New Era for Mining in Mexico Creates Uncertainty

• Mexico passed amendments to mining laws, establishing new regulations for concessions, terms, scope, transferability, and indigenous consultation.
• Concessions will now be awarded by public bidding after securing permits, are for 30 years renewable once, and are mineral-specific.
• Mining is no longer a preferential activity; concessions no longer confer automatic access rights.
• New economic obligations require giving 5% of profits to communities; new crimes established.
• Existing concessions remain but renewal terms unclear; actions to revoke may spur legal fights.

Major Overhaul of Mining Rules

Mexico has enacted sweeping reforms that fundamentally rewrite the rules for mining concessions, permitting, operations, and obligations in the country. The reforms have profound implications for junior miners and investors in the sector.

On May 8, 2023, amendments to Mexico's core mining laws went into effect establishing dramatic changes to concession policies, requirements, and miner obligations. Most notably, concessions will now be awarded through competitive public bidding only after securing permits. This replaces the previous "first-come" system. Concessions will also be for 30 years renewable once, rather than 50 years renewable once, and be mineral-specific rather than covering all deposits.

Squeeze on Juniors

Additionally, mining is no longer considered a preferential activity entitled to access rights and land use privileges. Miners face new profit-sharing obligations, giving 5% of net profits to local indigenous communities. New crimes are established related to mining operations, exposing companies and staff to criminal liability.

For existing concession holders, renewal terms are unclear but concessions will not be revoked outright. However, the government may seek to cancel or reverse concessions, which could prompt legal battles over constitutionality and expropriation. Investors should watch closely for such disputes and their implications.

The new competitive bidding process for concessions paired with stringent social and environmental permitting will favor deep-pocketed major miners over juniors. The reduced concession terms also pressure rapid execution of mining plans. Combined with narrowed access rights, these changes squeeze juniors' flexibility and increase barriers to entry and investment returns.

Cautious Optimism for Future

However, Mexico's immense mineral wealth remains attractively underexplored using modern techniques. Once regulatory uncertainty subsides, opportunities will emerge for nimble juniors able to adeptly navigate the new concession and permitting regime. Investors with higher risk tolerances may be rewarded for early moves.

But the industry should brace for a period of upheaval. With further implementing regulations due within 180 days, the new mining law's impacts will unfold over 2023 and beyond. While opportunities will re-emerge, the regulatory overhaul marks the end of an era for mining in Mexico. Juniors and investors face a more difficult but still prospective path forward. Careful due diligence and risk management will be required to realize continued gains from Mexico's mineral riches.