Mining Law: Modifications Are Necessary

Q: What advantages will industry players realize from potential modifications to the Mining Law?
A: Given this framework is quite old, many modifications are required. First, the location of mining concessions could undergo an objective process by establishing clear parameters. This would avoid common mistakes when a complaint related to a mining lot is presented. Second, I personally believe indigenous consultation has to be included in this law and not only through paralegal dispositions as the entrant administration plans to incorporate it. We know the major problem with a law is when these issues are not correctly regulated by a document that establishes certain frameworks in accordance with the Constitution. Third, the issue of how to maintain a mining concession without having to comply with investment obligations is generating a lot of confusion. The current framework states that if a company cannot cope with these obligations, this compliance can be omitted and other dispositions must be obeyed. Hence, companies undergo this process expecting that at some point a revision will take place and its case might be litigated in court.
Many times, lawmakers try to legislate without receiving feedback from those who are regulated by the law. We should take the experience related to every issue the industry faces and generate an understanding of what is creating hurdles to make the necessary modifications. This work does not only pertain to lawyers but specialists, such as geologists and expert witnesses, because they are the ones who suffer from confusing and obsolete laws.
Q: What key elements should be contemplated when consolidating a JV in the mining segment?
A: Designing a JV in the mining industry is different from consolidating a business entity of a commercial character because the JV requires significant specialization. First, you need to know the objectives of each participating party. There is the company that holds the mining concession and hence, you need to determine whether if the participation that will be awarded to the other party will be exteriorized to third parties. If this happens, that contract should not be subjected to inclusion in the Mining Public Registry.
Hence, third parties are aware the original concession holder will own 60 percent of the asset during the first stage of the contract, and the contracting part will own the rest. This provides the advantage of having 40 percent of a mining concession in the company’s balance, which could be taken to the stock market. In fact, there is a possibility of increasing this share to 70 percent, resulting in a takeover of the project’s management.
When clients with a JV approach us because they want to participate in the stock market, some do not know they do not have the right to do this in Mexico. On the other hand, if the JV is contracted through a society, it becomes a corporate business. The value we add to these transactions is in our experience as corporate lawyers and expertise in these transactions.
Q: What are the firm’s plans for the remainder of 2019?
A: We have a number of projects in our pipeline. Two of these have the possibility of consolidating a JV, depending on some technical elements. Once this decision is taken, we will analyze the right path regarding holdings, mining negotiations, permits, and fiscal and contractual schemes. We already have a nonbinding LOA for both negotiations and the next six months will be crucial to fully consolidate these contracts.