Mining Reform 2023

On May 8, 2023, the DECREE amending, adding and repealing several provisions of the Mining Law, the National Water Law, the General Law of Ecological Balance and Environmental Protection and the General Law for the Prevention and Integral Management of Waste, regarding mining and water concessions, was published in the evening section of the Official Gazette of the Federation (DOF), which enters into force the day after its publication, that is, on the 9th day of the month and year indicated.

The most relevant aspects of the reform are

• It is established that the Ministry of Economy may coordinate with the tax authorities in order to gather the necessary information to verify compliance with the obligations of the holders of mining concessions. 

• The obligation to verify the execution of works and exploitation works in an accounting and financial manner is added, including in the verification reports the delivery of statistical, technical and accounting information regarding the situation of the mining lot under concession, as well as the obtaining, production and benefit of minerals or substances that are the subject matter of the concession. Likewise, if any, the identification data of the concession holders that benefit minerals or substances (materiality figure and final mining beneficiaries) will be provided.

• Additional grounds for cancellation of mining concessions are added, including, among others, failure to pay taxes for two consecutive fiscal years; failure to submit required reports; failure to have the water concession for industrial use in mining in force; as well as the existence of an imminent risk of ecological imbalance.

• Mining concessions will be granted only for exploitation (not exploration) through public bids or contests carried out by the Ministry of Economy and will be limited to those places determined appropriate by the State, in addition, mining concessions cannot be granted in Natural Protected Areas.

• Free, prior and informed consultation with indigenous and Afro-Mexican peoples and communities is established to obtain the consent of such peoples and communities for the granting of the concession title. In addition, when the concessioned land is located in an indigenous or Afro-Mexican population or community, the concessionaire must pay a consideration of at least 5% of the net profit, and must also deliver a copy of the corresponding declarations to the community in question. The resources of the consideration will be deposited in an account to be administered by the community in accordance with the operating rules issued by the Ministry.

• Concessions may only be per mineral or substance. The concession title must specify each mineral or substance to be exploited. However, more than one mineral may be exploited, but it must be provided for in the concession title. After the concession title has been granted, if there is any other mineral in the lot, the concession may be requested and extended in the respective title with the corresponding payment.

• The duration and extension of mining concessions is reduced from 50 to 30 years, of which the first 5 years will be for pre-operational activities. Concessions will be extended for one single occasion, for a term of 25 years, for a total of 55 years, as long as they do not apply any assumption or cause for cancellation and they request it within 2 years and up to 1 year before the end of its term, and have the necessary authorizations and permits for its operation from all the authorities involved, such as the Ministry of Environment and Natural Resources (SEMARNAT), the National Water Commission (CONAGUA) and even from the state and municipal authorities, as well as the water concession for industrial use in mining. After the 55 years of the concession, or once the extension is concluded, the holder of the concession may participate in the bidding of the same mining lot, in which case it will have preference for the determination of the ruling if it equals the highest proposal; this concession will be granted for a non-extendable term of 25 years.

• The Ministry of Economy is empowered to initiate a judgment of annulment against administrative resolutions and concessions that harm the public interest; therefore, it may revert a resolution previously issued in favor of a private party and that is contrary to the Mining Law.

• The exploration of the territory for the search of minerals will be exclusive of the State through the Mexican Geological Service. However, private parties may inform the Ministry of Economy about the existence of minerals or substances in an unassigned or concessioned lot, so that it may determine the convenience of ordering the exploration and, if applicable, enter into a collaboration agreement with the private parties to carry out the exploration. If in the lot there are minerals to be explored and they can be the object of a concession, a contest may be held in which the private parties that carried out the exploration have the right to obtain it if they offer at least 90% of the highest proposal and comply with all the requirements. That is to say, those concessionaires that participate in a bidding process for lots neighboring the lot they have a concession for will have preference to match the highest bid.

• The transfer of concession titles is regulated, establishing that they may only be transferred when it is for the mining activity, with prior authorization from the Ministry of Economy, and the requirements covered by the original holder are met.

• The power of the Ministry of Economy to review compliance with the duties and obligations in mining matters is increased from 5 to 10 years, as well as to sanction non-compliance; in addition, fines are also increased.

• On the other hand, the figure of the water concession for specific use in mining is established. The mining concession is conditioned to the availability of water and, if applicable, to the mining water concession previously obtained.

• The term of the concessions for the use or exploitation of national waters in mining is equal to that of mining concessions. Likewise, in the water concession, the supply of water for human and domestic consumption is a priority in the granting of the water concession; if there is a shortage of water for the population, the volume of concessioned water may be reduced, including its cancellation, in order to guarantee the human rights to water and the environment.

• In addition, concessionaires are required to recycle at least 60% of the water granted.

• The figure of allocations in favor of parastatal entities is transformed, which may be in charge of the exploration or exploitation of minerals without competition and for an indefinite term in the case of minerals such as lithium and uranium, which are reserved to the State.

• Mining concessions may be subject to guarantees for compliance with the obligations of their holders, provided that the corresponding mine is in operation, prior authorization is obtained from the Ministry and the person in whose favor the guarantee has been issued demonstrates that he/she meets the requirements to be a concessionaire or, in the absence thereof, must assign the rights of the concession.

• Additional obligations are incorporated for mining concession holders, such as, among others, determining the social and environmental impacts of each mining concession, notifying the start of operations, reporting or submitting various reports on permits, authorizations, opinions on labor matters such as health and safety, and assigning mine managers.

• The assumptions of "afirmativa ficta" are eliminated, changing to "negativa ficta", so that if the Ministry of Economy does not respond to a procedure it will be understood as denied.

• It is added that the concession will be suspended when there are accidents or accidents within the mining lot, while the competent authority determines what is appropriate and requests the lifting of the suspension.

• A chapter on crimes is included in order to punish criminal conduct in mining matters, including, among others, the extraction, sale and trafficking of minerals or substances without having the respective concession, as well as causing harm to workers due to lack of physical safety, by failing to comply with their obligations in the area of mine safety.

• It adds and regulates the process of closure of the mining activity, which must include a work plan that establishes the obligations, procedures and actions to be carried out by the concessionaires and assignees for the repair, restoration, rehabilitation or environmental remediation and mitigation or social compensation, once the mining operations are concluded; such plan must be submitted within two years and up to one year prior to the closure of operations and be approved by the Ministry of Economy, with the opinion of the Ministry of Environment and Natural Resources, in relation to the corresponding Restoration, Closure and Post-closure Program. 

• The grounds for revocation of the water concession are broadened to include events or acts of public interest and failure to comply with the Restoration, Closure and Post-closure Program provided for in the General Law of Ecological Balance and Environmental Protection.

• Underwater mining and mining in protected natural areas is eliminated. 

• The regulation regarding the management of mining and metallurgical waste is integrated, limiting its final disposal in national protected areas, wetlands, watercourses and federal zones of national waters or in places where the path that the waste would follow in case of rupture would affect population centers. It also establishes the obligation to guarantee responsibility for the waste generated by mining activities.

• The free land scheme is eliminated, which will prevent the application for concessions in any part of the national territory indicated by private parties. The figure of first applicant is also eliminated.

• The definition of "Use or exploitation" is added, understood as the right to obtain and dispose of the resources derived from the exploitation and benefit of mining activities.

• The preferential nature of mining activity is eliminated and, therefore, the right of concession holders to obtain the expropriation of land for mining exploitation is eliminated. Expropriation must be reserved for cases of public utility.