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UPDATE 2-Brazil lower house okays higher mining royalties, new regulator

(Adds approval of new mining regulator)

BRASILIA, Nov 22 (Reuters) - Brazil's lower house of Congress on Wednesday passed a bill that would boost royalty rates on iron ore by 75 percent - instead of doubling the rates as had been proposed - and later voted to approve the creation of a new mining regulator.

Under the revised plan, gold mining royalties would rise 50 percent, but potassium mining royalties would be slashed. The full Congress now faces a deadline of Nov. 28 to pass President Michel Temer's planned overhaul of mining policies.

In a vote after midnight, the lower house amended the bill that had been proposed in committee for iron ore, gold and fertilizer components.

Iron ore royalties would rise to 3.5 percent from the current 2 percent, instead of doubling to 4 percent.

The lower house maintained a provision that the royalties would be calculated off gross revenue instead of net revenue as is currently done, a move that will sharply increase collections.

The chamber also preserved an amendment made in committee allowing less-profitable iron mines to apply for a rate as low as 2 percent, a move favoring smaller miners over the likes of Vale SA and BHP Billiton Ltd.

Gold royalties would increase to 1.5 percent from 1 percent currently, instead of a proposed rise to 2 percent.

Royalties on potassium would be slashed to 0.2 percent from 3 percent, making them even lower than the 1 percent rate proposed in committee.

The changes in royalties are part of a wider reform effort launched by Temer to boost the sector and help a nascent economic recovery.

The lower house also approved a related proposal to create an autonomous oversight agency called ANM and is set to consider a third measure streamlining mining rules. Proponents argue that jointly the proposals offset higher taxes with greater regulatory efficiency.

But the three policies must be fully approved by Nov. 28 or face expiry, as Temer proposed the reforms via temporary decrees that must receive congressional approval to become permanent.

The bills on royalties and the regulatory agency will next pass to the Senate for approval.

"If (the Senate) changes it and it returns to the lower house, there won't be enough time to approve it and the temporary decree will fail," said Israel Araujo, a legislative expert who advises the Senate on mining.

Vale, as the major producer of iron ore in Brazil, would be the biggest winner if the proposal on royalties fails and the rates remain unchanged, Araujo said.

The bill on revised mining rules has yet to go to a vote in the lower house and is at greater risk of missing the deadline, he said.

Brazil collected 1.8 billion reais ($555 million) in mining royalties for 2016. The mining ministry said the initially proposed rate hikes would raise collections 80 percent. ($1 = 3.24 reais) (Reporting by Jake Spring; Editing by David Gregorio and Cynthia Osterman)