mining in mexico© regulatory framework challenges and opportunities mining in mexico© regulatory...
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MINING IN MEXICO©MINING IN MEXICO©REGULATORY FRAMEWORKREGULATORY FRAMEWORK
CHALLENGES AND OPPORTUNITIESCHALLENGES AND OPPORTUNITIES
MINING IN MEXICO©MINING IN MEXICO©REGULATORY FRAMEWORKREGULATORY FRAMEWORK
CHALLENGES AND OPPORTUNITIESCHALLENGES AND OPPORTUNITIES
Abdon Hernandez-EsparzaAbdon Hernandez-EsparzaLegal ConsultantLegal Consultant
Abdon Hernandez-EsparzaAbdon Hernandez-EsparzaLegal ConsultantLegal Consultant
INTERNATIONAL SCENARIOINTERNATIONAL SCENARIOTHE IMPORTANCE OF MINING IN THE IMPORTANCE OF MINING IN
MEXICOMEXICOKEY 2009 STATISTICSKEY 2009 STATISTICSLEGISLATIVE FRAMEWORKLEGISLATIVE FRAMEWORKCHALLENGES AND OPPORTUNITIESCHALLENGES AND OPPORTUNITIESCONCLUSIONSCONCLUSIONS
CONTENTSCONTENTS
INTERNATIONAL SCENARIOINTERNATIONAL SCENARIOINTERNATIONAL SCENARIOINTERNATIONAL SCENARIO
Worldwide 2009 was not a good year for the Worldwide 2009 was not a good year for the mining industrymining industry
• The world´s economy collapsed in the second The world´s economy collapsed in the second half of 2008 and adversely affected 2009.half of 2008 and adversely affected 2009.
• The worldwide recession impacted all industrial The worldwide recession impacted all industrial sectors.sectors.
• The industrial strength of China supports the The industrial strength of China supports the world´s demand for minerals.world´s demand for minerals.
• China has become the number one producer of China has become the number one producer of automobiles.automobiles.
• Latin America leads in investment in Latin America leads in investment in mining exploration (26%).mining exploration (26%).
• Peru is the third mining country in the Peru is the third mining country in the world.world. (Metals Economic Group)(Metals Economic Group)
• Mexico faced strikes and work stoppages, Mexico faced strikes and work stoppages, increased cost of energy and suffered delays in increased cost of energy and suffered delays in exploration projects.exploration projects.
INTERNATIONAL SCENARIOINTERNATIONAL SCENARIOINTERNATIONAL SCENARIOINTERNATIONAL SCENARIO
WORLDWIDEWORLDWIDE INVESTMENT IN MINING EXPLORATION: INVESTMENT IN MINING EXPLORATION:
U.S. $7.320 BILLION (- 42%)U.S. $7.320 BILLION (- 42%) WORLDWIDEWORLDWIDE INVESTMENT IN MINING EXPLORATION: INVESTMENT IN MINING EXPLORATION:
U.S. $7.320 BILLION (- 42%)U.S. $7.320 BILLION (- 42%)
16%
13%
6%
5%
5%
4%
3%
6%3%
Canada
Australia
U.S.A.
Russia
Mexico
Chile
China
South Africa
Brazil
THE IMPORTANCE OF MINING IN MEXICOTHE IMPORTANCE OF MINING IN MEXICO
Mexico’s tradition as a mining country goes back many centuries and since the pre-Columbian days
The search for gold was a driving force behind the Spanish conquest .
The miners spread throughout New Spain side by side with the Spanish conquistadors, the priests and missionaries.
Guanajuato Zacatecas
Taxco
THE IMPORTANCE OF MINING IN MEXICOTHE IMPORTANCE OF MINING IN MEXICO
Wealth from mining was the most important source of financing for the construction of architectural jewels .
THE IMPORTANCE OF MINING IN MEXICOTHE IMPORTANCE OF MINING IN MEXICO
Santa Prisca. Taxco
THE IMPORTANCE OF MINING IN MEXICOTHE IMPORTANCE OF MINING IN MEXICO
Mexico has a rich territory and a definite and well known mining vocation. 70% of the territory is favorable for the finding of world class mineral deposits
VILLA HERMOSA
OAXACA
TOLUCA
QUERETARO
GUANAJUATO
MORELIA
GUADALAJARA
COLIMA
AGUASCALIENTES
TEPIC
ZACATECAS
DURANGO
LA PAZ
SALTILLO
CHIHUAHUA
HERMOSILLO
D-44
A-51 A-53
D-68C-77
A-23
C-43 C-47
C-31
C-42 C-45C-46
C-54
C-64
A-16
A-26
A-46
B-34
A-44A-45
A-54A-55
A-65
D-32
B-22B-23
B-43
C-44
A-63
A-73
D-58
C-88
C-36D-34
B-27
B-36
B-46
A-74
A-84
D-51 D-53
D-61D-62D-63D-71
C-12
A-51
B-34
B-58
B-68B-69
A-72
C-25
A-65
D-58D-59
A-73
C-55
D-76
A-89
D-76
B-35
B-44B-45
C-15C-16
C-26
D-14
D-24
D-13
D-62
A-59
A-69
B-24B-25
D-52
B-78B-79
B-88B-89
A-24
A-34
A-51 A-55
A-33
A-43
B-59
D-79C-71
B-39
B-49
A-13
A-22
A-42
A-54
A-31A-32
A-72
C-85
B-23
B-14B-13
B-33
D-45
A-11
D-75
B-72
D-12 D-13
D-22 D-23
B-64 B-65
B-74 B-75A-89
A-69 B-61
A-79 B-71
C-29
C-39
B-66
D-32
A-57
A-46A-47
A-56
A-66A-67
B-88 A-85
A-41
A-51
A-73
A-83
A-52
A-84
A-58
C-82
D-71
C-11 C-17C-18C-19C-27
C-37
A-38
A-48
C-56
C-35
C-45 C-49
C-59
C-28C-21
C-79
B-69
A-75
A-85
B-33
A-64
A-53
A-63
D-69
D-78
A-71
B-82
D-12
D-67
C-53
C-84
D-69
D-59
B-78
C-48 D-42
B-59
D-63
B-53
B-62 B-63
B-73
B-79
B-65
C-61
C-51
Cu, Mo, Au
Au
Ag, Pb, Zn
Pb, Zn
Fe, Cu
F
Sr
C
S
P
Mn
En estudio
Source: Consejo de Recursos Minerales
Metallogenic Map
Ag
CuAu Zn
C
Fe
P
Sr
Pb
MnAg
Mo
Au
Cu
Bi
NaCl
Ti
Fe
Au Sb
Fl
S
Existing World Class DepositsExisting World Class DepositsFresnilloFresnilloTayoltitaTayoltitaCananeaCananeaReal del Monte y PachucaReal del Monte y PachucaCharcasCharcasSanta EulaliaSanta EulaliaLa HerraduraLa HerraduraLas CuevasLas CuevasMolangoMolangoPeñasquitoPeñasquito
The importance of mining in Mexico
Mining activities in 24 of the 32 states in Mexico and impact directly or indirectly 83 millon Mexicans.
2009 Key Statistics Annual value of production:
US $9,319 million
Share of GNP:1.6%
Direct Employment: 269,000
Indirect Employment: 1,500,000
Investment in mining: US $2,858 million
(- 22%)
Projected Investment 2010-2012:
US $3.083 billion
New mining operations: 15
Minerals in top 12 places: 18
TOTAL INVESTMENT IN MINING-MEXICOMillion Dollars
TOTAL INVESTMENT IN MINING-MEXICOMillion Dollars
380 258 348585
912
1,257
2,156
3,659
2,858
0
500
1000
1500
2000
2500
3000
3500
4000
2001 2002 2003 2004 2005 2006 2007 2008 2009
380 258 348585
912
1,257
2,156
3,659
2,858
0
500
1000
1500
2000
2500
3000
3500
4000
2001 2002 2003 2004 2005 2006 2007 2008 2009
SHARE BY METALValue of Mining-Metallurgical Production: US $9,319 Million
SHARE BY METALValue of Mining-Metallurgical Production: US $9,319 Million
9%
6%
5%
5%
22% 22%
16%
15%
Copper
Gold
Silver
Zinc
Molybdenum
Coal
Steel
Others
2008
18%10%
7%
6%
5%
18% 18%
18%
Copper
Gold
Silver
Zinc
Coke
Coal
Steel
Others
2009
FOREIGN INVESTMENT IN MINING IN MEXICOFOREIGN INVESTMENT IN MINING IN MEXICO
70%
30%
Foreign Mexican
Foreign Investment in Exploration: US$366 Million
40%
60%
Foreign Mexican
Value of Mining Production: US$9,319 Million
FOREIGN INVESTMENT IN MINING IN MEXICO BY COUNTRYFOREIGN INVESTMENT IN MINING IN MEXICO BY COUNTRY
75%
15%
2%3%
1% 4%Canada
U.S.A.
UnitedKingdom
Australia
Japan
Others
RESULTS IN 2009RESULTS IN 2009
Notwithstanding the adverse world environment and Notwithstanding the adverse world environment and internal problems faced by the sector, such as:internal problems faced by the sector, such as:
Strikes and work stoppagesConflicts in access to landHigh energy costsUnjustified attacks on MiningLegislative initiatives which would adversely affect the
competitiveness of the sector
15 important mining operations were opened or 15 important mining operations were opened or reactivated in Mexicoreactivated in Mexico
NEW MINING OPERATIONS- 2009NEW MINING OPERATIONS- 2009
BAJA CALIFORNIA– El Triunfo (US $23 M)– San Juan of Rofomex, recommenced operations (US$75 M)
SONORA– San Juan of Timmins Gold (US$40 M)– San Felipe of Minera Hochschild (US$40 M)
CHIHUAHUA– Dolores of Minefinders (US$450 M)– Pinos Altos of Agnico Eagle (US$240 M)– Palmarejo of Coeur D’Alene (US$30 M)
COAHUILA– La Encantada of First Majestic, expanded operations (US$30
M) DURANGO
– Cerro Las Minitas of Silver Dragon (US$40 M)– Velardeña of ECU Silver (US$10 M)
NEW MINING OPERATIONS- 2009NEW MINING OPERATIONS- 2009
ZACATECAS– Peñasquito of Goldcorp (US$1,700 M)– El Coronel of Frisco (US$71 M)
SAN LUIS POTOSI– Asientos of Frisco (US$44 M)
JALISCO– Cascaronal of Jaguar Mining (US$30 M)
MICHOACAN– Aquila of Terniun (US$30 M)
INVESTMENT: US$3,098 MINVESTMENT: US$3,098 M
EXPLORATION PROJECTSEXPLORATION PROJECTS
5858585851515151
11111111
1111
6666
8888
323213131313
4444
131355
1616161634343434
6635353535
1515
16162626 15151515
7777
14141414
111111111616161655
19191919
738 PROJECTS738 PROJECTS
232 Mining Companies232 Mining Companies
738 PROJECTS738 PROJECTS
232 Mining Companies232 Mining Companies
EXPLORATION PROJECTSEXPLORATION PROJECTS
Foreign Companies
Company Country Company Country Goldcorp Canada Teck Cominco Canada Panamerican Silver Canada Alamos Gold Canada Farallon Resources Canada Gammon Lake Canada Agnico Eagle Canada Constellation U.S.A. Kinas Minerals Australia F Majestic Canada Frontera Copper Canada Glamis Gold Canada Arcelor Mittal India Hecla Mining U.S.A. Minco PLC U.K. Silver Eagle Canada
Foreign Companies
Company Country Company Country Goldcorp Canada Teck Cominco Canada Panamerican Silver Canada Alamos Gold Canada Farallon Resources Canada Gammon Lake Canada Agnico Eagle Canada Constellation U.S.A. Kinas Minerals Australia F Majestic Canada Frontera Copper Canada Glamis Gold Canada Arcelor Mittal India Hecla Mining U.S.A. Minco PLC U.K. Silver Eagle Canada
Investment Forecast 2010-2012: US$13.083 Billion
EXPLORATION PROJECTSEXPLORATION PROJECTS
Mexican Companies
Grupo México Peñoles
Frisco Autlán
Grupo Alfil Fresnillo PLC
Minas de Bacis Las Encinas
Materias Primas GAN
MINING LEGISLATIONMINING LEGISLATION
Regulation of mining activity dates back to the 16th century colonial period of New Spain.
The Cedula Real issued on December 9, 1526 The Ordenanzas del Nuevo Cuaderno on August 22nd, 1584
The Ordenanzas de Aranjuez on May 22nd, 1783
Codigo de Minas de los Estados Unidos Mexicanos of 1884.Ley Minera de los Estados Unidos Mexicanos of June 4, 1892.
Ley Minera of 1909.
Independent MexicoIndependent Mexico
MINING LEGISLATION
The Political Constitution of the United Mexican States adopted in 1917.
Article 27 of the Mexican Constitution specifies that:“The nation has eminent domain over all natural resources in the continental shelf and islands; of all minerals and substances in veins, mantos, masses or beds which constitute deposits whose nature is distinct from the components of the lands, such as ores from which metals and metalloids used in industry are extracted, beds of precious stones, of rock salt and salt beds formed directly by marine waters…”
Ley Minera of 1930
Law Regulating Constitutional Article 27 on the Exploitation and Treatment of Mineral Resources of February 6, 1961
Law Regulating Constitutional Article 27 on Mining Matters, December 1975 Regulations enacted on November 30, 1976. New Regulations enacted on December 10, 1990.
MINING LEGISLATIONMINING LEGISLATION
Ley Minera of 1992. Regulations enacted on March 29, 1993.
The Mining Law amendments enacted on December 24, 1996.
The Regulations of 1993 were replaced by the new Regulations published on February 15th, 1999.
2005 AMENDMENTS TO THE MINING LAW2005 AMENDMENTS TO THE MINING LAW
On April 28, 2005 substantial amendments were made to On April 28, 2005 substantial amendments were made to the mining law.the mining law.The principal features of the 2005 amendments are:The principal features of the 2005 amendments are:
Reclassification of certain minerals, elements and substances, and updating of the terms used to identify some of them.
Changing the name of the Mineral Resources Council to Mexican Geological Service and strengthening and expanding its role.
Grants indigenous peoples and communities the (i) right to apply for and obtain mining concessions, provided they comply in all respects with the law and its regulations, (ii) the “preferential right” would apply in the case of “simultaneous” applications for concessions; and (iii) the “preferential right” would also apply in the case of bidding process upon disincorporation of an area as a National Mining Reserve.
.
Replacing the “exploration concession” and the “exploitation concession” with a single “mining concession” with a 50 year term, renewable for another 50 year term, provided the corresponding petition is filed within 5 years prior to the expiration of the initial term.
Regulates “gaps” or “voids” (huecos) and establishes rules for the preferential right to acquire a concession thereon
Establishes that, upon termination of a concession (through cancellation, expiration of term, or abandonment, a concession holder must provide to the Mexican Geological Service a complete geological and mining report including all exploration and exploitation work done, for incorporation in the “public geological survey and information system”.
Incorporates in the law, instead of the Regulations, the obligation of having a safety engineer in coal mines with more than 9 workers and in all other mines with more than 49 workers.
2005 AMENDMENTS TO THE MINING LAW2005 AMENDMENTS TO THE MINING LAW
Emphasizes the obligation of concession holders to comply with all applicable Official Mexican Norms and Mexican Norms regarding safety and environmental protection.
Simplifies and deregulates bureaucratic procedures, which complicated compliance by mining companies and created unnecessary workload for the Bureau of Mines.
Increases penalties to concession holders who relapse in breaches of the law.
2005 AMENDMENTS TO THE MINING LAW2005 AMENDMENTS TO THE MINING LAW
2006 AMENDMENTS TO THE MINING LAW2006 AMENDMENTS TO THE MINING LAW
On June 26, 2006 amendments were made to the mining On June 26, 2006 amendments were made to the mining law.law.
The principal feature of the 2006 amendments are:The principal feature of the 2006 amendments are:
Allows the capture, storage and delivery of methane gas Allows the capture, storage and delivery of methane gas from coal mines, subject to certain requirements and from coal mines, subject to certain requirements and consents from the Ministry of Energy and provided the gas consents from the Ministry of Energy and provided the gas is delivered to PEMEX.is delivered to PEMEX.
OTHER LAWS AND REGULATIONS APPLICABLE TO EXPLORATION AND MINING ACTIVITIES
OTHER LAWS AND REGULATIONS APPLICABLE TO EXPLORATION AND MINING ACTIVITIES
Importation, purchase, storage and use of Importation, purchase, storage and use of explosives:explosives: FEDERAL FIREARMS AND EXPLOSIVES LAWFEDERAL FIREARMS AND EXPLOSIVES LAW
Extraction, use and disposal of waterExtraction, use and disposal of water:: NATIONAL WATERS LAWNATIONAL WATERS LAW
Environmental matters:Environmental matters: GENERAL ECOLOGICAL BALANCE LAW FOR THE GENERAL ECOLOGICAL BALANCE LAW FOR THE
PROTECTION OF THE ENVIRONMENTPROTECTION OF THE ENVIRONMENT GENERAL LAW FOR THE PREVENTION AND GENERAL LAW FOR THE PREVENTION AND
MANAGEMENT OF WASTEMANAGEMENT OF WASTE NOM-120-SEMARNAT-1997NOM-120-SEMARNAT-1997 FOR EXPLORATION (Defines FOR EXPLORATION (Defines
environmental specifications for direct exploration environmental specifications for direct exploration activities) activities)
OTHER LAWS AND REGULATIONS APPLICABLE TO EXPLORATION AND MINING ACTIVITIES
OTHER LAWS AND REGULATIONS APPLICABLE TO EXPLORATION AND MINING ACTIVITIES
Environmental matters:Environmental matters:NOM-141-SEMARNAT-2003NOM-141-SEMARNAT-2003 FOR TAILINGS FOR TAILINGS
PONDS (Procedures, specifications and criteria PONDS (Procedures, specifications and criteria for the characterization of tailings and site for the characterization of tailings and site preparation, construction, operation and post-preparation, construction, operation and post-operation of tailings ponds) operation of tailings ponds)
NOM-147-SEMARNAT-SSA1-2004 NOM-147-SEMARNAT-SSA1-2004 FOR SOIL AND FOR SOIL AND LAND REMEDIATION (Establishes criteria for LAND REMEDIATION (Establishes criteria for determination of land contaminated with Arsenic, determination of land contaminated with Arsenic, Barium, Berylium, Cadmium, Chrome (VI), Barium, Berylium, Cadmium, Chrome (VI), Mercury, Nickel, Silver, Lead, Selenium, Talium, Mercury, Nickel, Silver, Lead, Selenium, Talium, and/or Vanadium)and/or Vanadium)
MAIN CHALLENGES AND OPPORTUNITIES FOR MINING IN MEXICO
MAIN CHALLENGES AND OPPORTUNITIES FOR MINING IN MEXICO
Public PolicyPublic Policy Mining must be reassessed as a strategic industry.Mining must be reassessed as a strategic industry. Government Mining Office must be promoted to the Government Mining Office must be promoted to the
level of Undersecretary of Mines.level of Undersecretary of Mines. Regulations of the Mining Law related to 2005-2006 Regulations of the Mining Law related to 2005-2006
Amendments must be enacted.Amendments must be enacted.
LandLand Resolution of conflicts between mining operations Resolution of conflicts between mining operations
and local rural communities.and local rural communities. Ensure the Rule of Law when all permits and Ensure the Rule of Law when all permits and
authorizations have been granted.authorizations have been granted.
MAIN CHALLENGES AND OPPORTUNITIES FOR MINING IN MEXICO
MAIN CHALLENGES AND OPPORTUNITIES FOR MINING IN MEXICO
Labor ReformLabor Reform Flexibility of labor market and recognition of Flexibility of labor market and recognition of
productivity.productivity. Mine workers labor union must adopt internal Mine workers labor union must adopt internal
democratic procedures and accountability.democratic procedures and accountability.EnvironmentEnvironment Timely compliance with existing regulations.Timely compliance with existing regulations. Publicize the sustainable development measures Publicize the sustainable development measures
adopted by the mining sector and their high social adopted by the mining sector and their high social economic and environmental benefits.economic and environmental benefits.
Human ResourcesHuman Resources The severe shortage of geologists and mining The severe shortage of geologists and mining
engineers is cause for concern.engineers is cause for concern.
MAIN CHALLENGES AND OPPORTUNITIES FOR MINING IN MEXICO
MAIN CHALLENGES AND OPPORTUNITIES FOR MINING IN MEXICO
EnergyEnergy Current domestic prices of energy pose a clear Current domestic prices of energy pose a clear
disadvantage vis-a-vis our competitors.disadvantage vis-a-vis our competitors. Mining is the third largest energy consumer in Mining is the third largest energy consumer in
Mexico.Mexico. Need competitive energy.Need competitive energy. Optimize use of energy in each mining unit.Optimize use of energy in each mining unit.WaterWater This resource is increasingly more scarce and with This resource is increasingly more scarce and with
higher demand.higher demand. Need public policies which promote the saving and Need public policies which promote the saving and
efficient use of water.efficient use of water.
CONCLUSIONSCONCLUSIONS
2009 was a difficult year for Mexican mining.2009 was a difficult year for Mexican mining.
It faced the collapse of metal prices, shrinking It faced the collapse of metal prices, shrinking markets, strikes and work stoppages, delays in markets, strikes and work stoppages, delays in exploration projects and legislative initiatives exploration projects and legislative initiatives adverse to the development of the mining adverse to the development of the mining industry.industry.
22 thousand jobs were lost in the sector, total 22 thousand jobs were lost in the sector, total investment fell 22% and 52% percent in investment fell 22% and 52% percent in exploration. The value of production decreased exploration. The value of production decreased 11%.11%.
CONCLUSIONSCONCLUSIONS
According to the Metals Economic Group, According to the Metals Economic Group, Mexico fell from the 4Mexico fell from the 4thth to the 6 to the 6thth place as a place as a preferred location to invest in mining preferred location to invest in mining exploration. exploration.
Notwithstanding the adverse scenario, 15 Notwithstanding the adverse scenario, 15 important mining operations were opened or important mining operations were opened or reactivated in 2009. reactivated in 2009.
The mining sector is honoring its commitment The mining sector is honoring its commitment to Mexico with forecasted unprecedented to Mexico with forecasted unprecedented investment of US$13.083 billion in 2010-2012. investment of US$13.083 billion in 2010-2012.