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Almaden Minerals Initiates Arbitration Against Mexico Under CPTPP
Introduction:
Almaden Minerals Ltd., along with its Mexican subsidiary Minera Gorrión S.A. de C.V., has officially commenced international arbitration proceedings against the United Mexican States (Mexico). The dispute, filed under the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), will be prosecuted through the International Centre for Settlement of Investment Disputes (ICSID). This move follows allegations that Mexico breached its CPTPP obligations by blocking the development of Almaden’s Ixtaca project and retroactively terminating the company's mineral concessions.
Background and Allegations:
Almaden’s dispute with Mexico dates back to actions that effectively halted the progress of the Ixtaca project, a significant mining endeavor discovered in 2010. According to Almaden, Mexico’s decisions resulted in the loss of substantial investments and potential benefits for shareholders and local communities. The company initiated a six-month consultation period as required under the CPTPP on December 13, 2023. Despite a consultation meeting on May 30, 2024, no amicable resolution was reached, prompting Almaden to proceed with arbitration.
The Ixtaca Project:
The Ixtaca project was poised to be a notable success story for Almaden. Key highlights from the feasibility study included:
- An average annual production of 108,500 ounces of gold and 7.06 million ounces of silver over the first six years.
- An after-tax Internal Rate of Return (IRR) of 42% and an after-tax payback period of 1.9 years.
- Proven and probable mineral reserves of 1.39 million ounces of gold and 85.2 million ounces of silver.
- Adoption of dry stack filtered tailings and co-disposal with waste rock to eliminate the need for a tailings dam.
- A fresh water storage dam intended for both mine and community use.
Despite the project's potential economic contributions, including creating approximately 600 direct jobs during peak construction and 420 jobs over the mine’s 11-year life, and generating significant federal, state, and municipal taxes, the project faced insurmountable challenges from the Mexican government.
Arbitration Proceedings:
Following the unproductive consultation, Almaden filed a notice of intention to submit a claim to arbitration on March 14, 2024. This triggered a 90-day notice period, culminating in the formal filing of the Request for Arbitration with ICSID. Almaden, in conjunction with Almadex Minerals Ltd., is seeking damages amounting to no less than USD 200 million. Duane Poliquin, Chair of Almaden, expressed regret over the necessity of arbitration, highlighting the company’s extensive efforts to adhere to international standards and practices. Despite their diligence, including thorough human rights impact assessments and environmental management plans, the project's termination left the company with no alternative but to seek legal redress.
Forward-Looking Statements and Risks:
The forward-looking statements in Almaden’s announcement reflect uncertainties inherent in legal, regulatory, and operational environments. The company's assumptions include stable and predictable responses from Mexico and the effective application of CPTPP provisions. However, risks such as political instability, crime, corruption, and environmental regulations in Mexico pose significant challenges.
Conclusion:
Almaden Minerals’ decision to pursue arbitration against Mexico underscores the complex and often contentious nature of international investment disputes. As the arbitration process unfolds, the outcome will have significant implications for the company, its shareholders, and the local communities affected by the Ixtaca project. Almaden remains committed to seeking justice and compensation for the losses incurred due to the alleged breaches by the Mexican government.
- Duane Poliquin, Chair of Almaden, expressed regret over the necessity of arbitration, highlighting the company’s extensive efforts to adhere to international standards and practices.
- The company's assumptions include stable and predictable responses from Mexico and the effective application of CPTPP provisions.
- Almaden Minerals’ decision to pursue arbitration against Mexico underscores the complex and often contentious nature of international investment disputes.
