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Law change could result in Mexico’s first-ever mining royalties

Keywords: Tags  Mexico bill, mining royalties, Pact for Mexico, Jesus Zambrano Grijalva, Enrique Pena Nieto, Adolfo Bonilla Gomez, Marco Antonio Bernl Gutierrez, Grupo Mexico Minera Autlan

MEXICO CITY — Mexico could introduce mining royalty payments for the first time in its history, a senior politician said this past week, noting that a new mining bill is expected to be concluded no later than June.

The bill could either be a "new mining law" or a "deep reform" of existing legislation, Jesús Zambrano Grijalva, president of the board of Pact For Mexico—an agreement between the country’s three main political parties—said at a press conference.

Basically, the bill will include reforms to concessions and mining rights payments.

Miners operating in Mexico currently pay a charge based mainly on the size of their mining concessions, as well as regular corporate taxes. However, there is no payment on the revenue generated from mining operations.

"We consider that the way of calculating, and therefore covering, the rights for the exploitation and use of minerals in the subsoil is not consistent and does not correspond to the generation of wealth from such use," the Institutional Revolutionary Party, known as PRI, said in the Pact For Mexico document.

Zambrano Grijalva didn’t disclose any planned royalty percentage. However, a March 12 proposal by PRI congressmen Adolfo Bonilla Gómez and Marco Antonio Bernal Gutiérrez asked for a 4-percent royalty on miners’ adjusted revenue.

The new rules will be ready by the third quarter, with full implementation in the first half of 2014, according to Pact For Mexico’s website.

But such reforms have been called "unviable" by mining companies and associations opposed to the changes.

"One study on the possible imposition of royalty payments on mineral production was prepared ... (and) concluded the impossibility of this royalty payment," Mexican mining chamber Camimex said in its 2012 annual report.

There are 763 mining exploration projects in Mexico and 320 mining companies operate in the country, the Camimex report said.

Two of Mexico’s largest miners—Grupo Mexico SAB de CV, Mexico City; and Cia. Minera Autlan SAB de CV, San Pedro Garza García, Nuevo Leon state—couldn’t be reached for comment.

Mining investment in Mexico totaled $1.3 billion—91.5 percent from Mexican companies and 8.5 percent from foreign enterprises—in the first eight months of 2012, up 77.4 percent from the same period a year earlier, according to Mexican government data.

A version of this article was first published by AMM sister publication Steel First.

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