Mining

Last verified on Tuesday 25th July 2017

Mexico

José Ruiz López
Creel Abogados, S.C.
  1. 1.

    Provide an overview of the mining industry in your country. What significance does the mining industry have as a component of the national economy?

  2. Mexico is the second largest economy in Latin America. Likewise, the economy of Mexico is the 15th largest in the world in nominal terms and the 11th largest by purchasing power parity, according to the International Monetary Fund.

    The mining-metallurgical sector in Mexico contributes 4 per cent of the gross domestic product in Mexico. Mexico continues to be the first silver producer worldwide. It is also placed among the top 10 producers of at least 16 different minerals, such as silver, bismuth, fluorite, celestia, wollastonite, cadmium, molybdenum, lead, zinc, diatomite, salt, barite, graphite, gypsum, gold and copper.

    According to a report published by SNL Metals & Mining 2015, Mexico is the first destination in mining exploration within Latin America and the fourth worldwide. The consulting firm Behere Dolbear specifies that Mexico is the fifth country with the most favourable environment for doing business in the mining industry. Based on the information from the Mexican Institute of Social Security, as of July 2015, the mining industry created 352,666 direct jobs and more than 1.6 million indirect jobs.

    Recently, certain indigenous communities (communities that are not legally recognised as indigenous communities) supported by non-governmental organisations have initiated legal actions to block mining projects, arguing the protection granted by international treaties to which Mexico is a party. Such situations have caused concern to mining companies as such blockings may seriously affect the future of the mining industry in our country.

    Furthermore, the new taxes imposed on the production of minerals have caused an additional concern to mining companies, as such new taxes have a negative impact in the financial models for carrying out mining activities.

  3. 2.

    Describe the legal and regulatory framework. What laws establish and grant authority to the mining authorities?

  4. Mining activities in Mexico are governed basically by: (i) article 27 of Mexico’s Political Constitution; (ii) the Mining Law enacted on 26 June 1992 with its latest amendment of 11 August 2014; and (iii) the Regulations to the Mining Law enacted on 12 October 2012 with its latest amendment of 31 October 2014. There are certain guidelines and official standards that also regulate mining activities in Mexico.

    The authority in charge of enforcing the Mining regulation is the General Bureau of Mining Regulation (the General Bureau) a branch of the Ministry of Economy. In addition, the Mexican Geological Service is in charge of generating the basic geological information of Mexico.

    To facilitate the mining activities, the General Bureau has established regional offices in which the interested parties may attend mining matters with the authorities.

    Mining regulation is of a federal nature, therefore, local or municipal authorities have no interference in those activities.

  5. 3.

    Describe the investment regime (specifically or generally) applicable to foreign company involvement in mining projects.

  6. Under the Mining Law, the exploration and exploitation of minerals or substances subject to the applicability of the Mining Law, can only be carried out by Mexican citizens, ejidos, agrarian communities, towns, indigenous communities and companies incorporated under the laws of Mexico, through mining concessions granted by the Ministry of Economy, through the General Bureau.

    In the case of companies incorporated under Mexican laws, they must comply with the following requirements under the Mining Law: (i) their corporate purpose must allow them to carry out the exploration and exploitation of minerals; (ii) they must set their legal domicile within the Mexican Republic; and (iii) the participation of foreign investors must comply with the requirements of the Foreign Investments Law.

    In turn, the Foreign Investments Law does not provide for any limitation in the participation of foreign investors in the capital stock of mining companies; therefore, foreign investment may participate up to 100 per cent. Mexican mining companies organised by foreign investors must be registered not only with the Public Registry of Mines but also the Foreign Investment Registry, and comply with the filing of the relevant reports and notices as required under the relevant regulation.

    Notwithstanding the foregoing, clearance from the Foreign Investment Commission is required in order for a company where foreign investors pretends to invest in a participation exceeding 49 per cent of the capital stock will be required, if the value of the total assets of the target company exceeds MX$16,816,200,000.

    Note should be taken that while the Foreign Investment Law allows foreign individuals to acquire mining concessions within Mexico, the Mining Law does not provide for such possibility so, in practice, it is not possible for such foreign individuals to directly acquire a mining concession in Mexico.

  7. 4.

    Is your country a party to international investment treaties applicable to mining projects undertaken or sponsored by foreign companies?

  8. Mexico is a member of a large number of multinational and international treaties that have an impact in the mining industry in Mexico, such as free trade agreements with 45 countries and agreements to avoid double taxation with 42 countries.

    With respect to the mining industry, Mexico has entered into the following agreements:

    • Memorandum of Understanding on Mining Cooperation between the Ministry of Economy of Mexico and the Ministry of Commerce of the Popular Republic of China. The main purpose of this memorandum of understanding is to set the basis to a broad and deep cooperation and productive investment in the mining industry, by following the principles of equality, reciprocal benefit and joint development.
    •  Memorandum of Understanding on the Cooperation in the Field of Mineral Resources between the Ministry of Economy of Mexico and the Ministry of Knowledge and Economy of the Republic of Korea. Through this memorandum, the parties agreed to promote cooperation activities between themselves in the field of mineral resources, through the exchange of information, support of companies and organisations belonging to both countries, the development of joint investigation for the exploration, exploitation, development, processing and transportation of mineral resources.
    • Agreement in Mining Affairs between the Ministry of Economy of Mexico and the National Agency of Mineral Resources of the Republic of Cuba. Through this Agreement, the parties agreed to establish cooperation mechanisms to allow the parties to develop programmes of scientific and technical collaboration on mining affairs.
  9. 5.

    What in general terms is the mining exploration and exploitation permit or concession regime? What is the licensing regime?

  10. In order for a Mexican company or person to carry out mining activities in Mexico a mining concession title must be obtained from by the Ministry of Economy through the General Bureau and have such title duly recorded with the Public Registry of Mines. By having such title, the concessionaire is entitled to carry out exploration and exploitation activities within the subsoil of the area covered by the concession, which is property of the nation. Owing to an amendment to the Mining Law, currently all mining concessions provide not only for the exploration, but also the exploitation of minerals. Likewise, the term of any mining concession is of 50 (renewable) years.

    Mining concessions may be granted so long the area covered by the application is free-land (ie, area not covered by another concession). From time to time the Ministry of Economy through the General Bureau publishes in the federation's Official Gazette a list of those areas that are considered free land and therefore may be subject to a mining concession.

    In case of archaeological findings within the mining concession area or surrounding area, any mining activity should be carried out in strict compliance with the anthropology and archaeological regulation.

    Depending on the nature of works to be performed within the lot covered by the concession, an environmental impact assessment authorised by the Ministry of Environment and Natural Resources may be required. However, when the nature of the works is not likely to cause damage to the surrounding area, a pre-emptive report with such Ministry may suffice.

    In order to maintain a concession in force, its holder has to comply with several obligations, including the obligation of carrying out certain minimum investments and to submit an annual report of proof of mining works with the General Bureau. Likewise, certain governmental fees are required to be paid in a semi-annual basis to maintain in good-standing the concession. Failure to comply with such obligations, may cause the cancellation of the concession.

  11. 6.

    What types of duties, royalties and taxes must be paid by the mining project company as a condition to obtaining or continuinga mining concession? What remedial actions are available to the granting authority when such levies are unpaid?

  12. To obtain a mining concession, the applicant has to pay the relevant governmental fees related to the analysis of its application and the issuance of the corresponding mining concession. Once issued, the concessionaire has the obligation to carry out the payment in a semi-annual basis (January and July) of the corresponding governmental fees for keeping the concession in force. Such fees are calculated based on the area covered by the concession and the term elapsing from its granting.

    When approving the Tax Bill for 2014, the Mexican Congress provided for new taxes and duties to the mining industry. According to the foregoing, concession holders that fail to develop mining works in accordance with the Mining Law, during a consecutive two-year period within the first 11 years of the term of the concession, will pay on a semi-annual basis an additional mining duty equivalent to 50 per cent to the maximum current mining duty. If failure to carry out works remains unchanged, starting on the twelfth year, such additional fee will be doubled.

    Under Mexican Income Tax Law, dividends paid out of “previously taxed net earnings” are not subject to Mexican corporate taxes. Otherwise, dividends are subject to Mexican income tax at the corporate rate, which presently is 30 per cent over a gross-up basis (amount of the dividend times 1.4286), payable by the Mexican company as an advance of its annual income tax. As of 1 January 2014, there is a new withholding tax on dividends paid by a Mexican company to Mexican individuals and non-Mexican shareholders of 10 per cent applicable to profits earned by the Mexican company as of 2014. This withholding tax rate may be reduced under the applicable Tax Treaties to Avoid Double Taxation entered into by Mexico.

    Corporations with their tax residence in Mexico are taxed on their worldwide income, which include all profits from operations, income from investments not relating to the regular business of the corporation and capital gains. The current corporate income tax rate in Mexico is 30 per cent.

    As of 1 January 2014, a mining royalty fee is in effect in Mexico of 7.5 per cent on income before tax, depreciation, and interest, as well as an extraordinary governmental fee on precious metals, including gold and silver, of 0.5 per cent of gross revenues.

    The IETU Flat Tax, which was structured as an alternative minimum tax, was repealed effective 1 January 2014.

    The value added tax is an indirect tax levied on the value added to goods and services, and is imposed on corporations that carry out activities within Mexican territory, including (i) the sale or other disposition of property; (ii) the rendering of independent services; (iii) the granting of temporary use of property; or (iv) the importation of goods and services. The standard value added tax rate is 16 per cent.

  13. 7.

    What in general terms is the water rights regime? What is the availability of water for mining facilities? What techniques or activity have you seen in your jurisdiction to address limited or shared water resources?

  14. As provided for in Mexico’s Political Constitution, ownership of water resides in the nation, including territorial seas, inland marine waters, the waters of lagoons connected with the sea, inland rivers, lakes and streams, underground waters and water extracted from mines.

    The Law of National Waters, in force since 1992 with its latest amendment of 24 March 2016, sets forth the legal framework applicable to the use and exploitation of national waters by Mexican individuals and companies holding water concessions granted by the executive branch, through the Commission of National Waters. The Commission of National Waters is the federal governmental agency in charge of the management and control of Mexico’s hydrological system and has powers and authority to enforce the provisions of the Law of National Waters. Water concessions may be granted for a minimum term of five years and up to 30 years, and may be extended for the same period of time subject to certain requirements.

    Pursuant to the Law of National Waters, concession holders are entitled to transfer (free of charge) their rights under water concessions with the prior approval from the Commission of National Waters. Any transfer must be recorded with the Registry of Water Rights. Water concessions do not follow land ownership upon its transmission.

    Under the Mining Law, the owner of a mining concession is entitled to use the water extracted from the mine in connection with the exploration and exploitation works, the benefit of mined materials and for domestic use by mine personnel. These rights follow with the ownership of the mining concession.

  15. 8.

    What in general terms is the surface rights regime (use and occupation of surface; access routes; pipeline and electric line routes; roadways or railways for product transport)?

  16. In order to have access to the surface where a mining lot covered by a mining concession is located, the concessionaire must enter into an agreement (eg, lease) with the owner or holder of the surface rights. Unless the land is located in certain specific locations (eg, ejido or agrarian community), such agreements are of private nature and are governed by the local Civil Code.

    The Mining Law provides that mining activities are of public interest and shall have a preferential right over any other use the land where they are located. Concessionaires may also obtain the access to the surface of the area covered by the concession, through the obtainment of a temporary occupation (mandatory lease), an easement of way, or even the expropriation of the land. Any right granted under a way of easement or temporary occupation shall not exceed the term of the concession, as it may be renewed under the Law. The consideration to be paid by the concession holder to the owner of the land is determined by the Institute of Administration and Appraisals of National Goods, the governmental agency in charge of carrying out such calculation.

    In the case of areas belonging to ejidos and agrarian communities, the concessionaire must also comply with the requirements and formalities established under the Agrarian Law, in order to have access to such land. Mining companies must be extra careful when entering into agreements with ejidos and agrarian communities, as missing a requirement or formality may result in the access agreement being legally void.

    Based on the obligations assumed by Mexico under certain international treaties, when the development of a mining project affects land of indigenous communities, there is the need of obtaining first the clearance from such community in order to carry out mining activities. Failure to obtain such consent may have a negative impact as the project may be blocked. Certain non-governmental agencies have been recently involved with indigenous communities in order to support them in the filing of legal actions against mining projects. In many cases, certain indigenous communities, may delay and hinder the development of mining projects through the filing of amparo (constitutional) complaints.

  17. 9.

    What is the availability of power for remote mining facilities? May mining facilities generate their own power?

  18. In certain mining projects, that are located in remote locations the electric power is not readily available. Additional infrastructure, including sub-stations and power transmission lines may have to be procured by the mining company to obtain the required power from the Federal Commission of Electricity, which is a state-owned productive company, that has the purpose to generate, transmit and distribute electricity in Mexico or from private power generators as permitted under the Energy Law.

  19. 10.

    What are the grounds for lawful termination of rights under a mining concession, water rights or surface rights or power (generation or transmission) rights? What remedies are available to the concessionaire if rights are wrongfully terminated?

  20. Mining concessions may be cancelled in any of the following events: (i) due to the expiration of their term; (ii) abandonment duly requested by the holder; (iii) substitution of the concessions due to the reduction, division, identification or unification of the area covered by the concessions; (iv) for carrying out any of the violations mentioned in the following paragraph; or (v) by judicial order.

    Among others, carrying out any of the following violations shall be punished with the cancellation of the mining concession:

    (i)       to exploit minerals not subject to the applicability of the Mining Law;

    (ii)       not to proof the mining works;

    (iii)      not paying the governmental mining duties;

    (iv)      not complying with the payment for the discovery royalty or by not rendering the semi-annual reports that in certain
               circumstances has to file with the Mexican Geological Service;

    (v)       to group concessions covered mining lots that are not adjacent between each other;

    (vi)      not to disclose information on the finding of any hydrocarbon within the area covered by the mining concession; or

    (vii)     lose the capacity for being the holder of mining concessions.

    In the case of section (vii) above, the cancelation shall not proceed when the company holding the concession loses its capacity for not fitting with the provisions that regulate the participation of foreign investors and such situation is rectified within the 365 calendar days following such event.

    The Mining Law provides for a cure period in certain circumstances. In any of the foregoing situations the concession holder may challenge the cancellation through the filing of an administrative procedure (annulment trail) against the General Bureau under the basis of the Federal Law of Administrative Procedure.

    In the case of water concessions, they may be cancelled by the Commission of National Waters in the case that the holder does not pay the corresponding duties or in the case of breach of the obligations imposed under the concession title. A water concession is terminated upon the expiration of its term, or because of abandonment of the concession. The water-concession termination events include the extraction of water volumes in excess of those allowed under the water concession, the transfer of rights under a water concession without the Commission of National Waters prior approval. Water concessions may also be terminated if the exploitation works results in environmental damages.

  21. 11.

    Describe the extent to which the legal and regulatory regime is conducive to the installation or provision of essential infrastructure.

  22. In Mexico, most of the key areas of essential infrastructure are controlled by the state. Owing to a modernisation strategy followed by the Mexican government, there has been an updating of the legal framework in order to, among others, allow domestic and foreign private participation in transportation, electric power, water and communications under privatisation schemes and granting of concessions.

  23. 12.

    Please provide a description of the collateral security arrangements permitted in your jurisdiction, relating particularly to the mining project’s ability to grant to creditors a perfected security interest (whether by mortgage, pledge, trust, etc) in concession rights, water rights, surface rights, related easements, permits, licences (including environmental), land and bank accounts. Are there any limitations to the ability to transfer such rights to a successor owner/operator of the mine?

  24. The most commonly used forms of security interest in Mexican project finance, in general, and in the financing of mining projects, in particular, are floating lien pledges and guaranty trusts. Whenever structuring a secured financing, a detailed case-by-case basis must be undertaken to determine the most appropriate form of security interest; however, these two forms of arrangements have proved to be the most efficient for the financing of mining projects and have been therefore widely used for these purposes as they may be used to create a security interest on all types of personal property, including machinery and equipment, inventory, bank accounts, receivables, rights under mining concessions and material contracts, land use rights and any other intangibles.

    In addition, as explained below, guaranty trusts may also be used to create a security interest on real estate assets.

    Under a floating lien pledges and guaranty trusts, subject to certain rules and limitations provided for in the applicable legislation, the borrower is allowed to maintain possession of the assets securing the financial obligations.

    In order to perfect the floating lien pledge, the corresponding floating lien pledge agreement must be ratified before a notary public or a commercial notary public in Mexico and be subsequently registered in the Sole Registry of Guarantees over Movable Assets (RUG).  Registration is required to have an enforceable floating lien pledge as regards third parties. If the pledge includes rights under mining concessions, the pledge agreement must also be registered with Mexico’s Mining Registry.

    If the project company has legal title to real property (surface land), a security interest on the property (including related easements) may be obtained through a guaranty trust or a civil mortgage. Registration of the relevant agreements must be registered, for perfection purposes, with the local public registry of property in which the real property is located.

    Finally, if the collateral security arrangement includes the sponsor’s equity interest in the project company, a security interest can be obtained through a share pledge agreement. In this case, perfection is accomplished through the delivery of the original share certificates duly endorsed in favour of the lender and a notation in the stock registry book of the company.

  25. 13.

    Is it accepted practice for creditors financing a mining project to enter into an agreement with the mining authority in connection with the creation, perfection or acknowledgement of the collateral security interests granted to the creditors in mining projects, including to facilitate the transfer of such rights to a successor owner/operator? Is there any requirement, benefit or limitation to such agreements?

  26. No. Security interests on mining concessions become effective in relation to third parties upon registration of the relevant agreements with the Public Registry of Mines.

    It is important to point out that a mining concession is subject to cancellation when the holder loses the capacity for being the holder of mining concessions (eg, transfer of the concession to a creditor). In such cases, the cancelation shall not proceed when the company holding the concession loses its capacity for not fitting with the provisions that regulate the participation of foreign investors and such situation is rectified within the 365 calendar days following such event.

  27. 14.

    What means of enforcement are available to creditors in connection with collateral security interests in mining rights?

  28. Under Mexican applicable legislation both floating pledges and guaranty trusts may be enforced through extrajudicial or judicial foreclosure proceedings.

    Guaranty trusts typically provide that upon the occurrence of an event of default of the borrower under the financing documentation or the guaranty trust agreement, the beneficiary may instruct the trustee to sell the collateral, pursuant to the foreclosure procedure set forth in the corresponding guaranty trust agreement, provided that such procedure comply with certain minimum requirements provided for in the applicable legislation. The proceeds of the sale would be applied by the trustee to the payment of the secured obligations, after covering expenses related to the sale of the collateral (ie, trustee and broker-dealer fees). Depending on the type of collateral involved, the foreclosure proceeding may take the form of an auction process or a private sale process with the assistance of a financial or independent adviser. When the collateral includes mining assets, it may be advisable to provide for foreclosure proceedings coordinated by a financial adviser, who would typically contact potential buyers, prepare presentations and information relating to the collateral, receive price proposals and negotiate definitive sale documentation.

    A summary in-court foreclosure proceeding is also available under Mexican law to foreclose on collateral provided under a floating lien pledge or a guaranty trust. Some of the applicable provisions are aimed at making the process more efficient, including limits on the defences that may be raised by defendants, and specific rules as to how and when certain types of evidence may be filed and heard.

  29. 15.

    What insurance must be placed with domestic insurance companies? Can insurance be placed abroad? Can claims be paid directly offshore? Are there restrictions with respect to obtaining reinsurance outside the country, and obtaining assignments or cut‑through endorsements to permit claims (and payment) to be made directly to owners or creditors outside the jurisdiction?

  30. Only licensed Mexican insurance companies or insurance brokers may sell or intermediate insurance products in Mexico. The Insurance Law provides that only Mexican licensed insurance companies may actively offer insurance products in Mexico. Under limited exemptions the Ministry of Finance may authorise a foreign insurer to sell insurance products in Mexico (such exemptions include insurance of risks that are likely to occur outside of Mexico and insurance in respect of risks that Mexican insurers cannot or will not insure in Mexico).

    Insurance companies can obtain re-insurance outside of Mexico only with reinsurance companies registered with the General Registry of Foreign Reinsurers kept by the Ministry of Finance. The enforceability in Mexico of cut-through arrangements with non-Mexican insurers is doubtful.

  31. 16.

    Describe any requirements related to the use of domestic and foreign labour, suppliers and contractors.

  32. The general rule is that most of any company’s workers must be Mexican individuals (ie, at least 90 per cent of the labour work). When dealing with specialised officers, the employer may temporarily employ foreign employees but not exceeding the 10 per cent of the workforce for such specialised work. The employer and the foreign employees have the obligation under the Mexican Federal Labour Law to train Mexican employees to perform such specialised activities. Finally, in the case of senior officials (eg, directors and general managers), there is no restriction on the nationality of such senior officials.

    There are no restrictions when contacting with suppliers and contractors, as those can be domestic or foreign companies or individuals. Except when hiring medical physician to work as in-house doctors of any company in Mexico, in such cases the medical physician must be Mexican nationals in terms of the Mexican Federal Labour Law.

  33. 17.

    Can any liabilities extend beyond the mining project company to its owners, mortgagees, or creditors?

  34. The general principle in Mexico for a company is that any liability shall be limited to the company’s estate and the shareholders or partners of a Mexican corporation shall not be jointly liable for any liability incurred by the corporation. The General Law on Commercial Companies, which is the legal statute that governs Mexican companies, provides that in the case of a stock company or a limited liability company, the responsibilities of the shareholders are limited to the contribution they have to make to the capital stock of the company.

    The foregoing protection is not applicable to those companies that do not comply with the formalities established for their recordation with the Public Registry of Commerce of their corresponding corporate domicile and with respect to those companies where the liability of the shareholders is unrestricted (eg, general partnership and partnership in simple commandite).

    In the case of tax matters, there are certain scenarios where the shareholders are jointly liable for any unfulfilled obligation of the Company. Under the Federal Tax Code, if the company is not registered with the Taxpayers Registry, if there is a change in the company's domicile without notifying such change to the tax authorities or if the absence of accounting records, the shareholders are jointly liable.

    In addition, it must be highlighted that, although debatable, recently Mexican courts have resolved to pierce the corporate veil in certain cases that differ from those mentioned above and that traditionally were not considered to be causes for such a piercing of the corporate veil (ie, abuse of the protection granted by the corporate veil, bad faith, abusive actions taken by controlling partners against other partners and monopolistic practices).

  35. 18.

    Describe any other relevant legal considerations related to financing of mining projects in your jurisdiction. Describe any trends in the types of financings recently closed or under discussion for mining projects in your jurisdiction.

  36. In the financing of any mining project in Mexico, it is common practice to obtain a legal opinion to confirm that the mining concessions subject to the financing are in full force and effect and that there are no liens or encumbrances. A due diligence should be performed to confirm that no liens or encumbrances are registered against the concessions and that the compliance of the obligations imposed under the Mining Law are duly complied with, especially with respect to the payment of the semi-annual governmental duties, the performance and annual proof of mining investments. It is possible to obtain from the General Bureau an official confirmation on the subject that may provide additional reassurance.

    In order to finance a mining project, the concession holder may request a loan from the Mining Promotion Trust a governmental agency that provides for loans with more attractive rates than a commercial bank.

    In the case of concessions located within land held by ejidos or agrarian communities, it essential that the concession holder has legal title to have access to such land. As those matters are also governed by the Agrarian Law, it is important to verify that the corresponding agreement with the ejido or agrarian community complies with the applicable legal requirements. Furthermore, it is important to verify if a mining project affects any indigenous communities as they could block it on the basis of protection granted by international treaties entered into by Mexico.

  37. 19.

    In recent times, several governments have mandated concession renegotiation, revisited royalty and taxation regimes, failed to renew favourable exemptions, or passed legislation introducing significant requirements for projects under ongoing permitting and regulatory processes, in light of increased commodity values. Has there been any such activity in your jurisdiction?

  38. When approving the Tax Bill for 2014, the Mexican Congress provided for new taxes and duties to the mining industry. According to the foregoing, concession holders that fail to develop mining works in accordance with the Mining Law, during a consecutive two-year period within the first 11 years of the term of the concession, will pay on a semi-annual basis an additional mining duty equivalent to 50 per cent to the maximum current mining duty. If failure to carry out works remains unchanged, starting on the twelfth year, such additional fee will be doubled.

    As of 1 January 2014, a mining royalty fee is in effect in Mexico of 7.5 per cent on income before tax, depreciation and interest, as well as an extraordinary governmental fee on precious metals, including gold and silver, of 0.5 per cent of gross revenues.

    Among the amendments for 2014, Mexican companies are no longer allowed to partially deduct certain expenses such as fringe benefits paid to employees, which in turn are tax-exempted for the same employees (eg, food coupons, pension and retirement funds additional to those provided for under the Mexican Security Law).

  39. 20.

    Please provide electronic links to any of the principal statutory and regulatory compilations referred to in your answers to the foregoing questions, including items such as Mining Law, foreign investment regime applicable to mining and environmental law and regulation.

Interested in contributing to Latin Lawyer Reference?


Questions

  1. 1.

    Provide an overview of the mining industry in your country. What significance does the mining industry have as a component of the national economy?


  2. 2.

    Describe the legal and regulatory framework. What laws establish and grant authority to the mining authorities?


  3. 3.

    Describe the investment regime (specifically or generally) applicable to foreign company involvement in mining projects.


  4. 4.

    Is your country a party to international investment treaties applicable to mining projects undertaken or sponsored by foreign companies?


  5. 5.

    What in general terms is the mining exploration and exploitation permit or concession regime? What is the licensing regime?


  6. 6.

    What types of duties, royalties and taxes must be paid by the mining project company as a condition to obtaining or continuinga mining concession? What remedial actions are available to the granting authority when such levies are unpaid?


  7. 7.

    What in general terms is the water rights regime? What is the availability of water for mining facilities? What techniques or activity have you seen in your jurisdiction to address limited or shared water resources?


  8. 8.

    What in general terms is the surface rights regime (use and occupation of surface; access routes; pipeline and electric line routes; roadways or railways for product transport)?


  9. 9.

    What is the availability of power for remote mining facilities? May mining facilities generate their own power?


  10. 10.

    What are the grounds for lawful termination of rights under a mining concession, water rights or surface rights or power (generation or transmission) rights? What remedies are available to the concessionaire if rights are wrongfully terminated?


  11. 11.

    Describe the extent to which the legal and regulatory regime is conducive to the installation or provision of essential infrastructure.


  12. 12.

    Please provide a description of the collateral security arrangements permitted in your jurisdiction, relating particularly to the mining project’s ability to grant to creditors a perfected security interest (whether by mortgage, pledge, trust, etc) in concession rights, water rights, surface rights, related easements, permits, licences (including environmental), land and bank accounts. Are there any limitations to the ability to transfer such rights to a successor owner/operator of the mine?


  13. 13.

    Is it accepted practice for creditors financing a mining project to enter into an agreement with the mining authority in connection with the creation, perfection or acknowledgement of the collateral security interests granted to the creditors in mining projects, including to facilitate the transfer of such rights to a successor owner/operator? Is there any requirement, benefit or limitation to such agreements?


  14. 14.

    What means of enforcement are available to creditors in connection with collateral security interests in mining rights?


  15. 15.

    What insurance must be placed with domestic insurance companies? Can insurance be placed abroad? Can claims be paid directly offshore? Are there restrictions with respect to obtaining reinsurance outside the country, and obtaining assignments or cut‑through endorsements to permit claims (and payment) to be made directly to owners or creditors outside the jurisdiction?


  16. 16.

    Describe any requirements related to the use of domestic and foreign labour, suppliers and contractors.


  17. 17.

    Can any liabilities extend beyond the mining project company to its owners, mortgagees, or creditors?


  18. 18.

    Describe any other relevant legal considerations related to financing of mining projects in your jurisdiction. Describe any trends in the types of financings recently closed or under discussion for mining projects in your jurisdiction.


  19. 19.

    In recent times, several governments have mandated concession renegotiation, revisited royalty and taxation regimes, failed to renew favourable exemptions, or passed legislation introducing significant requirements for projects under ongoing permitting and regulatory processes, in light of increased commodity values. Has there been any such activity in your jurisdiction?


  20. 20.

    Please provide electronic links to any of the principal statutory and regulatory compilations referred to in your answers to the foregoing questions, including items such as Mining Law, foreign investment regime applicable to mining and environmental law and regulation.


Other chapters in Mining

  • Ecuador
    Pérez Bustamante & Ponce Perez Bustamante & Ponce
  • Mexico
    Creel Abogados, S.C.
  • Panama
    Arias, Fábrega & Fábrega
  • Peru
    Gallo Barrios Pickmann, Abogados (Lima)