Brazil court backs crackdown on illegal gold mining in Amazon

By Ricardo Brito and Lisandra Paraguassu

BRASILIA (Reuters) – A Supreme Court judge backed a government move to crack down on illegal gold mining in Brazil, suspending a legal practice of buyers accepting the origin of the precious metal with paper receipts based on the “good faith” of the seller.

The injunction by Justice Gilmar Mendes gave the government 90 days to adopt a new regulatory framework for the gold trade to stop the sale of gold mined illegally from indigenous lands and other environmentally protected areas.

“This spurious consortium formed by illegal miners and criminal organizations must be stopped as soon as possible,” Mendes said in his ruling late on Tuesday.

The decision, which goes into effect immediately but needs approval by the full court, gives support to leftist President Luiz Inacio Lula da Silva, who is facing pressure from right-wing politicians to drop a crackdown on wildcat gold miners.

The presumption of “good faith” in the gold supply chain since 2013 helped to obscure the true origins of Brazilian gold exports, roughly half of which are now estimated to be mined illegally.

The previous government of President Jair Bolsonaro eased environmental protections and encouraged wildcat mining in the Amazon rainforest. A surge in illegal mining on the Yanomami indigenous reservation caused disease and malnutrition that led the Lula government to declare a humanitarian crisis.

The government has moved to establish stricter rules for the gold trade, proposing to end the “good faith” practice and new legislation that would require electronic tax receipts for the buying and selling of the metal.

Justice Minister Flavio Dino told Reuters on Wednesday that the text for the government‘s new regulations of the gold industry should be ready next week for Lula’s final review.

Last week, Brazils tax authority mandated electronic tax invoices for the trading in gold that is declared a financial asset or a foreign exchange instrument, helping to curb the trade in illegally mined gold when it takes effect on July 3.

In 2021, 54% of Brazils gold production, or 52.8 tonnes, had clear signs of having illegal origins, according to Instituto Escolhas.

The Brazilian Institute of Mining (Ibram), which represents gold mining companies such as AngloGold Ashanti Ltd and Yamana Gold Inc, as well as multinational giants such as Vale, Rio Tinto Ltd and BHP Group Ltd, said 20% of Brazilian gold had no declared origin in 2021, citing data from the National Mining Agency.

(Reporting by Ricardo Brito and Lisandra Paraguassu; Writing by Anthony Boadle; Editing by Brad Haynes and Jonathan Oatis)