LATIN AMERICA — New Mining Law for Mexico

Mexico’s 1992 Mining Law, which went into effect in June and which regulates Article 27 of the country’s constitution, lays the groundwork for bolstering the industry and its competitiveness, without neglecting safety and environmental conservation.

It takes into account that mining is an extremely chancy, capital-intensive business that requires a long time for the investment to mature. It clearly spells out the rights and obligations of the licensees and is based on trust in them to comply with the law.

The new law provides legal security, does away with the limits on the substances protected by concession and on the surface of the concession, expands the duration of the concessions and introduces measures that will undoubtedly mean greater capitalization of the sector and making Mexico mining more competitive internationally.

Among the principal changes brought about by the new law:

It establishes that the amount of the indemnification that should be paid in case of exploration, temporary occupation or servitudes will be set through an appraisal made by the National Properties Appraisal Commission. It allows private parties to explore and mine sulphur, phosphorus, potassium, iron and coal deposits, all formerly the exclusive domain of the federal government.

It allows exploration and mining, through competitive bidding for minerals on the continental shelf and underwater shelves of islands, as well as the seabed and the sub-soil of the exclusive economic zone. The only limiting factor of these concessions is that they are non-transferable. The issuing of mining allotments is restricted to the Mineral Resources Board only. The objective is for that body to identify and quantify the nation’s mining resources.

It eliminates the limits of the area subject to concession. The old law only allowed up to 50,000 hectares under exploration and 5,000 hectares for mining in the concession.

The duration of the exploration concessions is increased to six from three years, not subject to renewal, and mining concessions to 50 from 25 years, renewable for the same duration as the initial concession.

Concessions for ore preparation plants are done away with, and the system of substances incorporated in the national mining reserves is eliminated. The individuals engaged in processing minerals or substances subject to this law will be obligated to inform the Ministry of Energy, Mines and State Industry when their operations begin, submit the relevant reports and comply with the general regulations and specific technical standards in the area of environmental balance.

It allows for mining concessions for exploration to be grouped together for purposes of proving the execution of works and activities.

It requires proof to be submitted of works of exploration and mining in May of each year.

It makes it possible to channel venture capital into small- and medium-scale mining. The mechanisms to implement development programs for small- and medium-scale mining will be established in the new regulations of the law. The Mining Development Commission is abolished and its functions are taken over by the Mineral Resources Board.

The Mineral Resources Board will be in charge of technical assistance in support of the sector. It will also provide geological and mining information as a public service and will certify at the expense of the interested parties the blocking off of reserves of private parties who wish to use the rights derived from their mining concession as collateral.

It establishes payment of a premium for discovery for the Mineral Resources Board, in the case of concessions granted on mining allotments. The premium could be no less than 1% nor more than 3% of the invoice or liquidation value of the ore extracted.

— Sergio Almazan Esqueda is Director General of the Mining Chamber of Mexico.