MEXICO Law and Practice Contributed by: Fernando Todd, Mariana Todd, Jorge Garcia and Silvia Alanis, Todd
Mexico also maintains international co-operation agreements on mining matters with the following countries: Canada, Italy, Guatemala, South Korea, Chile, Australia, China, and Cuba. 5.4 Sources of Finance for Exploration, Development and Mining The mining sector can face significant challenges in attracting investment for project development. The industry’s constant need for capital, coupled with the high risks involved for investors at various stages, presents a hurdle. Factors such as commodity price volatility, rising production costs, and investor risk aversion have driven mining companies to seek alter - native financing options. Previously, the principal sources of investment used to be through traditional mechanisms for raising equity and/or debt, either by placing capital with the invest - ing public (for example, through the Toronto Stock Exchange), financial institutions, programme funds from the government sector or private companies with some important role in the world of mining. However, during the exploration and exploitation stages, mining projects require a lot of money and have high invest - ment return risks. Therefore, mining royalties and streaming agreements arose as an alternative financ - ing mechanism for mining projects and operations through royalties and streaming companies focused on the industry. The source of financing for a mining project can include a variety of options, and companies often turn to different sources depending on their specific needs and the stage of the project. The main financing mechanisms include: • the purchase of shares in mining companies; • the listing on the national or international stock exchange; • loans from financial institutions; • royalty and metal streaming agreements; and • government programmes. The Canadian market has had a significant presence in the Mexican mining industry. While there are also mining projects owned by Mexican capital, these pro -
jects often require further resources to progress their development. 5.5 Role of Domestic and International Securities Markets in the Financing of Exploration, Development and Mining In Mexico, domestic and international stock markets play a crucial role in the mining sector, as they offer mining companies the possibility of raising capital to finance projects and operations through the issuance of financial securities. In addition, the markets impact the valuation of mining companies, investor percep - tion, and the ability of companies to carry out explora - tion and development projects. Thanks to the stock market, both in Mexico and abroad, mining companies can access local inves - tors and domestic capital through various financial instruments, diversifying their sources of financing and reducing dependence on bank loans or other forms of funding. Listing on the stock exchange allows mining compa - nies to be valued by the market based on the supply and demand for their shares. Market capitalisation reflects the market’s perception of the company’s value. Because stock market listings necessitate financial transparency, mining projects developed in Mexico, along with their progress, become visible to the pub - lic. This increased visibility can either encourage or discourage investment. 5.6 Security Over Mining Tenements and Related Assets Security Interests Over Mining Concessions Holders of mining concessions in Mexico may grant security interests or liens over their concession rights to secure obligations with third parties, provided the concessions are part of an operating mine. The beneficiary of such a security must notify the Mining Authority and acknowledge that within a six-month period following the enforcement of the guarantee or lien, they must either comply with the legal require - ments to become a concession holder or transfer their rights over the concession.
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