Minas Gerais to use niobium credits to pay salaries, expenses

The audit court of Brazil's Minas Gerais state authorized the local government to sell credits to which it would be entitled in operations related to the state-run multi-business company Codemig, which develops the state's mineral reserves.

The credits in question correspond to the division of profits from niobium exploration in the city of Araxá, which accounts for almost all of Codemig's revenues, newspaper Hoje em Dia reported.

The authorization emerged from a dispute between Minas Gerais and local producer CBMM, partners in the niobium exploration at the Araxá mine.

Codemig said it would have been harmed in the division of profits since the niobium content and the volume of mined material would be higher to the state than to CBMM.

The state legislature guaranteed on December 4 the maintenance of state rights over the portion of the profits from niobium exploitation that is now destined for Codemge, a Codemig company spun off in February 2018.

However, the spin-off was later vetoed by the national department of business registration and integration (Drei) and is currently subject to legal challenge, according to Minas Gerais state assembly's news service.

Currently, 75% of the profits on niobium exploration in Araxá goes to CBMM, with the remaining portion hitting the government's coffers. The latter portion is split between Codemge (51%) and Codemig (49%).

According to the Minas Gerais state management and planning department (Seplag), after approval, the government initiated contacts with the São Paulo stock exchange B3 to carry out the credit sale operation, but bureaucratic procedures need to be performed at the B3.

The proceeds from the sale of niobium credits will be used to pay salaries of government officials and other expenses.

CBMM

CBMM reported a 2.8bn-real (US$680mn) profit in 2018, when the company produced 100,000t of niobium.

It extracts niobium from an open pit mine in Araxá, which is the world's largest deposit of pyrochlore.

The company also owns a refining plant and metallurgical production facilities in the Araxá area and supplies 82% of world demand for niobium products.

Brazil was the world's leading niobium producer with 89% of global output in 2017, followed by Canada with 9.4%, according to latest data from the US Geological Survey.