Legal Updates from some of our members

22 May 2023

Mining law reform in Mexico

– RICARDO RIOS FERRER –

On May 08, 2023, the modifications to several provisions of the Federal Mining Act, the National Water Act, the General Act of Ecological Equilibrium and Environmental Protection, and the General Act for the Prevention and Integral Management of Waste (“Mining Reform”)1, were published in the Official Federal Gazette (“DOF”) which came into force the following business day from such publication. The Mining Reform consists of considerable changes to the mining and water concession regime in Mexico.

Some of the most relevant modifications on the Mining Reform are the following:

I. Federal Mining Act

• Mining concessions will be granted through public bidding; therefore, such modification implies the elimination of the “free land” and “first applicant” regime.
• The terms of mining concessions will be reduced from 50 to 30 years, and they may be extended one time for an additional period of 25 years.
• The assignment of mining concessions now requires approval from the Ministry of Economy.
• Only a governmental agency can perform exploration activities, hence private companies will only be able to petition a concession in places previously explored and held viable by such agency.
• New requirements are established for the granting of new concessions, such as (i) social impact studies; (ii) a prior, free, and informed consultation with the indigenous and Afro-Mexican people and communities; if applicable (iii) a letter of credit to guarantee the compliance of the provisions established in the relevant social impact study; (iv) waste management programs; (v) give notice to the competent authority in case of an incident that puts the environment at risk, among others.
• Preferential rights over mining activities are eliminated. In this regard, the right of mining concessionaires to request the competent authority for land expropriation to obtain land access and superficial right over private property is no longer available.
• New grounds for cancellation of mining concessions were introduced, like the following: (i) failure to pay relevant taxes for two consecutive years; (ii) failure to start the relevant work within one year period after the concession was granted; (iii) lack
1 https://dof.gob.mx/nota_detalle.php?codigo=5688050&fecha=08/05/2023#gsc.tab=0
of reports on possible damages or risks to the environment; and (v) failure to have the water concession for mining in force. • New criminal offenses are included in the Mining Act, such as (i) illegal extraction of minerals or substances; (ii) alienation or trafficking of minerals and metallurgical derivatives not granted in the mining concession, and (iii) undermining the physical safety of workers by failing to comply with the applicable provisions.

II. National Water Act

• The concept of “water concession for mining use” is introduced in the Mining Reform, which will be granted subject to water availability for a term of 30 years, with the possibility to request an extension for an additional period of 25 years.
• New grounds for revocation are included, among others, events or supervening acts of public or social interest, or events that cause adverse economic, social or environmental effects.
• The assignment of rights for mining, and the rights to use or exploit national waters for any other use is prohibited.

General Act of Ecological Equilibrium and Environmental Protection, and the General Act for the Prevention and Integral Management of Waste

• It is now prohibited to grant mining concessions in Natural Protected Areas.
• A new obligation is introduced, consisting in the implementation of a “Mine Restoration, Closure and Post-Closure Program”. The purpose of this provision is to monitor compliance with environmental obligations at the time of termination of the mining concession.
• The managing of the mining and metallurgical waste is a permanent and non-transferable responsibility of the holder of the mining concession.

III. Relevant Transitory Provisions

• All pending applications to obtain mining concessions will be dismissed.
• All procedures and/or appeals that are in process will be carried out in accordance with the provisions in force, which means, the Mining Reform provisions.
• Concessions granted prior to the entry into force of the Mining Reform will have the term provided in the respective title, however, ongoing statutory obligations under the Reform could affect their future operations.
• Requests for extensions of concessions that are in process will not be extended if been granted in Natural Protected Areas and/or for the exploitation of mercury.
• Concessionaires who are holders of a national water concession must request within 90 calendar days following the entry into in force of the Mining Reform, the change of industrial use to mining use.

As a result of the changes included in the Mining Reform, certain provisions could violate the rights of current concessionaires’ holders, the Federal Mexican Constitution, and international trade treaties, such as the United States-Mexico-Canada Agreement (“USMCA”), the Trans-Pacific Strategic Economic Partnership Agreement (“TPP”) (which does not require a case to go through all local judicial stages) and the Free Trade Agreement among the European Union and Mexico.

The Mining Reform could be challenged by different forms of recourse, including the amparo proceeding. In this regard, it is important to closely evaluate the impact of the Mining Reform case-by-case in order to determine an adequate defense strategy. Should there be self-enforcing provisions, then the deadline to submit an amparo lapses 30 business days following the publication of the Reform in the DOF. Conversely, should there be a specific act of the authority based on the Reform that adversely affects a mining company, then the period to file an amparo lapses 15 business days following the notification of such governmental act.

Its is important to note that this Reform cannot have retroactive effects on existing concessions. However, prospective actions by the existing concessionaires will be subject to this new provisions.

Should you require further information or have any specific inquiries related to the Mining Reform or its implications, please do not hesitate to reach out to Rios-Ferrer.

RÍOS-FERRER, GUILLÉN-LLARENA, TREVIÑO, RIVERA Y GUTIÉRREZ ABOGADOS︱riosferrer.com.mx︱︱T (52 55) 5980 03 50
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