Concessions' Cancellations: A Dangerous Precedent in Mining

The cancellation of Almaden Minerals’ concessions by Mexico´s Supreme Court (SCJN) may create a dangerous precedent for the Mexican mining sector, which could result in the interruption of more projects, as well as more international lawsuits against the Mexican government.

According to experts, additional communities and NGOs want to interpose precautionary measures in mining projects in Mexico. If this happens, the mining scenario would resemble that of Guatemala, where large mining companies have suspended operations due to precautionary measures filed against them. Currently, Pan American Silver's Escobal mine and Kappes, Cassiday & Associates' Tambor gold operation have been unable to resume operations in Guatemala.

Nonetheless, Almaden and other mining companies that may be affected could seek compensation as a result of these acts, especially as Convention 169 does not impose a direct obligation on companies but rather on the State. “If the concessionaire acted in good faith, it is possible that it should be compensated for the consequences of the State's conduct," the international law firm White & Case said in a statement.

In addition to Convention 169, mining companies could also be protected by international treaties. Currently, Mexico has reached investment agreements with more than 40 countries, committing to fair and equitable treatment. As a result, these decisions could be challenged in international arbitrations.

“The decision of the Supreme Court, as well as the possible use of this precedent in other mining concessions in the country, could affect rights protected by treaties, such as the reasonable and legitimate expectations of investors who reserved resources for the country and who trusted the application of a specific legal and commercial framework. This could give rise to possible complaints at international courts within the framework of the treaties to which the Mexican State is a party,” said the law firm White & Case.

Last week, the SCJN cancelled two concessions granted to Almaden Minerals after the Ministry of Economy failed to carry a consultation with the Tecoltemi ejido, which possesses territory located within the concessioned land. The Tecoltemi case dates back to 2015, when landowners felt pressed by the fear of losing water needed to cultivate their lands, since the mining project would require over 5 million L of water per day. This is a significant amount for a community that suffers from severe drought, reported Animal Político.

The community sought to cancel the concessions under the argument that the government did not consult the land owners before granting their license. The Mexican Constitution and signed international treaties protect the rights of indigenous communities and ratified the need to consult them about projects that affect them.

According to the Supreme Court's draft, the Court orders the Ministry of Economy to declare Almaden's mining concessions ineffective and reissue them until Almaden complies with its obligation to consult indigenous communities. The company explained that the SCJN statement is a draft, so its final decision can be modified and deferred. Moreover, Almaden announced it will reapply for an environmental permit for its Ixtaca project and that it looks forward to dialogue with local community and Mexican government officials to fully understand the impact of this decision before determining its next steps.