The San Rafael mining company will contribute 5% royalties to the departments of Santa Rosa and Japala, amounting to more than $80 million annually in taxes and profits for the country.
After several months of conflicts the mining company San Rafael, which is expected to start exploiting minerals later this year, and these two departments have reached an agreement.
It has been estimated that between southern Petén and northern Izabal there is one of the largest nickel reserves in the world.
"The Ministry of Energy and Mines (MEM) estimates that although at the moment the area of Izabal has only small projects, in the next few years there will be a mining complex because of the large mineral reserves, which would place Guatemala among the top five producers the world,"noted an article in Elperiodico.com.gt.
Royalties on mineral holdings in Guatemala will be imposed on three levels related to the base value of the extracted material.
According to Mario Marroquin, president of the Union of Mining and CEO of the company Montana Exploradora (main extractor of gold and silver in Guatemala), precious metals are those with the highest and there are other lower rates for base metals and non-metallic minerals.
Compañía Guatemalteca de Níquel, S.A. and Minera San Rafael S.A have been granted permission to undertake controlled mining activities in two sectors of the country.
From a press release issued by the Ministry of Energy and Mines of Guatemala (MEM):
This morning (yesterday) authorities at the Ministry of Energy and Mines (MEM) reported the granting of two mining licenses, identified as SEXT-015-11 "ESCOBAL" to company "MINERA SAN RAFAEL, SA" and SEXT-019-11 "Proyecto de Explotación Minero Niquegua MONTÚFAR II" for company "Compañía Guatemalteca de Níquel, S.A.".
The exploration license for project El Sastre 1 and the application for a similar license for project El Sastre 2 have been canceled.
According to the head of the Ministry of Energy and Mines (MEM) in Guatemala, Erick Archila, the process of forfeiture was started because MEM technicians have repeatedly been prevented from entering to inspect the area where the mine El Sastre 1 is operating, in San Antonio La Paz, El Progreso.
The Guatemalan Nickel Company (CGN by its initials in Spanish) has reported that it will pay voluntary royalties semi-annually amounting to 2% of its commercialized mining product.
Under ministerial agreement 009-2013 signed on the 6 of December, the company CGN has agreed to pay a voluntarily contribution of 2% to the state and municipalities.
"Of that 2 percent, 1 percent is to be distributed equally to the State and the municipality of El Estor. The other 1 percent is to be split between the municipalities of Amates, Puerto Barrios and Livingston, in Izabal, and Panzós , in Alta Verapaz, and the Ministries of Environment and Energy and Mines.
Mining businesses are concerned about communities who are resistance to mining activities, delays in the approval of permits and amendments to the Mining Act.
Next on the list of concerns for the sector, is the evolution of the global crisis, which investments in the extractive industry are dependent on.
Elperiodico.com.gt reports that clashes with opposition social groups "is a matter of the state and could find a possible solution next year, said Fernando Castellanos, director of mining at the Ministry of Energy and Mines (MEM) . "
Thriving companies from the banking mining, sugar, rubber, call center, and palm oil sectors, have been the engines of the Guatemalan economy over the last 10 years.
An article in Elperiodico.com.gt reviews the characteristics of each of these sectors and the major players in each.
"At the beginning of this century, Guatemala had 34 banks that managed assets of about $5 billion.
In the first six months of 2012 FDI amounted to $770 million, mainly devoted to the activities of energy, mining and textile industries.
In the first quarter FDI reached $405.9 million and $364.6 million in the second, surpassing the $523.5 million in the first half of last year, according to data from the Bank of Guatemala (Banguat).
The sector which attracted the most investment is power, says Luis David, director of the agency Invest in Guatemala, followed by the mining industry. The Tahoe Resources company alone is to invest $500 million in the San Rafael mine. "The figures reflect the confidence of investors in the country", said Luis David.
After two years of not granting mining licenses, the Ministry of Energy and Mines has approved exploration in the departments of Alta Verapaz, El Progreso, Zacapa, Jalapa, Jutiapa, Quiche and Santa Rosa.
Of the one hundred and eighty applications that were pending, the Ministry has already resolved one hundred, said the head of the ministry, Erick Archila.
"The state’s challenge is to modernize the mining industry sector ", said Eric Clay, Minister of Energy and Mines in Guatemala.
Diálogo Libre interviewed the Minister of Energy and Mines regarding the reforms to the current mining law, and the interview was published by Prensalibre.com.
A few excerpts from the interview:
The Executive refrained from amending Articles 125 and 242 of the Constitution, which established the right of the state to an involvement of up to 40 percent in mining companies, but the law governing the industry still provides for this. What are the state’s plans?
The Ministry of Energy and Mines in Guatemala has proposed changes to 33 of the 80 items in the original bill, including the creation of a State Mining Company.
Within the project to reform the Mining Law, the Ministry of Energy and Mines (MEM) has included the creation of a State Mining Company, operated by the Government. The percentage of government involvement in the company has not been established.
The Constitutional Court of Guatemala has received allegations from indigenous groups regarding the constitutionality of the Mining Act which has been in force for 15 years.
Concerns about a possible court ruling in favor of the constitutional motion filed by the indigenous people was demonstrated by the presence of entrepreneurs in the courtroom.
According to an article in Siglo21.com "the first to make their arguments were the proponents of the constitutional motion, via their lawyer Lucia Xiloj, who explained that the mining law, as determined by the CPO, is unconstitutional because it was approved 6 days after the ILO Convention 169 took effect, which stipulates in Article 6 the right to prior and informed consultation. These arguments were refuted by Mario Fuentes Destarac, representing the Chamber of Industry. "
The mere announcement of the draft constitutional reform in Guatemala so that the State can participate as a partner in mining companies has brought down the shareholder value of Tahoe Resources by 22%.
An article in Elperiodico.com.gt reveals the uncertainty and the damage amonst investors and businesses caused by the announcement of reforms to the Constitution that would include authorization for the State to participate by holding up to 40% of the shares belonging to companies engaged in metal extraction.