Mexico is amending its Mining Law and related laws

The decree amending the Mexico’s Mining Law (Ley Minera), National Waters Law (Ley de Aguas Nacionales), General Law of Ecological Balance and Environmental Protection (Ley del Equilibrio Ecológico y la Protección al Ambiente), and General Law for the Prevention and Integral Management of Waste (Ley General para la Prevención y Gestión Integral de los Residuos) was published in the Official Gazette of the Federation on May 8, 2023 (the Decree). The Decree came into effect on May 9, 2023.

The Mexican Federal Executive Branch (Poder Ejecutivo) first submitted a bill to amend the four laws on March 24, 2023. The main purpose of the bill, as provided for under the statement of purposes (exposición de motivos), was to “recover the state's control over the mineral and water resources found in the Mexican subsoil and which are the direct domain of the nation.”  The bill is intended to regulate the granting, maintenance, supervision, and termination of mining concessions and water concessions for mining purposes.

The new provisions, modifications, and additions, as outlined in the Decree, are indicated below:

1.  Mining Law

• Mining concessions. Mining concessions will only be granted through a public bidding process. Therefore, concessions will no longer be granted to the “first applicant.” If the mining lot subject to a bidding process is contiguous to a lot that already is subject to a concession, the owner of the latter will have a preference in the bidding process.
• The preferential nature of mining concessions is abolished. The right of concession holders to obtain the expropriation of land for mining exploitation is abolished. Consequently, mining companies shall have to negotiate considerations subject to the consent of the owners of the land, such as ejidos, communities, and agrarian nuclei.
• Concessions for specific minerals. The concession titles must specify the minerals or substances subject to exploitation. If additional substances are detected, the concession title would need to be modified by the Ministry of Economy (Secretaría de Economía) to include the new minerals.
• Collaboration agreements. The Mexican Geological Service may enter into a collaboration agreement with a person who possesses information indicating the presence of minerals or substances reserved to the state for exploration in an ungranted or unassigned lot. In such cases, the collaboration agreement will have a non-extendable term of five years.
• Term. The maximum term of the concession titles is reduced from 50 to 30 years. The first five years could be used for pre-operational activities, leaving 25 years for the effective exploitation of the mining lot. The aforementioned term will start as of the registration of the concession title in the Public Mining Registry (Registro Público de Minería) and may be extended only once for an additional 25-year term.  At the end of such extension, the concessionaire will have the right to participate in the bidding process of the same lot for a non-extendable period of 25 additional years.
• Assignment. The assignment of mining concessions will be subject to the authorization of the Ministry of Economy (Secretaría de Economía). The Ministry of Economy (Secretaría de Economía) will confirm whether the assignee complies with the requirements originally imposed to the assignor for the granting of the concession title and the provisions set forth in the Mining Law to authorize such assignment (eg, registration in the Public Mining Registry). Any private agreement by which the concession could be assigned in contravention of these requirements will be null and void.
• Restriction to secure obligations. Concession titles may not guarantee obligations contracted by their holders unless they obtain prior authorization from the Ministry of Economy (Secretaría de Economía), provided that the mine is already in operation and, in the event that the guarantee is enforced, the new holder thereof proves that it meets the requirements to be a concessionaire or, in the absence thereof, assigns the rights of the concession as mentioned above.
• Temporary suspension. Temporary suspensions for technical and economic reasons may be approved only once and with a duration of up to three years.
• Indefinite term for government-held allocations. Allocations (asignaciones) for the specific case of “strategic minerals” reserved to the state (eg, lithium and uranium) granted by the Ministry of Economy (Secretaría de Economía) in favor of the Federal Public Administration will have an indefinite term.
• Previous consultation. When the land within the concession is inhabited by an indigenous or Afro-Mexican community, a prior, free, informed, culturally appropriate and good-faith consultation must be conducted by the state (at the cost of the private party), and an agreement must be executed with such community. The consideration for such use must be of at least seven percent of the amount resulting from subtracting the amounts paid by the concessionaire for non-deductible contributions for income tax purposes from the profit before tax (PBT) referred to in the Income Tax Law (Ley del Impuesto sobre la Renta).
• Additional project documents. The following documentation must be prepared and provided to the competent authorities:
  • Social impact studies to be submitted once the mining concession has been awarded under the relevant bidding process
  • Restoration, closure, and post-closure programs for mines
  • Mine closure program and insurance policy, letter of credit, deposit with the Treasury of the Federation (Tesorería de la Federación), or trust, to guarantee to the population living in the areas where mining activities are performed that the necessary resources will be available to cover the possible damages caused by such activities, and
  • Waste management programs.
• New criminal offense. The amendment includes a new criminal offense; if the holder of the concession does not comply with the mine safety measures for the protection of workers established in the applicable regulations, the aforementioned conduct will be considered a criminal offense.
• Revocation of concessions for environmental reasons. The cancellation of mining concessions is set forth in case of imminent risk of ecological imbalance or irreversible damage or deterioration to natural resources; cases of contamination with dangerous repercussions for ecosystems, their components, surface, or underground hydrological systems; or for public health. However, prior to the revocation of the concession, the holder thereof will have the opportunity to carry out the necessary prevention or remediation actions within a term of three months.
• Cancellation of concessions due to non-compliance. Article 42 of the Mining Law is amended to include, among others, the following cases for cancelling a mining concession. The Ministry of Economy will have the authority to cancel a mining concession in the event of:
  • Failure to make timely payments of contributions for two consecutive fiscal years
  • Failure to submit the required reports, and
  • Failure to commence the corresponding works within one year, from the effective date of the concession or assignment.

2.  National Water Law

• Water concession. Water concessions for mining purposes will be obtained by means of the corresponding request, filing of the documents and information set forth in the National Waters Law, and payment of the respective rights to the National Water Commission (Comisión Nacional del Agua).
• Term of water concessions. The maximum term of the water concession will be 30 years, with the possibility of extension for 25 more, under the same terms as the mining concession.
• Existing water concessions. The current holders of water concessions performing mining activities will have a 90-day term to request the National Water Commission (Comisión Nacional del Agua) to replace the industrial use of the relevant concession with “industrial use for mining purposes.”
• Revocation of concession titles. New grounds for revocation of water concession titles are established, eg, supervening events of public, general, or social interest, or that cause economic, social, environmental, or any other kind of imbalance.

3.  General Law of Ecological Equilibrium and Environmental Protection and General Law for the Prevention and Integral Management of Waste

• Prohibition of mining concessions in certain areas. The amendment prohibits the granting of authorizations for mining activities in certain areas, including protected natural areas.
• Program for the restoration, closure, and post-closure of mines. The amendment creates the program for the restoration, closure, and post-closure of mines. This program is to be submitted to the Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiembte y Recursos Naturales), with the purpose of establishing a program to remove deposits from areas subject to mining concessions that affect or may affect the ecosystem or that may contribute to environmental contamination.
• Mining and metallurgical wastes responsibilities. The amendment establishes that mining and metallurgical wastes are the permanent responsibility of the holder of the mining concession. The amendment also sets forth restrictions for the location of deposits or final disposal sites.

4.  Transitory regime

Finally, it is paramount to take into consideration the provisions of the transitory articles of the Decree:

• The Decree entered into force on May 9, 2023.
• All legal provisions previously issued are repealed with the entry into force of the Decree.
• The Federal Executive, within a term not to exceed 180 days from the entry into force of the Decree, must issue the corresponding amendments to the respective regulatory provisions, and, until such regulations are issued, the provisions that were in force prior to the Decree will continue to apply.
• Current applications for new exploration and exploitation concessions will be dismissed.
• Administrative procedures related to mining and water activities, previously initiated, will be processed and resolved in accordance with the provisions in force at the time of their filing, to the extent that they do not oppose the provisions of the Decree.
• The mining concessions granted prior to the enactment of the Decree will have the term set forth in the relevant concession title.
• Neither mining concessions in protected natural areas nor those for the exploration, exploitation, and benefit of mercury will be renewed once the reform becomes effective.
• Within a term of one year, the holders of mining concession titles will be required to:
  • Issue a “financial vehicle” to guarantee for possible damages caused by the relevant mining activities
  • Submit to the Ministry of the Environment and Natural Resources (Secretaría de Medio Ambiembte y Recursos Naturales) for its authorization the program for the restoration, closure, and post-closure of mines, and
  • Remove the deposits or sites for the final disposal of earth, tailings, or slag dams, when it is proven that their path affects population centers, productive zones, or ecosystems.[1]
• The holders of national water concessions that carry out mining activities will have a 90-day term to request the National Water Commission (Comisión Nacional del Agua) to change the industrial use of the corresponding concession to “industrial use for mining purposes.”
• Within 180 days following the entry into force of the Decree, the Mexican Geological Service must withdraw its participation in risk-sharing investment funds in which it has assets, as long as it does not generate losses. For such purposes, it may maintain its position until they are in the securities in which they were acquired.