Brazil to raise mining royalties, set up new regulator

RIO DE JANEIRO/BRASILIA, July 24 (Reuters) - Brazil's government will announce an expected increase in mining royalties and the creation of a new agency to regulate the industry in a bid to inject new life in Brazilian mining, two sources with knowledge of the matter told Reuters on Monday.

The sources gave no details of the royalty increases and said they would be put into effect by temporary decree that would have to be approved later by Congress.

The new agency will replace the National Department of Mineral Production, known by its initials DNPM, a bureaucratic office accused of failing to effectively monitor the industry and enforce environmental and other regulations.

"Some mining code rules will change," one of the sources said, requesting anonymity.

The Mining and Energy Ministry said President Michel Temer would announce a plan to "revitalize" the mining industry on Tuesday.

Brazil has tried to modernize mining regulations dating from 1960, but a bill drawing up a new mining code has been stalled in Congress for years, creating uncertainty in the industry and discouraging investment.

Political turmoil and a collapse in commodity prices impeded the advance of reforms. But efforts to control a bulging budget deficit has led the government to focus on raising royalties.

Officials said in December that the government would break the bill into three pieces whose passage can more easily be negotiated through Congress: the creation of a new regulator, government revenue from the sector and rules governing mineral extraction.

Earlier this year, Brazilian media reported that the government planned to introduce a bill to set a flexible royalty rate for iron ore that would be between 2 percent and 4 percent depending on international prices.

The current iron ore royalty rate is 2 percent. (Writing by Anthony Boadle; Editing by Cynthia Osterman)