The deadline for the formulation of the regulations derived from the reforms to the Mining Law and other important laws affecting the mining industry in Mexico is drawing nearer. The new changes have drawn the attention of industry experts, who expect some ambiguities to be clarified.
According to the transitory provisions of the new Mining Law, published on May 8, 2023, the government must formulate the corresponding set of rules within the next 180 days after the publication of the decree in the DOF. For this purpose, the federal government conducted technical consultations with key stakeholders, including mining associations.
In an interview with MBN, Armando Ortega, President, CANCHAM's Mining Task Force, pointed out a critical issue regarding the Mining Law reform. He stated that demanding and hard-to-meet conditions within the reform discourage new investments, especially in the exploration sector. Under this scenario, CAMIMEX presented a regulation proposal to the Ministry of Economy (SE) on July 9, 2023. According to Karen Flores, Executive Director, CAMIMEX, it is crucial that the exploration sector continues to operate under conditions similar to those in other jurisdictions.
While the main and most important change is the monopolization of exploration by SGM, industry experts pointed out that there are other aspects that the soon-to-be-published regulation must clarify to give more certainty to the sector.
Concession Granting Process
Since the start of the López Obrador administration in 2018, there have been no new concessions granted. The federal government's reasoning behind this decision is that during previous administrations, an excessive number of concessions were issued. The lack of new concessions impacts newcomers and it will be more common for already established companies to focus on existing projects, as Hernando Rueda, Country Manager, Vizsla Silver, noted in an interview with MBN.
In another interview with BNAmericas, Rueda expressed concerns about the clarity surrounding the awarding of new titles. He emphasized that the SGM still lacks a functioning mechanism regarding this and that the sector will have to wait until the formulation of the bidding process, which intends to make the process more transparent. Rueda highlighted the potential risk for a concession holder who discovers a promising area and intends to claim it. Under the new law, a larger corporation could also enter the competition and outbid the smaller one. Rueda emphasized the need for the forthcoming rules to address this issue comprehensively and provide a clear explanation of the entire process.
Under the new law, concessions will last 30 years and could be extended once for a period of 25 years, only if the concession holder did not incur any violation. The law also gives preferential rights in the bidding process for the same area for a non-extendable stern of 25 years, which makes it possible for a company to have the concession for 80 years. These time frameworks do not apply to companies with concessions granted before the reform. However, Rueda said that it is not clear what will happen with those concessions that are just finishing their initial validity of the 50-year extension granted under the previous law. “What will happen to that title? Are they going to give it to me for 30 more years? In fact, they can tell you that there is no extension. That is what is not clear," Rueda told BNAmericas. Experts have also pointed out that some authorities have retroactively applied the law, especially in the issuance of MIAs, as highlighted by Ortega.