction up to 68% – Biodiesel producers that acquire raw material from family farmers (anywhere in Brazil) ● granting of total or partial Federal tax exemptions ( CIDE, PIS/PASEP and COFINS ) to biodiesel producers that support family farmers ● reduction up to 100% in Federal taxes - purchasers from family-based producers of: palm oil in the North Region castor oil in the Northeast and in the semi-arid region

16. Biodiesel SOCIAL FUEL STAMP ● Social Fuel Stamp = Certificate issued by the Ministry of Agrarian Development ● Entitlement to: certification of origin/brand name of Biodiesel total or partial reduction of Federal taxes participation in purchase auctions ( four auctions were held – 840 million liters of biodiesel purchased)

17. Biodiesel SOCIAL FUEL STAMP ● Requirements: ● purchase of minimum percentages of raw materials from family farmers 10% from North and Mid-West regions 30% from the South and Southeast regions 50% from the Northeast and de Semi-arid regions ● entering into contracts with family farmers ● provision of technical assistance to family farmers

18. Biodiesel MANDATORY MIX ● from January 2008 – “B2 mix” – 2% biodiesel and 98% diesel ● from January 2013 – “B5 Mix” – 5% ● higher percentages up to B100 (pure biodiesel) – authorization by ANP – Petroleum, Natural Gas and Biofuels National Agency ● Europe: 10% biofuel (biodiesel or ethanol) until 2010

19. Biodiesel LINES OF CREDIT ● Funding for equipment/plants or planting of raw materials at reduced rates, longer grace and amortization periods BNDES (National Bank for Economic and Social Development) PRONAF (National Program for the Strengthening of Family Farming) Banco do Brazil – “BB – Biodiesel line of credit” other official or private banks

20. Biodiesel AUTHORIZATION ● Production and sale of biodiesel in Brazil require: Authorization from ANP (National Agency for Petroleum, Natural Gas and Biofuel) Registration with the Federal Revenue Secretariat (SRF) of the Ministry of Finance