In this chapter

• General framework
• Environmental and community relations
• Taxes
• Listings

General framework

Major features

The mining sector in Argentina is becoming highly dynamic, providing genuine and sustainable development.

Substantial exploration during the last 15 years has confirmed a great potential for the development of new world-class projects related to the extraction of copper, gold, silver and lithium.

Despite Argentina facing difficult times due to inflationary pressure and exchange rate delays, the country is undergoing an unprecedented growth stage in the mining industry, with large investments in progress and encouraging expectations regarding advanced projects of world-class deposits.

Legal system and sources of law

Argentina is a governed by a civil law system. In addition to general corporate, labor, regulatory and tax rules that are generally applicable to all industries in Argentina, the main legal rules regulating the mining industry arise from the following statutes:

• The National Constitution
• The Mining Treaty between Argentina and Chile
• The National Mining Code (NMC)
• Law 24,585 (specific environmental title for mining included in the NMC)
• General Environmental Law No. 25,675
• Law 24,196 (promotional legal regime to which all of the provinces have adhered).

In addition, most provinces have their own mining procedural codes, which generally follow the standards and guidelines of the National Mining Code. The provincial mining procedural codes set out the:

(i) Relevant procedure for requests for the granting of mineral rights.
(ii) Available mechanisms to challenge decisions of mining enforcement authorities.

Provinces also have their own regulations that affect mining activity, such as environmental legislation that applies to mining operations.

Ownership of mineral resources

According to the National Constitution, provinces are the owners of natural resources located in their respective territories.

As a general rule, mining rights and concessions are granted to private companies who hold title to such rights and mining concessions, and explore, exploit and develop them. As an exception, state-owned companies may hold mining rights (in reserved areas) but are obligated to grant them to private third parties for exploitation.

Foreign investment

The legal framework applying to mining activities in Argentina particularly favors investment, both foreign or local. The applicable legal framework establishes a non-discrimination principle regarding the nationality of individuals or entities that own or seek to acquire mineral rights.

Role of the state

At the federal level, the competent authority is the Secretariat of Mining within the National Ministry of Productive Development.
Provinces have their own authorities that control mining affairs.

The mining authority usually belongs to the provincial executive branch. However, in some provinces (such as Salta and Catamarca), the mining enforcement authorities are subordinated to the judicial branch.

Nature of mineral rights

Each province is considered the owner of the mineral resources located in their jurisdictions. Nonetheless, individuals and legal entities can obtain concessions to explore and develop the deposits and freely dispose the minerals extracted from the concession area.

Granting of mineral rights

The Mining Code provides two types of mining rights:

(i) Exploration permits: Prior to commencement of exploration, the mining company must obtain an exploration permit from the provincial mining authority. This permit grants the exclusive right to explore and obtain the development concession if a discovery is made.

(ii) Development concession: Development concessions grant the title holder the right to conduct further exploration after a discovery and exploit all mineral deposits of the mine. Mining concessions are not subject to a term and, thus, insofar as the title holder does not incur in a cause of termination, the concession lasts until the mineral reserves are exhausted. Mining concessions comprise rights over the mine, its deposits and any buildings, machinery, vehicles used in developing the mine, and other movable assets that can be sold or transferred.

Security of tenure

Mining activity is declared of public utility and has priority over activities performed on the surface land.

Mining exploitation concessions are granted in perpetuity but may expire if the work and investment obligations required to keep the title in good standing are not met.

The essential obligations to keep the title of a mining concession in good standing are the payment of the annual mining fee and the compliance with an investment plan. Failure to comply with these obligations provides for the termination of the concession.
Additionally, a mining concession can eventually be revoked if a mine has been inactive for more than four years.

As mentioned previously, the assignment of mining rights and properties acquired through direct concession are not subject to the prior approval of any governmental agency.

Ownership regarding oil and gas resources and third category minerals are subject to specific regulations.

Environmental and community relations

Environmental protection and licensing

Before the commencement of mining, an environmental impact study must be prepared and must comply with the standards of Law No. 24,585 and its complementary regulations.

The enforcement authority issues an environmental impact declaration (EID) that authorizes the holder to carry out the proposed activities and establishes the conditions that the applicant must observe throughout the development of the mining activity. The EID is valid for two years and companies must submit updates of the environmental impact study (EIS) every two years to renew the EID.

The minimum environmental standards can be enhanced by relevant provincial and municipal regulations, establishing higher protection.

Environmentally protected areas

There are certain protected areas and reserves created by national or provincial laws where the performance of mining activities is prohibited or restricted (i.e. certain glaciers, national and provincial parks, etc.).

Communities

The General Environmental Law provides that the provinces must establish a mandatory consultation procedure or public hearing to authorize those activities that may have significant harmful effects on the environment. Citizen participation should precede the authorization of the mining project and is usually accomplished through the Environmental and Social Impact Assessment (ESIA) prior to the granting of any authorization. In the context of the ESIA, the competent authorities and those who intend to develop a mining project must inform the community of all the relevant environmental and social impacts. Citizens’ participation shall be guaranteed during the environmental impact assessment processes. Although the result of the consultation is not binding, it should be addressed before granting the authorization of a mining project.

Indigenous rights and consultation

According to the Argentine Constitution and the Indigenous and Tribal Peoples Convention of 1989 (“ILO Convention 169”), indigenous communities have the right to be recognized by the authorities (at federal and provincial level) as entities with legal status. As such, they can exercise collective rights, such as community ownership of the lands they inhabit and of the natural resources.

The legal status of indigenous communities is registered in a special registrar alongside information concerning the structure of their organization, authorities, location, area of interest and the appropriate consultation procedure that they require to give them proper participation in accordance with their own traditions.

ILO Convention 169 and many federal and provincial regulations determine that it is enough for individuals to consider themselves as indigenous for authorities to recognize their ethnic identity and the lands on which they live. National and some provincial authorities have issued regulations related to the implementation of Convention 169.

In Argentina, and depending on the province, citizen consultation and indigenous communities consultation may be held separately or carried out simultaneously. In most cases it is not necessary that the indigenous communities provide their consent to a mining project, as this is restricted to certain exceptional cases specifically identified in Section 16 of ILO Convention 169 (when relocation of the indigenous community is required).

Opposition by indigenous communities to mining activities in the public consultation process is not binding to the authorities. The validity and legality of the authority’s approval will depend on how the authority responded to the observations and questions of the indigenous communities.

Taxes

Duties, royalties and taxes

Mining activities have a special tax regime that establishes: (i) the financing or reimbursement of the value-added tax payments made by the mining companies; (ii) a 30 years tax stability period for the taxes applicable at the time of submitting the feasibility report; (iii) the right to deduct each year 100 percent of the amount invested in prospecting, special research, mineral and metallurgical tests, pilot plants, applied research and other works performed for the purpose of determining the technical and economic feasibility of a project from their income tax return (iv) the right to accelerated depreciation benefits (within three years) regarding investments made on housing, transport, construction of plants and equipment in connection with the necessary infrastructure for mining activities within three years, (v) the exemption from paying income taxes derived from the revenues of mines and mining rights, used as payment for the subscription of shares of registered beneficiaries companies, (vi) exemption on duties and other charges in relation to the import of capital assets and other goods and (vii) a three percent cap on royalties along with other benefits.

Incentives

The legal framework applicable to mining activities in Argentina particularly favors investment, either foreign or local. The applicable legal framework establishes a non-discrimination principle regarding the nationality of individuals or entities that own or seek to acquire mineral rights. Moreover, Argentina has signed bilateral investment treaties with several countries, including Australia, Austria, Canada, Chile, China, Croatia, Denmark, Finland, France, Germany, Israel, Italy, Malaysia, Mexico, the Netherlands, New Zealand, Peru, Russia, Spain, Sweden, Switzerland, the United Kingdom and the USA.

Transfer tax and capital gains

Gains derived from the sale, exchange or any type of disposal of shares, securities or quotas issued by Argentine entities when they are obtained by non-Argentine residents (either individuals or entities) are subject to a withholding tax of either 13.5 percent on the sale price or 15 percent on the difference between the sale price and the acquisition cost.
Capital gains from the transfer of shares and securities traded in the Argentine Stock Exchange are tax-exempt (if certain conditions are met).

If the shares, quotas or securities are transferred by a non-Argentine resident to an Argentine resident, the buyer must act as the withholding agent (under the Income Tax Law and the applicable regulations). If the seller and the buyer are both non-Argentine residents, the legal representative of the seller in Argentina or the seller itself must pay the tax.

Listings

Listing requirements of mining or mineral companies in your local stock exchange or in international stock exchanges

Primary listing on the main market exchanges requires the prior authorization by (i) the National Securities Commission (Comisión Nacional de Valores or CNV) to enter the public offer regime; issue and place shares on the market through a public offer and (ii) the relevant exchange to list the shares, and by the relevant markets to trade the shares.

The relevant requirements to be authorized both by the CNV and the exchanges/markets are similar and include the filing with the regulatory authorities of certain information related to the issuer and the shares to be placed on the market, including the following: a prospectus, the corporate approvals and modification of the by-laws, agreements entered into with agents of the transaction, and risk rating reports, if applicable.

The company must also pay a filing fee, and certain publications must be made, including, for instance, a summary of the prospectus and a notice announcing the placement period to investors. If securities are to be listed and traded on a local market such as the MERVAL or Mercado Abierto Electrónico, similar notices and fees must be paid.

The company is subject to reporting requirements, comprising quarterly and year-end financial statements, reports related to significant events that may affect the value of its securities and reports regarding any changes in the corporate structure and the authorities.

Foreign entities can submit a request to the CNV to make a public offer of their securities. The documentation required is similar to that applying to local companies.

Before filing its request with the CNV, the foreign entity must establish a branch, and register its offices with the Argentinean General Inspection of Justice (Inspección General de Justicia or IGJ) or the equivalent provincial register.