Law Firm Guides Miners Through Investment LandscapeSat, 10/28/2017 - 17:19
Q: What is the status of DBR Abogados’ challenge to the constitutionality of the mining tax?
A: The firm is only representing McEwen Mining in these matters. We attempted to file amparos for Aranzazú Holding and a Chinese company but were unsuccessful. The case is still under review with the Supreme Court of Justice of the Nation (SCJN) and we do not know for sure when this will be resolved. The petition was lodged in October 2015. When the law was introduced, we believe a technical mistake was made and we must wait to see if the SCJN agrees with us. This is a favorable situation because until we have the resolution of the amparo, the company is not obligated to pay the mining royalty, giving McEwen some room to breathe while developing its project. As far as I know, this is the only company in the mining industry that does not pay the mining tax. We are convinced that we will win this case. We are aware that other companies have filed amparos but we are not sure under which basis they are arguing the case. We hope to have a resolution as soon as possible because this would be positive for the entire industry.
Q: What other projects are you working on with mining companies?
A: We are working on the Ana Paula project with Timmins Gold that is being put into production, which is a huge challenge. Many factors must be considered, such as land rights and community relations, and several parties must be consulted, including SEMARNAT and CONAGUA. All the concessions must be in good standing and permits like that for explosives must be obtained. Helping clients take a project into production is how law firms really prove their expertise in mining.
Another challenge is when a project is sold to another company and another law firm is reviewing all the actions taken. This is a very good test of the caliber of any law firm. Last year, we carried out a few interesting projects, including overseeing Timmins’ sale of the Caballo Blanco concession to Candelaria Mining. We were also involved in the acquisition of Paramount Gold by Coeur Mining. Other tasks included project-financing assistance. A market with which we worked in Zacatecas and we believe will grow is lithium. I predict many companies related to lithium will be attracted to Mexico in the near future.
Q: How has the election of Donald Trump affected your clients and the work you do?
A: We have not seen any effect so far because although much of the investment in mining in Mexico comes from North America, the vast majority is Canadian. I do not predict any negative effects at all from the presidency because mining is a global industry and it does not depend on the US as much as other sectors like automotive. It is such a diversified global industry and this is positive in that no one player can really cause too much of an effect. I would even go so far as to say that Trump’s presidency could create a positive effect due to the rate of the dollar against the peso. Because salaries and often operating costs of Mexican mines are in pesos, this offers dollardenominated companies an added advantage financially.
Q: What is DBR doing to prepare itself for 2017 and what will be the biggest trends?
A: We expect more investment in Mexico in 2017 because metal prices are going up, which gives us more opportunities, especially in exploration. We are hoping the government will modify the rules slightly to attract more investment.
For the last few decades, the mining sector has been incorporated into the Ministry of Economy under the General Coordination of Mines, which attributes less importance to the sector. At the end of last year, mining was assigned its own Undersecretary under Mario Alfonso Cantú, emphasizing the increasing importance the federal government is ascribing the industry. This helped the government elevate mining in accordance with its contribution to the country’s GDP.