UPDATE 2-Brazil overhauls decades-old mining law to lure investment

(Adds Temer quote)

BRASILIA, June 12 (Reuters) - Brazil's President Michel Temer issued two decrees on Tuesday overhauling 50-year-old mining laws in attempt to draw investment to the sector and implementing rules on the collection of higher mining royalties.

The changes to the 1967 mining code include measures to allow for mining titles to be used as guarantees for financing, aimed at stimulating investment in sector and to allow miners to continue exploring for minerals while production license applications are pending, the Mines and Energy Ministry said.

The decree will also apply stricter rules to miners for the recovery of degraded areas and mine closure planning, the ministry said.

"What we are announcing today reflects the best practices internationally in mining," Temer said at a signing ceremony in the presidential palace.

"We want mining that is increasingly competitive, innovative and sustainable."

Reuters reported first on the presidential measures last week, citing sources.

The decree, which will bypass Congress, makes similar changes to the mining code that were proposed last year but failed to pass the legislature.

A separate presidential decree implements rules passed by Congress last year on the collection and redistribution of mining royalties on a variety of minerals.

The decree confirms that municipalities affected by mining that takes place elsewhere will receive a portion of the royalties, a move seen benefiting Maranhao, Rio de Janeiro and Espirito Santo states which transport vast quantities of minerals from the interior of the country. (Reporting by Jake Spring Editing by Chizu Nomiyama and Marguerita Choy)