Amendment to the Mining Industry in Mexico approved by the Congress

In the early hours of April 29th, 2023, Mexico’s mining reform was approved by Congress after a fast-track process. The Senate ordered the bill to be sent to the President for its official publication.

The most relevant changes proposed are detailed below:

1.MINING LAW (“ML”)

Amendments and Additions to the ML
Mining Concessions, Allocations and Reserves
Before the Mining Amendment BillAfter the Mining Amendment Bill
Currently, mining concessions and allocations are granted on free land to the first applicant in time for a mining lot.It is proposed to modify the process for granting concessions to shift to a public bidding scheme.
[…….]A prohibition is added regarding the granting of concessions when the area does not have water availability, is in protected natural areas or when the population is put at risk.
[…….]Additionally, it is set forth that in all cases, public tenders must guarantee the best economic conditions for the State and guarantee the performance of activities to prevent and control air, water, soil and subsoil contamination.
Rights Granted by the Mining Concessions and Allocations
Before the Mining Amendment BillAfter the Mining Amendment Bill
It is provided that the concessionaires have several rights, including, among others: (i) the disposal of the land covered by the concession title; (ii) the use of the water coming from the mines for the exploitation and benefit of the minerals or substances obtained from the mines; and (iii) the preference to obtain concessions on the water of the mines.It is proposed to repeal such rights.
[…….]It is provided that mining concessions may not be the subject of a guarantee for the fulfillment of the obligations of their holders.
Term and Extension
Before the Mining Amendment BillAfter the Mining Amendment Bill
Currently, mining concessions are granted for a fifty-year term, as of the date in which they are recorded in the Public Mining Registry, and are extended for an equal term, provided that they are requested five years prior to the expiration of the concession.It is proposed in the Mining Amendment Law that mining concessions are granted for a thirty-year term, as of the date in which they are recorded in the Public Mining Registry, which may be extended on one time for twenty-five years, with the third extension happening via an auction that gives preference to the current holder of the title.
Occupation of the Lots
Before the Mining Amendment BillAfter the Mining Amendment Bill
Currently, the occupation of land where mines are located can be obtained by (i) expropriation, (ii) temporary occupation or (iii) constitution of easements.As a result of the Mining Amendment Bill, the expropriation figure is eliminated and only temporary occupation or the constitution of easements are maintained.
Cancellation of Mining Concessions and Allocations
Before the Mining Amendment BillAfter the Mining Amendment Bill
Currently, there are certain grounds for termination of mining concessions, including, among others: (i) withdrawal of the concession holder; (ii) substitution due to any modification to the surface that covered the mining concessions; or (iii) by judicial resolution.The Mining Amendment Law proposes to add several causes for cancellation of mining concessions, including, among others, (i) failure to pay the corresponding contributions for two consecutive years; (ii) failure to start the corresponding work within one year after the concession was granted; (iii) lack of reports on possible damages or risks to the ecological balance; (iv) failure to obtain permits from other authorities; (v) failure to have the corresponding closure or waste management programs; and (vi) failure to have the water concession for mining in force.
Fines
Before the Mining Amendment BillAfter the Mining Amendment Bill
For the non-compliance with the provisions of the Mining Law, fines under this law range from $10,374.00 M.N. (approximately US$550.00) to $207,480.00 M.N. (approximately US$10,920.00).The applicable fines are modified to, as the case may be, range from 1% of the infringer’s total annual income plus $518,700.00 M.N. (approximately US$27,300.00) or 4% of the infringer’s total annual income plus $1,037,400.00 M.N. (approximately US$54,600.00).
Crimes.
Before the Mining Amendment BillAfter the Mining Amendment Bill
[…….]The amendment adds a section on crimes, providing for penalties, as the case may be, ranging from five to ten years of imprisonment and a fine equivalent to 5% of the total annual income of the infringer plus $1,037,400.00 M.N. (approximately US$54,600.00), or 5 to 15 years and a fine equivalent to 5% of the total annual income of the infringer plus $1’244,880.00 (approximately US$65,500.00).
[…….]The conducts foreseen are, among others: (i) the extraction of minerals without being the holder of a mining concession; (ii) the sale or trafficking of minerals and metallurgical derivatives without the corresponding concession; (iii) the presentation of false documentation to obtain a concession.

2.GENERAL LAW OF ECOLOGICAL BALANCE AND PROTECTION OF THE ENVIRONMENT (“LGEEPA”)

Amendments and Additions to the LGEEPA
Before the Mining Amendment BillAfter the Mining Amendment Bill
[…….]It is proposed to ban the granting of authorizations for mining activities in Natural Protected Areas (“NPAs”).
Currently, the Ministry of the Environment and Natural Resources (“SEMARNAT”) may require the granting of insurance or guarantees when activities may cause serious damage to ecosystems.An additional obligation is introduced to have a Mine Restoration, Closure and Post-Closure Program before SEMARNAT, for which a mandatory guarantee must be submitted. Failure to comply with the program will be grounds for enforcement of the guarantee.

3.NATIONAL WATER LAW (“LAN”)

Amendments and Additions to the LAN
Before the Mining Amendment BillAfter the Mining Amendment Bill
[…….]The Mining Amendment Law proposes the inclusion of three new grounds for revoking concession titles and discharge permits, the most relevant of which are:   When an economic, social, environmental or any other kind of imbalance is caused; and   Failure to comply with the Restoration, Closure and Post-closure Program provided for in the LGEEPA.
[…….]The “Use of National Waters in Mining” is added to regulate the procedure for requesting a concession of national waters for mining use, the obligations of the concessionaires, and the limits of the concession.
Currently, the assignment of the rights of the concession title is allowed, without limitations, except when they are located in the same aquifer or basin and others indicated in the LAN. It is foreseen that the assignment of rights will require authorization when their characteristics are modified.The assignment of rights, for mining use, to use or exploit national waters for any other use is prohibited.
In the granting of concessions, the National Water Commission (“CONAGUA”) does not consider in its decision the water concentration of individuals, but rather the availability of the basin and aquifer, among other factors.The Mining Amendment Bill includes the prohibition to grant concessions for mining use when:   The applicant intends to concentrate more than 30% of the total volume of average annual availability of the basin or aquifer.   Concessions are granted on watercourses or vessels and their federal zones for the final disposal of mining waste.
Currently, concessions to use, exploit or take advantage of national waters shall not be less than 5 years or more than 30 years.The Mining Amendment Bill provides that national water concessions for mining use will have the same extension of the concession.
The LAN provides that concession holders are required to submit a report every two (2) years containing the chronological analysis and indicators of the quality of the water they discharge, with no fines for the non-compliance with this obligation.The proposal is intended to impose a fine that goes from $161,834.00 M.N. (US$8,520.00) to $674,115.00 M.N. (US$35,500.00) on anyone who fails to file an annual report of discharges for mining use with CONAGUA.

4.GENERAL LAW FOR THE PREVENTION AND INTEGRAL MANAGEMENT OF WASTE (“LGPGIR”)

Amendments and Additions to the LGPGIR
Before the Mining Amendment BillAfter the Mining Amendment Bill
Currently, the LGPGIR forbids the location of landfills outside NPAs, unless otherwise provided for in the declarations of such areas.The Mining Amendment Law proposes to ban the final disposal of mining and metallurgical waste in PNAs, wetlands, watercourses and federal areas of national waters or places where the path that the waste would follow in the event of a rupture would affect communities.
Hazardous wastes are transferable to industries for use as inputs in their processes, as long as they are authorized by SEMARNAT.The proposed wording refers that mining and metallurgical wastes are the permanent and non-transferable responsibility of the party holding the mining concession.
Transitory Regimen
The Transitory Regime included in the Mining Amendment Bill states that all those procedures and/or appeals that are in process will be carried out in accordance with the provisions in force, which means, in accordance with the current legislation. The foregoing, provided that they do not oppose to the provisions of the Mining Amendment Bill itself.   It is also foreseen that all those concession applications that are in process will be discarded so that they may be requested in accordance with the new provisions. Regarding the requests for extensions of concessions that are in process, the Transitory Regime states that they will not be extended for those concessions that have been granted in ANP and/or for the exploitation of mercury.   On the other hand, the Transitory Regime refers that those concessionaires who are holders of a national water concession must request within 90 (ninety) calendar days following the entry into force of the Mining Amendment Bill, the change of industrial use to mining use.

The bill it will be sent to the President for enactment and publication in the Official Gazette of the Federation in the next few days.

We consider that the approval of the Mining Amendment Bill may affect present and future concessionaires. Such effects may be challenged by means of an indirect amparo proceeding or by other means of defense, as the case may be, as of its entry into force or against its first concrete act of application. Within such means of judicial redress and until the constitutionality of the Mining Amendment Bill is resolved, we consider it possible to obtain the suspension of its application.

The lawyers of the mining, environmental, regulatory, and administrative areas of the firm are at your service to attend any matter related to the above.

KINDLY,

JUAN CARLOS SERRA
serra@basham.com.mx    
ADOLFO ATHIÉ CERVANTES
aathie@basham.com.mx
PABLO NOSTI HERRERA
pnosti@basham.com.mx
DIANA RANGEL LEÓN
drangel@basham.com.mx    
CAROLINA NOGAL GÓMEZ
cnogal@basham.com.mx
PABLO CHEVEZ GALLEGOS
pchevez@basham.com.mx    
FERNANDO OSANTE KRETCHMAR
fosante@basham.com.mx
RODRIGO ALFONSO RUISEÑOR NÚÑEZ
aruisenor@basham.com.mx