1. business and industrial
2. mining industry

Latin American
Mining Handbook
2010
Table of Contents
Argentina ............................................................................................. 1
Brazil ................................................................................................... 9
Chile .................................................................................................. 21
Colombia ........................................................................................... 35
Mexico............................................................................................... 41
Venezuela .......................................................................................... 55
Argentina – Mining Handbook
Argentina
Mining
1.
Exploration Permits
Any company or individual may request an exclusive exploration
permit. The application filed to obtain the permit must include: (i) the
geographic coordinates of the limits of the requested area; (ii) the
purpose of the exploration; (iii) the name of the individual or company
requesting the permit; (iv) the name of the owner of the surface land;
(v) a description of the work to be done, including the estimated
investment and equipment; and (vi) a sworn statement affirming that
the request does not violate the Mining Code.
The person requesting the exploration permit must pay an exploration
fee simultaneously with the filing of the application. The fee is
reimbursed (totally or partially) if the permit is denied or granted for a
smaller area. The mining authority automatically denies the request if
the solicitor does not submit evidence of fee payment. Currently, for
first-category and second-category minerals (gold, silver, copper,
lithium, salt, etc.) the exploration fee is approximately AR$400 per
unit (500 hectares), regardless of the term of the permit. The
boundaries of exploration areas must have north-south and east-west
orientation.
The provincial or the Federal Mining Authority (“Authority”) is in
charge of: (i) registering the permit; (ii) notifying the owner of the
land; and (iii) publishing an official notice in the Official Gazette of
the place where the permit is requested. Anyone who claims to have a
right to the land to be explored must come forward within 20 days
following the publication. If there is no opposition, the Authority will
grant the permit immediately, and from the filing date, all discoveries,
even those made by third parties, shall belong to the permit holder.
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2.
Concession of Mines
Although the Federal Government and the provinces are the owners of
the mines located within their territories, only private parties with
exploitation concessions may exploit minerals. Any company holding
an exploration permit that discovers minerals must file a written
request (declaration of discovery) with a sample of the minerals
found. The Authority is bound to grant an exploitation concession to
the discoverer.
The concession grants its holder a perpetual property right to the mine
it has discovered. But the right is subject to two conditions: (a)
payment of an annual fee; and (b) investment of a minimum amount.
If the holder of the concession does not comply, the concession is
forfeited. For first-category minerals and most second-category
minerals, the annual fee per unit is approximately AR$800; for other
second-category minerals, the annual fee per unit is approximately
AR$400.
Mines may be sold, leased or otherwise transferred in the same way
that real property is sold, leased or transferred.
3.
Mining Modernization Law
In June 1995, the government issued the Mining Modernization Law.
Among other innovations, this Law (i) has eliminated the prior largescale mining regime; (ii) establishes that private parties could cover
with exploration permits up to 200,000 hectares in each province; (iii)
regulates geological investigation using aircrafts; and (iv) has reduced
the areas reserved for exclusive mining and geological investigation
by the Provincial or Federal Governments (from 200,000 to 100,000
hectares) and the term of those investigations (from four to two years).
Under the modified regime, private companies could carry out mining
projects in areas of a size comparable to that established in the former
large-scale mining regime without being forced to enter into any kind
of joint venture with the Federal Government, and are entitled to a
legal rather than an administrative concession.
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4.
Mining Investment Law
Mining Investment Law No. 24,196 (“Mining Investment Law”) was
issued in April 1993, replacing the old mining promotional regime
(1979) and granting certain tax benefits for federal, provincial and
municipal taxes. This has been adhered to by most provinces. Below
is a summary of its benefits.
4.1
Tax Stability
Any company qualified under the Mining Investment Law enjoys “tax
stability” for 30 years from the date of filing of the feasibility study.
This 30-year tax stability covers every federal, provincial and
municipal tax that may be levied on the mining activities carried out
by the companies registered under the Mining Investment Law, except
VAT. Any increase in the tax rates or new taxes that may lead to an
increase in the thorough tax liability will not apply to companies
operating under the Mining Investment Law. The stability shall also
apply to the exchange control and customs duties, excluding the
refund of taxes related to exportation.
Exports withholdings
In December 2007, the Executive Branch set forth a withholding duty
on the exportation of minerals which would affect the tax stability
granted to individuals or companies developing mining activities
pursuant to the Mining Investment Law. For this reason, many major
mining companies that have been awarded said tax stability filed the
corresponding legal actions questioning the validity of the
withholdings applied to mineral exportations. There have been two
court rulings declaring the invalidity of the withholding duty on the
export of minerals in relation to mining companies that have already
applied for the tax stability benefits of the Mining Investment Law.
However, the Supreme Court of Justice has not ruled in this regard
yet, so the referred rulings could be modified by such Court (January
2009).
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4.2
Repatriation of Exports’ Profits
Companies qualified under the Mining Investment Law are exempt
from repatriating profits from export transactions with respect to a
new mining project as well as the broadening of production units
already in existence. In addition, any company that obtains tax
stability under the Mining Investment Law is entitled to freely dispose
of the funds arising from any external loan and to request export
reimbursements (taxes) without being compelled to bring the export
proceeds to Argentina or to file any other supporting documents.
4.3
Registration
To qualify for the benefits of the Mining Investment Law, the
company carrying out the exploration or exploitation activities must
be registered with the Federal Mining Authority. In addition, to enjoy
the tax stability, interested parties must file additional documents
related to the feasibility study.
4.4
Income Tax
Income tax applies, on a worldwide basis, to the income of individuals
or companies residing or doing business in Argentina. The Mining
Investments Law sets forth the following additional benefits:
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Double deduction: If a company is registered as a mining
investor, to calculate its income tax, the amounts invested in
prospecting, exploration and any other expenses necessary to
determine the feasibility of the project that are incurred before
the filing of the feasibility study will enjoy a double
deductibility. The exploration fee and exploitation fee are not
included in the benefit. Moreover, in the case of new projects
or the expansion of existing ones, the deductions may be
made in the fiscal year in which the start-up of the productive
process takes place.
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Accelerated depreciation: An accelerated depreciation regime
is applicable to new mining projects and to the enlargement of
existing ones, as well as all the capital investments made
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during the exploitation. In this sense, investments made in
infrastructure may be depreciated by 60% during the year the
investor obtains the corresponding authorization, while the
remaining 40%, in equal parts in the following two fiscal
years. On the other hand, investments in equipment that
differs from infrastructure (e.g., machinery, vehicles, fixed
assets) may be depreciated in three years.
This depreciation regime is not mandatory; mining investors
are entitled to choose between the general depreciation regime
established by the Argentine income tax law and the
accelerated depreciation procedure mentioned herein.
!
When a company qualifies under the Mining Investment Law,
the profits that its shareholders may gain from the
contribution of mines or mining rights as capital are exempt
from income tax. The shareholders and the company
receiving the assets may not sell them within five consecutive
years as of the date the contribution is made. However, under
certain circumstances, the Mining Authority may authorize
the sale of those assets.
!
Investors may capitalize on up to 50% of the assessment of
economically exploitable mining reserves certified by an
authorized professional. The balance may be recorded as an
accounting reserve. The capital and accounting reserves will
have accounting effects but will not be taken into account in
determining the income tax that the company may owe.
4.5
Import Duties
Any company registered under the Mining Investment Law regime
may import into Argentina capital goods, equipment and spare parts to
be used in the performance of mining activities without having to pay
any import tax (0–35%), statistics duty (0.5%), or any special import
tax. Companies not registered under the Mining Investment Law
regime may also benefit from the aforementioned exemptions as long
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as the capital goods, equipment or spare parts imported are leased to
persons or companies registered under such regime.
4.6
Royalties
Any province adhering to the Mining Investment Law may charge a
maximum of 3% royalty on the “mine head” (boca de mina) value of
extracted minerals.
4.7
VAT for Exploration Activities in Mining Projects
The Mining Investment Law provides that tax credits from the import
of certain goods and services, as specifically determined by the
applicable Authority – and which are intended for prospecting,
exploring, mineralogical tests or applied research – by companies that
perform mining exploration activities and that are registered under the
Mining Investment Law shall be refunded to such companies in
accordance with the terms and conditions that the National Executive
Power will rule.
The aforementioned refund must proceed as long as after a 12-month
taxable period as of the fiscal year in which it should be computed,
such tax credits comprise the taxpayer’s credit balance in line with the
Value-Added Tax Law provisions, and provided that such tax credits
are financed under the provisions of Law No. 24,402.
Law No. 24,402 sets forth a financial regime for value-added tax that
is levied on: (i) the purchase or definitive destination imports of new
capital assets; and (ii) the investment in physical or tangible
infrastructure (such as buildings and equipment) for mining activities.
The beneficiaries of the aforementioned financial regime shall be: (a)
the buyers or importers of new capital assets as long as they are
applied to the productive process focusing on sales to the outward
market; and (b) the companies subject to the Mining Investment Law
regime that make investments in building and construction activities
in order to provide the necessary infrastructure for export goods.
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5.
Federal Mining Agreement
As practically most of the mineral resources belong to the provinces,
on May 6, 1993, all Argentine provinces executed an agreement with
the Federal Government to unify the mining policy and procedures
throughout the country. Most of the provinces have ratified this
agreement in their own legislation. The most important principles of
this agreement are the following:
a.
No law or regulation enacted by the Federal Government, the
provinces or the municipalities will prevail over tax
exemptions granted to mining activities.
b.
Each province will have full competence to call for bids to
explore and develop, on a large scale, the mineral reserves
located within its territory.
c.
State-owned companies will not have privileges over privately
owned companies in carrying out mining exploration and
development activities.
d.
The provinces will foster the abrogation of municipal taxes
and duties, which may burden mining activities.
e.
The provinces will eliminate the stamp tax on documents
related to prospecting, exploration, development and
processing of minerals.
f.
The Federal and Provincial Governments will do what is
necessary to avoid distortions in electricity, gas, fuel and
transportation tariffs that may affect mining activities.
g.
Companies that protect the environment while carrying out
their mining activities shall receive further incentives.
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Brazil – Mining Handbook
Brazil
Mining in Brazil and The Legal and Technical Protection of
Property Rights
1.
Legal Framework
Legal guaranties related to the performance of mining activities (both
Exploration Authorization and mining concessions) are provided for,
and are derived from the Brazilian Federal Constitution, the Mining
Code and some laws and regulations which apply specifically to the
mining industry.
2.
Operational Framework
The main basic set of rules governing mining activities in Brazil are
Decree-Law No. 227 as of February 28, 1967, as amended from time
to time (“Decree-Law 227”, also known as the “Mining Code”) and
Decree No. 62,934 as of July 2, 1968 (“Decree 62,934” and jointly
with the Mining Code referred to as “Mining Laws”).
3.
Operating Framework
3.1
Mining Legislation
According to Article 176 of the Brazilian Federal Constitution of
1988, all mineral fields (“jazidas”) located within Brazilian territory
belong to the Federal Government, whether these involve mining
production or not. These mineral fields are deemed to be distinct from
real estate where they are located.
The research and the exploitation of mineral resources in Brazil may
be undertaken only with the approval from the Federal Government,
i.e., after the issuance of exploration authorization and mining
concessions, to either (i) Brazilian citizens and (ii) companies with
head offices and management in Brazil, respectively (regardless of
whether they have national or foreign capital).
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Exploration Authorizations and Mining Concessions may be assigned
to another party, whether totally or partially, but only upon prior
approval from the Federal Government (Article 176, Section3rd of the
Federal Constitution).
3.2
Brazilian Mining Authority
The National Department of Mining Production – DNPM
(“Departamento Nacional de Produção Mineral”) created by Decree
No. 23,079/1934 is a federal governmental autarchy subordinated to
the Brazilian Ministry of Mines and Energy (“Ministério de Minas e
Energia”) (“MME”) vested with administrative power to inspect
mining undertakings and to enact ordinances governing the regulation
of mining activities. The DNPM also has a legal standing to impose
administrative penalties on mining undertakings not performed in
accordance with applicable requirements.
Mining companies are required to cooperate with DNPM inspection
officers and to provide technical and financial information on the
entire chain of exploitation, production and commercialization of the
mineral resources.
3.3
Organization and Functioning of Mining Companies in Brazil
In the past, mining companies had to obtain previous authorization
from the MME to carry out mining activities. Nowadays, such
authorization is not required, but the companies shall present its
corporate acts to DNPM in its proceedings for the obtainment of an
Exploration Authorization or a Mining Concession, or in proceedings
related to the assignment of mining rights.
3.4
Restriction on Mining Activities in Brazil
The research work, extraction, exploitation and economical use of
mineral resources within the Brazilian frontier zone (“Faixa de
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Fronteira”) shall depend on the prior approval of the Brazilian
National Defense Counsel (“Conselho de Defesa Nacional”). 1
Under these laws, an internal line of 150 km of width parallel to the
frontier between Brazil and other countries is considered the Brazilian
Border Zone (“Faixa de Fronteira”).
In addition, any company that performs mining activities within the
Brazilian frontier zone shall comply with the following requirements:
(i) at least the majority of the capital must ultimately belong to
Brazilian citizens, (ii) two thirds of its workers must be Brazilian
citizens, and (iii) the majority of the members of management of such
companies must be Brazilian citizens who shall have relevant powers
to manage the company.
It is worth mentioning that the exploration and the mining of nuclear
minerals and its derivatives on Brazilian territory may be carried out
only by state-owned companies. 2
3.5
Water Legislation
Brazil also has legislation and legal guarantees related to the
exploitation and use of water rights. Conceptually, the manner in
which to obtain, maintain and protect these rights is similar to that
with respect to the Mining Laws (as explained below), although they
operate in a distinct manner and under distinct Codes and Regulations.
3.6
Environmental Protection Legislation
Mining activities are deemed as highly potentially pollutant activities
pursuant to the Brazilian Federal Law No. 6,938/81, that establishes
the National Policy of Environmental Protection and Resolution No.
1
The Brazilian National Defense Counsel comprises the following members:
President of the Republic, Vice-President, Chairs of the Senate and House of
Representatives, Ministry of Justice, Ministry of Foreign Affairs, Ministry of
Economy, and Secretaries of the Brazilian Army, Navy and Air Force.
2
See Article 176 of the Brazilian Federal Constitution.
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237/97 issued by the Federal Environmental Council – CONAMA.
Thus, these activities are subject to mandatory environmental
licensing by the Federal or State Environmental Agency, depending
on the extension of the potential environmental impact.
Environmental licenses shall be granted prior to the construction,
installation, expansion or operation of the mining activity.
The interested party must, when presenting the Mineral Research
report to the DNPM, obtain orientation from the environmental
protection agency on the procedures required in the environmental
licensing.
Ordinarily, an environmental licensing proceeding comprises three
phases represented by the issuance of three licenses: (i) the
Preliminary License, which authorizes the location of the activity and
the concept of the project, pursuant to the studies presented; (ii) the
Installation License, which upon the fulfillment of the conditions
imposed in the Preliminary License authorizes the installation of the
activity; and (iii) the Operating License, which authorizes the start-up
of the activities.
During the licensing proceeding, the authorities evaluate all conditions
in which the mining activity will be developed, but other specific
environmental licenses may also be required for specific activities
related to the mining activity, such as water use and barriers, solid
waste generation, transport and disposal of certain products and scrap
materials, the suppression of vegetation, the use of explosives and
chemical products, and the like.
As a general rule, for the issuance of the Preliminary License, a
previous Environmental Impact Study – EIA and a corresponding
Environmental Impact Report – RIMA are required. The purpose of
the studies is to assess any negative impact of the activity intended to
be developed and to explore the options to prevent and cushion the
effects thereof .Along with these assessments, the interested party
must also present (i) measures to mitigate such negative impact
(Environmental Control Plan) and (ii) Environmental Recovery Plan,
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which foresees the activities to be adopted by the party after the
conclusion of the activities in order to restore the environment to its
original state.
Noncompliance with applicable environmental laws and regulations
can result in criminal and administrative penalties pursuant to
Brazilian Federal Law No. 9,605 of February 12,1998, and Federal
Decree No. 6,514 of July 22, 2008, in addition to the obligation of
restoring the environment and indemnify third parties in case of
occasional environmental damage. Polluters in Brazil are subject to
strict, joint and several liability, meaning that in case of environmental
damage, any party which has directly or indirectly contributed to the
pollution may be held exclusively liable for the entire damage (Law
No. 6,938, of August 31, 1981).
Federal Law 9,605 also provides for piercing the corporate veil in any
situation in which the existence of a legal entity is deemed a barrier to
the recovery of damage to the environment.
4.
Exploration Rights
4.1
General Comments on Exploration and Mining Rights
There are two main governmental grants in connection with mining
activities in Brazil (i) Exploration Authorization (“Autorização de
Pesquisa”) and (ii) Mining Concession (“Concessão de Lavra”).
Exploration Authorization shall be granted by the General Officer of
DNPM while the Mining Concession shall be granted by the MME.
An exception is made in regard to mining activities already in place
prior to 1934, namely “Mina Manifestada.”
4.2
Filing Procedure
The request for an Exploration Authorization shall be addressed to the
DNPM General Officer and shall be accompanied with the following
information/documentation:
(i)
specifications of the mineral to be researched;
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(ii)
location of the reserve and extension of the surface area to be
researched;
(iii)
description memorandum of the area;
(iv)
plant of the facility;
(v)
a “Research Work Plan”; and
(vi)
a budget and schedule for the performance of the research
work.
Any area may be subject to an Exploration Authorization as long as
the Research Work Plan, the budget and schedule are approved and
the area is deemed to be “free,” meaning that it has not been granted
prior Authorization Research, Mining Concession or a similar grant.
The exploration shall be carried out according to the Research Work
Plan for not less than one (1) year and not more than three (3) years,
subject to extension of the term by the DNPM.
4.3
Exploration Authorization Term
The Exploration Authorization shall be granted for a period no less
than one year and not longer than three years, which may be extended
by the DNPM. At the end of this term, the owner of the Exploration
Authorization shall present a Final Research Report to DNPM, which
shall contain information regarding the results of its geologic studies
in the field as well as such field’s economic and technical feasibility.
4.4
Research Work
The owner of the Exploration Authorization shall begin the research
work within 60 days as of the publication of said Authorization,
provided that such person is the owner of the surface area or has
already adjusted the payment due the owner.
In case there is no agreement between the holder of the Exploration
Authorization and the owner of the surface area, a lawsuit may be
filed to allow access to the surface area necessary for the research.
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Once the research work is finished and the Final Research Report is
approved by DNPM, the holder of the Exploration Authorization has a
one-year exclusivity term to request the Mining Concession.
4.5
Size of Exploration Authorization Areas
The DNPM General Officer shall limit the size of the areas for
purposes of granting an Exploration Authorization. Such limit varies
in accordance to the type of mineral to be researched in a specific
area. As an example, in accordance with Ordinance No. 392/2004, an
Exploration Authorization related to the mining of iron ore shall be
granted only with respect to areas measuring a maximum of 2,000 ha.
4.6
Main Payments Related to Exploration Authorization
Annual Hectare Fee – TAH (“Taxa Anual por Hectare”): A fee per
hectare to be paid by the holder of the Exploration Authorization each
year until the delivery of the Final Research Report to DNPM.
Filing fees to DNPM: Fees paid when the Exploration Authorization
Request is filed.
Payment of royalties to the owners of the surface area: Royalties
equivalent to 50% of the amount paid as CFEM.
4.7
Assignment and Transfer of Exploration Authorization to Third
Party
The assignment of the title of the Exploration Authorization is allowed
subject to the DNPM’s prior approval. The DNPM will assess the
assignee’s ability to comply with the Research Work Plan, Budget and
Research Schedule.
5.
Mining Rights
5.1
Filing Procedures
The request for a Mining Concession must be made by the owner of
the Exploration Authorization or its assignor, within one year counted
from the date the DNPM issues its approval of the Final Research
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Report. If this term is not complied with, any other parties may
request a Mining Concession for a “free” mining field. In any way, a
Mining Concession may be granted only in connection with mineral
fields already subject to a Final Research Report.
The request for a Mining Concession shall be addressed to the
Ministry of MME and shall be accompanied with the following
information/documentation:
(i)
certificate issued by the Commercial Registry of the State in
which the mining company was incorporated;
(ii)
specifications of the mineral to be researched and documents
evidencing that a Exploration Authorization has been granted;
(iii)
description and location of the mining field to be exploited;
(iv)
graphical definition of the area to be exploited;
(v)
easements that shall apply to the area;
(vi)
Economic Development Plan (“Plano de Aproveitamento
Econômico”) with respect to the mining field; and
(vii)
evidence of the existence of funds or of financial commitment
necessary for the execution of the Economic Development
Plan.
As mentioned above, the Mining Concession shall be granted by the
MME through the issuance of an ordinance (“Portaria”) to be
published in the Official Gazette.
The holder of the Mining Concession shall request the DNPM the
possession (“imissão na posse”) of the surface area necessary for the
mining work within 90 days counted as of the publication date of the
ordinance. The DNPM will then draft an Access Term which will be
signed by all stakeholders. The owner of the surface area is entitled to
royalties equivalent to 50% of the amount paid as CFEM.
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5.2
Main Obligations Related to Mining Concessions
The holder of a Mining Concession must fulfill several obligations,
including but not limited to:
(i)
commencement of production work contemplated in the
Economic Development Plan within six months counted from
the date the real estate where the mineral rights are to be
exercised is accessed;
(ii)
extraction of minerals from the mining field in accordance
with the plan approved by the DNPM;
(iii)
addressing certain issues/concerns with regard to losses and
damage to third parties as a result of the mining activity; and
(iv)
presenting to the DNPM until March 15 of each year the
Annual Production Report (“Relatório Anual de Lavra”)
related to the activities performed in the previous year.
Note that there are other tax obligations, such as the payment of the
Compensation for the Exploitation of Mineral Resources – CFEM
(“Compensação Financeira pela Exploração de Recursos Minerais”)
pursuant to Federal Law No. 7,990 as of December 29, 1989.
The value of CFEM varies from 0.2 to 3% of the net sales of mineral
products. For most mineral products, the rate is 2%. Out of the
amount collected, 65% thereof is earmarked for certain municipalities
where production is to take place ! 23% for states and 12% to
the Federal Union.
As already pointed out, the owner of the surface area shall be paid a
monthly royalty under a Mining Concession equivalent to 50% of the
CFEM.
The holder of a Mining Concession shall not exploit any substance not
covered under the Mining Concession. In case new substances are
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discovered, the owner shall request an amendment to its Mining
Concession.
The Mining Concession may be encumbered or assigned, but an
encumbrance or assignment will be effective only after it has been
registered with the DNPM.
5.3
Assignment of Mining Rights (“Cessão e Transferência de
Direitos Minerários”)
The assignment of the title of the Mining Concession is allowed, but
subject to the DNPM’s prior approval.
Besides, it is also possible to lease certain mining rights
(“Arrendamento de Direitos Minerários”) to a third party, likewise
subject to the DNPM’s prior approval.
According to Article 11 of DNPM Ordinance No. 269, the term of the
lease agreement will be effective only as of the registration date it was
filed before the DNPM, independent of the initial date agreed on by
the parties, but complying with the final term they have mutually
agreed on. A lease agreement must be presented to the DNPM within
30 days as of the execution. The prorogation of the term of a lease
agreement will be allowed.
The lessee may perform mining activities only in the area covered
under the lease agreement after such agreement is registered before
the DNPM and the appropriate operation license (“licença de
operação”) has been issued. Otherwise, the lessee will be declared
involved in a crime (as set forth in Article 55 of Law No. 9,605 as of
February 12, 1998) and will be imposed a penalty, which may be
detention for six months to one year plus fine.
5.4
Protecting the Mining Concession
In case of failure to comply with an obligation regarding the granting,
the DNPM may impose the following penalties: (i) a warning; (ii) a
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fine or (iii) termination of the granting (i.e., termination of the
Exploration Authorization or the Mining Concession).
The termination may be imposed if the party (i) abandons the field; or
(ii) fails to comply with the term of exploration or production, after
the party is warned of its failure.
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Please do not hesitate to contact us in case you need further
clarification.
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Chile – Mining Handbook
Chile
Mining in Chile and The Legal and Technical Protection of
Property Rights
1.
Legal Framework
Legal guaranties assuring ownership of mineral holdings (both
exploration and mining concessions) are provided for, and are derived
from, the Constitution of Chile and by Basic Constitutional Laws,
Codes and Regulations which apply specifically to the mining
industry.
2.
Operational Framework
There are three basic areas in which legal ownership is regulated and
which guarantee that ownership:
!
The Codes and Regulations governing Mining;
!
The Codes and Regulations governing Water Rights;
!
The Laws and Regulations governing Environmental
Protection as related to mining.
3.
Operating Framework
3.1
Mining Legislation
Mining Legislation and its application are derived from the Mining
Code and Regulations. This Code basically establishes that to explore
for, or to mine, whatever type of mineral species, it is necessary to
obtain the rights to pursue said activity from the State, i.e. all minerals
are property of the State (Article 1 of the Mining Code (MC) states
that: “The State has absolute, exclusive, unalienable and
imprescriptible dominion of all mines….”). For these rights to be
obtained, the State has defined legal procedures which, when properly
completed, provide exclusive mining rights (Article 34 MC: “The
mining concessions are constituted by judicial resolution which is
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dictated by a process which is not contentious and without
intervention by anyone or authority which requires decision making”).
The legal assurances which cover the (mining) rights must be
protected. Although the State allows access to, and has the tools to
protect, these rights, the State itself, or through any State organization,
will not defend these rights. The Mining Law provides that the owner
of the mining property has the right to protect these rights whether
against another individual or against the State itself (Article 2 MC: “A
Mining Concession is a real (real estate) property right…defensible
against the State or whatever individual…”).
A second item that is addressed is the subject of the technical
assurances that are contained within these rights. From the very start
of mining in Chile, i.e. during colonial times, the laws insisted that the
mining rights clearly and exactly define the shape and dimension of
the concession being acquired (By Order of New Spain). Today, and
as long as the Mining Code (Law 18.248 which was published in the
Official Journal dated October 14, 1983) is current, UTM (Universal
Transversal Mercator) coordinates are to be used to define the
property using points which are very exact and restrictive (Article 45
MC: “The point of interest… with a precision of seconds or 10
meters…”) and with North-South orientation (Article 28 MC: “…the
length and with of the parallelogram will be oriented UTM NorthSouth…”).
3.2
Water Legislation
In view of the fact that some 98% of mining in Chile takes place in
desert or semidesert areas, the development of a water resource is
indispensable. Chile also has legislation and legal guarantees so that
water rights can be obtained and maintained, be it surface,
underground or marine water. Conceptually, the manner in which to
obtain, maintain and protect these rights is similar to that for the
Mining Legislation, although they operate in a distinct manner and
under distinct Codes and Regulations. The operational side, i.e.
application, maintenance and protection of the water rights, is also
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Chile – Mining Handbook
similar to that for mining rights. These rights are very precisely
defined both legally and technically and therefore provide guarantees
and the weight of the law.
3.3
Environmental Protection Legislation.
Chilean legislation is designed to protect the environment and as such
it obliges the property owner (operator) to meet certain requirements
and to accept certain responsibilities. These are initiated from the
inception of prospecting a property (Article 10 No. 1, Environmental
Law) when an Environmental Impact Statement must be filed (and
approved). Subsequently, as the project proceeds towards production
and installation of plants, Environmental Impact studies along with
guarantees and controls must be filed and approved. These studies,
etc., provide the operator with additional legal and technical
protection. As has been indicated above, in each of the three areas
which make up the Operational Framework, legal and technical
aspects are mixed, such that it is necessary to contract a range of
professionals capable of properly managing the various areas so as to
ensure the optimum legal integrity of a mining property.
Within this large heading, the objective of the report is to summarize
the Chilean Mining Legislation and the processes involved.
As stated above, all mineral deposits are the property of the State, but
individuals or legal entities, whether Chilean or foreign(er), may
acquire the rights to explore for, or to mine, these deposits as long as
they comply with procedures which are clearly and legally
established.
4.
Exploration Rights (Concession)
The right to explore for mineral substances is authorized by legislation
and encompasses four complementary conditions, as follows:
!
Finite duration;
!
Lower filing and maintenance costs;
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23
!
Ease of filing and receiving the rights;
!
Constitutes legal continuity as part of the process for filing for
the second type of Concession (the Mining Concession).
4.1
Finite Duration
The legislation contemplates two periods for the expiration of this
type of concession. The first period is for two years and the second
one for an additional two years (which must be solicited). The second
period is granted when 50% of the initial area is abandoned. To
maintain the property rights in good standing, annual taxes (“Patentes
Anuales”) must be paid.
4.2
Lower filing and maintenance costs
In view of the fact that filing for exploration concessions involves less
work and fewer stages, filing costs are lowered. Basically, the cost of
filing for this type of concession is approximately 1/5 that of filing for
a mining concession.
4.3
Ease of filing and receiving the rights
To file for, and acquire, an exploration concession it is only necessary
to file for the concession before the appropriate authorities. No
surveying or field work is required.
4.4
Constitutes legal continuity as part of the process for filing for
the second type of Concession (the Mining Concession)
The legislation considers that exploration is only one of the steps
involved in defining the existence, or not, of a mineral deposit in the
area of interest and that the surface will subsequently be occupied by
the future mining and processing operation. Based on this concept,
the decision was made to allow for a voluntary continuity of the
process of filing for the two types of concessions. Thus, the initial
filing date for the exploration concession also applies as the initial
filing date for the mining concession. Thus, the legislature established
the criterion of the “discoverer”, i.e. the first to file has priority.
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Chile – Mining Handbook
To summarize, two types of concessions exist: Exploration and
Mining, which, as their names imply, also allow that only the
corresponding types of work may be performed upon them. In view
of the fact that the filing requirements are distinct and different and
that there exists continuity between the two types of concessions, one
can elect which type of concession one requires prior to filing.
5.
Mining Rights (Exploitation Concessions)
The right to mine mineral substances is authorized by the legislature
as the second type of concession and encompasses five
complementary conditions, as follows:
!
Legal continuity, as part of the filing process for Exploration
Concessions;
!
Unlimited duration;
!
Higher costs of filing and maintenance;
!
Filing requirements which complicate obtaining the mining
rights;
!
The mining rights prevail over third party claims.
5.1
Legal continuity, as part of the filing process for Exploration
Concessions
As indicated in the section on Exploration Concessions, if the property
holder elects to begin the filing process via the Exploration
Concession concept, then the date of the initial filing process begins
with the date the Exploration Concession was filed for.
5.2
Unlimited duration
Once the filing process for this type of concession has been
completed, and as long the annual property tax payments have been
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made, the system provides the legal tools to maintain (and defend if
necessary) the concession in perpetuity.
5.3
Higher costs of filing and maintenance
The bulk of the costs to file and maintain a Mining Concession
involves two items:
5.3.1
The annual property taxes are significantly higher that those
for an Exploration Concession and are equivalent to 1/10 of a
UTM monthly (“Unidad Tributaria Mensual”) as opposed to
1/50 of a UTM monthly for an Exploration Concession;
5.3.2
Meeting surveying requirements and locating the appropriate
“claim” posts (linderos) on the ground.
5.4
Filing requirements which complicate obtaining the mining
rights
The process to file for a Mining Concession requires an exhaustive
and technically demanding survey, which is not required for the
Exploration Concession.
5.5
The mining rights prevail over third party claims
As opposed to an Exploration Concession where third parties can
overstake the concession, even though the prior rights of the initial
party continue to prevail, it is nearly impossible to overstake a Mining
Concession. The legislation has developed special rules that protect
the rights of the property holder and which can be applied either by
the Technical Authority (Servicio Nacional de Geología y Minería –
Sernageomin) which participates in the filing process, or by the
property holder.
6.
Filing Procedures
6.1
Exploration Concessions
The procedure for filing for an Exploration Concession is initiated
with the presentation of a completed document called a “Pedimento”
to the (Civil) judge in a courthouse located within the appropriate
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Chile – Mining Handbook
jurisdiction with regard to the geographic location of the solicited
concession(s).
The petition should include the following issues:
6.1
Name, nationality and domicile of the applicant. If the
petitioner is an individual, it is necessary additionally to
mention his/her profession and marital status;
6.2
Location of the center point of the concession (in UTM
coordinates) if the concessions are greater than 100 hectares
in area, or one or more geographically distinct points (with
direction, distance and identifying name) from the center
point if the concessions are less than 100 hectares in area;
6.3
Concession name being assigned; and
6.4
Concession surface, indicated in hectares, being applied. The
surface cannot be smaller of 100 hectares or bigger than 5,000
hectares.
Upon presentation of the properly filed Pedimento, the judge will
determine that within 30 days of the submission date, a Courtauthorized copy of the Pedimento should be jointly filed with the
Custodian of Mines in the corresponding jurisdiction and should be
published in the Official Mining Bulletin (Boletín Oficial de Minería).
Should an error or omission be detected in the Pedimento, then the
judge will allow eight days for the corrections, etc., to be made.
At the same time that this process is ongoing, and within the 30-day
period, i.e. from the time of presentation of the Pedimento, a filing fee
(tasa) should be made to any bank or financial institution. This fee to
the Government is calculated based on the number of hectares being
solicited and using the UTM published for the month in question as
well as utilizing a factor developed ad hoc (Formulario 10) by the
Treasury of the Republic.
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NOTE: All of the timeframes established by law refer to calendar days
and failure to meet any deadline can result in loss of the property, or
in the application having to start from scratch.
According to the Mining Code the minimum dimensions for an
Exploration Concession are 1,000m x 1,000m. It must be in the form
of an orthogonal parallelogram which must be oriented north-south
and east-west.
Following and within 90 days, starting from the application date of the
Pedimento and in the same legal (i.e. the non-technical portion)
application initiated previously, the applicant should formally solicit
the definitive granting of the concession.
The following documents should accompany the solicitation for the
issuance of the concession (signed by a lawyer):
i.
a copy of the notarized record of the Pedimento;
ii.
a copy of the Official Mining Bulletin which published the
authorized Pedimento application data;
iii.
an original map (and two copies) showing the configuration
and location of the applied-for concession;
iv.
the receipt for the payment of the appropriate filing fee which
is calculated based on the applied-for area in UTM for the
month in which the payment is made and which is for the
period remaining between the date of payment and the last
day in February of the following year.
When the above procedure has been completed, and no deficiencies
have been detected, the judge will order that the application be sent to
the Sernageomin for its technical review of the documentation. The
Sernageomin has 60 days in which to complete the review. Once this
review is completed and provided no deficiencies are detected, the
judge will allow 60 days for third parties to file possible complaints
with the Court of Appeals based on possible failings in the application
or, for example, reasons of superposition. At the conclusion of this
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Chile – Mining Handbook
60-day period and assuming no complaints have been filed, the judge
will issue the final approval of the application, thereby granting the
concessions to the applicant. If, for whatever reason, this does not
occur, the applicant must file suit against the judge demanding that
the judge issue the final approval.
Should any deficiencies be detected, the judge will order that the
deficiencies be identified to the applicant who will have 30 days to
make the appropriate corrections, or eight days to appeal the named
deficiencies.
Once the final approval (“Sentencia Constitutiva”) has been granted
by the Tribune, the applicant must within a period of 120 days:
i.
publish an extract of the Sentencia Constitutiva;
ii.
request that the Sernageomin provide a Statement of Proof
that the original map and an authorized copy of the Sentencia
Constitutiva; and
iii.
register the authorized copy of the Sentencia Constitutiva with
the appropriate regional Custodian of Mines.
During the application process and for the duration of the concession
the appropriate mining taxes (patentes) should be paid on an annual
basis. This will assist in making the filing and holding of the
concessions more difficult for other parties to oppose.
6.2
Mining (Exploitation) Concessions
The process to obtain a mining concession is initiated in a manner
similar to that used to apply for an exploration concession, i.e. with
the presentation of an application to the attending judge in the
appropriate jurisdiction. In this case the application is termed a
“Manifestacion” of which there can be two types:
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29
6.2.1
In which the application for a concession is for the first time,
i.e. not a conversion from an exploration concession.
This application will contain the following:
i.
Name, nationality and domicile of the applicant. If the
petitioner is an individual, it is necessary additionally to
mention his/her profession and marital status;
ii.
Location of the interest point of the concession (in UTM
coordinates);
iii.
The number of claims being applied for and the claim names
being assigned;
iv.
Concession surface, indicated in hectares, being applied for
each claim. According the Mining Code a Manifestacion
cannot consist of more than 10 hectares or less than 1 hectare.
6.2.2
The second type of application will contain, besides that
information indicated above, the statement that the application
is being made to convert previously existing, and legally
constituted, exploration concessions to mining concessions
and that the mining concessions will be located in the same
area as previously and that they will occupy the same area (or
less). In this manner the application will have as its initial
starting date the pre-existing date of application for the prior
exploration concessions.
Upon receiving the Manifestacion, or mining concession application,
the judge will issue a legalized copy of the Manifestacion which has
been approved by the Court within a period of 30 days of receiving
the application. This document must be registered with the Custodian
of Mines located in the appropriate jurisdiction and must also be
published in its entirety in the Official Mining Bulletin also located in
the appropriate jurisdiction.
Should an error or omission in the application be detected by the
judge, he will allow eight days to rectify the problem.
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Chile – Mining Handbook
Parallel with, and within 30 calendar days from the initial date of the
application, the appropriate filing fee must be made to the State and
can be made at any bank or financial institution. This fee, to the
Government, is calculated based on the number of hectares being
solicited and using the UTM published for the month in question as
well as utilizing a factor developed ad hoc (Formulario 10) by the
Treasury of the Republic.
NOTE: All of the timeframes established by law refer to calendar days
and failure to meet any deadline can result in loss of the property, or
in the application having to start from scratch.
According to the Mining Code, a Manifestacion cannot consist of
more than 10 hectares or less than 1 hectare. The configuration of the
Manifestacion must be that of a north-south, east-west oriented
parallelogram.
The next step in the process of completing the filing of a
Manifestacion is to request that the applied-for concession(s) be
surveyed. This application should be included in the same file
accompanying the application, and this should be completed in not
less 220 days and not more than 220 days from the date of the
application, or Manifestacion.
The request for the survey should include the following:
i.
a map which, complying with the Mining Code, includes the
location of the concessions in UTM;
ii.
the dimensions of the sides to be surveyed;
iii.
the division of the area into “pertenencias” of authorized size;
iv.
a current and legalized copy of the original notarized and
approved application;
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v.
a copy of the Official Mining Bulletin in which the
application was published; and
vi.
the receipt for the payment of the appropriate filing fee (tasa)
which is calculated based on the applied-for area in UTM for
the month in which the payment is made and which is for the
period remaining between the date of payment and the last
day in February of the following year.
Should any correctable errors or omissions be detected in the survey
request the judge will allow eight days to rectify the problem(s).
On determining that the survey request is without error, the judge will
order that the approved request be published within 30 days along
with subsequent resolutions in the Official Mining Bulletin (failure to
do so will result in the loss of the application) in the appropriate
jurisdiction.
In the event a third party believes that, per the information published
in the Bulletin, his rights are being affected by the survey request, said
person has 30 days from the date of publication, and in the same
proceedings (“Juicio Sumario de Oposición”) to start legal action
against the applicant. If a suit is filed and based on the determination,
the judge will determine whether the possibility exists to continue the
process granting a portion or all property rights, or deny the possibility
of continuing the application process. If a positive determination is
made on behalf of the applicant, the judge will determine and establish
the timeframe to complete the requisite surveying (mensura), and to
deliver the Plan Map and Summary of the Survey Process of the
applied-for concessions. If, on the other hand, the judge rules against
the applicant, then the judge will order that the registration of the
Manifestacion be cancelled, and the applicant loses the possibility to
obtain the mining rights to the desired ground..
If, on the other hand, at the end of the 30-day period from the above
mentioned publication in the Mining Bulletin, no suit has been entered
into against the applicant, then the process continues normally with
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the obligation to present the Plan Map and Summary of the Survey
Process of the applied-for concessions. This material must be
presented within 15 months of the date the Manifestacion was
submitted, or the ground will be lost. If the Manifestacion was
presented as a result of having preferential rights, i.e. pre-existing
exploration concessions, then the 15-month period is initiated from the
date of the presentation of the Mining Concession application to the
Tribunal.
Once the judge has reviewed the newly submitted documents, i.e. the
Plan Map and Summary of the Survey Process, he will order that they
be sent to the Sernageomin for its technical review. If the
Sernageomin has no comments to make, then the judge will
definitively approve (Sentencia Constitutiva) the mining concession
application. If, on the other hand, the Sernageomin report indicates
that there are deficiencies, then the judge will allow the applicant eight
days to object to the Sernageomin comments, or he will allow the
applicant 60 days to make the necessary corrections.
Once this step has been satisfactorily accomplished (as approved by
the Sernageomin) the judge will definitively approve (Sentencia
Constitutiva) the mining concession application.
Upon receiving the approval, the applicant has a period of 120 days in
which to publish an extract of the Sentencia Constitutiva, request that
the Sernageomin deliver the original Plan Map and an authorized copy
of the Sentencia Constitutiva and register the Sentencia Constitutiva
with the appropriate Custodian of Mines. Having completed these
final steps the applicant will have completed the process of obtaining
the legal rights to the mining concession.
6.3
Protecting the Mining Concession
While in the process of applying for the rights to whichever of the two
types of mining concessions, or if these rights have already been
granted, and after the payment of the first proportional property
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payment (patente), the annual property payments must be made in
March of each year.
If the property payments are in arrears, then after June 1 of the same
year and at some date proposed by the Chilean Treasury which date is
approved by the designated Court, the property will be put up for
auction. However, the auction will not take place until a list of unpaid
“patentes” has been published in the Mining Bulletin and not before
30 days after the date of publication has expired. At this time any
interested party can participate in the auction. Those concessions that
are not bought, or paid for, are then declared void and are available for
reacquisition in the normal manner described above.
*
34
*
*
*
*
Baker & McKenzie
Colombia – Mining Handbook
Colombia
Mining in Colombia and The Legal and Technical
Protection of Property Rights
1.
Legal Framework
As a general rule, the Colombian State is the owner of all minerals
located both on the surface and in the subsurface of the Colombian
territory. Mineral exploitation is conducted under concession
agreements. These concessions give the holder the right of ownership
of mined minerals, subject to compliance with the obligations
contained in the concession and the payment of a royalty.
The basic statute that regulates mining concessions is the Code of
Mines, as recently amended by Law 1382 of 2010.
2.
Operating Framework
2.1
Mining Legislation – basic outline
!
The State grants concessions to individuals and companies
interested in exploring and exploiting a predetermined zone.
!
The Government may designate certain areas which can be
temporarily or permanently excluded from the areas to be
granted in concession:
!
o
special reserves (Code of Mines, Article 31);
o
national security areas (Code of Mines, Article 33);
o
declared areas for protection and development of
natural resources (Code of Mines, Article 34).
INGEOMINAS is the governmental entity that administers
and grants mining permits (concessions). The general rule for
the award of areas is “first come first served”.
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35
!
Royalties are payable in connection with the exploitation of
minerals (e.g. gold is 4% of gross income, coal is 5% or 10%
depending on size of exploitation.).
!
Concession agreements grant the right to exploit minerals
during a period of time, but do not convey title to the surface
or subsurface for the exploration or exploitation term.
!
There is a National Mining Registry set up to provide the
public with the information regarding concessions and mining
areas.
!
Upon termination of the concession all goods destined to the
exploitation will revert to the State.
!
The exploration and exploitation of mines without a legal title
is considered a criminal offense and will prevent the
individual or company from entering into concession
agreements for five years.
!
When required, the holder of a concession is entitled to obtain
mining easements or rights of way (“servidumbres mineras”)
and to request the expropriation of real estate which becomes
necessary for the infrastructure of the mining project.
!
The holder of the concession must employ a given percentage
of nationals vs foreigners: 70% of the qualified personnel and
80% of the ordinary personnel must be Colombian.
!
A minimum percentage of regional employees will be
required (this has not yet been determined).
2.2
Environmental Legislation – basic outline
!
The construction and operation of certain types of mining
projects and activities require an environmental license.
!
An environmental license is the authorization that the
environmental authority grants to develop a project or activity
that may have adverse effects on the environment.
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Colombia – Mining Handbook
!
Environmental licenses for mining projects will be granted by
the Environmental Ministry if the exploitation is equal to or
higher than 2,000,000 tons per year. If the exploitation is less
than 2,000,000 tons per year the environmental license will be
granted by the Regional Autonomous Corporation.
!
For mining activities, a global environmental license will be
granted which authorizes all the relevant activities and
constructions to be carried out.
!
Environmental impact studies of the project and, in some
events, an environmental diagnosis must be submitted to
obtain the environmental license.
!
Interested parties must request advice from environmental
authorities to determine if an environmental diagnosis is
required.
!
Environmental impact studies must identify potential areas
that may be harmed by the project and the special measures to
prevent, correct or compensate the damages caused.
!
The environmental impact study will be the main element to
judge the approval of the environmental license.
!
For mining purposes, such study must be audited by experts
qualified as such by the Environmental Ministry.
!
Environmental impact studies must include the environmental
management plan.
!
Environmental management plans contain the detailed
activities that after an environmental assessment are deemed
necessary to prevent, mitigate, correct or compensate the
environmental impacts and effects caused by a project, work
or activity.
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37
!
Environmental management plans must include follow-up
plans, monitoring plans, contingency plans and close-down
plans for the respective project, work or activity.
!
Decree 948 of 1995 determines the maximum permitted
contaminating levels for atmospheric emissions. In
accordance with such provisions outdoor mining activities
will require an emission permit.
2.3
Water Legislation – basic outline
!
As a general rule, rivers, river courses, beaches and all nonoceanic waters are public and their use for particular purposes,
such as mining, requires the issuance of a water concession.
!
Concessions will have a maximum term of 10 years, which
can be extended at the end of such period, unless public utility
matters provide otherwise.
!
Such concessions are granted by the Regional Autonomous
Corporations.
!
Water resources used in an industrial activity that cannot be
disposed in sewerage systems shall be specially treated to
avoid environmental damages.
!
The disposal of liquid residues requires a previous permit,
granted by the competent Regional Autonomous Corporation.
3.
Mining Legislation – basic outline
!
The terms and conditions of the concession agreement are not
negotiable.
!
All costs and risks associated with exploration and
exploitation are assumed by the concessionaire.
!
The concession agreement must be executed in Spanish and
must be registered at the National Mining Registry.
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Colombia – Mining Handbook
!
!
The current maximum term is 30 years:
o
Exploration period: three years and can be extended
for two additional years;
o
Construction period: three years and can be extended
for one additional year;
o
Exploitation period: the term of the concession minus
the term dedicated to exploration and construction.
The current maximum term is 30 years, extendable for up to
20 additional years.
*
Baker & McKenzie
*
*
*
*
39
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Mexico – Mining Handbook
Mexico
Mining in Mexico and The Legal Protection of Property
Rights
1.
Legal Framework
Legal certainty assuring ownership of mineral holdings is provided
for, and derives from the Mexican Constitution and by federal laws,
regulations and Mexican Official Standards, which apply specifically
to the mining industry.
2.
Operating Framework
2.1
Mining Legislation
2.1.1
Constitution
The General Constitution of Mexico provides that the lands and
waters within the national territory belong to the Mexican State.
Mexico has the right to transfer title thereto to private hands in order
to constitute private property. Article 27 of the General Constitution
provides that the nation has direct ownership of mineral deposits
within the national territory. The use and exploitation of such national
resources by private parties is only permitted pursuant to concessions
granted by the federal government, through its respective
governmental agencies and in accordance with the applicable laws and
regulations. Such laws and regulations must be complied with in the
exploitation of mineral deposits, as of their effective dates, even with
respect to previously granted mining concessions. Mineral deposits
required to satisfy the nation’s needs are incorporated into the national
mining reserves. Ore deposits incorporated into the national mining
reserves are not subject to mining concessions or mining allotments,
unless such zones are cancelled from the mining reserves through a
decree issued by the federal government. Only after such decree is
issued by the Ministry of Economy declaring the zone as “free land”
(as further explained below) may such area be subject to a mining
Baker & McKenzie
41
concession or a bid be called to grant one or more mining concessions
over such ore deposits 3 .
2.1.2
Mexican Mining Law
The Mexican Mining Law is the federal statute that governs the grant,
use, cancellation and expiration of mining concessions. The Mining
Law regulates mining as contemplated by the General Constitution 4 .
The provisions of the Mining Law are of a public nature and shall be
observed throughout Mexico.
The Mining Law applies to a thorough list of specifically identified
minerals and other substances. The Federal Government is
empowered to issue decrees to include additional substances within
the scope of the Mining Law.
The exploration, exploitation and processing of minerals or substances
governed by the Mining Law are considered of public benefit and
therefore have preferential status over any other use of the land,
subject to the conditions imposed by the Mining Law.
2.1.3
Regulations
The Mining Law Regulations provide the administrative rules required
for the observance of the Mining Law. In addition to the Regulations,
the Handbook of Services to the Public in the Mining Sector sets the
administrative procedures and forms for the requests, notices, filings
and review of matters provided for in the Regulations and the Mining
Law, the requirements and methods for surveys and location of
mining lots, among others.
3
Article 17, Mexican Mining Law.
4
Article 27, Mexican General Constitution.
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2.2
Authorities Involved in the Mining Industry
2.2.1
Ministry of Economy
The Ministry of Economy has a mandate to formulate and direct the
national mining policy, as well as to promote the use and development
of mineral resources. The Ministry of Economy is responsible for the
mining registries and recording activities and is empowered to execute
the agreements, concessions, allotments, permits and authorizations
covered under the Mining Law and its Regulations.
2.2.2
General Coordination of Mines
The Ministry of Economy exercises its legal authority through the
General Coordination of Mines, a centralized agency created by the
internal regulations of the Ministry of Economy. The General
Coordination of Mines in turn relies on the General Bureau of Mines.
The primary responsibilities of the General Bureau of Mines are the
management and control of concessions, allotments and national
mining reserves. Accordingly, the General Bureau of Mines relies on
the support of a variety of subordinate Mining Agencies.
2.2.3
Public Registry of Mining
The main purpose of this entity is to record title to concessions,
allotments, agreements, arrangements and administrative actions that
may affect mining rights. Any act or agreement required by law to be
registered with the Public Registry of Mining, when recorded will be
binding on third parties and on the Ministry of Economy.
2.2.4
Mexican Geological Service
This is a public decentralized agency, a separate legal entity,
coordinated by the Ministry of Economy. The Mexican Geological
Service (“SGM”) identifies and quantifies potential mineral resources,
generates an inventory of national mineral deposits and furnishes
public geological-mineral information to promote research, to identify
and foster infrastructure works which spark the development of new
mining districts. The SGM also advises the Ministry of Economy
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43
regarding concessions and areas to be incorporated into or removed
from the national mineral reserves, and assists the Ministry of
Economy in bids for concessions of mining lots with cancelled
allotments and ore deposits removed from the mineral reserves.
2.2.5
Mining Promotion Trust
This federal agency’s basic responsibility is to support the exploration,
extraction, processing and marketing of all types of minerals, except
hydrocarbons and radioactive materials, by providing technical advice
and financial support to existing and new mining companies.
2.3
Foreign Investment Law
The Foreign Investment Law has eliminated prior restrictions on
foreign participation in mining activities (including gold). Formerly,
foreign investors were limited to the ownership of 49% of the shares
or other equity interests of a Mexican company engaged in mining
activities. Currently, foreign individuals are authorized to participate
in 100% of the stock of mining corporations/companies incorporated
as Mexican entities. No authorization is required from the National
Foreign Investment Commission in case a foreign investor becomes
the sole owner of a mining company.
2.4
Water Legislation
As in the case of other countries in Latin America, most of the mining
projects are generally located outside the urban boundaries and
therefore have no access to direct water supply from the local
authorized water suppliers/agencies. Therefore, mining companies
usually need to extract water from the subsoil or to drain wastewaters
to a federal property. Mexico also has legislation and legal guarantees
so that water rights can be extracted from the subsoil. Conceptually,
the manner in which to obtain, maintain and protect water rights is
similar to that for the Mining Legislation, although they operate in a
distinct manner and under distinct laws and regulations. As provided
by the National Water Law 5 , the extraction or drainage of wastewaters
5
Article 20, National Water Law.
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requires the procurement of a water concession title before the
National Water Commission (“Conagua”). Prior to securing a water
concession title, it is necessary to verify that the property where the
water well will be located is in a water interdiction zone as established
by the National Water Commission. In such case, a drilling permit
would be required in addition to the procurement of an environmental
impact authorization. Additionally, if a mining project requires the
construction of roads or infrastructure on river beds, a permit by the
Conagua will be required.
Water concession titles are usually granted for a 5- to 25-year period
and once granted, quarterly and annual reports must be filed before the
Conagua in order to account for the water volume extracted from the
subsoil and the amount of wastewater deposited in federal receiving
bodies. The use of national waters or the use of federal receiving
bodies will generate an obligation to pay an applicable fee.
2.5
Environmental Protection Legislation
The exploration, development and operation of a mining project in
Mexico requires the observance of several topics intended to protect
the environment, which result in the obligation to verify/secure certain
environmental permits, licenses and authorizations, namely (i) Natural
Protected Area; (ii) Forest Land-Use Change; (iii) Environmental
Impact Authorization; (iv) Land Use License & Construction Permit;
and (v) Permit for the Use of Explosives, among others, and the
obligation to observe a number of Mexican Official Standards (i.e.
leachate impoundments).
2.5.1
Natural Protected Areas
The Federal Government is currently protecting several ecosystems
and some of the country’s most valuable natural resources. In order to
do so, the Federal Government issues specific decrees for the
constitution of Natural Protected Areas. The Federal Government has
established 158 Natural Protected Areas throughout the country. Each
Natural Protected Area has zones where mining activities are
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forbidden or highly regulated; these limitations are applicable to
private and public property within those areas.
It is important to note that if an economic activity has been initiated
with the applicable permits and licenses and a decree is later issued
restricting the activities (such as mining activities) that were
previously authorized by virtue of incorporating said properties into a
Natural Protected Area, then international treaties and federal
provisions will provide either an adequate compensation or an
interdiction protecting the investor in order to continue with said
activities. However, if a company does not have all the required
authorizations, the shutdown of the activities could be ordered in
accordance with the applicable environmental regulations.
2.5.2
Forest Land-Use Change
As provided by the federal environmental regulations, when
vegetation from a forest or natural land is totally or partially removed
in order to use such land for non-forestry affairs, its developer is
required to obtain a Forest Land-Use Change before the Ministry of
Environment and Natural Resources.
2.5.3
Environmental Impact Authorization
As provided by the federal environmental regulations, prior to any
mining exploration and exploitation activities, as well as to the
construction of roads, silos, storage facilities, offices and the like, the
individuals conducting such constructions are required to procure the
corresponding Environmental Impact Authorization before the
Ministry of Environment and Natural Resources. In order to
consolidate and file the documentation required to obtain the
aforementioned authorization it is required to perform an
environmental impact study of the activities to be engaged in. Such
study is recommended to be conducted by a certified consultant and
may be filed alongside the Forest Land-Use Change documentation.
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2.5.4
Land Use License & Construction Permit
Depending on the location of a mining project, a land use license
permit is generally required by the Local Urban Development
Regulations, if any, stating that the use of the land where a given
mining project is located is compatible with the local or regional
urban development plan. Accordingly, the Local Construction
Regulations, if any, provide for the obligation to secure a Construction
Permit for the construction of any improvements related to the mining
project.
2.5.5
Permit for the Use of Explosives
A general permit before the Ministry of Defense (“Sedena”) is
required for the purchase, storage and use of explosives in a mining
project, as provided by the Firearms and Explosives Federal Law and
its Regulations. The Explosives Permits required for mining
exploitation activities are limited to the mining lots covered in the
mining concessions and are subject to periodic renewal. The purchase
of explosives requires prior authorization of the Regional Military
Zone where the mining project is located and involves periodic
inspections by the military authority, among the observance of certain
limitations imposed by the Firearms and Explosives Federal Law and
its Regulations.
3.
Mining Rights (Concession)
3.1
Eligibility to Obtain a Concession
In Mexico, Mining Concessions over ore deposits may only be
granted to Mexican nationals, Mexican companies, ejidos (land
granted by the government to individuals for agricultural and ranching
purposes), agrarian communities, townships and indigenous
communities. In the case of companies, they must be domiciled in
Mexico, and their bylaws shall cover the exploration or exploitation of
minerals and substances subject to the Mining Law. Foreign
participation in the ownership of such companies must comply with
provisions of the Foreign Investment Law, which currently does not
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impose any limitations with respect to mining, except for radioactive
materials.
In addition, the General Constitution provides that only Mexicans by
birth and Mexican companies are entitled to obtain Mining
Concessions, but the Mexican government may grant such
concessions to foreigners upon condition, since foreigners must agree
before the Ministry of Foreign Relations to consider themselves as
nationals with respect to such concessions, and to not invoke the
protection of their governments in relation to such concessions, upon
penalty of losing the concession to the Mexican Government for
breaching this agreement. Accordingly, the Foreign Investment Law
provides that the authorization from the Mexican Government for the
acquisition of a mining concession must be deemed granted should the
Ministry of Foreign Affairs not publish its rejection in the Mexican
Federal Official Gazette, within five business days following the
submission date of the concession claim/application.
3.2
Land subject to a Concession
Concessions are granted over “free land” pursuant to the “first in time,
first right” principle, which establishes that the first person to request
a concession over a certain portion of land will have the right to such
concession, provided all other requirements under the Mining Law
and its Regulations are met. Under the Mining Law, “free land”
means any land within the national territory, except for (i) zones
incorporated into mineral reserves; (ii) land covered by existing
concessions and allotments; (iii) land covered by pending applications
for mining concessions and allotments; (iv) land covered by mining
concessions granted through a bidding process and those derived
thereto which have been cancelled; and (v) land covered by mining
lots from which no concessions would be granted due to the
cancellation of the bidding process.
3.3
Types of Concessions
Due to an amendment of the Mining Law since April 28, 2005, in
Mexico there is currently no distinction between the exploration and
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the exploitation mining concessions. Therefore, the Mining Law
currently provides the existence of Mining Concessions which allow
the title holder to perform (i) exploration works on the ground for the
purpose of identifying ore deposits and quantifying and evaluating
economically usable reserves and accordingly to perform work to
prepare and develop the area containing the ore deposits; and (ii)
exploitation works to detach and extract mineral products from such
mineral deposits. Mining concessions are granted for a term of 50
years from the date of their registration in the Public Registry of
Mining and are subject to renewal for an equal term if: (1) the holder
does not cause cancellation of the concession by any act or omission
so sanctioned by the Mining Law; and (2) the holder requests the
extension within five years prior to the expiration date.
3.4
Minerals excepted from Concessions
The following are excepted from the application of the Mining Law:
(i) petroleum and hydrocarbons, solid, liquid or gaseous, except gas
associated with deposits of mineral coal; (ii) radioactive minerals; (iii)
substances dissolved in underground water; (iv) rocks or products
derived from their decomposition which are only subject to be used
for the fabrication of construction materials; (v) any product derived
from the decomposition of rocks, the exploitation of which is carried
out through works on the surface; and (vi) salt coming from a basin
that does not reach the ocean.
3.5
Rights under Concessions
Concessions do not confer direct property rights to the land surface,
except for the rights to: (i) carry out exploration or exploitation
activities within the mining lot covered by the concession; (ii) dispose
of the mineral products obtained from such works during the term of
the concession; (iii) dispose of the debris within the area covered by
the concession, unless they come from another concession in force;
(iv) obtain the expropriation, temporary occupation or establishment
of an easement on the lands required to carry out the works of
exploration, exploitation and processing, as well as the disposal of
debris, rocks, clinker and slag heaps, as well as to establish
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underground right of way easements; (v) obtain certain water rights
related to the concession for the exploration, exploitation and process
of minerals and substances obtained and for the domestic use of the
same for the employees of the mines; (vi) obtain preference on
concessions from water of the mines for any use different from the
foregoing, in terms of the applicable law; (vii) transfer title to the
concession or assign rights thereto to persons legally permitted to
receive such rights; (viii) segregate or consolidate mining lots; (ix)
waive title and rights derived from mining concessions; and (x) obtain
the extension of the mining concessions for a subsequent 50-year
term.
3.6
Obligations under Concessions
The Mining Law imposes the following obligations on title holders of
concessions, among others:
i.
to commence exploration or exploitation activities within 90
days after the date the concession is recorded before the
Public Registry of Mining, with the obligation to conduct and
evidence a minimum investment or extract economically
useful minerals in the amounts provided under the
Regulations;
ii.
to pay mining concession fees 6 ;
iii.
to comply with technical safety and environmental standards;
iv.
to leave in place permanent fortification works, shoring and
other installations necessary for the stability and safety of the
mines;
6
(i) Article 63 of the Mexican Government Service Charges Law provides for the
payment of fees for the application for a mining concession, based on fixed rates for
lower and higher parameters per hectare covered by a mining concession and for the
additional hectares exceeding the lower parameter; and (ii) Article 263 of the Mexican
Government Service Charges Law provides for the payment of semiannual fees based
on a rate per hectare covered by a mining concession. The semiannual rates are
increased every two years up to the tenth year when they become fixed throughout the
remaining term of the concession.
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v.
to preserve landmarks in the same place and in good
condition;
vi.
to provide the Ministry of Economy with statistical, technical
and accounting reports in terms of the Regulations and the
Mining Law;
vii.
to allow inspection visits from the Ministry of Economy;
viii.
to provide the Ministry of Economy with geological-mining
reports when the mining concession is cancelled due its term
expiration, abandonment, substitution or reduction, sanction
or judicial resolution;
ix.
to provide the SGM, in case of those mining concessions
granted through a bidding process, semiannual reports of the
works carried out and of the production obtained from the lot
covered by the mining concession, for purposes of payment
control of the finders’ fee or any other economic fee provided
in favor of such organism; and
x.
to file checking reports before the Ministry of Economy
during May of each year referring to works carried out from
January to December of the prior year.
4.
Filing Procedures
Mining concessions may be secured either through a public bid or by
an application process filed by the interested party before the
corresponding Mining Agency in terms of the Mining Law,
Regulations and Handbook of Services to the Public in the Mining
Sector. Public bids apply when the government considers it necessary
to exploit certain mining reserve areas or by the cancellation of
mining allotments granted to the SGM, which has carried out prior
exploration works. Applications and reports related to mining
concessions must be filed on the forms set forth in the Handbook of
Services to the Public in the Mining Sector. The forms indicate the
number of copies and exhibits to be attached, including the obligation
to attach the receipt for payment of the applicable fees.
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The transfer or assignment of concessions or rights thereunder may be
freely made to any party having legal capacity. The transfer of mining
concessions or rights thereunder shall produce legal effects against
third parties and the Ministry of Economy upon their registration
before the Public Registry of Mining. Commercial agreements, such
as credit agreements or securities, may impose liens or otherwise
create security interests in the concession rights, always as they are
duly recorded before the Public Registry of Mining. Generally, a
transfer or assignment will be null and void when made to an
ineligible person under the Mining Law (i.e. a company incorporated
outside of Mexico). However, the Mining Law provides that a
transfer to an ineligible person will not be null and void when it
occurs pursuant to a judgment in payment of a debt, and provided
further that the rights are then transferred to an eligible person within
365 calendar days after the date of the judgment awarding the rights to
the creditor.
5.
Real Property Related to Mining Concessions
In Mexico, the mining rights covered under a concession do not
include direct ownership or possession rights over the surface where
the ore deposits are located. Therefore, since the Mining Law
provides that the exploration, exploitation and processing of the
minerals and substances covered by the Mining Law are preferred
over any other types of use of land, when the owner of the concession
does not have direct possession or property rights to access the land
where the ore deposits are located, it is entitled to file a procedure to
procure (i) a condemnation (always that a cause of public interest is
evidenced); (ii) a temporary occupation; or (iii) an easement over the
land necessary to explore and exploit the ore deposits covered by the
concession.
The extension of land subject to the temporary occupation or easement
derived from a mining concession must be allocated considering the
essential portions of land required to carry out the exploration,
exploitation and processing works. Any of the foregoing options to
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procure rights over the land requires the filing of an administrative
proceeding before the Ministry of Economy. The corresponding
resolution is issued by the Ministry of Economy after reviewing
technical reports filed by the requesting party (who shall provide the
Ministry with all the required information and documents as stated by
the Regulations) and after hearing the affected landowner, which shall
be indemnified according to an official appraisal carried out by the
National Property Managing and Appraisal Institute (INDAABIN), in
terms of the provisions set forth by the Regulations. In the case of
expropriation, when applicable, the Ministry of Economy must submit
the corresponding resolution to the Federal Government. The
expropriation of land owned by “ejidos” and “communes”, where most
of the mining projects throughout Mexico are located, shall be subject
to the provisions of the agrarian legislation.
The incorporation of easements or temporary occupation of land
subject to “ejido regime” or “communal property”, as well as the
expropriation of such land or its incorporation into the private
property, in most cases represents a lengthy and cumbersome
procedure. In most cases, the owners of concessions decide to
negotiate a lease or a similar agreement to secure possession of the
land surface required for its mining activities.
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Venezuela
Mining in Venezuela
1.
Legal Framework
The mines and minerals existing within the national territory are
regulated in the Constitution of Venezuela, the 1999 Mining Law
(Mining Law) and the 2001 Regulations thereto.
Mining legislation is either federal or state. While federal legislation
is applicable to metallic minerals, state legislation applies to
nonmetallic minerals and varies from state to state. Currently there
are 23 states in Venezuela. This legislation covers the exploration,
exploitation, usufruct, holding, circulation, transport and internal or
external marketing of the extracted substances.
Another fundamental provision is the typical declaration of
jurisdiction of the Ministry of Basic Industries and Mining (MIBAM)
over all matters related to mining and foreign investments in this
sector.
2.
Operational Framework
The general operational framework is contained in the Mining Law
and the Regulations thereto. Also, in close connection with the
foregoing, the provisions of the Organic Law of the Environment and
of the Criminal Environmental Law as well as the applicable
regulations must be observed, and if necessary, water rights must be
secured under the Law on Waters.
3.
Operating Framework
3.1
Mining Legislation
Venezuelan mining legislation is based on the civil-royalty principle
whereby all minerals belong to the State. Therefore, minerals are part
of the public domain, inalienable, not subject to acquisition by adverse
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possession, and as a consequence thereof, private mining activities
require government authorization.
Although the Mining Law establishes five alternatives for performing
activities (directly by the National Executive, Concessions for
Exploration and Subsequent Exploitation, Exploitation Authorizations
for Small Miners, Mining Communities and Artisan Mining), the only
one having commercial and industrial importance is the mining
concession.
The area covered by the mining concession is a pyramidal volume, the
vertex of which is the center of the earth and its outer limit is a
horizontal plan measured in hectares and of rectangular shape, whose
vertex and boundaries are oriented according to the Universal
Transversal Mercator (U.T.M.) projection system or any other major
technological advance system adopted by the MIBAM.
Any national or foreign individual or legal entity domiciled in
Venezuela and capable according to law may obtain mining rights in
the country, excluding rights for small mining carried out individually
or in communities. Small mining is reserved for Venezuelan citizens
or Venezuelan legal entities while artisan mining is reserved for
Venezuelan citizens. Certain persons and entities, namely,
Venezuelan public officials and specific relatives of such officials, as
well as foreign governments and companies dependent on such
governments or controlled by them are prohibited from acquiring
mining rights.
Mining companies formed in Venezuela must register their
establishment with the MIBAM. If there are foreign investment
and/or technology transfer agreements, agreements governing the use
of patents or trademarks, and technical assistance coming from
abroad, such agreements must also be registered with the respective
departments of the MIBAM.
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3.2
Water Legislation
The activities related to use or development of waters are governed
mainly by the Constitution and the 2007 Law on Waters (Law on
Waters). These rules provide that waters are of the Nation’s public
domain and, consequently, cannot be part of the private domain of any
individual or legal entity. The Law on Waters provides that the use of
waters for development purposes is subject to the obtainment of
concessions, assignments and licenses, according to the activity for
which they are to be used.
The use of water for development of hydroelectric generation and
industrial and commercial activities is subject to the granting of an
assignment or a concession. Assignments are granted to applicants
which are bodies or entities of the National Public Administration,
while if an applicant is a private person or entity, a concession for the
development or use of water (the “Concession”) must be obtained.
Mining activities are deemed to be industrial activities. Consequently,
the use of waters in this type of activities requires a Concession
granted by the National Authority on Waters, which is currently the
Ministry of the Environment.
The Mining Law confers on the beneficiaries of mining rights the
right to the rational use and development of the waters of public
domain for performing their mining activities, upon compliance with
the relevant environmental provisions. This means that, in order to
use the waters, the beneficiaries of mining rights must comply with
the procedure set forth in the national legislation on the use of waters.
The Law on Waters forbids the assignment or transfer of Concessions
by their holders to third parties. Therefore, it is indispensable that the
party, who is interested in using the waters, be the applicant (holder)
of the Concession. No third party may authorize the use of waters,
even if they are located in areas over which they have rights of
ownership or other rights. The use of waters for development
purposes, without having the relevant Concession, is subject to
penalties.
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To obtain a Concession, it is necessary: (a) to submit a request for a
Concession addressed to the Minister of the Environment,
accompanied by the relevant documentation mentioned in the
applicable legislation, and (b) to request from the Ministry of the
Environment the Authorization to Affect Natural Resources,
according to the provisions of Articles 14 and 44 of Decree 1,257
issuing the Rules on Environmental Evaluation of Activities Capable
of Degrading the Environment, published in Official Gazette N°
35,946 of April 25, 1996 (Decree 1,257). In our opinion, the request
for Concession should be presented to the Ministry of the
Environment when submitting the relevant Environmental Impact
Study (EIS).
3.3
Environmental Protection Legislation
In general, enforcement of Venezuela’s environmental rules has been
lax. As time passes, however, the Ministry of Environment continues
to press for full compliance with the environmental rules. The fact
that criminal courts may also enforce environmental rules makes lack
of compliance very risky. The risks increase due to the fact that
criminal courts have no knowledge of and very little experience with
environmental matters. As a result, the only practical suggestion is to
take no risks and to obtain all of the environmental authorizations,
which are required by Venezuelan environmental law to operate any
type of business or industrial activity. Only by securing such
authorizations and by complying in full with their requirements may
environmental liability be avoided.
Article 15 of the Mining Law requires that all mining activities be
performed in compliance with applicable environmental legislation.
Decree N° 2,219, published in Special Official Gazette No. 4,418 of
April 27, 1992, governs renewable natural resources, including the
exploration and extraction of minerals. The use of hydraulic monitors,
mercury, and cyanide is expressly prohibited in these activities.
There are, however, special rules for the use of mercury and cyanide
in gold mining. Decree N° 2,219 governs only mining activities, but
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the general rules for protection of the environment that are applied to
the other activities also regulate mining operations. Therefore, mining
activities are subject to the technical standards that regulate the control
of hazardous waste generation and handling (Decree N° 2,289), the
control of contamination generated by noise (Decree N° 2,217),
activities that cause changes in the flow and obstruction of river beds
and sedimentation problems (Decree N° 2,220), liquid effluents
(Decree 883), the control of air pollution (Decree No. 638) and the
opening of trails and access roads (Decree N° 2,226). Likewise,
mining activities require compliance with the EIS requirements before
initiating the exploitation phase of a particular project.
The authorizations for the establishment of mining projects include
authorizations for land occupation and for affecting natural resources
in accordance with the guidelines described above. Bonds must be
posted in favor of the Ministry of the Environment to warrant the
performance of ecological obligations. It should be noted that the
administrative trend is to demand that mining concessionaires reclaim
all environmental damage existing in their areas, even if the same
have been previously caused by third parties.
4.
Concession for Exploration and Subsequent Production
The Mining Law adopted a sole type of mining concession.
Consequently, as of the enactment thereof, the only mining
concessions available are the concessions for exploration and
subsequent exploitation.
4.1
Limits
The concessions for exploration and subsequent exploitation will be
awarded for plots of land that must be divided into lots with an area
that may vary from a minimum of 493 hectares to a maximum of 513
hectares, with a total extension not exceeding 6,156 hectares, that is,
12 lot units. The maximum number of lots that may be granted to the
same holder is 2, that is, 24 lot units.
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4.2
Concessions as an Actual Right
The right arising from the mining concession is a real property right.
However, MIBAM must first authorize and grant a permit in order to
alienate, encumber, lease or subcontract the property for exploitation.
To obtain this authorization, the concessionaire must have carried out
prior activities and required investments for presentation of the
development and exploitation program, which should be filed 30 days
before the commencement of exploitation.
4.3
Limits of Areas for Exploitation
Another characteristic of concessions is that the concessionaire is
entitled to select from its explored lot up to a maximum of six
adjacent lots (not more than half of the original extension) for
exploitation purposes.
4.4
Terms of Concessions
The term for concessions may not exceed 44 years. Concessions
provide for an exploration term of no more than three years, with a
sole extension of one year. The exploitation term may not be more
than 20 years as of the date of publication of the respective
Exploitation Certificate, with a maximum of two 10-year extensions
granted at the discretion of MIBAM.
4.5
Substances Granted
Concessions confer upon their holder the exclusive right to explore
and exploit the mineral substances granted that are found within the
area awarded. (Tailings are included in the mineral granted.)
4.6
Special Advantages
Private persons may be required to offer special advantages, stipulated
by MIBAM, to the Republic whenever requesting a concession.
These advantages normally refer to aspects such as the supply of
technology, internal supplies, provision of infrastructure, social
endowment, and obligations to train and specialize in geology-mining,
among others.
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4.7
Tax System
The holders of mining rights must pay:
1.
A surface tax for each hectare, starting on the fourth year of
the concession, payable quarterly in arrears. The amount is
calculated in tax units per hectare, depending on the number
of hectares and the year of the concession, based on a table
that goes, in the case of gold and diamonds, from 0.14 tax
units within the first four years of the concession for
extensions no greater than 513 hectares, up to 0.38 tax units in
years 17 to 20 of the concession for extensions of 12,312
hectares. Once the exploitation is started, the exploitation tax
will be deducted from the surface tax pertaining to the same
period until concurring with the former.
2.
An exploitation tax equal to:
!
3% of the commercial value, in Caracas, of the
refined material, regarding gold, platinum and metals
associated with platinum. A special reduction of the
applicable tax (1%) will apply if the gold is sold to
the Central Bank of Venezuela.
!
4% of the commercial value in Caracas, regarding
diamonds and other precious stones.
!
3% on the commercial value, at the mine, for other
minerals, which includes costs until the extracted
mineral, whether or not crushed, is deposited in the
vehicle that is to carry it outside the limits of the area
awarded or to a plant for refining.
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4.8
Extinguishment of Mining Rights
Mining rights may be extinguished:
4.9
!
Due to expiration of the term for which they were
awarded;
!
By express waiver contained in an authenticated
document; or
!
Due to cancellation based on the following:
!
Failure to carry out the exploration within the legal
term.
!
Failure to submit the drawings (plans) within the legal
term;
!
Failure to start exploitation within the legal term;
!
Unjustified suspension of the exploitation for a term
longer than that allowed by law;
!
Failure to pay any mining tax for a one-year term;
!
Failure to submit the feasibility study;
!
Failure to comply with the special advantages;
!
More than 3 instances of breach of the Mining Law in
6 months.
!
Other special causes provided for in the relevant
mining title.
Reversion of Assets
Usually, the MIBAM terminates a mining concession alleging
breach of the mining obligations without allowing the
concessionaire the opportunity to show proof of compliance.
The land, permanent works, facilities, accessories and
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equipment that are an integral part thereof and all the real and
personal property, tangible or intangible, acquired to be used
in the mining activities must be maintained and preserved in
proven operating condition according to technical advances,
during the term of the concession; full title thereto shall pass
on to the Republic, without liens, charges, or indemnification,
upon the termination of the rights for whatever cause.
Accordingly, a mortgage on a mining concession will be
erased upon termination of the underlying mining concession.
5.
Procedure to Obtain a Concession for Exploration and
Subsequent Production
Those wishing to obtain a Concession for Exploration and Subsequent
Production must file an application with the MIBAM.
The application should include the following items:
!
Identification of the applicant, indicating domicile,
nationality, status and in what capacity he is acting. If
it is a company, the name or purpose, domicile and
place of incorporation. In case of foreign companies,
they shall fulfill the requirements of the Commercial
Code and other applicable regulations, and be
represented by an attorney in fact, Venezuelan or
foreign, domiciled in Venezuela.
!
Indication of the type of mineral, estimated surface
and the boundaries of the area requested, geographical
location together with a sketch of the area applied for,
duly signed by a Mining Engineer, a Geodesist or a
Surveyor or any other professional legally authorized
to do so, the designation given by the applicant,
special advantages offered to the Republic and other
information demanded by the law.
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!
Declaration as to whether the land is vacant, protected
or private property and neighboring properties and in
this last case, the name of the owner.
!
Prove to the satisfaction of the MIBAM of the
applicant’s technical, economic and financial
capacity.
!
Any other information established in the regulations
or requested by the MIBAM, per the procedures
established in the Organic Law of Administrative
Procedures and other laws regarding the matter, and
!
Should the concessionaire offer special advantages
pursuant to Article 35 of the Mining Law, these must
be introduced in a separate sealed envelope, which is
to be opened by a committee integrated with the
Minister, the Legal Advisor and the Manger of
Mining Concessions, upon their making a decision.
Once the request for the mining concessions is filed, the MIBAM will
approve or deny it and shall notify the interested party within 40
consecutive days following the date of introduction. This time frame
can be extended for a period of up to 10 working days if deemed
appropriate by the MIBAM. If a pronouncement is not forthcoming,
the request will stand rejected as a matter of law; without prejudice of
responsibility to the official for lack of notification.
Any interested third party has 30 days in which to file an opposition.
If there is an opposition, an administrative procedure is initiated at the
MIBAM, and the MIBAM decision is the final administrative ruling
on the subject. The parties may appeal the MIBAM decision.
Should there be no opposition or when declared rejected, the MIBAM
will grant the concession, if all stated requirements within Mining
Law have been fulfilled, and will issue the Title of Exploration
through a resolution to be published in the Official Gazette of
Venezuela, within 20 consecutive days following the maturity date of
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Venezuela – Mining Handbook
the term of opposition or the decision whereby it was rejected. The
concession holder must register the aforementioned resolution in the
corresponding Registry Office of the Judicial District of the place of
the concession, within 20 consecutive days following its publication.
6.
The Anticipated Reform of the Mining Law
During the last few years, the current Administration has been
working on restructuring mining policy throughout the country. The
new mining policy will lead to an industry structure similar to the
current structure of the oil industry. Accordingly, mining activities
will be conducted directly by the State, by wholly-owned State entities
or by mixed companies allowing for private participation, but in
which the State holds more than 50% of the capital stock. Small
mining activities will also be permitted in designated areas.
Notwithstanding the foregoing, the date of adoption of this anticipated
reform remains uncertain.
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