Sao Paulo (Platts)--21Nov2012/159 pm EST/1859 GMT

The Brazilian government's attempt to improve regulation of iron ore mining has added to misinformation in the market and increased uncertainty for miners, potentially delaying investment in the sector, according to market sources.

And they said the new code is largely being discussed behind closed doors and without miners' input.

Elmer Prata Salomao, former director of the Brazilian Department of Mineral Production and current president of the Brazilian Mining Research Association, said details regarding the new code have been few.

"Acquiring minimum information of what is intended to be done is like assembling a puzzle," Salomao said. "We do not agree with this authoritarian attitude and it is time to reopen the dialog with mining sector."

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Officials with the civil house ministry, which is heading the government discussions on the code's development, declined comment other than to say studies are in their "final stage."

One of the measures being considered appears to be the introduction of a new process for granting mineral research rights. But it is unclear whether winners would be chosen according to the highest bidder or after an analysis of the economics and scope of each interested party's project.

"It is too costly to acquire land without knowing what is there," said the legal general manager of a major mining company.

The legal director of a Brazilian subsidiary of a global company said he expects such a measure would be based on the analysis of worthy projects. "It doesn't make sense any other way," the source said.

Another source said "both ways seem especially harmful for junior companies, because their business model is to prospect land and then raise capital to explore."

"Paying for the land before ... is prohibitive and economic analysis may benefit only the big companies," the source said.

Salomao added that because Brazil doesn't have sufficient geological mapping, the "government doesn't have the capacity" to make determinations within a reasonable time-frame.

But at least one junior miner preparing to explore an area in Brazil said it doesn't believe a change in methodology will have much of a negative impact. "Tenders based on project feasibility would not be harmful," a director of the miner said.

--Jose Guerra, jose_guerra@platts.com

--Edited by Jeff Barber, jeff_barber@platts.com

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