Mining auctions and the value of geological information: an empirical assessment for mining permissions in Brazil

Resumo

Since 2020, Brazil has revised the procedure for offering areas for mining that were previously owned by others. Before the new procedure, areas were offered based on the best technical project, a process considered slow and subjective. It has transitioned to a model of public offering and simplified auction. This article analyzes the first five rounds conducted since 2020, which offered 16,480 areas, with 9,643 areas awarded and 6,837 failing. The primary objective is to examine how geological knowledge affects the attractiveness of mining areas, considering the recognized challenges in valuing mining assets. Using logistic regression, the results show that areas with greater geological knowledge are 2.5 times more likely to be sold and that certain substances, such as gold and limestone, in addition to being more attractive, receive higher bids than others. The article contributes by providing a better understanding of the determinants of auctions, enabling the Public Administration to plan which areas will be offered in the next rounds, as well as supporting the decision to allocate public resources in search of greater geological knowledge in the Brazilian territory. For the private sector, the study can identify the most attractive areas, reduce information asymmetry, and support the calibration of bids, avoiding overestimation of the value of the area and the occurrence of the winner's curse.