Brazil's federal government opposes the mining of rare earths in Minaçu, in northern Goiás state, by the American company USA Rare Earth and is studying ways to reverse the deal, according to reporting by G1 published on Tuesday (26). The company signed an agreement to buy Serra Verde, which runs the only rare earth mine in production in Brazil. The transaction still needs approval from shareholders at a meeting scheduled for Friday (28).

The deal

The purchase of Serra Verde was announced in April for US$ 2.8 billion, about R$ 14 billion, according to Metrópoles and Poder360. The miner holds all eight of Brazil's rare earth mining concessions, all of them in Goiás, Poder360 reported. The two companies plan to build a complete magnet production chain, from extraction to manufacturing, outside Asia, the region that dominates that market, G1 reported. The clause most criticized by the government is the requirement that 100% of initial output be shipped to the United States.

The deal moved forward with American public money. The US Department of War announced on Monday (24) a US$ 750 million investment, about R$ 3.9 billion, in a fund created to buy the output of the Pela Ema mine, plus a US$ 300 million purchase commitment, according to Poder360.

"This strategic partnership will establish a secure supply chain for rare earth elements critical to national defense and economic security," the US government said in a statement.

Government officials told G1 that a strategy to reverse the contract is under study. The assessment is that rare earths sit in the subsoil and therefore belong to the Union, the legal term for Brazil's federal patrimony. In that reading, the company would hold no acquired right to exploit those resources once Congress passes a bill creating a National Policy for Critical Minerals. If the text stalls, the government weighs taking the case to court. The Ministry of Mines and Energy, however, has told the Chamber of Deputies that the transaction does not require prior federal approval because it changes the company's shareholding control without formally transferring the mining concession, according to Poder360.

Vote in the Senate

The bill creating the national policy was approved by the Chamber of Deputies, Brazil's lower house, in May and awaits a Senate vote. The text creates the National Council for the Industrialization of Critical and Strategic Minerals (CIMCE), a body linked to the Presidency that would set sector guidelines and validate mining projects. After meeting with President Luiz Inácio Lula da Silva on Tuesday, Senate President Davi Alcolumbre announced that the bill should be voted on next week.

Lula had already defended regulating the sector on August 17, during an event in Amapá state, according to Metrópoles.

"We will not let anyone from abroad come here to exploit our minerals, because we want to transform them here," Lula said.

Lula's ministers say the policy should encourage domestic private investment and that foreign capital will be accepted if the minerals are processed in Brazil into high-tech products such as chips, batteries and defense equipment, according to G1.

Two dates will define what happens next. Shareholders vote on the deal on Friday (28). The Senate is expected to vote on the critical minerals bill next week. Without the law, the council will not be installed in the short term, and the Planalto, the seat of Brazil's presidency, is preparing a court challenge to try to reverse the mining in Minaçu.